An Alternative: The Market Option

Late last week, Michael F. Cannon @ Cato released a study entitled, Yes, Mr. President A Free Market Can Fix Health Care in response to a challenge made by President Obama in March 2009:

“If there is a way of getting this done where we’re driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.”

This is very much a presumption based question, like “When did you stop beating your wife?”  It holds within an assumption the only plausible answer is one which uses the power of the government to control the market, and by extension individual citizens, with complete skepticism about any power of the free market.

While this seems to be the default assumption of many of my fellow citizens these days, I don’t know that I’ll ever understand how an objective look at market success versus an objective look at governmental success would lead one to believe the government is capable of much more than simple, repetitive tasks.

Having said that and even knowing the Democratic leadership and the White House is likely to ignore the answer, Mr. Cannon presents a pretty convincing case about a market solution (@Cato).  He explains:

how Congress can remove the impediments that currently prevent markets from doing so:

  1. Give Medicare enrollees a voucher (adjusted for their means and health risk) and let them purchase any health plan on the market,
  2. Reform the tax treatment of health care with “large” health savings accounts, which would give workers a $9.7 trillion tax cut (without increasing the deficit) and free them to purchase secure coverage that meets their needs,
  3. Free consumers and employers to purchase health insurance across state lines (i.e., licensed by other states), which could cover up to one third of the uninsured,
  4. Make state-issued clinician licenses portable, which would increase access to care and competition among health plans, and
  5. Block-grant Medicaid and the State Children’s Health Insurance Program, just as Congress did with welfare.
  6. Whole thing here.

    This is a free society?

    This morning, news outlets everywhere carried recent news out of the Treasury Department.  The Pay Czar, who is certainly living up to the moniker Czar, announced today (WallStreetJournal):

    The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government’s plans.

    As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department’s special master for compensation, also intends to demand a host of corporate governance changes at those firms….

    Even without bothering with the fact that the government is not in any position to understand what kind of compensation any single employee should have, this is still a radical and arbitrary move that if continued can work to destabilize the economy.

    Beyond that, this decision is an anathema to a free society breaking not only the contract rights of ordinary citizens, but also violating all individuals by pushing a blatant ex  post facto punishment.

    In a free society, within reason, individuals should be able to contract for any reason they want.  In this case, you have employees who have privately contracted with their employers for certain remuneration based upon their perceived worth to the company.

    I say perceived work, because obviously not all hiring decisions work out for the company even if the employee does very well at their job.  Personality conflicts, culture conflicts, and even performance problems are some of the reasons why a new hire might not work out as expected.  Unless specifically stated in the employment contract, even in these cases the employer’s general resource is firing, not taking back pay.

    Adding to this is the simple, real, true fact that this is by its very nature an ex post facto punishment for perceived mismanagement.  It has been a legal tradition for centuries, a that passing laws, which retroactively punish people, is against a free in democratic society.

    In fact it’s in the US Constitution and universally recognized by a number of treaties including Universal Declaration of Human Rights and American Declaration of the Rights and Duties of Man (from Wiki):

    no person be held guilty of any criminal law that did not exist at the time of offence nor suffer any penalty heavier than what existed at the time of offense. It does however permit application of either domestic or international law….

    To be fair, there are some uses for ex post facto laws which have been recognized by our supreme court including allowing for Congress to grant administrative agencies the ability to do just this thing.  So legally speaking, this might be ok, however to anyone who proposes to value freedom, it should be obvious that even allowing administrative agencies this power was a massive failure of all branches of the government.  They are supposed to protect our freedoms, not remove them one at a time.

    Either way – it’s intuitive that both contract rights & ex post facto laws are required for a free society.  If the government can interfere at will in private contracts and retroactively punish you for perceived wrongdoings, you have no ability to make relevant decisions for your life as you have no ability to be secure that those decisions will continue to hold true.

    This insecurity is what creates instability in most third world countries today.  This lack of basic economic & legal foundation is what continues to plague most of the planet and yet we seem to be moving on the same path.

    A week ago or so, a Democratic non-profit held a focus group of GOP members & Independents (here).  Among other interesting things they found, they noted how the GOP members opposed the President because they felt he was attempting to fundamentally move away from our founding principles.

    They went further to note how this differed from Independents “underscoring the extreme disconnect of the conservative Republican base voters”.

