Sunday, April 27, 2014

Week 6: Diminishing Returns Here, There and Everywhere

Is it bad economics if we do not save all premature babies despite the fact that we have the technology to do so?

This was one of the activity questions presented to us in class during week 6 and while some found it difficult to discuss initially, it actually did spark quite an intriguing but complicated debate.  Despite the fact that topics like choosing not to try and save the lives of babies can be unpleasant to talk about, they are issues that do need discussing.

My initial reaction was to start thinking about the actual survival of premature babies born at different stages of development and why health practitioners would choose to save some and not others.  Babies are considered to be premature if they are born at anytime prior to 37 weeks of gestation, with full-term being 40 weeks.  The earlier a baby is born, the less likely it is to survive and the more likely it is to suffer from various complications.  The point at which neonates have a decent chance of surviving or being "viable" assuming that there is access to advanced technology is generally considered to be 24 weeks (although some believe 25 or even 26 weeks may be more appropriate) (Lavin et al. 2006; Powell et al. 2012).  There definitely seems to be a physiological limit at 22 weeks of development, prior to which survival is impossible regardless of technology, while between 22 weeks and 23 weeks and 6 days, there is tremendous uncertainty (Lavin et al. 2006; Powell et al. 2012).  Weight can play a role (Powell et al. 2012), but having worked in a maternity ward, I also noticed that health practitioners will often have a feeling about whether a baby will make it or not, outside of statistics and readings.  Perhaps that foresight is an unconscious recognition of signs and patterns that are common among those that survive.  Either way, not all premature babies start off with an equal chance at survival.  Some only need to spend a week or two in hospital while others need months of constant intensive treatment.

Okay, so we've established that there is a point at which it is biologically impossible to save premature babies, a period during which survival is highly improbable, but possible and a stage past which the chances of living are very good, especially with medical intervention.  Next, we started thinking about those who do survive and how well they do.  Unfortunately, saving the life of a premature neonate does not ensure that he or she will go on to lead a long and productive life.  The truth is that premature babies are at higher risk of suffering from significant health problems (such as stroke or infection after birth), disabilities as well as developmental delays, especially if they are born very early and/or with complications.  That means that some premature babies could initially be saved only to die shortly thereafter while others may be kept alive but in a vegetative or profoundly disabled state.  This is certainly the reason why studies have shown that the majority of health practitioners (physicians and nurses) discourage resuscitation in most cases when the baby is born at or under 23 weeks of gestation (Lavin et al. 2006).  In fact in Holland, the policy is to allow babies born at or before 23 weeks to die peacefully without intervention (Wishart 2011).

Lastly I thought of the considerable amount of resources that it takes to keep a premature baby alive.  It costs roughly $5000 a day just to keep an incubator running, not to mention the man hours invested by medical staff who could be using that time to look after other patients.  A number of my classmates pointed out that the neonates who die later on or who go on to be severely disabled will generally be unable to repay the costs of keeping them alive to society and/or their families.  Therefore, keeping those babies alive will have no financial benefit later on but will rather create a deficit and perhaps that is why it is not bad economics to not save them.

If we combine all of these factors and create a graph, we see that the returns on saving all premature babies begin to flatten out over time.  

Let's imagine that we first save all of the babies born after 26 weeks of gestation with no complications.  The vast majority of those neonates will survive, thereby making the returns on investing in their care rather large.  Many of them won't have to spend much time in incubators and the work required to keep them alive will be less than if their cases were more complicated.  Next we start to save the less developed neonates with more complicated cases, say those born from 24 to 26 weeks.  Fewer of those will survive and they will likely have to spend more time in the incubators, thereby making the returns on investing in saving them smaller.  An even smaller margin of those born sooner (before 24 weeks) will live and so the returns on saving them will shrink even more.  Therefore, it does not make economic sense to save all premature babies because of diminishing returns.

The topic then turned to why economists dislike there being fewer women in the workforce than men.  It did take some rooting around for the answer, but we did get there eventually.  Assuming that men and women are equally educated and skilled, a greater proportion of men in the workforce may mean that women who are more educated or skilled and would be more productive are without a job.  Therefore, the productivity of the society is not all that it could be because its citizens are not being utilized to their full potential in the workforce.

Let's look at two societies with equally educated and skilled populations, but one has a male-dominated workforce and the other equal parts men and women working:

Now let's compare the productivity of those two societies:

Of course many of the women in a society where men are dominating the workforce may be choosing to be at home with their children, etc and we cannot say outright that they are not contributing to society in any way by doing that.  But, those contributions are harder to quantify in terms of numbers and dollars, particularly with the availability of inexpensive child care.  Obviously there are jobs that attract a higher percentage of workers of one gender over the other (for example nurses are predominantly female), but this scenario would assume that everything would even out in the end.  It would also assume that contributions include providing different perspectives and making a working group more dynamic.  The best example that we arrived in my opinion was sales.  In a sales team, having different perspectives on how to market your product or service to different people means that your team is more dynamic and having the best salespeople will make it more productive.  So if your team is made up of equally successful salesmen and women as opposed to a group of successful salesmen with some less successful salesmen, your team will not only be more well-rounded but have a higher number of more productive workers.  Again, it is best for the productivity of a society to have equal parts men and women in the workforce to minimize diminishing returns.

The further that we get into this course and the more that I learn about economics, the more that I am beginning to see that we truly live in a world of diminishing returns.  From misogyny in the workforce to saving premature neonates, they are everywhere.  Even on the weekend, I noticed an example of diminishing returns while walking through a market and looking at stalls selling jewellery.  I noticed that I spent a lot less time looking at shops with displays of large clusters of bracelets and earrings piled on top of each other and more time at stores showcasing only a few pieces in a more elegant, solitary fashion. 

Despite the fact that the price tags were fairly similar between stores, the jewellery at stores with only a few on display seemed to me to have a greater value, they just seemed to be worth more.  In contrast, the jewellery at stalls with lots of pieces seemed cheaper, less precious because they were only one of many and I found the displays too overwhelming to spend any serious time looking at individual pairs.  In the end I bought three pairs of earrings from a shop that only had around 15 on display instead of buying any from the stalls with hundreds of pairs to choose from.  I also noticed that I was not the only one shopping in this fashion, in fact from the number of people walking away empty-handed from the shops with busy displays, it did not seem like they were having a very successful weekend.

This experience has taught me that if I ever wanted to run a successful enterprise I should not dilute the products and/or services that I offer with excess, but instead concentrate my efforts on a few specific things to have the biggest possible impact.


Lavin JP, Kantak A, Ohlinger J, Kaempf JW, Tomlinson M, Campbell B, Fofah O, Edwards W, Allbright K, Hagen E, Suresh G & Schriefer J 2006, 'Attitudes of Obstetric and Pediatric Health Care Providers Toward Resuscitation of Infants Who Are Born at the Margins of Viability', Pediatrics, vol. 118, no. 2, p. S169-S176, viewed 19 April 2014, <>.

Powell TL, Parker L, Dedrick CF, Barrera CM, Di Salvo D,  Erdman F, Huff SP & Saunders M 2012, 'Decisions and Dilemmas Related to Resuscitation of Infants Born on the Verge of Viability', NAINR. vol. 12, no. 1, p. 27-32, viewed 19 April 2014, <>.

Wishart A 2011, 'Premature babies battle for survival at 'edge of life'', BBC, viewed 19 April 2014, <>.

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