Friday assorted links

Comments

#4 I would not expect anything radical coming from Portugal... It was and still is a conservative country, with urban pockets of liberal/left wing people.

FTA: Surprisingly, the change in law regarding use appears associated with a marked reduction in drug trafficker sanctioning. While the number of arrests for trafficking changed little, the number of individuals convicted and imprisoned for trafficking since 2001 has fallen nearly 50 percent.

This seems pretty radical, considering the ambiguity between what differentiates a "user" from a "trafficker". In some jurisdictions simply passing the bong to someone constitutes "trafficking narcotics".

Compared to US, Portugal is really "soft on crime". Maximum time in jail is 25 years. (And I am quite happy with that). It might be some misinterpretation of the law, or maybe the trafffickers carry very small quantities with them, just to have an excuse... If you go to Lisbon you will find people offering drugs everywhere in the most touristic zones (and this has been going on for years!)

2016, not 2006. Unless Obamacare included a time machine...

This is not a typo. Obamacare must include some form of time travel to the past since it has been given credit for the slowdown in health care costs that started about a decade ago,

This is not a typo. Obamacare must include some form of time travel to the past since it is being given credit for everything bad about health care before and after its enactment.

You do not understand how markets predict the future. In 1998, markets predicted Obama would sign Obamacare into law so insurers started hiking health insurance premiums generally by about 10% per year until they more than doubled insurance premiums.

And clearly the markets predicted Obama would win on a platform of controlling health insurance premium increases, because the white Obama signed Romneycare into law in 2006.

This is not a typo. Obamacare must include some form of time travel to the past since it has been given credit for the slowdown in health care costs that started about a decade ago and taken blame for skyrocketing health care costs that started 50 years ago.

Also, "Why are the 2006 Obamacare rate increases so large?" would be a great Onion headline.

Isn't that how they passed the bill before they found out what was in it?

Industry and nationwide insurance premium increases for the group market that had 90%+ participate by eligible consumers:

1999 to 2004: 72%
2004 to 2009: 34%
2009 to 2014: 26%

see http://kff.org/report-section/ehbs-2014-section-one-cost-of-health-insurance/

Obamacare for Massachusetts was signed into law by Gov Mitt Romney in 2006 and less than 4 years later a nationwide expansion was signed by President Obama, so Obamacare has not increased the rate of premium increases but possibly reduced the rate of increases.

No other broad policy change has been passed besides Obamacare to explain the reduced rate of premium increases, other than the end of the transition from mostly not-for-profit to for profit insurance and health care delivery that was the defining character of late 90s to mid-00s.

I was making a reference to Nancy Pelosi's "We have to pass the bill to find out what's in it". Not sure what your reply has to do with that :-P

1. An oldie and still an example of how the GMU crowd prefers ideology ("theory," as if Bryan Caplan knows a damn thing about theory) to empiricism.

What should an empiricist conclude about the employment effects of the minimum wage?

Clearly an empiricist would argue that forcing wages higher will put more money in the pockets of consumers and that will reduce the relative share of fixed costs in the economy and thus demand will increase increasing GDP increasing labor demand which with higher starting wages will accelerate the rate of increase in demand increasing growth in GDP.

Those arguing for lower wages are the ones responsible for the fixed costs, the managers and shareholders. When the firm is not growing as fast as they want because the economy is not growing, they don't call for cutting the fixed costs of dividends or share buybacks paid for by profit, no, they call for higher profits to increase share buybacks which means cutting labor costs and making shareholder costs relatively larger.

With worker-consumers being a common, individual firms trying to be good stewards of its workers and every other firms consumers, it suffers if it is the only firm to cut back on its exploitation of the common - the other firms will benefit by cutting labor costs and your sales to consumers while benefiting from your increased payments to their consumers.

There is a certain Martin Niemöller character to the response to the open attack on workers by Reagan.

The came for the jobs of the TSA workers, but I was a GM or RCA white collar worker and said nothing.
They came for the jobs of the union factory workers but I was in marketing and said nothing.
They came for the jobs of the non-union factory workers, but I was in upper management and said nothing because I like the cheaper imports.
My Asian supplier came for my job by selling directly to consumers, and no one has any sympathy for me because I said nothing while their jobs and futures were taken.

No one gets to earn a high wage any more. Its just some get paid a lot from the fixed costs of shareholders by being given a shareholder stake if they do everything possible to cut wages but increase sales by promoting increased debt.

Idiot.

[empirical evidence needed].

$50 per hour minimum wage it is.

Good post but maybe work something in about $2 per hour.

I would think an empiricist would appeal to empirical evidence, not a hypothesis like you give.

Well, its classic free lunch economics.

If he applied the same logic to the commons, he would be arguing that charging to use the commons is bad policy and that selling the commons to private parties is bad policy because that will harm business people by raising their costs, but most important it represents government intervention in the natural economy.

Low wages are an example of the tragedy of the commons. No single business person is going hike wages any more than he will cut back on his overuse of the commons because that will put him at a disadvantage to the other businesses.

But like over using the commons reduces output of all businesses, low wages reduces GDP because you can't sell more than the total wages so businesses will only survive if the cut back production to avoid excess inventory and that means cutting labor demand which only cuts the amount sold.

Free lunch economics makes arguments for the benefits of one factor in the economy while pointedly ignoring the benefits or harms to other factors in the economy and the aggregate impact on the economy.

After decades of fighting wage hikes, conservatives have delivered widespread stagnant wages which makes fixed costs loom larger and larger, and they then blame the relatively large fixed costs on Obama and claim that's the reason GDP growth is so slow.

Hey, with wages and aggregate wages stagnant, who can possibly buy more GDP? Only if you believe in free lunches can you think that low wages will increase GDP.

Just like the commons, exploitation of workers reduces production, harming everyone, although a small number are relatively better off.

As to the fixed costs. the biggest fixed costs for firms is the shareholders and managers - even when the business is in decline, eg K-Mart-Sears, the demand is for higher stock prices by higher returns to shareholders and the management must be paid higher incentives to motivate them to deliver more by what is essentially doubling the grazing on the commons.

The commons is a capital asset that is at risk of being destroyed.

The nation's labor force is a capital asset that is at risk of being destroyed if not maintained, and we see many nations destroying its labor force in service of managers and shareholders.

