What happens if you have a mortgage?

Jon Chait talks about a new idea from Tea Party Nation:

Tea Party Nation Judson Phillips thinks the franchise should be taken away from renters

Of course, the complexities in trying to operationalize such a plan are, shall we say, staggering.

Higher education and resource allocation

It is a powerful argument to reduce the concerns of your opposition by reframing their views into something that seems absurd.

Dean Dad writes:

Administrators may be the bearers of bad news, and sometimes the people who have to choose among terrible options. But to assume that we’re sitting on piles of money, cackling with glee while exploiting adjuncts and pocketing the savings for ourselves, is just otherworldly. It assumes a context completely out of keeping with anything I can recognize as reality. It’s so far afield that the only truly fitting rebuttal is a sigh.

I think that the issue is not that anybody is sitting on piles of cash. I think that there are two legitimate concerns. One, is the redistribution of resources (which is always going to be a feature of any organization that is not experiencing enough growth for all parties to "win" simultaneously). Two, is the concern about the growth of adminsitrative costs. Some of this growth is beyond the control of the administration (unfunded federal reporting mandates come to mind). But I think that it is a fair position to want to open a dialogue on this issue.

To dismiss these concerns out of hand doesn't seem to be the best way to encourage an open dialogue.

All costs are linked

From Austin Frakt:

It’s convenient to think about health care costs and expenditure organized in two sectors, public and private. But one deceives oneself in thinking they’re independent. A principle problem with control of public health care spending is that public prices can’t deviate too far from private ones. If they do, Medicare beneficiaries will experience access problems, as Medicaid beneficiaries already do.

I think that this is entirely correct. Presuming that the same procedure is being done, it is reasonable to expect that people would prefer to be paid more. When the cost differential is low then it isn't worth putting a lot of effort into trying to attract the higher yield business. But as soon as prices deviate enough, you would expect doctors to compete on non-financial grounds. Speed of access comes immediately to mind.

I still find it odd that the United States socializes the medical care that is the most expensive (end of life care) and not that of inexpensive groups (like 20-something adults). Perhaps that is simply needed due to issues of poverty and ill health in old age. But these sorts of tensions cannot be good.

Tyler Cowen appears to agree:

The differential payment rates across Medicare, Medicaid, and private insurance are becoming unsustainable more quickly than I had anticipated; see for instance the link in #4. Further reforms will be required more quickly than had been anticipated, but it's not obvious how such reforms should proceed. It's hard to either upgrade the Medicaid (and Medicare) rates or to downgrade the private insurance rates. Monitor this one closely, because it is likely to prove the breaking point of our health care status quo, with or without the Obama plan. (This is our version of the ticking time bomb within the eurozone, namely that natural rates of growth split apart a distortion, increasingly, over time.)

I think that these arguments mean that private health care costs will move back into the debate sooner rather than later. Add in the fast growth of health insurance costs and you can immediately see that pressure is going to come from many directions.

Of course, the idea of the Bowles-Simpson Deficit Plan to tax health insurance plans would actually accelerate the tensions here by making private plans even less affordable (which could have a huge impact on the lower middle class).

It's a complicated system with a lot of moving parts. But I think economists are right to worry about these costs diverging as much as they currently are.

A point to ponder

From Worthwhile Canadian Initiative:

Indeed, this is the fatal attraction of socio-biology - it's too easy to come up with untestable explanations for just about anything.

I think that this quote is exactly right. A lot of really interesting stories can be told that are not empirically testable. This approach can lend a veneer of respectability and scientific rigor to what is merely a form of "educated guessing".

Comments on Grants

Professor in Training mentions here recent experience of good comments and yet bring triaged by a granting agency. I think that this type of triaged is at least partially a consequence of the modern funding environment. A lot of people work very hard to submit good ideas and well written grants. As paylines shrink (and the endowments of a lot of foundations shrink due to market turmoil), I suspect that many fundementally sound research proposals will suffer this fate. It no longer needs to be great, it needs to be actively exciting.

Or maybe the real comments are coded. But I think the former suggestion of limited funding has a lot of explanatory power.

"The Instability of Moderation"

Some essential Krugman today. You may not agree that we've entered the Dark Age of macroeconomics but Krugman makes a good case for how and why things got so bad:

The brand of economics I use in my daily work – the brand that I still consider by far the most reasonable approach out there – was largely established by Paul Samuelson back in 1948, when he published the first edition of his classic textbook. It’s an approach that combines the grand tradition of microeconomics, with its emphasis on how the invisible hand leads to generally desirable outcomes, with Keynesian macroeconomics, which emphasizes the way the economy can develop magneto trouble, requiring policy intervention. In the Samuelsonian synthesis, one must count on the government to ensure more or less full employment; only once that can be taken as given do the usual virtues of free markets come to the fore.

