Opioid Overdoses: Worse Again [feedly]

Opioid Overdoses: Worse Again
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Deaths from overdoses, especially opioids, are getting worse. Here's a graph from the Centers for Disease Control. Each point plots the cumulative deaths from drug overdoses in the previous 12 months. Thus, in January 2015 on the left-hand-side of the figure, there had been bout 50,000 drug overdose deaths in the previous 12 months. By April 2021, on the right-hand-side of the figure, there has been about 100,000 drug overdose deaths in the previous 12 months. The figure also shows that the problem seemed to have levelled out for awhile in 2018 and 2019, but with the pandemic in 2020 is started getting worse again.

David M. Cutler and Edward L. Glaeser offer a primer on how we got here in their article in the Fall 2021 issue of the Journal of Economic Perspectives: "When Innovation Goes Wrong: Technological Regress and the Opioid Epidemic." (Full disclosure: I've been Managing Editor of this journal since the first issue in 1987. On the other side, all JEP articles have been freely accessible online for a decade now, so any personal benefit I receive from encouraging people to read them is highly indirect.)

Here's an evolution of the problem in one graph. The blue line at the top is drug overdoses from all causes since 2020. The red dashed line shows overdoses just from opioids: the red line tracks the blue line, showing that the problem is fundamentally about opioids. The yellow dashed line shows overdoses from prescription opioids, and you can see that for about a decade after 2000, this was the main problem. Around 2010, when efforts were made to crack down on overprescribing prescription opioids, overdoses from heroin take off. Not long after that, overdoses from synthetic opioids like fentanyl and tramadol take off, and have been the main source of opioids overdoses in the last few years.

Cutler and Glaeser tell the story this way:

The opioid epidemic began with the availability of OxyContin in 1996. OxyContin was portrayed as a revolutionary wonder drug: because the painkiller was released only slowly into the body, relief would last longer and the potential for addiction would decline. From
1996 to 2011, legal opioid shipments rose six-fold. But the hoped-for benefits proved a mirage. Pain came back sooner and stronger than expected. Tolerance built up, which led to more and higher doses. Opioid use led to opioid abuse, and some took to crushing the pills and ingesting the medication all at once. A significant black market for opioids was born. Fifteen years after the opioid era began, restrictions on their use began to bind. From 2011 on, opioid prescriptions fell by one-third. Unfortunately, addiction is easier to start than stop. With reduced access to legal opioids, people turned to illegal ones, first heroin and then fentanyl, which has played a dominant role in the recent spike in opioid deaths.

How did Oxycontin get such a foothold? There's plenty of blame to pass around. First, the government regulators who approved the drug deserve a slice of blame. The theory of oxycontin was that slow release would require less medication, and thus pose less harm. But as Cutler and Glaeser point out: "At the time of FDA approval and even after, no clinical trials backed up this theory." Instead, the FDA relied on evidence that hospital inpatients didn't tend to become addicted, without asking if the same would apply to outpatients. Cutler and Glaeser note:

The FDA generally requires at least two long-term studies of safety and efficacy in a particular condition before drug approval, but for OxyContin, the primary trial for approval was a two-week trial in patients with osteoarthritis. Even with this limited evidence, the FDA approved OxyContin "for the management of moderate to severe pain where use of an opioid analgesic is appropriate for more than a few days"—with no reference to any particular condition and no limit to short-term use. … Two examiners involved in OxyContin's approval by the Food and Drug Administration went on to work for Purdue. When the FDA convened an advisory group in 2002 to examine the harms from OxyContin, eight of the ten experts had ties to pharmaceutical firms.

I'd also say that some of the doctors who overprescribed these medications deserve their share of the blame. There's lots of evidence of how a big marking effort by Purdue encouraged doctors to prescribe oxycontin, but at the end of the day, it's the doctors who actually did the prescribing, and some of them went far overboard. Cutler and Glaeser cite evidence that the top 5% of drug prescribers accounted for 58% of all prescriptions in Kentucky, 36 percent in Massachusetts, and 40% in California. The medical profession is well-aware that people have been getting addicted to opioids in various forms for centuries, and some greater skepticism was called for.

Roughly 700,000 Americans have dies of opioid overdoses since 1999. The isolation and stresses of the pandemic seems to have made the problem worse. It feels to me as if it's become a cliche to refer to opioid overdoses as a "crisis," but it's a crisis that doesn't seem to be receiving a crisis-level response. Cutler and Glaeser go into some detail on demand-side and supply-side determinants of the crisis, but I'll let you go to their article for details. They conclude this way:

Past US public health efforts offer both hope and despair. Nicotine is an extremely addictive substance and yet smoking rates have fallen dramatically over the past five decades, because of both regulation and fear of death. On the other side, the harms of obesity are also well-known and average weights are still increasing. We cannot predict whether opioid addiction will decline like cigarette smoking or persist like obesity.