1) The "invest in human capital" line of thought has been over-abused to the point of ridicule. This is...minimum wages...we're talking about. Sorry, doesn't hold.

2) Explain to me how the countries which have artificially hiked wages through excessive minimum wages, excessive regulations, unionization and various other policies designed specifically to...hike wages...are doing? Ever heard of Greece? Ever heard of Spain? I rest my case.

3) I like how you frame everything in terms of GDP. First you start of with "the firm"...and then end up at "GDP". Why is "GDP" the metric of importance here? Communist Russia had as its metric of performance "employment". Full employment (meaning 100%) meant "great job!" I don't think I need to remind you how that worked out.

4) You can't seriously think the highest fixed costs (or even a significant fixed or otherwise cost) to a "firm" is "shareholders and managers". If you do, then I think we've discovered the problem in your thinking.

PS: I'm not sure how the logic of the last sentence follows from...minimum wages. I made that point in #1, I know. But I'm not quite sure where you're seeing evidence of the "nation's labor force" not being "maintained", and how exactly a "minimum wage hike" helps maintain "it" (whatever it is. I've learned that when people use terms like "the nation's labor force", they really can't explain what it is).

Especially considering the empirical evidence, which is rather large, of the effects of minimum wage hikes on employment, and especially on the "human capital" of individuals affected by it: http://econweb.ucsd.edu/~mwither/pdfs/Effects%20of%20Min%20Wage%20on%20Wages%20Employment%20and%20Earnings.pdf

Re: Ever heard of Greece? Ever heard of Spain? I rest my case.

Yes, presumably Canada, Australia, Denmark and a host of others are also basket cases. No? Your case just fell apart.

"Yes, presumably Canada, Australia, Denmark and a host of others are also basket cases. No? Your case just fell apart."

Hmm. Australia is an economy where 75% of exports are composed of raw materials. Canada is one where 90% are raw materials.

I fully accept that economies that grow simply due to commodity prices, labor freedom isn't even a secondary consideration. Saudi Arabia does great, regardless is anyone actually does anything there or not.

Your argument would have been a lot more convincing if you could argue if Canada or Australia would do...better or worst...with more labor market freedom, rather than less.

PS: Your argument also fails on face value given that Denmark has a "labor freedom index" of about 92.1 (according to Heritage), and Australia is at 81.6...whereas Spain is at 52.6 and Greece at 51.6. I.e....they're not even in the same ball park, while your examples are examples of actually quite free labor markets.

Australia is an economy where 75% of exports are composed of raw materials. Canada is one where 90% are raw materials.

The median for Australia in the last seven years or so has been 77% of merchandise exports and 64% of total exports. That for Canada has been 49% of merchandise exports and 41% of total exports.

The minimum wage in Canada is between $10-11, depending on province. ($8-9 American.) The minimum wage in America is between $7.25 and $9.50, depending on state, with some individual cities or counties slightly higher than that.
So to listen to the rhetoric, 75 cents an hour is the difference between a Randian "let the poor die in the streets" hellscape and straight-out Trotskyism.

PS: Your argument also fails on face value given that Denmark has a “labor freedom index” of about 92.1 (according to Heritage), and Australia is at 81.6…whereas Spain is at 52.6 and Greece at 51.6. I.e….they’re not even in the same ball park, while your examples are examples of actually quite free labor markets.

Doesn't this weaken the argument that higher minimum wages are the main cause of economic regulation related problems that Greece and Spain have? Despite also having a high minimum wage, Australia still has a much freer economy, implying that the lack of labor freedom in Spain and Greece is caused by something else.

"Low wages are an example of the tragedy of the commons. No single business person is going hike wages any more than he will cut back on his overuse of the commons because that will put him at a disadvantage to the other businesses."

Except they do have such an incentive -- if they can pay less than the value added by that worker, then they can afford to hire more and bid them away from other employers.

I dunno, just saw the words "caplan" and "minimum wage" on that link and never clicked on it, inferring (probably correctly from reading the comments) that no information would be forthcoming at that link.

Ha you're a fucking idiot. "I won't read something because I don't like the ideological sway of the author." You probably think that I would see things your way, if only I read the same rags that you read; I bet you do everything in your power to stay away from literature that goes after your world view.

What an odd perspective - 'to stay away from literature that goes after your world view'

It tends to be a lot more interesting reading someone like Calculated Risk, whose disinterest in world view is refreshing, allowing facts to be the basis of whatever view one forms from them. The reality that his predictions are not only fact based, but generally accurate, is equally refreshing.

Reading disagreeing sophists tends to have little value, apart from entertainment. Facts do not belong to any side, after all.

6. They are not rate increases, they are rates being floated by some insurers to see what reaction they will get from regulators and from other insurers. Opponents of Obamacare will have to wait for the victory dance. Has there ever been so many who were so committed to failure as opponents of Obamacare? I'll modify a Chinese proverb: may you lose your group insurance and die penniless with a pre-existing condition.

Increase or not, insurers took a huge hit on claims, even after federal backstopping.
Can't go on forever, especially as the Federal backstopping is scheduled to drop off.

A huge hit? Check out the stocks of the largest insurers the past year. Gangbusters, all of them.

http://finance.yahoo.com/echarts?s=AET+Interactive#{"allowChartStacking":true}

http://finance.yahoo.com/echarts?s=UNH+Interactive#{"allowChartStacking":true}

http://finance.yahoo.com/echarts?s=HUM+Interactive#{"allowChartStacking":true}

http://finance.yahoo.com/echarts?s=CI+Interactive#{"allowChartStacking":true}

That can be explained almost entirely by the noise surrounding the potential Humana buyout by one of the big four. Also, is anyone surprised that prices increased for a service that we all have to buy? If I owned GM, I'd hope my stock would go up if everyone had to buy a car as decreed by government fiat.

Well, no. The insurers took a huge hit and are fleeing the market. The medical loss ratio is punitive and the federal backstopping is ending. It's all a terrible situation for the insurers, you see.

The potential Humana buyout raised the price of all the other insurers 40% or more because ____. People were already required to buy coverage under the law passed in 2010. This isn't like new information that bubbled up the last 12 months.

