Deinonychus antirrhopus

The Sky Is Falling U.N. Report

Or more accurately known as the Millennium Ecosystem Assessment. Tim Worstall informs writes that the report isn't as bad as the media is making it out to be. The shocking thing is that the report actually suggests policies and reforms that are pro-market not anti-market.

For example, the report suggests ending subsidies that put an undue burden on (local) ecosystems. One such subsidy are farm subsidies. These subsidies encourage use of things like herbicides, pesticides and fertilizers and intensive farming that can strain the local ecosystem. Ending subsidies would reduce this negative impact, and not necessarily adversely impact prices. The reason for the lack of (or small) impact on prices is that removing the subsidies would allow for farmers in other parts of the world to compete. This would help keep prices low, reduce the strain on the ecosystem and have the additional benefit of possibly improving economic conditions in third world countries.¹

I highly recommend reading Tim's Tech Central Station article. I'm also going to try to read some of the U.N. report. I, like Tim, might actually have to admit the U.N. might be good for something after all.
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¹I say possibly improve economic conditions because when there are maniacs like Mugabe in charge of these countries, or the countries are severely lacking in the institutions that promote economic growth removing subsidies might do little to help such countries. This is also another reason to doubt Jeffery Sachs notion that simply flinging money at third world countries will help eliminate poverty.

Paul Shows We Actually Do Know Alot

Well Paul is still at it trying desperately to save face. In this case Paul is trying to show just how little we know about evolutionary theory and well stuff in general. However, I have, through lots of statistical work managed to take Paul's data and via renormalizing the data, then applying a 25 year Gaussian filter have managed to come up with the following chart,

See, since 1905 we have learned quite a bit about stuff. Isn't science great. And yes, we do know quite a bit about evolutionary biology as well. Do we know everything? No. Should scientific inquiry continue? Absolutely.

Yes, I have taken Paul's imaginary chart and simply rescaled it to show exactly how silly the concept is. Granted, there is a seed of truth here: yes, we do learn more as time goes by. But who disputes this? Not me, not any serious scientist, not most rational people. Paul is strongly implying that "evolutionary oozer zealot poop-heads" actually think we know everything and that there is no more room for debate let alone scientific inquiry.

Yeah Mankind is Dumb

But apparently some of us are dumber than others. I love how I have now, in addition to my Right-Wingnut label, acquired the label "Oozer". See, apparently because of my belief in evolutionary theory as being true, I must also believe in abiogenesis.

The term "oozer" is a term I coined for people who believe life started from inorganic ooze and evolved into every flavor of life we have today. It's descriptive.

Nevermind that I am pretty sure I've never written anything indicating whether or not I think abiogenesis is true or not. The simple fact that I believe a theory that has practically nothing to do with abiogenesis means I must believe in abiogenesis.

As for the notion that I think I know everything, or that people in my generation know everything I don't have a clue where that dimwitted view came from. I have not only admitted that not everything is known about evolution and things like speciation, I have admitted the current theories are very likely to be shown to be wrong. But apparently this view, that the current theories are not the last word is somehow tranmogrified into a belief that current theories are the last word on whatever the topic is.

And here Paul seems to completely miss the point. Let me see. The Commissar has a sarcastic post on the seperability of abiogenesis from evolution and how belief in one does not have much of an impact on the other, and it goes right past Paul.

[Paul in case you read this it goes like this.

1. One can believe in Abiogenesis and the Theory of Evolution.
2. One can believe in just the Theory of Evolution.
3. One can believe God created life on Earth and that evolution was the process responsible for the diversity of life.

These all are fairly reasonable to me. Hence classifying me as an "Oozer" is...well dishonest. Further, it shows that evolution is not dependent on abiogenesis, but that it is dependent on life being present no matter how it came about.]

If you follow any of that, can you please explain Paul's reasoning to me 'cuz I just don't get it.

Just to Make Dave Say, "What?!?!?!"

I took the English Genius test and...well here are the results:

Thank you so much for taking my test. I hope you enjoyed it!

For the complete Answer Key, visit my blog: http://shortredhead78.blogspot.com/.

Personally, I think there must be something horribly wrong with the test.

The Human Race Living Beyond Its Means

Well looks like it is time for the Malthusian Nightmare to rear its pathetic head again. Yes, 2/3^rds of the world's resources have been used up. The battle to feed humanity is over, nuclear armaggedon to follow. But we should believe this one because 1,360 scientist (from 95 countries no less) say it is going to happen.

We really need to take this kind of thing seriously. After all we remember the nuclear war caused by the food shortages Paul Ehrlich predicted. And don't forget the 28% unemployement during the Great Depression of the 1990's right? Clearly danger is approaching and a massive program must be initiated.

I think the first thing that should be done is what Paul Ehrlich advocated; that all brown people should be forcibly sterilized. Next we need to consider implementing a eugenics program for all non-brown people (i.e. the whites). Then an international agency should be set up to oversee the correct usage of what precious resources we have left on the planet.

Via the Mises blog.

Doesn't Anybody Care About Incentives?

Apparently the answer is no. Lets look at their first point of their ten point plan,

• All Americans under 65 will receive a voucher that guarantees them basic health care services such as doctor visits, hospitalization, pharmacy benefits, some mental and dental health services and catastrophic coverage, from a qualified health plan or health insurance company.

The problem here is that it is nothing more than universal health care slutted up in the language favored by many conservatives/pro-market types. We'll use the term voucher, even though it is meaningless, since it will put people in the same frame of mind as school vouchers. This kind of deceptive rhetoric is simply amazing, especially when it comes from people who have pretty good reputations.

Since vouchers covers "basic health care" (a definition which can change to suite political office seekers) then why shop around for the best deal and instead why not shop around for the best service. All healtch care providers will now have an incentive to make things nice and expensive. If your competitor is chargine $5,000/year for health care coverage why not make yours $10,000/year and include things the other provider doesn't. How about private rooms for any and all patients. Hotel accomodations for loved ones from out of town, etc.

The reaction will be to try and "reign" in these "frivolous" expenses with more red tape. Translation: spending more government money to prevent others from spending that money. In the end a huge bloated, wasteful, and probably horribly inefficient system. We can also, with a fairly high probability, add on that many health care providers might spend money finding out what perks are not prohibited and adding those to the service. None of these expenditures will do much of anything to help improve the quality of health care.

The authors do seem to be aware of this problem at some level, but their solution is...well...stupid.

Most important, over time increases in expenditures should be constrained. By linking the earmarked VAT with basic benefits, expansion of coverage is linked to the public's willingness to tax itself.

If my abusing the system costs me an extra $1, but gets be and extra $5 in service I should go right ahead abusing the system. This is a tragedy of the commons type of problem. While in some cases the tragedy of the commons does not have to be the result of common resource pool games there are also instances where it can occur. For example, if the community is large then it may pay to form local coalitions that operate against hte community as a whole. Also, if one group (the wealthy) can defect and not play in the common resource pool game. Both of these things can result in tragedy for common pool resource. Considering that this plan would likely cover the entire nation is does present a problem in terms over use.

The authors also try to salvage the plan with this dubious idea,

• An independent Institute for Technology and Outcomes Assessment is established to evaluate the effectiveness and value of new tests and treatments. It is funded by a dedicated one cent of every two dollars of the earmarked tax.

In other words, if a medical treatment doesn't offer much in the way of extending one's life forget about it. Of course, there is the problem that this new agency's budget is linked to the tax that will fund this whole health care program. In other words, if this new agency allows for more expensive treatements and the tax rate (and revenue) is increased the agency gets a bigger budget. Gee that isn't a perverse incentive at all.

Typically the way vouchers work is that the consumer is given a voucher for $x and is then allowed to shop around for the best deal. If the service is going to cost $(x-y) (where 0 < y < x ) then the consumer is lucky and doesn't have any out of pocket expenses. If the service costs more than $x then the consumer will have to come up with the extra money. In this way, consumers are not only looking at the quality of care, but also the cost of the care. This is how to really incorporate market forces into the purchasing of health care. Further, since these vouchers would be funded by tax dollars it would have whatever cost constraining benefits that are present in the proposal by Fuchs and Emanuel.

Would this type of voucher plan reduce the number of people without health insurance? Yes. It would have the effect of reducing the price of health insurance and as such more people would purchase health insurance. Would it reduce the number of people without health insurance to zero? No.

Overall the proposal has numerous problems which can be summarized as follows:

1. There are rent seeking opportunities in expanding the definition of "basic health care".
2. The red tape to prevent this will also be costsly.
3. The resources allocated towards rent seeking are wasted in that no social good comes from their expenditure.
4. The linking of the watchdog agency's budget to the tax revenue creates a perverse incentive for the watchdog agency to be to willing to allow new expensive treatements.

This can be overcome by three simple changes to the plan. First, institute a fixed dollar value for the vouchers. This will promote the market disciplines that Fuchs and Emanuel mention. Second, whatever legislation that is passed should have some sort of super-majority requirement for changing benefits. Seperate the budget of the watchdog agency from the tax revenue for health care. These changes would make the propsal much more viable in terms of accomplishing the stated goal of fixing the quality and quantity of health care in this country.

Via Kevin Drum.

