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Rand's Roland Sturm compiled some statistics on obesity in the United States

The study compares the effects of obesity, smoking and problem drinking on health care utilization and health status, using national survey data. Obesity is associated with a 36% increase in inpatient and outpatient expenditures and a 77% increase in medication costs than people falling within a normal weight range, while current smokers see increases of only 21% for services and 28% for medications over those of non-smokers, and problem drinkers see an even lesser effect for both. Meanwhile, aging from 30 to 50 is associated with a 20% hike in service costs, but a 105% increase in medication costs.

Much of the increase in obesity is recent--the story reports that the incidence of obesity is up 60 percent in the last decade. Last night, I attended a lecture by an NIH researcher, who pointed out that this could lead to an epidemic of diabetes.

Because the increase in obesity is so recent, most of the health care impact has yet to be felt. However, I would think that the combination of an aging Baby Boomer population and the surge in obesity implies dramatic increases in health care expenditures. Economic growth outside of the healthcare industry may be limited as a result.

Discussion Question. Obesity, like single motherhood and cigarette smoking, might be a divisive issue politically. Do you think that conservatives will hold people responsible for their own obesity, while liberals will consider them victims of Big Food?

The Skeptical Environmentalist is a controversial book by Bjorn Lomborg. He conducts a factual survey about the state of the environment, and he finds many signs of improvement and little support for the view that we need to curtail economic growth or risk environmental catastrophe.

Recently, Scientific American devoted an issue to attacking Lomborg. This has frustrated Lomborg's supporters, as Philip Stott illustrates.

not only did the magazine run an editorial criticizing Dr. Lomborg, it gave space to four known environmentalists to write separate articles attacking him with no balancing articles whatsoever from senior scientists who are likely to support Dr. Lomborg's critique. Again, I have never heard the like. In a so-called scientific journal, such a course of action beggars belief. I would always give my worst enemy the right of reply.

Lomborg points out that economic growth and technological progress are instruments for reducing pollution. It is that position which irks environmentalists. I am afraid that as I read the environmentalists, their view is that economic growth must be stopped at any cost. I suspect that if their policies were enacted, the environment will be more damaged than if progress is allowed to continue.

Discussion Question. Why are environmentalists so upset by an analysis that is grounded in statistics and economics?

Paul Krugman's NY Times column today is an obituary to James Tobin, the Nobel laureate who died yesterday. To me, Tobin's most outstanding contribution was his theory linking business investment to the stock market, through the ratio that he called "q": the market value of capital divided by its replacement cost.

Yesterday I spoke with William Brainard, another Yale professor who worked with Mr. Tobin, who remarked on his colleague's "faith in the power of ideas." That's a faith that grows ever harder to maintain, as bad ideas with powerful political backing dominate our discourse.

I would not argue that our political discourse at present is decent or wise. However, in some respects, it seems more informed by economics than it was 30 or 40 years ago. I think that the problems of certain types of regulations, such as price controls, are better understood than they used to be. On the whole, I think that more policies are evaluated in terms of the incentives they create than was the case in the 1960's and 1970's.

Discussion Question. The U.S. economy has spent less time in recession in the past 20 years than it did in the previous 20. Does this reflect more wisdom about economic policy? If so, where is the wisdom in Japan?

I thought that U.S. trade representative Bob Zoellick should have resigned in protest when President Bush approved steel tariffs. But that's not the way one of President Clinton's former trade representatives sees it. In fact, the Democrats' only complaint about the tariffs is that they wanted them to be higher.

Discussion Question. Kantorwould have us believe that the tariffs will be a bargaining chip that we can use in trade negotiations. But are other countries likely to react by offering to reduce trade barriers or by creating their ownl "bargaining chips"?

In April's Atlantic Monthly (not yet on line, but you can see some illustrations with QuickTime), Jonathan Rauch looks at some results from computer simulations of social epidemics. One of the interesting examples is one in which people pair off to make transactions. When both are corrupt, corruption pays; however, when one party is honest corruption does not work. Eventually, in such a society, honesty begins to dominate, because

Every so often...a particularly large number of corrupt agents, who happen to have particularly large networks of friends who perhaps themselves have larger social networks, will be arrested...Fearing that they will meet their friends' fate, the agents behave more honestly; and in doing so they heighten yet further the odds that a corrupt agent will be nailed...Soon--in fact, almost instantly--so many agents are behaving honestly that corruption ceases to pay, and everyone turns honest.

Discussion Question. Underdevelopment and bureaucratic corruption often go together. Could it be that the key to development is experiencing an epidemic of honesty?

Former speechwriter William Safire certainly knows how to assemble rhetoric. In arguing for vigorous antitrust enforcement, he writes

With the roundheeled Michael Powell steering the Federal Communications Commission toward terminal fecklessness; with the redoubtable Joel Klein succeeded at Justice's antitrust division by an assortment of wimps; and with appeals courts approving the concentration of media power as if nothing had changed since President Taft's day, the checks and balances made possible by diverse competition are being eradicated...

Why, then, should we supinely go along with the seizure of economic power by today's triopolies and duopolies on their march to becoming tomorrow's monopolies?

