Wednesday, September 30, 2009

The rise in health insurance costs will slow down

A point that's been frustrating me.
Everyone says that health insurance costs are spinning out of control, and we need to slow down how fast they're increasing.
The problem with this logic, as I and others have pointed out, is that the increase in medical costs is due to improved healthcare technology. Chemotherapy is expensive, dying is cheap. As we can treat more things, healthcare costs go up.
Healthcare costs going up is therefore indicative of medical progress - a good thing. If healthcare costs more, we're getting more.
We can quite easily lower costs by just including less things. If you were willing to lock yourself into a 2009 standard of care, your costs of health insurance would DECREASE over time - getting a late 80s/early 90s standard of care costs about 1/3 what it did back then, inflation adjusted, if i recall correctly.
Thus, increasing healthcare costs can stop pretty naturally - not all insurance plans need to include all developments in healthcare. In 10 years, if I am willing to pay 25,000 a year, I get the 2020 version of healthcare, if i'm willing to pay 20,000, i get the 2015 version, if I pay 8,000 I get teh 2009 version, etc. This diversity in plans hasnt really come out yet because so many plans are employer provided, but that can change.
Before somebody raises an ideological issue of your ability to pay influencing your quality of healthcare, consider two points:
1) healthcare costs a lot to develop, and it must be paid for or it will not be developed. it is a good with positive externalities (as in, it's a good thing that everyone wants the best they can get of and you want everyone else to have more of), but it is not a "right" in the conventional sense, because unlike life, liberty and property, it is not something you have that is taken away - healthcare is something you need to be provided with.
2) Current proposals plan to deal with this by capping the quality of healthcare that can be provided to everyone (either explicitly, by limiting what's covered for anyone - that's "rationing", or implicitly, by forcing drug prices down and making it less appealing for healthcare companies to develop new care, so they develop less of it). But healthcare is not something you want equality on, it's something you want maximality with some baseline for everyone. If you have 10 people receiving level A of healthcare, that is worse than having 9 of those people receive level A of healthcare and the 10th receiving level A+B. By far the most efficient way of ensuring maximality with a baseline is to allow people to pay for the level of insurance they can afford (probably with a mandate for some low level of health insurance, perhaps vouchered by the government). Thus, allocation based on ability to pay results in the societal optimum - even poor people should rationally prefer it that way. You're not rewarding people for being rich, you're doing the best you can for society which happens to correlate with rich people getting better healthcare.

47% of Americans pay no income tax

Given that medicare and social security taxes are intended to be a form of savings, not government funding, that means that half of America functionally does not pay for any of the benefits conferred upon them by government (national security, welfare/social safety nets, law and judicial rule, etc). Many of them actually receive payment for being able to partake in the benefits conferred by government.
I understand the need for progressivity, but that's close to confiscatory.

A contrarian case on China

Big drop in heart attacks w smoking bans

California Budget

A bipartisan tax commission has found that California's high tax rates have driven businesses and productive high-earners out of the state and into states with lower tax rates. The recommendation? In order to decrease California's record budget deficits, taxes on the rich need to drop and the tax base needs to widen away from simply taxing the rich.

Counterpoint on Tort Reform

From a close friend, Mike:
"I understand introducing tort reform for medical malpractice is an important issue for you (hell me too, my [relative hates] the high premiums for practicing [specialty])

Let me give you a little background, however, on how exactly doctors are held liable / what the damages can be

Most doctors are sued under common law negligence - to prove negligence you need to show four things the doctor (2) breached his (1) duty which (3) caused (4) damage to the patient and show all those elements by a preponderance of the evidence. 

In terms of element 2, the doctor only breaches his duty if he violates the custom of the profession, not if a bad result occurs.  Obviously, it is going to seem very likely that something did go wrong if a poor result occurs but that is hindsight bias for you.  So, honestly, as long as accepted procedure is followed, doctors cannot be held liable.  Further, the injury must have been caused by the doctor (how do we know it wasn't some infection or some other injury?).  If a patient comes back three years after a surgery claiming malpractice, she is going to be hard pressed to prove that something else didn't happen in the meantime that is a more direct result of her injury.  Finally, I know we see huge awards by jury trials, but punitive damages are rarely given out except in cases of gross and wanton negligence.  I doubt that many malpractice cases are results of "gross" negligence.  More likely, something went wrong and people want answers.  Damages are limited to lost wages, pain and suffering (obviously, this could be very high, but they have to prove the pain and suffering).  While lost wages seem like they can aggregate quickly, if an accountant loses a finger due to negligence of a doctor, he can still function at his job and he hasn't really lost the ability to be an accountant (his damages would likely be low). 

