Friday, October 30, 2009
Clearly health care is an example of the complexity of society that Hayek confronted in The Use of Knowledge in Society. The dispersed knowledge relevant to health, the care of health and the approaches to funding health exemplify the knowledge problem. A reading of Hayek is useful in examining the underlying assumptions of any expansion of the state into this market (as it would be prior to any state expansion).
There have been two excellent posts in the blog world this past week dealing with this topic.
Over on EconTalk, Mike Munger directs his attention to the debate in a podcast well worth the 1 hour you will spend.
Mike Munger of Duke University talks with EconTalk host Russ Roberts about the limits of prices and markets, especially in the area of health. They talk about vaccines, organ transplants, the ethics of triage and what role price should play in allocating. The discussion concludes with a discussion of how markets respond to price controls
Our colleague Tim Schilling directs us to the contra view on his blog.
It saddens me that support for universal coverage and a public option has become, in many circles, a sort of litmus test for compassion and caring about the poor. It particularly saddens me to hear the president say that “What we face is a moral issue; at stake are not just the details of policy, but fundamental principles.” It’s the details of policy that change people’s lives. The moral imperative is to get them right.
Thursday, October 29, 2009
Wednesday, October 28, 2009
Tuesday, October 27, 2009
Sunday, October 25, 2009
Samuel Gregg does a nice job of highlighting the urgency in a civil discourse in his book The Commercial Society.
" . . . intellectuals who recognize the benefits of commercial society bear a tremendous responsibility, not the least because of the damage facilitated by other scholars in either prescribing yet another set of collectivist or corporatist solutions to economic problems or who persist in defending economic orders that are indefensible in terms of their limited effects on poverty, their undue inhibitions of human liberty, and their steady de facto encouragement of soft despotism." (158)
I would broaden Gregg's injunction to all of us, as the erosion of personal liberty is facilitated not only by scholars but by the media, special interest groups and, most worrisome, those who are acting out of ignorance or misplaced belief.
The avenues we have to include those who are unaware of the threats to liberty may seem limited, but to the extent we can engage in a civil, yet directed engagement we fulfill the responsibility passed down to us.
Greg Mankiw writes in Why Health Care Will Never Be Equal
The push for universal coverage is based on the appealing premise that everyone should have access to the best health care possible whenever they need it. That soft-hearted aspiration, however, runs into the hardheaded reality that state-of-the-art health care is increasingly expensive. At some point, someone in the system has to say there are some things we will not pay for. The big question is, who? The government? Insurance companies? Or consumers themselves? And should the answer necessarily be the same for everyone?Inequality in economic resources is a natural but not altogether attractive feature of a free society. As health care becomes an ever larger share of the economy, we will have no choice but to struggle with the questions of how far we should allow such inequality to extend and what restrictions on our liberty we should endure in the name of fairness.
Thursday, October 22, 2009
Anita Dunn is the communication director of the President of the United States. In the interview Prager asked what Tomasky thought of the Anita Dunn remark that her two favorite philosphers were Mao Tse Tung and Mother Teresa. Prager queried how a mass murderer of over 75 million people could be the most important guiding light of the communication director of the President? What do you think about this? Tomasky had to say, "You have me there, I have not heard about this. " In fact coverage has not occurred outside of Fox and Glen Beck.
What does this say about the discussion between libertarians, conservatives, and statists? It says that someone needs to provide facts. And perhaps, facts about the success of nations, success of individuals, and the factors leading to success won't even solve the communication issue. If people believe, as Tomasky does, that people are better off for having government involved in their lives, then facts might mean nothing. Beliefs are difficult to debate.
The ASET book discussion group Wednesday, October 21, 2009
ASET book club Stealing from Each Other How the Welfare State Robs Americans of Money and Spirit
ASET Book Club Event - Wednesday October 21, 2009 5:45 p.m. - 7:15 p.m.
discussed Browning's "Stealing From Each Other". After examining many elements in the book, the question arose as to how a conversation between free market thinkers and statists could take place. Does it depend on how statists arrive at their opinions: Are statists paternalistic in thinking that they know better than the individual what is good for the individual? Are statists evil and just want power? Are statists stupid and simply not understand the issues and implications?
