From the dawn of man until just a couple hundred years or so ago, humans lived a hand-to-mouth existence, with average global per capita consumption about $3 per day (in today's dollars). While there were important inventions over the millennia like the plow, paper, and gunpowder, and some of those inventions did boost production, they came relatively infrequently, and population growth kept humanity limited to its meager rations.
Suddenly, somewhere around 1800, the rate of innovation exploded, catapulting humanity away from the Malthusian limit and the average global per capita consumption is now $30 per day. And in the west, we've done far better, so much so that we consider consumption limited to a mere $30 per day to be mired in poverty!
The rapidity and magnitude of material progress can't be stated often enough or too strongly. At least an order of magnitude increase in average per capita consumption in less than a dozen generations! It's astounding and yet most people rarely consider it.
So how can we explain the creation of the goose that laid this golden egg of prosperity? Incredibly, nobody really knows and many narratives really don't fit history very well. As a result, we're each entitled to our own economic creation myth about where this prosperity came from. In fact, more than that, it's imperative that we form a framework to explain it because the Soviet Union and Communist China proved beyond a shadow of a doubt that it's possible to kill the golden goose.
Nobody knows what caused the exponential explosion of entrepreneurial endeavors, but there are a lot of things that we know didn't cause it. For example, it wasn't government funded education because there wasn't any; it wasn't government funded social safety nets because there weren't any; it wasn't socialism of any kind - Marx hadn't been born yet; it wasn't government funding of infrastructure - no increase (from very low levels) there; it wasn't government funding of research or development - no increase there either; it wasn't that suddenly civilization became stable or that urban population density reached a critical mass because China had both those characteristics for millennia; it wasn't because of an increased savings rate or capital accumulation - there's just no evidence for that; it wasn't just one or a handful of critical inventions - it was instead a massive number of incremental innovations in business process, trade, and lastly technology; it wasn't sudden discovery of natural resources as this was again very incremental; and it wasn't imperialism or slavery, in fact both waned as innovation exploded.
So what's your Economic Creation Myth?
Wednesday, September 28, 2011
Tuesday, September 20, 2011
Not Free to Die
Recently, a friend sent me the following email containing a link to a article by Paul Krugman:
In the past I've mentioned to you that I don't have a big problem with government (possibly even the federal government) covering at least some classes of catastrophic health expenses. My wife (who works in health care administration) calls this the "doughnut" approach where the government covers some preventative care (the "hole" of the doughnut), each individual is responsible for routine expenses up to some maximum (somewhere between $5k - $20k per year and this is the main part of the doughnut) that can be either paid directly out of pocket or covered by auxiliary private insurance purchased by the individual, and the government covers expenses beyond that (the "outside" of the doughnut). It's as if everybody has one of the high-deductible plans with some preventative care (e.g. vaccinations and the like) thrown in.
I would do this for an overwhelming practical reason. As my wife also points out regularly, some people have health insurance, others have sufficient assets to pay, and others have "coverage" such as medicaid. Whether or not you have insurance, assets, or coverage, if you show up at an emergency room with a life threatening condition, they will treat you, regardless of ability to pay. Why? Because in the seconds or minutes that action needs to be taken to save you, there isn't the minutes, hours, or days to determine ability to pay so they have no choice but to go for it. This is a strictly practical consideration and really has nothing to do with compassion.
If, during the treatment, you end up in the ICU for 6 months, nobody will pull a life support plug, even if you can't pay. Not me, not Ron Paul, not the crowd, and certainly not the medical staff. As a society, we have a hell of time pulling the plug on someone who's in a brain-dead coma for ten years, much less someone conscious with terror in his eyes as you go for the plug. Not going to happen.
Because it's not going to happen, and absolutely everybody has this access regardless of ability to pay, the money ought to come from a public source. Currently, it comes from the hospital increasing fees on everybody else. This means that a relatively poor person who plays it safe and buys health insurance (or who is paid less to fund health insurance out of their compensation package) is subsidizing the relatively high earning 30-year-old man in the example. Whether or not the poor should carry their own weight, I certainly don't think that they should be subsidizing higher-income people, so funding catastrophic health care (i.e. very high deductible health care) from the progressive tax system makes sense and is the only solution that I see that makes sense. That may make me a bad libertarian, but I don't much care.
On to Krugman's column. Clearly, Blitzer, Krugman, and Paul all assume that it is possible to deny life saving coverage in the emergency room and ICU, so let's assume that from here on out, even though it's not true. You wrote that you "often find [your]self well-aligned with Krugman's thinking", but you didn't mention if you were aligned with his thinking in this particular article. I'm trying to imagine which of the attitudes and opinions he expresses in this article that you might agree with.
The first opinion expressed is that one ought to demagogue issues and demonize and ridicule opposing viewpoints. His "Free to Die" title initiates the demagoguery from the very start and is an eerie echo of the "Death Panels" quip by that great demagogue of the right, Sarah Palin. Everyone is "free to die" and indeed we all will die at some point, though ironically, as I've described above, in the hypothetical example the 30-year-old man isn't free to die. Both Palin and Krugman are referring to the unavoidable fact that some entity somewhere, whether individuals or government departments need to decide how to allocate non-infinite resources. That does mean that some people will die at different times than they might have otherwise if there were unlimited resources. "Free to Die" and "Death Panels" are just demagoguery meant to appeal to passion and stifle rational debate. Is demagoguery the part of Krugman's (and Palin's) thinking that you're aligned with?
