ObamaCare’s Preventive-Care Subsidies: Neither Free nor Cost-Effective
Matt Yglesias criticizes my comment in today’s USA Today when he writes, “making preventive health care free to the patient is…very cost-effective.”
Except it isn’t “free” to the patient.
And it isn’t cost-effective. The evidence strongly suggests we would “buy” as much health if we just waited for people to get sick and treated them then.
Do Forced Mortgage Writedowns Create Wealth?
Matt Yglesias recently added his voice to the long running calls for principal reductions on underwater mortgages. His argument is that such would create additional spending. Or as he puts it, “I think that if people in Phoenix got a principal writedown on their mortgages, they’d have more disposable income and might go to the bar more.”
What Matt, and others calling for forced principal reductions, miss, or choose to ignore, is that while a mortgage represents a liability to the borrower, it is an asset to someone else. Matt’s logic, which I agree with here, is that an increase in one’s net wealth (via a reduction in one’s liabilities) should increase one’s consumption. To complete the analysis, however, we must extend that same logic to the holders of the asset, so that a reduction in the value of their asset (the mortgage) should reduce their spending. Taking x from A and giving x to B is not going to increase A+B. To assert otherwise is to engage in Enron-style social accounting.
Now if you want to argue that the borrower has a higher marginal propensity to consume than the investor (say, a retiree living off a pension) then provide some support for that position. It is just as likely that those on the losing end will take efforts to protect themselves from this loss, decreasing overall social wealth. So what one has to show is that the marginal propensity to consume for the borrower is so much larger than that for the investor that it offsets any costs from the investor trying to protect his investment from theft.
Now if you simply favor redistribution of wealth for its own sake, just say so. If you hate investors and love defaulting borrowers, then just say so. Personally, I don’t believe the role of government should be to take from A to give to B. I just ask that we stop pretending, in the absence of compelling evidence, that redistribution of wealth is the same as wealth creation.
The Government Shouldn’t Try to Manage the Communications Marketplace
Matt Yglesias takes my recent post gathering three links a little too seriously. Beyond their subject matter—the proposed merger of AT&T and T-Mobile—the theme running through the links was that they were all to the TechLiberationFront blog, not that “the federal government should not try to manage the development of the communications marketplace.” My humor is a little odd. Not everyone gets to come along….
But it’s true that the federal government should not try to manage the development of the communications marketplace. So I’ll defend that, and first principles, which Yglesias claims to have reached their limits when it comes to communications.
First, I’ll refine my thesis: the government should not manage the communications marketplace.
What is a “marketplace”? The handiest web dictionary has the following two relevant definitions: “1. An open area or square in a town where a public market or sale is set up. 2. The world of business and commerce.”
To “manage” such a thing ["to take charge or care of: to manage my investments"] would be to have a hand in much or all of it—not just meta-rules about the terms of buying and selling, but what may be sold on what terms, often up to and including price and quality.
Given these ordinary meanings, I think “manage the communications marketplace” has a relatively broad connotation, and the argument that the government should not manage the communications marketplace is easy. The give-and-take of the market is a better way to discover consumers’ true interests and to apportion resources to serve them. For all the effort and smarts they put into it, government regulators are at a serious disability compared to the market’s manifold forces. More often than not, regulators serve the interests of the corporations that are well organized to win their succor, and they nurture their own interests in maintaining and growing power.
The Moral Equivalent of Monarchy
Matt Yglesias plumps for monarchy, based on — what else? — human nature:
[I]t seems inevitable in any country for some individual to end up serving the functional role of the king. Humans are hierarchical primates by nature and have a kind of fascination with power and dignity. This is somewhat inevitable, but it also cuts against the grain of a democracy. And under constitutional monarchy, you can mitigate the harm posed by displacing the mystique of power onto the powerless monarch. We follow the royal family with fascination, they participate in weird ceremonies, they have dignity, they symbolize the nation, we all talk about them respectfully, etc. Meanwhile, the Prime Minister gets to be just another politician. Admittedly the one who’s most important at this given moment in time. But that’s no reason not to jeer at him during Question Time. He’s not the symbol of the nation who’s owed deference. He’s a servant of the people and people who feel he’s serving them poorly should say so.
Dignity and power?
Dignity, sure. I admit, I am fascinated by dignity. I delight when formerly servile people regain it. I love, without apology, the dignity of being an American, under which our “weird ceremonies” happen chiefly of our own volition. I love the dignity of the immigrant shopkeeper — she might not have much, but what she has is hers, she’s worked for it, and she knows it. I love the dignity of a good book, a well-baked loaf of bread, or Dvořák’s Ninth. I love the dignity of suburbia, and of bohemia. I’ve known them both, and what they have in common is this — large stretches of time in which you are left to your own devices. That’s dignity.