The medical use of opioids to treat pain will always involve costs and benefits, and the optimal level of opioid prescription is unlikely to be zero. The mistake that doctors and prescribers made in recent decades was to assume overoptimistically that a time release system would render opioids non-addictive. Thousands of years of experience with the fruits of the poppy should have taught that opioids have never been safe and probably never will be.

The larger message of the opioid epidemic is that technological innovation can go badly wrong when consumers, professionals, and regulators underestimate the downsides of new innovations and firms take advantage of this error. Typically, consumers can experiment with a new product and reject the duds, but with addiction, experimentation can have permanent consequences.

Here are some of my previous posts on what I will keep calling the opioid "crisis:"

• "Remember the Opioid Crisis?" (December 1, 2020)
• "Opioid Crisis" (March 1, 2019)
• "Fentanyl and Synthetic Opioids: What's Happening, What's Next" (October 23, 2019)
• "Opioids: Brought to You by the Medical Care Industry" (March 22, 2018)

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pK on inflation

On Wednesday, the Bureau of Labor Statistics announced that consumer prices in the United States rose 6.2 percent over the past year. Critics of the Biden administration jumped on the report like football players piling onto a fumbled ball. But does high inflation by recent standards (what we're seeing now is nothing compared to the 1970s — or the 1940s) reflect a failure of U.S. policy? Is it even a uniquely American phenomenon?

As it happens, Eurostat, the statistical agency of the European Union, has released a flash estimate — that is, a preliminary estimate based on incomplete data — for annual inflation in the euro area. Like the U.S. report, this estimate showed inflation hitting a much higher level than we've become accustomed to. But the European inflation rate, at 4.1 percent, was considerably lower than the U.S. rate.

There are two ways to look at the Europe-U.S. comparison. Should we focus on the similarities or the differences?

Well, I spent a good part of the past two days exploring various rabbit holes in an attempt to understand why European inflation is lower and ended up concluding that we should mainly stress the similarity of inflation experience. I won't bore you with all the dead ends I explored. Instead, let me give you the big picture.

Here's consumer price inflation on a 12-month basis in the United States and the euro area since 2017. In case you're wondering about the dashed line at the end, Federal Reserve Economic Data doesn't include the flash estimate, so I extended the euro line to reflect it:

Up, up and away.FRED

As you can see, inflation has surged on both sides of the Atlantic. It's now higher in the United States, but as you can also see, that's normal: U.S. inflation consistently runs above European inflation. I'll talk in a second about why.

It's also helpful to look at one European nation in particular: Germany. The Germans are famously inflation averse (largely because of selective historical memory — everyone knows about the hyperinflation of 1923, far fewer about the deflation that brought you-know-who to power). They also chose not to engage in large-scale spending to promote recovery from the Covid pandemic; there was no German equivalent of the Biden administration's American Rescue Plan. Yet Germany has seen inflation rise and, in fact, has the highest inflation rate, 4.6 percent, among the largest euro area economies:

Germany too.FRED

Why has European inflation risen? For the same reasons it's higher here. Prices of food and energy, which are set on world markets, have risen sharply everywhere. The interaction of an uneven economic recovery with the lingering effects of the pandemic has led to extensive supply chain problems. In fact, the findings in a European Central Bank survey of businesses sound remarkably similar to the discussion in the Federal Reserve's Beige Book.

But why is European inflation about two percentage points lower than inflation here?

Part of the answer, surely, is that Europe started from a lower base — that is, underlying inflation in Europe was lower before the pandemic. This is especially clear if you look at core inflation, stripping out volatile food and energy prices:

Inflation in Europe has always been low.FRED

Core inflation in the euro area started out roughly one percentage point lower than in the United States, and this difference accounts for about half the current inflation difference. It's also important to note that low euro area inflation before the pandemic was a bad thing: There's a broad consensus among economists that monetary authorities should target somewhat positive inflation, at least 2 percent, to give them room to cut interest rates in recessions. European inflation has been low because its policymakers have consistently been too conservative.

Still, what about the other half of the inflation difference? As I said, I've been down various rabbit holes, and I still don't have an explanation. But I may have been searching for too much precision. After all, reported inflation rates are significantly different within the euro area, with Germany's about a point and a half above France's and Italy's. There might be real economic reasons for these differences, but how much is just statistical noise?

At one point in his magnum opus, "The General Theory of Employment, Interest and Money," John Maynard Keynes remarked that "to say that net output today is greater, but the price level lower, than 10 years ago or one year ago is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth — a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus." Keynes was actually making a dubious case for measuring everything in wage units, but I've always cited that line as a caution about taking economic measures too seriously.

In the case of inflation, I'd say that the moral of the story is not to dwell too much on international differences in the latest print. The important point is that we've seen broadly similar inflation surges in many countries. Which tells you that what's happening in the United States isn't mainly about policy.