The second opinion expressed is that "American politics is fundamentally about different moral visions." I don't think the visions are fundamentally moral visions, rather they are visions of the capabilities and motivations of the human animal. Sowell does a good job describing the visions from a fundamental perspective in "A Conflict of Visions". Have you read that book yet now that summer has passed? The optimal level of government involvement in the decisions of individual citizens is inextricably linked with the different visions. From reading Krugman's articles over the past years (especially within the past decade), it seems he's never met a government intervention in personal affairs that he didn't like and he seems to call for ever expanding regulation - not only for business, but for personal affairs as well. Is this the thinking you're aligned with? Should the government limit risky activities like parachuting, driving a car, motorcycling, bicycling, playgrounds for children (it's already doing this), or poor eating habits (think Bloomberg's salt reduction regulation in NYC) or should individuals be allowed to weigh the risks with benefits and make their own decisions, both for themselves and their children?
Or is it just for the specific area of health-care? Should the 30-year-old man (why does it matter that it's a man?) in the article be required to buy health insurance in order that he's forced to do the "right thing"? (I argued above that as a practical matter, there's really no choice but for publicly supplied catastrophic health insurance, but now we're back to the theoretical/philosophical argument in the hypothetical which can have a completely different answer). Should the federal government intervene if he then gets sick and can't afford to pay for care required to save his life? Only a little more than 1 in 1,000 30-year-olds die in a given year from all causes. The other 999 that didn't buy health insurance had money to do other things like make or save for a down-payment on a house, go out to dinner more with family or girlfriend or date a prospective wife, travel, enjoy entertainment, etc. Is it really the government's place, or Krugman's, or yours, to balance the trade-offs and make the decision for each and every individual? Should everyone be required to cling to a relatively mediocre life or might it actually be rational and beneficial to some to decide to take the risk, even if there's some small chance of death? Clearly, according to Krugman, the answer is no. Is that where you agree with Krugman?
From the articles of his that I've read, Krugman also has never met an excuse for raising taxes and/or increasing government size that he didn't like, and certainly extending government health care entitlements fits in this category. In other words, it's impossible to tell whether he actually cares about health care or whether it's just an excuse to give the government yet more money and power. Perhaps this is the thinking you're aligned with? What if, instead of specifically subsidizing healthcare, we simply gave the money to the poor such that they could buy health insurance if they wanted, or they could spend it on other things? I wonder how many would choose to spend it on health insurance? My guess is that a very low percentage would get the health insurance - even those with children. Why? Because they might think it better to buy other things for their children like piano lessons, some travel to see the world, nicer clothes, better food, better and more entertainment, college education, etc. The trade-off is a more mediocre, safer life or a most probably better life with some risk. And since we've decided that everybody must have health insurance, a greater slice of GDP will go to health care, even if many or most of the poor would've preferred it went to other things.
Lastly, I completely disagree with Krugman's definition of "compassion" (and yours if this is where you agree with his thinking). First, the mechanism is inherently not compassionate. When group A takes from group B to give to group C, it matters little if group A is marauding bandits taking from townfolk to give to their favorite prostitutes or the government taking non-voluntarily from one group using its full force and authority to give to another group it favors. It's only compassionate and charitable in my definition if group B gives voluntarily to group C. It may be necessary for the government to force redistribution (and as I wrote in the beginning of the response I think that's the case), but it has nothing to do with compassion. Second, Krugman says he cares about children in Texas (color me skeptical since he seems to dislike everything about Texas), yet he doesn't mention children in South America, Africa, South-East Asia, etc. Why not? Why are Texas children more important? By increasing government involvement in health care, we're likely going to slow down innovation that would eventually help the billions of existing and future poor children and adults, both within the United States and elsewhere. How is that compassionate? Krugman writes "the weak economy continues to wreak havoc on American lives". Isn't it possible that Obamacare is one of the reasons for the weak economy?
In summary, I'm wondering which of the following you agree with Krugman: the imperative to demagogue issues and demonize opposing viewpoints; the intrusion of the government into the private resource allocation decisions of individuals, whether universally or just for health care; the dishonest use of emotional issues to facilitate higher taxation, more regulation, larger government, and greater redistribution even if the those receiving the benefits would rather have other kinds of aid; that forcibly taking resources from people is somehow compassionate; or that the lives of poorer Americans (who are relatively well-off compared to much of the rest of the world) are more important than the poor elsewhere in the world?
On to the Hayek quote. Here's the encompassing paragraph:
"Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provisions. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance -- where, in short, we deal with genuinely insurable risks -- the case for the state's helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective..."
I'll have to admit I didn't recall that paragraph and had to look it up. I'm also somewhat surprised by it. Nonetheless, there are some important caveats. The first is the concept of "genuinely insurable risks". That would imply significant limits to the health care provided and I think this aligns with the "doughnut" plan I described above. It doesn't look like Hayek believes that all medical expenses should be covered (or covered with a copay).
Also note that the case is for the "state's helping to organize" the system. I'll admit that I'm not sure what he had in mind, but he doesn't advocate for the state to run said system.
Last, he notes that those "wishing to supercede" "the competitive system" will want to use this system of social insurance as an excuse to do so and may "make competition more or less ineffective". From my perspective, a lot of the effort looks like it's specifically aimed at make competition more ineffective.
I'm not sure what his view of Obamacare would be, but I doubt it would be favorable as it goes well beyond an insurance function, the state will likely end up running the system, and it will make competition in health care yet more ineffective.
Thanks,
Bret
Bret, as you know, I often find myself well-aligned with Krugman's thinking. Here's a recent article by him that invokes Hayek, so I immediately thought of you: http://www.nytimes.com/2011/09/16/opinion/krugman-free-to-die.html?_r=1&ref=opinion .The following is my response.
