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Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapters 6 and 7

Chapter 2

3.  Public and private colleges increasingly admit high school dropouts; see Karen W. Arenson, “Can’t Complete High School? Go Right to College,New York Times, May 30, 2006, p. A1.

5.  See Edward L. Glaeser and Jesse M. Shapiro, The Benefits of the Home Mortgage Interest Deduction,” Discussion Paper 1979 (Cambridge, Mass: Harvard Institute of Economic Research, October 2002) (post.economics.harvard.edu/hier/2002papers/HIER1979.pdf). To be sure, the deductibility of mortgage interest is presently incorporated into the price of housing and in that sense is not a continuing subsidy. However, removing deductibility would impose a windfall loss for home owners.

7.  Daniel Patrick Moynihan, “Defining Deviancy Down,” American Scholar (Winter 1993), pp. 17-30.

8.  See the discussion of the probability weighting functions in Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk, Econometrica 47, no 2 (1979): 280–294. It shows that individuals tend to respond little to differences in low but positive probabilities.

12.  On hospital costs, see Christopher J. Zook and Francis D. Moore, “High-Cost Users of Medical Care,” New England Journal of Medicine 302 (1980): 996–1002. The authors found that hospital costs were concentrated on a few patients; on average, these high-cost patients (13 percent) consumed as many resources as the low-cost patients (87 percent). For a recent account, see Malcolm Gladwell, “Million-Dollar Murray,” New Yorker, February 13, 2006. In the article he describes resource drains who fall into a number of these categories simultaneously and impose extremely high costs on the social services system, such as a substance abuser whose costs totaled $65,000 in only three months, 2,500 hardcore homeless individuals who were sheltered at a cost of $62 million a year, and 15 chronically homeless inebriates who were treated in hospital emergency rooms 417 times over eighteen months, running up medical bills averaging $100,000 during this period.  On long-term welfare recipients, see, for example, Mary Jo Bane and David R. Ellwood, Welfare Realities: From Rhetoric to Reform (Harvard University Press, 1994); for government data on welfare dependency, see U.S. Department of Health and Human Services, Indicators of Welfare Dependence: Annual Report to Congress 2004, especially section II, indicators 7–9.

21.  See, for example, Jacob S. Hacker, “After Welfare,” New Republic, October 11, 2004, pp. 46–47 (reviewing Jason DeParle, American Dream: Ten Kids and a Nation’s Drive to End Welfare [New York: Viking, 2004]). The same is true of most tax expenditures; see Christopher Howard, The Hidden Welfare State: Tax Expenditures and Social Policy in the United States (Princeton University Press, 1999) for data comparing transfer programs with various categories of tax expenditures.

23.  See Henry J. Aaron and William B. Schwartz with Melissa Cox, Can We Say No? The Challenge of Rationing Health Care (Brookings, 2005).  

 24.  See, for example, Michael Chernew and others, “Managed Care and Medical Technology: Implications for Cost Growth,” Health Affairs, vol. 16, issue 2 (1997), pp. 196-206.   For discussions on specific drugs, see Alex Berenson, “Cancer Drugs Offer Hope, But at Huge Expense,” New York Times, July 12, 2005, p. A1, and Sarah Lyall, “Court Backs Briton’s Right to a Costly Drug,” New York Times, April 13, 2006, p. A3. 

25.  “The Health Care Crisis and What to Do about It,” New York Review of Books, March 23, 2006, pp. 42–43 (reviewing Henry J. Aaron and others, Can We Say No?, and citing health economist Uwe Reinhardt).


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