So, in reality, malpractice is not really a ticket to fortune for the patients, but a way to "make them whole" which is exactly the goal of tort law.  Tort law is concerned about corrective justice, and there really is no other way than money to make up for horrific injuries and accidents.  There are some states which cap the damages award.  But if I am a skilled laborer and I lose the use of my arm and still have many years left in my working life, that cap really won't do me much good. 

Perhaps some other ideas for the legislature to consider are to eliminate jury trials for malpractice claims.  Juries are always going to be more sympathetic to the victim than the well educated doctor and deep pockets of the insurance company.  A judge with long experience will be able to weed out the phony from the legitimate claims and be less biased.  Another idea can be to educate doctors more thoroughly on personal injury law to make them more aware of what their potential liabilities are.  Finally, the local legislatures could create a specialized court (like traffic court) to provide a forum where these claims can be heard, saving some time and expense that would be wasted during a general trial that needs to educate the judge and doctor on extremely complicated medical knowledge. 

Or, the legislature could just make it more difficult for doctors to breach their duty - that would create a "barrier to entry" so many claims would be barred from being heard.  Remember, negligence is common judge made law - the legislature can preempt at any time. 

Anyway, long message but I hope this helps"
Interesting point. My problem with tort reform is less the damages and more the problems you mention with juries - juries overwhelmingly tend to decide based on patient outcome, not doctor actions. I agree with you fully on specialized health courts; whether or not they should involve a jury or some outside party is questionable, given the potential for inconsistencies between judges. Punitive damages are also a problem, to some degree, for  the same reason, so punitive damage payout caps aren't necessarily a bad idea.
Your point on non-punitive payout caps is an interesting one that I hadn't thought about. The general goal of tort reform is to let a doctor avoid defensive medicine, so I suppose you'd have to structure it all in a way that still lets the patient "be whole" in the case of an actual doctor error while still letting doctors practice the best way they know how, instead of the most likely-to-avoid-prosecution way they know how. Easier said than done.

Tuesday, September 29, 2009

More legislative foulplay

In defense of the drinking age

Neoconservative Foreign Policy

Another opinion piece.
The biggest problem I have with it is not an ideological one, it's an executional one. Where do we choose to get involved, or not? How do we do it? Iraq and Afghanistan have cost trillions of dollars and thousands of lives, and Afghanistan will require a great deal more for success.
So yes, I do think the US needs to stand up for itself and for human rights, and no, I don't think negotiation with Iran or North Korea can work unless there's a major threat of consequences, which leftist foreign policy seems to ignore. But far right, interventionist foreign policy has quite clearly demonstrated its troubles - it reduces international support for our operations, spurs opposition and logistically fails.
So how can we intervene without hurting civilians in the country, and without a protracted invasion? The US invasions of Afghanistan and Iraq spared civilians and remain quite popular in those countries, but have been logistical nightmares back home (By my estimate, every single person in the US's annual salary would be 1.5%-2% higher if the wars hadn't taken place and instead had come in the form of tax cuts... and that doesn't even count any supply-side economic impact). The Israeli operation in Gaza avoided a protracted invasion and stifled the rocket threat, but seemed to spawn civilian and international resentment that may undermine the long-term prospects for peace.
Short of fomenting and arming a civilian revolution against governments, or assassinating leaders, both of which are against international law (worth less than it used to be because of a mockery of a UN, but it still matters in both an IR and a moral standpoint), how can an injust and destabilizing government get upended without crushing civilians in the country? Because it seems to me that right-wing foreign policy tends to say "it's better to stop that government, and civilian impact is unavoidable but do your best to stop it" and left-wing foreign policy says "civilian impact is unacceptable, and if that means not stopping an injust or dangerous government, so be it". Both of those options suck. In the long term, it probably splits down the middle (in Cuba, the left-wing approach probably was better, while in Sudan the right-wing approach would almost certainly have been an improvement. The right wing approach has ensured Israel's continued survival but if peace is possible, elements of the left-wing may need to enter to provide it).
What else is there?

