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August 12, 2009

Economist's View - 7 new articles

"Medicine and Society in the Medieval Hospital"

I was curious about the degree to which health care has been universally available historically, and I stumbled upon this brief history of hospitals that gives some information on the question. Based upon bits and pieces of information from other sources, I had speculated that, particularly after the Black Death, societies saw a need for health care for all strata of society to prevent the spread of disease. Diseases such as the plague did not discriminate by income, and this gave the wealthy an incentive to keep the poor free of deadly, contagious afflictions. That would result in fairly universal care for diseases that could spread throughout society (though perhaps separation from society is a better description). I think that's part of why care was established for the poor and for the sick more generally, but the social relationships appear to be a bit more complicated than that:

Medicine and Society in the Medieval Hospital, by Tatjana Buklijaš, Croat Med J. 2008 April; 49(2): 151–154: Hospitals today are places where medical treatment is provided, but also places where major life events, such as birth and death, occur. Yet, their history is relatively short; they were born, together with modern medicine, some two hundred years ago in the revolutionary Paris (1,2). Around 1790, large hospitals and pioneering research blossomed throughout Europe, replacing the Hippocratic model of disease with the localizationist paradigm. The rise of the modern hospital began in Paris when the social change brought about by the French Revolution provided the momentum for the transformation. For the first time in history, cure of the body and care for the soul were separated, and physicians, rather than the church and rich lay patrons, took charge of medical institutions. Medical treatment was no longer a privilege of the rich (at home) or charity for the poor (in hospital), but an indispensable human right. This article discusses the influence of social changes on the history of the pre-modern hospitals between the late Antiquity and early modern period. Using examples from Southern Croatia, it illuminates the subtle differences in socio-political organization, which shaped the history of hospitals.
While institutions providing some form of medical treatment existed in ancient Greece and Rome, neither of these cultures organized community care for the sick, poor, and needy (3). A radical change occurred in the late Antiquity, with the rise of Christianity, which embraced charity as one of its basic doctrines. The first hospitals were founded when Christianity became the state religion of the Roman Empire (3). Hospital tradition in Byzantium continued into the Middle Ages, but the West experienced a centuries-long break. At the end of the early Middle Ages, the Benedictine monks revived the hospital institution. Hospitals flourished in the crusades, with the rise of orders specialized for that service, such as Hospitaller Knights. But, by the thirteenth century, growing urban communities had taken over the leading cultural role from monasteries (3). While monastic hospitals and hospital orders, such as the energetic Sisters of Mercy, continued to develop, hospitals physically and administratively moved to the cities.
Italian merchant urban communes, such as Florence, Padua, and Venice, spearheaded urbanization and partial secularization of hospitals, which were being increasingly established by local governments, confraternities, and rich individuals (4). Hospitals guarded the social order and enabled uninterrupted running of commerce and manufacture in cities. Considered as institutions of social prevention, they simultaneously protected marginal social strata from homelessness and hunger, and the society from the marginal social layers. They brought under the same roof all those who could not afford better accommodation – abandoned children, travelers, the sick, and the poor. In contrast to monastic institutions, they employed university-educated medical practitioners. This was the period when early-medieval type of religiousness, marked by asceticism, withdrawal from the worldly life, and contemplation, was replaced by the late-medieval "secular" type, which emphasized the need to act socially and charitably. Thus, the number of hospitals was often higher than what the population size required. The representatives of the secular type of religiousness were confraternities (5). These associations of citizens practicing the same craft or inhabiting the same area performed religious and social activities, organized processions to honor protector saints, and ensured financial and other support to its members and the wider community.
