Fining Companies: Who Thinks this Gets Passed on to Shareholders and Managers?

Reading an article on al Jazeera about Mexico fining HSBC for money laundering led me to reflect on whether or not these fines get passed on to shareholders and management, or whether it just leads to higher prices for consumers or cost cutting that impacts the rank and file. I really don't know, but if anyone has references that explore this question I'd appreciate them being passed on.

Watch the Company you Keep

So, unsurprisingly really, negotiations over the small arms treaty failed in the UN. I have no real interest in discussing the issues at length, but it is notable who we happen to be siding with here. Aside from Syria, Iran, and North Korea in the recent discussion, in the earlier debate over the bill "24 countries abstained: Bahrain, Belarus, China, Egypt, India, Iran, Iraq, Israel, Kuwait, Laos, Libya, Marshall Islands, Nepal, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Sudan, Syria, UAE, Venezuela, Yemen, and Zimbabwe. The United States of America voted against the resolution. (was feeling lazy, wikipedia, sorry)"

I would just like to point out how often anti-internationalists point towards guilt by association types of arguments. It would be very, very hard to keep worse company than this. Perhaps this is something to reflect on.

A Trend Will Continue Until it Can't

Reading an op-ed piece, that wasn't bad by any means, in the Washington Post inspired a desire to ask for some sense in discussing health care costs.







From Forbes


Scary graph and all, but does anyone really think this is sensible? Continue this graph out and some time in the 2100s health care spending will exceed 100% of GDP.

Rather obviously, this doesn't make any sense. The current trend won't continue because it can't, whether or not we have health care reform.

This isn't to say that reform isn't necessary, that we don't need more doctors, or that we shouldn't be worried about the problems. However, the sharp trendlines and high cost increases are just noise, they simply aren't possible. If Medicare spending gets cuts few doctors will be able to cease seeing Medicare patients, for many doctors those over 65 make up the majority of their patients. You can't make any money by not seeing anyone. In the end, what we are discussing with health care reform is who is going to be paying for forced changes, not whether or not current trends will continue.

I think this is critical to keep in mind when discussing health care. There is no solution where everybody wins, current trends, and thus current power arrangements, cost structures, and winners and losers, cannot be the same because the current trend is unsustainable. What we are debating is who wins and who loses. This is why the debate is so fierce, no one wants to be the loser. This is also why everyone should be very skeptical of claims made and aware of framing, everyone has some skin in this game so expect dishonest presentations from just about everyone involved in the health care debate.

Government Pay: An Ambiguous Result is a Meaningful Result

Just a brief note. There was a column in today's Washington Post looking at a recent GAO report that examined various studies comparing public to private sector pay. What I find notable is that the column briefly mentions that the GAO report doesn't tell us which methodology is correct.

I disagree with the claim that this leaves the debate at the same place it was before the report. A null result is a significant finding. If the perception of difference relies on the method used to perceive that difference, and all methods are methodologically sound for the question under examination, than the difference is too small to be worthy of basing public policy on (or the methodologies being used are either flawed or improper for the question at hand, but this is not the finding of this report).

Full stop.

Why Does the Topic of Welfare Inspire Some Republicans to do their Best Impression of an Outraged Aristocrat?

I hadn't heard this elsewhere, but apparently Obama has been granting waivers to welfare work requirements. This has outraged the right as Jennifer Rubin displays rather well:

Like Kaus, I am at a loss to explain this maneuver on political grounds. (“Requiring that welfare recipients work is a political winner — proven, again and again. . . . And in 2008, Barack Obama didn’t dare suggest that he wanted to do what he has done today. Obama’s given his opponents a huge opportunity to raise the ‘welfare’ issue, to associate him with the unpopular idea of subsidizing women who have children they can’t support, usually out of wedlock — even giving them free community college training that hardworking people who don’t go on welfare can’t get!” )...

