Irrationally talking about rationing

David Leonhardt is quick becoming one of my favorite columnists.  Here, he nails the “rationing” red herring on its head.  It is abundantly clear to anyone who has spent 5 minutes thinking through the topic and reading a newspaper that the government is not even close to proposing to ration healthcare.  Moreover, economic activity is intrinsically rationing, so even private insurance plans ration health care, and they do it with a greater negative cost than a public plan would.  In other words, the health care complex is counting on the ignorance and apathy of Americans to allow it to preserve the status quo.

My opinion on the torture photos

Though I understand the issue is probably more complex than the data I, a layperson, have been presented suggests, I doubt more information would change my basic opinion.  I can think of few substantial reasons to not release photos of what our previous administration did.  (I also believe Gerald Ford was wrong to pardon Nixon.)

Some fear the negative effect this will have on Obama’s rating, but since these photos were taken under the Bush regime, I asuspect the flak will accord to the Republicans.  They already look like such a horrible party that this could be the nail in the coffin. 

Moreover, when most people talk about torture, it is such an abstract term that they are going to support it without greater reflection.  This is why no one who has undergone water boarding supports its use afterwards, not even crazy right wing radio jocks.  It’s also the same reason we as a nation are blase about reforming health care: we don’t think the extraordinary costs are a problem until it affects us or someone we know, probably through a bankruptcy.  “Torture” is so abstract that these photos are as close (in conjunction with the Abu Ghraib ones) as we can get to internalizing torture.  In other words, I suspect that seeing exactly what we, THE GREATEST NATION THAT HAS EVER LIVED AMERICA HELL YEA, does to these people will shock a lot of that 57%.
 
And I don’t think that it is such smart triangulation either.  Obama is supposed to be about change, and switching stances here, so soon after reaching the White House, makes him look increasingly like a Washington insider.  We all understand that there is a difference between a stump speech and pragmatism, but you don’t break a campaign speech on something gigantic like this.  You switch stances on protecting nature preserves or your stance on desk regulation, but you don’t change it on one of your central issues (government transparency and the rule of the law).  Just as China can tell us to shove it because of these photos, Israel can do the same by refusing to stop expanding its West Bank settlements. 
 
Finally, it is interesting that no one has offered specific instances of when and where the torturing has saved lives.  If it is such an imperative practice and so defensible, then surely the hand of the defenders of torture would be strengthed by revealilng, “We interoggated Mr. X in fashion Y and he revealed Z.  This took us to A and we prevented B deaths.”  What state secrets would be revealed?
 
All in all, I think it is hard for us as Americans to often realize how backwards we can often look.  In 1957, the National Review was arguing against the Civil Rights Acts because “Negros” were less civilized than “Whites.”  50 years ago!  We conflate our military supreriority with moral superiority, and so we bury clear, universally immoral actions under red herrings about national security and domestic sovereignty.  Surely no one who defends Guantanamo would defend North Korea’s actions towards our two journalists.  The only difference is that it’s Them, not Us, doing it.

The speech that best sums our current problems

Reconceptualizing the size of our government

We tend to understimate the size of our government.  I suspect that if we factored in the amount of tax breaks we give for charitable donations, which as as a government payment to charities, we’d see an impact on the size of government as a percentage of GDP.  Same if we looked at tax breaks given to companies on types of debt they issue; tax breaks on mortgage interest; or tax breaks given to corporations to settle in communities.  And we should also factor in our annual budget deficit.

More importantly, our government could provide more and better social services (R&D, national health insurance, infrastructure) if we shifted resources away from farm subsidies and the military.  It is a lot easier to pay for neonatal care when you don’t have to pay for JDAMs.  I am not saying we should abandon our military and retreat into pacifism, but it does seem that our military receives more money than it needs.  On the other hand, the security we provide, especially to international shipping, is a public good and should, ideally, be compensated for by other nations; I don’t see this happening.

argue for redistribution of gov, not shrinking of

The Roberts Court

Jeffrey Toobin argues that John Roberts is leading the court to the right.  Strict interpretation is not being neutral, it’s being Republican.

Cap and trade is the free market answer

What opponents of costing emissions (either through cap and trade or a carbon tax) either fail to realize or do not want to admit is that they are defending an imperfect perfect.  While the government seeks to introduce market competition, the defenders of established interests, thinking they are protecting the hallowed free market, are defending an imperfect one.

Product prices are not currently set at their marginal cost because firms do not have to internalize all of the pollution costs associated with a product or service’s production.  One of the primary roles for government is to step in when externalities exist and the coordination costs of resolving them are too great for private actors; one could argue this is the primary justification for any government expansion.  Under our current economic system, we are harming the planet without pricing in the costs of repairing it.  In other words, the prices we see are imperfect information.

Telling producers to price the costs of their pollution is basically an exercise in price discovery, and the most efficient method for this price discovery should be pursued.  As I understand it, this is cap and trade.  Let me rephrase this: introducing cap and trade will make the market work better.  Cap and trade is the closest to a free market answer to a free market failure that exists; if private actors could have coordinated this action amongst themselves, they already would have.   The lack of a market mechanism is the demonstration of the market’s failure.  In a sense, it is like revealed preference, a favorite phrase of economists that means we demonstrate our beliefs by our actions; just as we show how much we want something by giving it a price, the free market’s failure to solve the obvious problem demonstrates its inability to do so. 