More of Kevin Drum's Magic Money

Kevin has a new post on how rotten the idea of private accounts are. Here is the problem. In the past Kevin has argued that the growth scenarios in the the Social Security Trustees Reports is too low. Further, that we should go with these higher growth forecasts and hence do nothing. However, at the same time, when trying to show that private accounts are a bad idea, the only growth rate that Kevin considers are the growth numbers from the Trustees Reports.

This is an extremely dishonest method of presenting an issue. At the very least try to be consistent between the numbers that you are using, or present the results for both sets of numbers. Or if you can't do the number crunching to present both sets of numbers have the integrity to tell your readers that you believe such growth projections are too low and hence are probably a worst case scenario. But do we get any of this from Kevin? No.

Instead Kevin chugs happily along switching from whichever set of economic growth numbers are convienent for whatever point he is trying to make. It is rather amusing in that Kevin has become a rather pathetic parody of the the perfidy that he decries in the Bush Administration.

The First Economic Idiot Award

Tim Worstall has come up with a new award. The first Economic Idiot Award goes to David Winning for the following,

Oil prices rose today amid concerns that the fatal explosion at a BP refinery in Texas would leave the energy industry more overstretched.

A barrel of US light crude for May delivery rose 47 US cents to 54.28 US dollars in early trading in the Far East, following the blast which killed at least 14 people and injured more than 100 others.

Now many might be wondering what is the problem with this. The problem is that there is extremely little reason to think that the explosion had an impact on the price of oil. The problem is that crude oil is an input into the refining process, not an output. Hence the supply of crude oil is not affected by the explosion. Or as Tim puts it,

Consider, crude oil, the price of which rose, is the raw material which flows into a refinery. The explosion means there is less capacity to refine that crude. There is therefore x amount of crude per day being pumped which cannot be refined. (X, according to whether the entire refinery is shut or just that small portion that went bang, could be 430,000 or 25,000.) This, ceteris paribus (econspeak from the priestly caste meaning all other things being equal), means that the price of crude will fall, given that crude is a difficult and expensive thing to store.

Or to think of it another way. With the explosion of refinery the demand for oil (from refineries) has declined, hence the price should drop. Of course, everything else does not have to remain unchanged and so the price of oil can rise. The problem is reversing the direction of causality here, and this is what makes David Winning and economic idiot.

Is Teaching Economics Illeagal on University Campuses?

The Atlanta-Journal Constitution looks at this question.

That is the only logical conclusion one can reach after studying the treatment of Harvard President Lawrence Summers and his fellow economist, University of Nevada-Las Vegas professor Hans-Herman Hoppe.

I have to think there might be something to this claim. After all, one of the things that Hoppe suggested was that since homosexuals, as a general rule, don't have children they will make different choices in the market. While it may or maynot be true, it strikes me as at least a viable question for research.

Now Hoppe also suggested that another reason for homosexuals having different rates of time preference was the riskier lifestyles. Again, while it may or may not be true it strikes me as a question that could be researched. Further, it might also be that there are gender differences. For example, female homosexuals might have different rates of time preference than male homosexuals. Is there is problem with researching this?

Apparenlty according to the student who filed the discrimination complaint there is.

"When the door closes and the lecture begins, he needs to make sure he is remaining as politically correct as possible," Knight said.

In other words, an interesting line of research has to be forgone for political purposes. The Orwellian implications are rather disturbing. Frankly I think conservatives should respond in kind. I'm pretty sure that "hostile learning environment" rules are sufficiently vague that anti-conservative/right wing views would also fall under the heading of "creating a hostile learning environment". If the university fails to respond to such "hostile learning environments" sue them. I am sure there are plenty of conservative/right wing organizations that would love to get their names in the media over an issue like this. Perhaps when universities beocome a complete joke in terms of educating students will something be done.

Corporate Governance, Economic Entrenchment, and Growth

Another reason to be doubtful of the notion that came up a few weeks ago about solving world poverty for a mere $150 billion (click here and here) is who controls the corporations. Some recent research at the National Bureau of Economic Research looks at who controls corportations and the possible impact such control has not only on corporate performance, but also economic performance.

In the United States a single family might control a large part of a corporation, perhaps even have controll of the corporation. However, in other parts of the world it is not uncommon for a family to own quite a few corporations.

Elsewhere, however, it is common for a family to control numerous corporations. Indeed, most large corporations in these countries - many are in Asia but many are in Europe, as well -- have controlling family owners who use pyramidal structures, cross shareholding, and super voting rights to maintain command over many listed companies. These control pyramids drive a wedge between the families' dominant control rights and the often-small amount of actual wealth invested in the companies they control.

There are two problems that can arise from this kind of corporate control. The first is the divergence in interests of those who control the corporation vs. those who have invested in the corporation. Further, in many cases these situations arise in countries where the mismanagement of the corporations can also have large effects economy wide.

But poor or shortsighted governance of a few family patriarchs may well yield inefficient economy-wide capital allocations, reduced investment in innovation, and retarded economic growth. Additional problems include the limits that may be placed on access to information, allocation of resources, monitoring of managers, and borrowing and investing practices. Moreover, to preserve the status quo, these elite families evidently can influence public policies so as to curtail the advancement of private property rights, of capital markets, and of economic openness. In order to maintain their advantageous positions, the elites also likely use their political connections to hold back the institutional development of capital markets and to erect a variety of entry barriers. Such a situation is especially harmful, the researchers say, in countries where public shareholders have inadequate legal rights in seeking redress from inept or corrupt corporate insiders.

So the idea of simply throwing money at the problem of world poverty would largely amount to throwing money into the pockets of these already wealthy families and do very little to help world poverty.

John McCain: You Son of a Bitch

Well given all the recent news over McCain-Feingold and blogging I cetainly do wish for bad things to happen to John McCain.

Robert Barro on Private Accounts

Via Kevin Drum, comes this article in Business Week by Robert Barro on why private accounts are a bad idea. Barro's reasoning goes like this:

1. The government will bail out those who lose their shirts.
2. Hence people will opt for too much risk.
3. Thus, private accounts are bad.
4. We need to reduce Social Security as it promises too much.
5. And given number 4, people will invest more on their own thus obviating the need for private accounts.

Okay, I don't get it. Seems to me we have a contradiction here. Since we have as an assumption that the government is going to bail out those who opt for too much risk and lose their shirts, how will reducing the current Socail Security program help? Wont we just be back at number 1 again and maybe even moreso? After all if we allow for people to invest on their own a great many might not take the time to carefully select their investments whereas with a private accounts scheme people will have a limited number of options thus reducing the chances they'll pick something really dumb.

Maybe I'm missing something here, but the above doesn't seem to go anywhere. It is almost as if Prof. Barro stopped at number 5 on the list and failed to consider what it would mean given his earlier assumption about the government bailing people out.

Incidentally, Kevin Drum calls this moral hazard. I don't think it is moral hazard as there is no "insurance policy", but is actually more an example of time inconsistency. The time inconsistency is where the government announces the "optimal" plan. Then at some future point it "pays" (i.e. it is welfare enhancing) for the government to deviate from the optimal plan. Hence individuals don't believe the initial "optimal" plan and in this case take on too much risk.

Scientific Methodology and the Theory of Evolution

I went over and was reading through the comments at Wizbang for Paul's post here. One thing I missed earlier was this comment by Paul,

You claim to be a scientist but refuse to accept your holy grail of a theory might be wrong... That's called religion Steven and you are smart enough to know that.

Paul would be correct that holding the view that evolution is never wrong would indeed be a religious type of view. However, fortunately for me I don't hold such a view and have never indicated I hold such a view. So it is rather amusing that Paul runs around the web calling people liars and then see him pull this lame stunt (technically it is called a strawman argument).

In fact, I'll even go one better on Paul. I fully expect that some day the current Theory of Evolution (ToE) will be shown to be wrong. So my own views on this are 180 degrees opposite from what Paul thinks I believe (also note the arrogance of Paul's position...he actually thinks he knows what I'm thinking--i.e. he apparently thinks he is a mind reader).

The funny thing is I tried to demonstrate this months ago to Paul in this post. I lay out the simple version of using Bayes theorem as way of assessing the evidence in favor of different hypotheses. The results of using Bayes theorem are a probabilities for each hypothesis. Except in the case where the prior probability of a hypothesis being true is (dogmatically) set to 1 the researcher is always taking a position that any dominant theory can indeed be incorrect. Now, I'm not an evolutionary biologist and I haven't sat down and tried to do such a calculation, but given that all other competing theories are severely lacking, doing such a calculation is rather pointless. The current neo-Darwinian theory is the (conditional) winner. At least for now. Will it always be the winner? Not in its current form.

Now I will go out on a limb and say that it is unlikely that naturalism is going to replaced. That is, while the current theory might eventually be replaced it will likely be replaced by something that also fits in the natrualist paradigm. I think this view is shared by most scientists and most evolutionary biologists (which is why biologists are excited by this recent developement with genomic information and plants). The bottom line is that when somebody starts calling the adherents of the Theory of Evolution religious zealots you know something stinks. Most people who believe in the ToE will jettison it if another theory comes along that can displace it. That is how science works. The problem for most people who don't like the ToE is that there is literally no such theory out there to replace it (and no Intelligent Design does not even come close to qualifying).

Dinosaur Soft Tissue Found

Well I think this is very fitting given the silliness over at Wizbang. Apparently it looks like some soft tissue from a Tyrannosuarus rex has been found.