    I will say this move is absolute proof that the GOP members have it right.  If the administration allows this travesty, it is without a doubt a complete move away from not only our founding principles, but away from freedom in general.

    Is this reality or a weird parody?

    Without apparent concern about the percentage of people who loudly proclaim their dislike of the DMV and use it as an analogy for all that is wrong with the government… the Senate version of the health care bill includes a portion that would allow citizens the pleasure of getting health care insurance through the DMV (Townhall.com):

    The most revelatory passage in the so-called “plain English” version of the health care bill that the Senate Finance Committee approved on Tuesday (without ever drafting the actual legislative language) says that in the future Americans will be offered the convenience of getting their health insurance at the Department of Motor Vehicles.

    This is no joke. If this bill becomes law, it will be the duty of the U.S. secretary of health and human services or the state governments overseeing federally mandated health-insurance exchanges to ensure that you can get your health insurance at the DMV.  You will also be able to get it at Social Security offices, hospitals, schools and “other offices” the government will name later. …

    I guess a Social Security office makes a little sense and even perhaps schools as a temporary sign-up location, but it seems to me signing up at a hospital or school isn’t a good idea over the long run.  I think the idea is that we will all live in the beautiful world with top of the line health care we got when  dropping our children off at school…  If so, it seems that getting insurance at the hospital or waiting until my child goes to school would  be a little late…

    Even assuming all three of those are brilliant ideas – did they really mean to include the DMV?

    I have this sinking feeling politicians everywhere laughing at us.  Either that or we need a new term other than “out of touch” that connotes the gap between everyday individuals and our leaders is so large as to make the Grand Canyon seem tiny by comparison.

    Do they honestly think adding health care insurance to the duties of the the normal DMV clerk will help them pass the bill?

    Who knows though?  Maybe I’m completely off base and this is setup behind the scenes by some mysterious genius who brainwashed unwitting politicians. <begin dream sequence>

    In fact, it’s not stupidity that created this language.  Not at all; in fact, it’s a creative attempt at a self destruct device for the bill as is.  Where exactly in the world is Hank Scorpio <end dream sequence>

    Of course the latter would assume a complex network of contacts and some people with super powerful persuasion skills while the former only requires a belief in the group ignorance of our current set of politicians.

    In experience and recent history is any guide, the safe bet is on idiocy.  All day, every day, and twice on Sunday.