Jan, the medical loss ratio is a calculated figure, what do you mean that it's punitive? Do you know what a loss ratio is? You're understanding of financial markets seems pretty rudimentary if you don't understand that the prospect of a buyout raises the market caps of both companies. Have you followed any of the telecom firms that have been on the block this year? Time Warner? Comcast? Remember when Heinz got bought out a few years back? Can you give me an example of a firm that's been bought out and had it's market cap remain largely unchanged? I'm a little confused of where you're coming from; why do you think stock prices have increased for health care insurers lately?

Sorry I went sarcastic to serious on ya in that one.

Yes, I know what a medical loss ratio is and that new requirement from the ACA should cause insurer profits to suffer, not rise. And no, the stocks of the four of the five largest insurers did not rise massively and consistently over the past year just because of rumors that Anthem might be acquired. That's ridiculous.

Do we even have the numbers to know that? And bear in mind that the ACA only provide coverage via the Exchanges to a small fraction of the population-- who tend to skew younger.

Second JonFraz, are you sure they've taken huge hits, even with reinsurance and loss corridors? They have time to use experience and change their premiums before their bottom line takes a hit.

No amount of fantasy in the world can correct for a 120% loss ratio. Either regulators approve the rate increases or carrier's exit. Anything else is unsustainable.

Cue Barkley Rosser writing a bunch of vaguaries about how his uncle was an actuary that helped write ERISA and actuarial projections are the biased because conservatives!!!!!! and you've all been doomsayers since the ACA came out so everything you say can be dismissed without a point by point rebuke. Oh Barkley, you poor, sad man.

I love Caplan. He says there is nothing wrong with the research showing that the minimum wage has insignificant impacts on employment. He just refuses to accept it because it disagrees with his simplistic introductory analysis of the situation.

Wonder what he has to say about Wal Mart reporting that its recent experiment with raising wages is actually reducing its labor costs.

How would the Wal-Mart case disagree with anything Bryan said?

It would conflict with the general libertarian theory that the best cure for everything is cheap labor.

But to be serious, Caplin obviously thinks that an increase in labor cost has to always cause less employment and the only alternatives are lower profits or higher prices. The real world is much more complex than that. For example, essentially all low wage firms experience extremely high labor turn over and WMT is no exception. Just reducing turnover could significantly reduce a firms labor cost because they do not have to pay and pay to train new employees and that is what WMT found. But that possibility does not exist in Caplin's simplistic world.

It is interesting that in introductory economics the professors try to have the students believe that if you have a shortage the solution is simple--just raise prices. But when it comes to labor they teach just the opposite and than wonder why the students do not seem to get it.

Let's lower everyone's turnover with a minimum wage of $50 an hour at gunpoint.

Also, you can't spell.

"But when it comes to labor they teach just the opposite and than wonder why the students do not seem to get it."

-And an idiot.

"Just reducing turnover could significantly reduce a firms labor cost."

True -- and some companies already use exactly that strategy (pay higher wages for lower turnover, and better/more reliable/higher productivity workers). But that strategy only works when there's a differential between what those companies are paying and companies paying less. If all employers are forced, by law, to $15/hr, that's no longer a premium wage, and the incentives for lower turnover disappear (if I'm being paid $15/hr and the likely alternatives pay $8/hr, I'll be very reluctant to leave my current job, but if all jobs pay $15, I have no incentive not to jump ship).

UNLESS. Unless, with a $15/hr minimum wage, jobs for low-skilled workers become generally scarce, in which case folks with $15/hr jobs will cling even tighter (since the likely alternative is no longer $8/hr it's unemployment). Is that what you're arguing? That with a $15/hr minimum wage, employers will enjoy maximum employee loyalty because the prospect of unemployment will put the fear of god in them?

"when it comes to labor they teach just the opposite"

Who ever taught that? That doesn't seem to follow from anything Bryan says.

But you're arguing a completely different point than Bryan. It is entirely possible that raising wages reduces turnover and reduces employment. If you pay a higher wage, you can pay a higher skilled person that will be more consistent and may not leave jobs for whatever reason. That, of course, leaves those unreliable ultra-low skill workers in the lurch. Maybe it doesn't work like that, but that's a possibility, and you can't rule it out a priori.

spencer: I challenge you to provide a citation to even one serious libertarian - someone known to be a libertarian and also respected as a scholar or thinker - who has even remotely argued that "the best cure for everything is cheap labor." Who ever said such an absurd thing? Not Milton Friedman. Not Hayek. Not Mises. Not Bryan Caplan. Not Bastiat. Not Deirdre McCloskey. Not David Boaz. Who?

Whatever gives you such a notion?

Wow, Don Boudreaux, king of minimum wage hypocrisy, shows up. Inventor of the "Empirical evidence can't disprove `theory,' and anyway, there's some cherry picked studies which show my side!" strategy. What an honor.

So what you are saying is that paper's like the Muriel boatlift paper do not indicate elastic labor demand, and New Keynesian's are not saying wage rigidities matter to unemployment? Caplan is up front with his priors, and then cites evidence for both opposing views to update his posterior.

Dummy, he doesn't make an argument concerning labor costs. He makes one about the downward sloping nature of the labor demand curve. You obviously didn't read his post (I bet you read the first paragraph given your reference to that point he makes about his respect for the authors), and are so caught up with your own ideological preconceptions that no amount of evidence could convince you otherwise. No one has made an argument paying people as little as one can is the best way to run a business. Their are huge costs associated with employee churn that firms spend tremendous time and energy trying to prevent. They are willing to pay a wage premium to prevent employees from leaving, and this is one of many examples. The problem is that you're a moron who probably thinks that free market economics means that everyone who isn't rich is living in a Dickensonian nightmare. I, and I would bet large sums of money that Caplan, take no umbrage with Walmart paying their employees wages higher than the minimum wage; we have a problem with the state mandating higher wage across the board.

I love Caplan. He says there is nothing wrong with the research showing that the minimum wage has insignificant impacts on employment. He just refuses to accept it because it disagrees with his simplistic introductory economics analysis of the situation.

Whttp://www.amazon.com/gp/product/0691120420?ie=UTF8&tag=marginalrevol-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0691120420onder what he has to say about Wal Mart reporting that its recent experiment with raising wages is actually reducing its labor costs.

