CBO: Obamacare costs revised downward, again. Finds lower than expected premiums.

[sunmaster14]

How can a question be a strawman?

Well, either that or a non sequitur. Do you like waiting in a long queue at the ER when you have a gaping wound?

It doesn't matter what the reason is. That's irrelevant. Would you care if you got a completely different, random doctor each time you went?

Of course I would care. But there is a level of financial compensation which would make me indifferent. If somebody gave me $1,000 to switch doctors, I would probably do it. I'm sure most people have far lower indifference thresholds.

Compare to: do you care if it's a different brand of eggs that gets used in your omelet each weekend? Would you notice?

Are you trying to prove that a primary care physician is not an egg? If so, I'll concede the point.

 

[Emily's Cat]

Well, a car is a commodity.

No, it isn't!

Wikipedia

The term commodity is specifically used for an economic good or service when the demand for it has no qualitative differentiation across a market.[1] In other words, a commodity good or service has full or partial but substantial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them. As the saying goes, "From the taste of wheat, it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist."[2] Petroleum and copper are other examples of such commodities,[3] their supply and demand being a part of one universal market. Items such as stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface and the perceived quality. The demand for one type of stereo may be much larger than demand for another.

In contrast, one of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, sugar, rice. Soft commodities are goods that are grown, while hard commodities are ones that are extracted through mining.

There is another important class of energy commodities which includes electricity, gas, coal and oil. Electricity has the particular characteristic that it is usually uneconomical to store; hence, electricity must be consumed as soon as it is produced.

Investopedia

The basic idea is that there is little differentiation between a commodity coming from one producer and the same commodity from another producer - a barrel of oil is basically the same product, regardless of the producer. Compare this to, say, electronics, where the quality and features of a given product will be completely different depending on the producer. Some traditional examples of commodities include grains, gold, beef, oil and natural gas. More recently, the definition has expanded to include financial products such as foreign currencies and indexes. Technological advances have also led to new types of commodities being exchanged in the marketplace: for example, cell phone minutes and bandwidth.

About.com

When an economist, economics professor, or economics textbook talks about a commodity, they mean a good that possesses the following properties:

usually produced and/or sold by many different companies
Is uniform in quality between companies that produce/sell it. You cannot tell the difference between one firm's product and another.
Lumber, oil, and electricity could all be considered commodities, while Levi's jeans would not be, as consumers consider them to be distinct from jeans sold by other firms. Economists call this distinctness "product differentiation".

BusinessDictionary

A reasonably interchangeable good or material, bought and sold freely as an article of commerce. Commodities include agricultural products, fuels, and metals and are traded in bulk on a commodity exchange or spot market.

A car is NOT a commodity.

I own a 2011 Honda CR-V. There are probably 100,000 copies of it in the US, modulo some options and the color. When I bought it, I called up 10 dealers and asked for their best price. I told them what trim I wanted and what options, and which things I was flexible about. I didn't give a crap about which dealer sold me the car. All I wanted was the best price, which I got. It turns out, even their inventory didn't matter. They all shared inventory anyway, so if one dealer had an opal sage one, with this or that option, and the guy with the best price didn't, he could just get it from the guy who did within a couple of days.

They are not different producers of the good. The auto dealer is a retailer, not a producer. The good isn't fungible between producers. There is not another manufacturer who makes Honda CRVs. A Honda CRV is differentiated from a Mazda CX7. They are not interchangeable.

Just because a 2011 Honda CR-V is not fungible with a 2015 BMW 330ix doesn't mean that the market is not completely commoditized.

Yes, actually, it does. It means EXACTLY that.

There are many BMW dealers to choose from. They have to compete on price. They try to distinguish themselves by offering better customer service, blah, blah, blah, but there are enough people like me, who care only (or at least mostly) about price to keep their prices from getting too far out of line with each other.

Actually, no, not really. Generally speaking, brand-based auto dealers (as opposed to used car dealers) have distinct geographic footprints. They are managed in such a way that they are not usually in direct competition with one another. Some competition may still occur between dealerships in more dense population centers, but the vast majority of the competition comes from other brands, not other retailers of the same brand.

There's no reason that routine health care couldn't become like the market for car repair and maintenance. Getting a checkup could be like getting an oil change. In fact, this has already been happening. Except you go Walgreens or CVS instead of Valvoline.

You can theorize it all you want. For *some* people this will be true, they won't care who their primary care doctor is, and wont care if they see somebody completely new each time. But the majority of people do care - especially as they get older. People have medical histories, past illnesses and injuries, that make their routine visits non-fungible with the visit of another person. A person with Type 1 diabetes, who has had several instances of pneumonia is going to have different tests, different questions, different interactions than you will. It's important for their health that their doctor actually know something about their medical history.