    Social Service Verification for Helen   Kelly


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    Employment and Income Information current as of: 09/15/2009
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    EMPLOYER
    Employer: 11472 – Johns Hopkins University
    Headquarters Address: 3400 North Charles Street
    Baltimore , MD 21218
    US
    Federal Employer Identification Number (FEIN): 52-0595110
    Division: 52-0595110
    EMPLOYEE
    Employee: Helen  Kelly
    Social Security Number: XXX-XX-0652
    Address: 307 S Cornwall St
    Baltimore , MD 21224
    US
    Employee Phone Number: Data not provided
    Date of Birth: Data not provided
    EMPLOYMENT
    Employment Status: Active
    Most Recent Start Date: 02/15/1999
    Original Hire Date: 02/15/1999
    Reason for Termination: Data not provided
    Total Time with Employer: Data not provided
    Job Title: Administrative Program Coordinator
    Union Affiliation: Data not provided
    Work Location (Job Site): Data not provided
    MEDICAL INSURANCE
    Medical Insurance Available: Data not provided
    Employee Eligible: Data not provided
    Reason for Ineligibility: Data not provided
    Employee Enrolled: Data not provided
    Eligibility Date: Data not provided
    Next Open Enrollment Date: Data not provided
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    Dependents SSN Birth Date
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    Participating in Medical COBRA: Data not provided
    DENTAL INSURANCE
    Dental Insurance Available: Data not provided
    Employee Eligible: Data not provided
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    WORKERS’ COMPENSATION
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    Claim Pending: Data not provided
    INCOME AND DEDUCTIONS
    Average Hours per Pay Period: 81
    Rate of Pay: $2,237.25 / Semi-monthly
    Pay Cycle: Semi Monthly
    2009 2008 2007
    Total Gross: $37,989.39 $51,359.92 $48,890.04
    Payroll Deduction for All Insurance Coverage: Data not provided
    PAY PERIOD DETAIL   9/15/2009
    Income Withholding
    Total Gross Earnings $2,274.75
    Pension Data not provided
    Other Income Data not provided
    Federal Tax $152.13
    State Tax $52.03
    Local Taxes $34.81
    Social Security $141.03
    Medicare $32.99
    Retirement/401k $916.66
    Cafeteria Plan $0.00
    Garnishments $0.00
    Other Withholding $0.00
    HISTORICAL PAY PERIOD SUMMARY
    Pay Period End Date Pay Date Hours Worked Gross Earnings Net
    09/15/2009 09/15/2009 $2,274.75
    08/31/2009 08/31/2009 $2,274.75
    08/15/2009 08/14/2009 $2,274.75
    07/31/2009 07/31/2009 $2,274.75
    07/15/2009 07/15/2009 $2,274.75
    06/30/2009 06/30/2009 $2,274.75
    06/15/2009 06/15/2009 $2,445.09
    05/31/2009 05/29/2009 $2,189.58
    05/15/2009 05/15/2009 $2,189.58
    04/30/2009 04/30/2009 $2,189.58
    04/15/2009 04/15/2009 $2,189.58
    03/31/2009 03/31/2009 $2,189.58
    03/15/2009 03/13/2009 $2,189.58
    02/28/2009 02/27/2009 $2,189.58
    02/15/2009 02/13/2009 $2,189.58
    01/31/2009 01/30/2009 $2,189.58
    01/15/2009 01/15/2009 $2,189.58
    12/31/2008 12/30/2008 $2,189.58
    12/15/2008 12/15/2008 $2,189.58
    11/30/2008 11/26/2008 $2,189.58
    11/15/2008 11/14/2008 $2,189.58
    10/31/2008 10/31/2008 $2,189.58
    10/15/2008 10/15/2008 $2,189.58
    09/30/2008 09/30/2008 $2,189.58
    09/15/2008 09/15/2008 $2,189.58
    08/31/2008 08/29/2008 $2,189.58
    08/15/2008 08/15/2008 $2,189.58
    07/31/2008 07/31/2008 $2,189.58
    07/15/2008 07/15/2008 $2,189.58
    06/30/2008 06/30/2008 $2,189.58
    06/15/2008 06/13/2008 $2,487.08
    05/31/2008 05/30/2008 $2,040.83
    05/15/2008 05/15/2008 $2,040.83
    04/30/2008 04/30/2008 $2,040.83
    04/15/2008 04/15/2008 $2,040.83
    03/31/2008 03/31/2008 $2,040.83
    03/15/2008 03/14/2008 $2,040.83
    02/29/2008 02/29/2008 $2,040.83
    02/15/2008 02/15/2008 $2,040.83
    01/31/2008 01/31/2008 $2,040.83
    01/15/2008 01/15/2008 $2,040.83
    12/31/2007 12/28/2007 $2,040.83
    12/15/2007 12/14/2007 $2,040.83
    11/30/2007 11/30/2007 $2,040.83
    11/15/2007 11/15/2007 $2,040.83
    10/31/2007 10/31/2007 $2,040.83
    10/15/2007 10/15/2007 $2,040.83
    09/30/2007 09/28/2007 $2,040.83
    09/15/2007 09/14/2007 $2,070.79
    08/31/2007 08/31/2007 $2,033.34
    08/15/2007 08/15/2007 $2,033.34
    07/31/2007 07/31/2007 $2,033.34
    07/15/2007 07/13/2007 $2,033.34
    06/30/2007 06/29/2007 $2,033.34
    06/15/2007 06/15/2007 $2,033.34
    05/31/2007 05/31/2007 $2,033.34
    05/15/2007 05/15/2007 $2,033.34
    04/30/2007 04/30/2007 $2,033.34
    04/15/2007 04/13/2007 $2,033.34
    03/31/2007 03/30/2007 $2,033.34
    03/15/2007 03/15/2007 $2,033.34
    02/28/2007 02/28/2007 $2,033.34
    02/15/2007 02/15/2007 $2,033.34
    01/31/2007 01/31/2007 $2,033.34
    01/15/2007 01/12/2007 $2,033.34

    Correlation versus Causation: The Housing Crisis

    For more than 20 years now, with legislation leading back almost 40 years, the United States government has been pushing the idea that every citizen should have a home.

