Conflicted.

"A House subcommittee approved legislation Wednesday aimed at forcing college football to switch to a playoff system to determine its national champion, over the objections of some lawmakers who said Congress has meatier targets to tackle."

Is this news cause for disgust over the depths of Congressional meddling, or celebration that whatever time is spent on this won't be spent on screwing something important up?

Read here and decide for yourself.

Politicians....are they serious? Harry Reid edition.

Here are the wildest two sentences I've read today:

"Today we vote whether to even discuss one of the greatest issues of our generation – indeed, one of the greatest issues this body has ever faced: whether this nation will finally guarantee its people the right to live free from the fear of illness and death, which can be prevented by decent health care for all.  In the coming weeks, we will finally put people, not insurance companies, in charge of their lives."

Put aside the non sequitur for a second.  You read that correctly.  Harry Reid believes that he has the power to grant you freedom from the fear of illness and death.  Amazing.  If that's not enough for you, he deigns to put you back in charge of your own life!  If only that were true.

The arrogance is staggering.  Read the whole thing here.

Bad Journalism, a Continuing Series

Without saying anything about Ted Kennedy, I submit this headline/lead-in from the Yahoo! front page.

Edward Kennedy dies

The Democratic senator was one of the most influential political figures in history.

At first blush, I'm likely to agree and stick Ted Kennedy somewhere between Pericles and Henry VII.

Bad Journalism, Part MCCCLIII

From Reuters, headline: Medical bills underlie 60 percent of U.S. bankruptcies: study

Yeesh! That's a lot! Particularly with the housing crisis, which eroded something like 30% of America's real-estate values, you'd expect housing costs to be right up there. Apparently not!

Let's take a closer look.

Medical bills are involved in more than 60 percent of U.S. personal bankruptcies, an increase of 50 percent in just six years, U.S. researchers reported on Thursday.

Hmm. The headline claims that medical bills "underlie" bankruptcies. The first line here says that they "are involved" in bankruptcies. This suggests that my involvement with, say, my department constitutes a more substantial role on my part--in fact, I underlie my department--I rule.

Note: do not break it to your significant other that you've been "underlying" someone else.

Also--who the hell are "U.S. researchers"? Are they people who research the U.S.? Is it American researchers? Is it so many people that they can't be listed? (It's two people.)

About 170 million people get health insurance through an employer but President Barack Obama says soaring healthcare costs are hurting the economy and forcing businesses to drop medical insurance for their workers.

I guess there's nothing terrible about this sentence, but...is it just me, or shouldn't there be a comma after "employer"? Also, the second part of the sentence doesn't really relate to the first as a counterfactual, does it? And the writer couldn't dig up a study or an expert for this claim about healthcare? Obama is the word, apparently.

"Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year," the report reads.

Is this because firms tend to lay people with "disabling illness" off? Can I really expect Wake to foot my bills indefinitely if I drop into a ten-year coma?

"We need to rethink health reform," Woolhandler said. "Covering the uninsured isn't enough.

"Only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions we now waste on insurance overhead and bureaucracy."

So that's it? We go from hospital bills being frequently "involved" in bankruptcies, straight to an unqualified, unequivocal claims that single-payer systems are the "only...affordable" way of getting "universal, comprehensive coverage"?

Also, note the number of economics/business/accounting degrees present between Drs. Woolhandler & Himmelstein.

And, in completely predictable fashion, buried in the final two sentences of the piece, is the following:

While only 29 percent directly blamed medical bills for their bankruptcy, 62 percent had medical bills that totaled more than 10 percent of family income, said an illness was responsible, had lost income due to illness or some other medical factor.

Try parsing that. Then compare to the headline.

Yeesh.

Two more cents.

I thought this blog was dead.  Not so!

Becker and Posner are surprisingly clumsy on this.  Rizzo is not, though much of what he says can be found in Hayek's short essay, "Why I Am Not a Conservative," which I believe is now included in most copies of The Constitution of Liberty.

And, of course, what you say here is right, Mike.  The prerequisite of virtue is freedom.  Virtues--going "green," for example--are not virtues if they are coercively enabled.