In this period, hospitals preserved both the symbolic and material link to the Church and religion, based on the idea that the body and the soul were closely connected and mutually influenced. Physicians refused to treat patients who had not made a confession, as the sacrament of confession purified the soul from sins. Hospitals frequently emulated monasteries. Patients were occasionally required to follow the monastic rules and some hospitals admitted 12 male patients in an obvious reference to 12 apostles. Even the hospital architecture was supposed to inspire religious devotion—the leading European hospital, the Florentine Santa Maria della Nuova, had a cross-shaped ground-plan, with the long axis serving as the male and the short as the female ward (6). The monastery-like hospital interior included frescoes with Biblical motives and altars adorned with Christian iconography.
However, the influence of the secular sphere in hospitals was growing stronger. Urban communities at the Dalmatian Coast are a good example of how political and economic circumstances shaped the development of hospitals. In contrast to much larger and wealthier Italian cities, Dalmatian hospitals were small, situated in residential houses of rich citizens rather than in purpose-built institutions, and usually admitted no more than 30 patients. None of the hospital buildings survived to the present day: they either fell into disrepair or were rebuilt beyond recognition. Written sources, however, indicate that they were similar to Italian hospitals, although less luxurious (7). Domus Christi in Dubrovnik, possibly the most important late medieval and early modern hospital of the Eastern Adriatic, had a richly decorated altar in the main patient room, with a wooden cross, a painting, and two chandeliers. Unfortunately, very little is known about the everyday life, medical practice, and religious services in these hospitals.
Although the hospitals of Venetian Dalmatia and the independent Dubrovnik shared many similarities, they were also profoundly different. In Dalmatia under Venetian rule (1420–1797), the lack of strong and interested central administration had a negative impact on hospitals. In the relatively large and economically important Split and Trogir, urban hospitals were founded and financed by the powerful confraternity of Holy Spirit (Santo Spirito) (8). The confraternity of Holy Spirit was founded in Rome with the specific goal of establishing and running hospitals, yet there is no evidence of direct links between the center in Rome and Dalmatian institutions. The hospital in Trogir was founded in 1357 and the hospital in Split in the first half of the fifteenth century. While these institutions practically functioned as communal hospitals, they were not financially supported by the commune. Indeed, in the seventeenth-century wars, the hospital was confiscated for the military needs, in spite of the confraternity protests.
Zadar, the capital of Venetian Dalmatia, had many hospitals (9). They were financed with lay money and managed either by priests or by laymen under the bishop's supervision. In 1295, the rich nobleman Cosa Saladin founded a hospital as part of a monastery for eight Franciscans with a chapel, garden, and pharmacy. Similarly, the hospital founded by Teodor de Prandino accommodated Franciscan third-order nuns whose duty was to take care of the poor. The list of founders comprised many well-known families, but the hospital founded by the rich merchant Grgur Mrganić in the mid-fifteenth century in the immediate proximity of the church of St. Anastasia was especially famous. In his will, Mrganić specified the number and characteristics of the poor that should be admitted to the institution: 13 poor patients, Zadar citizens or foreigners, but no patients with plague. Although Zadar with its central administrative position and greater economic power had more and larger hospitals than either Split or Trogir, it was still subject to the vagaries of Venetian politics. As in Split, the naval wars of the seventeenth century caused the conversion of the city hospital of St. Mark into a military hospital.
In Dubrovnik, the local aristocracy firmly held power in their hands (10). Local confraternities were supervised and subjected to restrictive regulations, and the relationship with the Church was frequently strained. In this context, the commune and rich aristocrats were the chief founders and administrators of hospitals. The first hospital, following earlier monastic establishments, was founded by the city in the period immediately after the outbreak of Black Death in 1348 (11). The (h)ospedal del comun was located beneath the city walls, near the monastery of St. Claire. It accommodated diverse inmates: the old, sick, and poor. Travelers stayed at the hospitium near Sponza. The next two hundred years saw the foundation of several other hospitals by rich local aristocrats. The hospital of St. Jacob, (also known as de puteis, because it was located near the city fountain) was founded in 1387 with the bequest by Sir Jacob de Sorgo. The hospital of St. Peter (also called Clobucich de Castello after a nearby church) was founded by Sir Marin de Bodazia in 1406, while the hospital of St. Nicholas was founded by Sir Johannes de Volzo in 1451. In 1432, the city established an orphanage in the immediate proximity of the main street, Stradun. The window of the orphanage was equipped with a stone turntable (ruota), where unwed mothers could place the unwanted child, ring the bell, and disappear into anonymity of the night.