But power? In a wide swath all around it, power destroys dignity. That’s not just an unfortunate side-effect. That’s the whole point of power. That’s what it does. It’s telling that Yglesias manages to praise power unstintingly — but only among a group of preposterous twits who’ve long ago stopped wielding any significant power themselves. Except, evidently, the power to fascinate the power-hungry.
Is it human nature to love power? Maybe for some. Indeed, I could hardly explain otherwise the continued presence of coercion in the world. Thinkers far greater than I have come to the same conclusion, so let’s just leave it at that.
Not everyone, though, is quite so keen on power. As Ravi Iyer, Jonathan Haidt, et al. have recently suggested, one self-identified group — libertarians — has a high degree of skepticism regarding authority, tradition, and conformity. Self-described libertarians place a high value on individualism, personal choice, and reason, even sometimes at the expense of other values, like emotion or community. In short, when we see a king, we don’t say “Wow!” We say — “Why?”
Is an Education Free Market Really ‘Totally Insane’
Matt Yglesias thinks my assertion that we would be better off economically if education money stayed with taxpayers rather than going to public schools and universities is “totally insane.” Ouch!
Now, I can actually understand this, because many people have difficulty envisioning things other than what they’ve always known. But have I really gone all Crazy Eddie? If government didn’t spend taxpayer dough on education, would the poor be much worse off than they are today? Can we never over-invest in schooling because education is just so important? Does the college wage premium mean we should never ratchet down subsidies for college education? And is it at least possible that spending more and more public dough doesn’t lead to more or better education — by which I mean actual, valuable learning — as much as more waste?
Unfortunately, it seems Ygelsias didn’t follow any of the links I provided in the post containing the line he objected to, which furnished some valuable data answering these important questions. And, by the way, it really was just one line he seemed to dislike – the point of the post was to argue against spending yet more taxpayer dough on an education-centered stimulus, not for complete separation of school and state. And, of course, tax-credit-based school choice leaves taxpayers in control of their money without eliminating support for education.
But let’s start answering our questions in more depth so that Mr. Yglesias and others can start to think outside of the “how we’ve always done it” box.
Obama’s ‘Perfectly Clear’ Iraq Policy
As someone who has his own snarky tendencies, I am really starting to have a hard time discerning when Matt Yglesias is being serious and when he is being sarcastic these days. For example, he writes of President Obama’s Iraq speech last night that
I think Barack Obama’s Iraq policy was perfectly clear as of last week—war kinda sorta ending on August 31, 2010 and more honest-to-god ending in December 2011—so I wasn’t exactly glued to the set to watch his speech last night.
So Obama’s “perfectly clear” Iraq policy is that “the war” “kinda sorta ended” yesterday, and will have a “more honest-to-god [than kinda sorta?]” end on New Year’s Eve next year? But when does it just plain end?
Or maybe the best way to clear this up would be if I could put Tom Ricks’ question to Matt: “How many U.S. military personnel will be in Iraq four years from today — that is, Feb. 25, 2014?” Or if we’re assuming one term, by January 2013?
Too Quiet on the Texas Front?
Over at Matt Yglesias’ blog, Ali Frick wants to know why she hasn’t detected any “conservative outrage” over the great Texas textbook tangle. Strangely, though, she only critiques Cato by name. That’s odd because (a) Cato is a libertarian organization, not conservative, and (b) there are many other libertarian — as well as truly conservative — think tanks out there.
Unfortunately, those things are just the beginning of the post’s odd twists.
Before I get into the weirdness, though, let me cop to the charge of relative silence. I’ve been meaning to hit the Texas situation harder, but have been dealing with a much greater education threat to the country — truly national curriculum standards — as well as other big issues.
Which reminds me: If Ms. Frick is very concerned about having one set of standards imposed on the entire nation, I invite her — and anyone else — to a major debate we’ll be having at Cato on the same day that proposed national standards are expected to be released to the public. Register here to attend!
So anyway, I have been relatively quiet on Texas. But not completely silent, and Ms. Frick could easily have found things that both I and others have written on the Lone Star social studies shootout just by searching for “Texas” and ”social studies” on Cato’s website. That search brings up this, and this, and this. Oh, and we sent this statement to media outlets, resulting in lots of radio interviews on the subject. How Ms. Frick missed all of these things, I do not know.