 

[Emily's Cat]

I assume you're being facetious here. Just for the record, it's a rather dangerous thing to do when your arguments are so muddled. First of all, you still need to advertise that you have the best price. How would people know that you do if you don't tell them about it?

That's kind of the point - commodities don't compete with each other on price. The price of a commodity is set by the market, for pretty much all producers of that commodity good. The price of a barrel of oil is the same price, regardless of whether that barrel comes from Saudi Arabia, Yemen, Venezuela, or Alaska.

Second, there is a constant battle between low cost producers trying to emphasize low price without settling for low quality and the higher cost producers emphasizing that their high quality justifies their higher prices. That's a big part of the competition going on in a commoditized market.

No, it isn't. It's competition, in general. It's part of a healthy competitive market, but it's not at all part of a commoditized market. Not everything that competes is a commodity.

Which actually brings me to another point which is how strange it is that doctors don't advertise. Everybody else advertises for their services, but not doctors. By your logic, it's because doctors are already commodities. Of course, your logic is wrong. If they were commodities, they actually would have to advertise, at least to consumers, rather than insurance companies.

That's the complete opposite of what I've said. Doctors are very, very, very far from commodities. Commodities DON'T advertise.

Doctor's don't do massive advertising in the US because the bulk of their business comes through an intermediary (insurance companies). The insurance companies advertise their product, which packages the doctors within them. Most doctors are selected base don geographic accessibility. Most consumers don't drive 20 miles to see their doctor, they want someone convenient.

Doctor groups, as well as hospitals, do advertise. They don't do a lot of commercials, but TV spots are hardly the only marketing channel out there.

 

[Emily's Cat]

I think he's saying that the premise of the question doesn't apply to his position.

That still doesn't make any sense to me.

 

[Emily's Cat]

Well, either that or a non sequitur. Do you like waiting in a long queue at the ER when you have a gaping wound?

Of course I would care. But there is a level of financial compensation which would make me indifferent. If somebody gave me $1,000 to switch doctors, I would probably do it. I'm sure most people have far lower indifference thresholds.

It's not a strawman, nor a non-sequitur. It's directly relevant to this discussion.

The fact that you would care indicates that it is NOT a commodity.

Are you trying to prove that a primary care physician is not an egg? If so, I'll concede the point.

Primary care isn't a commodity. Thank you for proving my point for me.

 

[sunmaster14]

No, it isn't!

Wikipedia


Investopedia


About.com


BusinessDictionary

A car is NOT a commodity.

Repetition without thought does make a good argument. You have posted your cherry picked definitions once before already. And I have already shown them to be oversimplified. For example, by your interpretation, oil is NOT a commodity. And yet, you post links that give oil as an example of a commodity.

They are not different producers of the good. The auto dealer is a retailer, not a producer. The good isn't fungible between producers. There is not another manufacturer who makes Honda CRVs. A Honda CRV is differentiated from a Mazda CX7. They are not interchangeable.

Aside from the fact that a Honda CR-V and a Mazda CX-5 are highly interchangeable, far more so than a barrel of oil from Venezuela and a barrel of oil from West Texas, and hence their prices won't diverge by more than a few thousand dollars for the base model, your attempt to distinguish a manufacturer from a dealership makes no sense. You don't buy cars from a manufacturer. You buy cars from a dealership, and the dealerships compete with each other, and the price you pay can vary by as much as the prices between brands of cars in the same class. Still, the car is a commodity to the extent that quality and functionality are the same across all sellers. Thus, it doesn't matter who you buy the car from, if all you care about is the car itself and the price, and not other features of the purchase experience.

Yes, actually, it does. It means EXACTLY that.


Actually, no, not really. Generally speaking, brand-based auto dealers (as opposed to used car dealers) have distinct geographic footprints. They are managed in such a way that they are not usually in direct competition with one another. Some competition may still occur between dealerships in more dense population centers, but the vast majority of the competition comes from other brands, not other retailers of the same brand.

When was the last time you bought a car? Sounds like it was 30 years ago from the state of your knowledge. Competition between dealerships selling the same car is wicked fierce. And many dealerships sell multiple brands. When I bought my Honda, these two guys were the last guys standing, and they were bidding against each other. When I told each of them who the other dealer was, they became even more aggressive. Both dealerships are owned by the same guy.