Glad to have your thoughts when you have time.
In the past I've mentioned to you that I don't have a big problem with government (possibly even the federal government) covering at least some classes of catastrophic health expenses. My wife (who works in health care administration) calls this the "doughnut" approach where the government covers some preventative care (the "hole" of the doughnut), each individual is responsible for routine expenses up to some maximum (somewhere between $5k - $20k per year and this is the main part of the doughnut) that can be either paid directly out of pocket or covered by auxiliary private insurance purchased by the individual, and the government covers expenses beyond that (the "outside" of the doughnut). It's as if everybody has one of the high-deductible plans with some preventative care (e.g. vaccinations and the like) thrown in.
I would do this for an overwhelming practical reason. As my wife also points out regularly, some people have health insurance, others have sufficient assets to pay, and others have "coverage" such as medicaid. Whether or not you have insurance, assets, or coverage, if you show up at an emergency room with a life threatening condition, they will treat you, regardless of ability to pay. Why? Because in the seconds or minutes that action needs to be taken to save you, there isn't the minutes, hours, or days to determine ability to pay so they have no choice but to go for it. This is a strictly practical consideration and really has nothing to do with compassion.
If, during the treatment, you end up in the ICU for 6 months, nobody will pull a life support plug, even if you can't pay. Not me, not Ron Paul, not the crowd, and certainly not the medical staff. As a society, we have a hell of time pulling the plug on someone who's in a brain-dead coma for ten years, much less someone conscious with terror in his eyes as you go for the plug. Not going to happen.
Because it's not going to happen, and absolutely everybody has this access regardless of ability to pay, the money ought to come from a public source. Currently, it comes from the hospital increasing fees on everybody else. This means that a relatively poor person who plays it safe and buys health insurance (or who is paid less to fund health insurance out of their compensation package) is subsidizing the relatively high earning 30-year-old man in the example. Whether or not the poor should carry their own weight, I certainly don't think that they should be subsidizing higher-income people, so funding catastrophic health care (i.e. very high deductible health care) from the progressive tax system makes sense and is the only solution that I see that makes sense. That may make me a bad libertarian, but I don't much care.
On to Krugman's column. Clearly, Blitzer, Krugman, and Paul all assume that it is possible to deny life saving coverage in the emergency room and ICU, so let's assume that from here on out, even though it's not true. You wrote that you "often find [your]self well-aligned with Krugman's thinking", but you didn't mention if you were aligned with his thinking in this particular article. I'm trying to imagine which of the attitudes and opinions he expresses in this article that you might agree with.
The first opinion expressed is that one ought to demagogue issues and demonize and ridicule opposing viewpoints. His "Free to Die" title initiates the demagoguery from the very start and is an eerie echo of the "Death Panels" quip by that great demagogue of the right, Sarah Palin. Everyone is "free to die" and indeed we all will die at some point, though ironically, as I've described above, in the hypothetical example the 30-year-old man isn't free to die. Both Palin and Krugman are referring to the unavoidable fact that some entity somewhere, whether individuals or government departments need to decide how to allocate non-infinite resources. That does mean that some people will die at different times than they might have otherwise if there were unlimited resources. "Free to Die" and "Death Panels" are just demagoguery meant to appeal to passion and stifle rational debate. Is demagoguery the part of Krugman's (and Palin's) thinking that you're aligned with?
The second opinion expressed is that "American politics is fundamentally about different moral visions." I don't think the visions are fundamentally moral visions, rather they are visions of the capabilities and motivations of the human animal. Sowell does a good job describing the visions from a fundamental perspective in "A Conflict of Visions". Have you read that book yet now that summer has passed? The optimal level of government involvement in the decisions of individual citizens is inextricably linked with the different visions. From reading Krugman's articles over the past years (especially within the past decade), it seems he's never met a government intervention in personal affairs that he didn't like and he seems to call for ever expanding regulation - not only for business, but for personal affairs as well. Is this the thinking you're aligned with? Should the government limit risky activities like parachuting, driving a car, motorcycling, bicycling, playgrounds for children (it's already doing this), or poor eating habits (think Bloomberg's salt reduction regulation in NYC) or should individuals be allowed to weigh the risks with benefits and make their own decisions, both for themselves and their children?
Or is it just for the specific area of health-care? Should the 30-year-old man (why does it matter that it's a man?) in the article be required to buy health insurance in order that he's forced to do the "right thing"? (I argued above that as a practical matter, there's really no choice but for publicly supplied catastrophic health insurance, but now we're back to the theoretical/philosophical argument in the hypothetical which can have a completely different answer). Should the federal government intervene if he then gets sick and can't afford to pay for care required to save his life? Only a little more than 1 in 1,000 30-year-olds die in a given year from all causes. The other 999 that didn't buy health insurance had money to do other things like make or save for a down-payment on a house, go out to dinner more with family or girlfriend or date a prospective wife, travel, enjoy entertainment, etc. Is it really the government's place, or Krugman's, or yours, to balance the trade-offs and make the decision for each and every individual? Should everyone be required to cling to a relatively mediocre life or might it actually be rational and beneficial to some to decide to take the risk, even if there's some small chance of death? Clearly, according to Krugman, the answer is no. Is that where you agree with Krugman?