It’s a deeply reasonable approach – but it’s also intellectually unstable. For it requires some strategic inconsistency in how you think about the economy. When you’re doing micro, you assume rational individuals and rapidly clearing markets; when you’re doing macro, frictions and ad hoc behavioral assumptions are essential.

So what? Inconsistency in the pursuit of useful guidance is no vice. The map is not the territory, and it’s OK to use different kinds of maps depending on what you’re trying to accomplish: if you’re driving, a road map suffices, if you’re going hiking, you really need a topo.

But economists were bound to push at the dividing line between micro and macro – which in practice has meant trying to make macro more like micro, basing more and more of it on optimization and market-clearing. And if the attempts to provide “microfoundations” fell short? Well, given human propensities, plus the law of diminishing disciples, it was probably inevitable that a substantial part of the economics profession would simply assume away the realities of the business cycle, because they didn’t fit the models.

The result was what I’ve called the Dark Age of macroeconomics, in which large numbers of economists literally knew nothing of the hard-won insights of the 30s and 40s – and, of course, went into spasms of rage when their ignorance was pointed out.

Political instability

It’s possible to be both a conservative and a Keynesian; after all, Keynes himself described his work as “moderately conservative in its implications.” But in practice, conservatives have always tended to view the assertion that government has any useful role in the economy as the thin edge of a socialist wedge. When William Buckley wrote God and Man at Yale, one of his key complaints was that the Yale faculty taught – horrors! – Keynesian economics.

I’ve always considered monetarism to be, in effect, an attempt to assuage conservative political prejudices without denying macroeconomic realities. What Friedman was saying was, in effect, yes, we need policy to stabilize the economy – but we can make that policy technical and largely mechanical, we can cordon it off from everything else. Just tell the central bank to stabilize M2, and aside from that, let freedom ring!

When monetarism failed – fighting words, but you know, it really did — it was replaced by the cult of the independent central bank. Put a bunch of bankerly men in charge of the monetary base, insulate them from political pressure, and let them deal with the business cycle; meanwhile, everything else can be conducted on free-market principles.

And this worked for a while – roughly speaking from 1985 to 2007, the era of the Great Moderation. It worked in part because the political insulation of central banks also gave them more than a bit of intellectual insulation, too. If we’re living in a Dark Age of macroeconomics, central banks have been its monasteries, hoarding and studying the ancient texts lost to the rest of the world. Even as the real business cycle people took over the professional journals, to the point where it became very hard to publish models in which monetary policy, let alone fiscal policy, matters, the research departments of the Fed system continued to study counter-cyclical policy in a relatively realistic way.

But this, too, was unstable. For one thing, there was bound to be a shock, sooner or later, too big for the central bankers to handle without help from broader fiscal policy. Also, sooner or later the barbarians were going to go after the monasteries too; and as the current furor over quantitative easing shows, the invading hordes have arrived.

Orlando Airport

It has been a surprisingly pleasant experience, so far. The TSA screening was fast and polite (and the screener making announcements made public service messages witty). One can only hope Canadian customs is as pleasant.

But this has been a good start, at least.

Happy Thanksgiving

It has been a good year for OE (the default abbreviation of the blog title). We started in March 2009 as an experiment. The addition of Mark to the blog list has been a big improvement in the quantity and quality of posts. In 2010 we have months with more blog posts than the 2009 total.

So I hope that you all have a safe and Happy Thanksgiving!

Dental Care

So it looks like I am getting my second root canal next week due to a filling that went too deep. It is, sadly, one of my front top teeth (which makes the "just pull it" option unappealing).

There has been a lot of talk of health care, per se, at sites like the Incidental Economist and Marginal Revolution. But I am finding dental care to be shockingly expensive even with good dental insurance and a reasonable salary. Having experienced severe tooth pain (repeatedly), I wonder what happens to people who cannot afford care.

I will also say that free market options are limited when you are in blinding pain with a tooth abscess. One is willing to pay almost anything to make the pain stop and worry about things like rent later. Certainly it is a poor time for comparison shopping. Nor does the fact that many patients pay for most of their care seem to do anything to control prices.

These episodes have made me increasingly tough on my dental hygiene (flossing, brushing, ultrasonic toothbrush, prescription tooth paste). But I fear that some aspect of my diet or lifestyle still seems to be out of whack because dental decay appears to be accelerating at an alarming pace.

But it does make me wonder why dental care is treated differently than, for example, back pain.

