Regulation


George Newman has a good review of the often inconsistent arguments being put forward in favor of health care “reform.”

I was glad to see him address the “health care represents a rising proportion of our income” issue. 

That’s not only true but perfectly natural.  Quality health care is a discretionary, income-elastic expense — i.e. the richer a society, the larger proportion of income that is spent on it.  (Poor societies have to spend income gains on food and other necessities.)  Consider the alternatives.  Would we feel better about ourselves if we skimped on our family’s health care and spend the money on liquor, gambling, night clubs or a third television set?

When discussing this issue, I regularly ask people if they would rather have today’s healthcare at today’s prices or 1950’s healthcare at 1950’s prices.  No one has ever chosen the 1950s option.  (People would prefer to have today’s healthcare at 1950’s prices, and I too wish that Santa Claus was real.)

Newman, Parsing the Health Reform Arguments

(HT Andrew B.)

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. . . and doesn’t plan to get out of the business any time soon.

I have to admit that this scares the Hell out of me.  From the Wall Street Journal Opinion Journal:

Here’s a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit — until now.

Which brings me to the Pay for Performance Act, just passed by the House. This is an outstanding example of class warfare. I’m an Englishman. We invented class warfare, and I know it when I see it. This legislation allows the administration to dictate pay for anyone working in any company that takes a dime of TARP money. This is a whip with which to thrash the unpopular bankers, a tool to advance the Obama administration’s goal of controlling the financial system.

I think Congress should pass a law abolishing complexity, because then politicians, economists and climate scientists will never have to worry that they really have no idea what the Hell they are talking about.

From Aschwin de Wolf at Depressed Metabolism*:

Even when (macro) economists employ sound methodology and research design, the complexity of the phenomena they study seriously frustrates attempts to use their models to predict the future.  This issue  is not confined to economics. Climate science seems to suffer from this problem as well, which has not prevented scientists and non-scientists from making very strong claims for one position or another

So why are such scientists employable, even excessively rewarded? One reason may be because we would rather perceive ourselves as “doing something” than admitting that we don’t know. Increased government intervention in the lives of  people has increased the demand for social scientists and economists to confer credibility to what otherwise would be considered as arbitrary coercion. Another reason may be because most people are not aware that the emperor wears no clothes. People such as Alan Greenspan or Ben Bernanke are rarely challenged on general methodological grounds.

  • (A blog with a weird combination of philosophy and cryonics evangelism.)

I think I have a basic understanding of public choice theory, and how special interests can use political power to extort money from the rest of us.  However, I cannot understand the tremendous political power of the agricultural lobby, especially the corn growers.  Only 2-3% of the American workforce is directly employed in agriculture, and I’m sure the corn growers are only a fraction of that small percentage.  And yet, the industry continues to receive massive subsidies in the face of opposition by groups as diverse as the Alliance of Automobile Manufacturers, the Motorcycle Industry Council and the Outdoor Power Equipment Institute, the American Lung Association, the Union of Concerned Scientists, the Natural Resources Defense Council, and the Sierra Club.

Everyone Hates Ethanol, The Wall Street Journal Opinion Journal (Mar. 16, 2009).

Americans are unlikely to use enough gas next year to absorb the 13 billion gallons of ethanol that Congress mandated, because current regulations limit the ethanol content in each gallon of gas at 10%. The industry is asking that this cap be lifted to 15% or even 20%. That way, more ethanol can be mixed with less gas, and producers won’t end up with a glut that the government does not require anyone to buy.

The ethanol boosters aren’t troubled that only a fraction of the 240 million cars and trucks on the road today can run with ethanol blends higher than 10%. It can damage engines and corrode automotive pipes, as well as impair some safety features, especially in older vehicles. It can also overwhelm pollution control systems like catalytic converters. The malfunctions multiply in other products that use gas, such as boats, snowmobiles, lawnmowers, chainsaws, etc.

That possible policy train wreck is uniting almost every other Washington lobby — and talk about strange bedfellows. The Alliance of Automobile Manufacturers, the Motorcycle Industry Council and the Outdoor Power Equipment Institute, among others, are opposed, since raising the blend limit will ruin their products. The left-leaning American Lung Association and the Union of Concerned Scientists are opposed too, since it will increase auto emissions. The Natural Resources Defense Council and the Sierra Club agree, on top of growing scientific evidence that corn ethanol provides little or no net reduction in CO2 over the gasoline it displaces.