Palaeontologists have extracted soft, flexible structures that appear to be blood vessels from the bone of a Tyrannosaurus rex that died 68 million years ago. They also have found small red microstructures that resemble red blood cells.

Now that is very, very cool.

Apprarently the femur was broken because with its plaster protective jacket it was too heavy for a helicopter to retrieve.

Relating to the issue of macroevolution over at Wizbang there is this part,

To see what remained of this internal structure, Schweitzer soaked samples of the core of the bone in a solution that dissolved the calcium compounds. This left what she describes as "a flexible vascular tissue that demonstrates great elasticity and resilience".

For comparison, she then examined ostrich bones, as these birds are the largest and closest living relatives of T. rex. She found similar structures when she removed the calcium from the ostrich bones and treated the mixture with enzymes to break down collagen fibre in the bony matrix.

And it doesn't end there. Thanks to David Tufte at VoluntaryXchange we learn that Mary Schweitzer has recovered proteins from dinosaur eggs as well. Here is the cool bit,

Mary Schweitzer at North Carolina State University in Raleigh injected rabbits with protein from either bird or dinosaur eggshells, collected the antibodies produced and tested whether they stuck to the other type of egg protein. Both types of antibody reacted to both proteins, indicating that they were similar (Proceedings of the Royal Society B, DOI: 10.1098/rspb.2004.2876).

Another bit of evidence that birds maybe the descendants of the dinosaur. Makes me wonder if I can go into "I told you so" mode now.

Wizbang's Big Bad Biology

Well looks like Paul has taken another dive into the evolution debate. Most amusingly is that Paul is conflating the theories of evolution with abiogensis.

The nomenclature will always bite you. I don't use "evolution" in the strict definition here, I mean evolution as in the theory that lighting stuck inorganic material and started life that a bazillion years later evolved into every life form on the planet. That version of "evolution" is seriously, seriously flawed.... And no amount of your typing in the comments section will make unflawed.

Sorry, but this describes the notion of abiogenesis. Evolution is something different. Evolution is basically the theory that explains how we have so much diversity of life, not why there is life. Big difference. This is the central area of the debate in the Evolutionary Theory/Intelligent Design/Public School Science Education debate. The intelligent design guys aren't saying that the theories of abiogenesis are lacking quite a bit of support, but that the Theory of Evolution (ToE) is impossible.

Further, Paul's example is really a big yawner. So science doesn't know everything about evolution and how genetic information is transmitted. Notice that the scientists are excited at this discovery to learn something they previously didn't know about. Paul on the other hand sees this as a reason to conclude: God did it.

Thus, Paul's claim that "we" (by this I assume he means scientists) don't know jack about the origin of species is well lame. No, not lame it represents a fundamental degree of dishonesty here. Scientists do know quite a bit about how species originate. Do scientists know everything? Clearly no, and that is why the scientists are excited. Will this mean the downfall of the ToE? Unlikely if this means that the ToE is supplanted by some mythology on creation. What is most likely means is that the ToE will itself change to the new information that is learned. The question is how did that information skip a generation (crudely put)? If it is a natural mechanism then the ToE is fine and Creationists like Paul will have to look elsewhere for something to hang their Dogma Hat on.

You can read more of this at, PhaWRONGula, Pharyngula, Unscrewing the Inscrutable, The Politburo Diktat, The World Wide Rant, and On An Azure Field of Gratuitous Advice.

Update: Oh and watch Paul's meltdown here. Note that while Paul does say he is calling abiogenesis evolution in his post, he then goes on from this to say, incorrectly, that this means we know nothing about the origin of species. This is like saying, we don't know how the universe formed, therefore we don't know how planets form. That the two, while in some ways connected (you need the universe to have planets just as we need life for evolution to work), we can still talk intelligently about each subject independently in some regards. This distinction seems to be completely lost on Paul.

Another Update: Apparently Paul doesn't like being called on his scientific ignorance. It really is an amazing and sad thing to see. First off, apparently I am now an "Oozer". I guess this means that I must believe the theory of abiogenesis because I believe the ToE. Note that one can believe that God is the origin of life and that the ToE is the origin of species. Both are consistent with each other. This is the fundamental reason why saying abiogenesis is wrong does very little to the ToE.

This is where I just scratch my head. The "oozers" want us to believe (as a matter of religious doctrine) that lightning hit inorganic primordial ooze and it became life. From that humble beginning all life on earth evolved. I've written this many times on Wizbang but....

Where in there exactly did I imply that fossils in museums were fake?

Well gee Paul, maybe it is because you keep pointing to abiogenesis and then pronouncing the ToE wrong. I know you don't believe either theory, but your "proof" is well, not a proof. You can't disprove theory A and then claim it disproves theory B unless theory A is necessary for theory B.¹ This isn't evolution, religion, or anything other than simple logic.

I really like how Paul makes up converstaions.

"You're right Paul. There are some major holes in the theory. BUT it is the best theory we have today. History may prove us to be fools, but for today I believe it is the most probable way to answer all the questions surrounding the diversity of life on earth. But I do understand that there are enough problems still in the theory that you are not convinced yet."

First, how about I don't see "major" holes. Is the theory complete? No. Is our understanding perfect? No. But the theory is remarkably consistent and good at making predicitions. Now if Paul wants to remain unconvinced by the ToE that is his choice. However, based on his posts it is also fair to say he is not being very scientific or logical about this. Saying we don't know "jack" about speciation is just laughable.

For example we have this,

The EZ's love to say that their theory elegantly explains the diversity of life. I hate to point out their denial of reality, but there is no more elegant theory than "God made it that way." If we are scoring on elegance, religion wins... by definition.

This is just ridiculous in that it explains everything and hence nothing. Such a theory prohibits nothing. If a hypothesis predicts some outcome for an event and the outcome is different than predicted we consider the hypothesis wrong (this is a simplification but oh well). But with God, there is nothing that an omnipotent god can do, so there is no way to evaluate this "theory".

Paul then tries to pull the old Micro/Macro evolution trick to get out of this. Here is the hint here for ya' Paul: the same drivers for microevolution are what drive macroevolution. In other words, there isn't much a difference save that humans have put an artificial barrier in the evolutionary process.

The last part is very weird:

Zealot: You know Evolution exists. (#2)

Sane Person: Yeah but parts 1 and 3 are quite flawed.

Zealot: You idiot, you don't understand the difference between 1 and 2.

Paul hasn't been arguing that 1 & 3 are false, but that 1 is false so therefore 3 is false. Further, there is quite a bit of evidence that 3 (macroevolution) is true. For example, there is archaeopteryx which is a transitionary fossil from reptile to bird. If you really want to beat yourself over the head with this try Talk Origin's 29+ Evidences for macroevolution.

The basic point is that evolution is a fact. That fact is theorized to be the driver of speciation. Speciation has been observed both in the field and in the laboratory. While our knowledge is not complete the current theory is pretty good at both explaining the data and making predictions. As such, it seems reasonable to accept the current theory at least until a better theory comes along. Saying one does not accept the current theory because it isn't perfect is simply unscientific. Remember, the new theory that displaces the current one will have to explain everything the current theory does. As such, rejecting the current theory literally makes no sense.
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¹Not sure here, but we might need theory A to be both necessary and sufficient for theory B for a "disproof" of theory A to disprove theory B.

Matthew Yglesias's Positive Vision Thingy

In his post on how there is no crisis in Social Security and that the Democrats should do nothing in regards to Social Security, he does conclude that the Democrats should do something. That something is to put forward a positive vision thingy.

• Bringing the general fund budget into balance.
• Reducing Medicare expenditures by eliminating some of the pointless corporate subsidies in the 2003 Medicare Reform Act.
• Replacing tax deductions for saving with tax credits for saving to broaden access to existing private account-esque devices like IRAs and 401 (k) plans.
• Reform of the private pension system.
• Spitzer-esque Wall Street and corporate governance proposals.
• Making the point that current fiscal policy implies an interest rate hike that will wipe out large portions of most families savings by depressing home sale values.

Now the first two sound reasonable although I'm sure Matthew and I have different views on how the first one should be accomplished. I'd be all for cutting spending, and unfortunately Bush seems to like spending money.

The third item I do have a question about. The shift from a tax deduction to a tax credit might induce people to take larger risks. After all I now have more money going into that 401(k) or IRA, so why not get a little bit more risky with some of it with the hopes of getting a higher return. But I thought this was a bad thing. After all, we keep hearing about what horrible investors people are and how increased risk is actually a Bad Thing. So this one is puzzling to me. Sounds like more of that Liberal talking out of both sides of the mouth kind of thing.

As for reforming the private pension plan sytem I'm curious as to what is wrong with the current system that it needs reforming? I'm also curious as to how these reforms will do anything to help address the issue of funding retirment.

The corporate governance thing strikes me as typical Liberal/Lefty pablum. Things will be good if he just add more rules, laws and regulations. We saw the same thing back when the Enron, WorldCom, and Adelphia scandals first broke. Everybody, including President Bush, started talking about reforming and new rules for corporate governance (and not unsurprisingly everytime this was in the news the stock market would head south). This always struck me, and still does, as an silly position. I saw it as being analogous to adding new speed limits to address the issue of speeding vs. putting a traffic cop out there to start busting the speeders. Lots of hype and hot air, but with really nothing to show for it.