Feedback If you're enjoying what you're reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week's newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com.

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John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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dean baker on inflation

Getting High on Inflation

The October Consumer Price Index data has gotten the inflation hawks into a frenzy. And, there is no doubt it is bad news. The overall index was up 0.9 percent in the month, while the core index, which excludes food and energy, rose by 0.6 percent. Over the last year, they are up 6.2 percent and 4.6 percent, respectively. This eats into purchasing power, leaving people able to buy less with their paychecks or Social Security benefits.

There is no argument about what the numbers show, but the key questions are what caused this rise in inflation and what can be done to bring it down. There are four important points to recognize:

1) Inflation has risen sharply in many wealthy countries, so this isn't something that can be laid entirely on the policies of the Trump and Biden administrations.

2) There are good reasons for believing that many of the factors driving this inflation are temporary and will be reversed in the not distant future.

3) Conventional remedies for inflation, like raising interest rates to increase unemployment, and put thereby put downward pressure on wages, are likely to prove counterproductive; and

4) Many people have seen increases in wages and benefits that far outweigh the impact of higher prices.

Inflation Has Risen Sharply in Many Countries, not Just the United States

On the first point, most wealthy countries have seen a substantial increase in their inflation rate in the last year, even if the current pace may not be as high as in the United States. The OECD puts Canada's inflation rate at 4.4 percent over the last year. In Norway and Germany, the inflation rate it was 4.1 percent. Some countries do have lower inflation rates. In France the inflation rate over the last year was 2.6 percent, in Italy 2.5 percent, and in Japan, the debt king of the world, just 0.2 percent. (These data only run through September, a period in which the inflation rate for the U.S. was 5.3 percent over the prior year.)

While there are differences in inflation rates across countries, the sharp increases in places like Canada, and especially European countries like Norway and Germany, can't be blamed in any plausible way on U.S. policies to get through and recover from the pandemic. There is also no clear relationship between the size of the rescue and recovery packages and current inflation. For example, the size of the packages in France and Japan were considerably larger than the packages put in place in Germany, yet both countries have considerably lower inflation.

The Case for This Inflation Being Temporary

In many of the areas seeing the sharpest price increases, the inflation is clearly due to factors associated with the pandemic and the reopening of the economy which are not likely to persist long into the future. The most obvious example here is new and used vehicles, the prices of which have risen over the last year by 9.8 percent and 26.4 percent, respectively.

These two sectors, which added more than 1.2 percentage points to overall inflation rate over the last year, have seen sharp rises in prices due to production snags associated with a worldwide shortage of semiconductors. The latter shortage in turn results from a major semiconductor producer in Japan being temporarily sidelined by a fire. This supply reduction coincided with a big upturn in worldwide demand. Because of the pandemic, consumers in the United States and other countries shifted their consumption from services, like restaurants and movies, to goods like cars, television sets, and smartphones.

This surge in demand for goods created the backlog of containers and container ships that we are now seeing at major ports. However, we will likely work through this backlog, both because supply issues will eventually be resolved, as companies arrange to higher more truck drivers and trucks, and because demand for goods will wane for the simple reason that people don't make these purchases every month. If someone bought a car in May of 2021, they are not likely to buy another one in May of 2022.

It is not hard to find an example of this sort of price reversal. Television prices rose by 10.2 percent in the five months from March to August, a 26.3 percent annual rate of increase. In the last two months, they have fallen by 2.8 percent.

We can see similar stories in other areas.  The price of a bushel of corn rose by more than 100 percent from its low in August of 2020 to its high in May of this year. It has since fallen back by almost 20 percent, to a price that is well below what we were seeing back in 2013. Lumber is an even more striking case. The price more than quadrupled from its low point in April of 2020 to its peak in May of this year. It has now fallen back by more than 50 percent to a price that is about 10 percent higher than a peak hit in June of 2018.

It's not easy to determine how quickly supply chain issues will be resolved, but when they are, we are likely to see the price of a wide range of goods, starting with cars and trucks, reverse itself and start falling. This will be true not only of consumer goods, but many intermediate goods that have been in short supply in recent months. The end of the backlogs is also likely to mean reversal in shipping costs, which have risen by 11.2 percent in the last year, adding to the price of a wide range of products.

It is also worth noting some prices that have not risen much. The cost of medical care has risen by just 1.3 percent over the last year. The cost of college tuition is up 1.8 percent. Inflation in these former problem sectors has remained well under control through the pandemic and recovery.

Finally, it is worth mentioning the situation with rent, which accounts for almost a third of the overall CPI. We are seeing a sharp divergence in rental inflation across cities. The rent proper index was up 1.5 percent year-over-year in Boston and Los Angeles, 1.7 percent in Seattle and 0.2 percent in NYC. It was down 0.3 percent in Washington, DC and 0.4 percent in San Francisco over the last year. By contrast, it is up 6.3 percent in Detroit and 7.5 percent in Atlanta. This is consistent with people moving from high-priced cities to lower priced ones.

