1999-journal of consumer affairs

206 THE JOURNAL OF CONSUMER AFFAIRS

BOOK REVIEWS

Baker, Dean, editor, Getting Prices Right: The Debate Over the Con- sumer Price Index, Armonk, NY M. E. Sharpe, Inc., 1998, 190 pp., $50.95 ($19.95 paper).

Throughout this century the Bureau of Labor Statistics (BLS) has been researching the spending habits of American consumers. Over time, the research methodology has evolved, the questionnaires have been modified, and the collected data has been scrutinized not only by BLS statisticians, but also by academicians throughout the country. After Alan Greenspan, Federal Reserve Board Chairman, suggested to Congress that the Consumer Price Index (CPI) was overstated by at least 1.0 percent annually, and that a correction by that amount would reduce the federal debt by $700 billion in ten years, Congress held hearings on the matter and then appointed a commission to investigate.

In Getting Prices Right, Dean Baker provides a detailed critique of the commission’s findings as well as brief commentaries from Katharine G. Abraham, Barry P. Bosworth, and Martin Feldstein. Rather than rely only on Baker’s comments about the Boskin Commission report, the reader can review the actual report, which appears in its entirety in the beginning of the book.

The Boskin report begins with an executive summary and is divided into nine sections. The first section, an introduction, is followed by a discussion of the financial impact of the purported overstating of the CPI. The impact comes not only from the increased outlays by the federal government for social security, military retirement, veterans’ compensation, and civil service retirement but also from reduced revenues due to changes in individual income tax brackets and the personal exemption. With figures in the billions of dollars, this is sure to whet the appetite of any politician looking for solutions to the deficit. Section I11 of the Boskin report identifies how the CPI is constructed. Sections IV and V introduce the nature of the biases that led to the overstatement of CPI. Section VI summarizes the discussion on bias and estimates a range for the total bias. Four areas of bias are identified:

1. Substitution-this occurs because the CPI is based on a fixed market

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basket of goods, but when prices increase for one item, consumers typically substitute a similar item (e.g., chicken for beef).

2. Retail outlet substitution-consumers often shift to retail establish- ments with less service and lower prices, but this move takes some time before it is reflected in the CPI.

3. Quality-products improve, yet this is not captured in the nature of the CPI while increased costs associated with the improvement are included.

4. New goods-there is a delay in including new products in the CPI. This delay results in the index missing the decline in price that occurs as the product matures, especially with new technology.

Two questions related to the CPI are raised in Section VII: ( I ) Does the cost of living change equally across all demographic groups? and (2) Have improvements in the quality of products been offset by the decline in quality of life issues? The Boskin Commission provides recommendations in Section VIII.

Baker’s critique begins by considering the implications of the commission’s findings. He then analyzes the evidence provided by the commission for each area of potential bias in the CPI. The premise that the cost of living does not vary by demographic group is questioned, and Baker wraps up his evaluation by contrasting the CPI with a cost-of- living index.

Baker does an excellent job of identifying areas of potential bias in the Boskin Commission itself. As he notes, the commission was established “to determine not whether but how much the CPI overstated inflation” (8 1). The economists selected for the commission had testified that the CPI overstated inflation; others who had questioned this premise in testimony are noticeably absent from the commission. No original research was done, and, in some cases, the conclusions of the commission are based purely on speculation with no empirical support. There were no public sessions allowing for debate and scrutiny of the results.

Additional views on the CPI come from Katherine G. Abraham, BLS, in a brief paper presented to the American Statistical Association; Barry P. Bosworth, Brookings Institution, in a testimony before the Senate Finance Committee; and Martin Feldstein, Harvard University, in a testimony before the Senate Finance Committee.

Certainly no one has argued that the CPI cannot be improved. But the approach taken by the Boskin commission reveals some inconsistencies that underscore the bias noted by Baker, specifically, the notion of sub-


stitution bias versus the notion of quality bias. When the consumer sub- stitutes a lower priced item (e.g., chicken for beef), the commission does not suggest that any value or utility has been lost. However, when the consumer buys an “improved” product at a higher price, the commission bemoans the fact that the CPI does not capture this gain in utility.

