Friday, May 31, 2013

Sexism and Sacredness [Part 1]

I just finished reading Haidt's The Righteous Mind. It was an excellent book and I intend to do a series of posts drawing on the book to explore moral issues. I found myself agreeing with on a great many points. In particular I liked his emphasis on mankind's groupishness, something that I have always thought was fundamentally obvious but that too often seems ignored in our culture.

However, while I don't disagree that the moral foundations can lead to the formation and strengthening of groups I had a nagging feeling throughout the book that he was paying insufficient attention to how sacralizing the wrong things can tear groups apart and limit the groupishness that he claims loyalty/betrayal, authority/subversion, and sanctity/degradation all serve to promote.

While I had planned to take up this subject much later, Erick Erickson happened to say something stupid on TV and then dig himself into an incredibly deep pit by trying to extricate himself with a lengthy paean to sexism.

Erickson's "contribution" perfectly illustrates why I'm sceptical that the current political ideology of the right does in fact contribute to the groupishness that Haidt claims the moral foundations of Conservatives generally contributes to. This is not to argue that the strand of Conservative thought advocated for by Burke does not achieve this, only that the current incarnation in the United States fails to do so.

Erickson's argument basically boils down to men should be off contributing to society while women should be in the home raising children that can later contribute to society.  He seems to believe that he needs little proof that this is the natural order aside from common prejudice and his own anecdotal life experiences. By acknowledging that women can in fact work outside the home, when they have to, he also engages in the annoying habit of trying to signal he's not sexist and unreasonable because he uses soft, reasonable language while condemning their choices as less than ideal. Lets dig into the details.

First, the title. The Truth May Hurt but is Not Mean. This is a loathsome attitude I see all the time on the right. It appears to tap into Haidt's authority foundation, because I'm telling you something tough to hear I'm like a parent telling their kids to eat their vegetables. My beliefs are good for you because they're tough to follow, don't question further or subvert my authority by calling me mean.

 Next we move on to a sanctity argument:

Ladies, if you want to work that’s fine. If your position in life makes it advantageous for you to be the primary bread winner, that’s fine. But your individual circumstances and mine should not hide the fact that there is an ideal and optimal family arrangement whether we in our own lives can meet it.
So, this is basically saying that women should always choose to marry someone that is more financially successful than themselves. While a woman's individual position may make it advantageous for them to be the breadwinner for their household this can never conform to the ideal and optimal family arrangement which is with the male as primary breadwinner. This is either incoherent or it reveals the very sexist belief that some man, some where, is always more successful at being a breadwinner than any individual woman. I don't think Erickson would admit to this belief if pressed but this statement is obviously incoherent without this belief since otherwise some woman, some where would have an ideal and optimal family arrangement different from Erickson's favored arrangement. Of course, as a sacred belief there is no need for it to be coherent but we are forced to acknowledge that for Erickson sexism is a sacred issue and one that trumps actually forming stable, secure families.

Wednesday, May 22, 2013

Contrarian Articles We'd See if Contratrian Meant Something Other than Liberal Bashing

Paul Krugman makes the rather valid point regarding an article by Michael Kinsley that, "I’m not really sure, but in these cases I suspect it has a lot to do with the famed TNR/Slate premium on being “counterintuitive”, which in practice meant skewering supposed liberal pieties."

I'd like to go a bit beyond this and suggest that if this were something more than liberal bashing we'd see a number of articles targeting Conservative pieties as well. I have some suggestions:

"Government Transfers Undermine the Culture of Dependency"

"Raising Taxes can Raise Growth"

"Using Welfare Rules to Enforce Traditional Sexual Mores Destroyed the Black Family"

"Competition Increases Costs and Effectively Reduces Choice in Health Care Markets"

"Owning a Gun Makes you More Likely to be a Victim of Gun Crime"

"Abstinence Only Education Makes Unwed Pregnancy More Likely"

"Employees are the True Drivers of Growth, Not Employers. And Have Been Since the Industrial Revolution."

[I plan to add to this list tomorrow night, just for fun. Please suggest more in comments]

Some of these have evidence behind them, some of them are simply things I suspect are true. A few of them have even been published.