The last one I'm not sure is going to be a big deal. Granted the interest rates would probably rise due to deficits, but by how much is a big part of the question. I always enjoy it when an emprical point is made with literally zero data to support it. Overall a mish-mash grab bag of policies that would probably do very little in the end.

Social Security Trustees Report

Basically I'm with Victor on this one. There just isn't much new here. The basic conclusion is pretty much the same (a one year shift in either direction is not a big deal despite what either the Republicans or Democrats say). Victor notes that the ultimate assumptions between 2004 are virtually identical to the new ones for 2005.

What is fascinating is that Kevin Drum is in some sort of bipolar mode. First he suggests there is some sort of monkey business in the 2005 report. Later he recants this position based on an e-mail and Max Sawicky's comments. But a bit about an hour later (and prior to his recanting) Drum decides that the report is actually good news and apparently the monkey business is either good, not there, or while bad was done incompetently.

Later today Kevin citing Matthew Yglesias continues with the new meme that Social Security is not in crisis. See, we shouldn't have private accounts because not only is Social Security not in crisis because the economy is going to grow enough to keep Social Security solvent. But private accounts are bad because the economy is not going to grow enough to make the private accounts viable. If you are thinking this is one of the "free money" scenarios you aren't alone.

Economic Growth and Social Security Privatization

Via Kevin Drum is a paper (you can download the Word document here and you can read the Washington Post article on it here). The paper basically looks at a type of portfolio that starts out with most of the money going into higher yeild stocks early on, then start to shift the funds from stocks to lower yeild (and less risky) bonds.¹ The result is that growth (assuming we see growth in the next century similar to what we have seen in the last century) with these types of accounts will not be sufficient for these accounts to make money. About 32% of the time the accounts will lose money, and the median rate of return is 3.4%. If the economic assumptions are changed to the more pessimistic view many feel is more reasonable (i.e. lower growth than the last century) then the accounts do even worse with a median rate of return of 2.6%.

Recall that with the Bush's Model 2 from the President's Commission to Save Social Security there will be interest charged on each individual's notional account. The interest charge that is being talked about right now is 3%. Hence even in Shiller's best case scanario you'd only get an internal rate of return of 0.4%. Not very good.

Now what gets me though is that many on the Left always want to compare this to what we'd get if we do nohting to Social Security. The idea here is that while growth is going to be bad so that a lifecycle portfolio generates only a 2.6% rate of return, growth will be strong enough to keep Social Security solvent through the end of the century. I strongly get the feeling that not only is there a good chance Bush and the Right are being fast talking hucksters, but that the Left have their own shell game going as well.

Update: Thanks to commenter jjayson for the pointer to this post by Luskin that is quite critical of Shiller's analysis. Luskin's criticisms look pretty strong. One thing he is wrong about is this part,

With that statement, Shiller stands athwart the fundamental truth that animates the whole concept of the Ownership Society -- it's your money. There's no intervention, no borrowing, in personal accounts. Quite the contrary -- there is empowerment, and there is returning ownership of your money to you.--italics in the original, bold added

The interest rate charged on the individuals notional account really does end up working quite a bit like a loan.
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¹Based on my reading of the Shiller paper, the ratio starts out with 85% in stocks up to age 29 then the funds are slowly shifted over to bonds; where at age 60 the ratio is only 15% for stocks.

Private Police Departments

After reading an article like this it gives me pause to wonder if perhaps David Friedman is right about privatizing the law enforcement. The article is about a woman, Jessica Gonzales, who had a restraining order against her ex-husband. Further, that on June 22, 1999 Gonzales reported her daughters missing and that she had a restraining order that included prohibited his picking up the girls except for midweek dinner with prior notifcation. The response from the police was basically nothing. End result was one dead ex-husband and three dead daughters. Now the case is before the Supreme Court with Gonzales arguing that she was deprived of property (the restraining order).

The thing that makes me think that Friedman might be at least partially right in that a private law enforcement firm might have been more pro-active in seeing that the terms of the restraining order is upheld. The article paints a picture of local law enforcement agencies that are overwhelmed by their work loads. If this is indeed true, then it undermines one of the typical arguments for government provision of the police (a public good). Further, it undermines the argument that law enforcement is a good with externalities hence the government should provide it. Perhaps we should be considering having private law enforcement firms with the government provide law enforcement covering for the externality problem.

100,000 Dead Iraqi's and Statistics

You know I'm always amazed at how some people misunderstand one facet of (Frequentist) statistics, even people who are, generally speaking, pretty good at math. Case in point, Tim Lambert. This all started with the Lancet article about how 100,000 Iraqi civilians have dies as a result of the war. Over at InstaPundit there are a number of comments from readers about the statistics involved.

The first one is from David Ujeio who writes the following (in part--go to InstaPundit for the entire comment):

On a side note, I wanted to help a bit with the fact checking - we studied that piece in one of my courses. Slate has the statistical analysis of the piece wrong - though the confidence interval is 8000-194000, the median/mean in this case is actually far more likely to be true than either of the tails. These studies are conducted under the premise that the data fits a standard normal curve (imagine a mountain with low hills leading to a peak, then descending back to low hills.) 8000 and 194000 are the very end of the tails, and are thus FAR more unlikely to occur than the instances in the middle of the curve. What is most likely, and in this study statistically significant at the 95% level is that 101000 civilians have died as a result of violence attributable to the war.

Then another reader, Craig Bond, sends the following comment:

In non-Bayesian statistics, it is the interval that is random, not the population parameter of interest. The correct interpretation for, say, a 95% confidence interval around a given unknown parameter (in this case, the # of casualties) would be that the interval contains the true number about 95% of the time.

One cannot correctly claim that there is a 95% probability of the true number of casualties lying between the bounds of the interval. These bounds are now fixed, and thus the probability that the true parameter lies between these bounds is either 0 or 1 -- in other words, it is in there or it is not.

Based on this information, is it technically incorrect to claim that 8000 or 194,000 would be "rare" events. Instead, the correct conclusion, as in the "debunking" article by Kaplan, is that we can be 95% confident that the true number of casualties lies between the bounds. It says nothing of the probability of any of these outcomes.

Which is of course, precisely correct. The first comment by Ujeio is based on a fundamental misunderstanding of the what a confidence interval is. A confidence interval is not a probability interval. If it were a probability interval it would be called a probability interval. Yes, there are such things as probability intervals, but they are not the same as confidence intervals. The short answer is the probability interval is a confidence interval before the data is observed. That is, it is the "theoretical construct". Once you observe that data all uncertainty is removed and you have a fixed interval.

Enter Tim Lambert. Tim first decides that Ujeio is correct, but so is Bond...sorry Tim you can't have it both ways. If we are operating under the Frequentist assumptions, which we are when we have confidence intervals (i.e. there are no confidence intervals in Bayesians statistics; there are intervals that are basically constructed in the same manner, but their interpretation is very different), then either Ujeio has to be right or Bond has to be right.

Bond is correct and Ujeio is wrong in their interpretations of confidence intervals.¹ Tim's comment about constructing additional confidence intervals that are smaller (and with a smaller level of condifence) is irrelevant. It is almost as if Tim thinks that the confidence level associated with condidence intervals (e.g. 95%) is a probability. It isn't. If the confidence level were a probability then we'd call condifence intervals probablity intervals, but we've already seen that we don't do this.

Now in Bayesian analysis we can construct intervals much like the confidence interval, but since the parameters that are being estimated are themselves random and have distribtuions, the result intervals do have meaningful probabilistic interpretations. That is the 95% interval in Bayesian analsysis means that the paremeter is contained in the interval with a probability of 95% (or more correctly a probability of 0.95). Still Bayesians do not use these intervals generally speaking, and instead rely on Bayes factors. Fruther, Lambert's comment that the the different values in the interval are not equally likely is a strawman and a red herring. Bond never claimed they were equally likely.

Here is one way of thinking about this issue. I have a six sided die. I tell you I'm going to roll it. You want an interval that will have a 50% chance of capturing the result. You pick for your interval {2,3,4}. Now, I roll it an it comes up 3. Does your interval still have a 50% chance of containing the result? No. Your interval contains the result with probability 1 (100%). Now in this example we have the luxury of knowing the turth (the result of the die roll), but this point is still valid here even when you don't know the result. For example, you pick the interval {2,3,4,} and then I roll the die where you can't see it. Then I tell you, "Your interval contained the result." And finally even if I never tell you the result, but lock the die away in a safety deposit box, the interval will either contain the result or not. Granted you'll never know, but you do know that you are confident that your interval would have contained the result at the 50% level.²

Strictly speaking I'm not even convinced that we can use Frequentist statistics to do the kind of analysis that is attempting to be done here. Note the name "Frequentist". It is not a coincidence that it is similar to the word "frequency". The underlying assumption in the Frequentist school of thought is that we can repeat things. In fact, that is how the Frequentist defines the concept of probability: repeating an event an infinite number of times. Hence, strictly speaking Frequentist methods should not be applied to one shot events.

I don't know why this problem persists. However, that it is a problem suggests that not many people who understand something about statistics don't spend much time learing about some of the foundational issues in statistics. Not understanding these foundational issues leads people to make what are essentially incoherent statements. And in this case, I'm not sure the Frequentist measures can be applied. This is rather grisly, but a person can only die once. Hence the Frequentist notion of probability doesn't really apply here.

