US healthcare is famous for three things

Wednesday, April 12th, 2017

US healthcare is famous for three things, Ben Southwood notes:

It’s expensive, it’s not universal, and it has poor outcomes. The US spends around $7,000 per person on healthcare every year, or roughly 18% of GDP; the next highest spender is Switzerland, which spends about $4,500. Before Obamacare, approx 15% of the US population were persistently uninsured (8.6% still are). And as this chart neatly shows, their overall outcome on the most important variable — overall life expectancy — is fairly poor.

But some of this criticism is wrongheaded and simplistic: when you slice the data up more reasonably, US outcomes look impressive, but being the world’s outrider is much more expensive than following behind. What’s more, most of the solutions people offer just don’t get to the heart of the issue: if you give people freedom they’ll spend a lot on healthcare.

The US undoubtedly spends a huge amount on healthcare. One popular narrative is that because of market failures and/or extreme overregulation in healthcare, prices are excessively high. So Americans with insurance (or covered by Medicare, the universal system for the elderly, or Medicaid, the government system for the poor) get the same as other developed world citizens, but those without get very poor care and die younger. A system like the NHS solves the problem, according to this view, with bulk buying of land, labour, and inputs, better incentives, and universal coverage.

But there are some serious flaws in this theory. Firstly, extending insurance to the previously-uninsured doesn’t, in America, seem to have large benefits. For example, a recent NBER paper found no overall health gains from the massive insurance expansion under Obamacare.* A famous RAND study found minuscule benefits over decades from giving out free insurance to previously uninsured in the 1970s. In fact, over and above the basics, insuring those who choose not to get insurance doesn’t ever seem to have large gains. Indeed, there is wide geographic variation in the life expectancy among the low income in the US, but this doesn’t even correlate with access to medical care! This makes it unlikely that the gap between the US and the rest is explained by universality.

To find the answer, consider the main two ingredients that go into health outcomes. One is health, and the other is treatment. If latent health is the same across the Western world, we can presume that any differences come from differences in treatment. But this is simply not the case. Obesity is far higher in the USA than in any other major developed country. Obviously it is a public health problem, but it’s unrealistic to blame it on the US system of paying for doctors, administrators, hospitals, equipment and drugs.

In fact in the US case it’s not even obesity, or indeed their greater pre-existing disease burden, that is doing most of the work in dragging their life expectancy down; it’s accidental and violent deaths. It is tragic that the US is so dangerous, but it’s not the fault of the healthcare system; indeed, it’s an extra burden that US healthcare spending must bear. Just simply normalising for violent and accidental death puts the USA right to the top of the life expectancy rankings.

One of our cultural problems, Arnold Kling adds, is that we spend too much on health care and not enough on public health.

Alone

Sunday, July 19th, 2015

Arnold Kling sums up William Manchester’s view of the 1932-1940 period in British history in two paragraphs:

The British ruling class was rotten. The British Prime Ministers of that era were dull-witted and feckless. Traumatized by the first World War and frightened of Bolshevism, they came up with an endless list of excuses not to confront Hitler. The role played by the media during this period was dreadful — covering for Hitler and suppressing the views of Churchill until very late in the game.

Churchill was, in many ways, more out of touch with the twentieth century than were other members of the ruling class. However, he had the strength and intelligence that the leading politicians lacked. And unlike most others of his class, he saw Hitler with clarity.

Between the time he wrote that and posted it, an Islamist terrorist attacked and killed multiple American service members in Tennessee:

A casual reader of the Washington Post could be forgiven for blaming the attack on conservatives and the National Rifle Association. The lead Post story said that this was “the latest eruption of gun violence in the United States.” The print newspaper also provides a second front-page story, headlined “Shooter grew up in conservative family.” [The online version says “middle-class Muslim family.”]

I read every word of the second story, looking for the basis for terming the family “conservative.” Did they have a Romney bumper sticker on their car? A subscription to National Review? Perhaps they flew a Confederate flag? Were active in the Tea Party?

[...]

