Wednesday, October 16, 2013

The importance of measurement

Exactly how you measure a parameter is both important and difficult:
Well, one of the reasons some Americans feel they’re being taxed to death is that if you add up our taxes, which are low compared to other modern countries, and then you add in private expenditures for things the tax system pays for in other countries — a lot of our health care costs, higher education costs, admissions and fees and tickets and licenses for a lot of things — lo and behold, we end up being a relatively high-tax country. But it depends on how you analyze the data.

And let me give you one killer figure: We spend so much money on our health care in this country — or as I prefer to think of it, sick care in this country — that for every dollar that the other 33 modern economies spend for universal coverage, we spend $2.64. And this is done using something called “purchasing parity dollars,” so they’re truly comparable. So we spend $2.64 per person and still have almost 50 million people with no coverage and 30 million with limited coverage, and these other countries spend far less with universal coverage.

This is definitely a different perspective than I have had on this issue before.  In a way I have been trapped in the paradigm of public versus private provision (and so a small public sector seems to suggest a low tax country to me).  But a basket of goods and services can be difficult to break into such pieces. 

An excellent example of this problem is the extraordinary costs of health care in the United States.  Finding ways to properly tackle the problem of medical expenses is difficult, frustrating, and has some really nasty trade-offs. Trying to solve it is important. 

But in the meantime, pushing economic growth for the lower and middle classes is a good second best way to proceed forward while we seek solutions to these fundamental issues.   

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