Prager's interview seems to suggest that the conversation will be difficult to join because the groups live in different worlds.
This excellent colloquium sponsored by the Liberty Fund and the Foundation for Teaching Economics brought together teaching professionals to discuss the role that property rights play in economic development. The readings discussed over the 3 day conference can be found on the link above and are well worth a read.
Monday, October 19, 2009
Stealing from Each Other How the Welfare State Robs Americans of Money and Spirit
The rise of equalitarian ideology has driven Americans to steal from one another. Browning explains that certain kinds of equality have been a cherished value in America. Equality under the law and, within reason, equality of opportunity is consistent with a free society. Equality of results is an anathema to a free society and within it lie the seeds of tyranny.
For a contrasting perspective on Browning's view on immigration
Julian Simon - Economic Consequences of Immigration
Is the Welfare State Justified?
Monday, October 29, 2007
Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform
Saturday, October 17, 2009
The simple way to resolve the problem is to change the system to a consumer purchased system. Healthcare expenditures in the U.S. constitute approximately 16% of GDP or around $2.24 trillion. Since there are around 300 million people in the U.S., that is a per person expenditure of around $7,300 per person per year. Suppose then that each individual was given a voucher worth $7000. They could do anything they wanted with the money as long as it pertained to health care. Any funds they did not spend would be carried over to the next year and would add on to the $7000 obtained in the following year. With the money, people could purchase insurance, in most cases, catastrophic insurance. Catastrophic insurance premiums would fall and be very low as competitors attempted to obtain customers (and companies must be able to compete across state boundaries). With people in charge of their own health care expenditures, people would select services that provided them the care they prefer; they would not buy unnecessary tests or unimportant office visits. Costs would fall significantly. Perhaps more importantly, there would be no government programs involved in the health care arena. It has been estimated that in the current system, see here http://http://www.pnhp.org/publications/nejmadmin.pdf
that about 20 % of all costs are administrative. Thus, the health care expenditures would decline almost 20 percent from eliminating government agencies. Why is the Obama - Baucus - et al., plan so much more complicated and so much more expensive?
Thursday, October 15, 2009
Thinking about Boyes' post of Oct. 13th I would recommend a read of Bob Higgs posting over on HNN. Higgs is really getting at the importance of rhetoric in the "discourse" about the role of liberty and freedom in society. Samuel Gregg argues that civil discourse is a natural outcome of a commercial society, while Higgs implies that as the state expands in scope and scale in society civility is a casualty.
Both of these complimentary views are key to an appreciation of the importance of the media in the economic change of society. This change, to paraphrase North, is gradual and incremental and both formal and informal institutions shape this change. The institution of information diffusion is a key one as it shapes informal norms and beliefs and is shaped by these informal norms and beliefs.
I am thinking of a conversation with my brother, who considers himself a believer in liberty. I had given him Higg's classic - Crisis and Leviathan, my brother read the book and said that Higgs was a nut job. I had a similar conversation with a brother in law during the last election - he said that Ron Paul was a nut job.
Why does this happen? I think part of the answer might be in rhetorical choices by advocates of liberty. Higgs and, to a lesser extent Paul, seem to be to be reasonable, civil and accurate in their articulation of the importance of liberty and the consequences of its loss. However, an audience that is not convinced of these two issues (in my limited sample) finds them to be extremists. Oddly enough, one of these relatives applauds Michael Moore's latest film while the other condemns it.
In a previous post, I mentioned my reading of Samuel Gregg's The Commercial Society in which he models civil discourse. Perhaps advocates of liberty would benefit from a consideration of Gregg's rhetoric.
Doug Casey writes about George Bush in the context of the presidency:
"As disastrous as he was, I rather hate to put him in competition for “worst president” in the company of Lincoln, McKinley, Wilson, the two Roosevelts, Truman, Johnson, and Nixon. He is simply too small a character — psychologically aberrant, ignorant, unintelligent, shallow, duplicitous, small-minded — to merit inclusion in any list.On second thought, looking over that list of his personal characteristics, he’s probably most like FDR, except he lacked FDR’s polish and rhetorical skills. I suspect he’ll just fade away as a non-entity, recognized as an embarrassment."
