Deaths Of Despair, And The Service Project That Could Save American Lives

                                          Anne Case & Angus Deaton (Credit: Princeton University)

In 2015, Princeton University economists Anne Case and Angus Deaton(winner of the Nobel Prize in Economics) published a paper that made waves nationally. Case and Deaton reviewed mortality figures and causes of death, amongst Americans of various ages and genders as well as ethnic, racial, educational and income backgrounds. What they found was rather shocking.

Between 1970 to 2013, mortality rates for Americans aged 45 to 54 dropped by 44%. Similar decreases were found in other wealthy nations, such as the UK, Canada, France and Germany, thanks to improved medical treatment, disease prevention and behavioral change. More narrowly, from 1978 to 1998, mortality rates amongst white Americans aged 45 to 54 decreased at an average rate of 2% per year, which matched the average rate of decline across other developed nations.

From 1999 to 2013, other affluent nations saw their mortality rates continue to decline by 2% per year. The same was true for African-Americans and Latinos aged 45 to 54, whose mortality rates decreased by 2.6% per year and 1.8% per year respectively.

Yet, something very strange happened. During that same time period, mortality rates for whites of this age group rose by an average of 0.5% per year. Such a reversal in mortality rates is unprecedented amongst developed nations. Case and Deaton broke down the numbers by educational level, and found that for whites aged 45 to 54, with at least some college education, mortality rates continued to decline. However, for individuals with a high school education or less, mortality rates increased precipitously, which lead to a spike in overall death rates amongst whites of this age as a whole.

What caused this trend? Primarily, a precipitous rise in “deaths of despair” or drug and alcohol overdoses, poisoning and disease, and suicide. The self-assessed health of this group has also declined, with fewer people reporting excellent physical health, and more indicating challenges. Reports of chronic pain have increased rapidly, while indicators of poor mental health have spiked.

A large number of those Case & Deaton surveyed within this demographic, report increased difficulties in simple activities like walking and climbing, while an ever-larger portion indicate that they are consuming heavy amounts of alcohol. The author’s looked to obesity as a major cause of increased mortality rates, but found that life expectancy had deteriorated for both obese and non-obese whites aged 45–54.

Digging deeper into the data, Case and Deaton suggest that the opioid epidemic, which first began in the late 1990’s, when opioids gained increasing popularity as a pain treatment, and is linked with eventual heroin addiction, might be a partial cause of increased mortality rates. However, Case and Deaton are uncertain as to whether increased levels of pain came first, or opioid usage spiked prior to a pain epidemic (a sort of “chicken and egg” problem).

The authors also look to economic insecurity, in the form of minimal growth in wages, and the reality that Americans are increasingly unlikely to outearn their parents, particularly without a college education. Combined with the economic shocks of the 2008–09 Great Recession, this could play a role in increasing physical pain, suicide, and drug abuse. Yet, Case and Deaton note that other rich nations have seen similar or even worse slowdowns in wage growth, without accompanying increases in mortality.

Case and Deaton compare the reversal in mortality rates discussed here, to the AIDS epidemic, which costed around 650,000 American lives.* Increased death rates amongst middle aged whites were a major contributor to a drop in American life expectancy, first observed in 2015.

Case & Deaton published a 2017 followup, seeking to better understand this problem. They express skepticism towards the theory that stagnant incomes are the sole cause of the trends observed, noting that for middle-aged African Americans and Latinos, income growth wasn’t much better than for whites, yet mortality rate continued to drop.

Case & Deaton instead gravitate towards a hypothesis of “cumulative deprivation”, whereby employment opportunities for those with less education have steadily deteriorated, driven in part by globalization, technical change, and de-industrialization. As noted, whites with a high school education or less, are economically worse off than their parents. At the same time, marriage rates amongst those with lower incomes have declined (with more children being born out of wedlock), and fewer nuclear families.

