Democrats are already looking beyond ObamaCare’s slow-motion failure, and Colorado is showing where many want to go next: Premiums across the state are set to rise 20.4% on average next year, and some have concluded that the solution is more central planning and taxation. Voters will decide on Nov. 8 whether to try the single-payer scheme that blew up in Vermont.

Amendment 69 would alter the state’s constitution to create a single-payer health system known as ColoradoCare. The idea is to replace premiums with tax dollars, and coverage for residents will allegedly include prescription drugs, hospitalization and more. Paying for this entitlement requires a cool $25 billion tax increase, which is about equal to the state’s $27 billion budget. Colorado would introduce a 10% payroll tax and also hit investment income, and that’s for starters.

So far the ballot initiative is not popular, and it is also opposed by the state’s Democratic governor.  Still, it would write ColoradoCare into the state’s constitution, and if you run referenda enough times, etc.  The broader point is that single-payer plans, whatever their virtues and flaws in toto, cannot work at the state level in the United States.  The single state is not big enough to bargain down health care prices very much, and furthermore the state government has to run a balanced budget and, because of competition with other states, has only highly imperfect control over its own feasible level of taxation and expenditure.  A single state cannot simply decide to “go Denmark,” for instance.

Here are further details on ColoradoCare, eventually the link will become noisy.  Here is a Denver Post Op-Ed against ColoradoCare, again a noisy link.

Hat tip goes to Christopher Balding.

No, here is my latest Bloomberg column on that question.  Here is one bit:

One criticism is that the tribunals could force governments to pay compensatory “takings” to foreign companies that incur costs as a result of safety or environmental regulations. But it has long been standard practice for trade treaties to protect foreign companies, for example by limiting the nationalization of foreign investment. Investors don’t always trust the courts of the nations they are investing in, and indeed from 1990 to 2013, at least 150 foreign-owned firms were nationalized, typically in emerging economies, or otherwise subjected to confiscation of value. Agreeing to refrain from such practices can attract more foreign investment and raise living standards.


…the U.S. and Vietnam have had a bilateral investment agreement since 2001, and with few if any negative consequences. More generally, there are now more than 2,000 bilateral investment treaties worldwide, 41 with the U.S. at last measurement, and they typically have some form of investor-state dispute resolution. So does the 1994 North American Free Trade Agreement between the U.S., Mexico and Canada. Over this same period, trade and investment have brought global living standards to unprecedented heights.

National sovereignty has not exactly disappeared. Trade treaties typically recognize that governments have a legitimate interest in regulating safety and the environment, and most of the world’s trading nations have made good progress in those areas.

Part of the discomfort over dispute-resolution panels is the notion that their private deliberations circumvent the democratic process. But it is a basic feature of most democratic governments that the legislature sets up legal institutions that subsequently act outside of direct democratic control.

I do readily grant that ISDS may be a bad idea for tactical reasons, simply because it is unpopular.  But a good question to ask is this: if someone opposes a trade agreement because of ISDS, is that person a committed opponent of excess litigation more generally?  Usually not.

The year that is 2016

by on October 21, 2016 at 12:26 am in Current Affairs, Economics, Law | Permalink

Japan’s Financial Services Agency is nearing a landmark decision on the status and securitisation of PokeCoins, the virtual currency used to breed rare monsters in the highly successful mobile game Pokémon Go.

The FSA, which has not formally disclosed when it will make its ruling, is debating the issue with Pokémon Go’s US-based creator, Niantic. The outcome, according to lawyers scrutinising the matter, could oblige domestic Japanese and overseas companies whose games are available in Japan to secure the virtual money they have sold to local gamers with substantial deposits of real-world yen.

Analysts say that while the FSA is focused on PokeCoins, the regulatory time-bomb could threaten the magic stones of Puzzle & Dragons, the green gems of Clash of Clans and the rainbow orbs of Monster Strike.

The FSA is so far the only regulator in the world weighing the measure, but its decision looms over Japan-based pools of cash worth tens of millions of dollars, according to industry consultants. Yen-denominated sales of virtual currencies are especially high in Japan because of its status as the world’s most valuable mobile games market.