You are the dumbest literate human being on the planet. I would vote for legislation to raise the minimum wage if it was coupled with a rule banning stinky twats like yourself from accessing the internet. The democratization of forums like this has led to the over-representation of jerk off's by you in intellectual debate.

lol

Wow, what an intelligent reply.

Is that how you always reply to facts that disagree with your priors?

"It is interesting that in introductory economics the professors try to have the students believe that if you have a shortage the solution is simple–just raise prices. But when it comes to labor they teach just the opposite and than wonder why the students do not seem to get it."

I've already shown you why this exact statement is wrong, in a previous post on minimum wage. Let everyone read this quote of yours and take notice: you misunderstand basic supply and demand.

I fear Caplan is guilty of mood affiliation on this one, again.

Et tu Brutus

Weren't you saying just the other day that mood affiliation is a meaningless term because everyone exhibits bias ? Or is my memory failing me.

1. In what world is that a "goodie"? It's just Caplan saying that his priors on price controls and minimum wages are so strong that he's refusing to concede in the face of empirical evidence, and then trying to nitpick the results away. It's economics as religious ideology, not science.

2. I think the program will be sturdier than you think. Sure, there will be bad schools and problems, but they'll be diffused among parents as mistakes done by those parents - "if only they had picked the right schools, etc".

Nitpicking and vague musing in defense of right wing preferences is TC's preferred mode of economic discourse.

No, he isn't. He cites no less than four examples of empirical research that bolsters the case that the minimum wage reduces unemployment.

Er, reduces employment.

They aren't reading past the first paragraph

#3. Maybe human's aren't descended from chimps. Maybe chimps are descended from humans. The drunk ones. (Bah-dump-dump).

#2. In "a race between educators and charlatans" I'll bet on the charlatans every time.

I'm familiar with the studies that show limited or no unemployment effects. Those same studies also admit that the reason could be because in those particular places companies may have found other ways to compensate, such as forcing workers to work harder, cutting benefits, substituting higher productivity workers for lower productivity workers, etc.

These studies also seem to be grossly outnumbered by the studies that do show significant effects. Here in Canada, a meta analysis of unemployment papers finds a pretty consistent decrease of 1-3% in youth employment from 10% minimum wage increases. OECD papers find similar results.

But hey, there are a handful of outlier studies looking at small changes that have found little effect. So minimum wage increases don't ever cause unemployment. Because empiricism!

"These studies also seem to be grossly outnumbered by the studies that do show significant effects."

That's precisely the point. Caplan is his best worst enemy. He's too ideological and empirically illiterate to actually look at the empirical literature enough to make an argument on it.

It's not just evidence on the employment effect. There's plenty of evidence of other negative effects too on the specific individuals affected by it.

Empiricism is overplayed in this area. Economics is about human behavior. We're all human. Supply and demand is a model of human response to incentives, and it is accurate. There are no micro-foundations to logically deliver, minimum wage increase -> no change in demand for pre/post-increase-delta labor hours.

"My costs go up, and I have alternatives, but I change nothing" as the average response by 315,000,000 people is unreasonably illogical.

6) Biggest factor in insurance rate increases is consolidation of hospitals and other providers. These groups are extracting ever higher rates from private insurers. A PWC report from last year lists two causes for medical spending increases: specialty drugs and provider consolidation. Premiums will go up bit by bit until state AGs start to take these anti-trust issues seriously.

Health industry consolidation has increased more than 50% since 2009—activity that is expected to continue through 2014. Higher prices are sure to follow in some markets. According to a recent report, hospital mergers can lead to price increases of up to 20%. These price increases are especially acute in markets with one dominant system.

http://www.pwc.com/en_US/us/health-industries/behind-the-numbers/assets/medical-cost-trend-behind-the-numbers-2014.pdf

Here is a bit on how that is going in one state that has tried to stand up to excessive mergers: https://www.bostonglobe.com/business/2015/03/09/partners-healthcare-moving-complete-merger-with-south-shore-medical-group/FCnJNV85ayIvjJEhxDBQzJ/story.html

Industry consolidation is a direct result of some of the ACA's less well-publicized regulations that force providers into managed care networks.

Hazel, It sounds like you're blaming increased provider consolidation (which increases spending) on narrow insurer networks, something that has been proven to actually reduce health care spending.

And if you are referring to ACOs, a way of delivering coordinated care for Medicare patients, it is true that some physicians are now participating in these networks. However, providers to consolidate under a single hospital system to participate in an ACO. In fact, the majority of ACOs are physician-owned and consist of docs not affiliated with these consolidating hospital and health systems. In any case, only about a quarter of docs are in any kind of ACO--they are completely voluntary and nobody is being "forced" into these networks.

Should read "providers _don't have to_ consolidate under"

http://www.heritage.org/research/reports/2014/08/how-the-affordable-care-act-fuels-health-care-market-consolidation

Yes, I've read that. It is from Heritage and they throw like 10 different arguments against the wall there that--surprise!--all try to work out how the ACA is responsible for market consolidation. Consolidation was happening long before the ACA.

Consolidation was happening long before the ACA so the ACA can't be causing consolidation?

Logic fail

Pressure to join networks has existed since the early 90s (if not before). The ACA did not create it.

My car is rolling down the hill. I depress the accelerator. I'm not causing my car to move.

The biggest factor in insurance rate increases is the loss ratios and the biggest factor in the loss ratios is the insured population is sicker than expected.

Do anything you want with mergers, it won't make any difference. Obamacare is doomed.

Yes, yes. It’s been doomed since before it was passed. Destined to fail despite all the helpful tweaks conservatives have been making to ensure everyone gets affordable care. It’s been dead and come back so many times we are going to rename it the Lazarus project.

Mergers definitely do make a huge difference,despite what you say. And if new patients are sicker than expected, that is a one-time adjustment to premiums, made when the newly insured folks get coverage. It doesn’t just get worse and worse every year.

EXCEPT that it's not a one time adjustment.

The sicker the pool, the more the healthy subsidize the rest of the pool. If their premium is too onerous, at the margin, some healthy will drop out (people will always act in their best interest). This will yet cause the morbidity of the pool to worsen even more, causing more healthy to drop out at the margins ad infinitum until a stabilization mechanism is put in place.

