High-Skilled Immigrants and Innovation in US History

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How important have high-skilled immigrants been to innovation in US history? According to a recent study,

Medical inventions (e.g. surgical sutures) accounted for the largest share of immigrants, but this category produced just 1% of all US patents. However, immigrants were also active in chemicals and electricity – two sectors that had a particularly large effect on US economic growth, accounting for 13.9% and 12.6% of all US patents, respectively. Noticeably, immigrants accounted for at least 16% of patents in every area. This evidence suggests that their impact on inventive activity was widespread.   

[The graph below] also shows that the majority of immigrant inventors originated from European countries, with Germans playing a particularly prominent role. This is consistent with the findings of Moser et al. (2014) who show that German-Jewish émigrés who fled the Nazi regime boosted innovation in the US chemicals industry by around 30%. Today the closest analogue to these high-impact individuals would be inventors of Indian and Chinese ethnic origin who make substantial contributions to the development of innovation clusters in areas like Silicon Valley (Hunt and Gauthier-Loiselle 2010, Kerr and Lincoln 2010).

The researchers

constructed a measure of foreign-born expertise, which multiplies the share of each country’s patents granted in a given technology area between 1880 and 1940 (as a measure of proficiency) by the number of immigrants from that country in the 1940 Census (as a measure of how intensely that proficiency diffuses to the host country).

We find that technology areas with higher levels of foreign-born expertise experienced much faster patent growth between 1940 and 2000, in terms of both quality and quantity, than otherwise equivalent technology areas. Although we do not identify a causal relationship, our quantitative evidence can be used alongside qualitative evidence to highlight two areas where immigrant inventors may have acted as catalysts to economic growth: through their own inventive activity and through externalities affecting domestic inventors.

Immigrant inventors were responsible for some of the most fundamental technologies in the history of US innovation, which still influence our lives today. For example, Nikola Tesla, who was born in Serbia, worked in America on alternating current electrical systems; the Scotsman Alexander Graham Bell was instrumental to the development of the telephone from a workshop in Boston; Swedish inventor David Lindquist, while living in Yonkers, New York, assigned his patents relating to the electric elevator to the Otis Elevator Company located in Jersey City, New Jersey; and Herman Frasch, a German-born chemist, worked in Philadelphia and Cleveland on techniques which are analogous to modern fracking.

In short, the evidence suggests that “immigrant inventors were of central importance to American innovation during the 19th and 20th centuries. Although the migration of high-skilled inventors to the US involved some costs, immigrant inventors contributed heavily to new idea creation, through both their own work and collaboration with domestic inventors. Our evidence aligns with the view that growth in an economy is determined by its ablest innovators, regardless of national origin. The movement of high-skilled individuals across national borders therefore appears to have aided the development of the United States as an innovation hub.”

Does Corporate Culture Matter?

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Image result for corporate cultureYes and a lot, according to a new study. Researchers from Duke and Columbia University performed an interview-based analysis of 1,348 North American firms, finding that the majority of senior executives believe corporate culture to be a major driver of firm value. More important, though, they did “not find a strong relation between tracking stated values and business outcomes. We argue that for stated cultural values to have full impact on business outcomes, they must be complemented by norms that dictate actual behavior and by formal institutions. Consistent with this argument, we find that norms are at least as important as the values themselves in driving outcomes, and that formal institutions can either reinforce or work against these informal corporate institutions” (pg. 3; emphasis mine). “More specifically,” they write,

our econometric investigation into the effects of culture on business outcomes suggests several important findings. First, for culture to have full impact, values should be complemented by reinforcing norms and by formal institutions. Second, formal institutions and cultural norms substantially explain the effectiveness of corporate culture. These factors alone explain almost 36% of the variation in the effectiveness of culture. Third, an effective culture impacts firm value significantly, and influences many specific examples of innovation and ethical outcomes. Fourth, we find evidence consistent with an effective culture working by intrinsically motivating employees to perform and shaping the way their expectations are formed. Finally, given that an effective culture is positively associated with value creation and economic efficiency, we ask executives what is preventing their firm’s culture from being effective in practice. 69% blame their firms’ underinvestment in culture.