In identifying issues related to the quality of life, the Boskin report concludes,

Overall, we find that the presumed negatives (pollution, crime, suicide, divorce), the worsening of which may have increasingly detracted from the quality of life at one time, have reached a plateau and in the case of pollution and crime seem actually to have reversed direction, thus recently improving the quality of life. The remaining negatives are important but seem to us to have been more than offset by increased quality and variety of goods, services and choice of outlets (58).

The commission would be hard pressed to find many consumers who agree that having more types of cereals in more stores balances out the negative impact of suicide and divorce.

The most troubling remark in the book comes from Feldstein: ’

the appropriate Inflation Adjustment Factor cannot be derived by rigorous statistical methods but requires the exercise of informed judgment . . . Congress should (as recommended by the Advisory Commission) establish a rotating expert advisory committee that will periodically recommend the Inflation Adjustment Factor, that, in its judgment, best represents the modification of the CPI needed to measure the increase in the cost of living (171).

Such a subjective approach for an issue with far-reaching consequences, by a politically appointed committee is simply unacceptable.

What is the “true” CPI? At the end of this book, you know only that no one knows. The debate must continue, and there is great need for additional research. Nevertheless, this book is an excellent resource for anyone working with the CPI or the Consumer Expenditure Survey data or for anyone who is interested in this area. The index allows quick reference to a topic from a variety of perspectives. For those who wish to delve into the issue further, a very good list of readings is provided.

The recent interest in the CPI has focused on the potential impact on benefits and taxes; however, the implications reach well beyond this, to potentially change our notion of the economic well-being of society and “call into question the entire national policy agenda” (82). This topic is likely to continue raising concern and interest in the research and political arenas. After all, reducing the deficit by more than $25 billion with a


research sleight of hand is much less difficult politically than introducing new taxes or cutting social security or other federally funded programs.

Susan K. Harmon, Assistant Professor Department of Management and Marketing

Middle Tennessee State University Murfi-eesboro, 71v

Blau, Francine D. and Ehrenberg, Ronald G., Gender and Family Issues in the Workplace, New York Russell Sage Foundation, 1997, 301 pp., $42.50.

Initial versions of the papers in this book were presented at a confer- ence held at Cornell University in April 1995. The purpose of the confer- ence was to better explain the factors that have impeded women’s progress in the labor market and to suggest what could be done to pro- mote gender equity. The book includes papers on the tension between having a career and a family, the labor supply effects of legislated maternity leave, the impact of work norms on job tenure, the gender effect of early career supervisors, and policy perspectives on work and family.

There are eight chapters in the book. The first chapter is an introduction by the editors, Francine Blau and Ronald Ehrenberg. The editors skillfully integrate the papers; this is an important contribution of the book. Each of the remaining seven chapters is followed by a commentary. Thus, the reader has the benefit of both the author’s insight and that of one or more discussants.

In chapter two, Claudia Goldin traces the demographic and labor force experiences of several cohorts of college women from the 20th century. Overall no cohort of women college graduates have had a high success rate in combing family and career, although Goldin’s description of career may be too restrictive for some readers. She defines career as having several years of continuous labor force participation, earnings that exceed that of the 25th percentile for male college graduates and/or having worked at least 40 hours a week for three years. Cohort I (graduating about 1910) had a 50 percent rate of childlessness. Cohort I1 (graduating about 1933) was characterized by “job then family” meaning that women worked, stopped to raise families, and, perhaps, had a job later, but not a career. Cohort I11 (graduating about 1955) had a high rate of childbearing and, initially, a low rate of labor force participation. Cohort IV (graduating about 1972) con-


tained a small group of women who have combined family and career. The women of Cohort V (graduating about 1980) appear to have the opportunity for equality with their male counterparts.

In her comments, Ileen DeVault noted that Goldin found an unusually high divorce rate for Cohort IV and commented that, indeed, the women in Cohort V have grand plans for advancement. She also noted that each cohort served as a role model for the following cohort. In her remarks, Myra Strober said that she had identified three important concerns from her study of Stanford graduates of the class of 1981 (a group comparable to Cohort V). First, the women did not want just a career and family. Instead, they wanted a “happy” and egalitarian marriage and parenting. Second, young women were distressed about pay inequality between men and women. Third, young women managers reported that almost no one in the corporate setting advised them about their career path, in contrast to young men who were more likely to be informally mentored. Thus, she believed that young women were likely to become frustrated with the corporate sector and quit.