This often leads to loneliness, particularly amongst men. Participation in traditional religious institutions has weakened, and with it, the social ties offered by these these organizations. As Deaton put it in an interview with NPR: “There’s a lot of social dysfunction building up over time. There’s a sense that people have lost this sense of status and belonging.”

As with any complex problem, there isn’t one simple solution. Improved educational outcomes, particularly vocational training, and teaching workers new skills (something Case has advocated), could have a positive impact. Education, unemployment, and income are, after all, closely linked. In recent years, programs have focused on teaching former coal miners to code, or become wind farm technicians; another proposal argues for training displaced workers in the solar industry.

Increased rates of economic growth, over an extended period of time, leading to decreased unemployment, and a broad-based rise in wages, would help. After all, economic insecurity is associated with greater physical pain, anxietyand depression, while unemployment is linked to opioid abuses, and other pathologies.

Yet, the gains from economic growth are unevenly distributed. Since 1980, GDP in the United States has grown by 154%. During that time, the median income of the American worker rose by just 16%, while the average income of someone in the top 1% of earners increased by 190%. Even with strong growth, it is unclear how much those with less education and skills would benefit. Also, there are serious questions as to how a mature economy, such as the United States, can grow more quickly.

As Case & Deaton’ suggest, along with commentators from the left and right, what we are seeing is not a purely economic phenomenon. For that reason, we must look deeper, and address issues of alienation, dispossession, and a lack of meaning, amongst Case & Deaton’s target group.

Social isolation is closely associated with a range of health risks, and is linked with increased risk of mortality, often being as large of a risk factor as obesity or smoking. Alienation can be similar to social isolation, although some people who are not completely isolated might be alienated, in that they feeldisconnected from the world around them, from social or cultural norms, or suffer from a feeling that life lacks meaning or purpose. Alienation also carries serious consequences, in terms of mental and physical health. Much of what Case & Deaton observed seems to fall into the categories of social isolation or alienation, with dire consequences.

By contrast, volunteering, and being of service to others, has a tremendous positive impact on our lives. Individuals who volunteer enjoy a greater senseof self esteem and overall well being, including physical health, and feel more empowered, while lowering their stress levels. Brain research has found that giving helps trigger parts of our brain associated with pleasure and rewards. Older adults who offer social support to others, enjoy lower rates of mortality than those who don’t, even after controlling for socioeconomic and marital status, age, gender and ethnicity. Volunteering provides a sense of purpose, particularly amongst adults who (due to age), lost their roles as wage earners, or active parents. Volunteering also helps foster a greater sense of belonging and social inclusion, in part because it “focuses on what people have to offer, as opposed to what they may need.” It’s clear that volunteering can be very good for us.

For these reasons, I advocate creating a series of privately funded volunteer projects, where those who have are most vulnerable to the trends Case & Deaton studied, use their abilities to make a positive difference. What might this involve? For those who enjoy interacting with young people, this could mean mentoring interested youths in their communities, or other areas of need, on a monthly basis, in some sort of supervised setting. Volunteers and mentees could engage in team-building activities, sharing advice and guidance, based on life experiences, or assisting with schoolwork and teaching, where they feel sufficiently competent (or are interested in developing such a skill set). The iMentor program offers an interesting template for how such an initiative might be structured.

For other folks, who enjoy working with their hands, they might help to build and rebuild homes and infrastructure, in their own communities, and perhaps even throughout the country and the world. Habitat For Humanity offers an excellent model of the sort of program that could deliver great results. Expenses like transportation and lodging, would be covered by those who fund these projects.

These programs ought to be funded on a private basis, just like so many other wonderful nonprofits across the world. Given the range of philanthropic activity in the nation today, I believe it will be possible to pay for these projects, independent of any governmental support. Relying on the government to fund such initiatives, make it vulnerable to budget cuts and political rancor, which if at all possible, ought to be avoided.

