Monthly Archives: January 2012

Sentences worth reiterating ad nauseam

The Economist’s Free Exchange blog:

Having lots of well-paid manufacturing workers isn’t the way one grows rich; replacing lots of those workers with massively productivity enhancing machines is.

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Good sentences: Tyler Cowen on mobitilty

Tyler Cowen:

“How much of immobility is due to “inherited talent plus diminishing role for random circumstance”? Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.? What are you supposed to get when you combine genetics with meritocracy? I do not know how much of current American (or other) immobility is due to this factor, but I find it discomforting that complaints about mobility are so infrequently accompanied by an analysis of this topic.”

This sentence gets at something I’ve wanted to address for a while: is income mobility important, in that it’s a social goal worth pursuing, beyond the notion that we should allow people to rise to their potential? Is high income mobility required for a “just” society?

Imagine a society where 1) high-ability people tend to create useful things, and are rewarded for doing so, 2) people tend to sort themselves into relationships (and thus have children) based, in part, on being of similar intelligence and motivation, and 3) intelligence and other components of ability are inherited (although imperfectly). Inter-generational mobility (in relative income) in that society might be extremely low. People would be largely sorted into their relative income position at birth, because their parents were similarly productive and occupied a similar position in the income distribution.*

Such a distribution could persist even in a perfectly non-discriminatory society, where kids from wealthy families have no socially-conferred advantages (connections, better access to education, &c.) over kids from lower-income families. Would that society be unjust, because it has low mobility?

*Absolute income would hopefully increase across the board; I’m making no assumptions about the pattern or justice of how that growth is distributed.


SCOTUS and the ACA

Cross-posted (with minor modifications) from New Health Dialogue, because I rather like this post.

Various groups, including the Attorneys General of twenty-six states, the National Federation of Independent Businesses, and several individuals, have sued the federal government over parts of the Affordable Care Act. Specifically, they’ve alleged that the mandate requiring individuals to purchase health insurance is unconstitutional — it overreaches the enumerated powers of the federal government. The case was recently accepted by the Supreme Court, with oral argument scheduled for March and a decision likely by the end of June. If the Court accepts the plaintiffs’ arguments, they could strike down the individual mandate (which could create huge moral hazard problems and be catastrophic for the insurance industry) or strike down the law in its entirety.

As the excitement builds for the coming arguments, Meghan McCarthy of the National Journal issued a call for opinions and predictions on the final fate of the individual mandate. Here’s my take:

The final ruling on the individual mandate is tough to forecast, but I’m fairly confident that the Court will not strike it down. The challenge is based on whether Congress’s power to regulate interstate commerce extends far enough to allow the federal government to require all citizens to purchase health insurance or pay a penalty.

The ruling will depend in part upon how the Court sees uninsurance: is it an active choice for an individual to go bare, in effect to self-insure, or is it due to inaction? The precise definition of action and inaction is murky, but here’s how the argument goes: If going without health insurance is inaction, the Court has to deal with the messy question of whether Congress can regulate inaction when it affects interstate commerce. (Throughout the case, opponents of the Commerce Clause justification for the individual mandate have asked the government just how far Congress’s power stretches. Their favorite example has been the purchase of broccoli: can Congress require everyone in the country to buy broccoli? So far, the government has not said “no” — after all, choosing to buy, or not buy broccoli affects a whole series of interstate markets for leafy green commodities.) I won’t weigh in on the validity of that argument, but I agree with the Cato Institute’s Ilya Shapiro that the government’s inability to establish a limiting principle for the Commerce Clause will likely prove problematic when this argument reaches the Supreme Court.

I actually don’t think the case needs to address the action/inaction question at all. Health care is, to a certain extent, sui generis in that there is no inactive choice. Going without health insurance is inherently different from going without broccoli, because everyone has some interaction with the health care system at some point. Even if you choose not to buy health insurance, there is a good chance that you will need health care at some point. You are in a car accident, you get brain cancer, you fall down your stairs and break your leg. Since virtually everyone will, at some point, need  health care (and must therefore have a way to pay for it), choosing to go without private or public insurance is, in fact, choosing to self-insure. Since choosing self-insurance is an action that affects interstate commerce, it’s clearly within Congress’s power to regulate.

Alternatively, the Court might just accept the notion that the mandate is a tax (since its only enforcement mechanism is a penalty), in which case it is unambiguously within Congressional power. That runs contrary to how the Obama administration messaged the bill when it was in Congress, but it might be more palatable to Justices who are uncomfortable with striking down the law, but who don’t believe in the expansive Commerce Clause power that the government’s position implies.