…Our work relates to a number of strands in the literature. First, our findings are consistent with recent research pointing to the first-order importance of internal company practices for determining productivity and performance (Bloom and Van Reenen (2007); Bloom, Sadun, and Van Reenen (2012); Martinez et al. (2015)). Second, our research highlights the vital, but underappreciated, role that corporate culture plays in value creation (Hermalin (2001); Guiso, Sapienza, and Zingales (2006); Guiso, Sapienza, and Zingales (2015a); Guiso, Sapienza, and Zingales (2015b)). Third, our results suggest that formal institutions such as corporate leadership (Bertrand and Schoar (2003); Gibbons and Henderson (2013)), incentive compensation (Lazear (2000)), and corporate governance (Shleifer and Vishny (1997); Popadak (2016)) meaningfully interact with the underlying corporate culture. Fourth, our results indicate culture works by intrinsically motivating employees, consistent with theory showing trade-offs among systems of incentives within organizations (Akerlof and Dickens (1982); Gibbons (1998); B´enabou and Tirole (2003)) and the literature suggesting contract incompleteness depends on the firms’ internal organizations (Macaulay (1963); Levin (2003)). Finally, our evidence links culture to ethics (Guiso, Sapienza, and Zingales (2006)), myopia (Graham, Harvey, and Rajgopal (2005); Dichev et al. (2013)), whistle-blowing (Bowen, Call, and Rajgopal (2010); Dyck, Morse, Zingales (2010)), risk (Fahlenbrach, Prilmeier, and Stulz (2012)), and compliance (Kedia, Luo, and Rajgopal (2015)) (pgs. 3-4).

Shaping corporate culture is something managers should take seriously.

Between-Firm Inequality

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A couple years ago, I linked to a post by AEI’s James Pethokoukis that claimed income inequality was in part explained by more profitable companies paying their employees more. A recent Harvard Business Review article by economist Nicholas Bloom further supports this insight. He says,

If we want to truly understand income inequality — if we want to mitigate it and its pernicious effects — we must look beyond CEO compensation and tax policy and consider the role played by firms and their hiring and compensation policies for ordinary, non-millionaire workers. This is not a simple morality play in which evil companies are pitted against the middle class. There is nothing nefarious about Google’s goal of being the global leader in software and machine learning, or in its hiring the best employees it can find. Yet the result of countless strategic decisions in pursuit of such goals by Google and other elite companies throughout the world — not just in tech — has been to raise the compensation of some workers far more than others.

Bloom points out that “it’s not just the top 1% who are pulling away. The gap between workers with a college education and ones with only a high school diploma has increased dramatically as well. In 1979, the average annual salary for American men with a college degree was $17,411 higher (after adjusting for inflation) than the average for men with a high school degree. By 2012, the gap had nearly doubled, to almost $35,000; the gap between women with college degrees and those with high school diplomas nearly doubled as well.”

So what explains this growing gap?

Over the past several years, economists have begun to examine pay gaps between and within firms to see how company strategy and corporate trends affect the broader rise of inequality. The findings from this new area of study are striking and help explain why incomes have risen so much for some and not at all for others. They also explain why so many executives, managers, and other well-paid workers have failed to notice the growing disparity.

Companies can contribute to rising income inequality in two ways. As we’ve just discussed, pay gaps can increase within companies — between how much executives and administrative assistants are paid, for example. But studies now show that gaps between companies are the real drivers of income inequality. Research I conducted with Jae Song, David Price, Fatih Guvenen, and Till Von Wachter looked at U.S. employers and employees from 1978 to 2013. We found that the average wages at the firms employing individuals at the top of the income distribution have increased rapidly, while those at the firms employing people in the lower income percentiles have increased far less. (See exhibit “Inequality Between Companies Is Also Growing.”)

In other words, the increasing inequality we’ve seen for individuals is mirrored by increasing inequality between firms. But the wage gap is not increasing as much inside firms, our research shows. This may tend to make inequality less visible, because people do not see it rising in their own workplace.

This means that the rising gap in pay between firms accounts for the large majority of the increase in income inequality in the United States. It also accounts for at least a substantial part in other countries, as research conducted in the UK, Germany, and Sweden demonstrates.

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Bloom writes, “[O]ur research suggests…that companies are paying more to get more: boosting salaries to recruit top talent or to add workers with sought-after skills. The result is that highly skilled and well-educated workers flock to companies that can afford to offer generous salaries, benefits, and perks — and further fuel their companies’ momentum. Employees in less-successful companies continue to be poorly paid and their companies fall further behind.