Obama's imperious use of executive orders and refusal to enforce the laws of the land fairly and completely is a constitutional disgrace. But his policy judgment is so off-kilter that it also demonstrates Obama’s faulty approach to immigration, welfare, administration of justice, etc. The policy implications are far more politically damaging and reinforce conservatives’ fears that a second Obama term would witness a lurch to the left.

Perhaps this is an instance of a President trying to do what's right. He may have been advised on the issue by someone that has actually read the poverty literature, while work requirements can have a positive impact when the labor market is tight the people forced into work by them are those least able to compete on the labor and most likely to turn to illicit activities if not supported. With high unemployment it is very unlikely that the welfare recipients impacted by the relaxation of work requirements could find decent work, relaxing these requirements may help to alleviate other social problems, aside from the fact that putting food on the table and keeping the lights on for poor kids is a rather decent thing to do. I agree this is almost certainly a political loser but it makes a lot of sense to anyone that has read the poverty literature. In current economic conditions work requirements will almost certainly only drive up the competition for low end jobs and may lead to someone unlikely to keep the job getting it over someone that is more motivated and doesn't need the stick of a benefits cut to work. Even in better economic conditions the impact of work requirements is very small, in current conditions it is all downside and no upside from an economic and social point of view. Perhaps that, and not political considerations, is the motivation here.

It also deserves noting that people never seem to object when the president approves state waivers to tighten welfare, like drug testing or Michigan's restriction of benefits to four years. When states ask for these waivers where is the hue and cry over ignoring current law.

Examining Walker's Claims Regarding the ACA in Wisconsin

Scott Walker made some claims about how the ACA will impact Wisconsin that I found rather surprising. So I did the sensible thing, I read the report he supposedly got the data from.

First of all:

100,000 people will be dropped by their employer-sponsored health insurance;

According to the cited report, "there will be 10,000 fewer Wisconsin residents covered via ESI due to the effects of the ACA. This represents less than a 1% decline in ESI enrollment."  (p 14) Walker seems to be referring to he figure on p. 14 which shows firms dropping coverage, individuals voluntarily leaving, and new firms gaining coverage. To assess the ACA obviously the net effects are the relevant figure, isolating one number is cherry picking. It should also be noted that it is likely that many of those voluntarily leaving their employer sponsored coverage for the exchange feel their options have been improved by the reform. No one has seriously claimed that there won't be winners and losers from this policy change (or any other), isolating the downside when the net effects are clearer and more intuitive is a poor way to present data.

Another Data Point on how Resistant Beliefs are to Facts: Birtherism

Came across this post on polling on the question of whether or not the respondent believes Obama was born in the US. While there was an initial dip after release of the long form birth certificate, numbers are back to where they were before hand. The partisan divide remains just as strong.

Currently, 55% of Americans believe Obama was born in the US while 20% state this is false, the remainder respond not sure. Among Republicans,  31% believe Obama was born in the US while 33% state this is false. I have trouble believing those are truly honest statements, but then again I have encountered the odd birther who feels the need to bring it up even when basically irrelevant to the conversation; there may be a larger minority that believes this privately that doesn't wear the belief on their sleeve.

This is simply one more piece of data showing how hard it is to change beliefs with data as well as how much stronger group think and tribalism are than individual level rationality. I think this is an important point to drive home, too often we talk about social, political, and economic issues as if they can be analyzed through a framework of individual level rationality despite an overwhelming amount of evidence that resistance to data and individual level rational thinking not only exists, but is rather common.

(h/t Monkey Cage)

Burning Down Some Straw Men Curtosy of Jonah Goldberg

So I saw this piece of idiocy that somehow trended to the top of the Washington Post's most popular the other day. I probably shouldn't spend my time on Jonah Goldberg, but I think I can use it as a springboard to bring up some interesting topics. On the main point, that liberals also have an ideology, there is some truth to this. But he overstates it, there is a real difference between people who update their beliefs to fit the facts and those that let their ideology come first (basically the difference between medieval scholasticism, which saw its purpose as discovering evidence of known truths in the natural world, and the modern scientific method, which seeks to use evidence of the natural world to discover what can be known and understood). The test is not whether or not an individual has a pre-existing ideological basis for our thoughts, we all do, but whether we can update that ideology for new evidence.