Update: Amusingly, Daniel Davies actually notes that the 95% confidence interval = 95% probability interval is indeed incorrect, but who cares use it anyways. Then he also suggests that he really does believe you can make probabilistic statements about about Frequentist confidence intervals. He justifies all this by saying that there have been no known practical effects from such misinterpretations. Well I don't know if this counts, but Robert Matthews gives at least one example of where confidence intervals were misleading in at least one clinical test.

Update II: Here is one of Matthew's sources for the problems with Frequentist measures in clinical trials. Here is something from the section on inpatient mortality:

Disappointingly we have seen little change in inpatient mortality over the 10 years of our study. Our findings highlight the differences between the selected patients of clinical trials and the general population of patients, who have an overall mortality of 20%, at least twice that of most patients in trials. Purchasers and those involved in clinical audit need to be aware that the proportional reductions in mortality seen in clinical trials do not necessarily translate into benefits in a general population.

In other words, what looks like a great new drug or treatment in clinical trials based on Frequentist measures turn out to have much lower benefits in actual practice. In the case studied in this article people actually die. Are the deaths due to a "statistical misinterpretation"? No, but at the same time the statistics are misleading and it is possible that drugs are coming to market that offer little or no benefit. We'd be much better off allocating resources to other research in these cases vs. bringing the drugs to market. There is indeed a practical downside.
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¹Just a quick note, I don't doubt that Ujeio got an A- in statistics. This is an area that many statistics classes wont cover. Rarely will the professor test on such knowledge. Further, even getting this part wrong on an exam wouldn't mean getting a failing grade. Still it can lead to some incoherency when it comes to probabilistic statements.
²Note that in statistics textbooks this is the kind of language they use. The textbooks will talk about level of confidence not probability when discussing the level of confidence. I know this may sound a bit tedious all the repitition of confidence vs. probability, but I'm trying to highlight that the two words are not, in Frequentist terms, synonymous.

Oh the Iorny

Tim Lambert writes,

Oh no! It’s like one of those movies where there is a real person and a fake person and you have a gun and you hafta shoot the fake one.

What in the world is Tim Lambert doing with a gun (figuratively or otherwise)?!?!?!

[Note: Tim has been a long time supporter of gun control.]

Oil Prices, Records, and the Economy

Kash at Angry Bear has a good post on oil prices. Also, there is an excellent chart that shows the price of gasoline after adjusting for the CPI and the PPI.

I'm not sure about the conclusions that it will have a the effect that Kash is indicating.

Markets have seemed uncertain lately; some analysts have talked of being at or near an economic tipping point, a moment where things will soon appear substantially better or substantially worse. The continued rise in the price of oil would seem to make the latter outcome more likely.

While the oil prices are high compared to the last 15 or so years, it isn't as high as it was during the first half of the 1980's. The high prices will indeed act as a drag, but I'm not convinced that they will push things into a recession.

Consider the Weekly Leading Index from the Economic Cycle Research Institute.

"After it correctly anticipated the slowing in 2004, the WLI is now pointing to a soft landing for the economy and an acceleration in growth starting in the second half of 2005," said Lakshman Achuthan, managing director of ECRI.

The Conference Board's Leading Economic Indicators are also increasing again.

The leading index increased slightly in February following a decline in January. The leading index was on a rising trend from early 2003 to the middle of 2004, declined slightly for the next five months, and has now been increasing slightly since last October. In addition, there has been about an equal mix of strengths and weaknesses among its components.

So the higher oil prices are a point of concern, but I'm not sure it signals a recession at all.

Steve Chapman on the Steroid Hearings

Via InstaPundit.

We're at war in Iraq, at war in Afghanistan, threatened by Al Qaeda, mired in budget deficits, faced with gargantuan liabilities in Social Security and Medicare, struggling to sustain the fighting capacity of our military forces--and what does this committee think warrants its urgent attention? Whether a handful of overpaid entertainers are taking forbidden pills to improve their performance.

The hearing rests on two well-worn premises that ought to offend the conservative sensibilities of Republicans, who control this committee and Congress. The first is that absolutely everything is a federal responsibility. The second is that the private sector needs incessant guidance from government.--link

Couldn't have said it better myself. These hearings are stupid. If this is a criminal issue, then let the criminal justice system handle it. If it isn't, then shut the fuck up and get to work on something more important.

Republicans and Democrats...about a dime's worth of difference.

Rep. Henry Waxman (D-Calif.), who is no conservative, supports the committee's effort, which he likens to the congressional investigation of the quiz-show scandals of the 1950s. What's next? Subpoenas to Ashlee Simpson and Britney Spears to publicize the epidemic of lip-synching in pop music?

Chapman better watch out...he might just see this come to pass with these clowns in Congress.

School Finances and Obesity

Does the financial situation of a school contribute to the problem of adolescent obesity? There is some interesting research at the NBER that suggests that the answer might be yes.

---- Abstract -----

The proportion of adolescents in the United States who are obese has nearly tripled over the last two decades. At the same time, schools, often citing financial pressures, have given students greater access to "junk" foods, using proceeds from the sales to fund school programs. We examine whether schools under financial pressure are more likely to adopt potentially unhealthful food policies. We find that a 10 percentage point increase in the probability of access to junk food leads to about a one percent increase in students' body mass index (BMI). However, this average effect is entirely driven by adolescents who have an overweight parent, for whom the effect of such food policies is much larger (2.2%). This suggests that those adolescents who have a genetic or family susceptibility to obesity are most affected by the school food environment. A rough calculation suggests that the increase in availability of junk foods in schools can account for about one-fifth of the increase in average BMI among adolescents over the last decade.

Of course the BMI is not without its problems, but the research is suggestive that there might be a problem.

Fire Ward Churchill and Be Done With It

Via Final Protective Fire comes this article about Ward Churchill's academic plagerism. It is at this point, where it has been established that Prof. Chruchill is

• an academic fraud,
• an artistic fraud,
• a liar,
• and all around asshat,

that I have to wonder why CU simply doesn't just fire the bonehead. Sure, it was one thing when all it was was his blinkered views about he victims of 9/11, but it turns out that Churchill is completely unsuited for his job. Just fire him and get it over with for crying out loud.

More on Socialized Medicine

Victor has a post that also looks at Triumph Socialized Medicine and Phillip Longeman and Timothy Noah's articles on this supposed victory. It is a very good post so go read it.

Update: This quote that Victor pulls from the New England Journal of Medicine article that Longeman sites as one of his main sources (practically his only source) is simply too good to pass up.

Finally, we were able to measure quality in only a few clinical areas, and though the indicators target common diseases, we could not assess the quality of care provided along the entire spectrum of clinical conditions. We therefore cannot generalize our results to encompass the overall quality of care in the VA system, since the focus on these specific areas by VA management may have led to improvements in the targeted conditions alone.

In other words, even if we accept the measure of quality the article uses (administering more tests) it isn't clear that the VA and hence nationalized hospitals are superior in every respect. Not that you'd learn this reading Longeman's article.

Choice? Gee What A Concept

I suppose I shouldn't be too snakry about this post by Mark Kleiman. Mark seems to have finally realized that some people might not want to pay for high quality health care.

The spark for this idea was the following question from David Cutler:

What's wrong with paying a big chunk of your income for high-quality medical care? The idea of paying health-care providers for actually delivering high-quality care, and making that rather than cost control the central management idea of the nation's health care system, is intuitively appealing.

Mark notes that there is some intuitive appeal to this notion. That is, the richer we get as a country the more we should be willing to pay for higher quality health care, and the reason for this is that the utility of other wants diminish as income rises. But then...like a lightening bolt form heavan we have,

But if that's right, it suggests that not everyone wants to make the same decisions about allocating resources between health care and other needs. The poorer you are, the greater the value to you of each dollar spent on something other than health care. That suggests that poor people, if they got to make decisions for themselves, might choose to buy less luxurious health-care packages than richer people.

In other words, forcing everybody into a "one size fits all" package could actually be a less preferred outcome even if that "one size fits all package" is a really, really nice package. I've tried explaining this before on this blog and usually to no avial to most of the liberal commenters.

The bottom line to remember in almost all policy debates is that we are in the world of the Second Best. One of the results of this area of research is that there is generally speaking no policy that makes some people better off and none worse off (i.e. is pareto improving). More simply: policies will have both winners and losers.

That conclusion may look almost ridiculously obvious, but it is surprising how many commenters don't seem to understand this when writing their articles, essays and blog posts. With health care if we were to nationalize health care the poor might actually come out worse off than, as Mark notes, of simply cutting them a check. Here is an (extreme) example: Suppse you are poor and sitting in your crappy apartment in a crappy neighborhood and you are hungry. However, there is nothing to eat in your apartment. But you have access to great health care via the nationalized health care system. If you were to have a heart attack you'd not only likely be saved by excellent doctors; you'd get to eat too. Maybe you should have a heart attack. The point is that some people might be willing to reduce the quality of care in exchange for other goods. In our, admittedly extreme, example the other good would be food (sorry to be a bit pedantic here, but as I noted some people have trouble with this concept).

Of course despite this observation Mark backs away at the end of the post that we should let consumers have choice (yep better to force them into consuming something they don't want).

I'm not suggesting that we actually provide such choices; letting people choose their health plans runs into profound adverse-selection problems, even if we weren't worried about imperfect rationality or the ethics of withholding care from those whose insurance doesn't cover it.

