Medicine, Outsourcing, and Cartels

NYT:

Frank Levy, an economist at the Massachusetts Institute of Technology,… teamed up with two other MIT researchers, Ari Goelman and Kyoung Hee Yu, and they dug into the global radiology business. In the end, they were able to find exactly one company in India that was reading images from American patients. It employs three radiologists. There may be other such radiologists scattered around India, but Levy says, “I think 20 is an overestimate.” …

To practice medicine in this country, doctors are generally required to have done their training here. Otherwise, it is extremely difficult to be certified by a board of other doctors or be licensed by a state government. The three radiologists Mr. Levy found in Bangalore did their residencies at Baylor, Yale and the University of Massachusetts before returning home to India.

“No profession I know of has as much power to self-regulate as doctors do,” Mr. Levy said.

So even if the world’s most talented radiologist happened to have trained in India, there would be no test he could take to prove his mettle here. It’s as if the law required cars sold here to have been made by the graduates of an American high school.

From the paper by Levy and Goelman:

One could imagine international agreements that allowed radiologists credentialed in one country to practice in another. In fact, no such agreements exist for radiologists practicing in the United States, a reflection, in part, of U.S. doctors’ group power. U.S. radiologists’ power to restrict foreign competition is reinforced by malpractice insurance, Medicare reimbursement regulations, and in all likelihood, consumer preference. Software professionals have few of these protections and so face strong foreign competition. [Levy & Goelman (pdf)]

I believe it was Milton Friedman who described the AMA as the country’s most successful cartel.

New USTR

Susan Schwab is the new United States Trade Representative, previously serving as deputy USTR. Rob Portman is moving to OMB.

Drezner opines that this is bad for negotiations: “Bush and Bolten have decided to switch teams at USTR in the weeks before various deadlines for the Doha round of trade talks come up. This is a bad, bad sign for the likelihood of those negotiations to succeed.” According to the FT, “the appointment of Ms Schwab… was intended to send a signal of continuity, US officials said on Tuesday.”

I have no idea if the switch will have an impact at the negotiating table.

How to rescind sugar subsidies?

CEI:

This paper explores the possibility of reform of the sugar program by considering other agricultural reforms at home and abroad. The cases examined are New Zealand’s agricultural policy reform in the mid-1980s, changes to the United States peanut quota program through a buyout program, and the buyout program for tobacco quota holders in the United States.

[Hat tip: H&R]

The World Is Not a Metaphor

I’ve never seen a 55 page long book review. Ed Leamer:

When the Journal of Economic Literature asked me to write a review of The World Is Flat, by Thomas Friedman, I responded with enthusiasm, knowing it wouldn’t take much effort on my part. As soon as I received a copy of the book, I shipped it overnight by UPS to India to have the work done. I was promised a one-day turn-around for a fee of $100. Here is what I received by e-mail the next day: “This book is truly marvelous. It is perhaps the greatest book ever written. It will surely change the course of human history.” That struck me as possibly accurate but a bit too short and too generic to make the JEL happy, and I decided, with great disappointment, to do the work myself.

I’ve also never seen a smiley face in the JEL, but there it is on page seven. I’m still working my way through the section on economic geography, but Leamer also covers trade theory and recent economic history.

[Hat tips]

Foreign Aid at Cato Unbound

This month’s Cato Unbound focuses on foreign aid. I found Branko Milanovic’s criticism of William Easterly very compelling. Perhaps Easterly’s full-length book will contain nuances that accomodate Milanovic’s objections.

I found Deepak Lal’s essay surprisingly pessimistic:

That is why in a recent book I had argued that short of direct or indirect imperialism there seems to be little hope of overcoming the domestic political obstacles to the efficient utilization of foreign aid, particularly in Africa, where most of the current efforts of the “do gooding” brigade in the developed world are rightly concentrated. Given this political constraint, the best the rest of the world could do for Africa is to keep its markets open for the free flow of trade and capital, but otherwise leave Africa alone, to sort out its own problems.

In an essay that Jim will surely enjoy, Steve Radelet writes:

Take a closer look: $2.3 billion over 50 years is $46 billion a year, a modest amount for any global capital flow. And only about half went to low income countries, with the rest to middle-income countries like Israel that didn’t need it. So we have around $26 billion a year for all the low income countries. This works out to be a rip-roaring $14 per person per year in low-income countries. Much of that goes to consultant reports or is tied to purchases in donor countries where it gets much less bang for the buck. As a result the recipients actually get far less than these figures indicate. So let’s cut the grandstanding. It ain’t much. In Easterly’s judgment, based on his opening vignette, because poverty still exists in Ethiopia after it has received all of $14 per person in aid per year (Ethiopia happened to receive exactly the average amount), “aid doesn’t work.” Please! …

And here is the dirty little secret: most of the published research over the past decade has shown a modest positive relationship between aid and growth—not in all countries, to be sure, but on average across countries over time.

I think that Milanovic’s exposure of Easterly’s argument’s weaknesses makes Lal’s stance more compelling, but Lal’s essay contains insufficient evidence to refute Radelet.

Cato PA #557 & Average Tariff Statistics

A note worth passing along: Jim catches an odd statistical choice by Marian Tupy in his latest Policy Analysis, “Trade Liberalization and Poverty Reduction in Sub-Saharan Africa.” Check it out.

Using three countries to represent the average tariff of the 48 nations in sub-Saharan Africa is an embarrasingly bad approach, but apparently Tupy also avoided using an earlier base year that offered more data!

Another irony: Figure 7 makes it appear that Sub-Saharan Africa’s trade regime was the most liberal in the world in 1983!

Douglas Irwin – Against The Tide

I just finished reading my university’s copy of Douglas Irwin – Against The Tide and ordering a copy from Amazon. This stellar text is an intellectual history of the idea of free trade. Irwin masterfully traces the origins of the doctrine back to the ancient Greeks and illustrates its evolution up to the present. In describing how philosophers and economists thought about trade prior to Adam Smith, Irwin highlights numerous fascinating thinkers that many have forgotten. Of particular interest is Henry Martyn, who made an exceptionally advanced analytical case for free trade in 1701. And in tracing the history of free trade since Smith’s breakthrough work, Irwin aptly summarizes the most important debates with the clarity and insight afforded by contemporary analysis.

Paul Krugman found the text “full of new insights and unexpected delights.” I recommend it without hesitation.

Doha is dead?

World Trade Law:

House Ways and Means Committee Chairman Bill Thomas (R-CA) today (April 3) called on the Bush Administration to acknowledge that the ongoing Doha round of trade negotiations is completely stalled over European intransigence, and refocus its energies on completing negotiations for free trade agreements already launched before fast-track negotiating authority expires in July 2007.

Ben Muse:

An impasse in negotiations, a weakening American President (who will be a lame duck when an agreement would come before Congress), an opposition that’s seen the potential benefit of the protection card (a key element in the Dubai Ports World), and that can be expected to make gains in the 2006 mid-term elections. None of this augurs will for a successful Doha Round.