From the articles of his that I've read, Krugman also has never met an excuse for raising taxes and/or increasing government size that he didn't like, and certainly extending government health care entitlements fits in this category. In other words, it's impossible to tell whether he actually cares about health care or whether it's just an excuse to give the government yet more money and power. Perhaps this is the thinking you're aligned with? What if, instead of specifically subsidizing healthcare, we simply gave the money to the poor such that they could buy health insurance if they wanted, or they could spend it on other things? I wonder how many would choose to spend it on health insurance? My guess is that a very low percentage would get the health insurance - even those with children. Why? Because they might think it better to buy other things for their children like piano lessons, some travel to see the world, nicer clothes, better food, better and more entertainment, college education, etc. The trade-off is a more mediocre, safer life or a most probably better life with some risk. And since we've decided that everybody must have health insurance, a greater slice of GDP will go to health care, even if many or most of the poor would've preferred it went to other things.
Lastly, I completely disagree with Krugman's definition of "compassion" (and yours if this is where you agree with his thinking). First, the mechanism is inherently not compassionate. When group A takes from group B to give to group C, it matters little if group A is marauding bandits taking from townfolk to give to their favorite prostitutes or the government taking non-voluntarily from one group using its full force and authority to give to another group it favors. It's only compassionate and charitable in my definition if group B gives voluntarily to group C. It may be necessary for the government to force redistribution (and as I wrote in the beginning of the response I think that's the case), but it has nothing to do with compassion. Second, Krugman says he cares about children in Texas (color me skeptical since he seems to dislike everything about Texas), yet he doesn't mention children in South America, Africa, South-East Asia, etc. Why not? Why are Texas children more important? By increasing government involvement in health care, we're likely going to slow down innovation that would eventually help the billions of existing and future poor children and adults, both within the United States and elsewhere. How is that compassionate? Krugman writes "the weak economy continues to wreak havoc on American lives". Isn't it possible that Obamacare is one of the reasons for the weak economy?
In summary, I'm wondering which of the following you agree with Krugman: the imperative to demagogue issues and demonize opposing viewpoints; the intrusion of the government into the private resource allocation decisions of individuals, whether universally or just for health care; the dishonest use of emotional issues to facilitate higher taxation, more regulation, larger government, and greater redistribution even if the those receiving the benefits would rather have other kinds of aid; that forcibly taking resources from people is somehow compassionate; or that the lives of poorer Americans (who are relatively well-off compared to much of the rest of the world) are more important than the poor elsewhere in the world?
On to the Hayek quote. Here's the encompassing paragraph:
"Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provisions. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance -- where, in short, we deal with genuinely insurable risks -- the case for the state's helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective..."
I'll have to admit I didn't recall that paragraph and had to look it up. I'm also somewhat surprised by it. Nonetheless, there are some important caveats. The first is the concept of "genuinely insurable risks". That would imply significant limits to the health care provided and I think this aligns with the "doughnut" plan I described above. It doesn't look like Hayek believes that all medical expenses should be covered (or covered with a copay).
Also note that the case is for the "state's helping to organize" the system. I'll admit that I'm not sure what he had in mind, but he doesn't advocate for the state to run said system.
Last, he notes that those "wishing to supercede" "the competitive system" will want to use this system of social insurance as an excuse to do so and may "make competition more or less ineffective". From my perspective, a lot of the effort looks like it's specifically aimed at make competition more ineffective.
I'm not sure what his view of Obamacare would be, but I doubt it would be favorable as it goes well beyond an insurance function, the state will likely end up running the system, and it will make competition in health care yet more ineffective.
Thanks,
Bret
Monday, September 12, 2011
Flying on 9/11/11
I was on three flights on the 10th anniversary of 9/11: Adelaide to Sydney, Sydney to Los Angeles, and Los Angeles to San Diego. Every flight was completely full, there was no extra security or any sign of worry, and the immigration and customs lines into the United States seemed faster than usual.
The memory of 9/11 seems to be mostly faded as far as travelers are concerned.
The memory of 9/11 seems to be mostly faded as far as travelers are concerned.
Thursday, September 01, 2011
Consent of the Governed
Some people think that the survival of a democracy becomes questionable or should be questioned if it loses the consent of a substantial majority of the governed.
A recent Gallup poll finds that 84% of Americans disapprove of the job Congress is doing and I think that approval is a plausible proxy for "consent", or at least close enough that it's worrisome.
The problem is that roughly half of those disapproving think that the government isn't anywhere big enough (i.e. "doing" enough) and that the other half think the government is Way. Too. Big. There is such a wide chasm between the two sides that, as a result, I don't think America will ever again have the consent of the vast majority of the governed.
I'm confident America will survive, at least for a while, but I question whether or not it will thrive.
Update: Apparently congressional approval was a very good proxy for consent of the governed.
"Governments are instituted among Men, deriving their Powers from the Consent of the Governed, that whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or to abolish it, and to institute a New Government....it is their Right, it is their Duty, to throw off such Government, and to provide new Guards? for their future Security."I rather doubt that at this point westerners of any sort could summon the energy to follow Jefferson's advice and redo government, regardless of whether or not the government has the "Consent of the Governed." As a result, I don't think the survival of our government is in danger. However, I do think it's harder for a country to thrive without the "Consent of the governed" (depending a bit on the exact definition of "consent").
-- Thomas Jefferson
A recent Gallup poll finds that 84% of Americans disapprove of the job Congress is doing and I think that approval is a plausible proxy for "consent", or at least close enough that it's worrisome.
The problem is that roughly half of those disapproving think that the government isn't anywhere big enough (i.e. "doing" enough) and that the other half think the government is Way. Too. Big. There is such a wide chasm between the two sides that, as a result, I don't think America will ever again have the consent of the vast majority of the governed.
I'm confident America will survive, at least for a while, but I question whether or not it will thrive.
Update: Apparently congressional approval was a very good proxy for consent of the governed.