What is especially strange about Ms. Frick’s post, though, is not that she called Cato conservative (that’s all too common), or didn’t actually seem to check if we’d done anything on this. What is especially strange — or maybe just confused — is that she thinks people at Cato should be very upset about the Texas situation because the content of textbooks for Texas is often the content other states get stuck with.
For one thing, that Texas essentially dictates content for everyone else is an increasingly debatable point. More important for Frick’s piece, though, is that she asserts that somehow Texas being a big, centralized market is clearly something that creation of the U.S. Senate was supposed to mitigate, as well as the Constitution’s Supremacy Clause:
[I]t’s hard for me to think of really anything so antithetical to the Founding principles than for one state to mandate radical changes that all the other states are forced to swallow. Indeed, avoiding such an outcome was in large part the purpose of the Senate, not to mention the Supremacy Clause of the Constitution — really, the scrapping of the Articles of Confederation altogether.
What?
First off, if you read Federalist no. 62, there is just no way to interpret it as saying that the Senate will represent states so that an individual state’s policies won’t adversely affect other states. It simply discusses the need to give representation to both states and people in the national government of the new republic.
But that isn’t Frick’s biggest stretch. That is reserved for her application of the Supremacy Clause, which reads:
This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.
Once again, this says absolutely nothing about whether it is constitutional for a big state to adopt textbooks even if it affects the textbook choices of smaller states. The clause is entirely about the supremacy of federal laws — when made to exert the specific, enumerated powers given to the federal government — over state laws. It says diddly about state actions that simply have some impact on other states, especially when those actions have nothing to do with federal powers.
All that said, libertarians do have good reason to be concerned about what has transpired in Texas, as it illustrates brilliantly the conflict, politicization, and academic dangers inherent to government schooling. But that is an issue about which many of us at Cato have dealt at great length. I invite Ms. Frick to read it all.
A Post-Health Care Realignment?
From Franklin Delano Roosevelt’s New Deal to Joe Biden’s Big F-ing Deal, progressives have led a consistent and largely successful campaign to expand the size and scope of the federal government. Now, Matt Yglesias suggests, it’s time to take a victory lap and call it a day:
For the past 65-70 years—and especially for the past 30 years since the end of the civil rights argument—American politics has been dominated by controversy over the size and scope of the welfare state. Today, that argument is largely over with liberals having largely won. [...] The crux of the matter is that progressive efforts to expand the size of the welfare state are basically done. There are big items still on the progressive agenda. But they don’t really involve substantial new expenditures. Instead, you’re looking at carbon pricing, financial regulatory reform, and immigration reform as the medium-term agenda. Most broadly, questions about how to boost growth, how to deliver public services effectively, and about the appropriate balance of social investment between children and the elderly will take center stage. This will probably lead to some realigning of political coalitions. Liberal proponents of reduced trade barriers and increased immigration flows will likely feel emboldened about pushing that agenda, since the policy environment is getting substantially more redistributive and does much more to mitigate risk. Advocates of things like more and better preschooling are going to find themselves competing for funds primarily with the claims made by seniors.
I’d like to believe this is true, though I can’t say I’m persuaded. It seems at least as likely that, consistent with the historical pattern, the new status quo will simply be redefined as the “center,” and proposals to further augment the welfare state will move from the fringe to the mainstream of opinion on the left.
It’s Not Camelot, ‘It’s Only a Model’
In Monty Python’s Quest for the Holy Grail, the assembled knights look in awe upon the imposing walls of “Camelot”… until someone points out that “it’s only a model.”
I feel I’m watching a remake of Quest every time I read another blog post about the economics paper “Anti-Lemons” by MacLeod and Urquiola.
Matt Yglesias reproduced its abstract last month, saying “I would have to pay $5 to read the whole paper, but the abstract conveniently supports political positions I like, so I’ll talk about it some more.” That, needless to say, isn’t the sort of talk that calls for a thoughtful response.
But now that Megan McArdle has picked up the thread from a second Yglesias post, read the paper, and it given it a favorable verdict, it’s time to point out that “it’s only a model” — and not a very good one at that.
“Anti Lemons” is not an empirical study. Instead it presents a series of abstract mathematical models with arbitrary assumptions. The final model purports to demonstrate the authors’ conclusion that “For-profit entry turns out to be feasible, despite these assumptions, as long as private schools can cream skim the highest ability students from the public system.”
What are the authors’ assumptions?
i) individuals differ only with respect to innate ability
ii) all schools are equally productive
iii) for-profit schools must operate unsubsidized
The first two of these assumptions are nonsense and the third contravenes the whole point of a school choice program (whether tax credits or vouchers), which is to subsidize access to private schooling for those who could not otherwise afford it.