    Based upon several studies showing high correlations with positive societal behavior for homeowners, politicians, leaders, non-profits, lots of people pushed for easier access to affordable housing.  In a Federal Reserve report published in 1999, they state:

    A number of recent studies attempt to measure whether there are nontraditional benefits to homeownership, such as increases in the success of children (Green and White [5]), citizenship (DiPasquale and Glaeser [3]), and a variety of family outcomes and attitudes (Rossi and Weber [11])….

    This is only 1/2 the story of course.  What these studies, our politicians, our leaders, & the rest of them  can’t conclude from this data is whether home ownership actually affects any of these additional traits.  The study itself hints at this:

    …Because of the preferential tax treatment accorded homeowners, particularly low-income homeowners, and the large degree of wealth accumulated in housing, these authors argue that it is important to know the full range of homeownership benefits and costs. However, given the difficulty of credibly assigning causality to housing externalities, it is not surprising that such factors have been previously ignored.

    In one such paper, Green and White [5] find a strong statistical correlation between homeownership and the likelihood of dropping out of school or becoming pregnant. Yet a reasonable interpretation of their result is that of omitted variable bias. Clearly, homeowners are different from renters along a variety of dimensions. As a result, those factors that are latent in their work, such as parental skills, interest in the educational process, wealth, and family stability, potentially bias upward any homeownership effect….

    In other studies, they show correlations between home ownership & wealth accumulation, to help give more force to the “everyone needs a home” meme (study dated 2004):

    For many years the federal government has promoted homeownership as an important goal for low-income families. A primary motivation of this policy goal is the concept that owner-occupied housing can be an important means of wealth accumulation, particularly for those lower-income and minority families that are able to purchase homes….

    They as well admit the difficulty with this assessment:

    …However, very little has been done in the housing literature to determine the importance of housing and non-housing sources of wealth accumulation. This determination has been difficult to address for three reasons. First, detailed wealth information on families is seldom available on a consistent basis. Second, such information on wealth is even less likely to be available over time so that changes in wealth can be observed. Third, the process of housing wealth accumulation is dynamic. Housing wealth accumulation depends critically on how soon a family that is renting becomes a homeowner, whether or not the family graduates to more highly valued owned units over time, or becomes a renter again and never regains homeownership….

    With the current practice of press & political standards however, you might be hard pressed to find any evidence that assigning non-traditional benefits to home ownership is anything but an unqualified good.  The majority of reports dealing with low income housing stimulus are positive  (here & here).

    In some cases, overly emotional logic is used (here):

    After business dried up in May, Jodi Morris’ employer, an insurance agent, stopped sending paychecks.

    Since then, the 43-year-old single mother has had to sell almost all of her furniture – her kitchen table and chairs, bed frames, dresser and armoire, and living room set – to pay the bills.  Morris and her 7-year-old daughter, Karly, now sleep on mattresses on the floor of their two-bedroom Ahwatukee apartment. And with no table, the two eat dinner on their cream-colored couch.

    An eviction notice that arrived this month threatened to put Morris and Karly out on the street.  But Morris could be the first Phoenix resident to receive a lifeline from the federal government that seeks to rescue those on the verge of homelessness….

    & without exception, our government is not immune.  The US government is right now, before the housing crisis even fully contracts (I wrote about it here), spending money to help low income families purchase homes.

    Even before the housing crisis though, economists, experts, non-profits, were asking whether home ownership should be considered an unqualified good.  Unfortunately, reports questioning these basic assumptions are a very low percentage compared to the constant noise.

    In some cases, even questioning the wisdom of subsidizing low income home ownership has resulted in kill the messenger attacks from non-profit groups, community leads, and even Democratic leadership, by leveling charges of racism.  With a simple misdirection trick, questioning the basic assumptions is anti-low income & since low-income households are generally minorities, questioning these assumptions must be due to institutional racism.   Politicians and leaders everywhere have a grand ole time setting up straw men in a fields of hay while standing by with gasoline and matches, but we should expect more.  We should expect to be able to ask all relevant questions we can and to get answers to as many questions as possible.  Lastly, we should let the data lead to its natural conclusion.

    Assuming we truly want the best answers we can get and the best progress we can have, we must be willing to ask tough questions and live with the answers reality presents.

    Anything less is little better than just allowing random superficial rhetoric to control policy.  It’s almost like we never moved away from the world Richard Feynman spoke about in 1974:

    …But even today I meet lots of people who sooner or later get me into a conversation about UFOS, or astrology, or some form of mysticism, expanded consciousness, new types of awareness, ESP, and so forth. And I’ve concluded that it’s not a scientific world.

