In the US, medicine is a racket where the supply is intentionally constrained. Changes such as these should help ease the burden of doctor cost and availability.
It's amazing how people just accept that it takes 6 months or more to see a specialist and don't realize that it is de facto rationing caused by intentional supply restriction.
People prefer to argue endlessly about private vs state funded healthcare without realizing that issue is completely orthogonal to the massive doctor shortage.
Same thing with the housing debate really. People prefer to argue snot rent control instead of just building more housing.
You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap? Hardly.
We're only seeing sustained price decreases now that the bubble is bursting, but it's not going to make real estate more affordable, as it comes with a heavy economic downturn.
When your housing inventory is located on no mans land, and your economic policy is largely built on top of assumptions that housing should be an infinitely-appreciating asset (instead of a depreciating asset, like any other hars asset) , then you end up with china prices.
And I'm not even mentioning the fact that the Chinese birthrate decline is so precipitous that their current population is expected to half by 2100.
The chinese market of housing does not reflect real supply or prices. It instead reflects bad incentives and an economic bubble propped by the centralized state
> You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
Suppose housing prices are high. A construction company exists and has a million dollars, so they buy a $500,000 home, knock it down and spend $500,000 to build half a dozen condo units the size of the original house on the same lot, then sell them each for $500,000. That takes six months to a year. Now the construction company has three million dollars and buys three lots and makes nine million dollars, do you see where this is going?
The thing that prevents this is when either a) they're not allowed to knock down the house and build condos there, or b) you pass laws that make it cost $3,000,000 to build a six-unit condo instead of $500,000, and then the unit is never going to cost less than $500,000 because it costs that much to build.
> China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap?
China is hardly an example of markets. But it's a good demonstration of why you need to allow housing to be built anywhere that it's needed instead of having bureaucrats decide where it should go.
> We're only seeing sustained price decreases now that the bubble is bursting, but it's not going to make real estate more affordable, as it comes with a heavy economic downturn.
We made a mistake with the last housing crisis, which was to reinflate the bubble with low interest rates. What you really want in that circumstance is to increase take home pay, e.g. by lowering taxes on the middle class.
The commenter you replied to makes the mistake of mistaking the price of houses as a capital good with the monthly rent you pay for housing services.
If you want lots of new houses being built, high house prices are good. That incentivises developers to jump through all the hoops, build some houses, and sell them.
(In the wake of the Great Recession, we had and have the opposite problem: tightening of credit dropped house prices, thus house construction was choked off, and thus rents rose. The ratio of rents to house prices went up, and rents also went up in absolute terms.)
> That incentivises developers to jump through all the hoops, build some houses, and sell them.
That doesn't help with affordability, as when house prices are high they're... unaffordable anyway, so they get bought out by investors, who can produce any amount of cash as long as the investment pays off.
For this reason a huge chunk of new housing is not even built to be affordable - both the margins and ROI on a "premium" apartment are just better.
A win for investors and developers alike while at the same time regular people are thrown under the bus.
You are confusing housing as a capital good with housing as a service.
Corporate landlords (and investors in general) don't want the houses to sit empty. So they need to rent them out, or forego rental income.
And, yes, premium apartments are fine. You know that houses today are much nicer than the houses we had in 1800? That's because over time the average new house being built was nicer than the existing housing stock.
When a new nice apartment is being built, there ain't a sudden bang and a newly created rich person steps out of a cloud of smoke. [0]
That rich person that moves into that nice new house will (on average) vacate a slightly less nice house, that someone else can move into, and so on. This is called 'filtering'. See eg https://buildingtheskyline.org/filtering/
If you don't build nice new houses, rich people gentrify the existing houses; which ain't better for poorer residents.
[0] So if you had a market that worked like this, that would be great. It's like an infinite money machine for the economy. Rich people can pay a lot of taxes.
> so they get bought out by investors, who can produce any amount of cash as long as the investment pays off.
But they only do this if they expect housing prices to stay high, which they wouldn't if high prices were expected to spur construction and thereby increase supply and reduce prices. The problem is when the construction is inhibited so the investor's expectation is that prices will go up rather than down.
Please be careful to separate the price of houses as a capital good from the price of monthly rent.
I'm arguing that all else being equal, if the price of houses goes up, the price of housing as a service (ie rent) can go down under certain circumstances.
Specifically also the opposite: interventions that make houses drop in price, eg restrictions on lending like we saw in the wake of the Great Recession, can lead to less construction, and thus rents going up.
The tightening of lending standards in the wake of the Great Recession saw the ratio of rents to house prices go up a lot.
There are really two types of investors we have to regard here. One is ordinary landlords, but landlords buying properties and renting them out isn't a problem; the more of them there are the lower rents get and then the fewer of them they are. It naturally finds equilibrium.
The other type is global institutional investors who are using real estate as a substitute/diversification against government bonds and then not renting it out, because their desire is for a stable investment rather than high risk high reward. Because of artificial constraints in the housing supply, appreciation in housing prices has been beating the bond market without even renting the properties out, and renting them out is actually a risk because bad tenants in jurisdictions with adverse landlord-tenant laws can be a huge problem. So they just buy up whatever is available and take profits as property appreciation rather than rent.
The second type of investor is obviously really bad for housing affordability, but it also only happens when construction is restricted from increasing supply to meet demand, because otherwise the property itself wouldn't appreciate faster than inflation and would make a poor investment in the absence of rental income.
Your second type of investor has exactly the same opportunity cost for not renting out as everyone else, don't they? Conversely, your first type of investor has exactly the same problems with bad renters? So why does anyone rent anything out?
It looks like the problem of the occasional bad tenant can (and is) solved in practice via diversification. You buy a REIT instead of an individual property.
In my earlier nomenclature, I would classify your 'second investor' as a personal union between an investor and a 'weird' tenant. A 'weird' owner-occupier, who's never home.
> The second type of investor is obviously really bad for housing affordability, but it also only happens when construction is restricted from increasing supply to meet demand, because otherwise the property itself wouldn't appreciate faster than inflation and would make a poor investment in the absence of rental income.
Well, a land value tax would presumable also help here. But again, the opportunity costs for renting out vs not renting out are exactly the same.
> Your second type of investor has exactly the same opportunity cost for not renting out as everyone else, don't they? Conversely, your first type of investor has exactly the same problems with bad renters? So why does anyone rent anything out?
People have different levels of risk tolerance, and different resource levels.
For example, there are ordinary landlords that will take out a mortgage on a building, rent it out and then use the rents to pay the mortgage and the salaries of the people who fix leaky pipes and find replacement tenants when someone leaves etc. If they don't charge rent they're out of business because they'd have nothing to use to pay the mortgage and the bank would foreclose, so they have to.
Then there are investors who just want somewhere to park their money. There is no bank to foreclose, they're paying cash, so they're happy as long as the property is appreciating by more than e.g. the interest rate on government bonds. They can drain the pipes and turn off the heat and make money by doing nothing, as long as supply is constrained so the price keeps going up. Meanwhile they're risk-averse, so the extra income from renting it out (much of which is offset by increased maintenance costs) isn't worth the risk of e.g. some law preventing them from evicting a non-paying tenant.
> It looks like the problem of the occasional bad tenant can (and is) solved in practice via diversification. You buy a REIT instead of an individual property.
That's assuming you can diversify the risk. If someone wanted to invest in, say, San Francisco real estate, they could diversify across multiple properties, but then they'd all be affected by some new law there preventing evictions. Whereas they could diverisfy by also investing in properties in Ohio and Arkansas, but those might not be expected to appreciate enough to attract their interest.
> [...], but those might not be expected to appreciate enough to attract their interest.
I don't understand how that is supposed to work. I can see how a restricted housing supply in San Francisco can lead to us reliably anticipating that the prices there in, say, five years, so in 2030, will be high. I'm with you so far.
Also assume that we can reasonably reliably anticipate housing prices in Ohio in 2030.
But if the buyer is smart enough to figure that out, why wouldn't the seller be? For San Francisco's housing prices to _appreciate_ more than those in Ohio, today's seller needs to accept a bigger discount (compared to reliably estimated 2030 prices) for San Francisco real estate than for Ohio real estate. Ie SF housing prices need to be comparatively lower.
Why would the seller be so nice for SF but not for Ohio? Are current SF land owners less interested in money?
By default, current prices (should) anticipate market consensus expectations of future prices.[0]
> People have different levels of risk tolerance, and different resource levels.
Yes, but they all buy and sell in the same market, don't they?
Your hypothetical 'investor' is (A) risk seeking enough to willing invest in single undiversified properties and return seeking enough to go for SF over Ohio (assuming there's more of a return there, I don't know if that's true). And simultaneously (B) risk averse enough to even contemplate having tenants, and uninterested in returns, too, as long as they are barely above government bonds?
What kind of weirdly split personality creature are we dealing with here? (And where can I find them? I suppose I could try and sell them the Brooklyn bridge.)
Are you sure there isn't something else going? Perhaps some other weird law, or perhaps some weird tax dodge (or even status game?) that leads some investors to leave properties empty? What proportion of those properties are even empty? What proportion would we expect from purely profit seeking risk-neutral investors? (That null-hypothesis proportion is most likely less than 0. If even just because of tenants moving in and out.)
> That's assuming you can diversify the risk. If someone wanted to invest in, say, San Francisco real estate, they could diversify across multiple properties, but then they'd all be affected by some new law there preventing evictions.
You can at least buy an SF REIT, so a single bad tenant has less of an influence. And, new laws are unlikely to affect both commercial and residential renters the same way, so you can diversify across that dimension.
Even without tenants, an SF REIT with only empty properties makes more sense for diversification than a single property. After all, tenants and city wide regulations aren't the only thing affecting the prices of a single house.
[0] As a caveat to what I wrote above: if one asset class is considerably more risky than another, we can expect today's buyers to demand / today's sellers to offer a bigger discount on future prices. Ie on average returns on risky assets can in theory be higher. Risk vs reward.
But that explanation doesn't work for the picture of the hypothetical investor you sketched in the rest of your comment.
> For San Francisco's housing prices to _appreciate_ more than those in Ohio, today's seller needs to accept a bigger discount (compared to reliably estimated 2030 prices) for San Francisco real estate than for Ohio real estate. Ie SF housing prices need to be comparatively lower.
> Why would the seller be so nice for SF but not for Ohio? Are current SF land owners less interested in money?
The reason is that there are two classes of buyer; investors and occupants. The expectation in SF is that population will increase and the housing supply will not be allowed to increase, so occupants will have to pay more in the future, creating the expectation of future appreciation. Investors could then come in and bid up the current price in anticipation of this, but they'll only do this until the current price rises to match the risk-adjusted returns from competing investments.
The expectation in Ohio is that the population will be approximately flat and new construction will be less inhibited, so expected housing price appreciation there might be less than competing investments. That discourages external investors, but the current-day prices are still held at their current level from demand by local residents because they still need somewhere to live.
> Are you sure there isn't something else going? Perhaps some other weird law, or perhaps some weird tax dodge (or even status game?) that leads some investors to leave properties empty?
These things could be contributing to it. You could also add bureaucratic incompetence to the list, i.e. an institutional bureaucracy gets an order to invest in housing so it buys a bunch of housing and is too insulated from consequences to recognize that it could make more money by renting it out.