Wednesday, August 31, 2011
Instapundit's Fingers to Lance Armstrong's Tweet
On August 30th, Instapundit asks: IS IT PARENTAL NEGLECT to let your kid bike to school?
Within 24 hours the story is around the globe and Lance Armstrong, the famous Tour de France winner, tweeted his opinion about the story: "That's ridiculous. I'm glad I was so "neglected". #thanksmom"
And mainstream media is gonna compete with the reactive ability and rapid, targeted, viral dissemination of these alternative information channels how?
Within 24 hours the story is around the globe and Lance Armstrong, the famous Tour de France winner, tweeted his opinion about the story: "That's ridiculous. I'm glad I was so "neglected". #thanksmom"
And mainstream media is gonna compete with the reactive ability and rapid, targeted, viral dissemination of these alternative information channels how?
Friday, May 20, 2011
Ever More Taxation
Recently, a friend pointed me to an article that made the rather surprising claim that "by historical standards, what we pay in federal taxes - rich, poor and everyone in between - has gone down."
Surprising, and not true.
I conveniently happened to have a table lying around that shows historical federal tax revenue. In constant 2005 dollars, 50 years ago (in 1960), federal government revenue was $631 billion. In 2010, it was $1,919 billion (i.e. $1.9 trillion) or three times as much. So by historical standards, we're paying a hell of a lot more on average.
There are more people now, so I also did the calculation on a per capita basis. In 1960 the federal government revenue per capita was $3,518, while in 2010, it was $6,215, or nearly double. Again, these are in constant 2005 dollars. I graphed per capita revenue and it basically shows relentless increases in per capita (and total) collected taxes. There is a bit of chop (i.e. the trend is not perfectly smooth), but it's definitely clear what the trend is - up, up, and up.
So while we spend about the same or less per capita for most goods and services due to increasing technology and efficiency, my question is why do we need to be taxed twice as much per person to fund government as we did 50 years ago? Why is the baseline assumption, even among tea partiers, that we should be taxed a constant percent of GDP, which means increasing taxes forever (assuming GDP keeps growing), instead paying the same amount of taxes per person over time (adjusted for inflation, of course)? Why is the base assumption that government should expand (beyond population growth) forever? Do we really need ever more taxation, ever more government regulation, ever more government intrusion, and ever more government redistribution?
Just wondering.
Surprising, and not true.
I conveniently happened to have a table lying around that shows historical federal tax revenue. In constant 2005 dollars, 50 years ago (in 1960), federal government revenue was $631 billion. In 2010, it was $1,919 billion (i.e. $1.9 trillion) or three times as much. So by historical standards, we're paying a hell of a lot more on average.
There are more people now, so I also did the calculation on a per capita basis. In 1960 the federal government revenue per capita was $3,518, while in 2010, it was $6,215, or nearly double. Again, these are in constant 2005 dollars. I graphed per capita revenue and it basically shows relentless increases in per capita (and total) collected taxes. There is a bit of chop (i.e. the trend is not perfectly smooth), but it's definitely clear what the trend is - up, up, and up.
So while we spend about the same or less per capita for most goods and services due to increasing technology and efficiency, my question is why do we need to be taxed twice as much per person to fund government as we did 50 years ago? Why is the baseline assumption, even among tea partiers, that we should be taxed a constant percent of GDP, which means increasing taxes forever (assuming GDP keeps growing), instead paying the same amount of taxes per person over time (adjusted for inflation, of course)? Why is the base assumption that government should expand (beyond population growth) forever? Do we really need ever more taxation, ever more government regulation, ever more government intrusion, and ever more government redistribution?
Just wondering.
Friday, May 06, 2011
Musical Trespassing
A while back, I was trying to explain to my daughter why illegally copying music was stealing. To my surprise, she simply could not see why it was considered stealing. Since she's an intelligent, fairly sophisticated, and reasonably honest person, her response made me question my assumptions.
I've since decided she's right. Copying music may be somewhat like trespassing, but it's almost nothing like stealing.
The intangible property of value that you own when you create music is the copyright, not the song itself. The copyright can be bequeathed in your will, sold, etc., much like tangible property. On the other hand, you don't directly have ownership in any of the copies of the song.
When I copy a copy of a copy of a copy of a copy of a song, I'm not stealing or directly affecting your ownership of the copyright in any way. This is very similar to when I walk across your land uninvited, I'm not stealing your land or directly affecting your ownership of the land in any way. I merely trespassed, which while illegal in the US (but not other countries such as Sweden), is a much different level of moral and legal breach than theft.
Indeed, unlike laws against stealing which are derived from fundamental western morals ("thou shall not steal"), copyright is only a legal issue, has no objective or traditional moral component, should only exist only to further the arts and sciences (according to the U.S. Constitution), and is really only even relevant if a substantial majority of people believe it has a net benefit to society (which, to the dismay of the record companies is becoming less and less true by the day).
I think that calling copyright violations stealing is derived from the legal marketing of the recording industry and other stakeholders in monopoly rents from copyright. After all, what better way to get the public on your side than to try to assign an erroneous but much morally stronger word to the violation of a law you strongly care about.
My daughter and her friends are right, copying is somewhat like trespassing, but not at all like theft.
Friday, April 29, 2011
Thursday, March 24, 2011
Faster Than The Wind
In my opinion, One Man's Quest to Outrace Wind is a great article. It's well written, tells a great story with plenty of suspense, and is educational.
