Month: April 2007

Is it irrational to favor Fred Thompson because you like his character on TV?

Of course I’m not talking about myself here, Tyler is candidate-neutral.  I’m talking about other people.  Can they just say "I like his character on TV, I think I’ll vote for him"?

Surely there exists some game in which this strategy makes sense (I always chuckle when I write this line).  Let’s say many other people vote the same way and thus expect this same character from him.  Isn’t he then locked into playing this character to some extent?  Of course this means you should favor only truly popular and typecast actors, since an obscure actor, or any actor with many different roles, won’t be much locked in. 

And if he can play the character on TV, maybe he can play the character in the Oval Office as well.  The actual content of policy would still be driven by his ability to pick and heed good advisors, which presumably is not negatively correlated with acting ability or with the nature of this single character.  In fact maybe his agent told him to take the role and he listened.

Ankush has negative remarks on Thompson.

Money-driven Medicine

I was impressed by this book by Maggie Mahar; the subtitle is The Real Reason Health Care Costs So Much.  The book has the most coherent, supportable, and fleshed out anti-market story I’ve seen.  It both tries to explain why the current system works as it does, and historically how it evolved from more modest and less expensive ways of doing business.  It’s not just a rehash of the usual stories about the VA system or France.  The discussions of the growth of for-profit hospitals, the increasing specialization of medicine, the problems with pay for performance, and markets for medical devices are all full of interesting tales.

I interpret the basic story as this: the American health care cost spiral comes from suppliers and their entrepreneurial abilities to market expensive and highly specialized services of dubious medical efficacy.  Medical care starts off as ambiguous in value and hard to measure in quality.  Customers are cowed by doctors and other family members into accepting or even demanding what is offered to them.  Third-party payments make the problem worse, and government intervention has stoked rather than checked the basic dynamic.  You end up with massive expenses, lots of stupidity, and – because of its expense — radically incomplete coverage.  Every now and then the extra services do pay off, but not frequently enough to boost American stats on health care quality.

Medical suppliers, and not insurance company overhead costs, are the main villain of the piece.  The author wishes to put doctors back in charge and liberate them from the need to satisfy patients as customers.  Ha!, I say.  Jason Furman wants to encourage individual consumers to do more monitoring.  I hold an old-fashioned desire to increase transparency and competition to induce the insurance companies, and other third party intermediaries, to set things right.  Single-payer systems will improve matters only if you think the government will make wise decisions about the supply chain.  Otherwise we are choking off supply indiscriminately by lowering prices to providers.

Here is Ezra on the book.  Here is a very brief excerpt.

Addendum: Read Maggie Mahar in the comments.  And Matt Yglesias has a good post on the topic.

In a wealthy society, could you buy a good job?

Let’s say that the world is so wealthy that most people don’t need to work.  Still they might be bored.  They might want to work.

What kinds of jobs could they buy?  Under one view, the resulting jobs would always feel phony.  The customers/laborers would never fear being fired.  They would never have to try very hard, or could never feel that the enterprise really mattered.  You might, for instance, buy a job as a blogger.

Under another view, markets in artificial jobs will be very advanced, a’ la Total Recall.  Maybe it will be only twenty hours a week, but your phony job will feel quite real.  It will feel better and more important than today’s jobs.  Theatre, drugs, and self-deception all can be directed toward this end.

If need be, we can create a separate job in making your phony, purchased job matter (that job surely would matter).  Contract to suffer twenty lashes if you screw up.  Or hire a third party to start sending money to ten poor kids in India.  If you are not a superior producer, the third party will stop sending the money.  He will also send you photos of those Indian children, now kicked out of the orphanage and with distended bellies.  Over time you will see them starve and die.  Of course to accept such terms is, since you will likely work hard, an ex ante act of altruism.

I don’t expect this exact outcome, but only because there are cheaper ways of buying jobs that seem like they matter.  I believe we will be able to buy very good and very fun jobs.  I do not fear that we will all become dissolute recipients of trust funds.

I am indebted to Megan McArdle for a lunch conversation on this topic.

Hodgepodge questions: reaching the finish line

Here are some closing gifts from loyal MR readers:

1. "Economic sanctions (Iran, Cuba, North Korea) – do they work?  Can a libertarian support them?"

Read Dan Drezner’s book and blog posts. 

2. Various carbon tax requests.  Use Google, with "" at the end of your entry.

3. "I would also like to hear your thoughts on the future of money,
whether it be digital or not and what you believe the effect, if any
would be on the economy."

Read my Explorations in the New Monetary Economics.

4. "Do we need the tenure system anymore in higher education?"

I do.

5. "Thoughtful comments–pro and con, of course–on writings such as
"Hooked on Growth: Economic Addictions and the Environment" by Douglas
E. Booth. Our world economy seems to be predicated on growth, which
common sense says cannot continue indefinitely– or can it (short of
mining extra-terrestial bodies for resources)? Thanks."

Read this, from my evil twin Tyrone.