Jacob Kerman and Arlene Leibowitz studied the impact of maternity leave on women’s labor force attachment by comparing the labor supply behavior of women in states that passed maternity leave laws in the 1980s with the behavior of women in states that did not pass similar laws. Kerman and Liebowitz developed a theoretical model to demonstrate that the first-order effect of a maternity leave statute was to increase the time spent on leave and to reduce the rate of quitting by mothers of newborns. However, the results of data analysis using 1980 and 1990 census Public Use Microdata Sample (PUMS) files were ambiguous and suggest that the impact of state maternity leave statutes on labor supply behavior were relatively small. In separate commentaries, Lawrence Katz and Marjorie Honig commend the theoretical framework of Kerman and Leibowitz’ study, but argue that the data were insufficient for the intended analysis.

Jane Waldfogel found that women who return to the same employer following the birth of a child receive higher wages at a later date. The effect seemed to be concentrated among women whose firms offered a maternity leave policy. Rebecca Blank pointed out that this effect might be due to selectivity. Women who were better, more productive, and more stable workers could be more likely to be in a job that offered maternity leave. She also pointed out that women who were better matched to their employers were more likely to stay with their employers. Paula England offered the suggestion that there should be a distinction between the terms “paid work” and “working” because taking care of a child at home with-

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out pay is also work. England commented that there is some difficulty in reporting the characteristics of firms that provide maternity leave coverage versus those that do not, and that this provided an important direction for future research.

In chapter five, Christopher Ruhm and Jackqueline Teague provide a brief history of family leave legislation in North America and Europe and discuss the efficiency and incidence of mandated leave. They construct a longitudinal data set of maternity leave in 17 countries during 1960 to 1989. They found a modest beneficial effect of leave and some evidence of economic inefficiency. In his commentary, Jonathan Gruber offers suggestions to improve the model, such as information about the enforce- ment of leave policies, how parents qualify for leave, and the extent of usage of leave. Marianne Ferber questions whether the leave should apply only to women as is true in many countries and whether there should be international agreement on minimum standards for parental leave.

As women enter professions previously dominated by men, they are likely to demand a different mix of income and hours. Renee Landers, James Rebitzer, and Lowell Taylor studied how firms respond to demographic changes among employees. They suggested that “a rat race” equi- librium exists in many firms, and, thus, these firms are not able to offer shorter hours to those who want them. Their empirical study is based on data from large law firms. In discussing the study, Janice Madden offers several points specific to law firms that could impact the results obtained by Landers, Rebitzer, and Taylor. She indicates that “the rat race” model may be more appropriate to academe.

Donna Rothstein posits three theories to help explain why supervisor gender might affect employees’ labor market outcomes. The theories are focused on employee preference for gender of supervisor, productivity effect of supervisors on employees, and the role of supervisors in providing on-the-job training and promotion opportunities. But, the empirical results do not provide strong support for any of the theories. Rothstein explains that female supervisors appear to depress their workers’ current wages because of the kinds of jobs they supervise, not because they have any direct negative effects. Solomon Polachek and Cordelia Reimers offer numerous suggestions for further research.

The last chapter consists of three separate papers on work and family policies. First, Olivia Mitchell discusses the difficulty in defining family. Then she describes the changes in the workplace that have occurred, including time off for maternity and paternity leave, the use of pre-tax earnings to cover dependent care and out-of-pocket medical expenses,


and family-friendly medical plans at medium and large firms. The cost of mandated benefits is likely to be passed on to employees in the form of lower pay, reduced benefits for other needs, or lower labor demand. Bar- bara Bergmann points out that employers are now offering benefits to a smaller proportion of workers, usually those who are full time and non- temporary. Those left out (in the United States) are likely to be women. Finally, H. Elizabeth Peters provides a powerful argument for govem- ment support of childcare for preschool children. She says that families, especially women, have borne the primary cost of rearing young children. In her opinion, the cost is paid in the form of lower earnings, a shorter work life, and reduced access to high-powered jobs.

The book is a useful addition to the library of family and consumer economists. Educators and researchers will find thoughtful, comprehen- sive studies that include challenging theoretical frameworks and empirical analyses. The comments by discussants offer many avenues for further research. An excellent companion piece to this collection of studies would be a collection of papers on gender and family issues and the need for workers to provide elder care in addition to managing their paid work responsibilities.