    Journalism & International Analysis

    Over time I’ve come to the conclusion that where news entities fail miserably is in their analysis with international politics.  Most pundits, writers, journalists, etc, seem to be able to semi-grasp domestic policies, albeit still in the usual, overly simplistic, fits-to-the-narrative type of way, but lose all rationality with respect to international affairs.

    Interestingly enough, I think their failures in both domestic & international analysis stem from the same basic cause, oversimplification.  But it would seem that the degree to which it effects each type of analysis differs due to the lack of incentives private interests have in resolving inaccurate reports on international issues.

    Thinking about the counter thought to international policy, domestic policy, we see incentives existing to resolve press inaccuracies.  For instance, if the press pushes inaccurate opinions and analysis which oversimplifies a given topic, a special interest group or two, plus at least one political party, and finally non-profits everywhere will try to enlighten by showing the fallacy of the common narrative.

    This is because people rightfully see domestic issues as more directly impacting their lives.  The corollary is that our politicians, our leaders, our special interests, and our non-profits tend to focus where we as a society focus.

    The problem that can stem from this seems intuitive – inaccurate press on international issues should be held as highly suspect, but get printed without much serious disagreement.   Since very little counters popular wisdom, this gives the press a power to change opinions and as well as spread myths.

    This leads to all kinds of odd conclusions, with large swaths of people all over the planet prone to believe in things without substantial proof nor any degree of rational logic.

    For instance believing that western countries are somehow to blame for poor countries with constant internal strife and corrupt governments which inefficiencies and lack of resources.  Or said another way, people all over believe in a zero sum game.  This is true not only in the international sense, but also when dealing with immigration and free trade issues.

    Mistaken assumptions such as zero-sum games also lead to beliefs about what one thinks a President can actually do, versus what reality tends to dictate what will actually be done.  This leads to politicians making believable, yet highly impossible claims about given international situations.  This has been done to all recent Presidents, including President Obama when pulling a missile defense shield out of Poland & Czechoslovakia was made to appear as a rash decision amounting to abandoning our allies, when in fact it wasn’t a bad decision when concluding what options were open and what were the greatest threats to our security and security in the region (wrote about it here, though Mr. Obama went and said it had nothing to do with Russia… which was just amazing… wrote about that here).

    It leads to pundits everywhere snidely remarking how this action wasn’t “tough” or that action was going to anger others because it was “unilateral”.  With little recourse, journalists  print all sorts of things without taking into any account the actual framework through which any given action action was taken, under what circumstances, with what available options, or really they just leave out anything resembling actual analysis.

    Unfortunately, it seems no organization is immune.  A recent piece published in the Economist titled  Even greater expectations discussing the idiotic Nobel Prize Committee decision, is a far cry from the analysis for which the Economist is known.

    They rightfully begin with the question the world was asking, “Is it premature to give Barack Obama the Nobel peace prize, less than a year into his presidency?”, but delve quickly into non-international events dressed up to seem as if change had already happened:

    …Most broadly, he has sought to engage with opponents, saying that America would “extend a hand, if you unclench your fist”, for example to those who were earlier dismissed as an “axis of evil”. Somewhat to the discomfort of Iran’s president, Mahmoud Ahmadinejad, who had bolstered his domestic support by vilifying America as an aggressor, Mr Obama has proposed holding talks about nuclear affairs, removing a precondition that Iran first abandon enrichment of uranium. Mr Obama made withdrawal of American forces from Iraq one of the main pledges of his election campaign and has since overseen a slightly quicker run down of troops than was envisaged by Mr Bush. Towards North Korea, too, Mr Obama has dangled the prospect of bilateral talks and closer engagement.

    Regarding Russia Mr Obama has developed a policy of notably warmer ties, dubbed “hitting the reset button”. Relations had become especially frosty towards the end of Mr Bush’s presidency when war broke out between Georgia, an ally of America, and Russia…

    Continuing with this as reasoning:

    …Yet Mr Obama’s main achievement is a change of tone in foreign policy. A speech given in Egypt in June was an eloquent call for a new understanding between America and Islam. It was designed both to assure Muslims, now thought to number 1.6 billion around the world, that America is not set on a crusade. Similarly it was intended to convey to any Americans (and others) who believe in the notion of a “clash of civilisations” that friendly ties between religions is eminently possible.