However, I do think it is true that counter-intuitive news stories are something that are primarily used to undermine liberal policies, particularly those policies that benefit those not so well off. It is rarely used to undermine the Conservative worldview, particularly those parts of the Conservative worldview that are broadly shared across the elite.

It's interesting how rhetoric takes particular forms based on political orientation. Though perhaps it is just framed this way because it tells into a rather common narrative about how elite wisdom is superior to the intuitive beliefs of the hoi-polloi.

Saturday, May 18, 2013

What is the Right vs. the Left?

I've been sitting on this for awhile, this train of thought was initiated by reading over the comments in a rather old Economist blog post on a completely different topic, but I figure it's a topic worth posting about. However, I do think a bit of throat clearing is in order. I don't really believe that individual's political beliefs can be located along a line. But I do believe there are constant threads of political belief that tie together the aristocratic and democratic factions of Aristotle with modern Republicans and Democrats.

Specifically, it's the belief that some individuals are better endowed than others with controlling the ship of state vs. the belief that the important thing is that everyone that a decision involves should have a say (or as the disability community puts it, "nothing about us without us," which I see as the essence of left wing politics). I realize that doesn't form anything resembling a line, I believe this is an essential element in each side talking past each other. But I do think this can reasonably be used to compare Aristotle's, or Thucydides', democratic vs oligarchic party, with the optimates vs populares of the Roman Republic, with the Mensheviks vs Bolsheviks, or with the modern Republican and Democratic parties.

Something that needs to be noted is that this is about political orientation, it has nothing to do with people's economic beliefs; that's an entirely distinct way to group ideas that doesn't work with a right vs. left analysis.* Once this is accepted the classification works well enough to describe regimes, though it will upset those who use a more muddied conception of left vs. right to do things like classify the Soviet Union as left-wing (it was a radical regime, but it was far more elitist than Aristotle's oligarchic party which makes it really weird to put it on the left wing of the political spectrum, obviously where it is on the economic spectrum is irrelevant to its political classification).

It also needs to be noted that this does not necessarily make regimes more democratic. Many more left oriented regimes, particularly in ancient Greece and with Caesar's populares but also many Latin American regimes, resulted in dictatorships. Some of these eventually shifted right, remember Augustus started on the side of the optimates, others however simply collapsed after the death of a popular dictator who never formed an elite to facilitate the rightward shift. Generally stated, however, the political orientation is that of elitists vs. populists, in a modern context identifying characteristics are things like wanting to limit the franchise to people who are good citizens or embedded in their communities vs. those that think everyone should have a voice, even if they are downtrodden and despicable.

*I realize using right vs. left to communicate economic ideas is common even among well educated people. However, it results in nonsense like saying they're so far right that they're left. This just doesn't work, the Bolsheviks, for instance, compare with the Nazi regime because both had political beliefs regarding the need for an elite to dominate society, to an extent that could be called extremely far right. Both were radical parties and both implemented many similar economic policies, though to protect radically different social segments. But ultimately they were both rather similar in their political orientation as classified by Aristotle, even if radically different in many other ways of classifying societies.

More Evidence that Conservatives Have the Effects of Tax Cuts Backwards

I remember back when I was a conservative leaning undergraduate having completed a few economic courses how simple the world seemed. Incentives were straight forward way to explain everything. Amazing! Shift the incentives and you get more or less of something. The great depression happened because wages couldn't fall to a market clearing level. Higher taxes disincentivised work leading to lower growth. Tax cuts and deregulation meant the best, brightest, and most successful would have more ability to apply their skills and talents to efficient allocation. It's all so easy! Why are these stupid left-leaning Marxists always getting in the way?

Then I graduated and was able to spend some serious time investigating the questions that mattered to me. Then I went to graduate school where I was really able to refine my analysis and learn to interrogate the simple, logical models taught to me at the undergraduate level. By the time I had reached graduate school I had already realized that the world was too complex to bend to the application of straightforward logical reasoning, no matter how much brainpower one has to throw at it. After completing graduate school I had learned to tackle a problem from multiple angles in order to get at some rough semblance of the truth.