Sharon A. DeVaney, Assistant Professor Department of Consumer Sciences and Retailing

Purdue University West Lafayette, IN

Gross, Karen, Failure and Forgiveness: Rebalancing the Bankruptcy System, New Haven: Yale University Press, 1997, 302 pp.

Karen Gross, a New York Law School professor, was a key player in the recent Bankruptcy Review Commission process evaluating American bankruptcy law. Gross is an advocate for post-bankruptcy education to fulfill the rehabilitation mandate of the act, an objective of the law that is rarely addressed. A frequent speaker on bankruptcy in the U.S. and Canada, Gross testified before Congress as an advocate for the debtor. The book is timely as Congress revamps the Bankruptcy Act in reaction to the escalating rate of personal bankruptcies that exceeded 1.4 million in 1997.

In her book, Failure and Forgiveness, Gross describes the federal bankruptcy system and prescribes avenues for reform. The book goes beyond consumer bankruptcy and explains the basics of business failures

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as well. Because many “personal” bankruptcies are due to the failures of small businesses (Sullivan, Warren, and Westbrook 1989), the addition of the business perspective is valuable. Gross illustrates her proposals for reform with case studies of a consumer debtor and a business debtor. She adds the impact of financial failure on the community to the tension between the debtor and the creditor in the balancing act of determining how to allocate insufficient resources. Inclusion of community impact is a new facet reflecting Gross’ fresh perspective. What will be the impact of the bankruptcy on the community, particularly when a major business and employer are involved?

The book is accessible reading for the legal community, consumer researchers, educators, and advocates, as well as university students. The first encounter with the “duckrabbit” illusion assures the reader that the author can communicate effectively with non-lawyers. Gross begins with a description of current U.S. bankruptcy law and proceeds to her vision of what it ought to be. After identifying unfair provisions of the existing law, she explains how debtors, creditors, and communities should be treated in both business and personal bankruptcies. Gross proposes a contextual model for bankruptcy reform that relies on a thoughtful judiciary with sufficient time to consider issues. Her “contextual model” provides balanced treatment for the three parties involved (creditor, debtor, and community). The model is a call for change based on two underlying assumptions: (1) People live in a credit-based society (which is unlikely to change), and (2) People are inherently altruistic. Gross’ perspective reflects a humane view of human failure.

The author’s proposed changes begin with how we think about bankruptcy. Her suggestions include using different dispute resolution mecha- nisms and offering business debtors a choice between liquidation and reorganization similar to the choices of consumer debtors. Gross argues that Chapter 13 eligibility should be simplified by using one aggregate debt ceiling rather than separate amounts for secured and unsecured debts. Joint filing should be available to unmarried couples as well as the married. Needy debtors would be allowed to file without paying fees. At present, the protections of bankruptcy are unavailable to those debtors who are unable to afford filing fees. Uniform federal exemptions should replace the patchwork of state and federal exemptions. This sensible proposal would eliminate “forum shopping” which, while seldom used, is an oft-cited example of abuse of the system. Uniform exemptions would contribute to fairness and consistency of treatment. More controversial is Gross’ proposal to reevaluate non-dischargeable debts (e.g., child sup-


port, alimony, student loans, taxes). Most significant for consumers is Gross’ proposal that every debtor be

offered financial counseling prior to obtaining a discharge. Currently, Canada is the only country to require mandatory counseling for consumers filing for bankruptcy protection. Implementation in the U.S. would provide jobs for financial counselors and an opportunity for research on the effectiveness of education in preventing repeat bankruptcies and enhancing the quality of life for debtors and their families.

Some of Gross’ policy changes applying to creditors include recon- sidering the government’s status as a priority creditor, using mediation to resolve disputes among creditors, providing more consistent valuation of collateral, and allowing tort claimants and other involuntary creditors to rebut the pro rata presumption in allocation of payments. Far more controversial is a proposal that would affect both debtors and creditors: fewer protections for home mortgages, a proposal linked to equality of treatment among creditors.

In the chapter, “Which Communities Matter Within the Bankruptcy System?” Gross presents four ways in which the current law addresses community needs along with recommendations for changes. While bankruptcy law has traditionally dealt only with debtors and creditors, there is precedent for considering the impacts on communities. In the 19th century, railroads could not be dissolved, only reorganized, due to community dependence on railroad transportation. Gross proposes that judges and trustees be allowed to consider the interests of the community in deci- sions about bankruptcy.

