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Editorial Board, "Where You Want to Get Cancer,"Wall Street Journal, January 9, 2020, https://www.wsj.com/articles/where-you-want-to-get-cancer-11578615274

Where You Want to Get Cancer

Cheer up, folks. For all the political grousing about health-care costs, the good news out this week is that cancer survival rates have improved enormously over the last three decades. The chances of beating most types of cancer are increasing, and that’s especially true if you live in the United States.

The American Cancer Society reported this week that the cancer mortality rate in the U.S. has plunged nearly 30% since its peak in 1991, with the biggest annual decline occurring in 2017. Fewer Americans are smoking, which has reduced the incidence of lung cancer in particular. More Americans are also being diagnosed with cancer at earlier stages thanks to better tests and screening, increasing the odds of survival.

The five-year survival rate is now 98% for prostate cancer, 92% for melanoma and 90% for breast cancer. Between 2013 and 2017, the death rate for men with melanoma declined by a stunning 7.6% annually. Screening and treatment improvements also helped reduce the death rate for breast cancer by an average of 1.5% annually from 2008 to 2017.

Scientific understanding of cancer and its genetic determinants has advanced by leaps over the past decade. Personal DNA testing companies like 23andMe arm people with more information about their risk factors. Most women now know, for example, that mutations in the BRCA1 and BRCA2 genes increase the risk for breast and ovarian cancers.

Breakthrough therapies that harness a victim’s immune system have also increased survival rates by multiples over traditional treatments such as chemotherapy. That’s especially true for cancers with low survival rates such as metastatic melanoma and lung cancer.

Such government rationing and price controls on drugs are one major reason that countries with socialized medicine like the United Kingdom have lower cancer survival rates than the U.S. The age-adjusted cancer mortality rate is about 20% higher in the U.K and 10% higher in Canada and France than in the U.S. Survival rates for hard-to-treat cancers are also higher in the U.S. than in most countries with nationalized health systems.

According to a study in the journal Lancet last year, an individual diagnosed with pancreatic cancer between 2010 and 2014 had nearly twice the likelihood of surviving five years in the U.S. than in the U.K. The five-year survival rate for brain cancer in the U.S. is 36.5% compared to 27.2% in France and 26.3% in the U.K. For stomach cancer the five-year survival rate is 33.1% in the U.S. compared to 26.7% in France and 20.7% in the U.K.

Diagnostic and treatment advances in the U.S. are also accelerating. Google’s artificial intelligence can now detect breast and lung cancers with better accuracy—meaning fewer false positives and negatives—than radiologists. AI systems are also enabling researchers to identify more genetic links and to personalize treatments.

Even the report’s gloomiest news has a silver lining. Death rates for liver cancer are rising faster than for other forms of the disease, but Hepatitis C drugs could greatly reduce the incidence and have come down 80% in price since 2014. It’s also worth highlighting that the disparity in cancer death rates between blacks and whites declined to 13% in 2017 from a peak of 33% in 1993.

Almost everyone knows someone who has been struck with cancer, and many have had bouts of their own. The good news is that the prognosis has never been better, and innovative drug therapies are a major reason.

Factoid from WSJ “…Among the smallest 80% of companies, there has been a long-term increase in persistent loss makers—those losing money for three years.…”that seems in line withAutor/Dorn/Katz/Patterson/Van Reenenconclusion that,".... While the prediction that rising market toughness could generate an increase in concentration and the profit share may seem counterintuitive, the ambiguous relationship between concentration, profit shares, and the stringency of competition often arises in industrial organization...".