All legal analysis aside, I think the most important indicator of whether the mandate will survive is the record of decisions in the lower courts. The mandate is winning in most lower courts, and thus far the “liberal” case (that the mandate is constitutional) has persuaded several judges appointed by Republican presidents, but no judge appointed by a Democrat has bought the “conservative” argument and found it unconstitutional.  I’d be surprised if the Supreme Court decided to overturn such a majority of lower courts, and especially surprised if they do it 5-4 along party lines. Especially after Citizens United, at a time when public confidence in the Court is at historic lows, another seemingly-political decision would be deeply damaging to the Court’s reputation. If it’s a close vote, that could play a role in the decision.

Of course, there’s also a decent chance that the case won’t be meaningfully decided this year: part of the five and a half hours of scheduled argument concerns the Anti-Injunction Act, which might mean nobody can sue over the mandate until 2015 (when the penalty for uninsurance takes effect & people have to pay their 2014 taxes). On top of that, one of the plaintiffs went bankrupt, meaning she would probably not have standing to sue. The members of the anti-ACA legal team have asked to add two more plaintiffs, and the government isn’t opposing the motion, so the case will probably proceed for the moment.


I love hard questions!

Via the wonderful and intelligent Meb Byrne: “Is access to healthy food a basic human right?”

My initial response:

“In my line of thinking, no. I don’t think any basic human rights make material claims on other people–human rights entitle you to protection from other people’s actions, but (the way I see it) they usually don’t require action from other people on your behalf.

I looked at the Universal Declaration of Human Rights while thinking about this. They do include food, along with housing, education, and various other social safety net-type things. Those aren’t the only parts of the UDHR that I disagree with, but they’re the point where I object most strongly. Will blog shortly on why, although I don’t know if I’ll make sense.

What do you think?”

The addendum to my response:

Human rights are, by definition, inalienable and inherent to our humanity. That means, to me, that they have been consistent throughout time: human rights are the same today as they were when the concept emerged during the Enlightenment, when they were the same as they had been for the Ancient Greeks, immutable since the dawn of civilization. (Of course, they haven’t always been honored, but we’ve gotten better at it over the years–especially the last 200 or so.) To assert that the definition of human rights changes to fit the feelings of the time would imply that (perhaps) the various bouts of enslavement over the millennia were not, in fact, violations of the enslaved’s human rights.

Given that the definition of human rights should be constant over time, I don’t think we can include any material rights in the definition–that includes food, water, housing, medical care, &c. Basically, I can get outraged over political/religious/ethnic repression & wanton violence throughout the years, and in each case I can find someone who was committing an affirmative violation of human rights. I can’t muster the same ire over the Irish potato famine–or, for that matter, the bubonic plague, or the Indonesian tsunami, or any other essentially natural condition. I don’t think it’s philosophically consistent to hold all of Medieval Europe responsible for the fact that the population periodically got out of control and people starved, any more than we can call it a human rights violation that they didn’t have access to doxycycline.

Obviously, I might be very wrong here. If I am, please tell me!

 

(None of this, of course, suggests that I oppose public provision of social services. Obviously, governments exist to do more than protect basic human rights. It’s worth acknowledging, thought, that we provide social services because 1) we like having other people around who aren’t starving and 2) we all benefit from having an informed, productive workforce to do stuff for each other and 3) we like knowing that if something goes wrong, we’ll have a safety net available, and lots of other reasons. None of those rises to the level of human rights, though, and we need to admit that in policy discussions.)


Fat Acceptance

Chelsea Fagan, on Thought Catalog:

Going through blogs and websites for fat acceptance, one sees endless pictures of women and men smiling and showing off a body they’ve long been told to hide and be ashamed of. It’s a beautiful thing, and a wonderful way to feel better and more comfortable about yourself, as well. But then there are some pictures — and they’re not incredibly rare — which display people of extreme, morbidly obese size: 400, 500, 600 pounds. This is riding, of course, under the same banner as a young girl in a size-16 prom dress who is active and healthy and wants a safe place to show a picture where she looks beautiful. But the former are people who share this title, who also work for fat acceptance, and are by any and all standards putting themselves in grave medical danger.