The final section, “Creating the Balance,” offers conclusions and recommendations for reform. Operating under the assumption that “bankruptcy is all about responsibility and forgiveness,” Gross emphasizes rehabilitation of debtors, fair treatment of creditors and protection for communities affected by the bankruptcy of a major employer (249). Her perspective is in strong contrast to the current punitive atmosphere sur- rounding bankruptcy reform represented by recent passage of the House bill making it harder to file for bankruptcy protection and forcing more debtors into Chapter 13 repayment plans.

To what extent does our current system provide a “fresh start” to debtors? Where should the balance fall between making the debtor pay and satisfying the creditors’ desire for repayment? What are the impacts on the community when individual debtors and businesses file for bankruptcy? A review of legislation pending in Congress suggests that many policy makers could benefit from reading Failure and Forgiveness. The


punishment paradigm appears to be winning out over the fresh start perspective in Congress.

Gross’ book suggests many avenues for research, an ingredient in public policy making that is absent in the current bankruptcy debate. Con- sumer educators can use Gross’ arguments in favor of post-bankruptcy education to support proposals for providing this service. Her ideas regarding the community context of bankruptcy are original, reflecting the encompassing perspective and emphasis on social environment that she brings to this problem. With its humanist perspective, Failure and Forgiveness offers a refreshing balance to the increasingly punitive tone of the bankruptcy debate.

REFERENCE

Sullivan, Teresa A., Elizabeth Warren, and Jay L. Westbrook (1989), As We Forgive Our Debtors: Bankruptcy and Consumer Credit in American, New York Oxford University Press.

Jean M. Lown, Professor Department of Human Environments

Utah State University Logan

Profozich, David M., Managing Change with Business Process Simula- tion, Upper Saddle River, NJ: Prentice Hall PTR, 1998.

To remain competitive, corporation owners must throw out old notions about how businesses should be organized and run and consider how to realign business processes to meet customers’ needs. However, many of business owners’ ideas for creating value through processes are both costly and time consuming to implement. Each year large amounts of corporate resources are devoted to streamlining and re-engineering business processes. Thus, a reliable and accurate method is needed to test out these ideas before large investments in capital and time are made.

Profozich’s book introduces business process simulation as a tool to help corporation owners predict performance. He argues that simulation can help a firm better understand and assess the impact of change. The main strength of simulation is that it allows a system to be tested before it is fully built or implemented. A well-planned simulation study saves significant financial resources by reducing the risk factor. Also, simulation allows the analysts to fine-tune the system properly to meet opera-


tional requirements. This reduces the risk and time associated with introducing new systems or changing existing ones.

Profozich is vice-president of Systems Modeling Corporation, a system developer and supplier of business process simulation technology. Profozich champions harnessing simulation technology for competitive advantage and offers a vision for the future of business process simulation. Essentially, his target audience is business executives from non- technical backgrounds who wish to find out more about simulation technology. Profozich explains the concepts, benefits, and methods of this emerging technology in a clear and concise way. He artfully bridges the gap between the technical specialists and the pragmatic businessmen who need to understand how simulation can be used to solve real life problems.

The book focuses on discrete-event simulation, that is, events that occur at specific discrete times as a result of other events. Profozich explains the technology that allows organizations to create computer models of existing or proposed systems in order to study their performance. The book is organized into seven short chapters and begins with an explanation of the core concepts of simulation in terms of simple every- day experiences. Then, the concepts of randomness and variability, two key components in simulation, are introduced.

In chapter three, Profozich describes how an organization can quantify the value of simulation technology. This chapter identifies a positive return on investment (ROI) from simulation applications and many other intangible benefits of the technology. Profozich gives an indepth explanation of how simulation can add value to a business. His arguments are important points to be considered as they could form part of the basis for the business analyst intending to embark on simulation technology to optimize business performance.

Chapter four briefly explores the transition of simulation from a highly specialized technology to one that is widely used by business analysts as part of their standard package of problem-solving tools. Profozich analyzes the barriers simulation technology presents to the non-technical user and shows how the barriers are slowly eroding due to the rapid pace of simulation technology development. Chapter four also examines the rapid growth in acceptance that the simulation market is experiencing. Profozich provides many quotes and applications stories from big corporations, such as Motorola, Nike, and UPS. While the author has suc- ceeded convincingly in presenting the use of simulation as a strategic tool for big corporations, its applicability as a mainstream tool for smaller


f m s in the future is more speculative. However, with rapid advances in simulation technology development, Profozich’s projected acceptance level may still be possible but at what rate still remains an uncertainty.