You can theorize it all you want. For *some* people this will be true, they won't care who their primary care doctor is, and wont care if they see somebody completely new each time. But the majority of people do care - especially as they get older. People have medical histories, past illnesses and injuries, that make their routine visits non-fungible with the visit of another person. A person with Type 1 diabetes, who has had several instances of pneumonia is going to have different tests, different questions, different interactions than you will. It's important for their health that their doctor actually know something about their medical history.

First of all, everybody will care, and everybody will have an indifference point. That is, there is a price at which anybody will switch. Second, why is your medical history relevant? Some doctors see 3,000 different patients a year. Do you think they really remember who the hell each one is? Before the appointment, or usually during, the doctor reviews the medical history on a chart or computer. A new doctor can do that just as well as your old one.

 

[sunmaster14]

That's kind of the point - commodities don't compete with each other on price. The price of a commodity is set by the market, for pretty much all producers of that commodity good. The price of a barrel of oil is the same price, regardless of whether that barrel comes from Saudi Arabia, Yemen, Venezuela, or Alaska.

Did you not read my post earlier about the variation between different grades of crude oil? The crude oil that comes from Saudi Arabia is vastly different from the crude oil that comes from Venezuela.

No, it isn't. It's competition, in general. It's part of a healthy competitive market, but it's not at all part of a commoditized market. Not everything that competes is a commodity.

Whether something is a commodity and whether a market has become commoditized is a matter of consumer perception. If consumers perceive a substantial degree of equivalence or fungibility or substitutability between products, then those two products are commoditized. Food could be a commodity, depending upon circumstances. If I am only interested in the calories to stay alive (like, e.g. Matt Damon in the Martian), then food is a simple commodity, whose value is measured solely by calorie content. If I just want to get drunk, wine or beer becomes a commodity, whose value is measured solely by alcohol content. If I am an oenophile or a beer-o-phile, then I will see wine or beer as a highly fragmented and customized marketplace.

That's the complete opposite of what I've said. Doctors are very, very, very far from commodities. Commodities DON'T advertise.

What the hell do you consider to be a commodity then? I get bombarded by phone calls from electricity suppliers who want to sell me electricity. Is electricity not a supplier? How about natural gas? Once again, you seem to deny that anything is a commodity or has commodity-like characteristics. My claim is that everything is a commodity to a degree, some products more than others. Furthermore, my claim is useful. Yours is not advancing the conversation in the least. It is simply nitpicking.

Doctor's don't do massive advertising in the US because the bulk of their business comes through an intermediary (insurance companies). The insurance companies advertise their product, which packages the doctors within them. Most doctors are selected base don geographic accessibility. Most consumers don't drive 20 miles to see their doctor, they want someone convenient.

Doctor groups, as well as hospitals, do advertise. They don't do a lot of commercials, but TV spots are hardly the only marketing channel out there.

Well, if we had a free market, doctors would do a lot more advertising. And that would be a good thing, because it would lead to more competition and lower prices, and it would encourage doctors to squeeze out greater efficiency in their business, just like the LASIK guys do.

 

[sunmaster14]

It's not a strawman, nor a non-sequitur. It's directly relevant to this discussion.

The fact that you would care indicates that it is NOT a commodity.



Primary care isn't a commodity. Thank you for proving my point for me.

I care whether my egg is organic or not. Or whether it has Omega 3 or not. Does that mean an egg is not a commodity? Also, from a certain perspective, all that matters is that some people treat a product as a commodity. I will treat primary care physicians as a commodity if there were a sane pricing system, and it actually mattered to my bottom line. That would be enough to enforce some price discipline on these eggheads.

 

[jimbob]

You never see a commodity saying - "Brent Crude... the power of dreams" as opposed to "Your Venezuelan Crude Oil... Your Way"

Car makers do have such slogans and do try to have a brand image. The Volkswagen group owns Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, Škoda, as well as Volkswagen brands, but you are not going to see a Lamborghini with a SEAT badge.

Peugeot used to be famous for running expensive adverts:

This one, for example doesn't say much about the car's features - it's all the brand image


Or this for a GM car



If you are trying to sell a commodity, you don't try to sell it like that.

 

[sunmaster14]

You never see a commodity saying - "Brent Crude... the power of dreams" as opposed to "Your Venezuelan Crude Oil... Your Way"

Car makers do have such slogans and do try to have a brand image. The Volkswagen group owns Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, Škoda, as well as Volkswagen brands, but you are not going to see a Lamborghini with a SEAT badge.

Peugeot used to be famous for running expensive adverts:

This one, for example doesn't say much about the car's features - it's all the brand image


Or this for a GM car



If you are trying to sell a commodity, you don't try to sell it like that.