But all of these derive from the expectation that housing will appreciate and thereby make a good investment. Otherwise whatever weird law or unusual risk function is causing them not to rent the properties out would be irrelevant because they would lose the incentive to invest in them to begin with.
> Even without tenants, an SF REIT with only empty properties makes more sense for diversification than a single property. After all, tenants and city wide regulations aren't the only thing affecting the prices of a single house.
Sure, but then you have a REIT buying up properties and leaving them empty, which is no better than doing it one at a time, and moreover can likewise be prevented by not inhibiting construction to remove the expectation of market-competitive returns solely from housing appreciation.
> China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap? Hardly.
If you build housing where people don't care to live, it doesn't matter how much you build. Housing will be more expensive in desirable areas unless you build more housing in those desirable areas.
Houses built in the wrong place aren’t useful. Also, allowing hoarding of housing (viable since no property tax) can also restrict supply. There are plenty of reasons why more housing doesn’t necessarily lead to cheaper housing. Even inside 4th ring in East Beijing, we estimated that the block we were living in was only 60% or so occupied (by counting lights on nightly walks), much of the rest of the 40% were probably not even renovated.
> Also, allowing hoarding of housing (viable since no property tax) can also restrict supply.
I don't see how property tax makes any difference here?
The opportunity cost in terms of lost rent (if you are hoarding vacant property instead of renting it out) should be the same no matter what the property tax is?
> There are plenty of reasons why more housing doesn’t necessarily lead to cheaper housing.
If you can find a market that you can keep adding supply into, and prices don't react, you found yourself an infinite money machine!
(It's the same mechanism as when people complained that printing money (whether by the Bank of Japan in the 1990s or the Fed in the 2010) can't raise inflation:
Instead of complaining, you should keep printing money and gradually buy up the whole world in return for some ink and paper / database entries.)
What makes you think so? The Chinese problems come from different sources.
For example, there's lots of corruption, they are not keeping their nominal GDP on a stable growth target, and if I remember right, they have a lot of government intervention in the real estate and credit markets.
> You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
Huh? What kind of weird statement is this?
It seems there's a lot of confusion. I think it mostly stems from owner-occupiers.
For our analysis, let's separate them into two: some people own houses and rent them out, and everyone (but the homeless) rent houses. It's just that sometimes people rent from themselves.
What matters for discussions about affordability of housing is how much of your income you have to spend each month on housing every month. Let's call that 'housing services'. That is pretty much a function of available supply every month vs demand every month. Who owns them doesn't make a difference.
If an investor buys a house, but rents it out, that's fine. Neither supply of housing services nor demand for housing services has changed. If an investor buys a house, but doesn't rent it out (eg because it's intentionally empty, or because the investor lives there herself), then she counts as a consumer of that unit for that month. That's an indirect change in supply and demand for housing services, but doesn't directly have anything to do with the investor as a owner.
Now to come to your scenario:
If investors use houses as collateral to invest in more housing, that's great! Ideally that will drive up the prices of housing as a capital god.
The more expensive houses are as a capital good, the more it makes sense for developers to jump through all the hoops and build more houses to sell them into the market. That means more houses available for renting out, which drives down rents.
(In the wake of the Great Recession, we had and have the opposite problem: tightening of credit dropped house prices, thus house construction was choked off, and thus rents rose. The ratio of rents to house prices went up, and rents also went up in absolute terms.)
When I lived in Florida it was about like that. I couldn't accept that so just asked for the soonest appointment anywhere, and was assigned a new Haitian lady about an hour away who wasn't booked up yet.
Given the circumstances I expected the worst, but I was so amazed with her. She was tall, pretty, and extremely well spoken. Not that this matters a ton, just recalling my first impression shattering expectations. And she's the first doctor I've met that realized that my main problem was more with health anxiety than health itself and just kinda bro'd it out with me for a half hour.
All of that is to say, if this is what to expect from foreign doctors vs the purposely supply constrained 'elites' I'm accustomed to, consider me 100% on board.
Some level of supply restriction is probably warranted, though less than what we have now. It would be bad policy to have talented people train intensely for 8+ years, only to have them emerge on the other side with a "sorry, oversupply, no job for you."
I think availability of lengthy and highly-specialized training programs needs to be carefully calibrated to avoid other kinds of rackets (like have been seen with law schools and certain kinds PhD programs).
The free market has the assumption of perfect information.
In this case, perfect information of what the world will look like on the other side of an unusually long training course (how long depends on what you're training for exactly), so long that the opportunity cost can be life changing even if there was no direct cost for the course itself.
This breaks the assumption, making government intervention useful.
Government intervention would only be useful in that case if the government had some non-public information on what the supply and demand for doctors will be by the end of the training program. But if they had that information they could just publish it instead of trying to prohibit people from going to medical school, and people could decide for themselves if they still want to go given what the job market is expected to look like by the end of the training program.
More to the point, nobody actually knows this exactly, not even the government, but given the choice between too many doctors and not enough, the first one is obviously better. If you have too many doctors then some of them can become researchers etc. If you don't have enough, people die.
> Government intervention would only be useful in that case if the government had some non-public information on what the supply and demand for doctors will be by the end of the training program. But if they had that information they could just publish it instead of trying to prohibit people from going to medical school, and people could decide for themselves if they still want to go given what the job market is expected to look like by the end of the training program.
To the extent that the government has some non-public information, they cannot always reveal it directly. Sometimes this backfires, e.g. the UK politicians blaming the EU for all the things the UK politicians wanted to do anyway but needed a scapegoat for.
Most of the people beginning this training have only just reached adulthood, and have no reason to be politically sophisticated. I sure wasn't, at that age.
Even if the government was completely open and honest, market are not efficient unless P == NP.
> More to the point, nobody actually knows this exactly, not even the government, but given the choice between too many doctors and not enough, the first one is obviously better. If you have too many doctors then some of them can become researchers etc. If you don't have enough, people die.
Yes, when resources are effectively unbounded. Even more than that, I would even argue that (owing to what I've heard on the grapevine in the UK about overtime) training more doctors and nurses would lower the cost to the taxpayer.
But resources are not unbounded, and governments have other priorities besides this. What else can be bought for the cost of a doctor? Sometimes those other things are also measured in lives, other times they're measured in the economic cost that could pay for two doctors.
> To the extent that the government has some non-public information, they cannot always reveal it directly.
Is that expected to be relevant here? What kind of secret jobs data would the government be keeping under lock and key for the security of the nation in a typical year?
> Most of the people beginning this training have only just reached adulthood, and have no reason to be politically sophisticated. I sure wasn't, at that age.
This is why adolescents have parents or, failing that, teachers and guidance counselors.
> Even if the government was completely open and honest, market are not efficient unless P == NP.
Markets don't have to be perfectly efficient, the only question is if they're more efficient than central planning, and the answer to that question is yes.
Notice that the government also has no ability to timely perform NP calculations.
> What else can be bought for the cost of a doctor?
Probably like a tenth of a mile of paved asphalt. Having a few "too many" doctors is going to be worth more than the median thing the government spends money on, because trained doctors are valuable even outside the practice of medicine, e.g. as researchers or policy advisors or simply as a buffer against undersupply, since the consequences of that are so dire.
Moreover, this isn't even a valid question when the size of any given graduating class is a small proportion of the total pool. If it takes 7 years post-bachelors to become a doctor and then you are one for 35, the total size of the pipeline is only 20% of the size of the pool. If the number of doctors in training is 50% too large, the total supply will only be in excess by 10% from the point you figure that out, and that's the single-year peak that only lasts for one graduating class before it starts edging downward again. It's just not a big problem for that to happen. These numbers are within the error bars for how precisely "oversupply" or "undersupply" can even be defined or agreed upon as a concept.
> The free market has the assumption of perfect information.
No. Where do you get that misinformation?
Yes, it's relatively easy to construct a model where perfect information and a bunch of other assumption lead to markets being great. But that merely shows that these conditions are sufficient. Not that they are necessary.
To make an analogy:
We can analyse spherical, friction-less cows in a vacuum and conclude that as long as they move less than about 10km/s the won't escape into space. If we then observe that real cows aren't spherical nor frictionless, we can't automatically assume that they'll escape into space at a lower velocity.
> This breaks the assumption, making government intervention useful.
> Yes, it's relatively easy to construct a model where perfect information and a bunch of other assumption lead to markets being great. But that merely shows that these conditions are sufficient. Not that they are necessary.
I prove that if markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be solved in polynomial time. I also prove the converse by showing how we can “program” the market to solve NP-complete problems. Since P probably does not equal NP, markets are probably not efficient.
I think I see what you mean, as I didn't give sufficient justification.
In this case, government control makes this sector function as a planned economy. The normal flaw in a planned economy is that it cannot respond quickly to changing consumer demand, and I do not dispute this.
In the case of medical issues, consumer demand is a lot more predictable by the government than by the general public, as the demand 20 years from now is mostly directly influenced by other government interventions in the meantime (governments have a better awareness than random 18 year olds choosing their university degree of the plausibility of a smoking ban or a sugar tax, they can change pollution rules to ban leaded fuel, etc.), and the exceptions are things like "novel global pandemic" or "we're at war now" where the government has to directly intervene in other ways anyway.
That's a very cute result, but requires a very specific definition of 'efficient market'. There's actually a range of 'efficient market' definitions, each with their own 'efficient market hypothesis'.
One of the weaker forms that I like is: 'don't expect to make any money trading stocks as an amateur on news that the full time professionals (and their computers) in the hedge funds and at Goldman have already seen.' (This one is mostly useful for internet discussions with people who believe in reading price charts etc.)
The paper basically shows that if you want to be really careful in your definition of '(weakly) efficient market', you need to take computational complexity into account. It says more about definitions, than about the economy. In any case, if you like that kind of thing, you should check out https://scottaaronson.blog/?p=735 too.
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> In this case, government control makes this sector function as a planned economy. The normal flaw in a planned economy is that it cannot respond quickly to changing consumer demand, and I do not dispute this.
There's lots more wrong with (most) planned economies.
Eg the demand for toilet paper is---covid aside---famously easy to predict. Yet, the Soviet Union was also infamous for their toilet paper shortages.
> In the case of medical issues, consumer demand is a lot more predictable by the government than by the general public, as the demand 20 years from now is mostly directly influenced by other government interventions in the meantime [...]
The government officials in power today are most likely not the government officials in power over the next 20 years. In most cases, it's not even the same party that's in power. Current government officials don't necessarily have any special insight into long term government actions.
> This breaks the assumption, making government intervention useful.
Not useful, but rather required. The fixpoint of a ruleset allowing free markets to exist is not free market, but rather somewhere between laissez faire and anarcho-capitalism.
> The free market philosophy dictates that we absolutely should do it, and it's a good philosophy to follow.
Sorry, it's never a good idea to base real life policy on ideological dogma. The "free market philosophy" has some good ideas, as well as a lot of bad ones. We shouldn't blindly follow its "dictates."
In my experience, the people who dogmatically preach the free market frequently have an oversimplified understanding or use circular logic to conclude the free market is good by redefining good as whatever the free market does.
> In my experience, the people who dogmatically preach the free market frequently have an oversimplified understanding or use circular logic to conclude the free market is good by redefining good as whatever the free market does.
There are bad arguments for good conclusions, yes.
Most of the "free market" people dont understand that many markets can be cornered and oligopolies (or duo- or even mono-) can form.
