Illusory Follies Andrew Flanagan's Blog

19Jan/100

Price Tracking

Price tracking can be confusing online. Retailers  like Amazon and Newegg (two that I buy from frequently) seem to sometimes change their prices daily. One expects prices to drop over time but this doesn't always happen. I was surprised to find that prices for Solid-State Hard Drives have actually been rising recently (although the real deals appear to have been back in October/November). Thankfully there are some tools that can help. One of them is the Camelizer -- a Firefox plugin. Alternatively, you can access the same data at the website camelcamelcamel.com (for Amazon) and camelegg (for Newegg). The same group also tracks prices at BackCountry, Best Buy, OverStock.com, and Zzounds,

Here's an example of one of the SSD's that I'm interested in:

In this digital age it's nice to have something that keeps some history around. It's easy to get information these days but it's always easy to change information (which is why I'm also a big fan of the WayBackMachine -- check out the original Google page!) We don't keep coupons, flyers, or catalogs anymore, we just remember the website.

Anyone experience this sort of problem?

10Jan/092

Health Insurance

Stethescope by LadyheartThat's right folks, you know where to come when you need only the finest steaming fresh folly! Just minutes ago, I saw a new post on the infamous Slashdot. Rather than comment on the site itself and have my comments lost in the masses, I figured I'd comment here and let them get them lost in this corner of the Internet.

So the idea of the article is that cheap and easy genetic testing is here now. This sort of testing can provide massive insight into potential health risks. There's a lot of info that can be mined out of this that can help determine statistical likelihood for certain diseases, genetic defects, etc.

So it makes sense that health insurance companies would be interested in this.

But the line (posted in the Slashdot summary which is why it caught my eye particularly) that gets me is this: "Piecemeal insurance is not viable in a world in which insurers can cherry-pick the most risk-free customers". I find this statement to be fascinating. Not because it's so amazing and revealing of the future but because it's so stupid.

Insurance is a way to manage risk. In all things in life, there's risk. Even the sure things in life (that's right: death and taxes) have spawned insurance products. The idea is that you pay a known amount of money now in order to prevent you from paying an unknown amount later. It's considered equitable (at least when we're talking about regular, private insurance). That is, both the insured (the entity mitigating risk) and the insurer (the entity shouldering the risk) are happy to be involved.

And this makes sense... If I have a large amount of cash, I can charge more than the statistical likelihood of the sum output of cash expected. Statistics can be wrong, but if I leave a large enough gap, I can make money as an insurer.

If I wanted to insure against the possibility that I would die on my next plane ride (I just wrote this out as "my next plane crash"... har!) , I could probably get some sort of policy that would insure me for this. I would pay some amount -- let's say $50 and if, in fact, I died in a plane crash, the insurer would pay out $500,000 to my next-of-kin. This makes sense -- there's an extremely small chance of me dying in a plane crash. Statistics are fairly readily available that show the likelihood of such a crash (they're small -- really Mom -- it's not dangerous to fly!)

This premium charge would be quite a bit higher if you were an experimental test pilot. (By the way, shouldn't they call them "test pilots for experimental aircraft" to avoid adjective confusion? As in, "Hey man, I'm just experimenting with this 'test pilot' thing!").

Hutt, Jabba theSo now the fun begins: people want health insurance. Health insurance has been getting more and more expensive and people in the U.S. are having more and more trouble even being qualified to receive it. This makes sense.

Most of us are fat and unhealthy (see picture). Our idea of a nutritious meal is one that has fried meat AND fried vegetables.

So of course costs are rising. Of course some people are deemed "uninsurable". Who wants to cover someone who has an estimated 90% chance of developing a disease or condition that will cost on average $750,000 to treat? The answer is: someone willing to pay premiums that even at those estimated probabilities will still yield a profit (which is no one).

So insurance always has to be equitable -- it always has to make sense for both parties or else it will not be "viable".

I think the reason the statement was made is this: People don't want insurance, they want to avoid problems. They don't want health insurance, they want health. Insurance therefore is viewed not as a tool of the free market that helps manage and mitigate risk, but a social institution that promotes the general well-being of people.

Yummy! (but expensive)!One could say that the statistical ties between tobacco usage and cancer/death, resulting in increased premiums for folks using tobacco, has put pressure on healthy behavior. Previously, an individual could choose to simply ignore this but would have to suffer the consequences of their actions (in expensive treatment or in simply shuffling off this mortal coil earlier rather than later). Now, when applying for life insurance, you see a dramatic difference between the two rates based on that sole attribute: Do You Smoke? The result (at least might be) a decrease in smoking rates since people drive down the price they pay by changing their lifestyle. This is great! At least as long the statistical likelihood is actually accurate.

OK -- people don't seem to  have a problem with this. But with genetics they do... The reason is that someone genetically predisposed to some potentially expensive condition has no ability to alter their circumstances. Essentially, there is no socially reforming affect upon this person. They simply must pay more to mitigate their risk.