Bloom attributes this between-firm inequality to “three factors: the rise of outsourcing, the adoption of IT, and the cumulative effects of winner-take-most competition”:

  • Outsourcing: “As companies focused on their core competences and outsourced noncore work, the corporate world began to divide between knowledge-intensive companies such as Apple, Goldman Sachs, and McKinsey and labor-intensive companies such as Sodexo, which provides food service and facilities management services. Workers with lots of education and desirable skills were hired in the knowledge sector, with high pay, perks, and benefits. Less-educated workers got jobs in labor-intensive firms, where pay was stagnant or even falling and benefits such as health insurance were hardly guaranteed. Employees from these two types of firms often work in the same building, but they’re no longer in the same orbit.”
  • IT and Automation: “My research and other studies suggest that between-firm pay inequality has grown faster in industries that spend more on IT. Investments in technology allow successful online firms to rapidly scale up and reap the benefits of network effects. In this way, leading companies such as Amazon and Facebook dominate their markets. Offline, improved enterprise software and automation of routine tasks make it far easier to manage and grow large businesses, from Shake Shack (burgers) to Xiaomi (smartphones).”
  • Winner-Take-Most Competition: “[O]ver the past 35 years, firms have divided between winners and losers, and between those that rely heavily on knowledge workers and those that don’t. Employees inside winning companies enjoy rising incomes and interesting cognitive challenges.”

Bloom ends by listing several policy recommendations. There is also a link to further commentary on this subject by various experts, all of which are worth reading.

This is an important insight in the inequality debate. Policymakers and voters should take notice.

With great responsibility comes great power

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This post is part of the General Conference Odyssey.

This week we’re covering the priesthood session of the October 1975 General conference. Next week, we’ll take a break from hour General Conference Odyssey to cover the entire April 2017 General Conference. The week after that we’ll return to the Odyssey with the Sunday morning session of the October 1975 General Conference.

As for this priesthood session, there was at least one very clear them: sacrifice more. In the first talk Elder Brown said “a law of life” was that “Only if you sacrifice for a cause will you love it,” and stated:

In the world, many organizations, churches, governments, even families have lost much of their vitality because they are afraid to ask people to sacrifice. It is imperative that we not make the same mistake in the Aaronic Priesthood. We must be fearless in expecting Aaronic Priesthood holders to do the work which the Lord has commanded.

In the second, Elder Bangerter said “the devil taught us” to ask the question “[have you] got your home teaching done?” He explained:

That is a very poor way to refer to the comprehensive mission embodied in home teaching. By getting us to ask “Did you get your home teaching done?” the devil destroys 90 percent of our effectiveness. All that question implies is a quick visit the last day of the month so that we can send in the report.

In other words: give more.

Experience since 1975 have born this wisdom out. The churches that have gone the farthest in lowering expectations for their adherents have seen those adherents walk away. Living according to the strict discipline of a traditional faith is hard, but—it turns out—living according to the lax guidelines of a modern faith is pointlessly easy.

With great power, the saying goes, comes great responsibility. One thing Mormons understand is that the converse is also true.

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Check out the other posts from the General Conference Odyssey this week and join our Facebook group to follow along!

Gorsuch and the Frozen Trucker

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Neil Gorsuch, nominee for Associate Justice to the U.S. Supreme Court, and President Donald Trump, via the official White House YouTube page. (Public Domain)

As you might be able to tell from my last post, I like Judge Gorsuch. I’d never heard of him before his nomination, but I listened into a lot of his hearing, and quickly came to respect his philosophy of judicial integrity.[ref]That’s actually what was at the heart of my last post about his hearing.[/ref]

Earlier today, I had a Facebook friend castigating Gorsuch for the “frozen trucker case.” This refers to a dissent that Gorsuch wrote in 2016. According to a critical Slate article by Jed Shugerman, here are the basic facts of the case:

Alphonse Maddin was a truck driver for TransAm. Late on a January night in temperatures below zero, he discovered that his trailer’s brakes had locked up due to the cold weather. (The truck itself could drive but not when attached to the trailer). He called TransAm’s road service for help at 11:17 p.m., and then discovered that the truck cabin’s heat was broken. He fell asleep and woke up two hours later with a numb torso. Maddin also could not feel his feet. He called the road service again, and they told him to “hang in there” despite the life-threatening conditions. He waited about 30 more minutes before unhitching the broken trailer. Although his supervisor ordered him to stay, Maddin decided to drive off with the truck after almost three hours in the subzero cold. A service truck did arrive 15 minutes after he left, but it’s hard to blame him for deciding not to risk his life. It’s amazing he waited so long at all.