A lot of the stuff assumes that it is 1850 and everyone can buy land and farm potatoes. With "unlimited" land and tens of thousands conpetitors. No barriers of entry too.
No, it does not. In fact, student emerging on the other side and being met with "sorry, no job for you" is a clear proof of free market *not* working.
Free market is not "everyone can do anything", that's somewhere between laissez faire and anarcho-capitalism. "Free market" is a theoretical model where goods, services, and, crucially, information flows freely. Or in more textbook definition, there exists perfect information symmetry.
In a functional "free market" a student would know their employment prospects before they even submit application.
EDIT, addendum: If we are talking doctors, the training takes 10 years (6 if you don't include specialist training), but that's a long time. So long that the environment itself could change dramatically, for whatever reason. Free market being free, could distort itself so much that perfect information symmetry does not translate over time.
So how do you ensure that the information which was true before training remains true after training period even if the free market mutated itself and invalidated the information? Surprise, surprise, you get government to uphold the "freedom" of the market.
You have some weird straw man definition of 'free market'. Perhaps you should update the Wikipedia entry with your wisdom? See https://en.wikipedia.org/wiki/Free_market
What anonymous text books are you mentioning?
Under certain circumstances it makes sense to study a model of markets with perfect information symmetry. But that's a very different (and much more restricted) term than 'free market'.
> Critics of the free market also argue that it results in significant market dominance, inequality of bargaining power, or information asymmetry, in order to allow markets to function more freely.
> Inequality of bargaining power is generally thought to undermine the freedom of contract, resulting in a disproportionate level of freedom between parties, and that it represents a place at which markets fail.
> Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model.
> Under certain circumstances it makes sense to study a model of markets with perfect information symmetry. But that's a very different (and much more restricted) term than 'free market'.
Again, that's exactly what "free market" is. Market that functions *solely* on interparty contracts is laissez faire.
The key difference is that in laissez faire price equilibrium is a defining property, whereas in a free market price equilibrium is an expected emergent property if perfect information symmetry is maintained.
> "Free market" is a theoretical model where goods, services, and, crucially, information flows freely. Or in more textbook definition, there exists perfect information symmetry.
I was specifically referring this idiosyncratic definition.
> The key difference is that in laissez faire price equilibrium is a defining property, whereas in a free market price equilibrium is an expected emergent property if perfect information symmetry is maintained.
Because a ton of people want to dedicate their lives to advancing justice and human knowledge. Who are any of us to deny them that pursuit if they are competent and committed enough to pass the Bar or defend a novel thesis?
I’m pretty much the opposite of a libertarian, but I find the very idea of restricting education and denying competent people professional certification on the grounds of limiting supply to be perverse.
You need to meet some lawyers who were never able to practice because of oversupply, or hopeful PhDs that found themselves trapped in the adjunct precariat.
There's no good accomplished by letting people waste their time, money, and talent on training they won't be able to use; and which they are counting on using to support themselves.
I’ve got a family member who’s been an underpaid postdoc their entire professional career going on 30 years and another stuck in banking for a decade after a physics PhD. I’m intimately familiar with the reality. Neither of them regret their education or the effort they put in.
There’s no good accomplished by restricting education and professional certification to artificially restrict supply. All it does is create perverse incentives and harm the public good.
> I’m intimately familiar with the reality. Neither of them regret their education or the effort they put in.
The people I know in similar situations regret their choices, or are at least are a little bitter.
> There’s no good accomplished by restricting education and professional certification except to destroy peoples dreams for the sake of a lucky few.
Let me put it this way: if their dreams are going to be destroyed, it's best to do that as soon a possible. Putting that off makes things worse, not better.
Except you have no idea a priori who will succeed and who won’t. If your selection process happens before the certification process, you’ll just be selecting for other metrics, ones usually irrelevant to the actual field. That’s just bad policy.
There are a ton of shitty doctors and entire geographic regions that are deprived of specialists because of this kind of nonsense. Your policy may help a few people but it harms all of society.
> Except you have no idea a priori who will succeed and who won’t.
Sort of. In many areas it's possible to do a good-enough job of sorting out the people who will almost certainly succeed. It won't be perfect, but nothing is. If there are enough of those to fill a long and specialized training program to the point where actual needs are met, then you shouldn't be letting a bunch of extra "maybes" in too, because that just introduces bad outcomes at the end that could be avoided.
Based on my experience with doctors medicine is not one of those fields. Residency is the final gauntlet that matters and that’s the part that’s artificially restricted.
On the other hand, because of supply, finding a good lawyer just requires a bit of money, well within reach of the average person facing a criminal trial or some civil dispute. Finding a good doctor requires sitting on waitlists for months (if you’re lucky enough to find one taking new patients) unless you have enough money to afford a concierge service, which the vast majority of people cannot afford. I’ve had bad concierge doctors but I’ve never had a shitty lawyer paying that kind of money.
I mean really, where do we stop? There’s many more English literature graduates than jobs. Same with ____ studies and just about every other humanities degree. Do we restrict those too? How about higher education altogether?
There’s an important debate to be had about government financing and the non-dischargeability of loans and all its effects, but restricting education based on job supply is just harmful to societies on so many levels.
This is a two way street. Everybody needs medical care. Almost everyone is going to need legal advice in their lives. Depriving them of competent care and representation does far more harm than limiting supply would save. Failed medical students don’t die from the ordeal, but patients do.
The washout rate for A&P aircraft mechanics is on the order of 75%. Imagine if healthcare were as reliable as airplanes (though there’s a shortage there too).
> Based on my experience with doctors medicine is not one of those fields. Residency is the final gauntlet that matters and that’s the part that’s artificially restricted.
You're getting the basic facts wrong. As least in the US, the restriction is acceptance to medical school. Part of the reasoning is they don't want to accept anyone who they think will fail years down the line, because that's bad for everyone (you, me, the failed student, and the teachers who aren't in it for the $$$). There's a surplus of residency slots (overall), because otherwise no foreign-trained doctors would ever be able to practice here.
Lots of foreign-trained doctors practice here.
My position is they need to increase medical school admissions (and residency slots), but not throw the doors wide open to all comers. The slots need to be managed such that anyone who gets can complete the program and will have a job waiting for them that pays commensurate with the amount of training they receive, but probably much less than many doctors get now.
> I mean really, where do we stop? There’s many more English literature graduates than jobs. Same with ____ studies and just about every other humanities degree.
Yes. What's happening with English literature graduates (at least on the PhD level) is an exploitative travesty.
> ...but restricting education based on job supply is just harmful to societies on so many levels.
I disagree. It's harmful to string people along with false hope, only to slam the door in their face at the end. It's harmful for society for people to waste time on a job training program (which is what medical education really is) for a job they'll never get.
There needs to be a distinction made between general education and job training. Unless you're independently wealthy, specialized formal education needs to perform both functions.
> The washout rate for A&P aircraft mechanics is on the order of 75%.
> Except you have no idea a priori who will succeed and who won’t.
Not really relevant. We're not talking about the general concept of "success", we're talking about if the market for some profession or academic pursuit can support a certain number of people entering it. That's something that you can predict reasonably well. Not perfectly, and there can certainly be outlier events that drastically change things unexpectedly. But it's possible to have reasonably accurate forecasting here.
As for "success", sure, it's hard to tell if any individual who wants to enter a particular field will do it well enough to be successful. Admissions departments at universities can sometimes do an ok job predicting that, but they often end up being wrong (in both directions). That's just life.
The medical profession is of course doing those forecasts and then artificially restricting things further, in order to maintain high salaries and high prestige. I don't think we'd be having this argument if they weren't so greedy and set limits at reasonable levels such that we had enough doctors and specialists out there to handle patients promptly and effectively.
Perhaps the fellowship for PhDs should only be two years, and a faculty review at the end of the two years cuts out the majority of students, so many more can be admitted and evaluated than actually graduate? And maybe another round after the 4th year? That would solve both problems: most people going into the programs wouldn't graduate, but many more people who wanted to try would be able to at least get in, and most of the students who did graduate would be able to get jobs (maybe, out of a 30 person starting cohort, 2 graduate with a PhD).
It could vary year by year, so a year with a really great cohort, maybe the majority would come through, whereas with a bad cohort almost all of them wouldn't make it.
Why is medical school in the USA an 8 year vs 5 year program like in other countries? Yes, they still have residencies to go through, but a doctor in China is still through with their education and training much faster than in the USA.
Our system is overly expensive in terms of training requirements for doctors and nurses, and it doesn’t show much improvement in quality for those requirements.
I expect it's another, softer way to reduce supply: longer education requirements will discourage some people from even attempting it in the first place.
> It would be bad policy to have talented people train intensely for 8+ years, only to have them emerge on the other side with a "sorry, oversupply, no job for you."
"Oversupply" isn't a thing in the absence of price controls. If there are more doctors then they get paid less and because they get paid less there is more work for them. Medical research or labor-intensive treatment or diagnostics that wouldn't have been cost effective at higher salaries becomes so and it creates more jobs for doctors at the lower salary.
Of course, if doctor salaries get too low then fewer people want to become doctors, and fewer people going to medical school would cause salaries to go back up. So you end up at an equilibrium where doctors get paid the amount necessary to encourage people to go to medical school, but not wastefully more than that.
(1) The whole point is to prevent people from going to school for 8 years in the first place. Five years is only 1 more year than the average degree. You could do the same for law and other professional degrees like a PsyD. Or are we planning to supply cap every degree? (2) The debt from a four year bachelors plus medical school is wild, especially at current interest rates. (3) You’re assuming there are no other jobs for would be doctors like in pharma, tech, or consulting. (5) How exactly do you plan to “calibrate” this? Why isn’t a warning label enough.
The rationing is 'caused' by price caps (whether by law or informally observed).
Supply restrictions just restrict available supply, they don't cause long waits by themselves.
(Of course, this assumes that you don't want to re-interpret prices themselves as a form of rationing. That's a decent approach to take in some contexts, but eg doesn't gel with the common usage like 'food was rationed during the war', where we use 'rationing' in contrast to the usual price mechanism.)
There are no price caps. If you're rich, you have concierge medicine, and you'll see a great specialist whenever you want. The supply restrictions (and other things that reduce doctor productivity) cause a lack of supply relative to the amount of medical care that would be medically useful for the population. For people of normal income with normal medical insurance, that means that their care has to be rationed, or it would be unaffordable.
If there's such a long queue, why don't doctors raise prices until the queue goes away? Do doctors not like money?
> If you're rich, you have concierge medicine, and you'll see a great specialist whenever you want.
You don't need to be that rich to go see a doctor privately in eg the UK. And, yes, they have crazy queues for the NHS, while the same doctor can be had for a bit of money quickly when seen privately.
In that case, the price restriction comes from what the NHS is willing to pay. And because patient don't directly pay for the NHS, at least not proportional to the usage, instead of rationing via price the system rations via wait times.
> [...] the amount of medical care that would be medically useful for the population.
I'm not sure there's such a thing. There's no clearly defined amount that is 'medically useful'. There are just gradually diminishing returns to more medicine (in a statistical sense).
> If there's such a long queue, why don't doctors raise prices until the queue goes away? Do doctors not like money?
