Category: Political Science
Don’t take this the wrong way
The prospects for health care reform seem to be dimming. If I were a progressive I would be wondering right now whether Medicare was a tactical mistake. The passage of Medicare meant that most old people get government-provided health care coverage. Yet the way to get things done in this country, politically, is to get old people behind them. Further health care reform doesn't now seem to promise much to old people, except spending cuts on them. Given their limited time horizons, old people don't so much value system-wide improvements, which invariably take some while to pay off.
If Medicare had not been passed, might this country have instituted universal health care coverage sometime in the 1970s?
Intrade vs. MSM: Sotomayor Nomination
What tells you more about the Sotomayor nomination, all of the chatter and debate in the MSM over her "controversial" remarks or the single number from intrade: bids at 98,5, i.e. an estimated probability of confirmation of 98.5% (as of July 14, 11:12 pm EST)?
Loyal-reader Jim Ward writes:
Do reporters and news Agencies even know to check the betting markets? Or do they just ignore it, because “X sure to happen, nothing to see” is not a story?
Or they don’t want to seem biased, and have to provide 2 sides to every story…Why not just throw Intrade odds into every story as an addendum?
I'm actually amazed at how far prediciton markets have come. In Entrepreneurial Economics I wrote:
…perhaps one day, instead of quoting an expert, the
New York Times editorial section will refer to the latest quote on "health
care plan A" available in the business pages.
At the time, I didn't think that day would be just a few years in the future. Admittedly, we are not quite there yet but during the last election it was common for media outlets to refer to the prediction markets. I think this trend will continue. Can futarchy be far behind?
My Spanish article on Obama
Barack Obama has grown into a small industry. Some people are convinced
that he is a radical left-winger, while others claim he absorbed free
market economics during his time as a law professor at the University
of Chicago. Obama’s voting record in the Senate is left-wing, but
since he’s been planning on pursuing the Presidency for years, maybe
those votes were for public consumption.
My view of Obama’s economics is
straightforward one and it is consistent with his public
pronouncements. I view Barack Obama as an economic pragmatist who is
willing to borrow good ideas from many different sources. He stands
further to the left than do most Americans (myself included) but he has
lined up the very best centrist economic talent to advise him.
What’s
the reason for thinking that Obama is such a pragmatist? If you read’s
Obama first memoir (Dreams from My Father: A Memoir of Race and Inheritance),
which he wrote before he was famous, issues of identity dominate He is
acutely aware of being a mixed-race person in a community of largely
white American leaders. Most of all, I think Obama wants to do a good
job as President and he wants to be seen as having done a good job. That
would pave the way for improved race relations and, although Obama
would not use these words, it would bring higher status to
African-Americans. When it comes to his
subconscious, I see Obama as more attached to the notion of
excelling than to any particular view of economic policy. Keep in mind
that Obama was raised by a white mother (the father was absent) and he
“decided to be black,” and decided to marry a black woman and attend a
black church, only later in his life. Oddly, his hopes for improved
race relations are the hopes that would be held by a utopian white
liberal rather than the vision held by most African-Americans. That is
one reason why African-Americans were initially so slow to support him
and why so many educated white elites feel so at home with him.
Obama is also famously detached and
it seems he never loses his cool. He does not fixate on economic
ideology but instead he is focused on creating his own personal success. That implies a very strong ego but also it again leads to an economic and also a foreign policy pragmatism.
If Obama is elected, I expect the
major economic storyline to be Obama pushing policies in the national
interest (as he perceives it) and Congress pushing back with earmarked
expenditures and privileges for special interest groups. It won’t be about Democrat vs. Republican.
There is plenty of talk about Obama
being half-black but perhaps the more important fact is that Obama is
from Hawaii. Many Hawaiians barely think of themselves as North
Americans and they live thousands of miles from the continent. The
Hawaiian background is part of where Obama’s cosmopolitanism – which is
strong and sincere – comes from.
My description may sound like a very
favorable portrait of Obama on economics but he will likely encounter
serious problems if he wins the election. The
important American Presidents are those like Reagan who “know a few big
things” and push them unceasingly, without much regard for the
pragmatic or even the reasonable. Obama is not
used to connecting with mainstream America and if he wins it is because
the country is fed up with Republicans, not because the voters have
absolute confidence in him. Congress will test him. The chance that he makes big mistakes will be small, and that’s all for the better. But the best prediction is that he will be ineffective in tackling most of America’s biggest problems.
“Markets” in everything
The deal with doctors could come at a steep price: a $250 billion
fix to a 12-year-old provision in federal law intended to limit the
growth of Medicare reimbursements. The American Medical Association
and other doctors’ groups have sought to change or repeal the
provision, and they are likely to try to extract that as their price
for boarding the Obama train, people tracking the negotiations said.