TransAm fired Madding for leaving behind his trailer. In his turn, Maddin filed a complaint with OSHA, arguing that his decision to drive away from the trailer was statutorily protected. Then Tenth Circuit sided with Madding and OSHA, but Gorsuch wrote a strong dissent. This strong dissent has come back to haunt him, as Democrats in his confirmation hearing and journalists and pundits outside of it are using the dissent to paint him as having an “arrogant and cold judicial personality.”

I thought I’d look into this, so I read Gorsuch’s dissent, which you can find online here. Here’s the most important paragraph, where Gorsuch explains why he believes TransAm’s firing of Maddin wasn’t illegal:

It might be fair to ask whether TransAm’s decision was a wise or kind one. But it’s not our job to answer questions like that. Our only task is to decide whether the decision was an illegal one. The Department of Labor says that TransAm violated federal law, in particular 49 U.S.C. § 31105(a)(1)(B). But that statute only forbids employers from firing employees who “refuse[] to operate a vehicle” out of safety concerns. And, of course, nothing like that happened here. The trucker in this case wasn’t fired for refusing to operate his vehicle. Indeed, his employer gave him the very option the statute says it must: once he voiced safety concerns, TransAm expressly — and by everyone’s admission — permitted him to sit and remain where he was and wait for help. The trucker was fired only after he declined the statutorily protected option (refuse to operate) and chose instead to operate his vehicle in a manner he thought wise but his employer did not.

The logic is pretty straight forward and irrefutable. The law protects people who don’t operate equipment out of safety concerns. It doesn’t protect people who do operate equipment under safety concerns. And so–applying the statute–TransAm was free to fire Maddin as far as the law is concerned. And that is the only thing that Gorsuch (and his fellow judges) were called to decide. Gorsuch goes on:

… there’s simply no law anyone has pointed us to giving employees the right to operate their vehicles in ways their employers forbid. Maybe the Department would like such a law, maybe someday Congress will adorn our federal statute books with such a law. But it isn’t there yet. And it isn’t our job to write one — or to allow the Department to write one in Congress’s place.

This is a theme that Gorsuch talked about frequently during his hearing. Again and again he reiterated his position that a judge has to apply the law as it is actually written and can’t simply “interpret” the law in ways that suit our notions of justice or fairness or propriety or even common sense.

Reading between the lines, the majority opinion in this case was especially egregious because the judges invented a rationale for their position (siding with Maddin) that wasn’t even raised by the OSHA lawyers. Gorsuch points out that the majority opinion cites a prior ruling (Cehvron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.) even though:

…the Department [OSHA] never argued the statute is ambiguous, never contended that its interpretation was due Chevron step two deference, and never even cited Chevron. In fact, the only party to mention Chevron in this case was TransAm, and then only in a footnote in its brief and then only as part of an argument that the statute is not ambiguous.

I don’t think there’s any doubt that Maddin should not have been fired. As a matter of morality and basic decency, that’s a given. But the responsibility to grant him that legal protection rests with the legislative branch. It’s their job to write the law to cover that case. They failed to do so. Relying on the judicial branch to fix their mistake by–in effect–amending the law to be what it should have been is impermissible under American rule of law. As Gorsuch put it, “it is our obligation to enforce the terms of that compromise as expressed in the law itself, not to use the law as a sort of springboard to combat all perceived evils lurking in the neighborhood.”

 

I don’t like the ruling that Gorsuch came to, and Gorsuch didn’t like it either, but it was certainly the correct ruling to make under the Constitutional system of law we are supposed to live under. According to his critics, this case is supposed to make me like Gorsuch less, but it’s not working. It makes me like him more.

Donald Trump the Peronist

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[Trump’s] nationalistic view reminds me, of course, of [Juan] Peron, in some regards.

– Sebastion Edwards

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Financial Times‘s Cardiff Garcia has an incredibly enlightening interview with UCLA economist Sebastian Edwards on the economics of populism.