You do understand the 'queue' are sick people who need treatment? If the 'queue' goes away then they're just untreated and potentially die. Doctors like money but, at least where I come from, you don't go into medicine for cash. You do it for ideals or respect or to have a job that means something.
> I'm not sure there's such a thing. There's no clearly defined amount that is 'medically useful'. There are just gradually diminishing returns to more medicine (in a statistical sense).
there is actually such a thing as overtreatment. There's this really interesting statistical point where too much testing can actually cause harm, even if the test it self is harmless, because it discovers things that wouldn't have really been a problem ('incidentalomas').
And, unfortunately, there does come a point at times where a patient cannot be helped and it is better to just let them enjoy what time they have left rather than subject them to more treatment and recovery time and all that.
> You do understand the 'queue' are sick people who need treatment? If the 'queue' goes away then they're just untreated and potentially die.
Huh? How does having a queue help the doctor see more patients?
Let's assume our doctor can handle X patients a day. Having a six months long wait list does not increase X.
(If, for compassionate reasons, you want to always run the doctor at full capacity X, you will want some short waitlist, so that when a patient cancels you can backfill. But you don't need a six months waitlist for that.)
So you can carefully raise prices a bit, so that you can still see the same number of patients a day as before. But the doc gets more money, and the waitlist (almost) disappears.
(It's the exact same logic as congestion charging.)
They can eg use the money to make their life easier, eg by having their houshold chores done by a professional.
> Doctors like money but, at least where I come from, you don't go into medicine for cash.
Or they can donate the extra money to an efficient charity.
> there is actually such a thing as overtreatment. There's this really interesting statistical point where too much testing can actually cause harm, even if the test it self is harmless, because it discovers things that wouldn't have really been a problem ('incidentalomas').
Agreed.
But my argument even works without harm of overtreatment: extra testing only does you statistical good. And if you eg do colonoscopies every day instead of every year, you aren't gonna catch that many extra cancers.
> In the US, medicine is a racket where the supply is intentionally constrained.
The correct solution in that case would be to increase CMS funding for US residency and fellowship spots (which was frozen for ~25 years).
You should see this for what it is, salary suppression by importing foreign labor, in a similar vein to what the tech industry did with abusing the H1B system until fairly recently. It's easy to lower costs by cutting corners on quality, but that is not a pro patient move.
You sure about that? Seems to me that being able to see a “90%” doctor today instead of a “100%” doctor 6 months from now is beneficial to patients. Especially for things like oncology, where that 6 month wait could be the difference between life and death.
Yes, the boards of different states have quotas to limit the number of people passing the medical board exam each year.
BTW, more doctors should follow what this doctor does. https://www.youtube.com/watch?v=yCtAdgpW_Vs. Their website shows they're charging $40 per visit currently, vs $35 4 years ago.
It's the same in Europe as well. It's maddening. Every year I read of massively missing doctors, and at the same time, universities reject 90% of applicants or so because they don't have more places. So those doctors get "imported" from poorer countries, leading to brain drain and making situation in _those_ countries even worse.
It's especially bad now that the societies are getting older and boomer generation retiring. I routinely read news like "the doctor in town X is 70 y.o. and wanted to retire but his patients couldn't find a new doctor, so he came back from retirement".
In France every doctor wants to live and practice in big cities, there's even a term "medical deserts".
In Poland on the other hand, it's very common that a doctor either works in multiple hospitals at the same time (and sometimes also has a private practice); or having cabinets in different towns and every day being in a different town. So in those small towns you can see a specialist like "once month on Wednesdays".
My neighbour is working towards qualifying to specialise in urology. Problem is, there are just 43 openings a year for the entirety of Poland. That puts a hard limit of less than 2k specialists total at any given moment unless we expect people to work in retirement.
Currently there are around 1300 such people. How are they supposed to provide services for a country of 40mln residents?
True, and from what I have heard there is really a "lower cast" of staff being taken advantage of because they were trained abroad but working in EU hospitals.
So as usual it is very hypocritical. In that sense Florida's move make sense.
As always, it is that way of thinking that has been dominant in the west for at least 50 years: why bother making anything here if we can just import it for cheap?
Can you imagine a Federal law that makes state Medicare or Medicaid funding contingent on the state jurisdiction recognizing all professional licenses granted by all other US-states ?
So that a practicing doctor etc could easily move their practice and their skills from say NJ to FL, without the hassle of maintaining multiple state licenses ?
That would make an incredible revolution, and its not even touching the actual constraints inherent with the MD education barrier!
I'd take this generally more seriously, if the number of licensed physicians in the US wasn't growing 3x faster than the population, or if the number of international medical graduates wasn't already 23%.
The US population grew by 8% from 2010 to 2022, increasing from 309,327,143 to 333,287,557. The number of licensed physicians grew 23% from 850,085 to 1,044,734. So it's not retirements, or graduations and general licensure. It's the number of General Practitioners, and the number people they treat and amount of time they spend (not necessarily the care the patients receive) that makes wait times longer.
The fact that almost all of them are now in larger (private equity controlled?) groups rather than working as independents. That many more choose to specialize for higher pay so that they don't have to work with the masses. It is in the interests of the insurance groups for the price of healthcare to rise since they make a percentage of that cost as profit. As long as everyone has to pay more the insurance companies can pay their executives more money and provide dividends to stockholders. They want all patient care to be a hassle. They want to mandate additional busy work to every transaction. They want drug prices to rise. It improves the bottom line.
I don't know that brining in a few more doctors from Barbados or Australia or the UK is going to improve that, and it's probably going to make it worse in other places (that don't have for profit healthcare insurance).
Hawaii is the worst (in many regards, actually). There are "certificate-of-need laws"
> CON laws require businesses that want to build a new medical facility or offer a new service to go through an arduous state approval process. Moreover, they must prove their service is “needed.” [1]
Credentials and skill levels differ widely worldwide. Many developing countries lack the infrastructure to train doctors for modern medicine, and the degree of corruption in those countries increases the risk of unqualified or questionable practitioners.
It would really help for primary care doctors to start more private businesses - much like dentists. There is no reason to be stuck in hospital systems that grind doctors so much.
The revenue savings from the hospital not taking cut might even make primary care a highly paid profession - enough to incentivize more people to take up this specialization.
To understand the true cost of the American medical system, I think you need to look over the border at most any other 1st world country's medical system. Doctor's training is lot cheaper, so more people are incentivized to go into primary care. Insurance is better regulated or single payer. Hospitals are not forced to provide free care (US EMTALA) that causes financial uncertainty. Patients are typically incentivized to not abuse the system unlike the US (e.g. Dilaudid drug abuse enabled by EMTALA)... etc etc...
in india you can go to a government hosipital and you get a big line but you are seen by top doctors.
you go into an accident, you are met with the top most doctors of that area.
the only thing upfront cost is to get a "Card" or a prescription number from the registry outside. costs Inr 10 normally or $ 12 cents.
that gets you infront of a doctor who can decide what to do with you. blood tests or some radiology or something else.
if you are to be admitted, they ask you to get a "file" that costs around $ 1 or $2. that gets you a bed in a general ward where you are monitored by good doctors.
surgery if you have a health card, you dont have to pay anything. there is a line for non-essential procedures but if its an emergency, you are prioritized and taken care of.
i have relatives working in government hospitals and their opinion is to not do procedures in private hospitals. it just costs an arm and a leg (without insurance) and you dont even get best care because consultants/top doctors arent even available during nights for example.
Sounds similar to China. One issue is that they don’t provide many nursing/nurse assistant services, so you have to bring your own (usually family members, but you can hire someone to do it).
I just used private hospitals in China which are very western, and not very costly with private insurance. Yes, the ER is only staffed by a couple of doctors at night, but that worked for me.
Unclear. Things have definitely changed over the last 20 years. They used to have problems with scalpers monopolizing appointment tickets but I think they’ve fixed that with ID registration.
> It would really help for primary care doctors to start more private businesses - much like dentists.
You're talking about reversing tidal currents that have been in effect for over 30 years. It isn't happening. The financials make it increasingly difficult for lone hospitals to stay independent of big health systems, let alone small group practices and partnerships.
Medicine has been corporatized and commoditized. Next comes enshitification. For example, dropping the requirement for American doctors to complete their training in America.
> Does anyone know which and how many foreign medical schools qualify?
This is about residency programs, not medical schools. IIRC, graduates of pretty much any foreign MD program can already practice in the US, they just need to complete a US residency.
No, as long as you've graduated from medical school in a country that has accredited/globally recognized medical schools, you can take the steps (USMLEs), and thus you can get ECFMG certified.
In the US, medicine is a racket where the supply is intentionally constrained. Changes such as these should help ease the burden of doctor cost and availability.
It's amazing how people just accept that it takes 6 months or more to see a specialist and don't realize that it is de facto rationing caused by intentional supply restriction.
People prefer to argue endlessly about private vs state funded healthcare without realizing that issue is completely orthogonal to the massive doctor shortage.
Same thing with the housing debate really. People prefer to argue snot rent control instead of just building more housing.
You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap? Hardly.
We're only seeing sustained price decreases now that the bubble is bursting, but it's not going to make real estate more affordable, as it comes with a heavy economic downturn.
When your housing inventory is located on no mans land, and your economic policy is largely built on top of assumptions that housing should be an infinitely-appreciating asset (instead of a depreciating asset, like any other hars asset) , then you end up with china prices.
And I'm not even mentioning the fact that the Chinese birthrate decline is so precipitous that their current population is expected to half by 2100.
The chinese market of housing does not reflect real supply or prices. It instead reflects bad incentives and an economic bubble propped by the centralized state
> You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
Suppose housing prices are high. A construction company exists and has a million dollars, so they buy a $500,000 home, knock it down and spend $500,000 to build half a dozen condo units the size of the original house on the same lot, then sell them each for $500,000. That takes six months to a year. Now the construction company has three million dollars and buys three lots and makes nine million dollars, do you see where this is going?
The thing that prevents this is when either a) they're not allowed to knock down the house and build condos there, or b) you pass laws that make it cost $3,000,000 to build a six-unit condo instead of $500,000, and then the unit is never going to cost less than $500,000 because it costs that much to build.
> China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap?
China is hardly an example of markets. But it's a good demonstration of why you need to allow housing to be built anywhere that it's needed instead of having bureaucrats decide where it should go.
> We're only seeing sustained price decreases now that the bubble is bursting, but it's not going to make real estate more affordable, as it comes with a heavy economic downturn.
We made a mistake with the last housing crisis, which was to reinflate the bubble with low interest rates. What you really want in that circumstance is to increase take home pay, e.g. by lowering taxes on the middle class.
The commenter you replied to makes the mistake of mistaking the price of houses as a capital good with the monthly rent you pay for housing services.
If you want lots of new houses being built, high house prices are good. That incentivises developers to jump through all the hoops, build some houses, and sell them.
(In the wake of the Great Recession, we had and have the opposite problem: tightening of credit dropped house prices, thus house construction was choked off, and thus rents rose. The ratio of rents to house prices went up, and rents also went up in absolute terms.)
> That incentivises developers to jump through all the hoops, build some houses, and sell them.
That doesn't help with affordability, as when house prices are high they're... unaffordable anyway, so they get bought out by investors, who can produce any amount of cash as long as the investment pays off.
For this reason a huge chunk of new housing is not even built to be affordable - both the margins and ROI on a "premium" apartment are just better.