In mid-sixteenth century, the municipal authorities made a crucial decision that would transform the city hospital into a medical institution. The old (h)ospedal del comun was renovated. A decree from 1540 regulated that it could admit exclusively poor men suffering from curable diseases. They were required to leave the hospital immediately after they had been cured. Those who did not fit this description were transferred to other institutions. It is probably no coincidence that it was in 1543 that Sir Marino de Gozze established a hospital for old and/or sick women, which, under the name of St. Theodor, would remain in service for centuries.
Unlike Santa Maria della Nuova, which had had medical practitioners on the payroll as early as the fourteenth century, Domus Christi did not employ physicians and surgeons. The low patient numbers of around 30 did not allow for such an expense. The hospital did, however, have its own barber and lower medical personnel. Importantly, the decree from 1540 required the medical practitioners in the service of the commune to make hospital rounds twice a day, in the morning and the evening. The admission of patients was still, however, in the hands of hospital administrators, city aristocrats who selected patients worthy of treatment.
With the exception of the military hospitals under Venetian rule, Domus Christi was for a long time the only exclusively medical hospital on the Croatian territory. Other hospitals remained a mix of retirement homes, poorhouses, and clinics until the late eighteenth century, when the first medical institutions were founded, inspired by the ideals of the Enlightenment or under French administration. The Split hospital, financed by Ercegovac brothers, was only erected in 1797 – the last year of the Venetian rule (12).
Modern hospital was thus born with the secular state and medical reform in the French revolution. The norms and values of the new revolutionary society were built into the foundations of this institution and in modern medicine. This short overview of the history of the "pre-modern hospital," which appeared with Christianity in the late Antiquity, showed that many questions we grapple with today had also been tackled by our medieval ancestors. These were, for instance: what is the role of religion (or "spiritual treatment") in the care for the body? Should medical care be part of general welfare or should it be independent? Who should pay for it—the community/state, like in Dubrovnik, or citizens themselves, like in Trogir and Split? Different models coexisted at the same time in towns only a few hundred kilometers apart, but under very different regimes and economic circumstances, reminding us how deeply the history of medicine/medical treatment is embedded in social history.
1. Ackerknecht EH. Medicine at the Paris hospital, 1794-1848. Baltimore (MD): Johns Hopkins Press; 1967.
2. Foucault M. The birth of the clinic: an archaeology of medical perception. London: Tavistock; 1973.
3. Risse GB. Mending bodies, saving souls: a history of hospitals. New York (NY): Oxford University Press; 1999.
4. Henderson J. The Renaissance hospital: healing the body and healing the soul, London: Yale University Press; 2006.
5. Black C. Italian confraternities in the sixteenth century. Cambridge (UK): Cambridge University Press; 1989.
6. Park K, Henderson J. "The first hospital among Christians": the Ospedale di Santa Maria Nuova in early sixteenth-century Florence. Med Hist. 1991;35:164–88. [PubMed]
7.Vatican secret archives. Congregation of bishops and religious orders. Apostolical visitations [in Italian]. Ragusa: 28.
8.Benyovsky I, Buklijaš T. The confraternity and hospital of the Holy Ghost in Split in the Middle Ages and early modern period [in Croatian]. In: Budak N, editor. Raukarov zbornik. Zagreb: Filozofski fakultet Sveučilišta u Zagrebu; 2005. p. 625-55.
9.Jelić R. The medical past of Zadar. Acta historiae medicinae stomatologiae pharmaciae medicinae veterinae. 1981;21:11–42. [in Croatian]
10.Janeković-Römer Z. The frame of freedom: Dubrovnik patricians between the Middle Ages and Humanism [in Croatian]. Dubrovnik: Zavod za povijesne znanosti HAZU u Dubrovniku; 1999.
11.Buklijaš T, Benyovsky I. Domus Christi in late medieval Dubrovnik: a therapy for the body and soul. Dubrovnik Annals. 2004;8:81–107.
12.Brisky L, Fatovic-Ferencic S. From a philanthropic idea to building of civic hospital in Split in kight of new archival evidence. Croat Med J. 2006;47:162–8. [PubMed]
This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