moving the goalposts

An opinion piece on why France wants to stop using GDP as a measure of growth

The best part of healthcare reform

The best part of healthcare reform is almost certainly the set of proposals for tort reform. Medical malpractice lawsuits cost the nation on the order of $200 Billion per year in defensive testing.
However, the Democrats are excluding tort reform from proposals. The most popular hypothesis for why is special interest lobbying-  in this case, the trial lawyers association of America.

Friday, September 25, 2009

Creative Accounting

Has apparently taken over the legal system

Israeli Defense Minister Responds the UN

It becomes increasingly hard to take the UN seriously. Say what you want about issues of procedure with the IDF in the Gaza invasion, the aim of the military was not to hurt civilians (seriously... who else text messages everyone to get them to leave before you strike?).
Syria, Burma, Sudan, Venezuela, Libya, Iran, Iraq pre-invasion, Afghanistan pre-invasion, North Korea, Sri Lanka, Zimbabwe, Rwanda, Somalia, Kenya, Congo, China, Vietnam and plenty of other countries all have governments that actively SEEK to violate the human rights of individuals.
Meanwhile, Libya CHAIRED the UN human rights council.  The only countries to vote against Libya's chairmanship were the US, Canada and Guatemala. Most of Western Europe abstained rather than take on the challenge. Vietnam, Ghana, Egypt, Indonesia, Pakistan, Qatar, Saudi Arabia, Russia, Cuba, Nicaragua and China have spots on it; the US does not, anymore, because they're the only country that doesn't bargain for votes. New Zealand voluntarily removed themselves from the council to get us back on starting in a few years.
People complain all the time that we don't consider the UN response in asserting US influence, which makes us unpopular... I'm not sure that's entirely warranted, anymore, since pluralism has stripped the UN of any push

Worth of an Apology

Consumers and victims prefer apologies to cash compensation? Interesting.

An idea to prevent R+D free-riding

An understanding of monopsony theory leads one to a simple conclusion: the US is financing the national healthcare systems of the rest of the developed world.
Pharma and Medtech companies engage in very risky research because of the prospect of gains in success. Countries with national healthcare offer no prospect of gains because even if the pharma company finds a new drug, they will have already sunk all R+D costs into it and at that point the national healthcare plan, which has tremendous negotiating power because it represents every consumer in the country, can negotiate a low price that the pharma company will still have a reason to accept (i.e., it's better than nothing).
Thus, pharma companies won't develop healthcare solutions.
The US has a competitive private market for healthcare, so pharma companies don't have to accept reduced drug prices because the health insurance companies have less leverage. The US is a huge market, so pharmaceutical companies have an incentive to develop new healthcare for the US. Once they've invented them for the US already, they have an incentive to sell them to foreign countries.
In this sense, foreign national healthcare systems are free-riding off of US innovation... they don't pay for any of it, but they get the results.
An interesting idea would be a mandate that pharmaceuticals made in the US/owned by US companies/developed for the US (some metric like that) would not be allowed to be sold to the national healthcare plans of other *developed* countries for a price less than the average price at which it's sold to Medicare and US private health insurers.
This would substantially lower the cost of healthcare in the US, and stop US subsidy of foreign healthcare services. You wouldn't want to do this in impoverished countries, who can barely afford anything anyway, but to healthcare services in most of Europe, it'd be a viable option.

Poverty and Temptation

Mullainathan was a professor of mine; didn't know he moved to MIT (if he did, the facts could be wrong)
Either way, it's a much better way of explaining a lot of behavior.

Fascinating study of health insurance

One thing he neglects to mention, in speaking of a "death spiral", is that if the consequences of ignoring the mandate for health insurance are low, then people may choose to simply pay the fines, knowing that if they ever develop a condition, they can enroll in insurance with no pre-existing conditions clause. It's something the government needs to watch out for - the fines need to be the same size as a low-cost insurance plan.