Profozich makes simulation accessible to readers by comparing simulation’s value relative to “neighboring technologies,” such as spread- sheets, static flowcharts, optimization, and scheduling is discussed. He shows how simulation relates to and augments “neighboring technologies.” He helps to clarify the benefits of simulation relative to these tools and suggests ways that a simulation strategy can be integrated with them. Profozich argues that simulation technology can serve to enhance the pre- dictive ability of other tools because simulation is able to capture the randomness and variability of a system-factors usually not found in other constant process tools. Thus, Profozich has correctly pointed out that by integrating simulation with other “neighboring technologies,” optimum business performance can be achieved.

In summary, Profozich’s book presents a strategy for implementing simulation. It offers advice on when to use simulation, what to do before starting a project, and a step-by-step implementation strategy for embrac- ing simulation. The section on the recommended strategy for propagating the use of simulation throughout an organization serves to highlight to the serious reader and business practitioner the key issues involved when introducing simulation in a firm. Profozich suggests what may occur in the future as simulation spreads more aggressively, and becomes mainstream technology that is used by many business analysts.

Overall, this book is a digestible and easy read for the non-technical person. The book is written at an appropriate level for the intended reader and is the kind of book that could be read over a short business trip.

Hoe Siu Loon, MBA student Graduate School of Management

University of Western Australia Perth

Rubin, Rose M. and Michael L. Nieswiadomy, Expenditures of Older Americans, Westport, CT Praeger Publishers, 1997, 176 pp., $55.00.

Expenditures of Older Americans examines expenditure patterns of elderly Americans. This book is a compilation of the results of three grants funded between 1990 and 1994 by the AARP Andrus Foundation.


Some of the data from chapters 3 through 6 have been published as ref- ereed journal articles. The data comes from the Bureau of Labor Con- sumer Expenditure Interview Survey tapes from the years 1972-1973, 1980- 198 1, and 1989- 1990. There is an extensive reference section at the end of the book. As with any book dealing with dated material, one comes away with many questions of how things are now.

The book would be useful for researchers and students new to this field. The book contains some very useful information but may be a little hard to follow for someone who is not economically orientated because of the use of abbreviations. However, even someone not versed in economics will find many useful facts in this book-if they are willing to refer back to earlier chapters for explanations of the abbreviations.

Chapter 1, Introduction, gives an overview of why we need to understand the spending patterns of older Americans, a brief introduction to consumer expenditure theory, the Bureau of Labor Consumer Expendi- ture Survey, and the organization of the book. The stated purpose of the book is to be an “original text and reference source that comprehensively analyzes the economics of older Americans by emphasizing their expenditure patterns, which reflect household lifestyles and quality of life” (9).

Chapter 2, Characteristics of Older Americans, gives demographics and projections for the growth of this segment of the population, income and sources of income for various segments for 1967, 1976, 1984, and 1994, average expenditures for 1995 for the population as a whole compared to those over 65, and a brief overview of health care issues including personal assistance and costs. The elderly are not a homogenous group. Their expenditures differ with respect to age, gender, race, marital status, income, and education. In addition, the elderly population is changing as people retire earlier and lead longer, more active lives in retirement. The share of consumer expenditures by the elderly is expected to grow to as much as 20 percent by the middle of the next century. The expenditure models also compare elderly households to non-elderly households, elderly households across time, and retired and non-retired elderly households.

Chapter 3, Change in Expenditure Patterns, compares the changes in expenditure patterns in the elderly population between 1972 and 1987. There is a brief discussion of the methods used in the test and a formal mathematical explanation at the end of the chapter. Changes in income, assets, and expenditures are examined. The discussion highlights major trends and lifestyle changes of retired Americans. Health care expenditures increased because retired Americans had more out-of-pocket health


care costs. Retirees’ preference for leisure activities also increased over this 15-year time period. Single male retirees, and to a lesser extent, married couples have become more mobile and are generally successful in relocating. Single females spend a larger percentage of their income on housing compared to single males and married couples. Single females are the most rapidly growing segment, and there is a growing need for affordable, secure housing for this group. As the elderly are requiring more income to live on, they are making fewer cash gifts and contributions at a time of decreased government for the types of programs the elderly have supported in the past.