What does any of this have to do with the topic of the post? Well, the kind of logical reasoning that one gets out of Econ 100, from media pundits, presidential campaigns, and the whole range of business books all leads one to the conclusion that higher taxes means lower growth. Why, incentives. Simple, easy to understand, perfect for the busy businessman on the fly who wants to write a check to the candidate of the Chamber of Commerce's choosing (rarely explicit, but there's always a lot of indirect solicitation at these things).

The problem is, this reasoning appears to be wrong. Angry Bear has an excellent post discussing a graduate student's paper on marginal tax rates and economic growth. To excerpt:

Using a panel of 18 OECD countries over the period 1960-2009, this paper finds support in favor of a quadratic top tax-growth relationship. Results are robust to different model specifications and estimation techniques. The point estimates of the regressions suggest that the marginal effect of higher top tax rates becomes negative above a growth maximizing tax rate on the order of 70 percent.

Thursday, May 16, 2013

Are People Even Aware When They're Being Sentencious?

Sometimes I wonder if people have any awareness of what they're writing. Brad Delong has a great takedown of Michael Kinsley's article "Paul Krugman's Misguided Moral Crusade Against Austerity."

What I thought was worth going just a bit further into was the bit at the end.

Austerians don’t get off on other people’s suffering. They, for the most part, honestly believe that theirs is the quickest way through the suffering. They may be right or they may be wrong. When Krugman says he’s only worried about “premature” fiscal discipline, it becomes largely a question of emphasis anyway. But the austerians deserve credit: They at least are talking about the spinach, while the Krugmanites are only talking about dessert.

Is Kinsley aware that spinach/desert is exactly the kind of attitude that Krugman is criticizing? It's like a medieval doctor explaining that the pain of disease and bloodletting are necessary for the humors to purge themselves. Or, even worse, like medieval flagellants trying to use self-harm to ward off the Black Death.

This just isn't analysis, there's no reason to think solving a real problem should be unpleasant; the unpleasantness or pleasantness of a solution is entirely irrelevant to its efficacy. This is part of Krugman's point, there's simply no evidence that "the problem is the great, deluded middle class—subsidized by government and coddled by politicians." People want to believe this without any evidence because it fits in well with a morality play. I don't think this means people enjoy the suffering of others, it just means they are using a cognitive shortcut in looking at the world through a moral lens rather than trying to observe the world as it is. It gets in the way of rational analysis to talk of spinach vs dessert.

Given the close juxtaposition of the ideas I am left wondering if Michael Kinsley is even aware of his moralizing or if he has so internalized it that he is honestly mistaking it for insightful analysis? This would explain a lot of our problems. People have so internalized these moral ideas that they are just unable to recognize that they are repeating trite moralisms rather than analysis. He goes into this even further when he tells a story of Volcker and stagflation* that has to do with the moral story told by Ronald Reagan, of small government, entrepreneurship, and individual effort, rather than the actual history of expanding the government's balance sheet during this time. Kinsley appears completely unable to separate the moral story which justifies the policy and social order from the actual actions taken.**

Kinsley also asks, "What’s in all this for the austerians?"

The answer is simple, confirmation of their moral view. The feeling that all is right with this world, that the wealthy, who are doing quite well, deserve the fruits of their labors and that the poor and downtrodden deserve their lot. If stimulus is successful, if the government can upset the moral order of award by merit, this upsets this pleasant equilibrium. If we're not in fact awarded based on merit and effort, but instead have many of our successes and failures determined by institutional factors subject to democratic control, a lot of the mythology of corporate America will be upset. If the elite aren't really all that, if giving dessert to the masses would really be successful, a lot of elitists will have to confront their role as parasites rather than leaders.

And we can't have that. So let the pain continue so that we don't have to look at our society and its moral order any more closely than we have to.

Sunday, May 12, 2013

Brief Thoughts on Detecting Intelligent Life

Crooked Timber is engaging in some wild speculation regarding space travel today and I thought the topic sounded fun.