According to SuperData Research, annual revenues from mobile games in Japan have nearly tripled since 2012 to an estimated $8.6bn in 2016 — much of that, say analysts, driven by sales of virtual currency.

Pokémon Go, the Nintendo smartphone game that was launched in Japan in July and surged at record speed to the top of the accumulated revenue charts, has made the sale of its virtual currency especially appealing to players eager to complete the full collection of monsters. One hundred PokeCoins, costing Y120 ($1.16), will buy a monster lure while 500 will buy eight lucky eggs.

That is from Leo Lewis at the FT.

The primary reason Washington operators can dictate the terms of engagement with Washington journalists is that the true insiders are few and the journalists are many. In medium-sized towns, the power dynamic is reversed, as the number of journalists is very small and sources are many. This means journalists need not ingratiate themselves in the same way to get a story. Until the Washington press corps is reduced by 90 percent—which won’t happen in our lifetimes—the mortifying dance we see in the Podesta emails will continue.

That is from Jack Shafer at Politico, via the excellent Kevin Lewis.

Ford fact of the day

by on October 20, 2016 at 1:32 am in Current Affairs, Economics | Permalink

Mr. Trump and others have criticized Ford for creating jobs in Mexico rather than in the United States. Seldom mentioned by Ford’s critics, though, is an essential fact. The Wayne factory will remain fully staffed, with 3,700 workers, to build what Ford really needs now: more trucks and S.U.V.s.

There is no doubt that Nafta has played a role in the migration of many American manufacturing jobs to Mexico in the last 22 years. Before the trade agreement, United States automakers barely had a presence in Mexico. Now, Mexico’s car-making work force is about 675,000 strong, according to the Mexican auto industry’s trade association.

But the story of Ford’s Wayne plant makes clear that many factors determine the number of auto-making jobs in the United States — a figure that according to federal labor statistics has actually grown by 200,000 jobs, to around 900,000, since the recession gave way to economic recovery in 2009.

That is from Bill Vlasic at the NYT.

The world’s highly skilled immigrants are increasingly living in just four nations: the U.S., U.K., Canada and Australia, according to new World Bank research highlighting the challenges of brain drain for non-English-speaking and developing countries.

I don’t think we have thought through well enough the final equilibrium here.  English will be the global language for a long, long time to come, and China will remain robust as a major source of indigenous talent.  A lot of Chinese could leave and there would still be a lot of smart Chinese around in China.  I do fear, however, for the politics in this semi-cosmopolitan but not cosmopolitan enough Anglo-American world in the making…

That is from Adam Creighton at the WSJ.

The accuracy of these tests is astounding.
Hat tip: Nathaniel B.

Single quarter jobs

by on October 19, 2016 at 1:27 pm in Data Source, Economics | Permalink

We find that the decline in these jobs accounts for about a third of the decline in the fraction of the population that holds a job in the private sector that occurred from the mid-2000s to the early 2010s.

Here is the full paper, by Henry R. Hyatt and James R. Spletzer, via the excellent Kevin Lewis.

Kevin Grier lets loose at Cherokee Gothic:

People! Check out this quote,

“Michael Gapen, chief U.S. economist at Barclays Plc in New York, said Fischer’s comments “reflect an ongoing divergence of opinion” at the central bank. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy differently right now,” he said.”

After the events of the great recession, it’s just amazing to me that people think the economy is a steak, the Fed is a precision sous-vide machine, and all we have to decide is medium-rare or well-done.

For the millionth or so time, the models implying the Fed can do this, completely and utterly failed during the great recession. There is also evidence that a large part of the good outcomes credited to the Fed during the great moderation were actually due to exogenous forces (i.e. good luck).

Neither the Fed nor the President “runs” the economy. There is no stable, exploitable Phillips Curve / sous vide machine that lets us cook at a certain temperature.

This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed’s power over the economy is quite limited and tenuous.

But I guess it’s comforting to think that the little old lady behind the curtain can fix things for us.