As if these problems were not enough, the model also incorrectly assumes that when academic selectivity is permitted, every private school will not only select students based on academic entrance tests, but that they will all use the same test. Like the others, this assumption is out of touch with reality. When I analyzed survey data for Arizona private schools in 2006, I found that nearly half of all private schools were not academically selective. Only a third actually administered an academic admissions test of any kind. The only admissions criteria applied by a majority of schools were measures of student and parent desire to attend the school and students’ and parents’ willingness to abide by its code of conduct.
So the MacLeod and Urquiola model has precious little to do with reality. It tells us nothing about the real world or about tax credit or voucher programs or proposals. In fact, it seems to serve no productive purpose whatsoever, unless one considers it productive to give left-wing bloggers a study abstract to talk about that “conveniently supports political positions [they] like.”
Though MacLeod and Urquiola briefly discuss a modified model that relaxes the proscription against subsidization of private schools, its other erroneous assumptions remain and so it produces a result that is, not surprisingly, completely at odds with the reality established by the large body of empirical findings in this field.
Last year, I reviewed the worldwide literature comparing public and private schools (65 studies reporting 156 different statistical findings) and found that the statistically significant findings favor private schools by a margin of roughly 8 to 1. More importantly, when we focus more precisely and compare truly market-like school systems to monopolies such as U.S. public schooling, the statistically significant results favor markets by a margin of nearly 15 to 1 (and they greatly outnumber the insignificant findings as well). It is thus the least regulated private schools that show the most consistent advantage.
MacLeod and Urquiola mischaracterize that research literature as follows: “there is no consistent evidence that introducing choice substantially improves learning, or that private schools have higher value added than public ones.” The sources they cite to back up their mischaracterization are both incomplete and imprecise, failing to look at a large swath of the research and failing to distinguish among various forms of “choice” with fundamentally different features.
So, no, the “Anti-Lemons” study is not the Camelot it is cracked up to be by recent rhapsodic blog posts. It’s not even a good model.
[Should anyone want to interject Hsieh and Urquiola's 2006 empirical study of the highly regulated Chilean voucher system at this point, I've already offered my thoughts on it here.]
Average vs. Marginal Effects of Health Insurance
I have to thank Ezra Klein. I have for some time been trying, without success, to spark a debate about whether expanding health insurance coverage would actually save any lives. Even my bet with Karen Davenport seemed to go nowhere. But when Klein accused Sen. Joe Lieberman (I-CT) of being “willing to cause the deaths of hundreds of thousands of people” because Lieberman was jeopardizing passage of legislation that would expand health insurance to 30 million people, Klein made a debate possible.
Following on my first response to Klein that the evidence supporting his claim is remarkably thin, others have joined the discussion. Matt Yglesias of the Center for American Progress rose to Klein’s defense. Megan McArdle (in The Atlantic magazine and her blog) and Tyler Cowen (at Marginal Revolution) both argue that we don’t really know if Klein’s claim is true.
Today, Yglesias poses the following question on his Twitter page:
Do rightwingers really believe that US health insurance has no mortality-curbing impact?
I see two problems. First, there are no right-wingers in this debate. McArdle, Cowen, and I all support gay marriage, for example.
Second, Yglesias sets up a straw man. He asks whether health insurance on average has a positive impact on mortality, when the debate is actually over the effect of health insurance at the margin. In other words, would covering the uninsured save lives?
I don’t know anyone who thinks health insurance has zero effect on mortality overall. Yet it is entirely possible for the average effect to be positive and the marginal effect to be zero. One reason may be that the uninsured do benefit from the human and physical capital that health insurance makes possible. It may also be the case that when the uninsured do obtain health insurance, the additional medical care they receive is more likely to harm them than to help them. The researchers behind the RAND Health Insurance Experiment make essentially the same point.
If the marginal effect of health insurance on health is zero, it raises other interesting questions. Would it also have zero effect on health outcomes if we were to reduce the number of people with health insurance? What is the size of the margin over which health insurance has zero impact? (Robin Hanson suggests it may be very, very large.)
Klein recently declined an invitation to debate these issues at Cato. Too bad. This is worth pursuing.
On C-SPAN: What’s a Little Promise Among Friends?
My, oh my. Transparency is getting defined down to excuse a breaking campaign promise.
