Economics
Economics Department News
Economics Professor Jeanne Boeh speaks on Almanac Broadcast
Professor Jeanne Boeh along with economist Chris Farrell discussed business headlines on the public interest television newshow Almanac in March 2013.
IMF Economist Speaks at Augsburg College About Globalization
IMF Economist Prakash Loungani spoke at Augsburg College
International Monetary Fund (IMF) economist, Prakash Loungani, spoke at Augsburg College’s Batalden Seminar on Applied Ethics on March 3, 2009. Dr. Loungani’s speech was entitled “Economic Globalization: Who Wins and Who Loses.” For information about the IMF and Dr. Loungani please see IMF Economist Prakash Loungani.
Mayo Clinic Collaborates with Augsburg College for Student Research
Augsburg Mayo Scholars Zachary Stevens, Joe Buchman, Brianna Noland, Sandra Hinzs and Augsburg MBA student Kelvyn Henderson.
The Mayo Innovation Scholars Program (MISP) is an experiential, interdisciplinary learning opportunity that engages science and economics majors at select Minnesota private colleges in evaluating the commercial potential for inventions and discoveries by Mayo Clinic physicians and researchers. Each student is led by a MBA student and advised by a Licensing Manager from the Mayo Clinic Office of Intellectual Property. The student team gains valuable insights and experience in assessing and evaluating new medical technologies, devices, and ideas submitted to the Mayo Clinic’s Office of Intellectual Property. The experience culminates with a presentation of the team’s research findings at the Mayo Clinic in Rochester, MN.
Participating Mayo Scholar Students in 2013 included economics major Brianna Noland, biology majors Joe Buchman, Sandra Hinzs, Zachary Stevens and Augsburg MBA student Kelvyn Henderson. Faculty mentors for the team were Economics Professor Stella Hofrenning and Biology Professor David Crowe.
The Mayo Innovation Scholars Program is an annual research opportunity. There is a competitive selection process every fall to determine participating students. Please see Undergraduate Research and Graduate Opportunity at Augsburg College for additional information.
Economics student Brianna Noland Presents at Posters on the Hill in Washington, DC
Economics major Brianna Noland, Senator Al Franken and Economics Professor Stella Hofrenning
Brianna Noland, a senior economics major, represented Augsburg College in the Council of Undergraduate Research Posters on the Hill event in 2013. This non-partisan event, held each year at the U.S. Capitol Building in Washington D.C., showcases the research of a total of 60 undergraduate students (out of 800 applicants) from colleges and universities across the country.
Economics Professor Stella Hofrenning, who was Brianna’s research advisor, said that the Council chose projects that represented outstanding examples of undergraduate research. Brianna’s project, which was funded through the Undergraduate Research and Graduate Opportunities (URGO) program at Augsburg involved analyzing college student retention rates and the impact of student debt on those rates. For more information about undergraduate research see Augsburg Undergraduate Research (URGO).
While at the Capitol, Noland and Hofrenning met with U.S. Senators Al Franken and Amy Klobuchar from Minnesota. Later in the day, Noland presented her poster to a large crowd of members of Congress, congressional staffers and other guests. For more information about the Council of Undergraduate Research see U.S. Council on Undergraduate Research.
Nobel Prize Winning Economist Elinor Ostrom Speaks at Augsburg College
Nobel Prize Winning Economist, Elinor Ostrom with Augsburg Economics Professor Stella Hofrenning
Dr Elinor Ostrom, the first woman to receive the Nobel Prize in Economics in 2009, was the keynote speaker for Augsburg’s Festival of the Commons Conference, October 8, 2011 at Augsburg College. Her groundbreaking research demonstrated that ordinary people are capable of creating rules and institutions that allow for the sustainable and equitable management of shared resources. For more information on Dr. Ostrom, see Elinor Ostrom biography.
Economics students are front and center
Joel Wilken-Simon, Adela Arguello, Loi Duong and Andrew Held discuss making research posters with Prof. Hofrenning.
Stella Hofrenning’s Research Methods in Econometrics course not only introduces Economics students to the process of solving economic problems, it also provides them the invaluable opportunity to present their research and findings to a national audience and to connect with peers from around the country.
For the past several years, numerous students of Hofrenning have represented Augsburg at the MidWest Economics Association Conference, Posters on the Hill Conference and the National Conferences for Undergraduate Research (NCUR).
Professor Hofrenning reports: “The experience of working on a research project and presenting the research at a conference motivates students to learn by doing. My research students learn to apply the economic theory in class by working with data and developing models for analysis. Having been accepted to present at a conference also helps students build their analytical and communicative skills as well as their confidence speaking in front of a group.”
Reflections on Sabo Public Policy Forum: 2010 Healthcare Reform—What Does It Mean for You (and the Nation)?
By Khalid Adam ’12
“Medicine’s role is to entertain us while Nature takes it course”
—Voltaire
The quote from 18th-century French essayist Voltaire about the role of medicine in the continuum of life echoes the evolution of medicine’s role from one that was inherently pacifist to one that was rooted in dramatically extending both the length and quality of life with the use of technology and the scientific method. By the time French philosopher Voltaire wrote his famous quote, the pattern of human disease had changed little over the course of the previous 2,000 years, with doctors only offering hope and comfort for the ill.
In fact, according to British physician and columnist Dr. James Le Fanu’s monumental book, The Rise and Fall of Modern Medicine, the top-ten defining moments of modern medicine only happened over the course of the last 60 years or so with the discovery of penicillin in 1941. Before 1941 many great improvements were made in public health, allowing people to live longer and healthier. However, few of those changes had little to do with the practice of medicine. They had a lot to do with better housing and nutrition, safe water, and better hygiene, except for a few treatments like bone setting, insulin, and thyroid hormones. Usually patients got better on their own. Or in the case of Calvin Jr., they didn’t (Gratzer, 2006).