What I particularly wanted to engage with was the notion that since we haven't detected any extra-terrestrial signals advanced alien civilizations must be rare. While this may very well be the case, my speculation is no better than that of anyone else on this matter, I think this premise is too weak to draw this conclusion from.

Most notably, it assumes that any alien civilization will be using technology that gives off electromagnetic radiation similar to ours. Personally, I find this implausible for a few reasons.

First of all, this kind of communication is deeply impractical for an interstellar civilization. There are lag times between Earth and the space station, go out further, even to Mars, and this form of communication becomes increasingly impractical. Even a multi-planet civilization in one solar system will have powerful incentives to develop something else. Assuming that physical laws permit it, I think it is a safe assumption that the use of radio waves and other forms of energy detectable to us is a technological phase that lasts only briefly in any civilization.

A second problem is that we tend to assume that an alien civilization would be broadly similar to us technologically. But there is no good reason to assume this. The universe is billions of years old, extant alien civilizations may be millions or billions of years old as well.* While we're awfully impressed with our industrial revolution and the development of radio they may not consider us much more advanced than savages wielding stone tools, they may have no interest in contacting a civilization still fumbling around with a primitive toy like radio waves. Perhaps our planet is awash in signals we have no way of detecting and they won't bother with us until we can detect them and respond in kind.

Even if we assume these advanced species have something akin to academic departments that may be listening for antiquated signals we still have the problem of a lag time. We have only been broadcasting detectable signals for a bit more than a century, any alien academic would have to be within about 100 light years to detect us and have to be about half that to respond in kind with technology detectable to us. This vastly narrows the range of plausibly detectable life.

Another problem is an assumption of technological teleology. There is no reason to believe that technology has to, or even often will, develop in the order it did here. There may be many broadly similar civilizations that developed different ways of communicating that never embraced the widespread use of the electromagnetic spectrum. Even if not more advanced than us overall these civilizations would be undetectable as well.

Thursday, May 9, 2013

In Which I Call Robert Samuelson (and those like him) an Ass

Robert Samuelson in the Washington Post:

The only major health gain was psychological. Depression dropped from about 30 percent to 21 percent between the groups. One reason may have been that Medicaid recipients don’t fear huge medical bills...

Obamacare’s advocates ignored these ambiguities. They were too busy flaunting their moral superiority. Universal health insurance is a legitimate goal, but 2009 — in the midst of a major economic crisis — was the wrong time to pursue it. Predictably, it polarized public opinion and subverted confidence for what seem to have been, based on the available evidence, modest likely public health improvements. The crusade for universal coverage has been as much about advocates’ sense of self-worth as about benefits for the uninsured.

Fuck you. Depression is a serious medical condition which can lead to death and impedes the sufferer's ability to work, maintain relationships, and live a full life. Looking only at this measure* we have a very significant public health triumph. While there remains a very substantial stigma towards mental health conditions they are one of the largest public health problems in the United States as well as one of the costliest. According to NAMI "The economic cost of untreated mental illness is more than 100 billion dollars each year in the United States"** Even if we're just going to be good little capitalists and treat the working class as nothing but a potential labor pool, reducing the rate of depression is a very significant contribution to public health, not "flaunting our moral superiority" or "about advocates' sense of self-worth."

To be blunt, this attitude towards the concrete achievements of the study is nothing but knuckle-dragging, head in the sand, partisan denialism of the worst sort. Its atrocious in its disregard for the seriousness of mental illness and its dismissal of the importance of individuals' financial security. Another way to gloss just the statistically significant results is that the study found the poor protect their physical health at a substantial sacrifice to their mental and financial health. No wonder there are so many broken families among the poor, so many of them are broken and suffering from mental illness. How can people be expected to be valuable employees and raise stable families in this condition? I don't mind calling myself morally superior to someone that dismisses these concerns so breezily, I'd hope most people are morally superior to this or our country is going to hell.