Garcia: …Americans have been taken off-guard by some of the phrasings of Donald Trump and what he says is part of his agenda. But that if you’re from Latin America, you’ve seen how a lot of this movie plays out before.

Edwards: That is correct. You’ve seen it before. The modus operandi is very similar. And it’s very ironic. You have Donald Trump, and the way he approaches many of these issues is not too different to what Hugo Chavez did in Venezuela. And that’s exactly what makes this whole story quite fascinating.

How is “populism” defined? Edwards elaborates,

Rudi Dornbusch and I defined the economics of populism as an economic programme, a package of policies, that disregarded good, solid received wisdom on economics. And in the case of Latin America, which is going to be interesting when we compare it to Donald Trump, disregarded all budget and monetary constraints – and violated all those constraints, as the populists do, in a way that generates euphoria in the immediate short run, but ultimately results in a very deep crisis that affects, in particular, those that were supposed to be benefited by the whole programme. So populist economics is an economic policy package that disregards budget constraints, macroeconomic constraints, good solid productivity constraints, and generates short run benefits at the cost of crisis in the future.

…So those are the policies, what I described. And what the populist leader does then is that in a rhetoric that is quite extreme, and where he or she divides the population between “us, the people” and “them” – and it’s a vague “them”…In that rhetoric, the populist leader takes the discourse directly to the people through big rallies, a referendum, plebiscites. I’m talking about Hugo Chavez and Donald Trump, who continues to be, although he’s now the president, in campaign mode. And in doing this [he] skips the institutions. For instance, they tend to dislike the central bank because it is an institution that tends to maintain sound policies in most countries. First thing that Hugo Chavez did was fire Ruth de Krivoy, the Governor of the central bank of Venezuela, right. So they disregard the institutions, both economic and political. 

Garcia notes “that the majority of the populist leaders [Edwards] studied have been left wing. A lot of Marxists.” But as Edwards explains,

In some ways, [Juan] Peron, who had great sympathy for the fascist movements – he was a great admirer of Benito Mussolini – was right wing in many respects. 3 So there is no reason why we cannot have corporatist right-wing populist leaders that favour specific groups in their rhetoric and in their policies and again, very clearly blame, in quotation marks, “the other” for the suffering of “us, the people”. And in the case of Latin America, often “the other” was related to some foreign force – the multinationals, international speculators and, of course, the International Monetary Fund. And what is very ironic is that in the case of Donald Trump, foreigners also are blamed for the plight of the people and, in this case, they are immigrants, the Chinese and international terrorists.

Edwards then lays out the conditions for a populist leader to emerge:

[T]he first phase is a deep public dissatisfaction and discontent. And this dissatisfaction and discontent is of two types. Sometimes it’s quite abrupt. And in Latin America, usually that abrupt crisis has been associated historically with a very large devaluation of the currency…In other cases, the crisis develops much more slowly and it’s a simmering crisis. And that is what we can see in the United States where there is a simmering dissatisfaction, in particular among white, blue collar workers. So first phase, great dissatisfaction. And you can see it in country after country after country…The second phase is the emergence of this populist leader, very charismatic, who operates outside of the political institutions…So this leader that comes out is extremely forceful, very articulate, and in rallies and in direct appeal to the people, provides this very nationalistic rhetoric and gets the people to approve this particular political programme that disregards all sorts of constraints of good, solid economic management.

What does this begin to look like in practice?:

And what we see in many of these populist extremisms in Latin America is that the authority starts picking up on specific companies, firms, conglomerates. And the strong man or the strong woman (Cristina in Argentina) would call the CEO or the controlling figure of that company and would threaten him or her personally or would denounce that company in public rallies, and would direct the mobs to riot and to maybe even break into those stores. And then they are called in and they are told, you have to reduce your prices, or you have to do this, or you have to do that, and you have to raise wages by 50% while, at the same time, you cannot increase the prices of your product. Which, of course, is a variant of what Trump is doing with companies that want to invest and start plans in other parts of the world. So the rule of law, and in particular, the impersonal treatment – equal treatment of everyone in front of the regulators, and so on and so forth – starts to disappear.

The whole thing is great.

Religious Belief: Less Analytical, More Pro-Social?

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A 2016 study finds that while religious belief has a negative correlation with analytic thinking, it has a significantly positive association with moral concern. Interestingly enough, the negative correlation with analytic thinking can in part be explained by the tension between it and moral concerns. “When there’s a question of faith, from the analytic point of view, it may seem absurd,” said Tony Jack, who led the research.