When we look at the work done by the Gates Foundation, Project Literacy, Disabled Veterans (DAV), and so many other organizations large and small, we are reminded of the power of every individual, to make a positive difference in the lives of others. While doing so, if a volunteer experiences a sense of happiness and upliftment, and greater self worth, the effects of those new beliefs can carry over, into other areas of life. This individual might be more motivated to improve his or her economic, educational family or health situations, or simply to persevere through challenging times, and avoid destructive behaviors like excessive drinking or drugs. Volunteering may well be what Charles Duhigg, author of The Power Of Habit, described as a “keystone habit”, which leads to positive changes in many areas of life.

To be clear, I am not suggesting that volunteer programs take the place of public policy efforts, such as improving worker skills, or helping create jobs for those who face the sorts of risks Case & Deaton studied. Those approaches will be crucial to facilitating long-term change, at a large scale.

However, what ails so many of Americans today, seems to be a deeper crisis of self-worth and confidence, which has led to devaluation of their lives, and a range of destructive behavior. Changing those underlying beliefs is crucial to long-term upliftment. Volunteering is a highly effective way of ensuring this happens.

*It is worth noting that Case & Deaton’s findings have been contested by statistician Andrew Gelman of Columbia University, who argues that white death rates remained flat, rather than increasing, though Gelman acknowledges this is still an important finding.

The Trouble With Amazon

Amazon is more powerful than ever. In June, the company’s stock hit a historic high of $1017.00, allowing Bezos to briefly replace Bill Gates as the world’s richest man. This peak stock price came on the heels of the company’s acquisition of Whole Foods for $13.7 billion, giving the firm a foothold in not only the food business, but also offering a new set of distribution centers (not to mention increased access to Whole Foods’ affluent customer base).

Today, Amazon is an original producer of television series, as well as an exclusive distributor (in new markets), of television content, owned by other producers. They earned the right to stream 10 games of the 2017 NFL season. Amazon also offers a full-service publishing arm (which puts out books in both Kindle and print), as well as a marketing wing (offering pay per click advertising to sellers, allowing Amazon to compete with Google and Facebook).

Amazon also generates billions of dollars each year, from providing cloud computing services to businesses (including competitors) ,through Amazon Web Services. The company owns 7 in-house fashion brands, distributed alongside clothing from other designers. They also offer small business loans(to Amazon merchants, who are also competitors, and many of whom have trouble qualifying for traditional financing), and issues consumer credit cards.

Of course, all of this is in addition to a massive retail operation, which sells everything from headphones to sweatshirts, televisions and washing machines. Amazon is the largest e commerce retailer in the United States, selling more than the next nine largest competitors combined. Amazon is not just a direct seller of goods, but also a marketplace, allowing other vendors (who are competitors), large and small, to sell on Amazon Marketplace, and make use of Amazon Pay to collect payment. Amazon, of course, then enjoys access to a range of data and analytics, on it’s competitors.

To complement it’s retail operations, Amazon has built a supply chain which is widely regarded as the world’s’ best. These services, known as Fulfilment by Amazon, is also available to and widely used by outside vendors (technically competitors), many of whom have come to depend on it.

All of this has allowed Amazon to thrive at a time when traditional, brick and mortar stores are closing at a record pace. While Amazon certainly isn’t theonly factor contributing to this trend, it certainly plays a significant role. Investors in a range of industries have taken notice, with Amazon being mentioned in about 10% of US public company earnings calls earlier this year, thanks to what VentureBeat described as “the competitive threat from Amazon’s massive size, willingness to sell at low prices, and desire to push into a vast array of products and business lines.”

Amazon’s unprecedented success hasn’t gone unnoticed in Washington DC. After the Whole Foods acquisition was announced, House Representative David Cicilline (D-RI) called for an investigation into whether this proposed deal “…will affect the future of retail grocery stores, whether platform dominance impedes innovation and if the antitrust laws are working effectively….” Prior to Cicilline’s statement, during the 2016 presidential campaign, Donald Trump warned that Amazon founder Jeff Bezos has “got a huge antitrust problem, because Amazon is controlling so much of what they are doing.”