"...Thecombination of forces has pushed the percentage of listed companies in the U.S. losing money over 12 months to close to 40%, its highest level since the late 1990s outside of postrecession periods....What type of companies are losing money? In the U.S., 42% are health-care companies, reflecting the popularity of small, often loss-making biotech stocks. Another 17% are tech stocks, many of them fashionable new ventures.... Here we come to the third trend: Smaller companies being squeezed.The shares of three-quarters of the 100 biggest companies that reported losses rose over the past 12 months, because big loss-making companies tend to be growth stories where investors don’t much mind the losses. That’s far above the 41% of all loss-making U.S. companies whose shares rose, because smaller lossmakers really suffered, according to data from S&P Global Market Intelligence. Among the smallest 80% of companies, there has been a long-term increase in persistent loss makers—those losing money for three years. The proportion of these loss-making companies rose after each of the last two recessions and didn’t come down again afterward. The story should be familiar by now: Many small companies are being dominated by the biggest corporates, squeezing them out of markets and crushing their ability to invest for growth...."

"... Using long-run annual panel data for the advanced economieswe show that credit booms are a negative predictor for real GDP growth looking forward, as has been noted (Mian, Sufi, and Verner 2017);but they are also a negative predictor for future returns to the major asset classes, equities and bonds. Higher credit growth predicts lower returns to equities in absolute terms, and for equities relative to bonds. In short, when a credit boom is maturing, the investor exposed to equities would face a more likely drawdown, while the investor exposed to bonds would not.....

New Alan Taylor finds that rapid growth in credit (measured by the lagged three-year change in the ratio of total bank loans to GDP) is a predictor of less than average equity returns. Taylor finds that market leverage has historically predicted one year ahead stock returns better than measures of stock market momentum, and almost as well as measures of value. He find (Post World War Two, Table 1)the average return to stocks in sample of countries was 8.9 percent. When lagged growth in the credit-to-GDP ratio was < median the return averaged 11.6 percent. But when the credit growth ratio was high, returns the following year averaged only 6.8 percent.When testing his result he found that theSharpe ratio for the leverage factor alone was 0.78, better than the analogous measure of 0.70 for momentum but not quite as high as 0.82 for value. They found that a portfolio adjustment using all three variables, credit booms, momentum, and value generates a Sharpe ratio of 0.94.

(Philippon pushback)

"...In the graph below,the black line indicates expected 4G availability, conditional on price. On average, a 100 percent increase in the price of 1GB of data is associated with a 3.9 percent increase in 4G availability. Note that the US falls above the line, meaning that American consumers get more access to 4G than would be expected given the price they pay. France and Germany fall below the line. Great Britain falls just above it...."

Suggusting this for upgrade as we likely will want tocite Fully Grownat some point.

"...Two-thirds of the decline in growth rates between the second half of the 20th century and the first two decades of the 21st century can be explained by changes in the human capital embodied in our labor force. The great movement of women into the labor force created wealth that bought cars and built houses and paid for education. But that gender revolution was a one-time shock to growth. Our current apparent slowdown is better seen as the aftermath of that shock, not a massive decline in productivity growth...."

Edward Glaeser, "‘Fully Grown’ Review: Pumping the Brakes,"Wall Street Journal, January 12, 2020, https://www.wsj.com/articles/fully-grown-review-pumping-the-brakes-11578863484

America’s economic growth appears to have sputtered in the 21st century. While America’s real gross domestic product grew at a blistering rate of 4.2% a year between 1950 and 1970, real GDP growth has increased by only 2% annually since 2000. A sense of decline infects our national mood.

But what if our apparent stagnation is illusory and reflects success more than failure? Dietrich Vollrath’s “Fully Grown: Why a Stagnant Economy Is a Sign of Success” makes a coherent and compelling argument that American productivity growth has only mildly faltered. If Mr. Vollrath is right, perhaps we should worry less about the overall level of American dynamism and more about why the median worker’s real weekly earnings rose by only 6% from 1979 to 2019.

Mr. Vollrath argues that most of our apparent slowdown reflects demographic and industrial shifts. Mid-20th-century progress led to “more education for both women and men, later marriage, and delayed childbearing.” Since “baby boomers, on average, did not have large families of their own, when they began to exit the labor force in the twenty-first century there was no way to keep up the momentum.” As “we took advantage of our success in providing goods to buy more and more services,” we moved into service industries that “have relatively low productivity growth.”