Alternatively, Austrian Economists, in an interesting post listed the 6 free market presidents
The order is from the most laissez-fairist to the least (dates of presidency in brackets):
Tuesday, October 13, 2009
So I rushed home to wash out my mind by watching "Broke". Unfortunately, it was boring and not much of a counter to Moore. It did fairly represent the fact that we make decisions often to go along with the herd, and this often leads to bubbles. So, perhaps the message is personal responsibility. I like that message, but it is not stirring or hard hitting enough.
I found it quite scary that the audience to Moore's move applauded when the movie was over. Perhaps they were just happy the long boring diatribe was done, but somehow I think not.
I am curious what my students thought of Moore's movie. I will relay that in a later post.
Monday, October 12, 2009
The U.S. dollar has been the world’s reserve currency since the end of World War II. With the dollar's 45 percent decline against the euro during the past six years and its 37 percent drop on a trade-weighted basis, there is a growing concern that the greenback's six-decade reign as the world's most important currency may be ending.
Why care? The standard argument is that reserve currency status allows the U.S. government to borrow in its own currency and helps the government and American companies to fund themselves at low interest rates. It makes it easier for U.S. companies to do business and increases the international demand for U.S. assets. Perhaps most importantly, the reserve currency status provides interest-free loans to America from the hundreds of billions of dollars held overseas and hoarded. In other words, the reserve status has enabled the U.S. to live well beyond its means.
The US dollar is currently the world's reserve currency, but that status is being threatened by China, America's biggest creditor, which is becoming "concerned" about the safety of the $1trn in US government debt it holds. American national debt, including social security obligations, has grown to more than $11trn, above 80% of GDP and will rise in the coming years. That's likely to see US Treasury yields forced higher to attract investors willing to fund this soaring deficit, which will hit bond prices, hurting the value of China's existing holdings. On top of this, the Federal Reserve has expanded the money supply tremendously over the last two years. Between January 2007 and January 2008, the base money expanded by about 750%. Ultimately, many more greenbacks in circulation means the price, that is, the exchange rate, will fall. That's bad news for anyone outside the US who is holding on to dollar assets.
Right now China’s currency – the yuan, also known as the renminbi – is tightly controlled and not freely tradeable in international markets. But China is starting to use the yuan to settle trade accounts between some of its provinces and neighbouring states, starting with Hong Kong. Chinese officials recently moved to promote the yuan’s influence overseas. China has signed deals with six countries, including South Korea, Malaysia and Argentina, for currency swaps that would inject Chinese money into foreign banking systems, and allow foreign firms to pay for goods they import from China in yuan.
Is the declining status of the dollar a serious worry? Perhaps it is actually a blessing. Ordinarily, a country’s central bank faces sharp limits to a policy of monetary expansion since if a country expands its currency, other countries will not want to hold that money. Its currency is devalued against less expansionist monetary systems. But when a country’s currency is dominant, the situation is different. Because other countries find it convenient to hold this currency, they are reluctant to rid themselves of it, despite inflation. The dominant country thus has much more leeway to conduct an expansionary policy. Surely, though, far from being an advantage, the ability to expand the money supply more than other countries is a liability. Although the fiat money system is the true problem, anything that limits discretionary expansion has to be seen as constructive.
Sunday, October 11, 2009
It is this final outcome of morality that makes liberty an ultimate as well as instrumental virtue.
The Libertarian Nobel Peace-Prize Winner | Foundation for Economic Education
There Shouldn’t Be A Nobel Prize in Economics — F. A. Hayek’s Nobel Banquet Speech
Saturday, October 10, 2009
Friday, October 9, 2009
Two contrasting views of education prompt me to think about Douglass North's analysis of the role of learning in economic change. The two posts deal with education - the process, while North is thinking of both the process and the outcome. The role of learning in economic growth is one that deserves serious reflection - while it is unclear what that relationship may be, the impact of learning seems significant. Moreover, the formal and informal institutional context of learning (and by implication education) serves as the constrain that limits the impact of learning.