I would love to know how the Post determined on the basis of the content of the story that the best adjective to describe the family was “conservative.” Getting back to the 1930s comparisons, I do not want to equate Muslim radicals with Nazis, because I think that there are important differences. What I am getting at here are the similarities between the British media in the 1930s and what we find in the U.S. today.

As for the American educated in class in general, consider Harry Painter’s analysis of summer reading lists for college students.

Upon browsing the list, one might conclude that all of humanity’s best books are about minorities fighting and ultimately overcoming the oppressive constrictions of Western, male-dominated society.

Anti-Elitist, but Even More Anti-Mobist

Thursday, July 2nd, 2015

Arnold Kling thinks of himself as anti-elitist, but even more anti-mobist:

When the mob emerges, I cease to be libertarian and instead become ultra-conservative. There is no phenomenon more barbaric than the mob.

Kling was delighted to learn about “unfollowing” on Facebook, so he could unfollow any friends who constantly posted political screeds.

He also cites James Poulos on why Twitter is terrible:

Twitter is a megaphone for the worldview wars. It fosters constant competition among our claims that everyone should care and act as we do.

Hayek and Business Management

Tuesday, April 28th, 2015

Arnold Kling cannot emphasize enough how much he agrees with this:

If extensive knowledge is possible, then bosses might be able to manage big companies well. If not, then centrally planned companies will be inefficient. Sure, perhaps competition will eventually weed out egregious incompetence, but market forces might not grind so finely as to eliminate all inefficiency.

Kling explains:

Because I spent 15 years in business, I got an opportunity to see large organizations close up. I saw that in a large business, the top management cannot keep track of more than about three major initiatives at a time. I saw that compensation systems have to be frequently overhauled, because employees learn to game any system that stays in place for more than a couple of years. I saw the “suits vs. geeks” divide, as specialists in information technology or financial modeling had difficulty communicating with executives who had only general knowledge.

The notion of large, efficient organization is an oxymoron. If you think that large corporations have overwhelming advantages, then you have explained why IBM still dominates the computer industry, while Microsoft and Apple never really got amounted to much of anything. I like to say that if you are afraid of large corporations then you have never worked for one.

Of course, large corporations do exist. That is because as clumsy as they are, they can still be less clumsy than the alternative, which is to break a corporation into a network of contractually related divisions.

Community College: What is the Right Price?

Thursday, January 15th, 2015

Arnold Kling is skeptical about free community college:

Just based on my gut feeling, I think that the vast majority of students attending community college do not have favorable outcomes. [...] I am not even sure that students in the lower tier of four-year colleges have favorable outcomes. Instead, the true cost, including what the students pay out of pocket plus subsidies plus opportunity cost, exceeds the benefit for many who attend college. In contrast, President Obama seems to endorse the fairy-dust model of college, where you can sprinkle it on anyone to produce affluence.

Politicians and policy wonks face different incentives:

If I were President Obama, of course, I would champion universal “free” community college. Worst case, my proposal becomes law. A lot of money gets wasted, but it’s not my money. Best case, the Republicans vote it down and I call them anti-opportunity meanies.

How Civilizations Die

Sunday, September 28th, 2014

Arnold Kling describes David P. Goldman’s How Civilizations Die as very anti-Islam, very pro-Jewish and pro-Christian, very heavy on the civilization-barbarism axis and shares this representative sample:

Wherever Muslim countries have invested heavily in secondary and university education, they have wrenched their young people out of the constraints of traditional society without, however, providing them with the skills to succeed in modernity. An entire generation of young Muslims has lost its traditional roots without finding new roots in the modern world. The main consequence of more education appears to be a plunge in fertility rates within a single generation, from the very large families associated with traditional society to the depopulation levels observed in Western Europe. Suspended between the traditional world and modernity, impoverished and humiliated, the mass of educated young Muslims have little to hope for and every reason to be enraged.