A win for investors and developers alike while at the same time regular people are thrown under the bus.
You are confusing housing as a capital good with housing as a service.
Corporate landlords (and investors in general) don't want the houses to sit empty. So they need to rent them out, or forego rental income.
And, yes, premium apartments are fine. You know that houses today are much nicer than the houses we had in 1800? That's because over time the average new house being built was nicer than the existing housing stock.
When a new nice apartment is being built, there ain't a sudden bang and a newly created rich person steps out of a cloud of smoke. [0]
That rich person that moves into that nice new house will (on average) vacate a slightly less nice house, that someone else can move into, and so on. This is called 'filtering'. See eg https://buildingtheskyline.org/filtering/
If you don't build nice new houses, rich people gentrify the existing houses; which ain't better for poorer residents.
[0] So if you had a market that worked like this, that would be great. It's like an infinite money machine for the economy. Rich people can pay a lot of taxes.
> so they get bought out by investors, who can produce any amount of cash as long as the investment pays off.
But they only do this if they expect housing prices to stay high, which they wouldn't if high prices were expected to spur construction and thereby increase supply and reduce prices. The problem is when the construction is inhibited so the investor's expectation is that prices will go up rather than down.
That would be reasoning from a price change.
Please be careful to separate the price of houses as a capital good from the price of monthly rent.
I'm arguing that all else being equal, if the price of houses goes up, the price of housing as a service (ie rent) can go down under certain circumstances.
Specifically also the opposite: interventions that make houses drop in price, eg restrictions on lending like we saw in the wake of the Great Recession, can lead to less construction, and thus rents going up.
The tightening of lending standards in the wake of the Great Recession saw the ratio of rents to house prices go up a lot.
There are really two types of investors we have to regard here. One is ordinary landlords, but landlords buying properties and renting them out isn't a problem; the more of them there are the lower rents get and then the fewer of them they are. It naturally finds equilibrium.
The other type is global institutional investors who are using real estate as a substitute/diversification against government bonds and then not renting it out, because their desire is for a stable investment rather than high risk high reward. Because of artificial constraints in the housing supply, appreciation in housing prices has been beating the bond market without even renting the properties out, and renting them out is actually a risk because bad tenants in jurisdictions with adverse landlord-tenant laws can be a huge problem. So they just buy up whatever is available and take profits as property appreciation rather than rent.
The second type of investor is obviously really bad for housing affordability, but it also only happens when construction is restricted from increasing supply to meet demand, because otherwise the property itself wouldn't appreciate faster than inflation and would make a poor investment in the absence of rental income.
Your second type of investor has exactly the same opportunity cost for not renting out as everyone else, don't they? Conversely, your first type of investor has exactly the same problems with bad renters? So why does anyone rent anything out?
It looks like the problem of the occasional bad tenant can (and is) solved in practice via diversification. You buy a REIT instead of an individual property.
In my earlier nomenclature, I would classify your 'second investor' as a personal union between an investor and a 'weird' tenant. A 'weird' owner-occupier, who's never home.
> The second type of investor is obviously really bad for housing affordability, but it also only happens when construction is restricted from increasing supply to meet demand, because otherwise the property itself wouldn't appreciate faster than inflation and would make a poor investment in the absence of rental income.
Well, a land value tax would presumable also help here. But again, the opportunity costs for renting out vs not renting out are exactly the same.
> Your second type of investor has exactly the same opportunity cost for not renting out as everyone else, don't they? Conversely, your first type of investor has exactly the same problems with bad renters? So why does anyone rent anything out?
People have different levels of risk tolerance, and different resource levels.
For example, there are ordinary landlords that will take out a mortgage on a building, rent it out and then use the rents to pay the mortgage and the salaries of the people who fix leaky pipes and find replacement tenants when someone leaves etc. If they don't charge rent they're out of business because they'd have nothing to use to pay the mortgage and the bank would foreclose, so they have to.
Then there are investors who just want somewhere to park their money. There is no bank to foreclose, they're paying cash, so they're happy as long as the property is appreciating by more than e.g. the interest rate on government bonds. They can drain the pipes and turn off the heat and make money by doing nothing, as long as supply is constrained so the price keeps going up. Meanwhile they're risk-averse, so the extra income from renting it out (much of which is offset by increased maintenance costs) isn't worth the risk of e.g. some law preventing them from evicting a non-paying tenant.
> It looks like the problem of the occasional bad tenant can (and is) solved in practice via diversification. You buy a REIT instead of an individual property.
That's assuming you can diversify the risk. If someone wanted to invest in, say, San Francisco real estate, they could diversify across multiple properties, but then they'd all be affected by some new law there preventing evictions. Whereas they could diverisfy by also investing in properties in Ohio and Arkansas, but those might not be expected to appreciate enough to attract their interest.
> [...], but those might not be expected to appreciate enough to attract their interest.
I don't understand how that is supposed to work. I can see how a restricted housing supply in San Francisco can lead to us reliably anticipating that the prices there in, say, five years, so in 2030, will be high. I'm with you so far.
Also assume that we can reasonably reliably anticipate housing prices in Ohio in 2030.
But if the buyer is smart enough to figure that out, why wouldn't the seller be? For San Francisco's housing prices to _appreciate_ more than those in Ohio, today's seller needs to accept a bigger discount (compared to reliably estimated 2030 prices) for San Francisco real estate than for Ohio real estate. Ie SF housing prices need to be comparatively lower.
Why would the seller be so nice for SF but not for Ohio? Are current SF land owners less interested in money?
By default, current prices (should) anticipate market consensus expectations of future prices.[0]
> People have different levels of risk tolerance, and different resource levels.
Yes, but they all buy and sell in the same market, don't they?
Your hypothetical 'investor' is (A) risk seeking enough to willing invest in single undiversified properties and return seeking enough to go for SF over Ohio (assuming there's more of a return there, I don't know if that's true). And simultaneously (B) risk averse enough to even contemplate having tenants, and uninterested in returns, too, as long as they are barely above government bonds?
What kind of weirdly split personality creature are we dealing with here? (And where can I find them? I suppose I could try and sell them the Brooklyn bridge.)
Are you sure there isn't something else going? Perhaps some other weird law, or perhaps some weird tax dodge (or even status game?) that leads some investors to leave properties empty? What proportion of those properties are even empty? What proportion would we expect from purely profit seeking risk-neutral investors? (That null-hypothesis proportion is most likely less than 0. If even just because of tenants moving in and out.)
> That's assuming you can diversify the risk. If someone wanted to invest in, say, San Francisco real estate, they could diversify across multiple properties, but then they'd all be affected by some new law there preventing evictions.
You can at least buy an SF REIT, so a single bad tenant has less of an influence. And, new laws are unlikely to affect both commercial and residential renters the same way, so you can diversify across that dimension.
Even without tenants, an SF REIT with only empty properties makes more sense for diversification than a single property. After all, tenants and city wide regulations aren't the only thing affecting the prices of a single house.
[0] As a caveat to what I wrote above: if one asset class is considerably more risky than another, we can expect today's buyers to demand / today's sellers to offer a bigger discount on future prices. Ie on average returns on risky assets can in theory be higher. Risk vs reward.
But that explanation doesn't work for the picture of the hypothetical investor you sketched in the rest of your comment.
> For San Francisco's housing prices to _appreciate_ more than those in Ohio, today's seller needs to accept a bigger discount (compared to reliably estimated 2030 prices) for San Francisco real estate than for Ohio real estate. Ie SF housing prices need to be comparatively lower.
> Why would the seller be so nice for SF but not for Ohio? Are current SF land owners less interested in money?
The reason is that there are two classes of buyer; investors and occupants. The expectation in SF is that population will increase and the housing supply will not be allowed to increase, so occupants will have to pay more in the future, creating the expectation of future appreciation. Investors could then come in and bid up the current price in anticipation of this, but they'll only do this until the current price rises to match the risk-adjusted returns from competing investments.
The expectation in Ohio is that the population will be approximately flat and new construction will be less inhibited, so expected housing price appreciation there might be less than competing investments. That discourages external investors, but the current-day prices are still held at their current level from demand by local residents because they still need somewhere to live.
> Are you sure there isn't something else going? Perhaps some other weird law, or perhaps some weird tax dodge (or even status game?) that leads some investors to leave properties empty?
These things could be contributing to it. You could also add bureaucratic incompetence to the list, i.e. an institutional bureaucracy gets an order to invest in housing so it buys a bunch of housing and is too insulated from consequences to recognize that it could make more money by renting it out.
But all of these derive from the expectation that housing will appreciate and thereby make a good investment. Otherwise whatever weird law or unusual risk function is causing them not to rent the properties out would be irrelevant because they would lose the incentive to invest in them to begin with.
> Even without tenants, an SF REIT with only empty properties makes more sense for diversification than a single property. After all, tenants and city wide regulations aren't the only thing affecting the prices of a single house.
Sure, but then you have a REIT buying up properties and leaving them empty, which is no better than doing it one at a time, and moreover can likewise be prevented by not inhibiting construction to remove the expectation of market-competitive returns solely from housing appreciation.
> China reportedly has currently enough housing stock to house their population twice over. Did that make housing cheap? Hardly.
If you build housing where people don't care to live, it doesn't matter how much you build. Housing will be more expensive in desirable areas unless you build more housing in those desirable areas.
is this housing stock in places where people want to live? I find it hard to believe that half the units in hong kong or shanghai are vacant
Houses built in the wrong place aren’t useful. Also, allowing hoarding of housing (viable since no property tax) can also restrict supply. There are plenty of reasons why more housing doesn’t necessarily lead to cheaper housing. Even inside 4th ring in East Beijing, we estimated that the block we were living in was only 60% or so occupied (by counting lights on nightly walks), much of the rest of the 40% were probably not even renovated.
> Also, allowing hoarding of housing (viable since no property tax) can also restrict supply.
I don't see how property tax makes any difference here?
The opportunity cost in terms of lost rent (if you are hoarding vacant property instead of renting it out) should be the same no matter what the property tax is?
> There are plenty of reasons why more housing doesn’t necessarily lead to cheaper housing.
If you can find a market that you can keep adding supply into, and prices don't react, you found yourself an infinite money machine!
(It's the same mechanism as when people complained that printing money (whether by the Bank of Japan in the 1990s or the Fed in the 2010) can't raise inflation:
Instead of complaining, you should keep printing money and gradually buy up the whole world in return for some ink and paper / database entries.)
That was China’s thinking, but it turns out there is a limit, it’s just not a gradual slope downward but a huge crash.
What makes you think so? The Chinese problems come from different sources.
For example, there's lots of corruption, they are not keeping their nominal GDP on a stable growth target, and if I remember right, they have a lot of government intervention in the real estate and credit markets.
See https://www.econlib.org/the-confusing-china-debate/ for an assessment more qualified than mine. And https://scottsumner.substack.com/p/chinas-mysterious-deflati... for something more recent.
> You can't outpace investment demand - especially not in the phase when housing is used as collateral to borrow in order to invest in more housing.
Huh? What kind of weird statement is this?
It seems there's a lot of confusion. I think it mostly stems from owner-occupiers.
For our analysis, let's separate them into two: some people own houses and rent them out, and everyone (but the homeless) rent houses. It's just that sometimes people rent from themselves.