A market for... infected saliva?

NBER working paper on inequality


The rise in American inequality has been exaggerated both in magnitude and timing. Commentators lament the large gap between the growth rates of real median household income and of private sector productivity. This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure. Further, the timing of the rise of inequality is often misunderstood. By some measures inequality stopped growing after 2000 and by others inequality has not grown since 1993. This cessation of inequality's secular rise in 2000 is evident from the growth of Census mean vs. median income, and in the income share of the top one percent of the income distribution. The income share of the 91st to 95th percentile has not increased since 1983, and the income ratio of the 90th to 10th percentile has barely increased since 1986. Further, despite a transient decline in labor's income share in 2000-06, by mid-2009 labor's share had returned virtually to the same value as in 1983, 1991, and 2001.

Recent contributions in the inequality literature have raised questions about previous research on skill-biased technical change and the managerial power of CEOs. Directly supporting our theme of prior exaggeration of the rise of inequality is new research showing that price indexes for the poor rise more slowly than for the rich, causing most empirical measures of inequality to overstate the growth of real income of the rich vs. the poor. Further, as much as two-thirds of the post-1980 increase in the college wage premium disappears when allowance is made for the faster rise in the cost of living in cities where the college educated congregate and for the lower quality of housing in those cities. A continuing tendency for life expectancy to increase faster among the rich than among the poor reflects the joint impact of education on both economic and health outcomes, some of which are driven by the behavioral choices of the less educated.

Thursday, September 24, 2009

Tort Reform

The single best idea for healthcare reform, which is tort reform (an entirely bipartisan policy), is getting ignored due to political considerations.

Euro Voting

The EU is trying to remove the requirement for popular support for its policies. Ireland is the only country still standing in the way.

Doctors calling it quits

On governments pulling people out of recessions

"To prevent the Minsky moment from becoming a national calamity, part
of his solution (which was shared with other economists) was to have
the Federal Reserve - what he liked to call the "Big Bank" - step into
the breach and act as a lender of last resort to firms under siege. By
throwing lines of liquidity to foundering firms, the Federal Reserve
could break the cycle and stabilize the financial system. It failed to
do so during the Great Depression, when it stood by and let a banking
crisis spiral out of control. This time, under the leadership of Ben
Bernanke - like Minsky, a scholar of the Depression - it took a very
different approach, becoming a lender of last resort to everything
from hedge funds to investment banks to money market funds.

Minsky's other solution, however, was considerably more radical and
less palatable politically. The preferred mainstream tactic for
pulling the economy out of a crisis was - and is - based on the
Keynesian notion of "priming the pump" by sending money that will
employ lots of high-skilled, unionized labor - by building a new
high-speed train line, for example.

Minsky, however, argued for a "bubble-up" approach, sending money to
the poor and unskilled first. The government - or what he liked to
call "Big Government" - should become the "employer of last resort,"
he said, offering a job to anyone who wanted one at a set minimum
wage. It would be paid to workers who would supply child care, clean
streets, and provide services that would give taxpayers a visible
return on their dollars. In being available to everyone, it would be
even more ambitious than the New Deal, sharply reducing the welfare
rolls by guaranteeing a job for anyone who was able to work. Such a
program would not only help the poor and unskilled, he believed, but
would put a floor beneath everyone else's wages too, preventing
salaries of more skilled workers from falling too precipitously, and
sending benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky's points on
financial instability, it's safe to say that even liberal policymakers
are still a long way from thinking about such an expanded role for the
American government. If nothing else, an expensive full-employment
program would veer far too close to socialism for the comfort of
politicians. For his part, Wray thinks that the critics are apt to
misunderstand Minsky. "He saw these ideas as perfectly consistent with
capitalism," says Wray. "They would make capitalism better."