    Similarly, American policy towards small and repressive regimes, ranging from Myanmar to Cuba, has shifted in mood, if not yet substance, by offering the prospect of engagement if governments demonstrate progress towards democracy…

    Which to date has not only done absolutely nothing to help international cooperation, but has made our interests tougher to protect.  In nearly every UN Conference on whatever, for instance the G-20 dealing with the economic crisis, the US asks for a lot of cooperation and everyone goes their separate ways.

    In some ways this is to be completely understood.  American solutions for economic issues will differ from that of Germany or the UK.  Even though the same basic problem afflicts most countries during the global recession,  their banking industries are setup with much different regulations, making the solutions for one country not necessarily compare to another country.  The separate policies might even be attempting the exact same “type” of solution, for instance increasing capital requirements, but under different systems any one specific solutions will affect different countries differently.

    When it comes to reaching our hand out to those regimes, we see that North Korea, Russia, and Iran have been openly hostile to any US intents.  Iran’s deadline of October the 1st to fess up or face sanctions has come and gone, even while it was precipitated by Iran admitting to an additional enrichment facility.

    And all this, including that all important warming of US-Russian relations, Russia has stated publicly the will continue to trade with Iran, meaning they will back them, if the UN, lead by the US impose stricter sanctions against Iran.

    Now these situations are fluid to some extent, especially between cautious friends such as US-Russia and most of the controversial moves taken by Iran & North Korea would likely have happened to test any new US President’s resolve.

    The issue is that by glossing over the realities we end up believing in myths.  Think about all that talk about “unilateral” action as if it’s a huge negative due to the controversy surrounding the last semi-unilateral decision to be made, without understanding that this is exactly as we should expect it.

    No country should do something the US requests if they know in the end the analysis states otherwise.  On the international stage, Europeans, Cechs, Persians, Africians, indeed every person deserves the same representation we deserve – for their representatives to look out for their interests.

    Now this can and does lead to all kinds of international policies from all different governments that appear wrong or unseemly when in truth it’s a playing field for which no one actor controls the rules which leads to countries making decisions that seem antithetical to their stated morals or goals.

    It also allows one country to look at another as particularly egregious, regardless of their country’s current international policies.   It should be obvious that while beating up on your own politicians on domestic policy makes sense, doing so on the international stage is just beating yourself up.  Even if well-deserved, it’s easier to beat up on other country’s policies than it is to self reflect.

    In some ways, national feeling probably affects this as well.  When most countries populations have enough information to dislike a number of other countries, going against that grain can be seen as being unpatriotic.  You certainly wouldn’t see a major political figure like Tony Blair coming to the US to air Britain’s dirty laundry or Putin to do the same in the US against Russia.

    It also allows for journalists to paint country X with any brush they choose.  This helps some countries as the press will like some allies, but can obviously hurts or diminish countries for which popular sentiment doesn’t exist.

    In the end, what it does is allow for a type of international superiority by enhancing nationalistic feelings.  When only reviewing other countries’ by hand picking policies, self-selecting cultural attributes, last recent controversy, crazy politicians, one can get the opinion of their general greatness over all those “other” people.

    Lastly, and in my opinion, the most unfortunate consequence of this misinformation, is our inability to actually analyze international issues.  In between these simplistic news stories real trade-offs on the international stage are being made and constantly simplified.  From a high-level view the policy might appear to be utterly wrong, but in reality  might not be so.  It might simply be the least bad of all the bad options.  & it might really be the policy itself which is wrong.

    For real analysis however, historical context, actions taken versus realistic options available, trends, and a number of other data points are required.  Without honest sourced information cost/benefit analysis simply isn’t possible.

    The right thought, with the wrong conclusion

    Over at the Huffington Post, Keli Goff wrote an interesting, yet disturbingly short sighted piece about particular health care costs which exist in large part due to personal private choices.

    She begins the piece titled Mad at Greedy Insurers for This Health Care Mess? Then Why Aren’t You Mad at Your Greedy Neighbors discussing the government’s bail out of private businesses:

    Raise your hand if you are still filled with anger when you hear the name AIG and picture the more than $100 million of your tax dollars that were delegated–without your consent–for employee bonuses there.