To assess the antitrust implications of Amazon, it’s helpful to briefly review the basics of American antitrust law, as applicable to this situation. Under the 1890 Sherman Act, any unreasonable “restraint of trade”, which is harmful to market competition (i.e. customer choice and prices),is forbidden. The Sherman Act does not restrict firms that have grown thanks to offering a superior product or service, or a better business strategy, but rather those, which have taken active efforts, to hinder competition, and develop a monopoly.

The Clayton Antitrust Act of 1914, further restricted monopolistic practices, including the use of price discrimination, if it helps create a monopoly. The Act also forbids those mergers and acquisitions which might function“substantially to lessen competition, or to tend to create a monopoly.” In considering mergers, it’s helpful to differentiate between horizontal mergers(between businesses which are in the same space and often compete directly), and vertical mergers (which combines two firms in different parts of the supply chain, in the same industry, like an auto manufacturer and a tire company).

In 1976, the Clayton Antitrust Act was amended, to include the Hart-Scott-Rodino (HSR) amendments. HSR requires firms involved in acquisitionsinvolving a deal value in excess of $80.8 million, to file details of the proposed acquisition with the Federal Trade Commission, and the Antitrust Division of the Department of Justice. The parties involved must then wait for 15 or 30 days (depending on whether the deal involves purely cash, or includes debt financing), while the FTC and DOJ assess whether the potential merger violates antitrust laws.

If the FTC and DOJ believe that a merger is anti-competitive in nature, they will request another 15 to 30 day review period, to gather more information, after which they can ultimately reach a settlement with the parties involved (where the deal is restructured, to overcome concerns), or file suit in federal district court, to block the merger. Historically, under 3% of all mergers reviewed are challenged, although larger deals are more likely to draw scrutiny.

Writing in Slate, shortly after the announcement of the Whole Foods deal, law professor and antitrust expert Chris Sagers argued that Amazon was “now the most interesting and important problem in American antitrust law.” As Sagers sees it, Amazon has succeeded by selling goods in a cheaper, more effective manner, than it’s competitors. This doesn’t, on it’s face, violate antitrust law. Yet, Sagers argues that Amazon purchase of a brick-and-mortar store, given the company’s efforts to undercut retail in price competition, poses a unique threat, ripe for an antitrust challenge.

Sagers thinks that Amazon’s acquisition of Whole Foods, will make it difficult for any online grocery store, to succeed in the future, which would violate provisions that forbid mergers “thwart technological or other developments that pose future competition.” Sagers sees Amazon’s acquisitions of Zappos and Diapers.com as both falling into this category, having prevented competition by startups which might have posed a threat to Amazon’s dominance in certain product categories.

This means that the Whole Foods acquisition, in addition to prior deals, have made Amazon so powerful, that it can actually force it’s suppliers to sell their goods at “subcompetitive” prices, and that Amazon possesses “economies of scope that no retail entrant could meaningfully challenge.” (Almost on cue, after Sagers’ article was published, Amazon announced that Whole Foods was slashing prices on a range of items). Sagers’ claim involves proving that this dominant position came about not through normal market competition, but rather, through actions that were monopolistic and exclusionary.

Lina Khan, a fellow at think tank New America, recently published a note in the Yale Law Journal, raising concerns over whether today’s application of antitrust doctrines, is sufficient to check Amazon’s market power. Khan notes that current interpretation of antitrust laws mainly assesses competition in terms of the “short term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

Khan argues for a different, more dynamic approach, one which considers “the structure of a business and the structural role it plays in markets.” As part of such a shift, Khan suggests thinking about “whether a company’s structure creates certain anticompetitive conflicts of interest; whether it can cross-leverage market advantages across distinct lines of business, and whether the structure of the market incentivizes and permits predatory conduct.”

As Khan observes, from the beginning, Amazon has not focused on profits, and has incurred losses (largely through lower prices), in order to grow aggressively (although the firm has finally been profitable for the past 9 quarters, a first in it’s history). Investors have been willing to give Amazon much leeway, to pursue this goal.