Yes, I suppose I could be more analytical and deliver less ad hominems but I've been seeing a lack of concern for the mentally ill among the commentariat that I consider outside the bounds of human decency. This is awful people acting awfully and they don't deserve a fair hearing. They aren't acting like polite company and I don't believe they should be treated as such. I've read article after article (Robert Samuelson is the straw that broke the camel's back, not the first instance) that seems to dismiss this result as next to nothing, as if physical health is all that matters. I find this appalling in its lack of recognition of the real challenges depression poses in sufferer's lives and the very real damage it causes their families and the larger economy.

[Update: I forgot to actually call anyone an ass. Robert Samuelson, and similar critics, is an ass for ignoring the fact that the Medicaid study showed large and significant improvements in by far the most prevalent health condition in his conclusion, seemingly for no other reason than that depression is a mental health condition and he likes to punch hippies. You would have thought we had moved past the point where we only think physical health matters, but it seems not everyone has. It just gets worse when you realize the observed points on physical health are consistent with other research on the impact of health insurance on other measures of health, it would have been highly unusual to have observed a statistically significant impact on physical health given the size and composition of the treatment group. No one expects an intervention to reduce complex health problems by half or more in a 2 year period, these are just more difficult to treat conditions than that (ok, the blood pressure result was a bit disappointing, but the magnitude of the elevated glucose levels was fairly impressive at a 20% reduction).]

Tuesday, May 7, 2013

Some Excellent Graphs on Private vs. Public Sector Employment

Menzie Chinn at Econobrowser takes out the garbage in response to a recent to a Heritage release on employment. He does a great job pointing out the deceptiveness of their baseline and the oddity of ignoring the postal service. I'm not going to repost them here, but they are worth taking a look at. Too much deceptive or outright misinformation gets spread around.

Monday, May 6, 2013

Jared Bernstein has Some Thoughts on Tax Reform Worth Reading

I've beat this drum a couple of times myself, but I'm happy to be able to link to someone else posting about how badly our debates over tax reform misses the target. Jared Bernstein has some interesting things to say on tax reform.

We hear all the time about how low taxes on capital leads to growth

and yet, there’s virtually no evidence.
University of Michigan tax economist Joel Slemrod, another of the nation’s leading tax policy experts, has found that “there is no evidence that links aggregate economic performance to capital gains tax rates.”  Similarly, [Tax Policy Center] has found no statistically significant correlation between capital gains rates and real GDP growth during the last 50 years. In addition, a new CRS report analyzing capital gains tax rates and economic growth finds that “analysis of such data suggests the reduction in the top [capital gains] tax rates have had little association with saving, investment, or productivity growth”.

As an alternative, Bernstein proposes some ideas that evidence actually exists for, rather than prejudice and discredited theory:

Instead of starting from what are basically discredited supply-side arguments—the fiscal version of drink-our-beer-and-prepare-for-the-arrival-of-the-hotties—tax reform should focus on what really drives economic growth these days: globalization, including currency and trade imbalances, technology, skill demands, connectivity, industry mix, capital markets and how those national and international phenomena interact our workforce, public goods/infrastructure, our airports, financial markets, technology, ports, and so on.  Simply cutting taxes on the wealthy or the multinationals doesn’t begin to scratch any of these critical economic itches.
I don't have time to comment much, but I do think the framing of tax reform is one of the clearer pieces of evidence of how the elite dominate the discourse and manipulate our institutions to their own benefit, rather than the benefit of the nation as a whole. It's common wisdom that "pro-growth" policies mean low taxes on "job-creators," business, and capital; yet there's little evidence to support these policies. It's common wisdom for the sole reason that a rich man in a suit said it, which isn't wisdom at all.

Sunday, May 5, 2013

The Biggest Story of the Year

Getting to this a little late, but I think the fertilizer plant explosion in Texas is probably the biggest story likely to happen this year. It points at a number of deep, structural problems in the United States and, more generally, in our conception of capitalism. The basic problem is that our institutions allow individuals to privatize potential gains regardless of the total social cost. There is no way that the amount of gain from this plant even approached the amount of losses that it has now inflicted. That it only has $1 million in liability insurance only adds marginally to the damage, though the lack of outrage has added greatly to the insult.

