Wednesday, August 26, 2009

A wonderful example of cognitive dissonance

Here, in the comments. I wonder how long it will be there before it goes down the memory hole.

A fascinating graph

Charles Murray at the American Enterprise Institute has a graph showing the changes in political self-identification of non-Latino whites ages 30-49. A variety of different groups have slowly been getting more conservative, but one group, wealthy with a graduate degree, such as lawyers, academics, scientists, writers, and creators of entertainment programming, have been rapidly getting much more liberal.

What he shows is consistent with what I see happening around me.

The error on the debt

The Obama administration says that they underestimated the amount of debt that the U.S. will incur over the next ten years by about $2 trillion dollars. That error is about as much as the federal debt held by the public grew during the second Bush Administration. It is also much less than the numbers others are suggesting.

Paul Krugman says not to worry, that it is "bad but not horrific." Does anyone think he would say the same thing if it were a Republican administration piling up the debt?

Monday, August 24, 2009

The economics of heath care

Tigerhawk links to an excellent article in the Atlantic on health care. From the article:
All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.
But health insurance is different from every other type of insurance. Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is.
There was nothing natural or inevitable about the way our system developed: employer-based, comprehensive insurance crowded out alternative methods of paying for health-care expenses only because of a poorly considered tax benefit passed half a century ago.
Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total.
Many hospitals still exist in their current form largely because they are protected by regulation and favored by government payment policies, which effectively maintain the existing industrial structure, rather than encouraging innovation.

Read the whole thing if you want a good summary of why health care is the mess that it is.

More visual illusions

Carpe Diem has another batch of visual illusions.

Staffing the government

The New York Times reports that only 43% of the senior positions in the Obama administration have been filled.
Measuring the progress in appointments depends on what positions are counted and who is doing the counting. The White House Transition Project counts 543 policymaking jobs requiring Senate confirmation in four top executive ranks. As of last week, Mr. Obama had announced his selections for 319 of those positions, and the Senate had confirmed 236, or 43 percent of the top echelon of government. Other scholars have slightly different but similar tallies.
Much of the problem is the vetting process:
“Anyone who has gone through it or looked at this process will tell you thatevery administration it gets worse and it gets more cumbersome,” Mrs. Clinton said last month. “And some very good people, you know, just didn’t want to be vetted.” She added: “You have to hire lawyers, you have to hire accountants. I mean, it is ridiculous.”
Isn't there a lesson here, that trying to solve one problem with ever more regulation can create a new, more serious problem elsewhere?

Thursday, August 20, 2009

Sowell on health care

Thomas Sowell writing for National Review:
Despite incessant repetition of the fact that millions of Americans do not have medical insurance, hardy souls who have actually read the mammoth medical-care legislation being rushed through Congress have discovered all sorts of things there that have nothing whatever to do with insuring the uninsured — and everything to do with taking medical decisions out of the hands of doctors and their patients, and transferring those decisions to Washington bureaucrats.
Many people who are uninsured have incomes from which medical-insurance premiums could be paid without any undue strain. But they choose to spend their money on other things. Many young people, especially, don’t buy medical insurance, and elderly people already have Medicare. The poor have Medicaid available, even though many do not bother to sign up for it until they are already in the hospital — which they then can do.
Wasn't part of the pro-abortion position that the government had no business getting between a woman and her doctor? Of course all the choice arguments were there for the rubes--they were not what the elites actually believed, but it still is striking that in the current debate about health care there have been few if any references to intrusion by the government into the patient-doctor relationship.

Wednesday, August 19, 2009

Feldstein on health care

In The Wall Street Journal, Martin Feldstein cuts through the rhetoric and slogans about health care to get the heart of the matter: health care reform is about rationing.
Although administration officials are eager to deny it, rationing health care is central to President Barack Obama's health plan. The Obama strategy is to reduce health costs by rationing the services that we and future generations of patients will receive.
The key problem facing the government is the the explosion of costs in Medicare and Medicaid in the future.
There is, of course, no reason why limiting outlays on Medicare and Medicaid requires cutting health services for the rest of the population. The idea that they must be cut in parallel is just an example of misplaced medical egalitarianism.
He then goes on to explain how the present system of tax deductions and credits encourage too much spending on health care.
Like virtually every economist I know, I believe the right approach to limiting health spending is by reforming the tax rules. But if that is not going to happen, let's not destroy the high quality of the best of American health care by government rationing and misplaced egalitarianism.

