Month: September 2007

I am not laughing any more

In late August, Maryland’s Joppatowne High School became the first
school in the country dedicated to churning out would-be Jack Bauers.
The 75 students in the Homeland Security and Emergency Preparedness
magnet program will study cybersecurity and geospatial intelligence,
respond to mock terror attacks, and receive limited security clearances
at the nearby Army chemical warfare lab.

The new school is funded and guided by a slew of federal, state, and
local agencies, not to mention several defense firms. Officials say it
will teach kids to understand the "new reality," though they hasten to
add that the school isn’t focused just on terrorism. School
administrators, channeling Cheneyesque secrecy, refused to be
interviewed for this story. But it’s no secret that the program is seen
as a model for the rest of the country, with the Pentagon and other
agencies watching closely.

More here.  And do remember that vouchers are a bad ideas because we need public education to teach civic values.

This idea should be well-known, not novel

A small Michigan insurer is trying a novel way to woo young, healthy people who lack health insurance: let them buy lots of coverage after they get sick.

American Community Mutual Insurance Co. is rolling out an unusual two-tier coverage plan today that would give policyholders struck by serious illness or accidents the option of adding $5 million of coverage.

Here is the article.  Here is John Cochrane on time consistent health insurance , a more radical and indeed consistent version of the same idea (you can also find this paper in Alex’s excellent book Entrepreneurial Economics).  Under Cochrane’s scheme, you also insure against the possibility of your premiums rising in cost, due to your illness.  In essence you are buying insurance against bad health insurance outcomes.  So if you get sick yes you can buy more insurance and yes your premiums cost more but in part you are protected against bearing all of those costs yourself.

What I’ve Been Reading

1. A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States, by Stephen Mihm.  This book offers interesting tales of 19th century counterfeiters — an understudied topic — but it is too quick to slush together counterfeiters, capitalists, and Herman Melville’s The Confidence Man.  I read about 80 pages, some of you will wish to read more.

2. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, by Ha-Joon Chang.  This is a less subtle version of the "free trade isn’t always best" arguments made by Dani Rodrik.  Reread my post The New Attack on Free Trade.

3. Bill Clinton, Giving: How Each of Us Can Change the World.  Should we resent that this book is essentially a campaign prop for Hillary?  Still, it was better than expected.  It’s not deep but it does stress the virtues of commercialization and the profit motive.  Less surprisingly, globalization and micro-finance are portrayed as positive forces as well.

4. Denis Johnson, Tree of Smoke.  The NYT gave it a rave, lead review, as did The Washington Post and other sources.  So far it is being framed as the major American novel of the year.  It’s an almost anachronistically modernist in its structure and seriousness.  And is there really anything more to say about the Vietnam War?  First I was bored but then I reread the first 150 pages and now I love it. 

5. Herbert Spencer and the Invention of Modern Life, by Mark Francis.  It’s the best intellectual history I’ve read since McCraw’s Schumpeter book, and did you know that he and George Eliot had a non-consummated fling?  It’s a highly specialized topic, so I can’t recommend this book to everyone but I loved it and no you don’t need to care about Spencer the libertarian.

Why Most Published Research Findings are False (2)

John Ioannidis’s argument that most published research findings are false has been getting some attention in the blogosphere because of a recent article in the WSJ.  In an earlier post I  explained why most published research findings might be false using a simple diagram.

Hat tip and thanks to Steve Novella at Neurologica Blog and Mark H at Denialism both of whom refer to my analysis adding many excellent insights of their own.

Broken Buildings, Busted Budgets

That’s by Barry B. LePatner and the subtitle is How to Fix America’s Trillion-Dollar Construction Industry.

The key problem is that building or new construction owners become completely dependent on information provided by their contractors.  The contractors experience cost overruns and the commissioning owners have to suffer delays, cost increases, and the general feeling of having been screwed over.  Opportunism and recontracting are rampant.  According to the author, no institution successfully helps commissioning owners distinguish between good and bad contractors.  Ex post the construction industry is not competitive, even though it has a large number of firms ex ante.

According to LePatner, the answer is to move to truly fixed-rate contracts.  This means no more passing cost onto owners, real penalties for delays, and much more risk on the construction company itself.  That in turn requires larger and more integrated construction companies instead of today’s small proprietorships.

If this is such a good idea, why doesn’t the market provide such a solution already?  Surely there is enough capital to support large construction companies.  I don’t know, and for that reason I cannot evaluate the author’s central proposal in an informed manner.  Nonetheless this book is argued on a very serious level and I found it definitely a worthwhile and stimulating read.

A must for anyone interested in the economics of construction, and a possible read for others as well.

A defense of employer-linked health insurance

The employer-based system provides a tremendous service to workers by providing a buffer between the plan administrator or insurer and the workers and their families.  The employer helps the employee navigate the system, is an advocate for the worker and frequently assists with claim appeals and disputes, not to mention assuring that premiums are efficiently collected.  Employers are also leading the charge on the health and wellness front.  Employers who seek to abandon this system out of hand should consider the consequences of having thousands of workers taking the time (on the job) to resolve the many issues and problems that will continue to occur under any insured scheme, but now with individuals left to navigate the system on their own.

I have been an employee-benefits professional for nearly 46 years and have worked with thousands of employees on every kind of health-care issue imaginable under every type of health-care plan.  Most of the problems are created by the patients and the health-care providers, not the dreaded insurance company.  That is unlikely to change.

That is Richard Quinn, of Verona, New Jersey, in a letter to The Wall Street Journal, Sept. 15, p.A7.  On net, I do not agree with this opinion, but this perspective is too often neglected in health care debates.

Every claim is wrong

I wondered whether that can be said of Naomi Klein’s new The Shock Doctrine: The Rise of Disaster Capitalism.  Still, at some fundamental level I liked this book.  Perhaps I still had the Greenspan memoir too fresh in my mind, but at least this text is alive.  Yes she refuses to admit that Chilean reforms, however horrible the accompanying atrocities, did represent a success for market economics.  Yes she misstates the role of Milton Friedman in just about everything.  Yes she suggests that black children in New Orleans, pre-Katrina, enjoyed equality of educational opportunity.  Yes she is naive enough to think that we need only put the good people in power.  Yes she repeats many timeworn fallacies about Halliburton.  Yes there is a senseless conflation of torture, Iraq, and the Coase Theorem.  And so on.

Still, at the heart of this book she pinpoints the discomfort that free market advocates have with democracy.  You can go the non-democratic route, you can claim that markets should stand above democracy, or you can reinterpret libertarian ideas as a general framework for social analysis and a program for gradualist democratic reform.  Either way, for all her mistakes, Klein has yet to lose this debate.