Its a class antiselection spiral.

The sick are now in the pool for the most part, because they can actually get insurance. People receiving subsidies have to pay a maximum of about 10% of their income in premiums. Many lower income folks are paying an even lower share of their income. The ACA has made insurance quite affordable. I don't think we are missing very many sick people with chronic conditions at this point. The majority of folks not in the pool yet are those who are young and did not want to get insurance--and immigrants--not older sicker people who really need the coverage.

Here is some info on who remains uninsured.

In CA, the uninsured are less likely to have a diagnosed medical condition than the insured. People in insured families were more likely to be full-time workers than the newly insured. These indicate to me that those who had major health conditions have already obtained coverage: http://kff.org/health-reform/report/coverage-expansions-and-the-remaining-uninsured-a-look-at-california-during-year-one-of-aca-implementation/

Nationally, most of the remaining uninsured largely did not get coverage because they did not know they could, rather than the high cost. <30% did cite the high cost as the barrier, but they are less likely to have a diagnosed condition or take any prescriptions. http://kff.org/health-reform/report/coverage-expansions-and-the-remaining-uninsured-a-look-at-california-during-year-one-of-aca-implementation/

And I don't think those links discuss it, but many of the uninsured are undocumented immigrants who are typically healthier than non-immigrants, probably in part due to a kind of selection bias.

People don't respond to incentives. They don't respond to higher minimum wages. They don't respond to higher costs in their insurance pools. In fact, the only people who respond to incentives are teachers, who will produce more scientists if we give the Democrat party more money.

Unsurprisingly, the health actuary seems to know more about this than the blowhard grad student. Jan, you've made an awful lot of claims about the health insurance industry and have yet to post a single link to back up what you say. Where's your evidence for one time increases? Actuaries have jobs because the experience is never what we expected, and we have to adjust premiums accordingly. It's a simplifies explanation of what we do, but you're a simpleton so I thought it'd be appropriate.

Gabe that's fine. What you seem to have done on here today is call a bunch of people fucking idiots and dummies. Please post the evidence for anything you say--including that it is NOT a one-time increase.

Jan,

We are talking about loss experence from last year. If memory serves, in 2014 healcare inflation came in at about 6.5% which was actually down from the previous year of about 6.8% (healthcare inflation is making something of a comeback so far this year). Regardless of whether mergers contributed to the increase in costs (hard to make that case given the actual facts), you don't get 120% loss ratios from slightly falling healthcare inflation. On average, on a nationwide basis Insurers would have assumed about a 7% increase in healthcare costs when they calculated the prior year's premiums.

However, you do get adverse selection from large increases in premiums. In fact, you would have gotten adverse selection anyway, even if premiums remained stable. Large premium increases just accellerate the process. This is NOT going to be a one time adjustment.

And, yes, it was doomed from the beginning and from before the beginning. Regardless of any tinkering which anybody might have done.

See my response above to to health actuary for why this is will largely be a one-time phenomenon. Remember, health care spending has grown faster than GDP for a very long time. What we are trying to do is insure more people while slowing or eliminating that disparity in growth. We've done a good job so far.

Jan,

The chronically ill are certainly more likely to be insured than the general population (that was also true before Obamacare). Under Obamacare the chronically ill may find it easier to become insured, so it is reasonable to expect that as they become ill, they will join Obamacare plans in greater numbers. The problem, however, is not with them but with rate of participation by the young and healthy. The terms of the deal being offered to young and healthy people started out bad and they are about to get worse. This will continue and accellerate as people generally become more familiar with how the program is intended to operate. The young and healthy already receive almost no benefit from Obamacare plans, will more young and healthy participate in Texas if the cost of participation increases by 20%?

Obamacare has not reversed or significantly improved the relative growth rates of the economy and healthcare spending. As I pointed out above, healthcare inflation was about 6.5% last year while nominal GDP grew at about 3.6%. In general, healthcare spending was increasing by about 7% per year prior to Obamacare but nominal gdp was growing much faster 4-6% for most of that period. Thus, the gap between nominal GDP and the rate of increase in healthcare costs is actually larger now. There was a reduction in the rate of increase in healthcare spending, probably due to world-wide disinflation and slow growth. The reduction in the rate of increase in "healthcare spending" began prior to Obamacare and, as I indicated, is world-wide in scope. Hard to credit Obamacare under those circumstances.

But this should not be a surprise, the parts of Obamacare designed to "bend the cost curve" (such as the infamous "death panels") have not taken effect yet. Once they do, the trend in Obamacare popularity should intensify.

I agree. You can't have certificate of need laws in 34 states effectively limiting or barring new entry into the market and then sit back and allow whatever mergers and acquisitions industry executives can agree on. Healthcare providers are simply going to carve things up into larger monopolies.

#1: The minimum wage debate can be summarized as follows, I think:

1) Most minimum wage hikes are so small as to produce effects that are not measurable given current statistical tools or identification strategies. That's the only real argument the "pro" minimum wage hike folks can make. Even though, much of the empirical evidence, does find it, in many circumstances.

2) Minimum wage hikes may not impact employment because effective clearing wages are already higher than the minimum wages in most places (in the US). Which means, increasing a floor that is already below what the market offers, has little to no effect. This is evident by the fact that very few people in the US actually get paid minimum wage (and they are mostly specific demographic groups; young and female, and mostly part-time workers where HOURS CAN BE ADJUSTED easily).

3) I don't think even the most outlandish pro-minimum wage hike person can argue that if we increased minimum wages by $100/hour, you wouldn't get massive displacement effects (well, only full blown commies would argue you don't). So all they can really argue for is: the effects are going to be very small if you only increase it very little, so let's not worry about it. Most "anti" minimum wage hike folks would agree (or should agree), that the effect of a 50 cent hike is likely to be so tiny that it should surprise no one that it's not statistically significant.

But that doesn't undermine the argument for why they are bad. It simply reinforces that argument.

4) There are many other metrics that can be used to measure their impact, besides aggregate employment in a population (where already a very small % of people work at those rates). Earnings, hours worked, experience, residual effects of switching jobs, even things like physically having to move to another geographical location to find a job.