But I got distracted. His first cliche is diversity is strength. He makes a good point about how diversity can erode social trust. However, diversity can also foster new ideas and approaches. A colleague recently remarked to me how much the diverse viewpoints and backgrounds enhances our ability to get our job done and interact successfully with differing clients. He contrasted this with the false and pointless diversity stereotyped in the media.

This I find very true. The point of diversity isn't to provide "extra help because of the horrible legacy of slavery and institutionalized racism" (though there is a lot of evidence that institutionalized racism remains prevalent in the US), it is because different perspectives can reveal problems and propose solutions that would not be revealed by a uniform perspective. Admittedly, race is an imperfect proxy for this, but it is a readily identifiable one that tends to be substantially correlated with having a different background and upbringing, and thus often perspective, from the individuals that tend to make up the majority of firm management or classroom students. Of course, this advantage can also be eliminated by hiring managers who choose to select for members of a race most like themselves in upbringing and viewpoint to meet quotas, there is no institutional solution to human stupidity and obstinacy. I'm sceptical of anti-diversity "color-blind" arguments because they almost invariably elide into a selection process that would select on universality of background, and often perspective, whatever the skin color of the person under consideration. Which just shows these arguments entirely miss the point (I should mention that more than a few people have proposed that men such as Socrates would have been influenced by the diverse individuals that they encountered in the Athenian forum, race provides a good proxy for diversity in America, in other cultures other traits would be correlated with diversity of belief and perspective).

New Report on Economic Mobility

Just finished reading a new report on economic mobility from the Economic Mobility Project at Pew Charitable Trust. In a nutshell, the report reveals that Americans have experienced absolute mobility, families have both more income and wealth then their parents, while relative mobility (between quintiles) has been less remarkable.

A couple of brief observations. First, economic immobility remains substantially correlated with race, there's a very good reason that people continue to seek explanations and solutions to this problem (like affirmative action).

Second, I would find the absolute mobility measures far more useful if a section were added comparing it to overall economic growth. With a rich country expected growth rate of around 2% a year, it would be shocking if any quintile did not experience some absolute growth. The relevant question is whether or not each quintile is experiencing relatively similar rates of growth or if the place in the distribution is a significant determinant of the growth rate. After all, if the lowest quintile is experiencing a 0.1% rate of growth a year over 40 years there will be an absolute improvement but it isn't very impressive if the top quintile was experiencing 3-4% a year growth. This matters for putting absolute increases in perspective.

Also, briefly, the report reinforces the importance of getting people in the lowest economic rungs into further schooling. Education has a much greater impact on these individuals than it does for others who likely have other resources to aid in their income mobility and security. In addition, the report shows that the lowest income quintile appears to have more of a floor under it than in preceding generations. This is open to interpretation, but the continuation of the stickiness of mobility at the bottom provides a hint that income support programs, like a higher minimum wage, the EITC, and more benefits targeted towards children (like SCHIP) may be helping to prevent these individuals from becoming as destitute as 40 years ago. If enhanced access to market income was the cause, I would expect the absolute gains to be associated with greater mobility, though this is only an educated guess.

Excellent Discussion of Coercion in the Private Sphere

Crooked Timber has an excellent discussion of libertarianism and coercion in the private sphere. I find the section contrasting how libertarians discuss union coercion vs. employer coercion particularly interesting. I recommend everyone take a moment to read over the post for a good overview of the topic, though it is rather lengthy.

http://crookedtimber.org/2012/07/01/let-it-bleed-libertarianism-and-the-workplace/#more-25029

(Of course, this viewpoint is inconsistent with any philosophy wishing for a cessation of coercion, since the state used as a check is necessarily coercive. But I think it is undeniable that people experience coercion even when engaging in free contract, trying to define coercion differently doesn't remove the reality of the experience. It simply allows for an internally consistent, coherent philosophy, something which I believe comes at the expense of dealing with reality and with making a philosophy relevant to policy discussions.)