At the Center for American Progress’ “Think Progress Wonk Room” blog (or whatever it’s called), Igor Volsky makes the case against allowing C-SPAN cameras into negotiations about the health care bill. Recall that President Obama promised on the campaign trail to have health care negotiations broadcast on C-SPAN.
“But if one actually considers the tone and tenor of the televised health care debate of 2009,” says Volsky, “filming the conference negotiations seems counterproductive.”
He does have a point. Television causes politicians to grandstand and doesn’t necessarily improve the legislative process.
But President Obama knew that when he made the promise, and he made the promise all the same. The credibility of the legislative process suffers from its overall opacity, and Candidate Obama promised different, starting with health care legislation — to progressives’ cheers as much as any other group.
Yet he appears to be walking away from that promise. And Volsky wants to abet him with a transparency caveat — only if it “improve[s] the underlying bill.”
Improvement is in the eye of the beholder, of course. This is not a welcome gloss. It’s bait and switch. “[T]he reality of politics doesn’t square with the promises of the campaign trail,” says Volsky.
Obama, American Nationalism, and the Weird Anti-Materialism of the Foreign Policy Elite
Matt Yglesias puts down the bloody shirt long enough to make the modest-on-its-face claim that “actions, not words, will clarify Obama’s foreign policy.” I don’t think that’s quite right.
In one sense, of course, it is. For the bean counters among us, the outcomes are the real metric: whether the United States remains the sole superpower on the planet; whether a diplomatic resolution can be reached with Iran; whether Obama can (assuming he has has any intention to) get our military out of Iraq; whether his spun-like-cotton-candy Afghanistan policy can stabilize that sorry land — these are the things we’ll be looking at.
But the more important thing in the short term for Obama is probably to slake the nearly-unquenchable thirst of the David Brookses of the world — and probably the American people — to have their identities stroked. To take the most recent example, Brooks, William Kristol, Robert Kagan, and the Foreign Policy Elite of whom they are avatars were in desperate need of a cold shower and a trip to the nearest confessional after Obama indulged them by unsheathing the Mighty and Awesome Totem of American nationalism — before a crowd of peacey Norwegians no less. To take another example, witness the veritable panic, the hysterical and fluttering response to the imaginary Obama “apology tour” that didn’t exist and had no affect on anything in any event.
Indeed the Foreign Policy Elite is so captivated by the rhetoric, imagery, and perhaps most importantly the identity surrounding U.S. foreign policy it hardly has time to think seriously about the material realities. There are of course examples where analysts simply misrepresent material reality — witness this ridiculous characterization of Obama’s boost in defense spending as an “assault” on the defense budget — but in general the foreign policy commentariat seems more interested in how American power makes them feel than it is on the outcomes it produces. And witness the frenzy over the Oslo speech, the “apology tour” claptrap, or the whining about Obama’s restraint from calling on the Iranian people to start a revolution.
Charles Krauthammer, in a recent essay, went so far in the anti-materialist direction to claim that “decline is a choice.” “Decline — or continued ascendancy — is in our hands.” Of course, it isn’t always a choice, says Krauthammer. The British had it coming, for example, but the crucial factors in Krauthammer’s telling weren’t imperial overextension and the relative waning of its latent power but rather “the civilizational suicide that was the two world wars, and the consequent physical and psychological exhaustion.” Thus, nations decline in large part because of sapped will — perhaps this would be the foreign policy equivalent of the “mental recession” we heard about a year ago. If this is right, keeping a careful eye on will-sapping things is more than a parlor game.
But of course Krauthammer’s charge that Obama is willfully precipitating American decline cannot be substantiated by reference to material factors, so it’s perhaps no coincidence that he takes aim primarily at Obama’s “demolition of the moral foundations of American dominance.” Krauthammer’s central piece of evidence is telling:
In Strasbourg, President Obama was asked about American exceptionalism. His answer? “I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.” Interesting response. Because if everyone is exceptional, no one is.
Reading this, I was reminded of Conor Cruise O’Brien’s observation that
Ideally those responsible for international affairs ought to be able to understand and moderate the holy nationalism of their own country and to discern, even when disguised, the operations and limits of holy nationalism in rival countries as well as in third-party countries.
Unfortunately this may be too much to hope for. There are serious cognitive difficulties involved. Any nationalism inherently finds it hard to understand any other nationalism or even to want to understand it. This is particularly true of holy nationalism. Rejection of the other is part of the holiness.
All of this is enough to make you wonder then — if Obama wanted to, could he just keep the opinion columnists — and the American people — happy with a regular genuflection at the altar of American nationalism rather than by providing them with actual wars and actual crusading? Would he if he could?
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