What matters for discussions about affordability of housing is how much of your income you have to spend each month on housing every month. Let's call that 'housing services'. That is pretty much a function of available supply every month vs demand every month. Who owns them doesn't make a difference.
If an investor buys a house, but rents it out, that's fine. Neither supply of housing services nor demand for housing services has changed. If an investor buys a house, but doesn't rent it out (eg because it's intentionally empty, or because the investor lives there herself), then she counts as a consumer of that unit for that month. That's an indirect change in supply and demand for housing services, but doesn't directly have anything to do with the investor as a owner.
Now to come to your scenario:
If investors use houses as collateral to invest in more housing, that's great! Ideally that will drive up the prices of housing as a capital god.
The more expensive houses are as a capital good, the more it makes sense for developers to jump through all the hoops and build more houses to sell them into the market. That means more houses available for renting out, which drives down rents.
(In the wake of the Great Recession, we had and have the opposite problem: tightening of credit dropped house prices, thus house construction was choked off, and thus rents rose. The ratio of rents to house prices went up, and rents also went up in absolute terms.)
What is snot rent control?
Swipe typo! I meant "about"
When I lived in Florida it was about like that. I couldn't accept that so just asked for the soonest appointment anywhere, and was assigned a new Haitian lady about an hour away who wasn't booked up yet.
Given the circumstances I expected the worst, but I was so amazed with her. She was tall, pretty, and extremely well spoken. Not that this matters a ton, just recalling my first impression shattering expectations. And she's the first doctor I've met that realized that my main problem was more with health anxiety than health itself and just kinda bro'd it out with me for a half hour.
All of that is to say, if this is what to expect from foreign doctors vs the purposely supply constrained 'elites' I'm accustomed to, consider me 100% on board.
Some level of supply restriction is probably warranted, though less than what we have now. It would be bad policy to have talented people train intensely for 8+ years, only to have them emerge on the other side with a "sorry, oversupply, no job for you."
I think availability of lengthy and highly-specialized training programs needs to be carefully calibrated to avoid other kinds of rackets (like have been seen with law schools and certain kinds PhD programs).
We do it all the time with lawyers and PhD scientists of all stripes. Why should doctors receive special treatment?
(Wrote this before your edit introducing the second paragraph)
> We do it all the time with lawyers and PhD scientists of all stripes. Why should doctors receive special treatment?
We shouldn't do that with lawyers and PhDs either. Why must everything be a race to the bottom?
The free market philosophy dictates that we absolutely should do it, and it's a good philosophy to follow.
The free market has the assumption of perfect information.
In this case, perfect information of what the world will look like on the other side of an unusually long training course (how long depends on what you're training for exactly), so long that the opportunity cost can be life changing even if there was no direct cost for the course itself.
This breaks the assumption, making government intervention useful.
Government intervention would only be useful in that case if the government had some non-public information on what the supply and demand for doctors will be by the end of the training program. But if they had that information they could just publish it instead of trying to prohibit people from going to medical school, and people could decide for themselves if they still want to go given what the job market is expected to look like by the end of the training program.
More to the point, nobody actually knows this exactly, not even the government, but given the choice between too many doctors and not enough, the first one is obviously better. If you have too many doctors then some of them can become researchers etc. If you don't have enough, people die.
> Government intervention would only be useful in that case if the government had some non-public information on what the supply and demand for doctors will be by the end of the training program. But if they had that information they could just publish it instead of trying to prohibit people from going to medical school, and people could decide for themselves if they still want to go given what the job market is expected to look like by the end of the training program.
To the extent that the government has some non-public information, they cannot always reveal it directly. Sometimes this backfires, e.g. the UK politicians blaming the EU for all the things the UK politicians wanted to do anyway but needed a scapegoat for.
Most of the people beginning this training have only just reached adulthood, and have no reason to be politically sophisticated. I sure wasn't, at that age.
Even if the government was completely open and honest, market are not efficient unless P == NP.
> More to the point, nobody actually knows this exactly, not even the government, but given the choice between too many doctors and not enough, the first one is obviously better. If you have too many doctors then some of them can become researchers etc. If you don't have enough, people die.
Yes, when resources are effectively unbounded. Even more than that, I would even argue that (owing to what I've heard on the grapevine in the UK about overtime) training more doctors and nurses would lower the cost to the taxpayer.
But resources are not unbounded, and governments have other priorities besides this. What else can be bought for the cost of a doctor? Sometimes those other things are also measured in lives, other times they're measured in the economic cost that could pay for two doctors.
> To the extent that the government has some non-public information, they cannot always reveal it directly.
Is that expected to be relevant here? What kind of secret jobs data would the government be keeping under lock and key for the security of the nation in a typical year?
> Most of the people beginning this training have only just reached adulthood, and have no reason to be politically sophisticated. I sure wasn't, at that age.
This is why adolescents have parents or, failing that, teachers and guidance counselors.
> Even if the government was completely open and honest, market are not efficient unless P == NP.
Markets don't have to be perfectly efficient, the only question is if they're more efficient than central planning, and the answer to that question is yes.
Notice that the government also has no ability to timely perform NP calculations.
> What else can be bought for the cost of a doctor?
Probably like a tenth of a mile of paved asphalt. Having a few "too many" doctors is going to be worth more than the median thing the government spends money on, because trained doctors are valuable even outside the practice of medicine, e.g. as researchers or policy advisors or simply as a buffer against undersupply, since the consequences of that are so dire.
Moreover, this isn't even a valid question when the size of any given graduating class is a small proportion of the total pool. If it takes 7 years post-bachelors to become a doctor and then you are one for 35, the total size of the pipeline is only 20% of the size of the pool. If the number of doctors in training is 50% too large, the total supply will only be in excess by 10% from the point you figure that out, and that's the single-year peak that only lasts for one graduating class before it starts edging downward again. It's just not a big problem for that to happen. These numbers are within the error bars for how precisely "oversupply" or "undersupply" can even be defined or agreed upon as a concept.
> The free market has the assumption of perfect information.
No. Where do you get that misinformation?
Yes, it's relatively easy to construct a model where perfect information and a bunch of other assumption lead to markets being great. But that merely shows that these conditions are sufficient. Not that they are necessary.
To make an analogy:
We can analyse spherical, friction-less cows in a vacuum and conclude that as long as they move less than about 10km/s the won't escape into space. If we then observe that real cows aren't spherical nor frictionless, we can't automatically assume that they'll escape into space at a lower velocity.
> This breaks the assumption, making government intervention useful.
Non sequitur? Reminds me of the famous syllogism https://en.wikipedia.org/wiki/Politician's_syllogism
Something has to be done. This is something. Thus it has to be done?
> No. Where do you get that misinformation?
> Yes, it's relatively easy to construct a model where perfect information and a bunch of other assumption lead to markets being great. But that merely shows that these conditions are sufficient. Not that they are necessary.
"Markets are efficient if and only if P = NP": https://arxiv.org/abs/1002.2284
To quote:
"""
I prove that if markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be solved in polynomial time. I also prove the converse by showing how we can “program” the market to solve NP-complete problems. Since P probably does not equal NP, markets are probably not efficient.
"""
> Non sequitur? Reminds me of the famous syllogism https://en.wikipedia.org/wiki/Politician's_syllogism
I think I see what you mean, as I didn't give sufficient justification.
In this case, government control makes this sector function as a planned economy. The normal flaw in a planned economy is that it cannot respond quickly to changing consumer demand, and I do not dispute this.
In the case of medical issues, consumer demand is a lot more predictable by the government than by the general public, as the demand 20 years from now is mostly directly influenced by other government interventions in the meantime (governments have a better awareness than random 18 year olds choosing their university degree of the plausibility of a smoking ban or a sugar tax, they can change pollution rules to ban leaded fuel, etc.), and the exceptions are things like "novel global pandemic" or "we're at war now" where the government has to directly intervene in other ways anyway.
Thanks for the considered response.
> "Markets are efficient if and only if P = NP": https://arxiv.org/abs/1002.2284
That's a very cute result, but requires a very specific definition of 'efficient market'. There's actually a range of 'efficient market' definitions, each with their own 'efficient market hypothesis'.
One of the weaker forms that I like is: 'don't expect to make any money trading stocks as an amateur on news that the full time professionals (and their computers) in the hedge funds and at Goldman have already seen.' (This one is mostly useful for internet discussions with people who believe in reading price charts etc.)
The paper basically shows that if you want to be really careful in your definition of '(weakly) efficient market', you need to take computational complexity into account. It says more about definitions, than about the economy. In any case, if you like that kind of thing, you should check out https://scottaaronson.blog/?p=735 too.
---
> In this case, government control makes this sector function as a planned economy. The normal flaw in a planned economy is that it cannot respond quickly to changing consumer demand, and I do not dispute this.
There's lots more wrong with (most) planned economies.
Eg the demand for toilet paper is---covid aside---famously easy to predict. Yet, the Soviet Union was also infamous for their toilet paper shortages.
> In the case of medical issues, consumer demand is a lot more predictable by the government than by the general public, as the demand 20 years from now is mostly directly influenced by other government interventions in the meantime [...]
The government officials in power today are most likely not the government officials in power over the next 20 years. In most cases, it's not even the same party that's in power. Current government officials don't necessarily have any special insight into long term government actions.
> This breaks the assumption, making government intervention useful.
Not useful, but rather required. The fixpoint of a ruleset allowing free markets to exist is not free market, but rather somewhere between laissez faire and anarcho-capitalism.
> The free market philosophy dictates that we absolutely should do it, and it's a good philosophy to follow.
Sorry, it's never a good idea to base real life policy on ideological dogma. The "free market philosophy" has some good ideas, as well as a lot of bad ones. We shouldn't blindly follow its "dictates."
In my experience, the people who dogmatically preach the free market frequently have an oversimplified understanding or use circular logic to conclude the free market is good by redefining good as whatever the free market does.
> In my experience, the people who dogmatically preach the free market frequently have an oversimplified understanding or use circular logic to conclude the free market is good by redefining good as whatever the free market does.
There are bad arguments for good conclusions, yes.
Most of the "free market" people dont understand that many markets can be cornered and oligopolies (or duo- or even mono-) can form.
A lot of the stuff assumes that it is 1850 and everyone can buy land and farm potatoes. With "unlimited" land and tens of thousands conpetitors. No barriers of entry too.
And Im pro market.
No, it does not. In fact, student emerging on the other side and being met with "sorry, no job for you" is a clear proof of free market *not* working.
Free market is not "everyone can do anything", that's somewhere between laissez faire and anarcho-capitalism. "Free market" is a theoretical model where goods, services, and, crucially, information flows freely. Or in more textbook definition, there exists perfect information symmetry.
In a functional "free market" a student would know their employment prospects before they even submit application.
EDIT, addendum: If we are talking doctors, the training takes 10 years (6 if you don't include specialist training), but that's a long time. So long that the environment itself could change dramatically, for whatever reason. Free market being free, could distort itself so much that perfect information symmetry does not translate over time.
So how do you ensure that the information which was true before training remains true after training period even if the free market mutated itself and invalidated the information? Surprise, surprise, you get government to uphold the "freedom" of the market.
You have some weird straw man definition of 'free market'. Perhaps you should update the Wikipedia entry with your wisdom? See https://en.wikipedia.org/wiki/Free_market
What anonymous text books are you mentioning?