So, my take on it:
Most economists don't support a minimum wage because it drastically increases unemployment. However, given that we have a minimum wage, a system like this could actually work, given 2 conditions. Firstly, welfare would need to be abolished for individuals capable of working who are not fully employed. Secondly, any job provided by the government would have to pay significantly less than the minimum wage, to incentivize people to get off the government payroll. In this situation, the system wouldn't be any more socialist than welfare (a quite reasonable socialist policy, as long as administered in a way that doesn't too heavily incentivize complacency), but would help the unemployed build skills and work experience while getting the taxpayer some return for their buck.
A likely-necessary component would be a clause that those on the government payroll must seriously interview for other jobs regularly - certainly multiple times per month. Indications that the interviews weren't being taken seriously may need to be grounds for ineligibility.

high yield agriculture

Norman Borlaug died recently. Here's to an innovative and courageous man.

A "public option": student lending

A public option was introduced in student lending. It is quickly becoming the only option in student lending.
By the way, public schools were once a "public option", and now it's the only option for all but the wealthy. A huge percentage of people pushing for a public option in healthcare are those most critical of our public school system. It's a wonder they haven't made the leap.
One could say something similar about the post office. For all but high end things (packages), we're stuck with the post office - an overstaffed, inefficient, and possibly overpriced institution if there ever was one.

Bad Allies

Another thing that was pointed out to me recently.
One concern about current foreign policy is the incredibly backwards way in which we're treating our allies.
We have:
Backed out of Polish and Czech Missile Defense, undermining our Polish and Czech allies while appeasing opponents in the Russian government.
Provoked major trade fights with Canada, Mexico and China (an economic ally, whether or not its a political one)
Stalled on trade treaties with Colombia and South Korea
Publicly berated Israel
Excluded Japan from talks with North Korea
Intervened in a constitutional battle in Honduras to assist a president who seemed to be trying to turn himself into a mini-Chavez
Meanwhile, the administration has sought diplomatic relations with Iran, North Korea, Russia, Venezuela and Burma.
As a side note on Iran, Iran has no incentive to compromise with the US at any price less than massive, but every incentive to keep pressing forward with nuclear development. Talking will not dislodge them.

Intergenerational Inequality and Healthcare

Saw a point somewhere the other day that I thought was worth mentioning. Wish I could remember where so I can assign proper credit, but the point still stands.

One of the more interesting components of the mandatory insurance rule is that it creates tremendous intergenerational inequality. Young people who choose not to purchase healthcare now have to purchase it, which means they're subsidizing older, sicker people. At the rate of fiscal irresponsibility that we now face, it's a safe likelihood that current adults are already setting up younger people (our generation) for a major fall - in other words, we're going to have to pay for the excesses of our parents.

It's exceedingly unlikely that a big government program like this is going to be affordable when young people get to the point where they need the healthcare. In other words, young people have to pay for older people when nobody will be paying for them later on.



Destroying Innovation in Medicine

Another well researched op-ed, this time on destroying innovation in Medicine:

Indiana Democrat on Fiscal responsibility

<a href="">An excellent op-ed by Evan Bayh</a>, a Democratic Senator from Indiana, on the importance of fiscal responsibility

Partisan Politics in Massachusetts

<a href="">Partisan

The idea that a legislature can change the rules of succession for
political posts depending on who's in power is a scary, scary one. I,
for one, have no intention of ever voting for the state
representatives who switched their opinions to suit their party (45
Democrats and 13 Republicans in the House, by the way - not quite sure
how many in the Senate, but I intend researching that ASAP - or just
voting against every incumbent in the legislature), and I hope my
other Massachusetts-living friends will follow suit... but I really
hope somebody sues and wins. The Democratic portion of the
legislature, especially, has been deplorably unethical in this.

As a side note, while Patrick has been an awful governor, he only had
two choices in this that were reasonably fair. Pick a Republican or
Moderate to fill the seat, which he was never going to do, or pick a
Kennedy aide, because Kennedy was who the voters chose. At least
that's what he did.

Saturday, September 12, 2009

How can the US remain competitive?

Business Week has an interesting article on high-tech manufacturing

Obama institutes tariffs

Obama approves tariffs against Chinese Tires.

Smoot-Hawley, anyone?

If we've learned anything about economics this century, it's that tariffs to protect jobs don't protect jobs. He again shows that he is far more the politician than the economist.