Chapter 4, The Effect of Retirement on Expenditures, examines changes in income, assets, and expenditures for people entering retirement in 1987. This chapter examines how budget allocations change in retirement. Married couples fare better than single households in being able to maintain their standard of living in retirement. There are three times as many single females living below the poverty level than married couples, with single males falling in between. Retired single females dis- save at unsustainable rates. The retired spend a greater share of their income on food at home, utilities, household operations, and health care than the non retired. “Retired non-blacks spend more on health care and entertainment but less on gifts and contributions than comparable black households” (70).

Chapter 5, The Vulnerable Elderly, discusses the economic vulnera- bility of elderly Americans. It examines the 1990 expenditures for necessities and the changes in spending for necessities over the 1980s for older Americans by income level. “Elderly households with incomes less than 200 percent of the poverty level spend almost three-fourths of their budgets on necessities”-food, housing, and health care (96). This is an indicator that the poor elderly may need government assistance to afford these costs. The well-being of elderly families receiving assistance did not increase as much as elderly families not receiving assistance during the 1980s.

Chapter 6, Health Expenditures, provides an examination of out-of- pocket health care expenses for the elderly and non-elderly during 1986 to 1988 by income level. A second study in this chapter compares the out- of-pocket expenditures in 1980 to 1990. In addition, it examines differences in families with Medigap insurance and those without. The study found that income, age, and insurance coverage positively impact out-of- pocket health care expenses for both the elderly and the non-elderly. Medicare does not affect all income groups the same because health


expenditures for the poor elderly are still considered a “luxury.” Increases in Medicare deductibles and co-payments hurt the low-income elderly the most. The study also found that constant dollar increases in medical expenditure come more from increased insurance premiums than from medical goods and services. In addition, even Medigap insurance does not insulate the elderly from increased out-of-pocket health care costs. This increase may be due to people with more health care needs opting to purchase the additional coverage.

Chapter 7, Trends and the Future, summarizes the significant patterns found in the analyses and what the authors predict the impact will be for households, businesses, and government policy. Only married couples are able to continue to save in retirement. In addition, the percent of the elderly’s budget spent on charitable gifts decreased while the percent spent on leisure and health care increased. Expenditure for health care and medical insurance increased with age, indicating “the oldest old, faced with increased life expectancies, are more inclined to purchase health care, and more high-technology care is available” (I 32). This population offers many business opportunities for those willing to provide assistance and leisure activities. However, as this segment of the population continues to grow, it poses serious policy issues, especially for enti- tlement programs, such as Social Security, Medicare, and Medicaid.

Celia Ray Hayhoe, CFF’, Assistant Professor Department of Family Studies

University of Kentucky Lexington

Weiss, Lawrence D., Private Medicine and Public Health: Pro& Poli- tics, and Prejudice in the American Health Care Enterprise, Boulder, CO: Westview Press, 1997,220 pp., $21.00 (paper).

Lawrence Weiss’s book is useful, but probably not as the author intended. It is a good example of ideology outpacing reason. It would serve as a good point of departure for a more reasoned and balanced discussion of U.S. health care problems.

Weiss blames all problems with the current health care situation on capitalism. His best alternative to the current system is a National Health Service with facilities owned by the federal government and care deliv- ered by salaried government workers. Recognizing the political futility of

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such a recommendation, he suggests a single-payer system as a next best alternative. The book contains no new evidence or data to condemn the current system or to support the alternatives. Therefore, its merit would be in its arguments, its organization, and its presentation. The book is useful because the arguments are so obviously biased and shallow, the organization is concise, and the presentation is remarkably broad. Weiss provides a concise and clear look into a socialist view of health care, although he never uses that label and might find it pejorative. Weiss’ book is useful because it reveals the socialist view and its inadequacies and inconsistencies. Anyone dealing with health care policy or health services education will encounter the socialist view, although rarely in such an explicit form.