My Lucky Day

[If all goes according to plan, this will post at 11:30.]

I was lucky enough to draw jury duty today, and I'm assuming blogging from my iPhone won't be allowed, so I (probably) won't be able to post or talk about the press release from the FOMC meeting today until much later.

Is there anything in the press release that should be noted?

Update: Yahoo, after a long wait a plea bargain settled the case and I've been released. A quick scan of the news reports on the meeting indicate that two statements in the press release (see below) caught people's attention, the statement that "economic activity is leveling out" and the notice that the Fed will "gradually slow" its purchase of Treasury Securities and "anticipates that the full amount will be purchased by the end of October." The first statement is a slight nod toward recent improvements, and the second is an extension of earlier plans to end the purchases in September. This will keep options open, and recognizes that there is still considerable uncertainty about the path the economy will take:

Press Release Release Date: August 12, 2009: Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Can Econometricians Tell Us which Macroeconomic Model is Best?

This sounds familiar:

Ecology is one of the hardest branches of biology, possibly of all science. Real ecological communities are fantastically complex ... and hard to dissect and understand. Experiments in the wild are difficult to control, and important variables are often hard to measure. ... Experiments in the laboratory are problematic too. ...

Much of the uncertainty in economics derives from our inability to do laboratory experiments, and that includes uncertainty about which model best describes the macroeconmy.

When the present crisis is finally over, those who advocated fiscal policy, those who advocated monetary policy, and those who advocated no policy at all will all say "I told you so" based upon their reading of the evidence.

Some New Keynesians will cite fiscal policy as the important policy response, and the timing of the policy relative to the recovery will likely support that argument. Other New Keynesians along with Monetarists (e.g. Lucas and others who believe monetary policy can help, but fiscal policy is ineffective) will insist it was monetary policy that saved us. The timing of the monetary policy response will support their position as well.

Still others, those such as Prescott who believe in Real Business Cycle models, will say the economy recovered despite policy, and would have recovered all that much faster if government hadn't gotten in the way. Without a baseline to refer to showing what would have happened without policy, it would be hard to refute this argument.

Once this is all over, there will be ways to tease this out of the data, e.g. the pattern of the response of key macroeconomic variables may be most consistent with one of the policies, but there will still be considerable uncertainty due to the high correlation in the timing of the monetary and fiscal policy responses (cross-country studies could help too since the policy response varied by country, but other differences across countries that are difficult to control for making these estimates uncertain as well).

Ideally, we would go to the lab and run the economy with the same initial conditions, say, 1,000 times with no policy intervention at all to establish the average non-intervention response (and its variance), i.e. the baseline, an important missing piece of information when all you have is non-experimental data. Then, we would run the economy again with a monetary policy response to the crisis 1,000 times (or do several experiments with different monetary policy responses to see which is best), and yet again 1,000 more times with fiscal policy (or, as with monetary policy, perhaps several fiscal polices involving different levels of spending and taxes), then compare the results to see how well each policy attenuates the cycle. (I would also want to run the economy with several combinations of the two polices in case there are important interaction effects the experiments with individual treatments might miss.)

That would probably give us a pretty good idea about which policy works best. However, without the ability to do experiments, the best we can do is to build a model of the economy based upon historical data, and then use the model to simulate the experiments above. That is, estimate the model based upon actual data, then run it with various combinations of monetary and fiscal policy and see how the outcome varies with differences in policy. Unfortunately, the answers you get are only as good as the model used to get them, and considerable uncertainty remains over which macroeconomic model is best (which is why we have Real Business Cycle, New Keynesian, and Monetarist type macroeconomic models along with all their various sub forms, though more recently questions have arisen over whether any of the existing theoretical structures are satisfactory).

Here's another way to think about it. Macroeconomists know all of the major historical episodes and correlations that a model must explain. We can't do experiments, so there is just one set of data, and of course any model that is built will be able to explain how these data evolve over time. And it's possible to build different models that explain the data equally well. If we could do experiments, we could test these models in ways that would potentially rule some of them out, but with just one set of data and models built specifically to explain the data such testing is not possible.

So we have to wait for time to bring us more data and then see if the model can explain them, test the models across countries, find things we didn't know about when we built the model and test the model against those -- and there are other ways to get at this -- but for the most part it's time that settles these issues. The models either do or do not continue to explain new data as they arrive.

But at any point in time, it will be difficult to distinguish between different models because those models are built to explain everything that is known about the historical macro data. Perhaps some time in the distant future when we have much more data than we have now, it will become more difficult to construct competing models and we will begin to converge on a common theoretical structure -- it seemed like we were headed in that direction prior to the recent crisis -- but for now we are stuck arguing about which model is best without the means to turn to the data and clearly distinguish one from the other.

