Category: Current Affairs

The Medicare bill

Daniel Drezner offers an excellent analysis, replete with useful links. His bottom line: it is poorly designed and a fiscal catastrophe. He reproduces a Heritage graph with the rather tragic heading: “A Drug Benefit Will Add $2 Trillion to Medicare’s $5 Trillion Shortfall by 2030,” see the link for the visual. Drezner, who describes himself as a “pragmatic libertarian,” is, like myself, depressed at the current political climate and the willingness of the Republicans to abandon principle and fiscal discipline.

Equality within black communities

The gap between rich and poor blacks is smaller in Maryland than in almost any other state, click here for the full story. Black households in Maryland scored a Gini coefficient of .430, only in Alaska is within-black inequality lower, counting only the states with a black population of three percent or higher. Most of the middle class black communities are concentrated around Washington D.C., much of the black poverty in Maryland comes from Baltimore.

David Dishneau notes the following: “The numbers reflect a relatively large black middle class, supported by good-paying, stable jobs in government, biotechnology and related industries, social scientists say.” In other words, the government as employer has done more for black communities than the government as purveyor of affirmative action. Yes our government has played a heroic role in helping stamp out unjust racial inequalities, but let us assign the credit to the policies that deserve it. When it comes to Alaska, seventeen percent of adults are veterans, the highest percentage of any state. Once again government employment, in this case mostly through the military, may play a significant role in reducing inequality and helping to create a black middle class.

The economics of on-line dating

Yesterday’s New York Times Magazine offers a lengthy look at on-line dating. This article is longer than most links I offer, it is not full of economic reasoning though the interesting and salacious content may keep you reading.

The bottom line, however, is simple. On-line dating seems to serve (at least) two major constituencies. First, many people use it to marry or otherwise find a monogamous relationship. Match.com claims to have lost 140,000 members, by enabling those people to find partners. Second, many people use internet dating to find casual sex or serial partners. The article quotes a “Greg,” who enjoys a first date with quickie sex at the end, and then offers the following remark: “I liked her, but not enough to merit fireworks. Given the seemingly endless selectoin, I get to be a little less forgiving.”

Since I suspect that on-line dating is more effective than not, people will increasingly choose one category or the other. Those people who are willing and able to marry, will find their partners and marry. After some period of time, the stock of marriageable people will be smaller. (Note: I believe that some decent chunk of the unmarried are simply emotionally incapable of marrying, for whatever reason.) The remaining unmarried will then find relatively higher returns from the serial dating and casual sex routes. So the distribution of the number of sexual partners will become more bimodal over time.

Furthermore, the last two years have been an especially good time to marry through on-line dating. The new technology is being applied to a large stock of unmarried people who could marry and be happy, but who otherwise could not find the right partner. Yes, an ongoing flow will replenish the stock but arguably the stock has been at a peak in recent times, given that on-line dating has just taken off. So if you want to marry, hurry up and get on-line. If you are just looking for casual sex, well, you have a greater luxury of waiting and in fact your options will likely improve with time.

The new medicare bill

This is one debate I simply have not had time to follow. Brad DeLong, however, offers two posts, the first notes that the prescription drug benefit has no funding source. The second, drawing on Henry Aaron, notes that the insurance component of the bill is far from ideal, here is one excerpt, Brad quoting Henry Aaron:

The design of the bill’s drug insurance makes little sense. Any plan that covers the three-hundredth dollar a person spends on drugs in a year, but provides no coverage for that person’s three thousandth dollar of spending has to be regarded as a bit wacky. Yet that is what this bill would do. It would end federal support for Medicaid drug benefits if patients are also eligible for Medicare, even where the new Medicare coverage would be narrower than existing Medicaid coverage. At the same time, it does nothing to remedy Medicare’s other major failings. It does not cap out-of-pocket costs, even though almost all policies covering the nonelderly provide this essential “stop-loss” protection. It provides no additional help to pay crippling nursing home costs, which are poorly covered under the current program. And it does nothing to help the half of the poor elderly and disabled who now receive no help with premiums and cost sharing they can ill afford.