As a result, Amazon accounted for 43% of all online retail sales in 2016, more than the next nine largest online sellers combined. What’s more, Amazon’s sales have grown by a greater percentage than the e commerce market as a whole, which means it is becoming only more dominant. Much of this success is driven by precipitous growth of membership loyalty program Amazon Prime (which half of American households could be part of by 2020). Yet, as of today, Amazon Prime is also a loss leader, rather than a source of profits.

Khan emphasizes that Amazon has expanded into so many different areas of business, that many of it’s competitors are actually it’s customers as well. For example, a retailer whose products compete with those sold by Amazon, might also use Amazon’s delivery services, or it’s cloud computing technology. Perhaps most of all, Amazon’s Marketplace offers a massive array goods for sale on behalf of Amazon, as well as competing sellers. This has made Amazon a “utility” which is “indispensable to e-commerce”, making it even more formidable to challenge. This is especially true, given the depth of knowledge Amazon has about these competitors, thanks to it’s data from Marketplace, and the dependence of both rivals and customers on this platform. Amazon confounds traditional antitrust analysis, where a firm just seeks to put it’s rivals out of business.

Amazon used below-marketing pricing as their growth strategy with Kindle, which is now the dominant platform for e books. Large discounts for books sold on a “platform based product” like Kindle, are used to lock users into buying e-books in the future, both since these books can’t be read in any other medium, and because Amazon can use prior customer preferences (the books already bought), to offer items of interest, at the click of a button.

Today, Amazon has not only gained dominance in the e book space, and also dissuaded prospective competitors. Similar platform effects likely apply in many of Amazon’s other markets.This is quite different from price discounts on physical items, sold at brick and mortar stores, where someone might buy something at a lower price today, with little ability to really guarantee that they’ll return to purchase tomorow.

Amazon also engages in predatory pricing to pressure and ultimately acquire promising rivals, after which Amazon often raises prices. Khan details how Amazon made an acquisition offer to fast-growing rival Quidsi (owner of Diapers.com and beautybar.com), which was declined. Amazon then set up a service to sell diapers and other baby products (Amazon Mom), and slashed prices on diapers and baby products (goods sold by Quidsi), often in responses to price changes from Quidsi.

Quidisi’s sales growth slowed, and the company eventually accepted an acquisition offer from Amazon. After completing this deal, Amazon went on to shut down new memberships to Amazon Mom, and raise prices. In March of 2017, Amazon shut down Quidsi.

Amazon’s approach runs counter to dominant thinking on predatory pricing, which was largely codified in Robert Bork’s The Antitrust Paradox. Bork believed that any efforts to use acquisitions to create monopolies, would be defeated by the entry of competitors into the space. However, as Khan sees it, with online retail, unlike opening a physical store, success will require “attempting to build a new online platform, or of creating a brand strong enough to draw traffic from an existing company’s platform….the practical barriers to succesful and sustained entry as an online platform are very high, given the huge first-mover advantages stemming from data collection and network effects.” Therefore, assessing a platform like Amazon, using traditional pricing doctrine, is not entirely effective.

Khan ultimately argues for a more comprehensive view of antitrust enforcement. She believes that a narrowly defined conception of “consumer welfare” which only really considers outcomes (i.e. prices), is flawed. Rather, Khan argues for looking at “process and structure”, that is, a deep analysis of “whether power is sufficiently distributed to keep markets competitive.” She notes that the focus on prices is misguided, in that it will only result in intervention when a monopolistic power has already gained enough power to shift prices, rather than as the process of monopolization occurs.

Khan wants antitrust enforcement to reflect how platform economics allows companies like Amazon to sell goods below cost, for years on end, in order to achieve market dominance. She suggests that whenever goods are sold for a loss, through a platform which controls a large share of the market (around 40%), a presumption of predatory pricing (with some exceptions, for example, for new and untested products), ought to be introduced. In such a situation, antitrust laws would look to whether a company was leveraging it’s platform and financial resources, in order to illegally weaken competition.