She can’t, Stan Fischer can’t, Bernanke couldn’t. Maybe the sous vide machine is unplugged?

Yup, whatever your prior was, after the events of the Great Recession, you should surely downgrade your belief that Fed has a lot of control over the economy and yet I see a resurgence of this view despite it being at all odds with the evidence.

From Brad Plumer at Vox:

“We have done extensive polling on a carbon tax,” Podesta apparently told Clinton adviser Jake Sullivan back in January 2015. “It all sucks.”

There is further detail at that link.  A quite remarkable David Roberts piece at Vox, worth reading in its entirety, lays out why much of “the left” opposes the carbon tax on the ballot in Washington state.  It is revenue-neutral, doesn’t produce enough social justice, and as I would say it doesn’t have the right mood affiliation, among other factors.  Economist Yoram Bauman plays a key role in the article, and here is a quotation from him:

I am increasingly convinced that the path to climate action is through the Republican Party. Yes, there are challenges on the right — skepticism about climate science and about tax reform — but those are surmountable with time and effort. The same cannot be said of the challenges on the left: an unyielding desire to tie everything to bigger government, and a willingness to use race and class as political weapons in order to pursue that desire.

I’m not so sure about that portrayal of the Republicans, but still that is a perspective you don’t hear enough.  (Scott Sumner comments on the piece.)  You may recall my earlier post on Republicans and Democrats:

At some level the Republicans might know the Democrats have valid substantive points, but they sooner think “Let’s first put status relations in line, then our debates might get somewhere.  In the meantime, I’m not going to cotton well to a debate designed to lower the status of the really important groups and their values.”  And so the dialogue doesn’t get very far.

To return more directly to the title of this post, why don’t we have a carbon tax?  I would put it this way: for better or worse, the American people expect their government to solve this problem without raising the price of energy.  Funny that.

Dancing retirements

by on October 19, 2016 at 12:32 am in Economics, The Arts, Uncategorized | Permalink

Dancers are notoriously bad at planning for their second acts. They underestimate the age at which they’ll retire (the average age of retirement is 34), overestimate the amount of money they’ll earn, and misjudge the forces that will end their careers. More than one-third of the dancers in a 2004 survey were driven to retirement by an injury; only 5 percent left because they actually wanted a new career. When dancers enter the workforce in their thirties, many are woefully unprepared. Only 3 percent of current dancers say that teaching dance is their preferred post-retirement line of work, but it’s the most common fate: 53 percent end up teaching dance in some capacity.

And this:

Even during peak earning years: in the U.S., an average dancer’s annual total income is just $35,000—about half of which comes from non-dance activities.

The article is interesting throughout, for instance:

She wants a serious relationship; both of her sisters are married. She’s tried Tinder and recently joined Bumble. For obvious reasons, she doesn’t like the apps that make you fill in your whole biography. Does she miss her old life—the drama, the spotlight? “I don’t think real life has enough glamour,” she says. But she also says that she doesn’t think glamour is “enough to base your life on.”

That is from an Alice Robb Elle profile of Alexandra Ansanelli, a ballerina who retired early, via Annie Lowrey.


Ansanelli is on the far right.

No.  I have a longer Bloomberg column on that topic.  Here is an excerpt:

Overall, Republican legislators are less comfortable with higher inflation than Democratic lawmakers. In other words, political constraints, to the extent they have had influence, have pushed Fed monetary policy closer to the views of many Republicans than to Democrats. That is not because the Fed is partisan, but rather because it simply cannot afford to alienate the public too much.

In other words, no.

Narrow networks in Obamacare

by on October 18, 2016 at 1:33 pm in Economics, Law, Medicine | Permalink

That’s why the results of a recent study of new plans offered in California are especially troubling. Simon Haeder, a West Virginia University political scientist, and colleagues at the University of Wisconsin-Madison and the University of California, Irvine, found that access to primary care physicians was relatively poor for a sample of plans offered through California’s Affordable Care Act Marketplace in 2015. Most Obamacare marketplace plans in California, as well as in other states, are narrow network plans.