Even worse, the conference committee bill could single out Medicare for unfair benefit cuts or payroll tax increases in the future. Currently, Medicare hospital benefits (part A) are covered by a dedicated payroll tax. Revenues from this tax now exceed costs and, together with the excess collections from past years (which are deposited in the Hospital Insurance trust fund), are sufficient to cover benefits through 2026. Under current law, three-fourths of the cost of Medicare’s Supplemental Medical Insurance (SMI or part B), which covers doctors bills, durable medical equipment, and certain other expenses, are paid from general revenues and the balance by beneficiary premiums.

I’m still a bit baffled by the whole issue, but it appears we have to write down yet another case (e.g., profligate domestic spending increases, various protectionist measures, the stalled energy bill, etc.) of bad economic policy from the people downtown.

Why are we fascinated by celebrities?

Michael Jackson and Kobe Bryant make the front pages for their possible misdeeds. The tabloids are full of news about Reese Witherspoon’s baby boy. Why do we care? Here is one account:

On the surface, the celebrity rags seem to be about sex. But their real subject is reproduction and the future of the human tribe. On the savannah, we needed to monitor how our clan was faring, and given our small populations we could do the job by ourselves, gossiping about how Gronk had left Zumba and that last night she slipped into Uggah’s cave to make a baby, and what our chance might be to steal one of them as a mate. But in a country of 290 million people, where even our next-door neighbors are strangers, we still need to flex those savannah needs for gossip and information in order to measure our species’ prospect. What better proxy than the young, wealthy, handsome, and visible alpha-male and -female breeding stock that Hollywood employs?

So writes Jack Shafer on Slate.com, see his full analysis. I agree, though I would be reluctant to write with such a reductionist tone myself. Furthermore I think we use celebrities for more prosaic reasons as well. We are fascinated by what produces relative status, something we all seek. We also use celebrities as a topic of social conversation, a means of showing that we are in touch, a way of signaling our views on various issues, and as a vicarious outlet for our hopes and fears. For more, see my What Price Fame?, also shown on the right bar on this blog.

How to outfox terrorists and other pursuers

You might try bsr-inc.com, they offer a two-day anti-terrorist driving school, which includes surveillance and 180-degree spins. You can even give your loved ones a gift certificate for the camp.

Why stop at driving? A three-day anti-terrorist camp in Arizona also teaches espionage and combat pistol techniques, for only $3800, try incredible-adventures.com. They offer a special course on Russian martial arts, promising “If you do spend time in a hotel, it won’t be a five-star.” You learn the “Systema” method of self-defense, enabling you to strike from virtually any position, dating from the Russian cossacks. Oddly, the course promises only two hours a day, I suppose you spend the rest of the time sunning yourself at the hotel pool. Their driving adventures include a course in Southern truck racing.

Many Hollywood movies, by the way, suggest that you overtake a car in pursuit by bumping it in the rear. Anti-terrorist driving instructors assure us this is the wrong way to go. Bump them from the back side, cause their car to spin around, and then pin them against a wall. Warning: do not try this on your own.

From this month’s issue of Popular Science. Oh, yes, if any of those anti-terrorist courses are beyond your means, consider a simple computer game for $50 or less, or perhaps the new John Woo movie, due out Christmas day, for $8.50 or so. That will be my pick of the lot.

What is the hot Christmas toy this year?

Just click here to see it. It is called “Lunar Stunt Car.” I can’t for the life of me imagine what is special about it, though of course I am not the typical buyer in this market. It is already hard to get in stores, but of course they are not raising the price, creating yet another puzzle in price theory, in fact they are advertising that it is on sale.