Wal-Mart, the nation’s largest private-sector employer, agreed recently
to support requiring all big companies to insure their workers. In
exchange, Wal-Mart said it wanted a guarantee that the bill would not
“create barriers to hiring entry-level employees” – in effect, code
words to insist that lawmakers abandon the idea of requiring employers
to pay part of the cost for workers covered by Medicaid, the government
insurance plan for the poor.
“It’s kind of a give-and-take, quid pro quo kind of environment,” said Tom Daschle, President Obama‘s
first choice for health secretary, who remains in touch with the White
House on health care issues. “I think that the stakeholders wouldn’t do
this if they didn’t think there was something in it for them.”
…Over the past year, Mr. Baucus, Democrat of Montana, has
strong-armed industry groups, warning them not to publicly criticize
the process if they want to stay in negotiations.
Mr. Baucus, in
turn, has said little about his talks with industry players. On
Tuesday, he said only that he was “heartened” by how many groups were
supporting the health care overhaul.
That's the NYT reporting, not The Weekly Standard. Here is much more.
How should I feel if Obama, or maybe Congress, threatened to re-zone my neighborhood — unfavorably — unless I support an active Afghanistan plan on my blog? (Should it matter if I've incorporated the blog as a business? As an association? Even if there is no corporate right to freedom of speech, should there be "forced speech"?) Should it help much if the intimidation against freedom of speech is for a benevolent end? If Republican Presidents had done something similar?
Might it be correct to call this "evil"? I have seen "evil" defined as "morally bad or wrong."
Of course these deals are not unrelated to why health care reform — if we get it — won't in fact solve most of the major problems the sector faces.
Understanding politics
I was wondering why there had been so much talk recently of ramping up antitrust attacks on Google. Now I know. This is the way politics works. See my letter on antitrust protectionism (pdf) if you need more.
Symposium on Paul Collier
You will find a Collier essay on democracy and development along with numerous comments, including from Bill Easterly and Nancy Birdsall, all courtesy of Boston Review.
Easterly is not happy:
I have been troubled by Paul Collier’s research and policy advocacy for
some time. In this essay he goes even further in directions I argued
were dangerous in his previous work. Collier wants to de facto
recolonize the “bottom billion,” and he justifies his position with
research that is based on one logical fallacy, one mistaken assumption,
and a multitude of fatally flawed statistical exercises.
Nancy Birdsall suggests that donors support more investment in policing. She also notes:
The economy of sub-Saharan Africa–including Nigeria and South Africa–is smaller than the economy of New York City.
There is much more at the link.
Administrative costs, a simple point or two
Andrew Gelman serves up some links. Mankiw's addendum serves up some more.
Public sector programs usually have higher administrative costs — all relevant costs considered — than corresponding private sector programs. The public sector program is funded by taxation. That means the public sector doesn't have to worry so much about marketing or meeting payroll on commercial revenue alone. That will bring significant cost savings on administrative matters. But you can't stop counting there.
The deadweight loss from taxation is perhaps twenty percent or more. (It depends on which tax you consider as "the marginal tax" and there is not a simple factual answer to that question.) That should be factored into any comparison, even if you define that cost as "not an administrative cost."
The public sector also engages in less monitoring of who receives its services. If you're 67 and have worked a lifetime in this country, usually you can receive Medicare benefits. The "indiscriminate" nature of the program may be either a net social cost or a net social benefit but certainly it should not be counted as zero or ignored.
If you favor "indiscriminate" programs over targeted programs, OK. But the accompanying lesson is not one about the relative efficiency of the public sector at a comparable task. The lesson is that sometimes the public sector can be more effective when you don't wish to discriminate in supplying a particular kind of service.
TANSTAAFL.
Should “Fairfax County” become a city?
Should Fairfax County become a proper city? It has over a million people, many more than Washington, D.C. The bottom line seems to be this:
The basis for the idea is largely tactical — under state law, cities
have more taxing power and greater control over roads than counties do
— and it led to more than a few snickers about the thrilling nightlife
in downtown Fairfax (punch line: there isn't any).
Natasha could no longer say "We are from Washington":
If Fairfax does become a city, it would instantly become one of the largest in the nation, the size of San Antonio or San Jose.
It would also diverge dramatically from the stereotype of the gritty
metropolis. Fairfax enjoys many of the benefits — wealth and jobs —
and few of the detriments — crime, troubled schools — of a large
urban center. With a median household income of $105,000, it is the
wealthiest large county in the nation. Among large school systems, it
boasts the highest test scores. And it has the lowest murder rate among
the nation's 30 largest cities and counties.
One question is why this rather uncoordinated mix works so well. Federal dollars, diversity of immigration, and diversity of planning strategies all can be cited. The latter factor probably means we should not touch the status quo. And by the way, almost all of our nightlife is Korean but it does exist.
The value of personal experience
It's rare that I read something about Barack Obama which I had not already seen:
Barack Obama's last visit to Russia,
as a senator in 2005, did not end so well. He was detained by the
security services at an airport near Siberia for three hours, locked in
a lounge, his passport confiscated, like a scene from a John le Carré novel.