The core topic is "DDWFTTW", which stands for "Directly DownWind, Faster Than The Wind" and refers to a vehicle or vessel powered only by the wind. Until recently, it had always been thought to be impossible to build a wind-powered vehicle that could go faster than the wind while going directly down wind. That's because once the platform reaches the same speed as the wind, it seems like there would not be any wind forces acting on it, so how could it go faster if it's powered only by the wind?
Someone figured out how to do it and proposed his concept on the Internet.
And he was promptly ridiculed and called an idiot by almost everyone including physics professors.
He built a small prototype that proved the concept.
And he was promptly ridiculed and called a fraud and an idiot by almost everyone including physics professors.
He and a very small group of supporters managed to raise $15,000 to build a full size version that could carry a person. They demonstrated it to the Land Sailing Association where it clearly went directly down wind much faster than the wind.
Finally, most people believed him!
What's interesting to me is that the approach is very, very clever, but it's not really that complex, yet a lot of people just refuse to believe it, even after it's been clearly demonstrated.
No one is so blind as those who refuse to see.
The core topic is "DDWFTTW", which stands for "Directly DownWind, Faster Than The Wind" and refers to a vehicle or vessel powered only by the wind. Until recently, it had always been thought to be impossible to build a wind-powered vehicle that could go faster than the wind while going directly down wind. That's because once the platform reaches the same speed as the wind, it seems like there would not be any wind forces acting on it, so how could it go faster if it's powered only by the wind?
Someone figured out how to do it and proposed his concept on the Internet.
And he was promptly ridiculed and called an idiot by almost everyone including physics professors.
He built a small prototype that proved the concept.
And he was promptly ridiculed and called a fraud and an idiot by almost everyone including physics professors.
He and a very small group of supporters managed to raise $15,000 to build a full size version that could carry a person. They demonstrated it to the Land Sailing Association where it clearly went directly down wind much faster than the wind.
Finally, most people believed him!
What's interesting to me is that the approach is very, very clever, but it's not really that complex, yet a lot of people just refuse to believe it, even after it's been clearly demonstrated.
No one is so blind as those who refuse to see.
Sunday, September 19, 2010
Ahoy Matey
The really important news of the day is that it is International Talk Like a Pirate Day! Arrrrrrr!
Thursday, September 16, 2010
Higher Education Loan Bubble
Instapundit has had a number of posts regarding the supposed higher education bubble. However, to me, the most disconcerting part is the massive amount of student loan debt that exists (it exceeds total credit card debt now) and the onerous terms that are attached to that debt as shown by the graphic below.
So you want to be simpleminded?
The world is very complex. It generally pays to look at things from many different perspectives drawing upon history, data and theory. My experience is that very few people are willing to do that, especially in a political discussion. Well, if anyone insists on being simpleminded...
via redstate
h/t instapundit
Wednesday, September 15, 2010
Flawed Metrics
One of the repetitive debates throughout society is when to leave things to individual action and when to have government intervention. Eric Raymond points out that flawed and incomparable metrics are sometimes used to compare private and government action. In his post he focuses on an example of a "collective-action problem" which anti-statists often have to answer for.
Our key insight is a pessimistic one: this is the sort of situation which, though individuals and markets don’t handle it well, isn’t actually handled well by governments either. The fundamental mistake of statist thinking is to juxtapose the tragically, inevitably flawed response of individuals and markets to large collective-action problems like this one against the hypothetical perfection of idealized government action, without coping with the reality that government action is also tragically and inevitably flawed. [...]In other words, don't take imperfect and possibly even very bad situations and make them even worse because you assume that individuals who act badly in the private sphere will suddenly become virtuous when they are part of the government.The second level of error, once you get this far, is to require that the market action achieve a better outcome without including all the continuing, institutional costs of state action in the accounting. So, for example, other parts of the continuing costs of accepting state action to solve this individual toxic-exposure problem in the Deep Horizon aftermath is that Americans will be robbed every April 15th of five in twelve parts of their income (on average), and be randomly killed in no-knock drug raids. And it’s no use protesting that these abuses are separable from the “good” parts of government as long as you’re also insisting that the prospect of market failures is not separable from the good behavior of markets! [...]
Rational anarchists like myself know that stateless systems will have tragic failures too, but believe after analysis that they would have fewer and smaller ones.
If this seems doubtful to you, do not forget to include all the great genocides of the 20th century in the cost of statism.
Tea Party Organization Phenomenon
Whether or not you like the Tea Party's politics, and whether or not they succeed in achieving any of their objectives, I find their "Radical Decentralization" fascinating. Jonathan Rauch has documented the Tea Party's structure in a recent and well written article.
Sunday, August 29, 2010
Making it more difficult than it needs to be
An IBD editorial nails it pretty well right here:
If the european statists realize that at some point the state starts to crowd out the private sector in a destructive manner, shouldn't we?Jobs: Obamanomics has done more than just keep unemployment high during a modest recovery. It may also be keeping high joblessness permanent by raising the costs to businesses of hiring new workers.
July's 9.5% unemployment level was bad enough. But the real problem is that the private-sector jobs machine, which is usually going full tilt at this point in a recovery, now seems to be broken.
To many, it's becoming clear that if President Obama's radical job-killing agenda stays in place, job growth will be nonexistent.
One of America's great advantages has always been its flexible, private-sector labor markets. From 1985 to 2008, U.S. unemployment averaged 5.6%. For the six largest economies in the European Union, the average rate was 34% higher, at about 7.5%.
Yet many of those countries now have jobless rates lower than ours. Why? They've been dropping Keynesian stimulus as a strategy and moving more toward cutting spending and, in some cases, cutting taxes.