5) So the only take-away from me from the empirics is that: given that so few people actually work at those wage levels to begin with, small hikes impact aggregate employment figures in such a small amount as to (sometimes, but not even the majority of times) be difficult to find. Great. No argument from me on that.

However, this is obviously not sufficient evidence to say that it doesn't have negative effects if implemented on a larger scale. A $5 hike is different from a 50cent hike. And more importantly it doesn't mean it doesn't negatively effect specific groups or individuals that may be more susceptible to it. There's plenty of evidence that it does.

PS: As to the Wal-Mart case brought up above, it doesn't mean anything about minimum wages. Wal-Mart's problem has been that it attracts rather poorly skilled individuals to work there, and hence it adversely affects their profits. By increasing the wages they can attract better skilled individuals, and given their shift in emphases towards other things than simply bare-bones low cost, this may work for them. I.e., it's a pure...factor market competition strategy...between firms.

Firm's obviously pay engineers a lot more than minimum wage for this exact reason. But this has no relevance to minimum wage.

"2) Minimum wage hikes may not impact employment because effective clearing wages are already higher than the minimum wages in most places (in the US). Which means, increasing a floor that is already below what the market offers, has little to no effect. "

Well. I would say that in those cases the minimum wage has no direct, immediate effect on unemployment. That doesn't mean it's harmless. For one thing, like all price controls minimum wages destroy information. We have no idea what the job market might be like below minimum wage, because we are no longer able to go there. We have no idea if the unemployed could find work at $.50/hr less, because we're not allowed to carry out that test. We don't know what demand there is for services and products below that level, because we are not allowed to supply it.

And while ramping up the minimum wage to be constantly slightly less than the prevailing wage may not cause immediate unemployment effects (because it has no effect on the current job market at all, and therefore doesn't help anyone), if the economy goes into recession the job market becomes much more brittle. If the productivity of minimum wage workers drops below the minimum wage floor, businesses are not allowed to lower wages to compensate. So instead of taking a $1/hr cut in pay, the employee is fired and earns nothing at all.

When a recession hits, is it better for minimum wage workers if they are laid off en masse, or if their employer is allowed to cut their salary by 10%? What's better for the country?

Yes, yes. It's been doomed since before it was passed. Destined to fail despite all the helpful tweaks conservatives have been making to ensure everyone gets affordable care. It's been dead and come back so many times we are going to rename it the Lazarus project.

Mergers definitely do make a huge difference,despite what you say. And if new patients are sicker than expected, that is a one-time adjustment to premiums, made when the newly insured folks get coverage. It doesn't just get worse and worse every year.

#6
It helps to look at absolute numbers rather than simply percentages. The below example of one company reveals something very interesting:

The health plan commented in its federal government rate filings that it covered 730,833 Obamacare individuals in 2014 with premium of $2.1 billion and claims totaling $2.5 billion––for a medical loss ratio of 119%.

$2.5B in expenses for 730,833 people works out to $3421 per person.

http://www.statisticbrain.com/health-insurance-cost-statistics/ indicates that even the states with the lowest cost health care (N. Dakota, Georgia) are in excess of $4700 per year.

So big rate increases? Yes but is that a problem here? It seems the pool covered by this company are healthier than average ( as witnessed by the fact that their collective costs are lower than average). If something is being sold a huge, below cost discount then yea expect a price increase eventually. But let's say premiums increase to $3721 a year (gotta be something for admin costs plus some profit). That's still lower than what the average person's coverage costs. So exactly what is the issue here given these facts?

Your link shows "average cost of healthcare" not cost of insurance.

Are you sure that's not including the cost of healthcare for elderly people on Medicare?

It seems to be cost of health insurance and the elderly wouldn't be part of that since they would either be on Medicare or using Medicare as a primary. If you can find better data please do so but $4K seems reasonable.

Boonton,

Adverse selection is the issue. Obamacare is not attracting enough young and healthy people. Obamacare is a bad deal for young and healthy people and there are ways for them to avoid participation at a comparatively modest cost. More will avoid it in the future, which will result in worse loss ratios, which will increase premiums, which will reduce participation by the young and healthy, which will make he loss ratios worse, etc.

Young people will be better off when uninsured and get cancer because waiting 6 months on average to get treatment is the best medical advice for young people who typically have the fast growing tumors?

Young people are better off when uninsured and get severely injured watching a foot race because they can sue the dead terrorists for compensation to pay for all their hospital bills?

ah, yeah, young people know they can easily raise hundreds of thousands of dollars with go-fund-me internet campaigns to pay the bills and then get the news coverage to get government welfare officials to pay the majority of the bills.

After all, why should individuals pay for insurance when government exists to pay the bills when bad things happen.

It's the young healthy people who are not signing up. They make the judgment that they are better off without it. You seem to be saying they should not be allowed to make that choice. Because obviously a huge government bureaucracy knows better.

Yet there's no such evidence that is the problem. The pool from the Texas company appears to be healthier than average.

The issue here seems much simpler. The insurance company set a very low price. Now that it is clear they set a super low price, perhaps by accident or perhaps on purpose to get new customers, there's a 'huge' rate increase. How is this different than, say, the cable company which offers me a $99 a month deal until the first year expires and the charge jumps to $150?

mulp,

You are confused. Why on earth would anybody wait 6 months to get treatment for cancer or for an injury? With or without health insurance, or go fund me campaigns, or any similar thing, everyone in the US can get immediate treatment for cancer or any other injury or illness.

Young and healthy people are better off avoiding insurance coverage because health insurance does not protect, or otherwise alter, a person's health. Health insurance protects financial assets which, by and large, the young and healthy don't have and therefore don't need to protect.

But young people rarely do get cancer. And if it does happen, they can enroll in an ACA plan without waiting if they get married or divorced, move to another state, get a new dependent, or even just become a dependent (e.g. quit their job and move back in with the parents). A lot of the qualifying events for special enrollment are under their own control.

bmcburney,

Evidence? The example of the Texas company seems to hint that they were attracting enough young and healthy people to achieve costs in line with the national average.

Also with premiums of $2.1B a year to cover 730K people that works out to an average premium of $2873 per year and they are asking for a 20% increase so that would become $3448 per year.