The Russians later called it a “misunderstanding.”
A theory of Fed announcements
If you've been paying attention, the Fed likes to release bad news
after the markets close on Friday afternoon. The past couple weeks,
they've announced the failures of small regional banks.
Well today [referring to a Friday], they announced something just a little bit bigger – the government bailout/takeover of Fannie Mae and Freddie Mac,
the two large mortgage finance guarantors. The markets have been
expecting this for a while, but obviously not everyone was expecting it
as their stock prices were $5.50 and $4 respectively when the market
closed today. If everyone was expecting this, then those prices would
have been a lot closer to zero.
Here is more.
Cap-and-trade-war
Eric Posner and Paul Krugman defend the use of tariff threats against polluting countries, such as China. I'll outsource my response to an earlier post by Matt Yglesias:
The bottom line about the international aspects of climate change is that the very idea of an effective response assumes
the existence of a generally cooperative international environment. It
doesn’t assume the non-existence of the odd “rogue” state here or
there, but it assumes the absence of any kind of serious great power
rivalries. Not just China, but also India and probably Russia, Brazil,
and Indonesia as well are going to need to cooperate in a serious way
with the OECD nations on this. And I just don’t see how you’re going to
get where you need to get through coercion. If anything, I think
attempted economic coercion of China is more likely to wind up breaking
down solidarity between the US, EU, and Japan than anything else.
First, we impose our carbon tariff. Then suddenly Airbus and European
car companies are getting all kinds of sales because the EU hasn’t
followed suit. Now not only are the Chinese mad at us, we’re mad at the
Europeans. Optimistically, at this point everyone decides coercion is unworkable and we start to back away.
I'll say it again: the current version of Waxman-Markey will make things worse. Keep in mind by the time we are slapping those 2020 tariffs on China, we won't have made much progress on emissions ourselves. How would we feel, and how would it influence our domestic politics, if the Chinese demanded we pass Waxman-Markey, while polluting at a high level themselves, or otherwise they will stop buying our Treasury securities?
When No Means Yes
… Having voted against the administration's climate change bill on the record means that at least some of these House Democrats will be able to vote for what emerges from a House-Senate conference later in the year. Therefore, the chances of a climate bill being enacted this year is now much greater than it was 24 hours ago.
That's the ever-perceptive Stan Collender on the politics of the climate change bill.
Regulation and Distrust
In an interesting paper, Aghion, Algan, Cahuc and Shleifer show that regulation is greater in societies where people do not trust one another. The graph below, for example, shows that societies with a greater level of distrust have stronger minimum wage laws. Note that the result is not that distrust in markets is associated with stronger minimum wages but that distrust in general is associated with greater regulation of all kinds. Distrust in government, for example, is positively correlated with regulation of business. Or to put it the other way, trust in government (as well as other institutions) is associated with less regulation.
Aghion et al. argue that the causality flows both ways on the regulation-distrust nexus. Distrust makes people turn to government but in a society with a lot of distrust government is often corrupt and this makes people distrust even more. Crucially, when people distrust others they invest not in the highest return projects but in human and physical capital that is complementary to distrust–for example, they invest in human capital that helps them bond with their group/tribe/family rather than in human capital that helps them to bond with “outsiders” and they invest in physical capital that is more difficult to expropriate rather than in easier to expropriate capital, even though in both cases the latter investments may be the all-else-equal higher return investments. Such distrust traps are quite similar to Bryan Caplan’s idea traps.
Thus, societies with a lot of distrust generate regulation and corruption and citizens who don’t have the skills or preferences to break out of the distrust equilibrium. Consider, for example, that in societies with a lot of distrust parents are less likely to consider it important to teach their children about tolerance and respect for others.
Insightful books on politics, written by politicians
That is another question I was asked yesterday, here are a few nominations:
2. James Madison and John Adams, for the latter Discourses on Davila.
3. Some of Richard Nixon, scattered.
4. Ulysses S. Grant.
5. Tocqueville, J.S. Mill and some other political writers were also politicians of a sort but I am not counting them as I do not view their contributions as stemming so directly from their political experience. Along these lines, you could try John Kenneth Galbraith's book about being ambassador to India.
6. Winston Churchill is a beautiful writer and important historian but I am not sure how insightful he is about politics.
7. Denis Healey, Time of My Life.
8. I've yet to read the new book by Zhao Ziyang.
9. Willy Brandt, My Life in Politics.
My knowledge is weak in this area (here is a list of Canadian political autobiographies and I know not a single one) and Google is surprisingly unhelpful; what else am I missing? And why are there not more? Are politicians so drunk with self-deception that they cannot write insightful books?
Three word explanations
Median voter theorem.
It's my first-cut account of a lot of what is going on in the newspaper headlines. Yet somehow I rarely see it mentioned, even when I read very prominent social scientists commenting on current policy.
I thank Garett Jones for a useful conversation behind this blog post.