Under certain circumstances it makes sense to study a model of markets with perfect information symmetry. But that's a very different (and much more restricted) term than 'free market'.
Let's read TFA, shall we?
In "Criticism" section we find:
> Critics of the free market also argue that it results in significant market dominance, inequality of bargaining power, or information asymmetry, in order to allow markets to function more freely.
Clicking "https://en.wikipedia.org/wiki/Inequality_of_bargaining_power" shows right at the introduction:
> Inequality of bargaining power is generally thought to undermine the freedom of contract, resulting in a disproportionate level of freedom between parties, and that it represents a place at which markets fail.
One could click on https://en.wikipedia.org/wiki/Information_asymmetry#cite_not... , to find:
> Information asymmetry is in contrast to perfect information, which is a key assumption in neo-classical economics.[11]
But that would require one more click to https://en.wikipedia.org/wiki/Neoclassical_economics:
> Neoclassical economics is an approach to economics in which the production, consumption, and valuation (pricing) of goods and services are observed as driven by the supply and demand model.
> Under certain circumstances it makes sense to study a model of markets with perfect information symmetry. But that's a very different (and much more restricted) term than 'free market'.
Again, that's exactly what "free market" is. Market that functions *solely* on interparty contracts is laissez faire.
The key difference is that in laissez faire price equilibrium is a defining property, whereas in a free market price equilibrium is an expected emergent property if perfect information symmetry is maintained.
> "Free market" is a theoretical model where goods, services, and, crucially, information flows freely. Or in more textbook definition, there exists perfect information symmetry.
I was specifically referring this idiosyncratic definition.
> The key difference is that in laissez faire price equilibrium is a defining property, whereas in a free market price equilibrium is an expected emergent property if perfect information symmetry is maintained.
You are mixing up `if` and `iff`.
Free market philosophy is more of a dogma that it is an empirical fact.
Because a ton of people want to dedicate their lives to advancing justice and human knowledge. Who are any of us to deny them that pursuit if they are competent and committed enough to pass the Bar or defend a novel thesis?
I’m pretty much the opposite of a libertarian, but I find the very idea of restricting education and denying competent people professional certification on the grounds of limiting supply to be perverse.
You need to meet some lawyers who were never able to practice because of oversupply, or hopeful PhDs that found themselves trapped in the adjunct precariat.
There's no good accomplished by letting people waste their time, money, and talent on training they won't be able to use; and which they are counting on using to support themselves.
I’ve got a family member who’s been an underpaid postdoc their entire professional career going on 30 years and another stuck in banking for a decade after a physics PhD. I’m intimately familiar with the reality. Neither of them regret their education or the effort they put in.
There’s no good accomplished by restricting education and professional certification to artificially restrict supply. All it does is create perverse incentives and harm the public good.
> I’m intimately familiar with the reality. Neither of them regret their education or the effort they put in.
The people I know in similar situations regret their choices, or are at least are a little bitter.
> There’s no good accomplished by restricting education and professional certification except to destroy peoples dreams for the sake of a lucky few.
Let me put it this way: if their dreams are going to be destroyed, it's best to do that as soon a possible. Putting that off makes things worse, not better.
Except you have no idea a priori who will succeed and who won’t. If your selection process happens before the certification process, you’ll just be selecting for other metrics, ones usually irrelevant to the actual field. That’s just bad policy.
There are a ton of shitty doctors and entire geographic regions that are deprived of specialists because of this kind of nonsense. Your policy may help a few people but it harms all of society.
> Except you have no idea a priori who will succeed and who won’t.
Sort of. In many areas it's possible to do a good-enough job of sorting out the people who will almost certainly succeed. It won't be perfect, but nothing is. If there are enough of those to fill a long and specialized training program to the point where actual needs are met, then you shouldn't be letting a bunch of extra "maybes" in too, because that just introduces bad outcomes at the end that could be avoided.
Based on my experience with doctors medicine is not one of those fields. Residency is the final gauntlet that matters and that’s the part that’s artificially restricted.
On the other hand, because of supply, finding a good lawyer just requires a bit of money, well within reach of the average person facing a criminal trial or some civil dispute. Finding a good doctor requires sitting on waitlists for months (if you’re lucky enough to find one taking new patients) unless you have enough money to afford a concierge service, which the vast majority of people cannot afford. I’ve had bad concierge doctors but I’ve never had a shitty lawyer paying that kind of money.
I mean really, where do we stop? There’s many more English literature graduates than jobs. Same with ____ studies and just about every other humanities degree. Do we restrict those too? How about higher education altogether?
There’s an important debate to be had about government financing and the non-dischargeability of loans and all its effects, but restricting education based on job supply is just harmful to societies on so many levels.
This is a two way street. Everybody needs medical care. Almost everyone is going to need legal advice in their lives. Depriving them of competent care and representation does far more harm than limiting supply would save. Failed medical students don’t die from the ordeal, but patients do.
The washout rate for A&P aircraft mechanics is on the order of 75%. Imagine if healthcare were as reliable as airplanes (though there’s a shortage there too).
> Based on my experience with doctors medicine is not one of those fields. Residency is the final gauntlet that matters and that’s the part that’s artificially restricted.
You're getting the basic facts wrong. As least in the US, the restriction is acceptance to medical school. Part of the reasoning is they don't want to accept anyone who they think will fail years down the line, because that's bad for everyone (you, me, the failed student, and the teachers who aren't in it for the $$$). There's a surplus of residency slots (overall), because otherwise no foreign-trained doctors would ever be able to practice here.
Lots of foreign-trained doctors practice here.
My position is they need to increase medical school admissions (and residency slots), but not throw the doors wide open to all comers. The slots need to be managed such that anyone who gets can complete the program and will have a job waiting for them that pays commensurate with the amount of training they receive, but probably much less than many doctors get now.
> I mean really, where do we stop? There’s many more English literature graduates than jobs. Same with ____ studies and just about every other humanities degree.
Yes. What's happening with English literature graduates (at least on the PhD level) is an exploitative travesty.
> ...but restricting education based on job supply is just harmful to societies on so many levels.
I disagree. It's harmful to string people along with false hope, only to slam the door in their face at the end. It's harmful for society for people to waste time on a job training program (which is what medical education really is) for a job they'll never get.
There needs to be a distinction made between general education and job training. Unless you're independently wealthy, specialized formal education needs to perform both functions.
> The washout rate for A&P aircraft mechanics is on the order of 75%.
Aircraft mechanic school is about 18-24 months (https://www.indeed.com/career-advice/finding-a-job/how-long-...), and costs a few tens of thousands of dollars. That's not comparable, at all.
> Imagine if healthcare were as reliable as airplanes (though there’s a shortage there too).
Sure imagine that, but people aren't manufactured products. Not a valid comparison.
> Except you have no idea a priori who will succeed and who won’t.
Not really relevant. We're not talking about the general concept of "success", we're talking about if the market for some profession or academic pursuit can support a certain number of people entering it. That's something that you can predict reasonably well. Not perfectly, and there can certainly be outlier events that drastically change things unexpectedly. But it's possible to have reasonably accurate forecasting here.
As for "success", sure, it's hard to tell if any individual who wants to enter a particular field will do it well enough to be successful. Admissions departments at universities can sometimes do an ok job predicting that, but they often end up being wrong (in both directions). That's just life.
The medical profession is of course doing those forecasts and then artificially restricting things further, in order to maintain high salaries and high prestige. I don't think we'd be having this argument if they weren't so greedy and set limits at reasonable levels such that we had enough doctors and specialists out there to handle patients promptly and effectively.
I'm glad we are not relying on government forecasting for the number of programmers needed.
Perhaps the fellowship for PhDs should only be two years, and a faculty review at the end of the two years cuts out the majority of students, so many more can be admitted and evaluated than actually graduate? And maybe another round after the 4th year? That would solve both problems: most people going into the programs wouldn't graduate, but many more people who wanted to try would be able to at least get in, and most of the students who did graduate would be able to get jobs (maybe, out of a 30 person starting cohort, 2 graduate with a PhD).
It could vary year by year, so a year with a really great cohort, maybe the majority would come through, whereas with a bad cohort almost all of them wouldn't make it.
I don't think you can generalize attitudes based on the experiences of two people you know.
But there is good, in letting people wait 6 months for important medical issues?
You misunderstand my position. I am not arguing for the status quo: https://news.ycombinator.com/item?id=41947148.
What I'm arguing against is a reactionary over-correction.
Why is medical school in the USA an 8 year vs 5 year program like in other countries? Yes, they still have residencies to go through, but a doctor in China is still through with their education and training much faster than in the USA.
Our system is overly expensive in terms of training requirements for doctors and nurses, and it doesn’t show much improvement in quality for those requirements.
I expect it's another, softer way to reduce supply: longer education requirements will discourage some people from even attempting it in the first place.
> It would be bad policy to have talented people train intensely for 8+ years, only to have them emerge on the other side with a "sorry, oversupply, no job for you."
"Oversupply" isn't a thing in the absence of price controls. If there are more doctors then they get paid less and because they get paid less there is more work for them. Medical research or labor-intensive treatment or diagnostics that wouldn't have been cost effective at higher salaries becomes so and it creates more jobs for doctors at the lower salary.
Of course, if doctor salaries get too low then fewer people want to become doctors, and fewer people going to medical school would cause salaries to go back up. So you end up at an equilibrium where doctors get paid the amount necessary to encourage people to go to medical school, but not wastefully more than that.
(1) The whole point is to prevent people from going to school for 8 years in the first place. Five years is only 1 more year than the average degree. You could do the same for law and other professional degrees like a PsyD. Or are we planning to supply cap every degree? (2) The debt from a four year bachelors plus medical school is wild, especially at current interest rates. (3) You’re assuming there are no other jobs for would be doctors like in pharma, tech, or consulting. (5) How exactly do you plan to “calibrate” this? Why isn’t a warning label enough.
It is an 8 year programme in order to reduce supply.
The rationing is 'caused' by price caps (whether by law or informally observed).
Supply restrictions just restrict available supply, they don't cause long waits by themselves.
(Of course, this assumes that you don't want to re-interpret prices themselves as a form of rationing. That's a decent approach to take in some contexts, but eg doesn't gel with the common usage like 'food was rationed during the war', where we use 'rationing' in contrast to the usual price mechanism.)
There are no price caps. If you're rich, you have concierge medicine, and you'll see a great specialist whenever you want. The supply restrictions (and other things that reduce doctor productivity) cause a lack of supply relative to the amount of medical care that would be medically useful for the population. For people of normal income with normal medical insurance, that means that their care has to be rationed, or it would be unaffordable.
If there's such a long queue, why don't doctors raise prices until the queue goes away? Do doctors not like money?
> If you're rich, you have concierge medicine, and you'll see a great specialist whenever you want.
You don't need to be that rich to go see a doctor privately in eg the UK. And, yes, they have crazy queues for the NHS, while the same doctor can be had for a bit of money quickly when seen privately.
In that case, the price restriction comes from what the NHS is willing to pay. And because patient don't directly pay for the NHS, at least not proportional to the usage, instead of rationing via price the system rations via wait times.
> [...] the amount of medical care that would be medically useful for the population.
I'm not sure there's such a thing. There's no clearly defined amount that is 'medically useful'. There are just gradually diminishing returns to more medicine (in a statistical sense).
> If there's such a long queue, why don't doctors raise prices until the queue goes away? Do doctors not like money?