I'm always curious as to why so many people get worked up about adverse selection problems in the market economy, but not with government programs. Markets tend to find ways around things like the adverse selection problem. Using used cars and the concept of a lemon (i.e. a bad used car) there are ways to get around that problem. The used car dealer could let prospective buyers take the car to an independent mechanic. Another solution coule be to offer a money back guarantee, or a warranty (20,000 miles or 2 years). One thing we hear about now are "pre-owned cars"--i.e. used cars that have supposedly gone through an inspection process to eliminate lemons. Instead with many liberals it is almost like, "Gadzooks! Adverse slection! We need a government program to address this problem." Further, it isn't clear that the costs of adverse selection and moral hazard are reduced with a government program either. Why there is this fondness for government provided solutions I don't know.

The Triumph Of Socialized Medicine

Timothy Noah points to an article in the Washington Monthly and claims that Socialized Medicine has won hands down. Frankly I think Noah and Longman are over-reaching.

Right at the front of the Washington Monthly article written by Phillip Longman we have this,

Ten years ago, veterans hospitals were dangerous, dirty, and scandal-ridden. Today, they're producing the highest quality care in the country. Their turnaround points the way toward solving America's health-care crisis.

In other words, it isn't clear that socialized medicine has to be better than privately provided medicine. Longman even writes,

By the mid-1990s, the reputation of veterans hospitals had sunk so low that conservatives routinely used their example as a kind of reductio ad absurdum critique of any move toward "socialized medicine."

Now it is also quite true that it appears that the VHA has made big improvements. But does this always have to be the case? That is the primary conclusion of the both articles. Socialized Medicine will solve all our health care problems, or at least quite a few of them.

Fruther, this conclusion is based on one, yes one study.

An answer came in 2003, when the prestigious New England Journal of Medicine published a study that compared veterans health facilities on 11 measures of quality with fee-for-service Medicare. On all 11 measures, the quality of care in veterans facilities proved to be "significantly better."

Yes, it is a peer-reviewed article. Yes, the New England Journal of Medicine is prestigous and yes, it is hard to dismiss. But there shouldn't we at the very least get a few more studies before we run headlong into socialized medicine? It is often said in medicine that getting a second opinion is a good idea. Well, how about a second study? Guess that is too much to ask.

The other problem is that this looks at just Medicare patients and not the recipients of private medicine in general. I don't know if there are substantial differences between Medicare and non-Medicare patients in terms of payment that could account for some, all or none of the differences in care that veterans recieve. At any rate it seems like a reasonable question to ask, but apparently not for Noah or Longman.

Further, are the differences between VHA patients and non-VHA patients? Are VHA patients more likely to go to the various VA hospitals because they have more medical problems and thus, more of their problems are detected compared to somebody like me who is generally healthy and hasn't gone to the doctor in...well I can't remember the last visit?

Now there are indeed some good issues raise by Longman and pointed out by Noah such as the information technology systems used by private medicine providers and the VHA. Here is how Noah put the problem,

The costs [of upgrading IT systems] are all up-front, but the benefits may take 20 years to materialize. And by then, unlike in the VHA system, the patient will likely have moved on to some new health-care plan. As the chief financial officer of one health plan told [the University of Chicago's Lawrence] Casalino: "Why should I spend our money to save money for our competitors?"

Or suppose an HMO decides to invest in improving the quality of its diabetic care anyway. Then not only will it risk seeing the return on that investment go to a competitor, but it will also face another danger as well. What happens if word gets out that this HMO is the best place to go if you have diabetes? Then more and more costly diabetic patients will enroll there, requiring more premium increases, while its competitors enjoy a comparatively large supply of low-cost, healthier patients. … An idealistic commitment to best practices in medicine doesn't pay the bills.

A good example of an externality. The upgrading of an IT system at one provider of medicine generates a benefit for another provider down the road. One way to solve that problem is to internalize the externality via integration: one entity providing health care and medicine. Obviously we don't want a monopolist doing this, so we'll have the government do it. But is integration the only way of addressing the problem of externalities? No. The problem is that the quality of IT systems is "under provided". So to increase it you could offer a subsidy to private firms to upgrade their IT systems.

I'm not sure I see a big problem with the providing better care for a certain medical problem (Longman uses diabetes). So you get more high cost patients...so you raise your prices.

Part of the problem comes from the liberal view that risks should be spread over large populations. Noah quotes Arnold Relman from the New Republic [$],

Healthy, young families would choose the least expensive plans with the highest allowable deductible, and those with health problems would be forced to choose plans with the lowest allowable deductibles but higher premiums. The premiums or the required co-payments of the latter plans would spiral upward because of the greater use of services by sicker beneficiaries, so it would become even harder for those with the greatest need for insurance to afford coverage. In this way, one of the most important values of insurance—the sharing of risks over a broad population base—would be lost.

Basically it looks like the liberal view point is that the most desirable outcome is a pooling equilibirum. The pooling equilibrium has one insurance plan and everybody pays the same premium, but you end up having the healthy subsidizing the sickly. Not surprisingly in a competitive market, the pooling equilibrium is not viable since competitors will engage in "cream skimming" where they offer the high deductible/low premium insurance plans to lure away the healthy individuals/families.

Further, I'm not sure what this has to do with the provision of quality health care as it is a failing of the health insurance market. I'm sure this is something that always sets Victor to grinding his teeth. Health insurance is not the same thing as health care. It is like saying your car insurance is your car. For some reason many on the Left can't seem to see the distinction between health insurance and health care, but can see a difference between car insurance and their car.

Further, this problem seems to stem from some sort of view more common amongst liberals that people should all pay the same price for insurance, but only for health care apparently. For example, suppose we have a driver who is just reckless...a bad driver. He would have a high premium due to a history of tickets and accidents. Many liberals wouldn't have a problem with this guy facing a high premium for car insurance. But why doesn't this apply to people who are sickly? They are basically like the bad driver. If you are 55 years old, ate fatty foods all your life and didn't exercise you are probably going to be more likely to suffer from various medical conditions than the fellow who ate responsibly, excersized and so forth. Both individuals made decisions...one made decisions that were later costly, while the other did not. Why should the "responsible" individual have to pay for the "irresponsible" individual?

Another possible problem is that Longman doesn't like the market result since it doesn't correspond to what he thinks is the best outcome. Longman writes,

Here's one big reason. As Lawrence P. Casalino, a professor of public health at the University of Chicago, puts it, “The U.S. medical market as presently constituted simply does not provide a strong business case for quality.”

Casalino writes from his own experience as a solo practitioner, and on the basis of over 800 interviews he has since conducted with health-care leaders and corporate health care purchasers. While practicing medicine on his own in Half Moon Bay, Calif, Casalino had an idealistic commitment to following emerging best practices in medicine. That meant spending lots of time teaching patients about their diseases, arranging for careful monitoring and follow-up care, and trying to keep track of what prescriptions and procedures various specialists might be ordering.

Yet Casalino quickly found out that he couldn't sustain this commitment to quality, given the rules under which he was operating. Nobody paid him for the extra time he spent with his patients. He might have eased his burden by hiring a nurse to help with all the routine patient education and follow-up care that was keeping him at the office too late. Or he might have teamed up with other providers in the area to invest in computer technology that would allow them to offer the same coordinated care available in veterans hospitals and clinics today. Either step would have improved patient safety and added to the quality of care he was providing. But even had he managed to pull them off, he stood virtually no chance of seeing any financial return on his investment. As a private practice physician, he got paid for treating patients, not for keeping them well or helping them recover faster.

Stipping this down to its basic elements we have the following.

• If given a choice between a doctor who offers:
  • Inexpensive, but more risky care or
  • More expensive less risky care,
  patients opt for the former.

If this is the case, then what is the problem? One could argue that people don't understand the risks and perhaps think they are facing the same levels of risk in both cases. However, even if this is true it does not necessarily mean that health care has to be socialized.

The problem is that Noah, Longman, and many other liberals think that we should have the best care possible. However, this view suffers from a fundamental problem. We,--i.e. consumers/tax payers--may not want to pay that price and are willing to settle for lower quality care for a lower price.

News Flash: Water Is Wet

Grass is green, the sky is blue, and little boys play with toy guns. The last one also is associated with a tragedy, a 4 year old boy shot his 2 year old brother in the head. Apparently the story is the boy new where is mother's pistol was and got it after his brother threw a toy at him and bit him. But the tone of the article, "Boys play with guns, one shot," is well incredibly lame. Boys play with guns, the problem here is a mother who negligently left a pistol some place where her child could get a hold of it.

The other annoying thing is the amalgam of statistics at the end of the article. Here is an idea: talk to your child about guns. I know I have with my son (even though I don't own any guns). I have made sure that he understands the potential finality of using a gun, and that they are not toys (also real guns are easy to spot, they don't have day glow orange, green or purple parts generally speaking). Why aren't things like this in the article? This is part of the National Safe Kids Campaign guidelines for guns. We'll give you all the statistics, but nothing on how to avoid the problems of children and firearms.

I guess the Associatd Press hires idiots and calls them journalists.

How to Waste Your Tax Dollars

Brought to you by the United States Congress,

WASHINGTON -- The head of the committee holding a hearing this week on steroids in baseball predicted Sunday the full House easily would pass a contempt of Congress resolution if subpoenaed players such as Mark McGwire and Sammy Sosa don't show.