Industrial Policy

I am a huge believer in mixed economies. But it is hard to prove that they are the best option for exactly the reasons that Ms. McArdle is skeptical about industrial planning in China:

It's not that I didn't understand that the government did this; it's that I didn't understand how pervasive it would be, or how popular this would be, at least with the folks we interview. Everyone--including most of the economists and NGOs--seems to think this is swell. No fiddling around with archaic, unplanned systems; just figure out what the country needs and do it!


Perhaps it is just my ideological blindness that makes me believe that this cannot, in the long run, turn out well. But there's a plausible story that the early boom was mostly a matter of removing distortions (and taking advantage of capital, human and otherwise, accumulated in Hong Kong and China). Now the government is much more directly picking winners and losers. They're not trying to manage growth; they're trying to cause it in places where it shows little sign of happening organically.


It's not that I think that no form of industrial policy can ever have good effect. Can government build infrastructure to good effect? Yes, certainly. Can they manage growth? Can it occasionally pick industrial winners? They have in the past--though on average, I'd say it's abundantly clear that governments have more often picked, and sustained, losers. And the more comprehensive the industrial policy, the worse the economic losses have generally been.

The issue here is that successes can be explained by a lot of different factors (as can failures). And it is pretty clear that people have strong "priors" (in the Bayesian sense) for the approach that they favor. This makes it hard to use the (limited in scope) data to decide between approaches. Add in confounding factors and it gets harder. Add in changes in technology and you guarantee issues.

Just consider, for example, stock market returns. What is the relevant period of interest? Some people claim you can consider returns on stock from 1800 to today based on what records are available. But clearly the information available to stock analysts is different today than in 1960. Now consider that you want to look at long term returns (i.e. saving for retirement) and suddenly the noise threatens to overwhelm the data -- as you really have only a very few (tightly correlated) time trends.

How much worse is that for looking at economic growth?

No wonder these arguments are difficult to make . . .

Another argument for parenting as an addiction

And unlike the one demolished here, the sitcom version actually makes some sense in terms of reinforcement schedules.



Of course, this story refers to actions parents take in pursuit of specific rewards, not to the decision to become parents.

Impact Factors

Frances Woolley makes a great point in Impact Factors and how they vary by field and by sub-field. This issue comes up in medical research all of the time. If I try and be really methodological, a statistics or epidemiology journal has a much smaller imapct factor than a medical journal. On the other hand, if I focus on the drugs and go to a pharmacy journal then impact factors are even lower.

So it is a constant dilemma about how to focus one's research. I would like to think that tenure and promotion committees are sophisticated about such issues but one does worry . . .

I suspect that the same issues are replicated with grant funding.

Airline Security

This is a nice point from Megan McArdle on the current value of airline security procedures:

Somehow, this seems like a questionable reaction to two attacks that failed. Especially since they failed for the same reason that any similar attack is likely to fail: the amount of explosives you can smuggle in your underwear or shoes is necessarily small, meaning that you need to be in the cabin to detonate them if you want to be sure that you'll bring the plane down. And it's really hard to set your underwear, or your shoes, on fire without your fellow passengers noticing. In Asia, I've never been required to have my shoes scanned--not even to get on a US bound flight. And yet, we have not been confronted with a rash of exploding planes out of Taipei or Saigon.

I am forced to fly a lot for work and I have the misfortune of living far away from family. Yet I would gladly never fly again if I could arrange it. It's really become a miserable process. At some point one really would like to avoid the whole mess.

History question of the day

This excellent column by Steven Pearlstein got me thinking, is hard-currency populism a new phenomena? I realize a lot separates Bryan and Palin/Beck/etc. but this would seem to be 180.

Maybe this is making outcomes worse?

From an interesting interview with a (formerly) obese cardiologist:

In 2003, Gary Foster, now director of the Center for Obesity Research and Education at Temple University, conducted a survey of primary-care doctors about obesity. More than half viewed obese patients as ugly and noncompliant. A third saw them as weak-willed and lazy.

and

He understands that doctors can be frustrated by their patients' failure to lose weight, but he sees it as no worse than many other difficult-to-treat diseases. "My fellow colleagues are understanding of cancer even when it recurs and recurs, and they'll say, 'Well, that's the disease,' " he said.

I think that this might have some serious ramifications for the treatment of obesity by the medical profession. Patients seem as noncompliant are less likely to receive treatment which can make the health risk associated with obesity more difficult to treat.

It's true that there is some factor that is driving the current obesity epidemic (and the even mroe cocnerning diabetes epidemic) that is, my definition, modifiable. But perhaps we should focus on what that factor is? After all, our grandparents were much less obese (on average) and that suggests that the focus shouldn't necessary be at the level of the patient but rather at how we have changed our culture.