Medicare versus Social Security

I hear this point a lot:

At any politically plausible margin, it makes more sense to take $1 out of Medicare than to take it out of Social Security. Social Security checks can be used to buy health care services.

I think that this analysis neglects one key point. Medical care in the United States (or anywhere, for that matter), is hard to bargain with at the time of a procedure (especially an emergent one). It is hard to discuss prices at the ER door during a myocardial infarct, where minutes matter. Here, the real benefit of medicare is the ability to exert market power to set standardized prices (to avoid the power asymmetry otherwise present in medical bargaining).

It is not ideal, but I have not yet come up with a better idea than collective price setting and my own experiences as an uninsured person in the US were certainly eye-opening in this regard. It was amazing how few doctors would even consider accepting cash for services.

Still more intellectual property silliness

I've got an actual post on this in the works but in the meantime check out these stories.

From the New York Times:

When copyright law was revised in the mid-1970s, musicians, like creators of other works of art, were granted “termination rights,” which allow them to regain control of their work after 35 years, so long as they apply at least two years in advance. Recordings from 1978 are the first to fall under the purview of the law, but in a matter of months, hits from 1979, like “The Long Run” by the Eagles and “Bad Girls” by Donna Summer, will be in the same situation — and then, as the calendar advances, every other master recording once it reaches the 35-year mark.

The provision also permits songwriters to reclaim ownership of qualifying songs. Bob Dylan has already filed to regain some of his compositions, as have other rock, pop and country performers like Tom Petty, Bryan Adams, Loretta Lynn, Kris Kristofferson, Tom Waits and Charlie Daniels, according to records on file at the United States Copyright Office.

“In terms of all those big acts you name, the recording industry has made a gazillion dollars on those masters, more than the artists have,” said Don Henley, a founder both of the Eagles and the Recording Artists Coalition, which seeks to protect performers’ legal rights. “So there’s an issue of parity here, of fairness. This is a bone of contention, and it’s going to get more contentious in the next couple of years.”

With the recording industry already reeling from plummeting sales, termination rights claims could be another serious financial blow. Sales plunged to about $6.3 billion from $14.6 billion over the decade ending in 2009, in large part because of unauthorized downloading of music on the Internet, especially of new releases, which has left record labels disproportionately dependent on sales of older recordings in their catalogs.

“This is a life-threatening change for them, the legal equivalent of Internet technology,” said Kenneth J. Abdo, a lawyer who leads a termination rights working group for the National Academy of Recording Arts and Sciences and has filed claims for some of his clients, who include Kool and the Gang. As a result the four major record companies — Universal, Sony BMG, EMI and Warner — have made it clear that they will not relinquish recordings they consider their property without a fight.

“We believe the termination right doesn’t apply to most sound recordings,” said Steven Marks, general counsel for the Recording Industry Association of America, a lobbying group in Washington that represents the interests of record labels. As the record companies see it, the master recordings belong to them in perpetuity, rather than to the artists who wrote and recorded the songs, because, the labels argue, the records are “works for hire,” compilations created not by independent performers but by musicians who are, in essence, their employees.

Independent copyright experts, however, find that argument unconvincing. Not only have recording artists traditionally paid for the making of their records themselves, with advances from the record companies that are then charged against royalties, they are also exempted from both the obligations and benefits an employee typically expects.

And from Andrew Gelman:

Christian Robert points to this absurd patent of the Monte Carlo method (which, as Christian notes, was actually invented by Stanislaw Ulam and others in the 1940s).

The whole thing is pretty unreadable. I wonder if they first wrote it as a journal article and then it got rejected everywhere, so they decided to submit it as a patent instead.

An interesting observation about the electoral math of Texas

And kudos to the New Republic for giving its interns a chance to do good, high-profile work. From Gabriel Debenedetti:

And Texas, Tucker notes, “is an unusual electoral landscape”—which is to say it’s nearly empty. The Democratic Party in Texas is nearly nonexistent, and puts up only the most pro forma candidates. (“The Democrats are weak in ways that are not even indicated in the low numbers or poor electoral results,” says Jim Henson, director of the Texas Politics Project and a professor of Government at the University of Texas at Austin. “As an organization, the Democrats are just—I can’t even come up with a negative enough word.”) And judging from the low turnouts in the Republican primary elections—the only votes in Texas that really count for anything—even the ruling party in Texas is extremely dispirited. In the 2002, 2006, and 2010 votes in which Perry was elected governor, only around 4 percent of the voting-age population turned out for the Republican primary.