Mr. Vollrath’s most important point is that changing employment patterns explain most of America’s declining growth. This can be seen by looking at real GDP per worker. The author reminds us that in the seven decades following the 1940s, “the number of men working just about doubled, to 80 million, which roughly tracked the doubling of the US population.” But “for women, the number working was close to 70 million in 2015, four times more than in the 1940s.” Between 1970 and 2000, the share of the population that was employed increased to 49% from 39%.

Including this shift reduces the earlier growth rate substantially: When we correct for the growth in the labor force by looking at real GDP per worker instead of real GDP, we find an annual growth rate of 1.38% over the 1970 to 2000 period. Since 2000, the worker-to-population ratio has declined slightly as the population has aged and started to leave the labor force. Real GDP per worker grew by 1.29% from 2000 to 2019, which is only a modest decline from the 1.38% growth per worker experienced from 1970 to 2000.

Mr. Vollrath’s growth accounting is more complex and compelling than my simple calculations, but the end result is much the same. Two-thirds of the decline in growth rates between the second half of the 20th century and the first two decades of the 21st century can be explained by changes in the human capital embodied in our labor force. The great movement of women into the labor force created wealth that bought cars and built houses and paid for education. But that gender revolution was a one-time shock to growth. Our current apparent slowdown is better seen as the aftermath of that shock, not a massive decline in productivity growth.

Mr. Vollrath’s second explanation for declining growth is the increasing specialization in low-growth industries, some of which are services. More than one-third of American output now occurs in sectors, such as health care, that have experienced declining productivity since 2000. The author is right that spending a greater share of our national income on health care may be a sign of success, since a longer life is the ultimate luxury good, but he is less convincing in explaining why productivity growth in many industries is so slow.

He estimates that “the shift into services during the twenty-first century shaved about 0.2 percentage points off of productivity growth.” He argues that as the labor needs of the service industry are more fixed, the potential for growth is more limited. But while productivity growth in some services, like barbershops and string quartets, may be inherently limited, the number of services that require a fixed amount of labor is small too. Productivity could grow robustly in health care, hospitality and construction.

A plausible view is that America’s growth has exhausted the best opportunities in our less-regulated, more-dynamic industries, and that the open spaces for innovation remain primarily in more heavily regulated sectors. Thus land-use restrictions limit innovative builders from unleashing economies of scale. The ride-sharing industry has been a constant battle against regulatory attempts to protect insiders. Medicaid’s management of health care creates stronger incentives to provide new treatments than to cut costs. The author also notes that slowing rates of new-business formation and reduced geographic mobility have probably reduced growth. To me, these shifts seem like symptoms of a political system that overregulates new entrepreneurship and new construction, as in highly productive places like San Francisco.

Mr. Vollrath convincingly dismisses three common explanations for lower growth: inequality, increased market concentration and trade with China. As he reminds us, inequality may be good for growth, as “the very rich tend to save a greater fraction of their income than the very poor.” Moreover, some “market power is required for innovation,” because markups compensate firms for “the time and effort put into innovating in the first place.” Trade with China could have reduced American growth by moving our economy out of manufacturing into services, but Mr. Vollrath’s quantification suggests that this effect is trivial.

Yet just because the China-trade shock has a small impact on growth doesn’t mean that the shock is unimportant. Compelling research shows that exposure to the China shock lowered wages and raised joblessness. Mr. Vollrath’s important book corrects the mistaken view that American productivity growth drastically slowed after 2000, but that doesn’t mean that all is well. Median earnings have stagnated for 40 years. Prime-aged men have increasingly left the labor force. Higher growth rates may not be possible, but perhaps better education and regulation might ensure that growth flows to a larger number of Americans.