The low rental inflation, or falling rents, in the high-priced metro areas is obviously good news for renters there, however the rising rents in previously low-priced areas is bad news for prior residents who may be looking at large rent increases. However, even with 6.3 percent rental inflation, rents will still look cheap in Detroit for someone moving from Boston or New York.

It's also important to remember that almost two-third of households are homeowners (only 44 percent for Blacks and 48 percent for Hispanics). For people who own their home, higher implicit rents are not a problem, and if the sale price goes up, as it has been doing, this is good news.

Anyhow, we may see some further increase in rental inflation in the months ahead. We have seen a large rise in home sales prices since the pandemic, which has far exceeded the rise in rents. The vacancy rate has also fallen somewhat, although the pace of new construction did pick up sharply, which should help to lower rents over time.

Will Slamming on the Brakes Cure Inflation?

The standard remedy for inflation is to deliberately slow the economy with higher interest rates from the Fed and possibly cuts in government spending and/or tax increases. The idea is that by slowing the economy, and throwing people out of work, we can put downward pressure on wages, which will then mean lower prices.

There is no doubt that if we force workers to take large enough pay cuts, it will alleviate inflationary pressures, but this is a rather perverse way to accomplish the goal. With low interest rates and high demand, companies have large incentives to innovate to get around bottlenecks. It's much better to allow the economy to work its way through a stretch of high inflation in ways that could lead to lasting productivity gains than to squeeze workers so as to alleviate cost pressures.

It's also worth noting that many of the proposals being put forward by the Biden administration will help to alleviate inflationary pressures in both the long-term and the short-term. In the latter category, universal pre-K and increased access to child care will make it easier for many parents, primarily women, to enter the labor force or to work more hours.

In the longer-term category, increased access to broadband and improving our transportation infra-structure will increase our capacity in many areas. Also, money spent to protect against the effects of climate change will reduce the disruptions caused by extreme weather events in the future.

This is a much more promising path for dealing with inflation than forcing workers to take pay cuts.

Keeping Score on Inflation

There have been several pieces in major news outlets in the last week telling people how inflation has been devastating for low- and moderate- income families. While it is undoubtedly hard for many families to pay more for food and other necessities, it is important to keep an eye on the income side of the equation.

In the case of families who have children, the vast majority are receiving the expanded child tax credit. Before the American Recovery Act (ARA), the credit was $2,000, but only partially refundable. This meant that many low-and moderate-income families only received $1,400 per child. Under the ARA, these families are receiving $3,000 per child and $3,600 for every child under the age of six. This is a big gain in income for a family with an income of $20,000 or $30,000. (There are families that don't get the credit. This includes undocumented workers who are not eligible and others who are excluded because of bureaucratic obstacles. These are important issues, but unrelated to the problem of inflation.)

There also have been sharp increases in wages for workers at the bottom end of the pay ladder. Restaurant workers have seen their pay rise by $1.84 an hour over the last year. This would come to an increase of $3,680 for a full year, full-time worker.

These increases in income would dwarf the rise in food costs that have featured prominently in news accounts on inflation. The Bureau of Labor Statistics puts the weight of food in a household's budget at 7.4 percent. Suppose we double this for moderate income families and make it 15 percent. For a family that spends $30,000 a year, that comes to $4,500 a year. If we apply the estimated 4.5 percent rate of food inflation over the last year, the higher prices will take a bit more than $200 out of this family's pockets.

That is less than 10 percent of the pay increases that we expect low-paid workers to be receiving or the gains from the child tax credit for families with kids. If we're going to talk about the well-being of these families it is incredibly irresponsible to only talk about the spending side of the ledger and ignore the income side.

Conclusion: Team Transitory Is Not Throwing in the Towel

While the stretch of high inflation has gone on much longer than many of us anticipated, however, there are still good reasons for thinking that inflation will slow sharply in the months ahead. We have seen the prices of many items, like television sets and lumber, reverse and fall sharply after prior run-ups. It is likely that many other items, like cars and meat, will be in this category in the near future.

For what it's worth, it seems that financial markets also agree with this assessment. The interest rate on 10-year Treasury bonds is only 1.56 percent, well below the pre-pandemic level. That is not consistent with a story where markets expect 4 or 5 percent inflation in coming years.

Also, contrary to gloom and doom predictions, the dollar has been rising in value against the euro and other currencies. That is also not consistent with a belief that the U.S. is facing a wage-price spiral.

Financial markets can be wrong, as those of us who predicted the collapse of the stock and housing bubbles know well. But for now at least, they seem to be in agreement with the analysis from Team Transitory.

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John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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