Is gasoline* a commodity?



*petrol for you Brits

 

[jimbob]

Is gasoline* a commodity?



*petrol for you Brits

Shell tries to sell their petrol as a premium brand, and presumably that works for sufficient numbers of people.

Supermarkets sell petrol on price.

Most people that I know just fill up with EN95 at the cheapest local garage.

 

[Emily's Cat]

Repetition without thought does make a good argument. You have posted your cherry picked definitions once before already.

They aren't cherry picked. They're easily accessible, standardly used and taught, widely accepted, economic definitions.

And I have already shown them to be oversimplified.

No, you haven't. you've merely insisted that they're oversimplified, then substituted your own definition which has nothing at all to do with economics.

For example, by your interpretation, oil is NOT a commodity. And yet, you post links that give oil as an example of a commodity.

Exactly what part of my argument would interpret oil as being NOT a commodity? I'm rather under the impression that the economic definition (not my definition) of commodity rather clearly makes oil a commodity.

Aside from the fact that a Honda CR-V and a Mazda CX-5 are highly interchangeable, far more so than a barrel of oil from Venezuela and a barrel of oil from West Texas

Are you living on the same planet as I am? What exactly distinguishes a barrel of oil from Venezuela from a barrel of oil from Texas? Is Texan oil quantifiable or qualitatively different from Venezuelan oil? And how exactly do you think that a CR-V and a CX-5 are *more* interchangeable than a barrel of oil?

, and hence their prices won't diverge by more than a few thousand dollars for the base model, your attempt to distinguish a manufacturer from a dealership makes no sense.

How do you land here? The manufacturer is the company that makes the cars. The dealership is a satellite retailer of that manufacturer. The dealerships aren't directly in competition with each other - they compete against other brands of automobile. You're the one who is treating each retail outlet store (the dealership) as if they're in competition with other retail outlet stores of the same brand.

You don't buy cars from a manufacturer. You buy cars from a dealership, and the dealerships compete with each other,

No, they don't. They're franchises. They compete with dealerships that sell other brands, they don't directly compete with dealerships that sell the same brand.

and the price you pay can vary by as much as the prices between brands of cars in the same class. Still, the car is a commodity to the extent that quality and functionality are the same across all sellers. Thus, it doesn't matter who you buy the car from, if all you care about is the car itself and the price, and not other features of the purchase experience.

Only if you're comparing Honda CR-Vs. Not if you're comparing cars. All those CR-Vs are coming from the same manufacturer. It's the same producer.

When was the last time you bought a car? Sounds like it was 30 years ago from the state of your knowledge. Competition between dealerships selling the same car is wicked fierce. And many dealerships sell multiple brands. When I bought my Honda, these two guys were the last guys standing, and they were bidding against each other. When I told each of them who the other dealer was, they became even more aggressive. Both dealerships are owned by the same guy.

Umm... the last transaction I completed was about 17 months ago. The next will be completed in about 8 to 10 days when the Golf-R gets off the boat.

First of all, everybody will care, and everybody will have an indifference point. That is, there is a price at which anybody will switch.

So what? This has nothing to do with commodities.

Second, why is your medical history relevant? Some doctors see 3,000 different patients a year. Do you think they really remember who the hell each one is? Before the appointment, or usually during, the doctor reviews the medical history on a chart or computer. A new doctor can do that just as well as your old one.

A doctor with whom I have an existing relationship will refresh their memory from my file, but they're likely to have some recollection of who I am. Their notes are in their own style, and easy to recall the events to mind. And someone with a complex condition will see their doctor regularly enough that the doctor will remember them and their case.

 

[jimbob]

Oil is a classic commodity. There are different grades of crude oil but the differences are well-characterised and each grade has its own price, which is related to other grades.

You don't get this for the vast majority of medical costs, which involves bespoke treatment...

 

[sunmaster14]

<snip>

Are you living on the same planet as I am? What exactly distinguishes a barrel of oil from Venezuela from a barrel of oil from Texas? Is Texan oil quantifiable or qualitatively different from Venezuelan oil?

Yes, as I've already point out. Sulphur content and density varies depending on the source. This matters for refining. Venezuelan crude is the heaviest and sourest of crude oils, and there are only a handful of refineries in the world that can refine it.

And how exactly do you think that a CR-V and a CX-5 are *more* interchangeable than a barrel of oil?

Almost any driver in the world can operate either a CR-V or a CX-5. For most refineries, Venezuelan crude is about as useful as a screen door on a submarine.