Businesses today face rising burdens — from ObamaCare, the financial overhaul, the expiration of tax cuts for entrepreneurs, the threat of new energy taxes or the surge in growth strangling regulations on business — that discourage hiring.
"The real threat to a robust recovery on the labor side," Gary Becker, a Nobel Prize-winning economist, warned recently, "has come from employer and entrepreneurial fears that once the economic environment improves, a Democratic Congress and administration will pass pro-union and other pro-worker legislation that will raise the cost of doing business and cut profits."
It's never been costlier to hire and keep a worker employed. And as ObamaCare kicks in and Bush's tax cuts expire — not to mention the huge tax hikes that will be needed to make Social Security and Medicare solvent — businesses will simply quit hiring.
This Keynes-on-steroids model has been tried before, in Europe. It didn't work. It led to permanently high levels of joblessness — what economists call structural unemployment.
A recent peer-reviewed study in Sweden found that for every 100 new jobs government creates, 114 are destroyed in the private sector. Similarly, a French study of data from OECD countries from 1960 to 2000 discovered, on average, "creation of 100 public jobs may have eliminated about 150 private sector jobs."
In short, it was a disaster that the U.S. is now duplicating. The next Congress should have no greater priority than reversing it all.
The very nature of an economy
Arnold Kling gives us his ideas about economic circumstances here: (heavily excerpted)
In the United States, the economic mystery of 2010 is the persistence of high unemployment, in spite of the application of the stimulus treatment that follows the prescription of the prevailing Keynesian orthodoxy. I wish to offer an alternative to that orthodoxy.
For the followers of John Maynard Keynes, economic activity consists of spending. When economic activity slows down, their prescription is to increase spending by government, businesses, consumers, or all three. Instead, what I like to say is that “economic activity consists of sustainable patterns of specialization and trade.” This is my mantra of macroeconomics.Here is a simple pattern of specialization and trade: Suppose that all of us eat grain and fruit, which we could grow for ourselves. If some of us have land better for fruit trees, while others have land better for growing grain, then specialization and trading can pay off. It is inefficient to waste good tree land by growing grain on it and to waste good grain land by planting trees on it. Instead, economic activity gives all of us more to eat.
What I mean by a sustainable pattern of specialization and trade is that everyone involved would voluntarily continue to follow the pattern. In accounting terms, profits are a sign of sustainability. If the accounts show a profit, then the value of output exceeds the cost of input. If not, then the pattern is not sustainable.
As conditions change, the patterns of specialization and trade evolve. For example, improvements in transportation make new trade patterns sustainable. Recall the changes brought about by ocean-crossing sailing ships, then steamboats, then railroads, then the automobile and the airplane. As new patterns become sustainable, older patterns become unprofitable and therefore unsustainable. The truck replaced the horse-drawn cart.
Patterns of specialization and trade have become more complex over time. The example of fruit pickers and grain harvesters could have been used hundreds of years ago. But many of the jobs that form today's pattern of specialization and trade are less than 50 years old—or younger.
The contemporary pattern of specialization and trade can be described as roundabout production. I first heard the term in a course on capital theory that Alan and I took from Paul Samuelson. Samuelson was explaining the Austrian theory of capital, as articulated by Eugen von Böhm-Bawerk, who developed his analysis more than a century ago.
The idea of roundabout production is to use intermediate activities to increase final output.
The trend is for the proportion of people employed in final-stage production to get smaller and smaller. Two or three generations ago in the United States, agricultural workers and manufacturing production workers made up half of the labor force. Today, that figure is less than 10 percent. However, thanks to roundabout production, we can produce more manufactured goods and more food than ever.Much of today's American workforce is engaged in roundabout production, which Böhm-Bawerk equated with capital. There is no longer a meaningful distinction between labor and capital. Labor is capital.
If labor is capital, then we have lost the automatic tight connection between spending and employment. Firms can vary their output with little or no variation in employment. This explains how we can have a “jobless recovery,” meaning a large percentage increase in output without a comparable percentage increase in employment. For firms in today's economy, labor represents an investment. Firms hire workers in order to develop capabilities that will eventually produce output more efficiently. The return on an investment in workers may take as long or longer to realize as the return on investment in a machine. The return on investing in workers may be at least as uncertain as the return on investing in equipment.
The phenomenon of roundabout production suggests a story for the current recession. The economy was suddenly caught in an unsustainable pattern of production, which involved too much housing construction in the “sand states” of Florida, Nevada, and California as well as too much financial activity related to mortgages and mortgage securities.
The suddenly unsustainable housing and mortgage boom comes atop the ongoing obsolescence of various patterns of specialization, as the Internet and globalization continue to foster new forms of organization and competition. The result of the boom-bust cycle superimposed on the ongoing obsolescence is to overload the market's ability to reconfigure production patterns so that workers are fully employed.
The market needs to undertake a recalculation in order to deploy workers in a new, sustainable pattern of specialization and trade. The process involves gradual, decentralized trial and error. Firms need to be launched by entrepreneurs, who will make risky investments in employees. The failure rate will be high, but eventually the successes will have a cumulative effect that brings about more economic activity.
The challenge is made difficult by the increasing specialization of labor-capital. The problem of matching skills with needs in roundabout production is much more complex than the problem of adding or subtracting workers in final-stage production.
The Keynesian prescription for a recession is to increase government spending. Even if the resulting output is not valuable (the proverbial digging ditches and filling them in again), the thinking is that this will stimulate productive output. Again, this is based on the theory that economic activity is spending. Supposedly, spending will encourage more spending, through the “multiplier” effect.