Khan also suggests introducing greater scrutiny when assessing vertical mergers, particularly those mergers which allow a firm to gain access to data of competitors (such as Facebook’s acquisition of Whatsapp and Instagram). Khan also advocates applying strict limitations on vertical integration by platforms which have “reached a certain level of dominance” in a given area, in order to prevent conflicts of interest. Under this framework, Amazon’s role as both a direct retailer, as well as a platform for third party retailers (through marketplace), poses conflicts, and ought to be restricted. Khan argues that Amazon’s crucial role in the “infrastructure of the Internet economy” poses some major risks, in terms of handing the firm unchecked power in the marketplace.

Khan offers the excellent suggestion of regulating platforms like Amazon, as public utilities, just as railroads, telephones, water, power and gas have been regulated over the years. Such a framework would acknowledge that these entities function like monopolies, and would instead seek to regulate it’s power.

She offers several requirements that ought to be imposed, of which the most relevant to Amazon, is a requirement of nondiscrimination, which forbids Amazon from offering preferential treatment to it’s own products, or discriminating between various parties who are users of it’s services (for example, deliberately disadvantaging a seller on Amazon Marketplace, who also happens to be a competitor). Amazon would also have “common carrier obligations” which requires that a platform “ensure fair and open access to other businesses”, similar to the requirements which net neutrality imposes on Internet service providers.

Khan also argues for application of the “essential facilities” doctrine, whereby any company which has a natural monopoly in a market should not be allowed to deny access to the “critical facility” to rivals in other markets. This doctrine sees difficulties in breaking up and dividing a facility amongst several different owners, since that could destroy “important efficiencies”, in Amazon’s case, the convenience of online shopping.

Thus, a monopoly is allowed to exist, with regulations on conduct. In the past, this doctrine was typically applied to physical infrastructure (like bridges and highways), as well as telephone networks, rather than retailers. However, given Amazon’s gargantuan role in today’s economy, Khan suggests exploring it’s application here.

Khan acknowledges the challenges in implementation of both the public utility and essential facilities doctrines, including increasing judicial skepticism towards anti-monopoly enforcement, as well as political hostility to “the very concept of public utility.” Challenging the legitimacy of Amazon as currently constituted, wont’ be easy.

Yet, Khan correctly observes that “competition in platform markets” online has slowed, in no small part due to Amazon’s dominance, achieved in large part through predatory pricing, and integration across a range of business lines. More broadly, the US corporate environment has become increasingly uncompetitive.

A 2015 Wall Street Journal article noted that in nearly 1/3 of American companies are in markets which are considered “highly concentrated” based on current antitrust standards, while another Wall Street Journal piece, also from 2015, argued that American corporations need more competition, with low rates of new business formation (at a multi decade low) being a possible product of (as well as a potential cause) market concentration. A 2016 analysis in The Economist found that 2/3 of American industries have become more concentrated since just 1997, thanks in large part to a wave of mergers, with record corporate profits likely a product of a minimally competitive environment.

Ultimately, the best way forward, is rigorous, broadly focused antitrust enforcement. This requires an expansive, macro approach, which does not view competition and consumer interests, solely through the narrow lens of pricing, but rather, in terms of it’s overall market and economic effects.

Antitrust attorneys of the future must fuse the sophisticated analysis of future competition and monopolistic behavior advocated by Sagers, with Khan’s understanding predatory pricing and platform economics, and the ways through which the utilities and essential facilities approach, offer a way forward. While it might not be necessary (or effective), to break up Amazon, competition is the basis of a thriving economy, and it has been considerably weakened in today’s market. Amazon is Exhibit A of this reality. Corrective measures must be taken, so that as Amazon, or any other online company, becomes even more wildly successful, they do so through vigorous market competition, rather than monopolistic practices.