With all that said, the 2008 Nobel winner in economics sees command systems as the mode to optimize education. It is not clear the Krugman believes that education and learning are closely related, but he is clear that education cannot take place without the state.
The Uneducated American, by Paul Krugman, Commentary, NY Times: If you had to explain America’s economic success with one word, that word would be “education.” In the 19th century, America led the way in universal basic education. Then, as other nations followed suit, the “high school revolution” of the early 20th century took us to a whole new level. And in the years after World War II, America established a commanding position in higher education.
But that was then. The rise of American education was, overwhelmingly, the rise of public education — and for the past 30 years our political scene has been dominated by the view that any and all government spending is a waste of taxpayer dollars. Education, as one of the largest components of public spending, has inevitably suffered.
My reading is that Krugman has this partially correct - if education in the 17-19th centuries in the US was "successful" it is in large part due to the emergent path that education was allowed to follow. And, while the state dictated "universal" (a misnomer of course) education - the responsibility for learning rested with the institutions of the family and church.
I also agree with Krugman that the crisis in education is a pressing one - a result of the altogether predictable consequences of the perverse incentives of the institution of public education. The second post which is well worth a read is by a parent who writes of a public school teacher in a highly rated school who lacked knowledge of the emergent concepts in the field (computer science). The post is titled - Beware Book Learning and the parent writes:
"This example supports the claim that it is mostly the students not the teachers who makes good schools good, and that even in computer science signaling takes precedence over learning."
Krugman and this parent have unintentionally opened a dialogue - they both work from the premise that education in the US is in crisis. As a public school teacher I would agree, and the crisis is deepening. The two offer drastically differing perspectives on the course of action to take. Krugman is confident that the state can resolve the problem - it is merely a matter of resources. In a post earlier this month I referenced Ken Rogoff's public response to the "confidence" (arrogance?) of one of Krugman's Nobel winning colleagues. More money, spent correctly will rectify the problem. Our parent, on the other hand, with direct knowledge of education on his child offers a more penetrating critique by pointing out the result of the institutional constraints of a state owned and directed enterprise. He observes of this public school teacher:
"Yes it makes sense for this teacher to ignore modularity if the AP exam ignores it. And perhaps it even makes sense for the exam to ignore it since modularity tests might take lots longer than other tests. But for someone with five years experience teaching computing at the nation’s best public high school to not even know that modularity goes way beyond objects – that seems a sad example of off-the-rails book learning."
Off the rails . . . I can't help but think of Bastiat's railroad and the recent discussion in the press of Bentham v Hume. The David Brooks article generated a great deal of discussion, and this posting (planners v doers) does a nice job of contextualizing the planner v searcher dichotomy. Planners like Krugman are confident that they have the answer, searchers such as the parent in Virginia engage in a process that can evolve in emergent responses - but only in the context of liberty.
So, the debate in education is a great way to view the debate over liberty - on one hand those who wish take away choice and liberty and coerce a solution or plan to be part of the expansive state and on the other hand those of us who stand for liberty and fear that it is leaving the station.
What did the welfare recipients do with the extra cash? They purchased flat screen TV's, iPods and video gaming systems," The welfare recipients were also free to withdraw the money as cash. That led to an unexpected run on ATM's across the state. Wilson Farms stores had their ATMs wiped empty. In addition, there were reported increases in sales of beer, lotto and cigarettes.
New York state officials defended the program by saying that “no matter what welfare recipients purchased with the taxpayer funds, it served to stimulate the economy.” These officials clearly do not understand Bastiat's broken window.
Wanna cut some med costs 30+% without sacrificing quality? Just have patients rely more on CVS, Walmart, etc. for care. From the Post:
Thursday, October 8, 2009
Using an allocation scheme other than a decentralized market approach has both incentive and outcome consequences that are predictable.
Elaborating on Boyes's post:
Government employees have radically better benefits and pensions than private sector workers. “When wages and benefits are combined, federal civilian workers averaged $119,982 in 2008, twice the amount of $59,909 which workers in the private sector averaged for wages/benefits. The value of benefits for federal civilian workers averaged $40,000/year, four times the value of benefits that the average private sector employee receives. Only 12% of retirees from the private sector have defined benefit pensions to supplement Social Security. ( http://www.openmarket.org/2009/09/30/overpaid-bureaucrats-expand-in-number-and-pay/ )
An interesting example/comparison of public v private sector compensation and employment suggests the extent of resource mal-allocation.