6. "How about the economics of credit card fraud and/or identity
fraud from the perspective of individual, information custodian, and
society? What is your reaction to the TJX breach of 10 million credit
cards or the VA’s loss of 26 million identities, for example? How
does/should the number of records that are lost, the volume of overall
activity (both good and bad), the number of attackers, and the nature
of the data impact decisions and outcomes?"

That’s a tough question.

7. "Your opinion on how to give to charity."  I’ll be covering this in my forthcoming book Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist, due out from Dutton on August 2.

I’ve now done 50, so that’s all folks!

Of course I’ll consider other topic requests in the future, on a case-by-case basis.

Markets in everything

Looking for the perfect Mother’s Day gift for that mom who loves Schoenberg?  The Schoenberg Center in Vienna can cover your needs.  The Schoenberg Shop is offering Schoenberg T-shirts (mit Aphorismen), pencils, mousepads, and postcards.  Also check out Schoenberg on YouTube.  And, of course, Schoenberg Webradio and Schoenberg Jukebox are still going strong.

Here is the link.


A loyal MR reader asks:

Is authoritarianism excusable or permissible – for any length of time – if it is justified by a need for economic growth/reform (e.g. Lee Kwan Yew, Pinochet, Park Chung Hee)?   

"Compared to what" is the first question.  At the margin, individuals favoring democratization did the right thing in opposing those dictators.  More democratic versions of those regimes would have been better.  That said, I don’t think absolute majoritarian democracy in Singapore, from day one, would have been better than the reign of Lee.  It would have led to ethnic voting and the quick end of democracy, in destabilizing fashion.  Yet now Singapore, a successful and well-established country, can and should become more democratic.  When it comes to Pinochet, we should condemn part of the regime and praise some of the parts concerning economic policy.  Viewing Pinochet purely as an individual moral agent, he was quite wrong to act the way he did.  If you ask "would I be willing to endanger the good economic reforms by eschewing torture to enforce the rule of the regime," the answer is yes I would want to immediately end the torture and take that risk.

#43 in a series of 50.

Does eliminating disease spur economic growth?

A loyal MR reader asks:

…is the flow of research against malaria and other targeted diseases
good or bad (or mixed) for the recipients?  I have been a believer that
eliminating diseases would have a big impact on economic growth, but
Foreign Affairs recently had an article attacking the concentration of
charity dollars in a few diseases as tending to distort funding
allocations away from the most important local needs.

The fight against disease, taken alone, won’t improve matters much.  There are, let’s say, thirty different major problems in sub-Saharan Africa.  Eliminating any one of these problems will hardly matter, even if there is no Malthusian trap.  Economic growth is all about complementary factors, and more generally it is hard to produce outputs of real economic value.

I favor Michael Kremer’s plan to offer prizes for vaccines against diseases in poor countries.  It doesn’t cost a fortune, and its successes are as likely to boost other forms of aid as take away from them.  The lives are worth saving for their own sake, and perhaps it will herald a larger push out of misery.  But, taken alone, such an initiative won’t much improve measured economic growth.

On the other side of the debate, this Jeff Sachs paper argues that disease kills the young, thereby requiring excessively large families as a form of insurance, and underinvestment in the human capital of each child.  Limiting disease might reverse this negative dynamic, though I am less inclined to see any unique lever in this kind of vicious cycle.

#42 out of 50.

Planned obsolescence

Giles Slade’s new book, Made to Break: Technology and Obsolescence in America made me want to list coherent microeconomic theories of planed obsolescence:

1. Consumer tastes change rapidly and so new models are needed frequently.

2. Old models become rapidly obsolete because of technical progress.

3. We are playing a durable goods monopoly game and suppliers want consumers to know they must buy the wasting asset now, rather than waiting for its price to fall.

4. Suppliers can’t credibly signal true durability, so the market standard ends up being a cheap, short-lasting good, sold at a relatively low price.

#1 and #2 are optimal and indeed splendid reasons to have planned obsolescence.  #3 is lame, and the time horizons for each decision don’t match up for this to be real.  #4 I can believe, but this implies too many light bulbs under the kitchen sink, or too many trips to K-Mart, rather than any great tragedy of consumer rip-off.

Here is an interview with Slade.  I found some useful material in his book, but no actual argument.

China fact of the day

…of the 3,220 Chinese citizens with a personal wealth of
100 million yuan ($13 million) or more, 2,932 are children of high-level
cadres.  Of the key positions in the five industrial sectors–finance, foreign
trade, land development, large-scale engineering and securities–85% to 90% are
held by children of high-level cadres.

Here is the longer story, interesting for its dissection of "China scholars."

Thanks to Kent Guida for the pointer.

Expand the AMT!

We shouldn’t get rid of the AMT we should expand it.  The AMT is a flat tax, it’s broad-based (few loopholes), it doesn’t allow for deduction of state and local taxes (which only increases the incentive of states and localities to raise taxes) and it’s simple.  The AMT should be reformed along the edges e.g. by indexing it to inflation (after more people are covered!) but overall it’s a much better tax than the current income tax.

I assume that readers know that I am not in favor of raising taxes but let me be clear.  We should expand the AMT but get rid of the income tax.