Many remember President Calvin Coolidge in 1924, then one of the most powerful men, crawling on all fours to catch a rabbit so his son could hold it while he was dying. This was after the 16-year-old son had one day developed a blister playing tennis without socks on the White House courts. “In his suffering, he was asking me to make him well,” remembered Coolidge; “I could not.” An administration of penicillin would have easily saved Calvin Jr.’s life, but penicillin hadn’t been discovered. It was discovered 17 years later after the fact; in fact, the majority of our most innovative and definitive medical discoveries were made in the last quarter century with the development of advanced antibiotics, steroids, lithium, and drugs that treated neurological disorders. It is for this reason and many others that the issue of health care is especially daunting to analyze and to set policy on because it seems to not follow long-held economic assumptions about supply and demand. Technological growth is so explosive that the CT scanner has been replaced by the MRI scanner, which is now being outdone by the PET scanner. Doctors are no longer as passive as they were; instead they were busy curing patients and using large sets of data to test whether one drug could have multiple uses (Gratzer 2006).
Conventional economic thought has it that there should be an inverse relationship between rapid technological strides and the total costs associated with health care, but the economic data shows otherwise. When economist Milton Friedman compared health care spending with the other sectors of the economy, he wrote:
The change in the role of medical care in the U.S economy is truly breathtaking … in 1946, seven times as much was spent on food, beverages, smoking, and tobacco as on medical care; in 1996, more was spent on medical care than on food and beverages. In 1946, twice was spent on transportation as on medical care; in 1996, one-and-a-half times as much was spent on medical care as on transportation (Friedman, 2001).
So just why has healthcare spending gone so much out of control consuming nearly a sixth of GDP spending in 2008? The answers to this question are different according to whom you ask. Liberals say it’s the health insurance companies’ greed and the government’s inability to take a more concerted effort at containing costs and in regulating the employer market for health insurance. Meanwhile, conservatives argue that it’s too much regulation that is driving healthcare spending out of control, citing the growing budgets of government welfare programs like Medicare and Medicaid as the main culprits. They also cite over use of healthcare resources as the main problem, making the problem of health care a ‘volume-control issue’. However, in spite of these differing viewpoints, a few observations are unarguably universal:
- The science of health care has advanced rapidly over the course of the last 60 years, and this has an effect on prices of medical inputs.
- Increased health costs that outpace the growth in GDP have adverse effects on the economic outcomes on industries with large percentage of workers with ESI (Employer-Sponsored Insurance); this results in the loss of output and by de facto, the loss of jobs in those industries.
- The current trend in the growth of per capita GDP spent on health care is unsustainable in the long term.
Health spending in the United States has increased dramatically over the course of the past 50 years, from $27.5 billion in 1960 to $912.6 billion in 1993, and to a mind-boggling $2.4 trillion dollars in 2008 (Centers for Medicaid and Medicare, 2008). Using data from the Organization for Economic Co-operation and Development Percentage for U.S GDP spent on health care, it seems to be rising at an almost exponential rate (OECD, 2009). In 2017, it’s expected to reach all-time high of $4.3 trillion or 19.5% of the GDP and the effect of this spending on the economy is largely unclear. But the following fact rings a mostly lucid tune for health policy wonks. That the American healthcare system of health delivery is like a state-of the art fire department (circuitously referring to the explosive growth in innovation indirectly attributable to relatively a strong and a pro-inventor U.S Patent Office) functioning on an archaic transportation grid.
However some arguments from well-respected researchers have gained some credence. They call for a more sensible approach to the re-structuring of the delivery system into organized networks of providers. Their approach incorporates:
- A comprehensive recalibration of FFS (Fee for Service) system, instituting outcomes-based performance system.
- Creating episode-based payment to encourage cooperation among hospitals, physicians, and other care providers (Mechanic and Altman, 2009).
Policy recommendations that echo system-inefficiencies reform, like the one outlined by Mechanic and Altman for payment systems, are critical for creation of a system that equips consumers, governmental entities, and industry alike with perfect information (relatively of course) to make the most economic choices. Even so, an understanding of the information available to consumers is imperative in order to better understand the health choices they make. We expect the consumers of health care to be fully informed about prices, quantities, and the relationships of medical care and other inputs to levels of health. In reality consumers often have no clue, even about the mortality rates of hospitals in their networks. It seems there is less information in the public realm (consumers of health outputs) about the current health care system than there is about the satisfaction rates of hotel beds. It would only seem logical (believing choices about health care necessitate greater concern) that consumers make the most economic choice. This phenomenon is something that is not new throughout the health economy. In fact the markets for healthcare services and that for insurance are marked by significant degrees of asymmetric information and agency (the former encompasses situations where buyers and sellers have different levels of information while the later deals with situations where the lack of information, buyers, and sellers rely on each other to help make decisions) (Folland, Goodman and Stano, 1997). These phenomena, including the presence of Lemon’s Principles behavior in the market for health services, reverberate the commonly-held belief that American health care is incredibly all encompassing and complex. The risk for repercussions of any health reform can prove to be disastrous for incoming administrations. Since 1962 alone, seven presidents and ten congresses have considered the issue of national health insurance, but reform remained forever imminent (Eastaugh, 2001). Currently, 43 to 46 million Americans or 16 to 16.4% of the population have no health insurance with a growing number weary about losing their plans because of the potential for discovery of so-called “pre-existing conditions” (U.S. Congress, 2000). The working poor have no political power, and special interest groups like the insurance industry are against any change to the status quo. This fact remains harrowingly true.