Not totally endorsing the article, but I think the main thrust is right: the fat acceptance movement should acknowledge a distinction between healthy and unhealthy bodies. While there perhaps should be less social stigma attached to being extremely overweight, it’s ridiculous to imply that all body sizes are equally preferable. Both extremes are dangerous, and impose significant costs on the person and on the rest of society.


Why can’t Mitt Romney respond to Bain criticisms?

Romney’s been taking fire consistently over the last few days over his time at Bain Capital, a private-equity firm. He tried to spin that experience as showing he knows how to create jobs in the private sector, but his numbers are fuzzy and impossible to verify. Meanwhile, Newt Gingrich &co. in the GOP primary are doing Barack Obama & the DNC a huge favor, trotting out workers who lost their jobs to his “vulture” capitalism.

The problem, as Matt Yglesias and others have pointed out, is that private equity isn’t intended to create jobs–it’s intended to create value for the owners of the company. In many cases, that means laying off workers who aren’t providing a valuable service anymore. Replacing those workers with more efficient inputs (be they machines, overseas workers, etc.) makes the economy as a whole more efficient, and creates value for consumers and producers, but it really sucks for the people who have invested in obsolete human capital.

Yglesias’s response to that problem is smart and pithy: we need to “celebrate the creative, help after the destruction.” That also captures Romney’s problem: he can’t express any willingness to help after the destruction. If he was a Democrat, or a Republican running in a less crazy year, he could make the intelligent argument that “This is the process of capitalism: people lose jobs when industries change. That change makes us all, as a whole, better off, but it also means we have a bunch of people who aren’t doing as much as they could be. It makes sense to provide an effective safety net for those people, so they can keep buying things that the rest of us make and making things that we want.”*

As should be clear, Romney can’t make that argument in a rabidly anti-government Republican primary. I’m not even sure he would agree with the idea (to the extent that he has any intellectual principles at all). But I think that’s the one way he could effectively respond to the attacks on private equity. Claiming “100,000 jobs!” isn’t going to counter the stories of fired workers, no matter how right he is.

 

*In essence, we should provide some form of human capital insurance to protect people in the same way that we insure our physical capital (houses, cars, etc.) against loss. I don’t see any theoretical reason that such insurance couldn’t be provided privately, but it might make sense as social insurance because the people most likely to need it are the least likely to afford it. If anyone has seen this mentioned in the econ literature, shoot me an email!


Rick Perry vs. Romney: Ringtone Edition!

Rick Perry made a ringtone of Mitt Romney. It’s great.

The problem is, I’ve actually been most impressed by Romney over the things for which he’s been most criticized: I’m thinking “corporations are people,” firing workers at Bain, “I like being able to fire people,” etc. All of those are actually things he did right.

First, “corporations are people:” Incredibly dumb sound byte? Yes. But he was also correct: he wasn’t arguing that corporate entities should have equivalent speech rights to people, or even anything close to that. Instead he was arguing that when corporations make money, that money goes to actual people. (This does not apply if the company is Apple.) That means corporate profits are good for people. They may not be good for all people equally, and you may not like the people who benefit from them, but corporations do not take worker’s hard-earned money and feed it to an evil dragon. Profits go to people.

Firing people at Bain: There’s this thing called “creative destruction.” Sometimes, people’s skills get overtaken by technology, or there are people who will do the same work for cheaper, or people stop wanting horse-drawn carriages. Those people usually lose their jobs, since nobody is willing to pay for what they make anymore. Bain bought some companies in that stage of their lives, and they sold off the bits that still had value. Bain is not legally or ethically responsible to the workers, and they probably made the world as a whole better off by re-allocating resources where they were useful. End of story. (Yes, folks, I haven’t got a populist bone in my body.)

“I like being able to fire people:” Again, dumb sound byte. But, importantly, he didn’t say “I like firing people,” and again, he’s right: being able to get rid of an unsatisfactory service provider is a useful tool that, in most cases, will lead people to get better service even if they never actually fire anyone. If a service provider knows you have no other options, they can do a shitty job with relatively little risk–after all, whatever service they’re providing has to be worse than nothing for you to leave. Certainly, most people wouldn’t want a system where they couldn’t get rid of (fire) their health insurer–it would lead to really lousy service. (None of that changes the fact that Romney’s health care plan is stupid, and there is exactly zero evidence that better private competition will lower health care spending, but that’s not what he’s being criticized for.)

So, while I have essentially no regard for Mitt Romney, let’s all be a little more careful how we criticize him. He has lots of dumb ideas–target them, not his rare moments of honesty.