The conversation also prompts me to refer to Will Wilkinson's recent take-down of David Brooks (I'd link it, but this computer is terribly slow).  Brooks is an idiot--a real NYT sort of conservative who frequently writes about things he knows nothing about (ideas, for example).  His big-government, nationalistic conservatism is just a savvier, inside-the-beltway-friendlier version of neo-conservatism, and it is unfortunate that he has the soapbox he has.

The problem with talking about conservatism in this context is that it's not a moral system in the way people often want it to be.  On the surface, conservatism is nothing more than a skepticism towards change--that is, its primary value, and the reason the thought of someone like Edmund Burke is very valuable, is its theoretical appreciation for the sophistication of social order.  It is an innovation in political thinking only really available after the social/economic/institutionalist turn in social thought that we normally attribute to Hume, Smith, and Ferguson--even if these three cannot accurately be called conservatives in the way that Burke rightly is.  It is because of this that Burke and Oakeshott are conservatism's greatest thinkers--and it is also the reason why "conservatism," as we think of it today, is dangerously overinflated.

Meaning conservatism is not a set of values.  It is a mode of analysis.  It is, as economists like to say, a way of thinking about problems in terms of the unseen, rather than the seen--and it is precisely the reason that David Brooks is an idiot.  Brooks is a technocrat--which is, by definition, the polar opposite of being a conservative.  Likewise, the recent embrace of government intervention in any number of institutions by the Republican party is not a conservative movement.  To refer to the Republican party as "conservative"--and here I'm speaking both about Bush/Cheney "neo-conservatism" and Palin/Plumber populist conservatism--is mistaken.  A conservative would be unable to talk about issues like gay marriage, for example, in the kind of morally-righteous terms that both sides employ--to a conservative, gay marriage is about an institution and its broader, organically-derived social meanings.  Being "conservative" can't tell you whether to be pro- or anti- gay marriage; what it can tell you is how to approach the problem.

Pushing one step further: anti-tax, anti-spending, anti-bailout, "tea-partyism"--these aren't conservative, either.  They are values, often arrived at in disparate ways, that huddle precariously under various labels.  People can be anti-bailout because they think it's unjust (my position); they can be anti-bailout because they are suspicious of Wall Street; they can be against it because they hate the President; they can be against it because they don't like immigrants and this looks like a position anti-immigrant-type people should take.  A conservative approach to the bailouts would be on that approached the question in a particular way--and I daresay a conservative could come down on either side of the matter.  I've lost my train of thought here.

Point being: conservatism: not a moral system: tells us almost nothing about values: can be used to justify bad social arrangements (see Burke): can be used to gain insight into the development of good social arrangements (see Burke).

Liberal? Conservative? Libertarian?

Mario Rizzo has a provocative essay over at ThinkMarkets about the pitfalls of political taxonomy entitled "What is the Philosophy of Freedom Called?" This follows a series of discussions on the Becker-Posner Blog about the changing nature of Conservatism in America, (read the 4 most recent posts starting from the bottom with "The Serious Conflict in the Modern Conservative Movement") and a rejoinder from Bill Easterly at Aid Watch. It is all worth pondering.

What is lost in most modern political discourse is any discussion of the proper scope of government action. (I am certainly guilty of losing sight of this---read my TARP support essays for a discouraging reminder.) I would encourage you all (Modern Liberals, Classical Liberals, Conservatives, Libertarians, whatevs) to look at your political inclinations and ask the following: Is it proper to use the coercive force of Government to compel everyone to act in accordance with my preferred policy?

I think that the Classical Liberal / Libertarian viewpoint generally limits the proper role of Government to some coercive interventions in human interaction (particularly in the enforcement of valid contracts), while having very little to say about interventions in human action.  Influencing human action is properly left to moral suasion and the utilization of the freedom to associate and contract with others.

This does not mean that you should not think about how you and others ought to act, or about the perfection of the human enterprise, or the nature of "The Good" or any other such things.  It means only that once you have determined what your beliefs in these areas are (lower taxes, green energy, Veganism, social justice, etc.), your goal should be to persuade others to agree with you, not to persuade legislators to enact a law forcing others to be a certain way.