How do you land here? The manufacturer is the company that makes the cars. The dealership is a satellite retailer of that manufacturer. The dealerships aren't directly in competition with each other - they compete against other brands of automobile. You're the one who is treating each retail outlet store (the dealership) as if they're in competition with other retail outlet stores of the same brand.

<snip>

Only if you're comparing Honda CR-Vs. Not if you're comparing cars. All those CR-Vs are coming from the same manufacturer. It's the same producer.

Hey, all that oil in the ground came from the same producer too - the Earth. The people who got it are just satellite retailers.

Umm... the last transaction I completed was about 17 months ago. The next will be completed in about 8 to 10 days when the Golf-R gets off the boat.

Congratulations. That's an amazing car (I have a regular Golf TSI). I hope you got it with a stick though.

So what? This has nothing to do with commodities.

Well, my claim is that doctors are like cars or like oil. Primary care physicians are interchangeable, kind of like one Honda CR-V for another or one barrel of Venzuelan crude for another. Sure, some doctors are worse than others, just like some Honda CR-Vs are lemons, or have more miles on them, or have other problems. And some batches of Venezuelan crude might be contaminated or be heavier or sourer than another. A cardiologist might be more like a BMW 330ix or a barrel of West Texas Intermediate. He's a little more high performance, although still capable of doing what doctors are most useful for, i.e. writing prescriptions, and therefore partly interchangeable with a primary care physician (if the regulatory scheme would allow for it).

The bottom line, though, is if consumers were paying for medical care directly, and therefore were price conscious, you would see the field of health care transformed. Doctors would be having half-off sales, and they would charge different amounts for different types of issues. They would offer shorter and longer consultation times, with different prices, as well as premium pricing for peak times and discount pricing for off-peak times. Customer service would improve by leaps and bounds, and no longer would patients have to wait an extra 45 minutes because the doctor was running late. Just thinking about some of the improvements and efficiencies that free market dynamics might bring makes me giddy.

A doctor with whom I have an existing relationship will refresh their memory from my file, but they're likely to have some recollection of who I am. Their notes are in their own style, and easy to recall the events to mind. And someone with a complex condition will see their doctor regularly enough that the doctor will remember them and their case.

Meh. I've never found a doctor who was special, and I'm certainly not. In my doctor's eyes, I'm a commodity too, and I'm comfortable with that.

 

[sunmaster14]

Oil is a classic commodity. There are different grades of crude oil but the differences are well-characterised and each grade has its own price, which is related to other grades.

The price spread between different grades is constantly changing, and some grades of crude oil cannot be refined economically (or at all) at many refineries. The price difference between Venezuelan crude oil and West Texas Intermediate is currently about $10/bbl, which is 30% of the price of Venezuelan crude. This is a far larger price difference than between two cars in the same market segment.

You don't get this for the vast majority of medical costs, which involves bespoke treatment...

What bespoke treatment? Give me some examples. Interestingly, Medicare (which the single-payer advocates want to turn into Medicare for all) has price lists for thousands of different procedures. Everything that is done has to be slotted into a particular bin or code. Otherwise the provider doesn't get reimbursed. Medicare certainly treats health care services as commodities. Unfortunately, it completely precludes any free market competition.

 

[Emily's Cat]

Almost any driver in the world can operate either a CR-V or a CX-5.

Almost any driver in the world can operate a Kia Rio and Bugatti Veyron. Clearly they're commodities.

 

[Emily's Cat]

The price spread between different grades is constantly changing, and some grades of crude oil cannot be refined economically (or at all) at many refineries.

If two barrels of crude have the same grade, is there any difference in their price based on what country produced them? If two barrels of crude have the same grade, can you tell which country produced them if they're not marked? Can you distinguish between two identically market barrels of the same grade?

 

[Emily's Cat]

Congratulations. That's an amazing car (I have a regular Golf TSI). I hope you got it with a stick though.

It's my spouse's car, and he's pretty tickled about it. He's always preferred a manual transmission, but he actually liked the DCC. Kind of blew his mind, but after driving both, he really thought the flappy-paddles were more responsive and more connected to the car than the stick.

He did, however, get it in Lapiz. Which is of course the fastest color.

 

[Mike!]

Almost any driver in the world can operate a Kia Rio and Bugatti Veyron. Clearly they're commodities.

Almost...

(NSFW, at least not with the volume on)

 

[sunmaster14]

Almost any driver in the world can operate a Kia Rio and Bugatti Veyron. Clearly they're commodities.

Well, interoperability is a necessary, but not sufficient, condition to be considered a commodity. A test, by the way, that crude oil fails for its most important purpose than most cars do. Venezuelan crude is useless to a refinery that is not designed to handle it.