Ironically, as Declan McCullagh reports, Safire's column was quoted at a hearing by Senator Ernest Hollings, known as the Democrat from Disney. Hollings is behind legislation favored by Big Entertainment to force all consumer hardware to incorporate copy protection technology.

The reason that we do not need government to protect us from monopolies is that other companies protect us from monopolies. When government steps in, the result often is to create and protect monopolies.

Discussion Question. Do you believe that the human beings in the government (as opposed to hypothetically omniscient benevolent deities) can regulate or break up a local phone company or Microsoft in a constructive way?

In case you were in any doubt about the wisdom of President Bush's decision to impose tariffs on steel, Pat Buchanan's position should settle it for you.

Though threatened with a trade war, the president did not buckle or back down. Good for him. Economic patriotism may just be back in style. And if the European Union decides to haul us before the World Trade Organization for a caning, the president should tell the WTO to take a hike. If Europe wants a trade war with the United States, let it begin here.

If steel tariffs have Buchanan's support, then you know that they are a terrible idea.

Paul Krugman criticizes the tariffs. This column is unusual for Krugman in that (a) he expresses opinions that most economists would endorse and (b) he makes an unflattering comment about Democrats.

Let's be clear: Many Democrats were on the wrong side of the steel issue. But it was up to Mr. Bush to show leadership, to demonstrate that he really cares about the principles he espouses. I guess not.

Discussion Question. Should someone in the Bush Administration have been willing to threaten to resign if steel tariffs were approved? Trade Representative Zoellick? Council of Economic Advisers Chairman Hubbard?

After September 11, some headlines screamed "Why do they hate us?" Since then, there has been much made of the antagonism toward the U.S. expressed in Europe and elsewhere.

To economists, the question is, "Why do they love us?" This love is expressed in the large waves of immigration and also the huge inflow of capital. That capital inflow in turns drives a large deficit in our balance of trade. As Paul Krugman once put it,

The "sustainability" question...- is whether the market seems to be properly allowing for that required future currency decline. If not, the dollar is doing a Wile E. Coyote, and is destined to plunge as soon as investors take a hard look at the numbers. (For those without a proper cultural education, Mr. Coyote was the hapless pursuer in the Road Runner cartoons. He had the habit of running five or six steps horizontally off the edge of a cliff before looking down, realizing there was nothing but air beneath, and only then plunging suddenly to the ground).

Since that was written, the dollar has remained high and the trade deficit has worsened. And the problem that Krugman raised--the fact that the rest of the world does not appear to be able to increase its demand for products to offset a turnaround in the U.S. balance of trade--persists.

Discussion Question. If the large capital inflow to the U.S. were to stabilize or reverse, are there automatic mechanisms that would increase foreign demand for U.S. goods, or would the result be a worldwide recession?

Paul Krugman really understands social security. I know this, because I went to www.pkarchive.org and found this essay, which Krugman published in 1996.

Generous benefits for the elderly are feasible as long as there are relatively few retirees compared with the number of taxpaying workers -- which is the current situation, because the baby boomers swell the workforce. In 2010, however, the boomers will begin to retire. Every year thereafter, for the next quarter-century, several million 65-year-olds will leave the rolls of taxpayers and begin claiming their benefits.

...the general thrust is clear: slow the growth in benefit levels, gradually raise the retirement age, impose limits on expensive terminal medical care that prolongs life for only weeks or days and -- last but not least -- raise taxes moderately now, rather than massively later...sensible proposals, however, because there is not the slightest prospect that they will be put into effect -- or indeed that we will do anything serious about the looming crisis until it is almost upon us.

Social security is one of those issues where economists hold a position that is ignored by politicians, who instead indulge in demagoguery. Krugman understands the importance of gradually raising the retirement age. However, in his current incarnation as a columnist for the New York Times, Krugman omits any mention of the economic consensus, because it runs counter to Democratic Party orthodoxy.

Discussion Question. If the real problem of social security is that there will be too many retirees relative to the working population, why focus on the issue of privatization?

Modern economists believe that capital flows drive trade flows. When foreign investors want American assets, the capital that flows in is balanced by a deficit in our balance of trade. But with the U.S. trade deficit at over 4 percent of GDP, who is so anxious to buy our securities?

Morgan Stanley economists Joe Quinlan and Rebecca McCaughrin have the answer.

Net US inflows from Asia ex-Japan totaled $17.3 billion in November and another $19.8 billion in December, the strongest two-month surge on record. In December alone, the region accounted for 42% of total US inflows, with China and Hong Kong the primary sources of capital. The late-year surge in inflows from Asia ex-Japan pushed the regional total to a record $111 billion for the year, more than double the level of the prior year. As a result, Asia ex-Japan’s share of US inflows rose to 21% last year, up from 11% in 2000.

Asian investors have more confidence in the U.S. economy than in any of their local economies. My guess is that they are irrationally exuberant about our economy (or irrationally pessimistic about Japan and other Asian economies). Meanwhile, they are helping to keep the dollar bubble and our stock market bubble inflated.

Discussion Question. A rapidly-growing developing country, like China, needs to import capital. How is it that China is able to supply capital to the United States?