[snip]

"These people are not above the law," Davis told NBC. "You know, they may fly on private planes and make millions of dollars and be on baseball cards, but a subpoena is exactly what it says it is. They have to appear."

What a stupid waste of time, money and resources. Doesn't Congress have something better to do?

More on Ending World Poverty

Matthew Yglesias also points to this post by Dan Drezner that has more information on this. In an update there is this from Dan,

1) Sachs ignores the importance of free market capitalism in economic development. No, Sachs is quite adamant about the benefits of free trade and market capitalism. His argument is rather that in some sections of the globe, the abject level of poverty is so low that it's impossible for people to generate any surplus value -- what Sachs refers to as a "poverty trap." In these areas, a boost of aid would permit some initial savings -- after which economic development along market lines can begin to take place.

Which is good, but I don't think it is good enough.

The problem is that Sach's position seems to really be a solution of flinging money at the problem. Granted, not blindly flinging money at the problem, but maybe more like tossing darts to determine where to fling the money--i.e. money would not be flung at a country were the dictator is likely to suck up most of the aid money and live a life of luxury while his fellow citizens suffer in abject poverty.

The basic idea is that a nation can find itself in a "poverty trap". The idea of a poverty trap is that the level of capital (i.e. plant and equipment) is so low that the dynamics lead to less and less capital accumulation. Standard neoclassical growth theory holds that since the marginal productivity of capital tends torward infinity as the amount of capital tends towards zero.¹ This means that additional amounts of capital will have large effects on output. Thus, saving and by extension capital results in large increases in output. In the standard neoclassical growth model, the dynamics result in convergence to a steady state in terms of capital.

What Sach's is suggesting is that we shouldn't limit ourselves to the class of functions that is used in the Cobb-Douglas production function (see footnote 1). Instead, Sach's suggests using a production function where the marginal productivity of capital does not tend towards infinity, but zero as capital tends towards zero. In this case the dynamics are more complex. There is an inflection point in the production function such that the concavity of the production function changes depending on which side of the inflection point you are on. If the economy is to the right of inflection point then the economy will tend towards the steady state and we get the standard result from growth theory. However, if you are on the left of the inflection point then the economy will tend towards zero in terms of capital and growth will fall.²

Now if this is all true, then Sach's solution is indeed the right one. Give these countries enough money so that they can get past the inflection point and put themselves into the phase space where they will have a positive amount of capital and converge on the (non-zero) steady state. Growth will be positive and poverty will be over, at least the extreme poverty we see in third world countries. It is a very nice theoretical package. But it is not without its problems.

Let us imagine the following: Robinson Crusoe has just crawled up onto the beach after making it to the island on his makeshift raft (i.e., a chunk of the ship he was sailing on). Right now he has no capital; all he has is his labor. According to Sach's model there is nothing for Crusoe to do. He is clearly below the inflection point so any effort at all to accumulate capital is fruitless unless it will push him past the inflection point. Being below the inflection point means that Crusoe will consume his capital vs. using it to increase production in later periods. In short, Sach's model is a model with no begining. Since we can always go back far enough to find instances where people have very, very low levels of capital the theory has a problem of explaining how people got out of this "poverty trap".³ I suppose one model could be that there are random shocks that allow some some countries to accumulate enough capital to get above the inflection point and put themselves on a good growth path. However, this raises the question of how come we don't see this going on now? In other words, if we do nothing for the next 20 years we should see some of these countries "get lucky" and have a positive shock to their economy that will get them onto a good growth path. Further, how come the countries that tend to be the most successful are Western countries or countries that emmulate much of Western economies? So this answer strikes me as unsatisfactory.

Further, there is the problem that many have with standard neoclassical growth models in general. Back when I was in graduate school in the early 1990's in our macro class one of the papers we read and discussed was one by Robert E. Lucas who was getting into endogenous growth theory and moving away from rational expectations. The paper by Lucas noted that about 40 or so years ago both South Korea and the Philippines were pretty much the same in many regards when looking at things like education, life expectancy, GDP, etc. But now four decades later one is an economic powerhouse the other is still a complete basket case. Why? Standard neoclassical growth theory says they should both be at the same place. Sach's theory says they should be at the same place. This kind of observation lead many to conclude there were problems with the standard neoclassical growth model and look at ways of enriching growth models to account for these discrepencies. Now endogenous growth theory is not an area I know alot about, but there is that problem...Sach's model indicates that South Korea and the Philippines should be about the same, but in reality one will likely be contributing to the $150 billion and the other will be a recipient of some of that money. This should make one sit up and wonder if Sach's really is onto something or not. After all, $150 billion is not chump change.

All in all I am not overly impressed with the research on this to date. I think it needs alot more work on it before we green light spending trillions of dollars via the United Nations which has its own issues with reliability, credibility and well...basic decency. Further, there very much should be a discussion of is this where we want to spend $150 billion dollars. And last, but not least I'm quite unimpressed with the lack of a microeconomics focus. Incentives do matter, and from what I've read Sach's is uninterested in these considerations. So maybe Sach's is right, but right now I don't see any reason to get excited or start spending the money now.

Update: Kevin Drum sounds rather skeptical...color me shocked. Also shocking is that Drum seems to be advocating some "muscle flexing" on the part of the U.S.

Update II: No wonder I was shocked to see that Kevin Drum was skeptical (see the first update), it wasn't a post by Kevin, but by guest blogger Brad Plumer (thanks to TangoMan for the tip). TangoMan also raises the issue of human capital, which is precisely one of the things the researchers on endogenous growth are looking at (or at least they were when I was in graduate school). The basic idea here is that human capital can result in increasing returns to scale. This would also account for differing growth rates and why it seems like some countries suddenly improve rapidly.

One way to improve human capital is to improve education. Of course, I'm quite skeptical of how successful such aid is going to be when we are "funneling money to corrupt governments," as Brad Plumer notes.

Update III: Dave Schuler has a nice post with lots of links to other people's reactions.
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¹Standard neoclassical growth models typically start with a Cobb-Douglas production function,

where . The partial derivative w.r.t. capital is,

The above is also known as the marginal productivity of capital, and it should be obvious that letting k tend towards zero will result in f_k tending towards infinity. The implication of this is tha when you have very little capital and additional amount of capital will result in large increases in output.
²I am abusing the term inflection point some what. The infection point is a point on the graph of the function, and consists of two points, {f(kⁱⁿ),kⁱⁿ}. When I am talking about being to the right and left of the inflection point I'm really talking about being to the right or left of kⁱⁿ.
³Some might object to simplification of Robinson Crusoe, but this is often the way neoclassical growth models are presented.

Yglesias on Ending World Wide Poverty

By severe poverty we mean here the conditions experienced by those who live on less than $1 per day. There are quite a lot of people like that on the earth, and I think it should be clear that if we really do have a workable plan on the table to eliminate severe poverty around the world for $150 billion per year that we probably ought to pony up the $150 billion. Indeed, we probably ought to pony up something like $200 billion to give ourselves some margin of error.--link

Bwahahahahaha.

The reason why I find the above funny (in a morbid way) is this idea that we can wipe out poverty by simply flinging cash at it. The problems with poverty are not simply a shortage of cash.

For example, Africa is a complete basket case in terms of poverty and economic progress. A part of the problem is a lack of the institutions that have helped make the West prosperous. Are we willing to smash into oblivion (or at least send packing to museums) the various aspects of African culture that prevent the adoption of things like property rights, the rule of law, wide spread educational reforms (i.e., educate both men and women) and so forth? If we aren't willing to do this the idea of ending poverty for the bargain basement price of $150 billion or even $200 billion is just fantasy.

As I noted here we should be striving to export capitalism--i.e. market economies-- and the institutions that allow market economies to work to generate wealth not just for the rulers, but for everybody.

Now this isn't the only problem, but it is part of the problem and ignoring it will mean not ending poverty, but creating dependency and paternalism. Also, I don't dispute that colonialism is still a factor in the problems of Africa in terms of the almost continuous warfare that seems to plague the continent. But flinging cash at this problem is the idiot's solution.

Another problem with this whole idea is the idea of using the U.N. After the recent debacles in Africa and the Oil for Food Program, the U.N. at the very least needs a major over haul if it is not already irrelevant. I would think that if one is serious about making the U.N. a credible force in international politics a good starting point would be the firing of Kofi Anan. While he may not have been personally involved in the Oil for Food Program it was a disaster that occurred on his watch and he should be sent packing.

Turning again to Yglesias' post we see a couple of gems in there that highlight the nonsensical nature of his position. I'm going to quote at length to reduce the risk of quoting out of context,

Dan says that "What I'm still undecided about is whether the investment is worth it even if Sachs is only, say, 50% correct. Would there be any other way of spending $150 billion a year that reduced extreme poverty by more than that amount?" These are both worthwhile questions, but they're actually different questions, and I don't think Dan should run them together. Obviously, continuing to do research on whether we can't come up with better ideas is something we should do. And if seemingly better ideas get put on the table, we ought to take them.