My response to stimulus questions

Cross-posted on Facebook

Question:

I don't suppose (in 500 words or less) :) you could explain the stimulus package to me?!?!? ... in a capitalist society (that in theory we live in) when the government bails out large corporations again and again how does this help the average joe? And, how does all of this help the person who pays their bills on time, owns a home and actually owes less than it is worth? I don't think I am an "all about me" kind of person, but there really isn't an incentive to work hard when if I don't, I can go to the government for funds. *** argues that it has always been like that - we have welfare and things that were meant to be short term solutions that now are going on for decades, but it seems bigger to me this time. Maybe because I am an adult living through it...

My Answer:

500 words or less...tough ;) I can't explain the details of the stimulus package, but let me take a shot at why it would happen at all. (This is not me advocating, just explaining). Prior to the Great Depression there was this idea in classical economics that wages and prices adjusted very rapidly (effectively instantly) to changes in demand, outlook, etc. This implies that you can never have a prolonged depression. Booms and busts will happen, they are part of human nature, but when they do, capital will be reallocated quickly to more productive uses and growth will march forward after brief sharp pain. This did not happen in the 1930's, and there are huge fights over why still to this day. One view point advanced by Keynes was the idea of the liquidity trap. Briefly, classical economists believed that no one would ever want to actually hold money (currency) for a long time, because it was not productive and would not make them better off. Keynes partially explained the Depression as this huge change in peoples' desire to hold currency instead of investments, which sucked liquidity out of the economy and caused things to spiral downward. Typically a monetary authority such as our Federal Reserve would lower interest rates to induce money back in to the market--i.e. borrowing costs become very low, making investment projects more profitable, and at the same time rewards for holding cash become very low, so people try and turn their cash into investments. There is this possibility however that even with interest rates at zero, people will be so afraid of capital losses (or deflation) that their fear will overwhelm this monetary inducement to invest. Keynes thought that this made monetary policy impotent in that situation. He further thought that this fear/paralysis could last a long time and that this would essentially mean that it would take forever for markets to recover to their prior levels of productive output. This led him to conclude that it times like these, governments should borrow and spend to replace the capital that individuals were hoarding out of fear and to ensure that things did not spiral downwards unnecessarily. It is similar to why economists like credit cards for individuals---it allows them to smooth consumption over time even if their flows of income are uneven. It is important to remember that he wanted governments to pay this temporary debt off when things turned around such that net government stimulus over the cycle would be zero. Ok---let's grant that in theory he is probably right. May not be true but let's give him the benefit of the doubt.

In the best of all worlds, a government with perfect foresight would be able to conclude whether or not people had rational or irrational fear about the future that caused investment to cease, and if it were irrational they would quickly invest in worthy projects which would restore confidence and keep things moving. You can object to this on many levels. You might believe as I do that there should be severe limits on the role of government, and that their low borrowing costs come strictly from their ability to coerce their citizens into repaying government debts with higher taxes. In this view, most government spending is immoral...it improperly deprives people of the product of their labor for no good reason. Read Bastiat for more:

http://www.econlib.org/library/Bastiat/basEss1.html

Let's say you don't believe that and let's give the government credit for good and moral intentions. They want and believe that they are doing the right Economic thing with stimulus. You still have this problem of the political process, which uses decent ideas as a rhetorical device for support, but in actual fact produces concentrated benefits for the constituents of politicians which secures their power at high expense, and without the "keynesian multiplier" everyone is looking for. In this view, even if the Keynesians are right in theory about the efficacy of their approach, they can never be right in practice. I think this is the likely state of the world. Keynesians are a bit like believers in Communism, who continue to argue that it would work, only if people were better, more public spirited, etc. Sorry..people respond to incentives. In Communism the incentive is to slack off, and in political Keynesianism the incentive is to use stimulus as patronage.