Using a “secret shopper” approach, the study found that only about 30 percent of attempts for appointments with specific primary care doctors were successful. In this approach, an individual pretending to be a patient seeking an appointment called the offices of over 700 primary care doctors listed in marketplace plan directories.

In about 15 percent of cases, the doctor did not accept the caller’s plan, despite being listed in its directory. In nearly 20 percent of cases, the directory included the wrong phone number or the number was busy in two calls on consecutive days. Ten percent of doctors called were not accepting new patients. And about 30 percent of doctors called were not primary care physicians, despite being listed as such in the directory.

When callers were able to make an appointment, the average waiting time for a physical exam was about three weeks. In cases for which the caller pretended to have acute symptoms, the average time until an appointment was about one and a half weeks.

That is from Austin Frakt (NYT).  It seems to be an example of the kind of rationing many of us predicted for Obamacare, although I would like to see the comparable numbers for the pre-ACA years.  The piece has other points of interest, mostly about cost savings, which seem to be real.

Overall, our results suggest that investing in secure payments infrastructure can significantly enhance “state capacity” to implement welfare programs in developing countries.

That is from Muralidharan, Niehaus, and Sukhtankar in the latest American Economic Review.  Their main result is this:

We find that, while incompletely implemented, the new system delivered a faster, more predictable, and less corrupt NREGS payments process without adversely affecting program access.

Most of all there is lower leakage of benefits, and program participants strongly prefer the biometric arrangements and the accompanying direct cash transfers.  The measurements of this paper, by the way, are based on 19 million data points.

I believe the Indian biometric smartcard initiative remains under-discussed and underappreciated.  It is actually one of the greatest achievements of contemporary times, based upon the innovative mobilization of the labor of millions in a manner that probably only India could do and that at first sounded quite ridiculous.  Scan, record, and use the biometric information of over a billion people, and in a “backward” country at that.  Well, they haven’t finished but it is well on track to succeed.

I do worry about the privacy implications of the technology and the data collection, but as it stands today so many Indians don’t have that much privacy in any case.

Here are ungated versions of the paper.  Here is my earlier post on the paper and the technology.  I had written:

One broader lesson here is that developing nations are not merely copying and applying the inventions of the West, but innovating on their own.  But a lot of their innovations take labor-intensive rather than capital-intensive forms, and thus they do not always look like innovations to our sometimes ethnocentric eyes.

Still true.

The founding father of Singapore, Lee Kuan Yew, credits ‘social discipline’ for the phenomenal economic rise of his country (Sen, 1999). Countries such as Singapore apparently demonstrate that autocratic measures are probably necessary, particularly in culturally fractionalized societies for creating the social stability necessary for economic growth (Colletta et al., 2001). Such thinking informs the so-called “Asian model” (Diamond, 2008).1 Recent studies, particularly in economics, support the logic (Alesina et al., 2006 and Easterly et al., 2006). According to these scholars, the more congruent territorial borders are with nationality, the better the chances for good economic policy to appear endogenously from within these societies because social cohesion determines good institutions and policies for development (Banerjee et al., 2005 and Easterly, 2006b). This paper addresses the question of whether or not social diversity hampers the adoption of sound economic policies, including institutions that promote property rights and the rule of law. We also examine whether democracy conditions diversity’s effect on sound economic management, defined as economic freedom, because the index of economic freedom is strongly associated with higher growth and is endorsed by proponents of the ‘diversity deficit’ argument (Easterly, 2006a).2

…Using several measures of diversity, we find that higher levels of ethno-linguistic and cultural fractionalization are conditioned positively on higher economic growth by an index of economic freedom, which is often heralded as a good measure of sound economic management. High diversity in turn is associated with higher levels of economic freedom. We do not find any evidence to suggest that high diversity hampers change towards greater economic freedom and institutions supporting liberal policies.

Paper here. The data is a panel from 116 countries covering 1980–2012 so this doesn’t rule out a negative long-run effect but it is prima facie evidence that diversity need not reduce freedom or growth.