"The Time has Come"

A plea for health care reform:

Even though we are a nation that places a high value on health, we have done very little to insure that quality health care is available to all of us at a price we can afford. We have allowed rural and inner-city areas to be slowly abandoned by doctors. We have allowed hundreds of insurance companies to create thousands of complicated policies that trap Americans in gaps, limitations, and exclusions in coverage, and that offer disastrously low benefits which spell financial disaster for a family when serious illness or injury strikes. We have allowed doctor and hospital charges to skyrocket out of control through wasteful and inefficient practices to the point where more and more Americans are finding it difficult to pay for health care and health insurance. We have also allowed physicians and hospitals to practice with little or no review of the quality of their work, and with few requirements to keep their knowledge up to date or to limit themselves to the areas where they are qualified. In our concern not to infringe on doctors' and hospitals' rights as entrepreneurs, we have allowed them to offer care in ways, at times, in places, and at prices designed more for their convenience and profit than for the good of the American people.
When I say "we have allowed" I mean that the American people have not done anything about it through their government, that the medical societies and hospital associations have done far too little about it, and that the insurance companies have done little or nothing about it.
I believe the time has come in our nation for the people to take action to solve those problems -- Edward M. Kennedy, In Critical Condition: The Crisis in America's Health Care, pp. 16-17, 1972.

That was written nearly forty years ago.

Would Saving Lehman Have Saved the Economy?

Ken Rogoff:

The Confidence Game, by Kenneth Rogoff, Commentary, Project Syndicate: Next month marks the one year anniversary of the collapse of ... Lehman Brothers. The fall of Lehman marked the onset of a global recession and financial crisis the likes of which the world has not seen since the Great Depression of the 1930's. ...
The overwhelming consensus in the policy community is that if only the government had bailed out Lehman, the whole thing would have been a hiccup and not a heart attack. Famous investors and leading policymakers alike have opined that in our ultra-interconnected global economy, a big financial institution like Lehman can never be allowed to fail. ...
Unfortunately, the conventional post-mortem on Lehman is wishful thinking. It basically says that no matter how huge the housing bubble, how deep a credit hole the United States (and many other countries) had dug, and how convoluted the global financial system, we could have just grown our way out of trouble. Patch up Lehman, move on,... and nothing bad ever need have happened.
The fact is global imbalances in debt and asset prices had been building up to a crescendo for years, and ... there was no easy way out. The United States was showing all the warning signs of a deep financial crisis long in advance of Lehman...
The entire financial system was totally unprepared to deal with the inevitable collapse of the housing and credit bubbles. The system had reached a point where it had to be bailed out and restructured. And there is no realistic political or legal scenario where such a bailout could have been executed without some blood on the streets. Hence, the fall of a large bank or investment bank was inevitable as a catalyst to action.
The problem with letting Lehman go under was not the concept but the execution. The government should have moved in aggressively to cushion the workout of Lehman's complex derivative book, even if this meant creative legal interpretations or pushing through new laws...
The right lesson from Lehman should be that the global financial system needs major changes in regulation and governance. The current safety net approach may work in the short term but will ultimately lead to ballooning and unsustainable government debts, particularly in the US and Europe.
Asia may be willing to sponsor the west for now, but not in perpetuity. ... Within a few years, western governments will have to sharply raise taxes, inflate, partially default, or some combination of all three. As painful as it may seem, it would be far better to start bringing fundamentals in line now. ...

The "hiccup not a heart attack" sets up a false comparison. Had Lehman been bailed out things might not have been quite so bad, or followed a slower downward trajectory, but it wouldn't have been just a hiccup. I don't think many people make the claim that "Patch up Lehman,... and nothing bad ever need have happened."

But the main thing I want to know is if he saying we should start balancing the budget and tightening monetary policy right now, at the trough of the cycle. It seems like that's the message at the end, but I must be reading it wrong.

Breaking the CNN Habit

I just noticed Ben Stein on CNN talking about health care reform. There had to be a better choice.

Lou Dobbs is still on CNN. I thought he should have been shown the door long ago, way before his latest antics.

I turn it on out of habit, but CNN has been going downhill for some time now, and it's time for that habit to change.

links for 2009-08-12

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