Sorry this is a success story. http://kff.org/other/state-indicator/single-coverage/ shows that in Texas the average employer provided policy in 2013 $5386. If that it what it costs to cover the typical person with a job (we aren't talking about the old or people in nursing homes here) then premiums of $2873 would be almost too good to be true. Even after the 'horrible' 20% increase the policy is still much less than the pre-Obamacare employer provided system.

Interestingly the rest of the article just tosses out increase figures in terms of percentages. It does not provide any other bases so the usual suspects here start their rants about Obamacare without noticing that I'd take a 20% increase on a $2873 policy any day to a 0% increase on a $5386 policy.

There's also a lack of thinking here about 'too many sick' versus 'too few healthy people'. Exchange plans are a minority of non-Medicare/caid health coverage. The bulk of coverage is coming from employer provided plans. So what does it mean if the exchange system has 'too many sick'? It means the exchange plans are covering people who the employer pools do not have to cover. Increases in one pool then are offset by decreases in other pools. Looking at just one side's increase or decrease in premiums misses the point.

Anyone here who wants to carp about 'too many sick' should explain exactly where/who was covering those sick people before Obamacare. They then have to account for the savings on that side to offset against the costs of where those sick are now.

Boonton,

Obviously, total per capita spending is primarily a function of the amount spent on the elderly primarily for end of life care. For the most part, that population is not included in the Obamacare pool because they are already on medicare (and medicaid). You can't draw accurate conclusions regarding the health of the Obamacare pool by comparing total spending per Obamacare participant to toal per capital spending for the entire population.

The meaningful comparison is between the actual insurance pools versus expectations. That's how the premiums, deductibles, and the expected cost of the subsidy programs are calculated. Whether the thing works at all depends on how much the young and healthy are willing to pay for a "benefit" they mostly don't need and can't use anyway. Among other things, whether the tax penalties associated with non-participation are effective depend on a comparision between the tax penalty and the premium cost. The tax penalty didn't change in Texas but the premium cost is about to increase by at least 20%. Will this increase or decrease participation by young and healthy people? On the off-chance that it results in a decrease in participation by young and healthy people, what will happen to premiums the following year? What magical event will take place to interrupt this process once it starts?

The meaningful comparison is between the actual insurance pools versus expectations. That’s how the premiums, deductibles, and the expected cost of the subsidy programs are calculated

Meaningful if you're running one of the insurance plans, but otherwise is it so? If an insurance company expects too much in costs, it will set premiums too high losing customers and vice versa. That's all part of the game.

Another aspect, though, is that premium instability may be part of the system. Imagine new policy A is created. It might make sense to roll it out with low premiums. Those with pre-existing conditions might not be eager to jump into it since they will be unsure if their doctors will take it or if the new policy will start balking at treatments and medications they get with their current policy. As a result the new policy scores a lot of healthy people who are mostly just shopping by price.

This is a temporary state of affairs. By grabbing lots of healthy people, the new policy has made older policies more costly. As a result insurance companies introduce yet newer policies to try to play the same game. Now Policy B attracts healthy people as policy A is flooded with sicker people leaving the discontinued older policies (or very large premium hikes in those older policies). Now Policy A gets headline grabbing premium increases leaving casual observers to wonder how medical inflation can be 5% but headline premium increases are 20%.

Obviously, total per capita spending is primarily a function of the amount spent on the elderly primarily for end of life care. For the most part, that population is not included in the Obamacare pool because they are already on medicare (and medicaid) -

Sorry the figures I provided were for average policies. Presumably they would have very few Medicare/caid patients since such people would mostly be using Medicare as their primary insurance.

Let's agree that "minimum wage significantly reduces employment of low-skilled workers" for discussion purposes. There's something I've never understood from a Tyler Cowen perspective: "Maybe, so what."

Ignoring that this positive claim remains disputed in some quarters, it seems that an equally, if not more interesting discussion could be had, that says "Under what conditions might a locality, state, or nation nevertheless want a minimum wage." Or to put it differently, "Acknowledging the many expected downsides, why might minimum wage simultaneously be a decent idea in Seattle and terrible idea in China?"

It seems like this hypothetical is far closer to the actual intellectual disputes about minimum wage among everyone who's not an economist.

Maybe from a short-term or even long-term policy perspective, forcing

I agree with you, but the neo-Keynsian's have been attempting to show that the economics make sense beyond the social benefits, and I have an issue with that. I don't think I speak for myself when I say that my issue isn't with social insurance policies and things of this nature, but that supporters often paint the issue as a win-win, both socially and economically. I think it's disingenuous to do that, and would be much more open to having a conversation about whether the costs to low skill workers are outweighed by the very real benefits we could see from such a legislation. We're having the same problem with the debate about healthcare; I don't mind helping to insure people who can't afford it, but don't tell me the fucking checks in the mail. So if we could all agree with your first premise, I think we could have a productive conversation about these types of policies. Somewhere along the line, the left decided that pitching social benefits wasn't enough to sell policies. They had to fill the academy and come up with theories to support their preconceived notions.

I think this has the argument almost exactly upside down. It is the opponents of minimum wages (ACA, CO2 emission reductions, etc) who think they have won the argument if they can find any cost at all to the policy rather than compare the costs to the benefits or the costs of one policy to the costs of another way of achieving the same benefits.

Unless one is willing to compare costs with benefits, one is left with only policies that make everyone better off. Changes in social arrangements that make everybody better off are probably discovered and implemented by the private sector. Politics gets the harder problems.

It is a win-win for low skill workers to live off government welfare?

Should the cut off for government welfare be the bottom 50% of workers with those in the top 50% paying higher taxes to fund the consumer spending of the lower 50% out of the excess income they will not spend on consumer goods and thus work to shrink the economy.

Note millions of low wage workers are dependent on welfare because unless someone gives them housing, cars, rides, clothing, food, they could never do a minimum wage job. But parents can't keep paying for these thing for their kids forever.

Or does bidding up the stock prices of the firms best able to drive down their employer wages to boost profits the most to either pay dividends or buy back stock increase GDP?

And just exactly who pays for consumer spending? The 1%? The government?

Clearly you do not believe wages pay for consumer spending and that in the ideal economy, no business would ever be burdened with labor costs.