The subtitle, “Profit, Politics, and Prejudice in the American Health Care Enterprise,” and the dedication, “To those who have suffered or died as victims of a health care system dedicated to maximum profit rather than universal access,’’ identify the author’s point of view early in the text. Unfortunately, the author’s bias distracts from an otherwise eloquent statement of problems that ongoing reforms may be exacerbating: great inequality in access to health care by economic class and minority status, similar inequalities in health, and a concentration of resources in high- tech medicine with relatively small marginal effects on health for a few at the expense of low-tech community programs with higher marginal effect on health for many. As Weiss points out, these are symptoms of private medicine for those in the economic and political mainstream at the expense of public health efforts for the entire community. According to Weiss, it is easier to gamer political support and market demand for health services that have identifiable benefits for the payer than for services that have effects that are difficult to quantify and are dispersed among many people. These are known differences between private goods and public goods and between curative and preventative services. Defi- ciencies in a market economy’s support for optimal levels of public goods and preventative services is old news. Weiss offers neither a solution nor hope for one, except some vague assertions near the end of the book that imply that forces are inexorably reaching revolutionary levels with regard to health care in the U.S. The absence of recommendations is disappoint- ing because Weiss argues that any government imbedded in a capitalist economy will be captured by the medical-industrial complex. He leaves the reader with no hope for a market-based improvement, no hope for a government-based improvement, and no third alternative.

Weiss’s critique of the current and emerging health care markets


revolves around condemnation of capitalism. For instance, he attributes failure to develop a better health care system to efforts of the American Medical Association, American Hospital Association, and insurance companies to turn health care into a capitalist commodity bought and sold to make a profit. Weiss believes consumers are controlled by the economic and political clout of health care providers and insurers. Health care is also ensconsed in sexism and racism.

Weiss is at his best when he is emoting over those poorly served by the present system. His analysis is superficial and inconsistent due to reli- ance on secondary or tertiary sources throughout. Some of those sources (for instance, statements by Congressional committee chairs) have doubt- ful validity. In some instances the book becomes anecdotal, for example, in its discussion of the alternative health care industry. Some of the most condemning passages, about hospitals for instance, are without references. These passages are not logical conclusions of the preceding sections.

Weiss correctly identifies incentives of fee-for-service for overtreat- ment and of capitation for undertreatment. However, for his preferred salaried providers he does not recognize the incentive of the provider to meet the agreed measure of work (hours, for instance) with a minimum of effort. Likewise, it goes unnoticed that each provider minimizing effort gives a predictable collective result: queuing by consumers. Salaried primary care providers have an incentive to refer more difficult cases that are within their ability to more expensive specialists to minimize their own effort. This potential waste is not addressed by Weiss. He does not recognize the existence of a principal-agent problem in the efforts to reform private health care.

Weiss argues that the ability of the Canadian government to get pre- scription drugs at a fraction of the cost paid by U.S. buyers demonstrates excess profits in U.S. drug prices. An alternative hypothesis is that phar- maceutical companies make drugs available in Canada at a price that just exceeds the marginal cost of production and distribution because it increases their profits on drugs for which expenses of research and nec- essary publicity have been borne by the U.S. market. Weiss discusses a similar situation with Medicaid where doctors fill otherwise empty appointments with marginally profitable Medicaid patients.

In one instance Weiss describes HMOs as becoming horizontally and vertically concentrated in a few massive insurance companies. Else- where, he describes HMOs as “implemented by an archaic mass of hun- dreds of insurers.” It is clear that he regards both situations as bad for the public, but it is not clear which he feels is the greater danger of the two


or why. According to Weiss, consolidation and standardization by private producers and providers is bad; consolidation and standardization of health services in federal government is good. Weiss seems oblivious to competition in national markets, on one hand, and with useful lessons from state and local government experiments, on the other hand

Because Weiss is a sociologist, one would expect class and subcul- tures to play a part in his analysis. They must surely be an important part of the U.S. health care story. Unfortunately, class is identified with class power and class conflict in this book in a clear ideological framework. In Private Medicine and Public Health, ideology overwhelms logic. Weiss opens many important areas for discussion in health economics, sociol- ogy, and public policy. But the book requires that the user must provide his or her own alternative to the socialist perspective without losing the problem.

John E. Kushman, Professor Department of Consumer Studies

University of Delaware Newark

1999-journal of consumer affairs

Documents

overstatement of cpi

consumer price index

boskin report

boskin commission report

new products

quality of products

actual report

lower prices