As a result, Perry only needed to convince roughly 2 percent of the voting-age population of the Republican-heavy state that he would be a suitable governor before cruising through the general elections against a pro forma Democratic candidate, or, in 2006, a slate of nominal candidates. In Texas, the “people who vote in primary elections are unusual people,” Tucker stressed to me. “They are more extreme, further to the right.” In other words, Perry was able to repeatedly vault himself to the governorship largely not because he was a persuasive campaigner, but because he catered to the extreme views of a minority of die-hard conservatives.

Wish I had time to discuss this in detail

Check out this interview with Michael Winerip on recent cheating scandals.

When you really want to reach a conclusion

I've heard the argument that unemployment benefits caused higher unemployment before, but I never expected anyone to use Germany's relatively strong numbers to support the case.

Last conference of the year

And so posting on my end is light this week. I'll have new content this weekend, though.

Noah Smith has some smart things to say about libertarians and property rights...

...and you should probably read the whole thing, but I wanted to single out this passage:

That's right: irreducible transaction costs are a fly in the libertarian soup. Completing an economic transaction, however quick and easy, involves some psychological cost; you have to consider whether the transaction is worth it (optimization costs), and you have to suffer the small psychological annoyance that all humans feel each time money leaves their bank account (the same phenomenon contributes to loss aversion and money illusion). Past a certain point, the gains to privatization are outweighed by the sheer weight of transaction cost externalities. (Note that transaction costs also kill the Coase Theorem, another libertarian standby; this is no coincidence.)

This dovetails nicely with this discussion about why the decision-making processes of engineers and scientists are often 'irrational' in the strict economics sense of the word. Like transactions, decision-making algorithms have a cost. In most cases, these costs are fairly small (like the few seconds it takes to decide on a brand of beer) and you can get away with ignoring them, but freshwater economists routinely make arguments for rational behavior that require people to make incredibly complicated calculations almost instantly. What's worse, they continue to make these arguments even when data suggests that people are using other, simpler rules to make their decisions.

Stop by and see what you think

Andrew Gelman has some intriguing news about the possibility of reform in the institutional review board system.

A sentence that you just don't want to hear

Matt Yglesias was writing about an innovative program in the Netherlands when he made the comment:

At this point, it just strikes me as fundamentally unlikely that bold policy innovation is going to come out of the sclerotic United States.

At the time, I mentioned it to Mark (my co-blogger) as one of those sentences that you just don't want to have applied to your country, even in jest. Now Jeffrey Early is willing to ask when was the last time that the United States was a policy innovator. His depressing suggestion is back when Richard Nixon was president.

So here is my question to the blogosphere: what can the United States do to go back to being a leader in policy innovation?

[My own angle is to look at work being done at places like The Incidental Economist to see if we can possibly find an alternative way forward for Health Care Policy]

XKCD

Unfortunately, this problem goes a bit further than star ratings in the App store.(insert comment about happiness research here.)

You might not want to read it while you're eating...

But you really should read Michael Lewis' latest entry. It's one of the best things you'll read on the German economy and almost certainly the only article you'll find describing the country's financial system through scatological metaphors (no, really).

Must-reads

Nate Silver and Felix Salmon take very different views on S&P. I don't know who I'd call the winner -- Silver's case seems slightly more convincing, but Salmon's opinions in these matters carry a lot of weight -- but both pieces are well worth your time.

I think we can all use a distraction now

Which is why the long delayed return of Burn Notice to Hulu is such welcome news to those of us without cable.

Tax Policy

From John Quiggin:

The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.

If their 25 per cent, or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.

In both policy and political terms, nothing can be achieved under these circumstances, except at the expense of the top 1 per cent. This is a contingent, but inescapable fact about massively unequal, and economically stagnant, societies like the US in 2010. By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

This is actually a very constructive addition to the discussion of how to finance government and society in general. When I was growing up, the general idea we had was that serious tax cuts had to focus on the middle class because that was where all of the money was. But 25% of the national income is a lot and it isn't clear that this type of extreme inequality is socially useful. Few people seem to suggest that we should impoverish the rich, but would it be a horrible world where the top 1% had 15% of the post-tax income?

Bad optics

I'm sure there's nothing sinister going on here, but S&P certainly has a gift for looking bad (from Marketplace):

This final note today, in which S&P beats up on Warren Buffet. The billionaire went on CNBC this morning, said he wasn’t worried at all about the debt downgrade and said, in fact, that the downgrade changed his opinion of S&P — not his opinion of U.S. Treasuries.

Funnily enough, couple of hours later, S&P put Buffett’s company Berkshire Hathaway on notice for a possible downgrade.

Hmmm.

Also, we should note here: Berkshire Hathaway’s the single biggest shareholder in S&P’s competitor, Moody’s.