1. I fear this is so much mood affiliation with rich people.

Professor Caplan seems to believe that his opinion that the minimum wage is mistaken is vindicated if the demand curve for labor slopes down, that is that an increase in the minimum wage will produce some unemployment. But that implies that there is some other cost less way of redistributing income to low-income workers that does not increase unemployment of low income workers. (There is, almost, the EITC but Republicans are even more opposed to making the tax system more progressive than they are to the minimum wage.)

Ruling out less costly ways of redistributing income one then has to look at the costs and benefits of the minimum wage itself. And the key element there is how elastic is demand for low income labor? For $1 transferred to workers who retain their jobs how much income is lost by workers who loose/do not obtain jobs, consumers who pay more for goods produced by workers at the new minimum wage, and owners of firms paying the minimum wage? The minimum wage is just another tax and transfer system and has to be evaluated like any other. To discover that it has some cost, even some cost some poor people cannot settle the issue.

So, first Tyler links to this guy at Forbes whining about the proposed insurance premia increases, not admitting that these generally do not go through, and missing that in fact we now have the first estimates of the average national increases from Avalere. So, last year it was 5.4%, and this has now zoomed to 5.8%. Sure looks like full bore death spiral. As I forecast, the most likely state to have an increase over 10% would be Oregon, and it has delivered at 12.0%. But then it is offset by some actually decreasing, such as Michigan, where the decline is -5.3%, not that we hear about those states from the usual gang of hysterical crazies here.

Sorry, kids, Obamacare continues to do just fine. We do not have all the states in, but I expect the final number will not be all that different from what we are seeing now. Yeah, there will probably be a further increase in the rate next year. Why it might even break 6%, but unless some politicans screw things up, we should see a return to lower rate increases after that.

Funny how none of you caught the latest report, including Tyler.

Oh, and Gabe, my uncle was very conservative, just for the record, but a highly published mathematician, if not as much so as his older brother, my late father, who was also very conservative.

The interesting thing here is (obviously) not the comment itself. The comment is nearly idiotic. The interesting thing is the level of bad faith being displayed. Why would Barkley attempt to convince others of something which he himself does not actually believe?

Barkely,

How much would you actually be willing to bet that Oregon's average premium increase (12%) turns out to be the only double digit increase for siviler plans sold to 50 year old non-smokers?

How much would you actually be willing to bet that Oregon's premium increase is the largest increase in the USA for silver plans sold to 50 year old non-smokers?

How much would you actually be willing to bet that the overall average increase in premia for silver plans sold to 50 year old non-smokers is 5.8% or less?

Why would Barkley attempt to convince others of something which he himself does not actually believe? -

He also professes to believe that Donald McCloskey is female.

I also happen to believe that you are a nauseating and disgusting homophobe, "Art Deco." No wonder you hide behind a phoney moniker for your garbage.

Make that "transgenderphobe." Not any better.

bmc,

I think that Avalere's estimates are likely to be close to correct. I have said nothing about there being no other states that might exceed 10% increase in the end. I said Oregon was the most likely, so I think probability is high that its 12% will prove to be the max for this year, although there might some others that beat 10%. Again,some states are seeing declining premia, with these averaging out. Sure looks like average national increase will only be slightly above what it was last year, again as I predicted.

I am not surprised, and I believe it. What is your problem, mcb? Why do you keep resisting facts that just keep on coming that the various hysterical stories you and some others keep pushing just keep failing to be confirmed. We went through this last year, but heard less about it because there were still some other potential Obamacare disasters the hysterics were focusing on more in their hope of the constantly forecasted doom. As it is, just about all of those have simply disappeared, clearly are not going to happen. So, this years set of exaggerated max rate increase requests has moved to the top of the hysterics' charts, but just as with last year, the actual rate increases are coming in a lot lower than those, and, of course the hysterics have completely ignored that some states have declining rates. But, hey, that messes up a good story about doom.

BTW, I find it curious that you call this "idiotic." I am simply reporting what is apparently the set of real facts coming in. That these facts correspond more closely with what I forecast than what you forecast does not particularly make me look like the idiot in this exchange. Indeed, I have been waiting to see you say anything either factually correct or intelligent yet.

Barkley,

You didn't answer the questions. If you really believed what you claim, why not answer the questions? Why not take financial advantage of your superior knowledge?

Your comment is idiotic because all 2016 rates will remain subject to reinsurance by the Federal government for one more year. As a result, the first real test of the program's stability in terms of premia will come next year as to proposed rates for 2017. At that point, we will see whether young and healthy "beneficiaries" really consider Obamacare a benefit. At this point, insurers can still submit low ball rates to gain market share (or to please politicians in liberal states) and the taxpayers will pick up all losses. The relevant information we have today are the loss ratios and they are horrific. As of today, the premiums are still fake but the loss ratios are very real.

The Avalere report shows some desperate cherry picking. Only silver plans, only in "blue" states, and no weighting to account for the size of the insurer in the market. As a result, for example, Avalere reports that Maryland has an average increase of 8.5%. That's nice but Laszewski (correctly) points out that the biggest player, First Care Blue Cross (80% of the market), just asked for an increase of 34% and 26% for its programs. How is this possible? It appears that some small players in Maryland are low balling their increases to gain share or because they are trying to curry favor with liberal politicians (did you happen to notice anything about the recent political history of ALL the jurisdications in the Avalere report?). Again, it costs them nothing to do this because the Federal taxpayer is picking up the tab for any losses. First Care Blue Cross, on the other hand, is actually going to have to live with something like the rates it proposes today (they don't want to be asking for a 50% to 60% increase next year).

But I suspect you knew all this. You may be dumb enough to tout the Avalere report but, somehow, you were not dumb enough to bet money on the conclusions. Although that was obviously the correct decision from a financial point of view, it does reveal something about the sincerity of your assertions.

2. I'm on the board of a charter school in Las Vegas. What I did not know before becoming a board member is that the annual amount paid by the state per student is sufficient to pay the compensation and benefits of the staff at the same level as public school staff; to pay for facilities and operations, to give the sponsoring school district a cut for various non-useful bureaucratic services, to provide special ed services...and to have a surplus. And, the test scores of the kids are as good or better as those of the public school kids.

Watch Nevada, it may be a real education innovator...if those moving here from California don't screw it up.

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