    Now raise your hand if you were angry when you learned that Citigroup (which has received so much bailout money that American taxpayers have been dubbed “its major stockholder”) was planning to spend $50 million of your money on a luxury jet….

    Even though the numbers she sights are a far cry from the actual tax dollars given to private business, she uses the anger over the bail outs to compare with the lack of anger of health care costs related to personal choice:

    …There is something inherently distasteful about being expected to foot the tax bill for someone else’s personal choices–particularly bad ones–and not being given any choice of your own in the matter. Which is why I am so surprised that there has been so little anger expressed by leaders on either side of the health care debate when it comes to the issue of personal choice and responsibility in health care…

    …According to the Centers for Disease Control, “obesity costs our nation as much as $147 billion per year in direct health care costs and lost productivity.” And according to the nation’s oldest anti-smoking organization smoking costs taxpayers a whopping $300 billion dollars annually, or 1,000 times the amount of the AIG bonuses….

    Utilizing this ratio of anger levels contrasted with actual dollars, she follows through by discussing the trait both costs have in common, personal responsibility:

    …Some health care reform advocates will argue these costs would be lower if there were government subsidized health care, but my question is why should the government, specifically taxpayers, subsidize health care costs for conditions that are not only preventable but essentially chosen by the patient? With all of the anger surrounding the health care debate, at town halls, in the House and Senate, where is the anger about personal responsibility?…

    Like many before her, she perfectly frames the clear distinction between individual actions which don’t harm others and societal responsibility.  She uses our innate disgust of having to foot the bill for the negative consequences of others and sees the fundamental issue of both problems.

    If only she had stopped there.  If only she understood clearly that when I hurt myself, I should be the only one liable for the resolution, we’d be in total agreement.  Instead, she illogically assumes that individual responsibility is shared among all citizens:

    …To be clear, personal responsibility is not only up to consumers.  Mayor Bloomberg’s success in curbing smoking in New York is due to a multi-pronged strategy of aggressively fining bars and restaurants that allow patrons to flout the anti-smoking ban and raising the cost of cigarettes, in essence targeting the dealer as much as the addict….

    Not only is responsibility shared in her view, but government force is also the solution.  Therefore since targeting these “bad smoking” behaviors has coincided with a decrease in the number of smokers , why not continue these policies to control other “bad” behaviors?

    …A similar strategy should be undertaken federally against fatty foods and drinks (including many of the ones I love).  But as long as groups like the AFL-CIO oppose efforts to hold Americans financially accountable for their personal health choices, so that the system can afford to treat those who do not choose to be sick…

    Thinking more critically though, this turns out to be very short sighted thinking devoid of any historical context and antithetical to fundamental human behavior.  Indeed, I think most people agree with her that when people make bad decisions that affect only themselves, they should be solely responsible for the consequences.

    Where she fails is in properly analyzing government as the solution.  If one fully analyzes her solution, the lack of follow through in her thinking becomes easily spotted.

    First, we know that human behaviors are heavily influenced by incentives.  It’s natural and obvious; we do things that benefit us.  For those willing to see reality for what it is, examples are all around us.  We can see it in the use of commission programs for corporate sales force.  We see it in TV commercials and marketing campaigns.  We even see it in the tax code.   Through denial or lack of contemplation though, some fail to see that this same fundamental human behavior also affects our decisions as they relate to health care.

    In fact, one of the reasons for rising health care costs and bad personal choices is individual consumers have been moved further and further away from the actual cost.   In the US, part of rise in health care costs can be attributed to  government incentives which pushed health care plans away from individuals and towards employers.  For the same reason, others countries with socialized medicine also see rapidly rising costs of health care.

    Second, we also know that historically, when governments are given the power continue to assume more and more control over individual lives, it ends in tyranny.  As we allow government to assume more responsibility for individual actions, we necessitate their ability to control those actions.

    Assuming we still believe in a free society, one of the prices we pay is having the responsibility for the negative consequences brought about by our choices.

    For instance, if you smoke – society doesn’t owe you CHEMO.  If I you eat 30K calories a day – society doesn’t owe you gastric bypass surgery.  If you drink a bottle of whiskey a day – society doesn’t owe you a liver.