(HT Carpe Diem)

I don’t know the statistics, but I’m willing to bet that this doesn’t happen often in Virginia.

Mansfield, England:

A BUSINESSMAN and his wife were robbed by four men who burst into their home with hammers, a screwdriver and a large bladed weapon.

The men escaped in a black car with an undisclosed sum of cash after the incident in Hermitage Avenue, Mansfield, at around 9.25pm yesterday.

Even stupid criminals aren’t willing to risk a robbery using this,

when the man’s castle might be guarded with this,

pistol

or this,

Unfortunately, as I have noted here and here, the English aren’t even allowed to protect themselves with “large bladed weapons” anymore.

Or, what do you mean “we”?  Do you have a mouse in your pocket?

An insightful point:

Looking at the (long term) consequences of an act is an important part of individual decision making.  This is so obvious that we are led to believe that such consequentialism is possible for society as a whole.  Political consequentialism can take two forms. In its first incarnation, it is assumed that society is a collective effort toward shared goals. This view regards society, and as a consequence “the economy,” as one organism. A good example of this mindset is displayed by Republican Senate Minority Leader Mitch McConnell when he says, “Our whole economy you could think of as the human body and the credit markets as the circulatory system.” Presumably, any measures that are made to restore circulation will benefit us all.

. . .

In its second incarnation, different interests and values among individuals are acknowledged but it is believed that policies can be designed to optimize a “social welfare function.” This position is a non-starter on epistemological grounds, as evidenced in real life by the lack of consensus among its advocates. This should not be surprising because consequentialism is not possible without guesswork and making personal value judgments. As the political philosopher Anthony de Jasay has argued, at some point someone needs to make decisions that will be binding for all, and consequentialism will ultimately collapse into authoritarianism, plain and simple. Nevertheless, this view has obvious appeal to people  who advocate government intervention and redistribution of incomes.

That brings to mind Milton Friedman’s opening to Capitalism and Freedom:

President Kennedy said, “Ask not what your country can do for you – ask what you can do for your country.” . . . Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society.

(HT Cafe Hayek)

The New York Times has this article on fatty foods and the concept of “informational cascade.”

The notion that fatty foods shorten your life began as a hypothesis based on dubious assumptions and data; when scientists tried to confirm it they failed repeatedly. The evidence against Häagen-Dazs was nothing like the evidence against Marlboros.

It may seem bizarre that a surgeon general could go so wrong. After all, wasn’t it his job to express the scientific consensus? But that was the problem. Dr. Koop was expressing the consensus. He, like the architects of the federal “food pyramid” telling Americans what to eat, went wrong by listening to everyone else. He was caught in what social scientists call a cascade.

We like to think that people improve their judgment by putting their minds together, and sometimes they do. The studio audience at “Who Wants to Be a Millionaire” usually votes for the right answer. But suppose, instead of the audience members voting silently in unison, they voted out loud one after another. And suppose the first person gets it wrong.

If the second person isn’t sure of the answer, he’s liable to go along with the first person’s guess. By then, even if the third person suspects another answer is right, she’s more liable to go along just because she assumes the first two together know more than she does. Thus begins an “informational cascade” as one person after another assumes that the rest can’t all be wrong.

Does this sound like another religious “scientific” non-debate grabbing headlines recently?  In fact, let’s play a game.  I’ll just take some of the money lines from this article on the health effects of fat and substitute a few words.

–  “The scientists, despite their impressive credentials, were accused of bias because some of them had done research financed by the food [oil] industry.”

–  “With skeptical scientists ostracized, the public debate and research agenda became dominated by the fat-is-bad [catastrophic global warming] school.”

–  “Later the National Institutes of Health [Intergovernmental Panel on Climate Change] would hold a “consensus conference” that concluded there was “no doubt” that low-fat diets “will afford significant protection against coronary heart disease” for every American over the age of 2 [global warming is now a reality].”

–  “But when the theories were tested in clinical trials [against actual climate data], the evidence kept turning up negative.”

On both global warming and dietary fat, I’ll defer to the wisdom of Dr. Edward H. Ahrens Jr., who stood steadfast against the fat-is-bad consensus:

“This is a matter,” he continued, “of such enormous social, economic and medical importance that it must be evaluated with our eyes completely open. Thus I would hate to see this issue settled by anything that smacks of a Gallup poll.”

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