USPS - average pay - $83,000 - employees - 656,000
UPS - average pay - $70,000 - employees - 425,000
FedEx - average pay - $74,000 - employees - 240,000
USPS is bankrupt and dependent upon subsidy for existence, while UPS and FedEx earn a profit and work toward efficient outcomes.
Here we have an illustration of Browning's thesis - predatory results as one segment of society (government employees) engage in rent seeking (stealing) from another group. There is a moral dimension to this process that Browning explores and that we all might reflect upon.
A dimension of the increasing scale and scope of the government is the steady increase in government employment. The 10 year growth rate in government employment in my home state of Arizona for example presents a clear and present danger to those who understand the incentives and consequences of command systems of allocation upon future growth and liberty.
This growth has resulted in direct employment by the government in Arizona over 20 per cent. (http://ebr.eller.arizona.edu/azeconomy/AEApr2009/AECurrent/AZ.asp) However, in addition to direct government employment, the level of military contractors, health providers and assorted other activity dependent upon the government would certainly increase total employment related to government.
The expansive presence of the government in labor markets and that impact on liberty needs little elaboration, nor does the impact on future growth. Tom Rex, in a dated analysis that bears reading concludes:
"The public sector is not too large - the private sector is too small. (I disagree with the first portion of this observation, but Rex's error here does not negate his conclusion)
Outside the Phoenix metropolitan area, most of Arizona suffers from too little economic activity other than of a governmental nature. A great need exists for private sector economic activity . . . to enhance living conditions for the existing populace."
For an in-depth analysis of the effect of the widespread unionization of government employees, see the new Cato Institute Policy Analysis, “Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government,
Wednesday, October 7, 2009
Tuesday, October 6, 2009
Smith did not write in favour of “enterprise”; he wrote in favour of “commercial society”. The former is a projection of a modern word onto the past; in fact, he displayed throughout Wealth Of Nations strong suspicions about the conduct of “merchants and manufacturers”.
The entire post is well worth a read and it reminded me of Samuel Gregg's book of the same title - The Commercial Society.
From a review of the book on the Acton site
Gregg explains the centrality for a commercial society of the healthy human attribute of trust. The centrality of trust is found in Adam Smith’s Wealth of Nations. Gregg examines the contributions of Adam Smith’s fellows of the Scottish Enlightenment. In the section Peace and Tolerance, Gregg expands upon the contribution of French philosophers to those principles. He quotes the letter of Archbishop Francois Fenelon of Cambrai to Louis XIV on the destructive impact of his wars. Voltaire, Montesquieu, Constant, and Tocqueville developed the theme of the contribution of commercial society to peace and toleration. Gregg quotes the French classical liberal Benjamin Constant: “It is clear that the more the commercial tendency prevails, the weaker the tendency to war must become.”
Monday, October 5, 2009
suggested that the Federal Reserve has captured the economics profession because it hires so many economists. Moreover, these economists are the gatekeepers of major academic journals such as American Economic Review, Journal of Money Banking and Credit and Journal of Monetary Economics. I recall publishing a paper with co-authors in the Journal of Money, Banking, and Credit in which we were criticl of the Fed and argued that much of its actions were to increase its power and reach.
"The Federal Reserve as a Bureaucracy: An Examination of Expense-Preference Behavior," JOURNAL OF MONEY, CREDIT AND BANKING, Vol. 20 (May, l988), 181-190.
I was told by an economist working at the Fed, that many people there were very irritated with the paper. I am not sure what that means other than there has to be an incentive to look favorably on Fed actions if you are being compensated by the Fed. I wonder how many free market advocates are compensated by the Fed.
Saturday, October 3, 2009
The letter is address to Joseph Stiglitz and, while the topic is his book Globalization and Its Discontents, the message is broader and more relevant today than when Rogoff wrote:
"you betray an unrelenting belief in the pervasiveness of market failures, and a staunch conviction that governments can and will make things better. You call us "market fundamentalists."