Wednesday, March 28, 2012

Who do you agree with?

Here is a part of a Facebook conversation I have been having with some friends about ObamaCare. Names have been changed (other than mine) to protect the identities of people who say such silly things.

Hank: "Adam, for starters it's not like the decision for healthcare is going to be "purchase it or die" or even "purchase it or we'll throw you in prison", it's "purchase it or incur some sort of tax penalty". Not much different than "don't smoke or we'll make you pay an extra $1.70 per pack". Second, you can argue slippery slopes going both directions. The direction towards pure capitalism is just as messy as a dictatorship. In fact capitalism cannot exist without some form of minimal government, most notably due to lack of property right enforcement, among other things. Even John Locke admitted that much. As far as health care is concerned, it is an inherently different good from most things we consume. We're talking about insurance, which is a hedge against some future possible bad outcome. This is why its provision by government makes more sense relative to other goods. Because of this the argument for or against a mandate should really be centered around risk-pooling, which is also key to why the free market is such a poor provider of health insurance: people are pretty bad at properly gauging risk. Obviously the burden of the mandate is going to fall on the healthy and/or young who have a lower probability of needing insurance. In addition to their probable miscalculation of their need for insurance, the lack of their involvement in the market for health insurance is indirectly a large contributor to the rise in insurance premiums. Like Bob said Obamacare isn't perfect, some form of government intervention is likely to raise welfare, and there's good reason to believe we'll improve upon this bill over time."

Me: "Hank, I totally agree. It is a tax. But Obama said it wasn't. And now he has to live with the consequences. Hopefully his mandate gets shot down, and he can go back to the drawing board, call it what it is, and see if it passes. Words matter, and Obama tried to use semantics to implement something that he really wanted and a lot of people are lukewarm about at best. So if the wants to go back and write a new law that involves taxing everybody to pay for something, a la medicare, then let him do so and try to get it passed. But this idea that you or anyone else can casually say its just a tax goes against everything the solicitor general and the Obama administration have been arguing. They have vehemently denied that it is a tax.

Also, if health insurances is such a hedge, as you claim, then why does it cover things like birth control and physicals? Health insurance has long ceased to be insurance, and has become more of a system of prepayment for things you know you are going to use. I am all about real health insurance for truly insuring catastrophic, unpredictable things like cancer, heart attacks, etc. Insuring just those things would make it much cheaper, because most people would probably want to buy something that was truly going to protect them from disaster, plus we wouldn't be paying premiums to insurers who then just turn around and immediately give it to doctors as soon as you go see him/her for that bunion on your foot. If you want more preventative routine care then subsidize it like we do public transportation or schools. But don't hide behind calling it "insurance". That's weak.

And as far as slippery slopes go, I agree they work in both directions. But I challenge you to find a country/civilization that has ever failed from too much freedom. I can name plenty that have gone down the slope in the other direction. That being said, I will repeat that I would much rather take my chances with anarchy than totalitarian rule. We know how the latter ends. You make the claim that pure capitalism is just as messy as dictatorship, but where is your evidence? Besides, I was never making the claim that we should have no government, so you are attacking a straw man. I simply said I would prefer anarchy to totalitarian rule if those were my choices.

I am not even against a health insurance mandate per se. I can see how it would fix some problems. But I am also not so naive or shortsighted to realize that if you give the government an inch they take a mile. Every democracy that has ever been formed has failed, and none of them because the people were too free. Books and movies are made about what happens when governments take over, not what happens when governments leave people alone. That story is not interesting, probably because nothing would happen.

It seems to me that the people who support the mandate only see the mandate, some small insignificant thing not worth worrying about. But its not. Its a big freaking deal. That's why the supreme court is giving it 6 hours of deliberation. I do not want to live in a world where I have to rely on the good graces of the govt to decide what I must buy, because frankly I don't believe we can always count on good (and I use that word loosely) people being in government."

Tuesday, March 20, 2012

States are corrupt so give more power to the Feds? Spare me...

http://www.nytimes.com/2012/03/20/opinion/the-states-get-a-poor-report-card.html?hp

The most recent editorial in the NY Times (link above) argues that a new report from the Center for Public Integrity showing that state governments are corrupt is evidence that they cannot be trusted with Federal programs like Medicaid, food stamps, and housing assistance. Of course this is a very naive and simple analysis (it is the NY Times editorial board after all), so I will try to probe a bit deeper here.

The main complaint from the report seems to be that state governments are not scrutinized by both media and citizens like the federal government. But might that be because the media and citizens don't really think that state governments matter anymore? Scrutiny is endogenous to power, i.e. if a government is perceived as having a lot of power over people, we will pay attention to their actions more. In this day and age of the federal government controlling just about everything, why would the media or citizens waste resources covering local governments? If there is a little more corruption on the local level so be it. We have to use our resources on watching the big fish. But if the states were given the reins to programs currently run by the feds, wouldn't the people who watch those federal programs continue to do so, just at the state level? The NY Times seems to think not. I guess they think those reporters and watch dog groups would just pat themselves on the back for a job well done and retire.

But more importantly, when states are given control of programs people can vote with their feet if they do not like what is being done. The article cites New Jersey as the state with the best grade. Could this be because people were voting with their feet and leaving New Jersey in droves? New Jersey had no choice but to clean up their act. If they didn't they would continue to lose people and their tax base. So over the last 3 year, NJ cleaned up their government and became the least corrupt state in an attempt to stave off their population decline. Thus if states were given the power to run the anti-poverty programs above and performed poorly and unethically, people would leave those states and move to others that performed well and did not waste taxpayer dollars. States would have to compete with each other for residents. When the federal government controls everything, people can't vote with their feet (unless they want to become a citizen of another country, but that has extremely high costs and is for the most part impractical).

I truly cannot understand why someone would think that putting all of the power into the hands of a relatively small group of people e.g. the federal government would lead to less corruption than spreading that power over 50 state governments. Who are these benevolent federal officials that run things so honorably? What are their incentives to do so? The goodness in their hearts? Let's not forget that nearly all federal politicians were state politicians at some point. Perhaps the NY Times thinks that they have a "born again" moment before moving to Washington.

It is time to get some real competition in this country and give more power to the states, not less.

Monday, March 12, 2012

Interesting article about the rising costs of education

http://www.nytimes.com/2012/03/11/business/college-costs-are-rising-amid-a-prestige-chase.html?src=tp

One of the more interesting quotes:

"Researchers have responded as expected to these incentives. But the additional papers they’ve written have added little value. The economist Philip Cook and I found, for example, that in the first five years after publication, many fewer than half of all papers in the two most selective economics journals had ever been cited by other scholars. "

Since being in graduate school I have often thought about exactly this point. The obsession with research has lead to more and more papers, most of which are uninteresting, at least in my opinion. But the marginal researcher is compensated much better than the great instructor, so academics focus most of their energy on research, despite the fact that many of them are not very good at it.

I think there is a benefit to having masters only programs for economics and other fields, where the students can learn all the tools and see what is going on at the frontier without being required to contribute to it. Especially since most of the contributions that I hear about leave me thinking "Who cares?".

Sunday, March 4, 2012

Great video

Great video from John Stossell about what happens when the government becomes involved in everything we do. Shutting down lemonade stands? Not letting people build on their own property? When will it end? And how long until it affects you?

Illegal Everything Part 1