(protecting labor conditions, protecting the environment, those are different, because you're willing to sacrifice some jobs for those)

Wednesday, September 9, 2009

Principal: Schools don't need more money

A former principal of a high-risk school says that intelligent leadership, not money, is the problem

Many of you are probably wondering...

what that last post was.
It's for personal use. Can't figure out how to make it a private post. I've relocated it, don't worry about it.

And no, if you filled out something, you won't see what I do with it (:

for my benefit:
My Stock Selector

Monday, September 7, 2009

political careerism

--I've mentioned this before, I think, but what if Congressmen and Presidents were forced to put up 10% or 15% of their wealth at the beginning of their term, and commit themselves by saying they only get it back if they accomplish x or y - "I will author healthcare reform legislation and vote for it, and that will be worth half of what i put up. I will fight for gays in the military and gay marriage by authoring this legislation, which is another quarter. I will try to be on the foreign affairs committee, which is the final quarter". If they do those things, then they get the money back.

If done before primaries, it forces politicians to lay out to the public exactly what is important to them. Understanding that putting up 15% of wealth is hard for poor people, you can make a paycheck appropriate to the condition. Poor people will still be able to save for retirement (while caring about the money they put up because its a lot for them), while rich people will care about the money they put up because a paycheck can't replenish what they put up.

--The other idea would be jungle primaries. Instead of all the gerrymandering, each state gets X house reps and 2 senators, and everyone votes for X house reps and 2 senators, and the X house reps and 2 senators receiving the highest number of votes in a state go to the white house. I understand the benefits of the electoral college (too much strength in the hands of the majority constitutes a tyranny over minorities, de Tocqueville style), but gerrymandering leads to an even worse result.

Ideas for education

In addition to school vouchers, I think there are a couple really easy steps to take to improve education in this country.

It may be a civil liberties infraction, so I suppose that it may not work, but something along the lines of disciplining school age children who aren't in school during school hours would work wonders. The only problem is that it sets up a dangerous precedent. If an alternative could be found that would be less dangerous, that would work.

Another idea would allow children to get a driver's license earlier if they get good grades in school. Similarly, maybe you're only allowed to drink alcohol at 21 if you have a HS diploma, otherwise you have to wait til 23.

Thoughts on the so-called lack of progress

This made me think.

The S+P has returned 4.5% annually with dividends over the last 8 years… that’s peak to trough, though, so it's not apples to apples.

In other words, we’re still growing well, and comparing comparable parts of business cycles somewhat reveals that. It doesn’t help that last boom was tech and this one was energy, because the same stocks didn’t do well. It’s not perfect (can’t verify his numbers well)…

But given that peak P/Es were MUCH higher in prior peak than current one (which isn’t the economy, it's sentiment regarding our future growth, which tends to be fickle and rarely correct), we’ve made much more progress than expected.

The other point to be made is that we just fought a tremendously wasteful war and still came out ahead. War arguably stimulates an economy with a shortage of jobs and too much labor, but we certainly weren't in that situation in 2001 and 2002. (I say arguably because it could be the Hayek-style parable of the broken window wastefulness, where everyone "seems" to benefit but it's actually just redistribution from the US taxpayer or future US taxpayer to the people involved in war). The fact that we still grew is impressive, but I suppose it is possible that the fact that the war was financed on debt may make this irrelevant - we haven't paid yet, so it won't have dragged on the economy yet.

Will US Energy Prices be More reasonable?

Unlike 2007, we may have more reasonable energy prices moving forward because of natural gas tech improvement and a “gas glut”. This wont last forever, but itll last for a while. This COULD spur the creation of natural gas cars, which would be good.

It won’t affect oil prices (oil is a global commodity, natural gas is much more regional due to transportation constraints), so gasoline prices would still go way up. But it would make electricity prices much easier, which would significantly help reduce inflation, and it would also improve the state of US exports, because I don’t believe the rest of the world has quite the same natural gas resources we do and it's certainly more expensive elsewhere.

Oil and coal will still go up because of international demand, and foreign natural gas may still increase a lot. But the US may see a lot of benefit in terms of the trade deficit, etc, because of our tremendous resources and the incredible improvements in horizontal gas drilling that have already hit 40% of natural gas wells in the US and have given us such an overabundance of natural gas. This would have benefits on US carbon emissions, too, because natural gas emits less than oil or coal.