My best guess: They keep the prices low to generate publicity, to drive a fad, and the artificial scarcity makes it an especially sought-after item. Furthermore it may generate trips to the toy store, leading parents to buy other toys, although whether these gains rebound to the Lunar Stunt Car manufacturer is unclear. That all being said, once the toy takes off, I still don’t see why they don’t raise the price to capture higher profits.

Joe Lieberman vs. Howard Dean

Score one for Lieberman, read Jacob Levy’s comparison of the two on economic policy. Dean recently called for the “re-regulation of business”, Lieberman countered with the following:

“Howard Dean doesn’t understand how Bill Clinton created 22 million jobs in 8 years. By responsibly deregulating markets, Bill Clinton allowed exporters to sell more American products to foreign markets and brought competition to existing monopolies.

“Howard Dean would usher in a new era of big government with his re-regulation proposal. He would give us a treacherous trifecta of policies that turn back the economic clock: new trade barriers, a larger tax burden on our middle class, and now bigger bureaucracy. Either he doesn’t know how to turn the economy around, or this is another reckless mistake.

“We need to toughen the integrity of our marketplace, put real enforcers in regulatory posts, and put wrongdoers in jail. We don’t need to cripple the economy with a whole new set of broad re-regulation as Howard Dean proposes.”

It is a shame that Lieberman has no chance within the Democratic party.

The forthcoming energy bill

Here is Andrew Sullivan, quoting John McCain and commenting on him:

“I’m not saying that this bill won’t generate some energy. It will certainly fuel the coffers of big oil and gas corporations. It will propel the wealthy special interests. And it will boost the deficit into the stratosphere. Indeed, this legislation can be fairly called the Leave no Lobbyist Behind Act of 2003.
There are also four proposals known as ‘green bonds’ for construction of commercial buildings that will cost taxpayers $227 million to finance approximately $2 billion in private bonds. One of my favorite green bond proposals is a $150 million riverfront area in Shreveport, Louisiana. This river walk has about 50 stores, a movie theater and a bowling alley. One of the new tenants in this Louisiana Riverwalk is a Hooters restaurant. Yes my friends. Here we have an energy bill subsidizing both hooters and polluters.” – Senator John McCain, on the monstrosity otherwise known as the Energy Bill. How any principled, small-government, free-market Republican could vote for this vast waste of public money is beyond me. But we’re beginning to realize that GOP has nothing to do with small government or fiscal sobriety. It’s a vehicle for massive debt and catering to the worst forms of corporate welfare. Thank God for McCain. Bush should veto this bill, until it is de-porked. He won’t, of course. He has yet to veto a single big-spending bill. He doesn’t seem to give a damn about what is happening to the fiscal health of this country.

For a less polemical assessment, but ultimately a similar evaluation of the substance, see the ever-reliable Lynne Kiesling, start at this permalink and scroll downwards for running commentary and links.

Addendum: Senators from both parties criticize the bill as well, read here.

Howard Dean disappoints me

After years of government deregulation of energy markets, telecommunications, the airlines and other major industries, Democratic presidential candidate Howard Dean is proposing a significant reversal: a comprehensive “re-regulation” of U.S. businesses.

And what are the proposed candidates for such a re-regulation?

…utilities, large media companies and any business that offers stock options. Dean did not rule out “re-regulating” the telecommunications industry, too.

He also said a Dean administration would require new workers’ standards, a much broader right to unionize and new “transparency” requirements for corporations that go beyond the recently enacted Sarbanes-Oxley law.

Somehow either Dean or the source article left out mutual funds.

OK, some of these are complex issues, where you might argue that laissez-faire is impossible, and that more regulation could be better than current hybrid structures. But we are not choosing policy today. For the time being, forget the detailed debates, and ponder what this suggests about Dean’s instincts, what kind of campaign he will run, and what kind of voters he will appeal to. Ugh, and the libertarians should have never wondered whether Dean might be a small government guy in disguise.