“But, from what we understand about the brain, the leap of faith to belief in the supernatural amounts to pushing aside the critical/analytical way of thinking to help us achieve greater social and emotional insight.”


…”A stream of research in cognitive psychology has shown and claims that people who have faith (i.e., are religious or spiritual) are not as smart as others. They actually might claim they are less intelligent,” said Richard Boyatzis, distinguished university professor and professor of organizational behavior at Case Western Reserve, and a member of Jack’s team.

“Our studies confirmed that statistical relationship, but at the same time showed that people with faith are more prosocial and empathic,” he said. In a series of eight experiments, the researchers found the more empathetic the person, the more likely he or she is religious. That finding offers a new explanation for past research showing women tend to hold more religious or spiritual worldviews than men. The gap may be because women have a stronger tendency toward empathetic concern than men. Atheists, the researchers found, are most closely aligned with psychopaths—not killers, but the vast majority of psychopaths classified as such due to their lack of empathy for others.

…“Because of the tension between networks, pushing aside a naturalistic world view enables you to delve deeper into the social/emotional side,” Jack explained. “And that may be the key to why beliefs in the supernatural exist throughout the history of cultures. It appeals to an essentially nonmaterial way of understanding the world and our place in it.”

…[Jared] Friedman said, “Having empathy doesn’t mean you necessarily have anti-scientific beliefs. Instead, our results suggest that if we only emphasize analytic reasoning and scientific beliefs, as the New Atheist movement suggests, then we are compromising our ability to cultivate a different type of thinking, namely social/moral insight.”

“These findings,” Friedman continued, “are consistent with the philosophical view, espoused by (Immanuel) Kant, according to which there are two distinct types of truth: empirical and moral.”

In short, “taking a carefully considered leap of religious faith appears be an effective route to promoting emotional insight. Theirs and other studies find that, overall, religious belief is associated with greater compassion, greater social inclusiveness and greater motivation to engage in pro-social actions.”

Gender Differences in Religiosity Among U.S. Elites

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Check out the graph below:

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The data come from a 2016 study on the religiosity of high-earning men and women. The author explains,

Among high earners, women are no more religious than men. High-earning men are just as likely as high-earning women to be religiously affiliated, to pray daily, to identify as a strong member of their religion, and to attend religious services weekly. This convergence occurs because the relationship between earnings and religiosity operates differently for women and men. High-earning women are consistently less religious than low-earning women, and high-earning men are consistently more religious than low-earning men.

Why is this the case?:

One likely explanation is the gendered norms around work and family in family-centric congregations. Previous research has shown that even progressive congregations still value and provide services around the assumption of a 1950s family with a bread-winning father and a stay-at-home mother. Therefore, high-earning men may receive positive validation from family-centric religious congregations and identities because they are fulfilling their “proper” role as providers for their family (and are seen as important congregation members with leadership potential). High-earning women, however, may receive less validation than women who are perceived as less career oriented and more family oriented. In fact, women with high-powered careers may feel marginalized when many “women’s activities” are centered on homemaking and scheduled during the work day.

Although scholars have come up with complex explanations for why women are more religious than men, the difference may simply be due to social expectations and social benefits. People may expect women, who are also expected to fill caring roles in their family and in society, to be more religious. These expectations could be especially strong in Christian contexts where religion is associated with family-centrism and sympathy (gender gaps in religiosity are usually smaller or non-existent in non-Christian religions). Relatedly, it is possible that the average woman simply gets more out of Christianity than the average man (e.g., opportunities to socialize outside the home, existential security, etc.). Among high earners, however, women may no longer get more out of religion than men.

Regardless of exactly why earning more money means something different depending on whether you’re a man or woman, there are no gender differences in religiosity among high earners, and differences among women and men are just as large as the average differences between them. Therefore, gender differences in religiosity shouldn’t be reduced to sex categories and hormones.

Are CON Regulations Barriers to Entry?

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A 2016 Mercatus working paper argues that “certificate-of-need (CON) laws restrict healthcare institutions from expanding, offering a new service, or purchasing certain pieces of equipment without first gaining approval from regulators.” Drawing on data from the Standard Analytic Files and the American Health Planning Association, the authors review the 21 states with CON requirements “for at least one of three regulated imaging services: MRI (magnetic resonance imaging) scanners, CT (computed tomography) scanners, and PET (positron emission tomography) scanners. Medicare claims provide an estimate of the utilization of these different services and allow their utilization and accessibility to be compared between CON and non-CON states.”