The tragedy, and what a proper news media would be exploring in depth, is how rampant this is. How small was the marginal benefit of increased home construction due to lax lending problems relative to the damage? How many millions of dollars of output are lost when people die of an e-coli outbreak for how tiny a marginal benefit to a marginal food producer (I'm intentionally ignoring the human cost so as to not mix economic and moral systems, the cost is clearly grossly disproportionate even if we think of a little girl as nothing but an economic agent)? Drugs that do little for patients but that increase risks result in huge damages. Pollution results in massively disproportionate losses, look at the evidence of the lead-crime link, and at the tail end may threaten human life on Earth.*

But since a business never accumulates assets sufficient to cover the damage no private can possibly way the incentives properly, their individual benefit is high but their liability is far less than the real losses. Add in to this the reality of economic power and the ability of agents to use assets collected now to protect themselves from future liability and we have a system that can never reach a productive equilibrium.

Further, it exposes the parasitical form of capitalism and policy that is coming to characterize the red states in the US. Texas can attract business with the low cost of doing business, but it does this by slashing protections resulting in the losses of hundreds of millions of dollars in this one case alone. Add to this the loss of life and health from these injuries and those costs are doubtlessly higher. Yet, as long as this model is permitted to exist, how could a business wishing to be responsible by increasing liability coverage and imposing greater safety protections pass these costs on to potential customers that are not impacted by the potential losses covered by these higher costs? The low cost Texas supplier would always have a cost of goods and a potential customer would have no way of seeing the differences between the responsible and the reckless business.

Luckily we can appeal to government, but as our regulatory agents get gutted this protection becomes ever slimmer. And as this occurs the ability of agents to advocate for further cuts to the agencies that impose precautionary expenses, like mandatory liability or tax enforcement, is further eroded. This is the story of the year, yet we are hearing far more about the Boston bombings and other relatively trivial stories. Since this is one of the few stories that we really do have the power to do something about, where public action and pressure really could create change, the failure of the media, and the public, to pick up on this and expose these problems is a really damning indictment on our generation. It was workplace issues, and public hazards, that touched off the Progressive era and all the great things that generation achieved. If we fail to use this as a rallying cry we prove ourselves less than our ancestors.

[Had little time to write this and will probably try to clean it up later]

*I regard this on the far tail end, not an imminent danger, but it's madness to fully privatize the gains from this while doing so little to protect ourselves from a downside that could reduce all sums to 0.

Friday, May 3, 2013

The PPACA is Awful, if You Pretend the Out of Pocket Maximums Don't Exist

I think there are a lot of flaws with the PPACA, it certainly isn't what I'd implement if I was dictator for a day. But that doesn't mean it isn't progress and doesn't excuse those who make it sound worse than it is in hopes of, well, I'm not sure since this is coming from the left. I find comments like these from a post on Naked Capitalism exasperating, but too common on the left wing:

ZEESE: [T]here’s several levels of insurance coverage [available under ObamaCare:] —90/10, where the insurance company pays 90 percent, consumer pays 10 percent; 80/20; 70/30; 60/40. The subsidy provided by Obamacare to people who can’t afford insurance will only cover 70/30 plans. So when you get a serious illness, you’re paying 30 percent of the cost of that health care.
Now, what’s really bad about this is that prior to Obamacare, some of the state insurance regulators were pushing insurance coverers to a higher level, where they would provide more coverage rather than less. Obamacare has now put it into law that 60/40 is okay and 70/30 is what the government will pay for. And so the 80/20 and 90/10′s become less common. So you’re going to see more and more people with under-insurance and not going to see lack of insurance completely go away.

This just isn't accurate. From Kaiser Family Foundation:

Within each tier, insurers could design a wide range of options with varying deductibles, copays, and coinsurance to meet the specific actuarial value. The only cost-sharing element specified for all plans is a cap on total annual out-of-pocket costs, equal to the out-of-pocket limit in Health Savings Account qualified plans (currently $6,050 for an individual and $12,100 for a family).
Lower-income enrollees who buy coverage through a health insurance exchange would have lower out-of-pocket caps and be eligible to enroll in plans with lower cost-sharing levels. For example, enrollees with incomes between 150% and 200% of the poverty level ($34,575 to $46,100 for a family of four) would have an out-of-pocket maximum equal to one-third of the standard level (e.g., a little over $2,000 per person) and receive coverage with an actuarial value of 87%.
The standard out of pocket maximum is something like $6500 (I don't feel like looking it up). In addition to the out of pocket maximum there will be a large number of mandatory covered benefits that won't be a part of the cost share. It's not exactly up to developed world standards but neither is it the status quo either. There will be some issues with individuals with an income just above the subsidy cut-offs, though the catastrophic plans available to those under 30 will mitigate this somewhat, but this is the kind of tweaking that can be done with time.