Blood supply and the FDA

Have you ever heard of Chagas disease? It is rare in the United States but common in Latin America, where 18 million people are infected and 50,000 die of it every year. Some little thingie crawls down your mouth and sucks your blood when you are sleeping (lovely), beware the thatched hut, and next thing you know, maybe about ten or thirty years later, your weakened heart or organs explode. There is no known vaccine, cure, or treatment.

Chagas is now making its way into the United States blood supply. Ideally, all donated blood should be screened for Chagas. But, can you believe this, the FDA needs to approve all blood tests of this kind. They haven’t approved any test for Chagas, nor have they shown much urgency in this regard, here is the full story.

About 30 tests are currently in use in Latin America, but none would appear to meet the FDA’s accuracy guidelines. In the meantime it appears someone would prefer that we have no test at all.

The New York Times put it as follows:

The failure of the blood industry and its regulators to develop a test since it was endorsed by a Blood Products Advisory Committee in 1989 seems to be a combination of bureaucratic inertia and divided responsibility for such a decision. Blood banks cannot use a test that the F.D.A. has not approved. The agency usually defers to its advisory committees, which have many experts from blood banks as members.

“It’s a political process that is not always fully engaged,” said Dr. Stuart J. Kahn of the Infectious Disease Research Institute, a Seattle group hunting cures for tropical diseases.

Whatever you think of the FDA as a regulator of drugs, this kind of bureaucratic control is hard to understand. Now it is longer enough for you to beware the thatched hut, you have to worry about the blood supply as well.

People hate flexible prices

They really do. Consider L. Chester Carter, who raised the prices of his ice and gasoline after Hurricane Isabel, only ten cents more a gallon for gasoline. He also took on the added burdens of running generators, bringing in ice, and cooking for emergency workers. He nonetheless claims to have experienced a public outrage against his pricing behavior, here is the full story.

His description of what happened is perhaps more to the point:

“What I did was what the state and federal governments couldn’t do: Stay open and deliver services to the general public,”

Here are links to my earlier postings on price-gouging. We now hear that more than 40 price-gouging complaints were levied in Virginia, after this year’s storms. Virginia officials are considering writing the state’s first anti-gouging law, comparable to a law already on the books in Florida.

No doubt, this is voter-driven. This example, if nothing else, should tip us off about what kind of economic policy you can get in a democracy.

Addendum: Kevin Brancato discusses other anti-gouging laws.

Terrorism futures are back

Yes, those terrorism futures, here is a story from cnn.com. The old group, Net Exchange, is behind the current revival, but this time without a Pentagon connection.

The idea is being marketed as a research tool:

In response to the highly charged criticisms that ended the Pentagon’s association with the project, Polk [a Net Exchange spokesman] noted the market is designed mainly as a research tool, not unlike the Iowa Electronics Markets, which have done a pretty good job of predicting the outcomes of presidential elections.

“It is potentially an interesting alternative to Gallup polls or to specialists reporting from the region,” Polk said. “It’s a way of going directly to individuals in the region or outside who have knowledge or interest in the political and economic events in the area.”

Polk said Net Exchange would initially limit the amount of money traders could invest in the market, so that people won’t be profiting from violence or upheaval in the region.

What’s more, the futures contracts would be based on general questions, such as the likelihood that the King of Jordan will be overthrown at some point during the second quarter of 2004, for example, rather than on specific acts or events, which could lend themselves to manipulation by terrorists.

My prediction: These markets require legal tolerance, given that they otherwise violate anti-gambling rules or fall under regulatory jurisdiction. I’ll bet that this revival is shut down pretty quickly.

My view: Most of the movements in asset prices are noise, rather than based on fundamentals. The main problem with the idea is that the price movements, even if “unbiased” in the mathematical sense, feed us a steady stream of misinformation about world affairs. I also could imagine public panic resulting, or bad events being accelerated into greater likelihood, imagine how Jordanese politics is altered if the betting market says the King of Jordan is a goner.