For more on natural gas, see here.

A lot of links

Bunch of healthcare, with some random other stuff thrown in

FDIC bailout. Don't know if it'll come, but it's a consideration at this point...

The insidious recalculation of what it means to successfully engage Iran.

Our accounting standards are about to get more European. This means they'll be more principles based, instead of more rules based. It's the difference between "Be home at a reasonable hour" or "Be home by 11 unless you a) get in a car crash, b) need to be a good samaritan, c) need to finish your homework, d)get a flat tire, e) witness a crime, f) call and specifically ask permission". Does anyone really wanna see our executives have even more leeway in their accounting?

At least 50% of the disparity in test scores is based on differences in parents' IQ, rather than wealth disparities. For complicated mathematical reasons expounded in the comments, this actually understates the amount parents' IQ determines children's test scores.

Concerns with an Obama healthcare adviser.

Prosecuting the CIA is foolish

Governments messing with kindergartens. Why I don't want the government regulating healthcare too much.

Strong evidence of insider trading inside investment banks. This needs to be cracked down on.

Some thoughts on challenges with hybrids. Not sure if his analysis is missing something, just skimmed the article quickly.

Obama not learning from Clinton. I feel a little vindicated for saying 6 months ago that I thought Obama's policy goals would cost Democrats power in 2 to 4 years.

Soviet style education not cutting it.

hindrances to reform: primary care doctors are mad

consumer driven care. Again, only skimmed this one.

How LBJ would pass the bill. Tongue in cheek.

Credit card relief, phase one, in effect

worriers die younger cuz they smoke more

Gawande on reforming the health system outside of legislation

Mankiw on trusting government vs competition

We're driving our children to injury! the little league arms race.

Becker on healthcare. Brilliant as usual.

a problem with waxman-markey

Gunning for google. Stupidly, in my view - Tech changes too fast to really have a monopoly for long...

Arrow, the brilliant health economist, points out that costs are going up because technology is getting better, not cuz we're getting less efficient

What's right with afghanistan

Found this interesting. What's going right with our fight in Afghanistan.

Sunday, September 6, 2009

Socialism at work: G20

A key issue of the G20 summit is curbing banker pay.

Banking is a job which very few people are good at, there are massive differences in productivity between the good and the bad, and it's not always clear who will be good and who will be bad moving forward - which lends itself to the "keeping up with the Joneses" effect of bad bankers being overpaid.

I don't think these bad bankers deserve the money they're getting... but regulating a bank's ability to pay its employees is a VERY dangerous thing to do for two reasons. Firstly, it throws out the good with the bad, so good bankers can't be paid (which doesn't seem fair). Secondly and more importantly, a major reason for this recession was that people at banks didn't know what they were doing. Making it less attractive for good bankers to stay in the industry raises the risk that this happens again.

Another classic example of where an unfair situation (inflated banker pay) shouldn't be addressed by government, who can only make it worse.

One interesting alternative that I haven't thought through much but could be promising - if you're going to limit banker pay anyway, it may be better to limit the company to paying its workers an AVERAGE of some number, but leave the individual allocation up to the bank. For every employee, a bank may be able to give out a maximum of an additional $X, without specifying the max any individual can get. A great banker will get paid but everyone else doesn't get inflated. It's the bank version of the NFL salary cap.

Innovation's impact on intelligence gathering

New intelligence software

Just thought this was cool, and an amazing example of innovation at work when incentives line up correctly.

Michigan redistribution

The failure of a widely-touted program in Michigan serves as more evidence that redistribution is risky.


A former government adviser crusades against government profligacy

Saturday, September 5, 2009

Tax Refunds as savings bonds?

I have about 50 updates I want to make (work has been busy!) but I just saw this and thought it should be posted:

Obama proposes steps to facilitate saving

I support parts of the measure - like letting people put the money from time they're on vacation into their 401-k - but giving people tax refunds in the form of savings bonds will only prolong the government spending binge. It WILL mitigate inflation, in the short term, which would be good, but makes the inevitable government spending crash worse by delaying it.