He thinks that recent events will lead people to give more consideration to such darker outlooks — and notices a change in the Zeitgeist:

By the way, my Facebook feed has changed radically in recent months, with much less political snark and a surfeit of cute animal videos. Part of me wonders if something like that happened in Britain when Hitler took power in 1933. Was politics just too unpleasant to contemplate at that point?

The Unintended Consequences of God

Sunday, March 17th, 2013

This year, a Super Bowl ad stated that God created a farmer. God created a money-lender, too:

In The Chosen Few, Maristella Botticini and Zvi Eckstein offer an explanation for how Jews wound up in high-skilled, urban occupations. They argue (p. 95) that between 200 and 650 AD,

world Jewry became a small population of literate individuals (“the chosen few”). The unintended consequences of the religious ruling that required Jewish fathers to invest in their sons’ literacy and education fully displayed themselves.

Jews became much more literate than other populations, but at a cost of numbers, as those who could not afford to educate their sons converted to other religions. Over this time period (p. 113)

the general population decreased by about 12 percent, whereas the Jewish population collapsed by roughly two-thirds.

In those days, most people were farmers, for whom literacy’s costs generally outweighed its benefits. However, in an urbanized society with skilled occupations, literacy pays off. As urbanization gradually increased in the late Middle Ages, Jews came to fill high-skilled occupations. Botticini and Eckstein argue that literacy, rather than persecution, is what led Jews into these occupations.

Thoughts on the New Commanding Heights

Monday, September 12th, 2011

Arnold Kling shares some thoughts on the new Commanding Heights of our economy, education and health care.

From Paul Howard:

Government policy both encourages consumer spending in health and education and protects providers in those industries through licensing requirements that reduce competition from lower-cost or higher-quality providers (charter schools, retail clinics, etc.).

From John Goodman:

We are living in a world in which entrepreneurs are encouraged to make unlimited amounts of money exploiting reimbursement formulas, but are not allowed to make any extra money making the formulas better and more effective.

Insiders and Outsiders

Wednesday, December 22nd, 2010

Arnold Kling just got around to reading the book that has been his strongest intellectual influence, The Symbolic Uses of Politics, by Murray Edelman:

The book (or, more specifically, chapter 2) has a long and deep influence on me because it was perhaps the favorite political theory of my father Merle Kling, a political scientist who earned a mention in the acknowledgments. My father constantly invoked the terms “symbolic reassurance” and “political quiescence” in commenting on political events. He would have immediately understood and appreciated my application of the terms to Elizabeth Warren and her role in the nascent financial consumer protection agency.

Imagine you are a 1950′s intellectual, Kling suggests:

To put the book in perspective, I think it helps to try to recreate the intellectual atmosphere of the 1950′s, the milieu that produced Alfred Hitchcock and J.D. Salinger. In five-factor personality jargon, the Fifties stand out for strong Neuroticism. Symbolic Uses was published in 1964, which was a few years before the phrase “Do Your Own Thing” was coined, marking the true onset of the Sixties and its Openness. The book had been in gestation for a long time — the interaction with my father would have taken place in 1961, when I was seven years old. We spent a semester in Champagne-Urbana, when my father took a sabbatical at the University of Illinois, where Edelman was a colleague.

To an intellectual of the 1950′s, the human psyche is dark. Freud’s shadow looms large over all discussion pertaining to human nature. You take it as given that terrible demons lurk in both the individual and collective unconscious. All About Eve could be the story of any one of us. The phenomenon of Adolf Hitler is most easily understood as having sprung out of the collective unconscious of the German people. Suspicious that a similar phenomenon could occur anywhere, you scan the American scene for signs of impending fascist tendencies. Edelman will cite Adorno, The Authoritarian Personality (1950) as well as Lipset on “The Sources of the Radical Right” (1955) and “working class authoritarianism” (Political Man, 1960).

You see the ordinary social interactions of American life as ritualized, superficial, and inauthentic. People are playing games (although Berne’s book will not appear until 1967) and engaging in dramaturgy — I think of Goffman (1959), but Edelman cites Kenneth Burke.