Nevertheless, a proposal that promises to cut extreme poverty to zero and that may, in fact, "merely" reduce it in half is a proposal that's well-worth supporting on its own terms. I could say something about the perfect being the enemy of the good here. I don't see any other similarly elaborate proposals on the table, nor would it be easy to generate the political will necessary to implement any plan on this scale, so it seems to me that it would be a good idea for people to put their support behind this idea and do what they can to get it implemented. If something better comes along down the road, then so much the better. Is the Sachs Plan worth doing even if it's "only" 50 percent right? Sure. If we had a plan on the table to eliminate global poverty for $300 billion a year, that would be worth doing. Instead, we have a plan to do it for $150 billion a year that may not actually achieve 100 percent of its goals. A huge number of people (including Dan) have supported the proposition that one ought to support an undertaking in Iraq that, when all the bills are done, will have cost the United States far more than $150 billion for essentially humanitarian reasons. And a commitment by the broader community of rich countries to pony up $150 billion in anti-poverty spending per year would require considerably less than $150 billion per year from the United States.

The unstated premise here is that there is an unlimited well of money that can be tossed at this problem. If $150 billion could get rid of world wide poverty, then lets make it $200 billion. Further, even if it costs only $300 billion to reduce world wide poverty by 50% then great! Lets do it and who cares what else we could have spent the money on. The last one is really insensate. Lets consider the case where the estimated cost of reducing world wide poverty to zero is $150 billion. Matthew suggests that we should tack on an additional $50 billion in "Just In Case Money". But what else could that money be spent on? A cure for HIV/AIDS, a cure of alzheimers, or alternative energy? One could argue, in a rather lame brained fashion, that we can't gaurantee success in finding cure for HIV/AIDS, alzheimers, or a solution for alternative forms of energy. But this very same criticism applies to reducing world wide poverty. We don't know what the chances of success of spending this $150 billion or $200 billion. And well just ignore that throwing in an additionaly $50 billion of "Just In Case" money is likely to lead to waste, fraud and abuse. After all, we are pretty sure we can do it with $150 billion, so who'll miss a billion here a few hundred million there.

In reading the post and the linked article it is a bad joke. There is no discussion of the problems with incentives. For example, if you raise these people out of abject poverty what if they increase their number of children? Does this run the risk of increasing the number of people on the brink of extreme poverty were a change in the political situation can send even more people into misery? How do we ensure that we spend $150 billion and end extreme poverty and not end up spending $1.5 trillion over the next 8 to 10 years with even larger expenditures over the next 20 to 30 years? How come there is no discussion of introducing and strengthening the very institutions that have helped make the West so successful? The best part is when Matthew is coming up with "fair" amounts each country should pay. Sure thing Matt, where should we send the check?

Wrong First Step Kevin

Kevin points to an article that argues that there were a great many things the government did that helped the economy. To a large extent there is truth to the claim. Information can be costly to obtain. You go into a store and want to buy some aspirin for your headache. How do you know that the various remedies on the shelf will do what they claim to do, and are not just a variant of snake oil? Are you going to buy a bottle of pills, send them to a lab, and then sit around waiting for the lab report? Will you understand the lab report?

In some respects information is very much like public goods. If I consume the information (i.e., I read it or listen to it) it does not prevent others from consuming the information. Hence the government provision of this kind of good could very easily help the economy function more efficiently.

Similarly for the articles other example, the internet. The internet is a commodity that exhibits network externalities.¹

My problem is not with this view. My problem is with Kevin's policy prescription,

Instead, of course, we've gotten an initiative to go to Mars. So I'd add to Ben's recommendations one more: the first step is to elect people to office who believe that government has a serious role in the economy in the first place. We liberals need to work on that.

No. The first step is to get people to understand that there is a role for government, but that it is a limited role. The government spends quite a bit of money compared to the good ol' progressive days of the 1930's and 1940's. Yet we probably don't get nearly the kind of benefits Kevin is talking about. Instead of government working to make markets more efficient we have calls for the government to provide private goods (health care, retirement savings, and prescription drugs). We have the government passing more restrictive intellectual property laws. We have the government running huge programs that subsidize the consumption of goods (Medicare).

Now with respect to health care there are some external benefits. For example, immunizations can help reduce the number of people with a given communicable disease making any outbreak that much less of a problem. However, a blanket subsidy on any and all medical care is unwarranted by the very principles that Kevin is pointing to for liberals to get to work on. If liberals did take Kevin's suggestion seriously they'd start to look quite a bit more like libertarians. Not that I'd complain about that, but somehow I don't think this is what Kevin means.

As for the specific recomendations from the article that Kevin points too, namely,

A stronger government role in a few specific areas such as broadband, wireless, alternative energy, and healthcare IT, combined with a bipartisan commitment to policies that broadly encourage innovation.

I don't have a problem with these, but my question is what are we going to cut to fund it? Oh...how silly of me, lets use that wonderful tool for impeding economic activity: (higher) taxes!
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¹What good is the internet with one person? You going to send e-mail to yourself? The more people who use goods that have network externalities the more valuable the good becomes. Think of facsimile machines. The first machine was worthless in terms of sending facsimilies as there was no second machine to recieve the data. Once a second machine is in use the first machine becomes more valuable. Each successive machine adds value to the existing machines.

Bankruptcy Bill Support

Kevin Drum is wondering why Democrats are supporting the bankruptcy bill. InstaPundit points to OpenSecrets.org for one possible explanation. However, I think page from OpenSecrets.org is a bit better.

In other words, about 1/3rd of the campaign contributions are going to Democrats. In short, these Democrats are, using Kevin's words, "rewarding their corporate paymasters as usual". Duh.

This page is also helpfull.

Finance and credit companies contributed more than $7.8 million in individual and PAC contributions during the 2004 election cycle, 64 percent to Republicans.

If the Finance and Credit Card companies gave 64% of their contributions to Republicans then it stands to reason that about 36% went to Democrats.

What I find fascinating is that Kevin seems to be under the bizzare assumption that only Republicans reward their corporate paymasters, after all the full quote for the above is,

So how is it getting such wide support? Sure, Republicans are rewarding their corporate paymasters as usual, and I know their discipline is pretty tight, but 100% support? And support from a dozen Democratic senators as well? Plus both the Blue Dog Coalition and New Democratic Coalition in the House?--links omitted

Is Kevin really this naive?

Lack of Blogging

Sorry about the lack of blogging...well okay I'm not. The reason is that the other day I was undergoing Lasik eye surgery and now I don't need my glasses any more.

As the World Turns

Okay, I've sort of been following the Sgrena story the past few days, but this new turn is just amazing. I love how some of these far Left kooks inflate their own importance in the grand scheme of things.

Giuliana Sgrena denies U.S. allegations that the car was speeding. She also is suggesting U.S. forces may have deliberately targeted her because Washington opposes Italy's policy of negotiating with kidnappers.

Yes, I'm sure the U.S. government is so worried about Giuliana Sgrena that they were keeping tabs on her, knew exactly where she was the whole time, and at the right opportunity decided to try and kill her. Unfortuantely the BFEE operatives missed and tragically killed the intelligence officer Nicola Calipari.

The unbridled and bloated self-importance some of these Leftwing Loons display is sickening. The fact that Sgrena is engaged in this kind of behavior after the death of one of the men to free her is rather ghoulish.

Update: Via InstaPundit

ROME -- Italian agents likely withheld information from U.S. counterparts about a cash-for-freedom deal with gunmen holding an Italian hostage for fear that Americans might block the trade, Italian news reports said yesterday.

The decision by operatives of Italy's SISMI military intelligence service to keep the CIA in the dark about the deal for the release of reporter Giuliana Sgrena, might have "short-circuited" communications with U.S. forces controlling the road from Baghdad to the city's airport, the newspaper La Stampa said.--link

Another Update: I want to also add I'm highly suspicious of this claim by Sgrena. Let us suppose that the U.S. really does want her dead. Wouldn't using an AC130 Spectre Gunship have done the job really, really thoroughly? Or how about sending in agents to kill Sgrena and the kidnappers and kill two birds with one stone? This looks very much like Sgrena being a mediawhore and doing it over the body of one of the men who saved her. Truely despicable.

Update III: Joe Gandelman makes the following observation,

Now it turns out that the Italian bigwigs may have not informed Americans about a huge ransom it was paying to free the journalist — money that it's clear will help fund the kidnappers' future operations.

Which is precisely right. The paying of kidnappers has a perverse side effect: it rewards the bad behavior. Now the terrorists/kidnappers have millions that they can use to finance further kidnappings and who better to kidnap than Italians since the Italians are so willing to fork over the big bucks.

Update IV: Cox and Forkum, as usual, have a good cartoon that summarizes this incident quite nicely.

Who is a Terrorist?

James Joyner has a good post on this that notes that many MSM outlets have a problem with their avoidance of the term "terrorist". He quotes Daniel Okrent,

I think in some instances The Times's earnest effort to avoid bias can desiccate language and dilute meaning.
[...]
While some Israelis and their supporters assert that any Palestinian holding a gun is a terrorist, there can be neither factual nor moral certainty that he is. But if the same man fires into a crowd of civilians, he has committed an act of terror, and he is a terrorist. My own definition is simple: an act of political violence committed against purely civilian targets is terrorism; attacks on military targets are not. The deadly October 2000 assault on the American destroyer Cole or the devastating suicide bomb that killed 18 American soldiers and 4 Iraqis in Mosul last December may have been heinous, but these were acts of war, not terrorism. Beheading construction workers in Iraq and bombing a market in Jerusalem are terrorism pure and simple.