Monday, August 17, 2009

Railcar loadings

Railcar loadings, the amount of traffic being carried on the nation's railroads, are a key economic indicator, one not generated by the government. Data can be found here.

Sunday, August 16, 2009

Chapman on heath care

From Steve Chapman:
In their 2006 book, "The Business of Health," economists Robert L. Ohsfeldt and John E. Schneider set out to determine where the U.S. would rank in life span among developed nations if homicides and accidents are factored out. Their answer? First place.
In Britain, by contrast, having guaranteed access to care doesn't mean you'll actually get it. Twenty percent of British cancer patients who might be cured become incurable while awaiting the treatment they need.

Friday, August 14, 2009


A column by Jerry Bowyer at NRO introduced me to a new set of labor statistics, the JOLTS or Jobs Openings and Labor Turnover Survey. The hire rate has been declining for several years. In July of 2008 it slipped below 3.5, and the latest report, for June 2009, it has slipped below 2009. Business is reluctant to hire. Bowyer argues that it is because business is scared of the tax burden of hiring--any fires increase unemployment insurance they must pay.
Obama has made them scared. Everywhere I go I hear the same story. Business owners know the little details that academics and pundits don’t, and they know what not to do. They know, for example, that payroll taxes are not only scheduled to rise, but already have risen. And they know all too well that government-mandated unemployment compensation is funded by employers through an unemployment-compensation payroll tax. As a result, they know not to hire.
A problem with that explanation is that it does not explain the drop in the hire rate that predates the election of Barack Obama.

The Obama administration has done at least a respectable job, and maybe much better than merely respectable, on the demand side in trying to end the recession. They do not seem to see need to do anything on the supply side, which does create an interesting test for economics.

Thursday, August 13, 2009

The incredible Mrs Palin

Since her resignation as governor of Alaska, private citizen Palin has not been writing articles for important newspapers or news magazines. She has not gotten a radio or TV show. She has not even set up her own website or blog, or joined an existing website or blog. Instead, she has been writing things on her Facebook Notes. And these, incredibly, have kept her views in the news, sometimes to the extent that they overshadow the news coming from the White House.

If we had a press that was not so politicized (which reporter broke the story that John Edwards, the Democratic VP candidate in 2004, had an affair and fathered a child?), it would be investigating some intriguing questions. For example, why did Mrs Palin decide to use Facebook as her way of communicating her views? If at the time of her announcement of resignation from the governorship, you had asked people if relying on Facebook as the principal interface with the public was a sound idea, I am quite confident that most of them would have thought that a crazy idea. Yet she is doing it and doing it effectively. Did she see something that almost everyone else missed? Of did she stumble on this solution by accident? What are the pros and cons of doing what she is doing? Is this something other politicians should think of adopting, or is it something that will only work for unusual cases such as Mrs. Palin? There are fascinating questions here but I do not expect to see them answered in the mainstream press.

There is another set of questions that is also interesting. Most mainstream pundits said after her resignation that she was finished politically. However, people who are politically dead do not get much attention, even when the clamor for it. (Consider Rod Blagojevich.) So if Palin really is politically dead, why the fascination with her? And it is not just her fan base that is interested--the Left is obsessed with her. The left blogosphere exploded with articles when she posted her "death panels" comments on Facebook. Why? People who spend the time to read these posts and make comments sometimes write things like, "Why does anyone care what she says?", and do not recognize that their very act of reading and commenting indicates that they care about what she says. Some of her fans say that the Palin-obsession of the Left indicates that they fear her. Perhaps, though any fear is at a subconscious level. I do not expect to see anything very perceptive from the mainstream press on these issues either.