From the market's standpoint, this seems to make good sense: With increased ability to predict risk (at least in theory), there's less waste as premiums be can fine-tuned to more accurate levels. Competing insurance companies can make tiny profit margins on policies with a highly predictable amount of risk (which saves consumers money).

But it doesn't "provide for the general well-being". So, oddly, government provided health care is essentially the same as a private insurance company that knows only statistic: Some people die, some don't. And the government will also up the premiums a little bit more for everyone who can afford to pay them because there are some who can't afford to pay anything at all -- even a low premium.

This is the concept. I suppose it's better than forced sterilization or elimination of Lebensunwertes Leben. That's another way to care for society.

CommunismSo, after all this, it comes down to the purpose of government. Can we provide a system where we can all be happy, from each according to his ability, to each according to his need? How well has that worked...? Should we try the other way to create a perfect, genetically pure society where equality becomes irrelevant?

I think the answer is neither. Life is tough. People die. Babies are born with horrible conditions. Some people are more likely than others to get fat, get cancer, get drunk. Can we ever really change that? Are disabled people the same as non-disabled people because we have a telephone-book-sized stack of laws that give them in equality in all things? Of course not. Life simply isn't fair.

Capitalism isn't the answer either. The thing that makes sense about capitalism is that it works with regards to motivating production. Production and effectiveness is a good thing for any civilization that wishes to remain one. However, capitalism provides no way of making life fair. Let's not try to coerce it and massage it into something it can never be.

So what about those people? The people who are born with horrible conditions or who are likely to develop them? Neither capitalism nor socialism can help them. We as people can. Instead of saying "Someone should do something about this inequality!" be the someone and stop passing the buck. We may not be able to make their lives longer or less painful -- even with unlimited medicine this is probably impossible. But we can make a difference in their life by developing relationships with them and loving them. I think the hardest of hearts out there can understand how much more a real, genuine friendship means to someone than extending a life of misery and depression yet another day.

So that's it! Your economic lesson for the day:  Love people and don't become commies!

11Dec/084

Pricing?

I was annoyed by a recent post to Slashdot. It references an article that makes the claim that the iTunes App Store (which sells applications for the iPhone and iPod touch) is hurting developers because of the pricing model that's allowed. Basically, the pricing model is open. Applications must be approved before Apple will list them but you can price them between $.99 and $999.99 (or they can be free). Developer's are apparently whining that with the availability of cheap (usually $.99 applications) it's hard to support serious development.

Stack of Money by Dani SimmondsThe request is that Apple "do something" to fix this.

This is bizarre. The claim is that because so many free or cheap applications have flooded the market, no one can compete. The analysis looks at cost to bring an iPhone application to market and the expected sales depending on its price.

Maybe the problem is simply that iPhone users aren't willing to drop as much money as developers would like. Maybe the current glut of free and cheap apps is a poor anticipation of actual demand by the developers. Some developers made free apps, sold the idea and hooked users and then migrated to $1 or $5 applications. These developers are making SOME money. Maybe not a lot, and maybe the iTunes App Store will never be a lucrative business for developers (although Apple seems to be doing quite well).

The success that small programming outfits have had is that they can leverage a nice API to work with that users can use in novel ways. At $1, many users are willing to buy without recognizing a brand name or being suspicious of a poorly made product. For independent software developers, this is probably enough to pay the bills. For larger products, the source of income is likely to be in the form of some integrated service (free iPhone application that interfaces with a $40 desktop application).

I don't see the dilemma. Isn't this what the free market is all about? If customers aren't willing to pay $20 for most applications for the iPhone, maybe developers shouldn't make them. On the other hand, if developers really can make a much more complex product with almost universal appeal, then even pricing it at $1 or $5, it will almost surely pay for the higher development costs. This is the way the world works.

11Jan/082

Solution to our economic woes?

I'm very confused over economist's handling of our current situation. On the one hand we have inflation and on the other we're struggling with economic growth.

In order to avoid a recession (negative economic growth) the Fed is considering cutting interest rates now while Bush is planning an "economic stimulus plan". So... cut rates which will cause more inflation and then print more money which will definitely cause more inflation. The end result seems like it will be out-of-control inflation regardless of real economic growth.

We have all the signs of "stagflation" seen in the 1970's but this time instead of going through a "disinflationary" period, we're planning to attempt to not worry about inflation and just worry about growth. But the problem is that while a "disinflationary" period would have certainly hurt and people would have lose their jobs, what we're doing instead offers no long-term solace -- at least none that I can see. Tackling inflation first would give us a solid base on which we could kickstart the economy (if we should kickstart it at all). I guess my rather un-academic feeling is that economic growth is good and necessary for the future but that inflation affects our already saved-up capital. If that's the case it seems to make sense to control inflation before we worry about ever-increasing economic growth.

Please add your comments -- I'm not much of an economist so I'm likely off the mark.

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