The results?:

  • CON Regulations Have a Negative Effect on Nonhospital Providers
  • The association of a CON regulation with nonhospital providers is substantial, ranging from −34 percent to −65 percent utilization for MRI, CT, and PET scans. Nonhospital providers in CON states experience significant decreases in the utilization of imaging services compared to hospital providers.
  • CON Regulations Have No Effect on Hospitals, Thus Increasing Their Market Share
  • CON regulation has no measurable effect on hospitals’ utilization of imaging services. The volume of services provided in hospitals is not affected by CON regulation. This may explain why hospital providers have a stronger market presence in CON states than in non-CON states.
  • Consumers Are Driven to Seek Imaging Services in Non-CON States

The researchers conclude,

CON laws act as barriers to entry for nonhospital providers and favor hospitals over other providers. In consequence, consumers of MRI, CT, and PET scanning services are driven to seek these services either out of state or in hospitals. More research is needed to determine whether additional costs and barriers in the healthcare industry restrict specific market providers and affect where procedures occur. 

Millennials: An Oppressed Group?

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“Roughly a quarter of the world’s people—some 1.8 billion—have turned 15 but not yet reached 30,” reports The Economist.

In many ways, they are the luckiest group of young adults ever to have existed. They are richer than any previous generation, and live in a world without smallpox or Mao Zedong. They are the best-educated generation ever—Haitians today spend longer in school than Italians did in 1960. Thanks to all that extra learning and to better nutrition, they are also more intelligent than their elders. If they are female or gay, they enjoy greater freedom in more countries than their predecessors would have thought possible. And they can look forward to improvements in technology that will, say, enable many of them to live well past 100.

So how can these youngsters be described as “oppressed”?

Many of their woes can be blamed on policies favouring the old over the young. Consider employment. In many countries, labour laws require firms to offer copious benefits and make it hard to lay workers off. That suits those with jobs, who tend to be older, but it makes firms reluctant to hire new staff. The losers are the young. In most regions they are at least twice as likely as their elders to be unemployed. The early years of any career are the worst time to be idle, because these are when the work habits of a lifetime become ingrained. Those unemployed in their 20s typically still feel the “scarring” effects of lower income, as well as unhappiness, in their 50s.

Housing, too, is often rigged against the young. Homeowners dominate the bodies that decide whether new houses may be built. They often say no, so as not to spoil the view and reduce the value of their own property. Over-regulation has doubled the cost of a typical home in Britain. Its effects are even worse in many of the big cities around the world where young people most want to live. Rents and home prices in such places have far outpaced incomes. The youngsters of Kuala Lumpur are known as the “homeless generation”. Young American women are more likely to live with their parents or other relatives than at any time since the second world war.

Young people are often footloose. With the whole world to explore and nothing to tie them down, they move around more often than their elders. This makes them more productive, especially if they migrate from a poor country to a rich one…[And yet,] many governments discourage not only cross-border migration but also the domestic sort. China’s hukou system treats rural folk who move to cities as second-class citizens. India makes it hard for those who move from one state to another to obtain public services. A UN study found that 80% of countries had policies to reduce rural-urban migration, although much of human progress has come from people putting down their hoes and finding better jobs in the big smoke. All these barriers to free movement especially harm the young, because they most want to move.

…[M]any governments favour the old: an ever greater share of public spending goes on pensions and health care for them. This is partly the natural result of societies ageing, but it is also because the elderly ensure that policies work in their favour. By one calculation, the net flow of resources (public plus private) is now from young to old in at least five countries, including Germany and Hungary. This is unprecedented and unjust—the old are much richer.

…The young are an oppressed minority—albeit an unusual one—in the straightforward sense that governments are systematically preventing them from reaching their potential. That is a cruel waste of talent. Today’s under-30s will one day dominate the labour force. If their skills are not developed, they will be less productive than they could be…What is more, oppressing youngsters is dangerous. Countries with lots of jobless, disaffected young men tend to be more violent and unstable, as millions of refugees from the Middle East and Africa can attest.

We tend to forget that “the poor” often means “the young.”