The lack of authenticity is typified by the United States position vis-a-vis China. We insist that one of the five seats on the Security Council is to be occupied by Taiwan, while refusing to recognize Red China. How can this be explained other than as a need to use a charade in order to mollify a public’s deep-seated, irrational fears? (If you are inclined to believe that the relationship between the public and the government has matured in the last fifty years, I have two words for you: airport security)

It is in this Fifties context that you should place the terms “symbols” and “quiescence.” The term “symbol” is meant to suggest the essential phoniness of politics, just as The Catcher in the Rye was meant to expose the phoniness of middle-class society. And the term “quiescence” suggests a mass populace with a rage that has been quelled, like a formerly vicious dog rendered meek by Pavlov-Skinner conditioning or a Randle McMurphy lobotomized by Nurse Ratched.

Kling summarizes Edelman’s view by saying that the political world is divided into Insiders and Outsiders:

Given these differences, the Insiders use overt political dramas as symbols that placate the masses while using covert political activity to plunder them. What we would now call rent-seeking succeeds because Outsiders are dazzled by the symbols while Insiders grab the substance.

In other words, expect the banks to be able to do a more efficient job of rent extraction with Elizabeth Warren in place than before.

Edelman thought of insiders as exploiting outsiders, in almost a Marxist sense. For Edelman, symbolic reassurance and political quiescence were somewhat troubling phenomena. The masses were being lulled by symbolic gestures into accepting adverse political outcomes.

What Franklin Roosevelt Accomplished

Tuesday, December 21st, 2010

In “The Achievement of the New Deal,” William E. Leuchtenburg defends FDR against left-wing academics, who deplore the president’s long reign as insufficiently revolutionary and anti-capitalist:

Before 1933 the government had paid heed primarily to a single group — white Anglo-Saxon Protestant males. The Roosevelt administration, however, recruited from a more ethnically diverse medley, symbolized by Ben Cohen and Tommy Corcoran, the Jew and the Irish Catholic… though, in the entire history of the republic of nearly a century and a half before 1933 only four Catholics had ever served in a cabinet, FDR, in choosing his first cabinet, named two.

That is what Franklin Roosevelt accomplished, Arnold Kling reminds us:

I think that if you want to understand why Roosevelt won such a landslide in 1936 and why the “Roosevelt coalition” was a significant force in American politics at least until the 1970′s, the Masonomics concept of group status is key. The biggest surge in population in the 1920′s had been among non-Protestants — the “hyphenated Americans” from Ireland, Italy, and Eastern Europe. Roosevelt gave them unprecedented status recognition. On rights for African-Americans, he moved forward just enough to earn the gratitude and loyalty of blacks in the North (where they could vote), while not moving forward fast enough to lose the racists of the Solid South. (The racists stuck with Roosevelt in part because they had nowhere else to go. Even as late as the 1960′s, Republicans were not willing to be as racially regressive as southern Democrats. In 1948, for example, when Strom Thurmond ran against Truman, instead of joining the Republicans Thurmond formed the Dixiecrats.)

Budget Puzzle

Tuesday, November 16th, 2010

The New York Timesbudget puzzle certainly makes fixing the budget seem easy enough. (Like Arnold Kling, I love the way they let you simply choose to cap Medicare spending growth. How hard could it be?)

Math Mastery

Monday, August 30th, 2010

Aretae remarks that Arnold Kling only thinks that he’s talking about economics, when he’s really describing many fields:

I suspect that a big reason that mathematics took over economics is that it gives you a sense of mastery. Indeed, it may give you a false sense of mastery. As you learn mathematical economics, you realize that you are getting really good at doing something that only a small group of people is able to master. And you get the sense that because you completed a mathematical proof that you accomplished something. It is very seductive.