Update: A related post with some interesting comments.

Update 2: It is only a month late, but Politico notices that private citizen Palin is a Facebook phenom, and it is the most read post of the day. Maybe there is truth in this American Spectator piece.

What will stop the recession?

A few days ago Carpe Diem had a post on two views of what is bringing us out of recession. One view said it was the self-stabilizing nature of markets aided by massive Federal Reserve action, the other argued big government, especially automatic fiscal stabilizers. One of the weaknesses of macroeconomics is that it is so hard to test different theories.

I could not resist the temptation to add a couple comments, but forgot that the word "data" is plural.

Sunday, August 9, 2009

Controlling invasive species

Australia has a problem with an invasive species, the camel. There are, according to an AP article, one million of them in Australia and their population doubles every nine years. The solution may be to shoot them from helicopters, which is how wolves are controlled in Alaska. Some people have suggested birth controlling them, which may be how feral horses will be controlled in the U.S. Is there any problem for which birth control is not the solution for some people?

Wednesday, August 5, 2009

Cash for clunkers

The Cash for Clunkers program that ran out of money after just a few days in operation is an interesting program from many perspectives. It is firmly in the tradition of some of the New Deal Programs--it immediately brings to mind the agricultural program that paid farmers to kill livestock. It seems to have a considerable amount of political appeal because it seems to be effective.

I have not read economists on the program, but I am confident most of them, other than some of the extreme partisans, would give it thumbs down. Economists have certain criteria by which they evaluate programs. One of them is equity or fairness. Who does the program benefit? The problem that this program has from an equity point of view is that it seems largely arbitrary. It is as if the government held a lottery and gave random people several thousand dollars. To qualify, one must have an car that has low value. Lots of lower and middle class families have those, often as a second or third or fourth car. I do not know enough about the rich to know if they tend to have old clunkers. Then one must be willing and able to buy a new car. For some of the poor, that may not be an option--they will not be able to make the payments. As time goes one, someone will figure out if this program subsidized the rich, the poor, or the middle. My guess is that it was a subsidy that went largely to the middle--or to the dealers, who were able to charge higher prices because of the program.

A second criteria is efficiency, which asks the question of whether the program increases value. Here the program is clearly a disaster because it destroys things that have value. The cars traded in with the program must be destroyed, as must their parts. The program is taking a lot of cars that are worth a couple thousand dollars each and converting them into scrap worth a few hundred dollars each. This brings up a secondary equity point. For many of the poor, the purchase of used cars is their best option in getting vehicles. This program will tend to raise the price of older used cars because it reduces their supply. The poor will pay more, and most economists believe that programs that hurt the poor should be condemned on equity grounds.

However, are these bad effects worth enduring for the good of stimulating the economy? We can see that sales of autos have greatly increased as a result of the program--so much so that the program ran out of money after just a few days in operation. A key question here is to what extent were those sales new sales, sales that would not have taken place without the program, and to what extent were those sales simple shifted in time. If you wanted to buy a new car and had a car that qualified as a clunker, you would have had a strong incentive to wait until the program was in force. Or if you were planning to buy a new car sometime in the future, you would have had a strong incentive to move the purchase forward in time to take advantage of the several thousand dollar grant. It is not clear that the program did more than shift sales in time, and if that was its primary effect, it was meaningful stimulus.

Addendum: People find ways to game the system, another example of people responding to incentives.

Update: Econbrowser had a post on the program with many comments.

Tuesday, August 4, 2009

Self selection

An interesting look at self selection and group think from a Psychology Today blog

Monday, August 3, 2009

Birthers and Truthers

From David Kuhn at Real Clear Politics:

Fully 35 percent of Democrats believe George W. Bush had advance knowledge of the 9/11 terrorist attacks. Fully 28 percent of Republicans believe Barack Obama wasn't born in the United States.

Meet the fanatical third.

A few years ago, an Emory psychologist scanned the brains of self-described partisans. Partisans were able to notice the hypocritical statements of the opposing candidate but not the inconsistencies of their preferred candidate.