From our more Austrian perspective, the Keynesian prescription will fail. Government spending tends to create or reinforce unsustainable patterns of production—temporary housing booms, transitory increases in auto sales, and the like. However, there is no reason to expect unsustainable patterns of production to stimulate the creation of sustainable patterns of specialization and trade. If anything, it would seem likely that government support for unsustainable patterns of production could make the market's recalculation problem more confusing. It will delay long-term recovery, rather than hasten it.
What needs to emerge are new, sustainable patterns of specialization and trade. Government does not have much incentive to create sustainable patterns of specialization and trade. In fact, the political system tends to favor subsidies to outmoded and unsustainable businesses.
Government could reduce the cost of investing in labor-capital. If it can be done in a fiscally responsible way, it would help to reduce the marginal tax rates on investment (the corporate profits tax) and employment (the payroll tax). This may require offsetting tax changes, such as eliminating the mortgage interest deduction or the deductibility of employer-provided health insurance.
On the whole, the best way to help the process of market recalculation and the creation of sustainable patterns of specialization and trade may be for government to get out of the way.
Well there are some things that might help but policy makers have chosen not to do them. Many of the things that have been done are counterproductive.
Saturday, August 21, 2010
It's not pretty to watch
My impression is that the current president is moderately bright and moderately clever in a narrow way. I see little evidence of very high intelligence or impressive breadth and depth of knowledge. Jennifer Rubin captures things rather well:
To be blunt, Obama suffers from a lifetime of others excessively praising his intellect. It insulates him from ideas and facts that conflict with his pre-existing liberal rubric (so “every economist” believed his stimulus would work). It leaves him unprepared to engage in real debate with informed opponents (e.g. the health-care summit). It skews his understanding of how geopolitics works, as he imagines that his own wonderfulness can sway adversaries and override nations’ fundamental interests (the Middle East).(ht/instapundit)
It’s a deadly combination — intellectual arrogance and lack of sympatico with the public — that leads him again and again to stumble. And when his shortcomings lead to embarrassment or failure, he strikes out in frustration — at Israel, at the media, and at the American people. The image of himself clashes with the results he achieves and the reaction he inspires. No wonder he’s so prickly. You’d be, too, if everyone your entire life had told you that you were swell but now, when the chips are down and the spotlight is on, you are failing so badly in your job.
Friday, August 20, 2010
We the People vs. The Elites, yet again
Thomas Sowell holds forth:
At the time when it was written, however, the Constitution was a radical departure from the autocratic governments of the 18th century. Since it was something so new and different, the reasons for the Constitution’s provisions were spelled out in the Federalist, a collection of essays written by three of the writers of the Constitution, as a sort of instruction guide to a new product.
The Constitution was not only a challenge to the despotic governments of its time, but has been a continuing challenge — to this day — to all those who think that ordinary people should be ruled by their betters, whether an elite of blood, or of books, or of whatever else gives people a puffed-up sense of importance.
It is no coincidence that those who imagine themselves so much wiser and nobler than the rest of us should be at the forefront of those who seek to erode constitutional restrictions on the arbitrary powers of government. How can our betters impose their superior wisdom and virtue on us, when the Constitution gets in the way at every turn, with all its provisions to safeguard a system based on a self-governing people?
To get their way, the elites must erode or dismantle the Constitution, bit by bit, in one way or another. What that means is that they must dismantle America. This has been going on piecemeal over the years, but now we have an administration in Washington that circumvents the Constitution wholesale, with its laws passed so fast that the public cannot know what is in them, its appointment of “czars” wielding greater power than Cabinet members’, without having to be exposed to public scrutiny by going through the confirmation process prescribed by the Constitution for Cabinet members.
Those ideas are captured rather well in this video:
Wednesday, June 09, 2010
News You Can Mews
I wonder if this brain parasite transmitted from cats could literally be the liberal disease:
The parasite, Toxoplasma gondii, has been transmitted indirectly from cats to roughly half the people on the planet, and it has been shown to affect human personalities in different ways.
Research has shown that women who are infected with the parasite tend to be warm, outgoing and attentive to others, while infected men tend to be less intelligent and probably a bit boring. But both men and women who are infected are more prone to feeling guilty and insecure. [...]
Can a common cat parasite account for part -- even if only a very small part -- of the cultural differences seen around the world? [...]
Toxoplasma, he notes, is "frighteningly amazing."
It can change the personality of a rat so much that the rat surrenders itself to a cat, just as the parasite wanted.
The parasite's eggs are shed in a cat's feces. A rat comes along, eats the feces, and becomes infected. The behavior of the rat undergoes a dramatic change, making the rat more adventuresome and more likely to hang out around cats.
The cat eats the rat, and the parasite completes its life cycle.
So the next time you think it's a good idea to appease murderous islamo-fascists or turn over complete control of our lives to the government, perhaps you should see if you're infected by this parasite.
Hat Tip: Tim Blair
That Was Lucky
Was it a miracle when the fronds of a palm tree broke his fall?
I just love it when real news sets up for full groan humor!
Maybe. In which case, as James Taranto points out, it's good to have fronds in high places.Authorities and witnesses say that a palm tree likely saved the life of Joey Williams, a 4-year-old boy who fell Friday morning from a 17th-floor balcony after chasing a balloon through his apartment home at the Doubletree Grand Hotel Biscayne Bay.
The boy opened a sliding glass door, climbed over a covered balcony railing, bounced off the crown of the palm tree and safely landed on the ``dirt surface'' of an area surrounding the hotel's 10th-floor pool, said Kenia Reyes, a Miami police spokeswoman.
``It's a miracle -- he doesn't appear to have broken a bone,...''
I just love it when real news sets up for full groan humor!
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