There will be very few people who actually end up in a situation where they pay 30% of their health care costs with a serious chronic illness, either their income will fall so they get the subsidies (yeah, this ain't great but it's the reality of serious illness) or they'll be making enough that they hit the maximum out of pocket maximum. The slice of the population that will be disadvantaged by this is far thinner than those disadvantaged by the status quo. Yes it would be nice if this slice did not exist, but shrinking this proportion is progress (it's also one of the few real, defensible examples where the middle class ends up worse off than the truly poor, since their benefits might erode a bit while they still bear high costs).

It is true that the PPACA will probably make corporate insurance plans less generous. This is something that doesn't bother me all that much. About the only thing the right is correct about is when they howl that insurance benefits are a burden on businesses. I disagree that having a mixed system where some companies voluntarily provide it is better (if employer provider insurance is the standard, making it mandatory is better than creating space where employers can gain a competitive edge simply by being dicks and breaking community standards), but I do agree generally that businesses financing healthcare makes US businesses less competitive. Eroding this coverage probably isn't a bad thing, it will help equalize the healthcare available across economic brackets. Of course, this is only another step on the path to a working health care system (the PPACA moves us from completely broken to completely broken but less so), but saying it's worth than nothing is just nonsense.

Of course, the limitations to the Medicaid expansion is a major problem.

Thursday, May 2, 2013

Yglesias Nails it On 401ks

I think Mathew Yglesias gets it exactly right on our 401k world, it sucks.

Here's the essential shape of 401(k) as a backbone of the retirement system:
— Poor people get absolutely nothing.
— Wealthy people who would have had large savings anyway get a nice tax cut that offers no meaningful incentive effect.
— For people in the middle, the quantity of subsidy you receive is linked to the marginal tax rate you pay—in other words, it's inverse to need.
— A small minority of middle-class people manage to file the paperwork to save an adequate amount and then select a prudent low-fee, broadly diversified fund as their savings vehicle.
— Most middle-class savers end up either undersaving, overtrading, investing in excessively high-fee vehicles or some combination of the three.
— A small number of highly compensated folks now have lucrative careers offering bad investment products to a middle-class mass market based on their ability to swindle people.

Another problem he is spot on about is that the dominant business strategy for companies marketing 40lk products is to market inferior products because it is possible to make more money on them. There is so little money to be made on better products that it doesn't make any sense to market them; when this is the case market mechanisms can't work to create good outcomes.

This situation isn't confined to 401ks either. Many goods are set up so that dominant business strategies are often terrible for the consumer (one example, health care and the dominant strategy of not publishing prices). In cases like these market incentives can't lead to good outcomes, the mechanisms just don't work.

To briefly broaden the focus, I think this is a general problem with the insistence on the merits of exposing individuals to risk. Basic economic thinking implies that we should all be sorting towards are individual comparative advantages, setting up institutions that mean particular skills heavily influence outcomes, like financial management, are terribly inefficient. Most people will reach a point where they are no longer capable of working, why should the outcome of their life after this point depend so strongly on financial skills they may or may not possess any talent for? Why do we create institutions that drive this result and advantage those with these skills rather than simply creating an even playing field that those skilled could enjoy additional advantages but everyone would be comfortable. It wouldn't be a problem if the financially savvy could use their skills to retire a year or two earlier, we should all enjoy the fruits of our talent and labor, but it is a problem that those that work hard but suck at finance have a poor retirement while those that are skilled in this area might be able to retire 10 years early due to all the subsidies they enjoy. What good does this do the country?