Category Archives: links to my essays

Judging the Health Care Olympics

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Avik Roy writes,

What’s just as interesting is that Japan, the country that tops the overall life expectancy tables, finished in the middle of the pack on cancer survival.

He finds, as have others (John Goodman comes to mind), that the five-year cancer survival rates tend to be higher in the U.S. than in other countries. The one issue I would raise with this is that survival is measured from the point of diagnosis, so that if we diagnose cancer sooner (or diagnose more non-lethal cancers), then we would come out ahead on that measure.

Roy continues,

A few years back, Robert Ohsfeldt of Texas A&M and John Schneider of the University of Iowa asked the obvious question: what happens if you remove deaths from fatal injuries from the life expectancy tables? Among the 29 members of the OECD, the U.S. vaults from 19th place to…you guessed it…first. Japan, on the same adjustment, drops from first to ninth.

I think this study offers more reason to believe that the U.S. is really number 1 when it comes to health care outcomes. Still, it may not show that the U.S. is number 1 in terms of cost-effectiveness of health care. My guess is that comparing the additional amount that we spend on health care to the additional longevity we obtain would yield a very large cost per year of life saved.

I have long argued against using longevity statistics to judge what I once called the international health care Olympics. As I pointed out in that essay, it would lead policymakers to make some really perverse choices. But even if we are number 1 in terms of medically-treatable life expectancy, that is no reason to be complacent that our system is cost effective.

College: Who is the Consumer?

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Mike Gibson has a piece on the bundle that is college education.

Taken together this is like an awful cable TV package. To get HBO, you also need to pay high prices for all those unwatchable stations like the Hallmark Channel. The future of higher education will involve unbundling this package and offering cheaper, higher quality substitutes.

Many of us have said that there is some potential to unbundle college. Gibson points to Reid Hoffman’s recent piece on separating out the credential.

Ten years ago, I wrote,

A generation from now, the most successful colleges may be the ones that provide the best aesthetics, while outsourcing the actual function of education.

It may be a mistake to make forecasts about the economics of college based on what we presume that students want, or even based on what we presume that parents want. Suppose that the most influential consumers of college are government and wealthy donors. If those consumers want bundling, then they will get bundling.

Consider the possibility that the biggest implication of Average is Over is the growth of toadyism. Be careful about predicting the evolution of goods and services based on consumer sovereignty. Instead, make your predictions on the basis of what will help in pleasing the very rich and the politically powerful.

Gotcha!

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Greg Mankiw (among others) points to new NBER working papers by Casey Mulligan that point out that marginal tax rates go up under Obamacare. I have not read the papers, but I assume that he counts as an increase in the marginal tax rate the fact that you lose out on subsidies as your incomes goes up. That is legitimate economic analysis, but try to do satisfy the following:

1. Use “means testing” in order to provide a significant benefit that is aimed at the poor.

2. Keep the marginal tax rate low.

3. Keep the budget cost low.

Those of us on the right tend to argue separately for all three. But collectively, they are not so easy to satisfy. (My undergraduate economics professor, Bernie Saffran, pointed this out, and I have not forgotten it.)

If you want to offer a means-tested benefit at low cost, then you have to scale-back the benefit rapidly as income rises, meaning a high marginal tax rate.

If you want to keep the marginal tax rate low and and the budget cost low, then you cannot offer a sizable benefit to the poor. So you can’t do much in terms of means-testing.

If you want to provide a significant benefit to the poor with a low marginal tax rate, then you have to phase the benefit out very slowly as incomes rise. So the budget cost is high.

If we want to, we can play “gotcha!” with any proposal that is aimed at helping people who are poor. It is bound to fail (1), (2), or (3). But how can we be constructive?

My solution was offered in the essay Bleeding-Heart Libertarianism. The idea was to offer a significant benefit with a low marginal tax rate. To hold down the budget cost, I shift away from in-kind benefits (such as food stamps or Medicaid) toward a cash benefit.

That essay is worth re-reading.

Wit and Wisdom from Me?

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Not really. Just another essay for everyone to ignore on housing finance reform.

If we want asset accumulation, then it is better to offer subsidized savings plans to help home buyers reach a 10 percent down payment threshold than it is to offer subsidized mortgages with down payments of less than 10 percent. If we want asset accumulation, we should make sure that there is no government guarantee or support of any kind for loans with negative amortization (including “teaser adjustable-rate mortgages”), second mortgages, home equity loans or cash-out refinances.

I’m afraid that the fix is in on housing finance reform. Wall Street will get what it wants. The housing lobby will get what it wants. I should just let it go and move on.

America 3.0

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James C. Bennett and Michael J. Lotus write,

As the 2.0 state fails, we are seeing increasing awareness, urgency, and activism in response to a deepening crisis. The emerging America 3.0 will reverse several key characteristics of the 2.0 state: decentralization versus centralization; diversity and voluntarism rather than compulsion and uniformity; emergent solutions from markets and voluntary networks rather than top-down, elite-driven commands. Strong opposition to the rise of America 3.0 is inevitable, including heavy-handed, abusive, and authoritarian attempts to prop up the existing order. But this “doubling down” approach is doomed. It is incompatible with both the emerging technology and the underlying cultural framework that will predominate in America 3.0.

That is from an essay that extracts from their book. I also have a review of their book. I write,

Bennett and Lotus argue that reformed government in America 3.0 would be strong but localized. They believe that the most unworkable aspect of the American welfare state is its scale, covering a population of three hundred million.

Macro-prudential = Micro Management

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So says John Cochrane.

This is not traditional regulation—stable, predictable rules that financial institutions live by to reduce the chance and severity of financial crises. It is active, discretionary micromanagement of the whole financial system. A firm’s managers may follow all the rules but still be told how to conduct their business, whenever the Fed thinks the firm’s customers are contributing to booms or busts the Fed disapproves of.

Echoing what I wrote.

Politicians want to make credit allocation decisions. Whatever its nominal purpose, bank regulation is used to enable politicians to undertake credit allocation.

Housing Finance Reform

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I collect some of my thoughts in this essay.

Who will win the battle to get the most favorable subsidies and regulations? At this point, all signs point to victory by two of the biggest culprits in the mortgage crisis — the mortgage bankers (firms that originate loans to distribute, not to hold) and the Wall Street investment banks. Both depend on securitization if they are to participate in the mortgage lending process. However, securitization has only been able to compete with traditional bank lending when securities are backed by guarantees from the taxpayers and when bank capital requirements punish banks that hold their own loans.

The Newspaper Business

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The newspaper business is going to die within the next twenty years. Newspaper publishing will continue, but only as a philanthropic venture.

That was me, writing in 2002.

“We’re in a post-profit era for newspapers,” Mutter says, noting the not-entirely-economic reasons behind recent rich guy purchases of the Globe and the San Diego Union-Tribune, not to mention the Koch brothers’ interest in the L.A. Times.

That is Lydia DiPillis, writing on August 5 of this year. She claims, however, that the Washington Post is not a charity case, even though she uses the term “money pit” to describe its current business condition.

The Progressive People’s Romance

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In this essay, I review a book by Internet-savvy political consultant Nicco Mele.

Mele combines a sophisticated understanding of what he calls “radical connectivity” and its applications with what strikes me as a romantic view of history and politics.

Mele is a young progressive who placed great hope in phenomena like the Obama Presidential campaign and the Arab Spring. In the essay, I try to point out how his perspective might change with more awareness of important libertarian concepts, notably public choice and spontaneous order.