    However, by not of following the logic of her solutions and ignoring historical contexts, she can safely and happily assume government control is the answer:

    …So the next time you are reminded of how angry you are at AIG or any other institution that was “bailed out” with your money, just remember that AIG may have mugged you once, but McDonald’s and your neighbor keeping them in business (and whoever invented the doughnut, bacon cheeseburger), will be sucking your wallet dry for decades to come….

    Which only leaves us in the end with nothing more than a false dichotomy as if we only have two choices:  either we pay for it or we control it.

    Really, due to faulty logic, she has unwittingly made a very cogent argument against government provided health care.  IE – we don’t need to control that behavior if we are not paying for it.

    But I don’t know if she understands that by continuing to promote societal responsibility for individual choices, she is also logically promoting less freedom and more government intrusion.  I don’t know if she even believes in the value and morality of freedom.  I also don’t know that she doesn’t fully understands all of this, but due to value differences only, still believes government control to be the answer to health care problems.  And I really don’t know which is worse – being wrong based upon ignorance or understanding the full ramifications of increased government control, but not caring.

    The truly concerning part should be that it doesn’t matter which is worse as the results are always the same.   For as long as we have enough people with these types of beliefs, we will continue to lose more and more individual freedoms.

    As Hayek stated:

    “We must show that liberty is not merely one particular value but that it is the source and condition of most moral values. What a free society offers to the individual is much more than what he would be able to do if only he were free.”

    Krugman: Following the False Dichotomy Road With Long Time Pal, Strawman

    This past Friday, the 25th of June, Democrats, with 8 Republicans in the House have passed sweeping environmental regulation known as Cap and Trade.

    Democrats narrowly passed historic climate and energy legislation Friday evening that would transform the country’s economy and industrial landscape.

    But the all-hands-on-deck effort to protect politically vulnerable Democrats by corralling the minimum number of votes to pass the bill, 219-212, proves that there are limits to President Barack Obama’s ability to use his popularity to push through his legislative agenda. Forty-four Democrats voted against the bill, while just eight Republicans crossed the aisle to back it…

    Despite the numerous problems with the bill and still open questions remaining as to what the full financial impact will be on average consumers, Nobel prize winning economist, Paul Krugman is full of praise (here):

    So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

    Which is perfectly fine.  I honestly tend to expect more out of an economist, like asking questions about cost versus benefits and the like, but I’ve gotten use to Mr. Krugman using his very large bully pulpit for his politics, and not economic principles.

    As is his trademark for completely disregarding anything that fails to comport with his world view, he moved from praise directly into false logic:

    But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

    And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

    So from the very beginning, he places everyone into two basic camps – those who voted for the legislation and those who are anti-science, treasonous bastards, how don’t understand the fundamental science behind climate change.

    Instead of acknowledging the well known fact that many opponents of this legislation are not global warming deniers, he presents a false dichotomy in which there are only two sides – his side and those that don’t believe in global warming.

    From this basic setup, his article flows smoothly as he defends the science behind global warming all the while pretending the strawman he is busy burning exists in real life.

    As usual, outside of his partisan world, the issue is not nearly as cut and dry.  Many of the best argued positions come from people opposed to this bill have absolutely nothing to do with the science of global warming at all.  The generally tread a few main points:

    1. What are the true costs of the bill to individual consumers? This question is almost impossible to ask as 300 additional pages were added to the 1000 page bill just a couple of hours before a forced vote.  None of Congress had time to read the additions prior to voting.
    2. If we can detail a good cost estimate, do we fully know what benefits to expect in order to balance costs with benefits?
    3. & lastly, the politics of the bill are being setup for corruption.  Instead of opening an exchange where the initial carbon offsets can be purchased through a free market system, the government will be handing out those directly to business.  They will get these carbon credits free of charge and be able to resell them on the market once that happens.  Allowing congress the ability to decide who gets free money is a system setup for corruption.

    Critiques :Reason, Cato.org, and just a lot of additional BS on politics of the entire thing

    Of course Mr. Krugman should know and likely does know exactly what he’s doing.  He frames the debate as a false dichotomy, only allowing two choices, then pretends to make one choice look completely stupid by comparison through the ceremonial burning of the strawman he invented.

    Not terribly surprising from a columnist who was arguing in 2004 that the economy needed a housing bubble to get us moving forward again, only to completely reverse course and pretend he never did any such thing after the collapse of that market (here).

    Is it really any wonder why the self proclaimed 4th branch of the government is trusted less and less everyday?