The market needs the government to make it “free.”

(For a Republican in Congress to be against cap-and-trade demonstrates that they are against Democrats.  Their ideology becomes one of oppositionism detached from considerations of pragamatism.  In this case, their ideological slavishness to the free market is suffocated by their ideological opposition to anything from the Left.)

Looking past the farmers’ market

Hopefully, we now realize the free market only exists at farmers’ markets.  The ideal rammed into us by business news, introductory economics classes, market titans, and Alan Greenspan has said that markets root out inefficiency and incorporate all available information into the price of a product or share has clearly been exposed by this crisis as little more than an ideology.

In 2001, The Economist published a reasoned, by-the-numbers analysis of AIG which concluded that it was greatly overvalued.  The firm to which The Economist contracted this work was then on the receiving end of brute pressure from AIG to rescind its findings, all of which were well-argued.  A free market ruled by rational men would have ingested this revelation and corrected downward the price of AIG’s stock; instead, mainstream analysts were incredulous and offended, and AIG continued to soar.  Oops.

Examples of this abound.  Ratings agencies (Standard and Poor, Moody’s, etc.) are another example of the failure of the market.  Banks want to give up their cheap government capital for more expensive private capital; in a normal market, an institution would be punished for pursuing high cost debt.  Interest groups make sure our diet runs on high fructose corn syrup. 

I am not starting an argument that says the free market is a failure; rather, the belief that we live in a free market that is self-correcting and needs not be protected from itself is antiquated.  The free market is not an abstract deity (our stance towards it does more often resemble that of a tribe and its pagan religion than that of rational people) but actually a collection of people.  And people have cognitive traps, intellectual biases, and feelings, all of which need to be moderated so that we do not individually do collectively what is bad for us as a society.  There are only people beign mortal, not an omniscient market, and the sooner we realize this, the sooner we will escape this crisis.

Links I like

Explaining the debt crisis as a lack of self-control.

Infrastructure requires too much bureaucratic planning. This is not an argument against government.  Too much bureaucracy also exists in private organizations.

Cognitive bias, creating patterns and economic development.

The problem with drug tourism is with the rest of the world, not with Amsterdam.

Schooling as a positional good

I started browsing another article about the perpetually rising cost of college (Internet Explorer crashed and I do not remember which newspaper published it), and I started thinking about different causes.  Of course the topic is incredibly complex, but I can think of two possible proximate causes.

First, the phenomenon of tuition rates rising signficantly above the rate of inflation is relatively recent, and by recent, I mean happening during the previous three decades.  Perhaps it is just coincidence, but the rise in the price of higher education roughly coincides with the rise of neoliberalism as a ruling ideology, our financial oligarchy, and the stagnation of the middle class.  This could be just correlation, but I think we need to reconsider everything of the previous 30 years in order to separate the fundamental progresses from ideological noice.

Second – and I think this is more convincing – is that a university education is a positional good.  This means that a bachelor’s degree is a limited good with luxury status, so the supply of it grows at a much slower rate than its demand.  Universities can therefore extract rents because it is very difficult to expand the supply of quality bachelor degrees.  Therefore, universities can charge higher and higher rates for the same product because income and population grow much faster than the quantity of quality bachelor degrees.  This same phenomenon explains why urban density is not uniform, prices for cultural events and most sporting events increase at a great rate, and the existence of premium luxury goods such as Prada, Gucci, Louis Vuitton, etc.

It is possible that this second explanation only applies to prestigious schools such as the US News and World Report‘s top 50 undergrad programs.  It would be nice to see the rise in tuition costs broken down for each school, by selectivity, or by US News‘ ranking to get a better idea of the robustness of my second proposition.

Not all suburbs are bad, just most of them

Avoiding suburbs is one of my primary interests.  Except for some inner-ring suburbs, which now look high-density compared to normal suburbs and exurbs, I find suburbs’ sprawl cultivates ennui, obesity, communal alienation, and blandness.  I currently live in downtown Minneapolis, and I hope to live in an urban environment as long as I can afford it.

This article in The American Prospect provides an interesting riposte to my knee-jerk suburbia fears.  The piece does not defend suburbia but points out that suburbs, mass transit, and walkability are not mutually exclusive issues.  Indeed, smart planning and infrastructure can allow suburbs to realize their full potential: the offering of a slightly more affordable, less polluted, modestly safer alternative to urban living.  The model he offers requires, however, higher levels of tax and smarter government involvement than that from which we currently benefit.  Both these changes are ones I would like.

(As an aside, I lived in an inner-ring suburb during my senior of college.  The DeMun neighborhood of Clayton, MO is quite idyllic and has a great walkability rating.  It is livable without a car because there is a grocery store nearby.)

The American Prospect article sent me to this website, the Center for Neighborhood Technology.  Though the name is not promising, the site actually has a lot of itneresting material, and its Housing + Transportation index goes a long way towards showing us that suburbs are not as cheap as we think they are.  I know I save a lot of gas and car maintenance money by walking for my groceries, walking to cafes, or driving only a couple of miles for museums or sporting events.