The Spirit of Independence

Wednesday, July 7th, 2010

Intellectuals tend to believe that ideas cause attitudes, Lee Harris says, though it is far more often the other way around:

Several years ago, while attending a street festival in the small town of Tucker, Georgia, I came across a booth sponsored by the local libertarian society. At the time, I did not realize that my encounter would generate my next book. I only remember being struck by the question asked of everyone who visited the booth that day: “So who owns you?”
[...]
To most of [those who wandered into the booth that day], the question “So who owns you?” seemed to come with the force of a revelation, and they responded with a decided and often emphatic, “Nobody owns me.” Which is to say, someone may own other people, but certainly does not own me.

Lee Harris sees this as evidence that many people are natural libertarians. Arnold Kling does not; he emphasizes the last bit of that excerpt:

I think that most people resent being told what to do, and yet such people are not libertarians when it comes to other people being told what to do.

I have a stronger criterion for natural libertarianism. When you see other people doing something that really offends you, are you willing to see the state allow that behavior to continue? Only if you can answer “yes” are you a natural libertarian. I think that there are very few natural libertarians.

The McCarthy Era Never Ended

Wednesday, April 28th, 2010

The McCarthy era never ended, Arnold Kling notes; Congressional hearings are still all about self-promotion:

The objective of every Congressperson at every hearing is to get on the evening news by bullying a witness. The only question I have is whether McCarthy is the one who started it, or whether he happened to be the one guy who got called out on it.

Too bad somebody at Goldman could not have called out a Senator. It must have been tempting to say, “Look. You can’t make a market by bending over backwards giving buyers every reason not to buy and sellers every reason not to sell. Sophisticated investors understand how we operate. Just like everybody who goes to play blackjack understands that some of the cards are dealt face down. You can complain that you think all the cards should be face up, but that would totally change the game. Do you hold to such high standards in your election campaigns? Do you think your disclosure of the consequences of your votes is honest? Do you disclose how lobbyists told you to vote? Do you go out of the way in your campaigns to give people all the possible reasons not to vote for you? You want to tell me about my responsibility to my clients? How would you like to hear my opinion about your responsibility to your constituents?”

Blame deflection. That is what this whole financial “reform” theater is all about.

The Looting Scenario

Tuesday, April 13th, 2010

A few years ago, Arnold Kling saw a great race between Medicare spending and technological progress (“Moore’s Law”):

Four Scenarios Moore’s Law Fails Moore’s Law Succeeds
Medicare is Reformed Low Gear Capitalist Utopia
Medicare is Not Reformed Economic Implosion Affordable Welfare State

The Singularity is behind schedule and the ruling class doesn’t seem to know what it’s doing, which could lead to an economic implosion or looting scenario:

Douglass North famously said that when the institutions of a society reward piracy, ambitious people become pirates. When the institutions reward wealth creation, people create wealth. In finance, our institutions did much to reward piracy in the past decade.

In the Looting Scenario, what is going to be rewarded is what we call rent-seeking. Basically, over the next twenty years, wealth transfer by government will be much more important than wealth creation — and the amount available for transfer could actually decline. For example, I expect that benefits for the elderly will become increasingly means-tested and savings will be increasingly taxed, to the point where the marginal return to saving will approach zero. If the marginal return to saving is low, and government deficits are high, then capital formation is going to be low. It’s hard to see how you get rapid innovation in that kind of world.

The Looting Scenario is one in which public employees and pensioners have the incentive to just take as much as they can while they can get it. It is a scenario in which people talk about the deficit, and wise heads say we must do something about it, but the only politically feasible approach is to raise taxes. Even so, it turns out that higher tax rates bring in less revenue than projected, because of the incentives to consume leisure and engage in black-market activity.

Seven years ago, it would not have occurred to me that our ruling class would be so bad that the Looting Scenario would be likely. My guess is that, even among libertarians, just about everyone else still has faith that our ruling class will not let the Looting Scenario take place. However, I think it is one of the higher-probability scenarios out there. Where others think of the upper bound of incompetence as, say, Jimmy Carter or George Bush, I think about truly historic blunders that make Carter and Bush seem brilliant. I see our current economic strategy as comparable in folly to the “search and destroy” strategy in Vietnam or the mass offensives of World War I. So, if I sound crazy on this blog, that is where I am coming from.