An Interview with Professor John Cawley

This entry is the second in a two-part interview with Cornell University health economist John Cawley. The interview is based on a survey (and forthcoming paper in the Journal of Health Politics, Policy, and Law) that he conducted with his colleague Michael Morrisey. In 2005, they received survey responses from 359 health economists from academia, government, non-profits and private industry regarding their views on health policy. Their responses shed light both on the major issues in health economics and on the state of (the pursuit of) knowledge in the economics profession in general.

On the whole, health economists tend to agree on issues of positive economics. However, we do see disagreements regarding questions that are not yet settled by empirical research - for example, whether the benefits exceed the costs of the Medicare Part D prescription drug coverage program.

One area of substantial agreement is that “education has a causal impact on health.” Can you explain that chain of reasoning? What is the implication for health care spending and economic policy in general?

Education might improve health if it leads you to make healthier decisions; for example, to exercise or not smoke. If education really does improve health, and some of those benefits are enjoyed by society (e.g. because of higher vaccination rates) then a utilitarian case (weighting aggregate costs and benefits) can be made for increased taxpayer subsidies for education as a means of increasing the well-being of society as a whole.

68 percent of respondents agreed that the most important cause of rising health care expenditures in the U.S. was rapidly advancing medical technologies. This seems to be more a symptom than a cause. Can you say anything about why or how these advances are leading to higher prices?

The good news is that the reason that health care costs keep rising is that we keep finding ways to save the lives of people who previously would have died. There is a great saying that you can still pay 1950s prices for health care; the rub is that you have to settle for 1950s quality. Moreover, individual interventions tend to get cheaper over time - as an innovation becomes more widespread it tends to become cheaper through economies of scale, and prescription drugs eventually lose patent protection and can be cheaply produced as generics. However, despite the generally falling prices of older treatments, the continual addition of newer, higher-tech, more expensive treatments keeps pushing costs higher.

Did health economists from academia, government, private industry and the non-profit sector display noticeable differences in attitudes and understanding toward health policy?

No, they didn't. There were no observable characteristics (including age, gender, type of degree, or place of employment) that consistently predicted responses.

That is encouraging. Were you surprised by this? Why or why not?

No, I'm not surprised, because the basics of microeconomics have been so thoroughly tested and confirmed that microeconomics training worldwide is pretty uniform. In my experience there are outstanding health economists in every place of employment: government and think tanks as well as in the academy.

Is there something that health economists and organizations like AIER could be doing to better communicate with the general public?

I think that public opinion surveys can be helpful for economists to understand how non-economists view the economy and economic issues, and thereby help us be better teachers and advisors.

John Cawley is an Associate Professor in Cornell University’s Department of Policy Analysis and Management and is a Research Associate in the Programs on Health Economics and Health Care at the National Bureau of Economic Research. Before obtaining his Ph.D in Economics at the University of Chicago, John was a student fellow during the 1993 AIER Summer Fellowship Program.