You do understand the 'queue' are sick people who need treatment? If the 'queue' goes away then they're just untreated and potentially die. Doctors like money but, at least where I come from, you don't go into medicine for cash. You do it for ideals or respect or to have a job that means something.
> I'm not sure there's such a thing. There's no clearly defined amount that is 'medically useful'. There are just gradually diminishing returns to more medicine (in a statistical sense).
there is actually such a thing as overtreatment. There's this really interesting statistical point where too much testing can actually cause harm, even if the test it self is harmless, because it discovers things that wouldn't have really been a problem ('incidentalomas').
And, unfortunately, there does come a point at times where a patient cannot be helped and it is better to just let them enjoy what time they have left rather than subject them to more treatment and recovery time and all that.
> You do understand the 'queue' are sick people who need treatment? If the 'queue' goes away then they're just untreated and potentially die.
Huh? How does having a queue help the doctor see more patients?
Let's assume our doctor can handle X patients a day. Having a six months long wait list does not increase X.
(If, for compassionate reasons, you want to always run the doctor at full capacity X, you will want some short waitlist, so that when a patient cancels you can backfill. But you don't need a six months waitlist for that.)
So you can carefully raise prices a bit, so that you can still see the same number of patients a day as before. But the doc gets more money, and the waitlist (almost) disappears.
(It's the exact same logic as congestion charging.)
They can eg use the money to make their life easier, eg by having their houshold chores done by a professional.
> Doctors like money but, at least where I come from, you don't go into medicine for cash.
Or they can donate the extra money to an efficient charity.
> there is actually such a thing as overtreatment. There's this really interesting statistical point where too much testing can actually cause harm, even if the test it self is harmless, because it discovers things that wouldn't have really been a problem ('incidentalomas').
Agreed.
But my argument even works without harm of overtreatment: extra testing only does you statistical good. And if you eg do colonoscopies every day instead of every year, you aren't gonna catch that many extra cancers.
> In the US, medicine is a racket where the supply is intentionally constrained.
The correct solution in that case would be to increase CMS funding for US residency and fellowship spots (which was frozen for ~25 years).
You should see this for what it is, salary suppression by importing foreign labor, in a similar vein to what the tech industry did with abusing the H1B system until fairly recently. It's easy to lower costs by cutting corners on quality, but that is not a pro patient move.
> It's easy to lower costs by cutting corners on quality, but that is not a pro patient move.
They're doing that, too. See the proliferation of physician assistants and nurse practitioners.
> but that is not a pro patient move.
You sure about that? Seems to me that being able to see a “90%” doctor today instead of a “100%” doctor 6 months from now is beneficial to patients. Especially for things like oncology, where that 6 month wait could be the difference between life and death.
Foreigners are also people.
Yes, the boards of different states have quotas to limit the number of people passing the medical board exam each year.
BTW, more doctors should follow what this doctor does. https://www.youtube.com/watch?v=yCtAdgpW_Vs. Their website shows they're charging $40 per visit currently, vs $35 4 years ago.
It's the same in Europe as well. It's maddening. Every year I read of massively missing doctors, and at the same time, universities reject 90% of applicants or so because they don't have more places. So those doctors get "imported" from poorer countries, leading to brain drain and making situation in _those_ countries even worse.
It's especially bad now that the societies are getting older and boomer generation retiring. I routinely read news like "the doctor in town X is 70 y.o. and wanted to retire but his patients couldn't find a new doctor, so he came back from retirement".
In France every doctor wants to live and practice in big cities, there's even a term "medical deserts".
In Poland on the other hand, it's very common that a doctor either works in multiple hospitals at the same time (and sometimes also has a private practice); or having cabinets in different towns and every day being in a different town. So in those small towns you can see a specialist like "once month on Wednesdays".
My neighbour is working towards qualifying to specialise in urology. Problem is, there are just 43 openings a year for the entirety of Poland. That puts a hard limit of less than 2k specialists total at any given moment unless we expect people to work in retirement.
Currently there are around 1300 such people. How are they supposed to provide services for a country of 40mln residents?
True, and from what I have heard there is really a "lower cast" of staff being taken advantage of because they were trained abroad but working in EU hospitals.
So as usual it is very hypocritical. In that sense Florida's move make sense.
As always, it is that way of thinking that has been dominant in the west for at least 50 years: why bother making anything here if we can just import it for cheap?
The US is far from alone in that.
numerus clausus is very common in med-related fields (medicine, pharmacy, dentistry, and vet).
Now some limitation does make sense as there’s only so much space for rotations and internships, but the limits tend to be artificially low.
Med school is government funded in my country- none of that bizarre student debt thing that America has.
Ofcourse this does mean that there is a maximum budget for new students every year which works a cap.
Can you imagine a Federal law that makes state Medicare or Medicaid funding contingent on the state jurisdiction recognizing all professional licenses granted by all other US-states ?
So that a practicing doctor etc could easily move their practice and their skills from say NJ to FL, without the hassle of maintaining multiple state licenses ?
That would make an incredible revolution, and its not even touching the actual constraints inherent with the MD education barrier!
Another one - bring back apprenticeship!
I'd take this generally more seriously, if the number of licensed physicians in the US wasn't growing 3x faster than the population, or if the number of international medical graduates wasn't already 23%.
The US population grew by 8% from 2010 to 2022, increasing from 309,327,143 to 333,287,557. The number of licensed physicians grew 23% from 850,085 to 1,044,734. So it's not retirements, or graduations and general licensure. It's the number of General Practitioners, and the number people they treat and amount of time they spend (not necessarily the care the patients receive) that makes wait times longer.
The fact that almost all of them are now in larger (private equity controlled?) groups rather than working as independents. That many more choose to specialize for higher pay so that they don't have to work with the masses. It is in the interests of the insurance groups for the price of healthcare to rise since they make a percentage of that cost as profit. As long as everyone has to pay more the insurance companies can pay their executives more money and provide dividends to stockholders. They want all patient care to be a hassle. They want to mandate additional busy work to every transaction. They want drug prices to rise. It improves the bottom line.
I don't know that brining in a few more doctors from Barbados or Australia or the UK is going to improve that, and it's probably going to make it worse in other places (that don't have for profit healthcare insurance).
https://meridian.allenpress.com/jmr/article/109/2/13/494447/...
It's even worse in Canada.
> Specifically, Alabama, Colorado, Idaho, and Washington already have enacted such legislation. Many other states are considering similar bills.
Fantastic. Licensing requirements are often insane and provide no value to consumers.
Hawaii is the worst (in many regards, actually). There are "certificate-of-need laws"
> CON laws require businesses that want to build a new medical facility or offer a new service to go through an arduous state approval process. Moreover, they must prove their service is “needed.” [1]
[1] https://www.grassrootinstitute.org/2023/10/hawaii-healthcare...
Aren't those common in most states in the US for new hospitals?
Naming them CON laws is a little on the nose isn't it?
Credentials and skill levels differ widely worldwide. Many developing countries lack the infrastructure to train doctors for modern medicine, and the degree of corruption in those countries increases the risk of unqualified or questionable practitioners.
This is not the right way to improve access.
Does this mean Caribbean medical school is less of a scam now?
It would really help for primary care doctors to start more private businesses - much like dentists. There is no reason to be stuck in hospital systems that grind doctors so much.
The revenue savings from the hospital not taking cut might even make primary care a highly paid profession - enough to incentivize more people to take up this specialization.
Hospitals don't provide primary care, and they are not the problem. The high cost of hospitals is due to insurance system incentivized for profits over efficiency and service to the patient: https://www.propublica.org/article/why-your-health-insurer-d... It does not help that private equity has also discovered hospitals as a source of revenue: https://www.propublica.org/article/investors-extracted-400-m....
To understand the true cost of the American medical system, I think you need to look over the border at most any other 1st world country's medical system. Doctor's training is lot cheaper, so more people are incentivized to go into primary care. Insurance is better regulated or single payer. Hospitals are not forced to provide free care (US EMTALA) that causes financial uncertainty. Patients are typically incentivized to not abuse the system unlike the US (e.g. Dilaudid drug abuse enabled by EMTALA)... etc etc...
in india you can go to a government hosipital and you get a big line but you are seen by top doctors. you go into an accident, you are met with the top most doctors of that area.
the only thing upfront cost is to get a "Card" or a prescription number from the registry outside. costs Inr 10 normally or $ 12 cents.
that gets you infront of a doctor who can decide what to do with you. blood tests or some radiology or something else.
if you are to be admitted, they ask you to get a "file" that costs around $ 1 or $2. that gets you a bed in a general ward where you are monitored by good doctors.
surgery if you have a health card, you dont have to pay anything. there is a line for non-essential procedures but if its an emergency, you are prioritized and taken care of.
i have relatives working in government hospitals and their opinion is to not do procedures in private hospitals. it just costs an arm and a leg (without insurance) and you dont even get best care because consultants/top doctors arent even available during nights for example.
Sounds similar to China. One issue is that they don’t provide many nursing/nurse assistant services, so you have to bring your own (usually family members, but you can hire someone to do it).
I just used private hospitals in China which are very western, and not very costly with private insurance. Yes, the ER is only staffed by a couple of doctors at night, but that worked for me.
Have they fixed the corruption issue yet? Last I heard you have to pay bribes to doctors in that part of the world
Unclear. Things have definitely changed over the last 20 years. They used to have problems with scalpers monopolizing appointment tickets but I think they’ve fixed that with ID registration.
bribes for what?
yeah. you need tonnes of family members to stay for the night, do the chores, arrange for medicine, get test reports and such.
> It would really help for primary care doctors to start more private businesses - much like dentists.
You're talking about reversing tidal currents that have been in effect for over 30 years. It isn't happening. The financials make it increasingly difficult for lone hospitals to stay independent of big health systems, let alone small group practices and partnerships.
Medicine has been corporatized and commoditized. Next comes enshitification. For example, dropping the requirement for American doctors to complete their training in America.
Does anyone know which and how many foreign medical schools qualify?
> Does anyone know which and how many foreign medical schools qualify?
This is about residency programs, not medical schools. IIRC, graduates of pretty much any foreign MD program can already practice in the US, they just need to complete a US residency.
check the ecfmg website
Does anyone know how would this interact with the USMLE, does it override it?
Not sure why the downvotes for an honest question, could you at least point out what's wrong?
In case anyone else was, like me, unfamiliar with the abbreviation USMLE:
https://en.wikipedia.org/wiki/United_States_Medical_Licensin...
If you're gonna do this, at least put it up front so people don't have to click a link.
USMLE = United States Medical Licensing Examination.
The one time I didn't quote. Thanks for the reminder to post better. I'm doing my best lol
In all seriousness though, I did second-guess myself. I knew better.
no, you still need usmle to get ecfmg certification. the difference is that you wont need US residency to get a state medical license
doesn't USMLE require you basically to finish studying in US?
No, as long as you've graduated from medical school in a country that has accredited/globally recognized medical schools, you can take the steps (USMLEs), and thus you can get ECFMG certified.
would this help doctors get a visa now that there is a "need" for them because local doctors are incapable of doing the work themselves?
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Why don’t they ease up or streamline their zoning and permit process so people can build back their homes after hurricane damage?
Will that be combined with less tax payer funding to those who build back their homes in places constantly hit by hurricanes?