So that's maybe why stimulus, and also why I think it won't work as advertised. As for bailouts, also complex. I think we have to separate the banking system from everything else because of some preexisting legislative conditions. Fact one---the government controls the currency and therefore the money supply. Fact two--most "money" is actually created by banks. Every dollar of currency becomes effectively ten dollars of "money" through fractional reserve banking--loans create new money. Fact three--the government views banks as agents of social policy--they transform peoples' desire for short term savings and liquidity into long term investments through financial intermediation, and investment leads to increased productivity leads to growth. Fact four--because of fact three, governments like to guarantee liabilities of banks--think FDIC deposit insurance--so that people will have the confidence to put their money there, and new investment will be facilitated.

Given this set of facts, you have to think of bank bailouts as bailouts of bank liability holders, not bank equity holders (essentially everyone else except the bank). I mean the equity of almost all of our major financial institutions has been nearly wiped out. When the government attempts to prevent loss to bank liability holders, they are ultimately trying to bail themselves out. If Citibank fails, the losses will overwhelm the FDIC's ability to repay the liabilities. The fear is that if you throw these losses into the legal system--bankruptcy--the whole financial system and maybe even the legal system will be overwhelmed and temporarily shut down (see Lehman Brothers aftermath). It is important to remember that these "bailouts" are probably only happening because the government put themselves on the hook for so much of this stuff in the first place---deposit insurance, government mortgage agencies such as Fannie and Freddie, etc. The fact that some bad managers get to keep their jobs is a very unfortunate side affect of these other realities, but there is probably a real shortage of people that have the skillset to run any of these institutions. Also, as you say--government guarantees create terrible incentives in the first place, and on some level they are the genesis of the depth of the current problem we have.

As for bailing out anyone in general--probably a bad idea. The virtue of capitalism is that when people use capital in such a way that the benefits don't outweigh the costs, they lose that capital. It is self-correcting in that sense. Anytime you hear a politician talk about saving "jobs" you can be assured that there is no good reason for whatever they are doing. Jobs exist only to facilitate the productive use of capital...they "belong" to owners, not workers. What workers own is their producitivity, their "human capital", which they can and should use for other purposes if the market signals that its current use is not valuable enough. It is undeniably true that there are frictions in job loss. Our economy is so specialized that retraining human capital to new uses takes a long time and a lot of investment---think college expense. This is why some form of unemployment insurance seems so necessary to smooth functioning job markets. What you should be asking is should the government provide this insurance, or could the private market do a better job---think AFLAC duck on steroids. This goes to a deeper issue between Libertarian-types and everyone else. Many people think that if someone does not advocate government unemployment insurance, health care, or social security, they are in effect advocating no help to starving, unemployed, old people. This is a huge fallacy. Protesting against a government solution has nothing to do with whether or not you think that smooth functioning society needs those who have resources to care about and supply those who do not. It is a debate over the proper channel of help.

So, how does this all help average Joe? In theory, saving the banking system means that credit will continue to be provided very cheaply to the American people or to their employers as it has been getting continually cheaper/easier to get for the last 60+ years. If this goes away our current standard of living will drop off pretty dramatically in the short term. The longer term issue is what level of debt relative to income is sustainable, and how much of the increase in our standard of living is illusory--simply the result of using too much debt. This is a very hard question to answer. In the same way, the plans for mortgage modification etc might stabilize the housing market in the short term, but one wonders what will happen to people who want to get mortgages in the future. Banks will probably be less eager to create mortgage assets for themselves, which should have the effect of making mortgages more expensive / harder to get. From a societal and moral point of view, rewarding the inefficient and unproductive at the expense of the productive is not sustainable.

Anyway, sorry that was so long-winded. I think I failed the 500 word test, but I hope it will be helpful.

Forget post-modern....

How about post-fair?

Check out this gem from HUD and Sheila Bair:

http://finance.yahoo.com/news/HUD-Secretary-Banks-must-step-apf-14409655.html

Here's the highlight:

Sheila Bair, chairman of the Federal Deposit Insurance Company, said: "There will still be some borrowers who lose their homes to foreclosure. Some of that will be inevitable. But this should have a significant reduction in the foreclosure rate, bringing it more in line with historical levels."
Bair, who appeared on ABC's "Good Morning America," said that as a person making regular mortgage payments herself, she understands the resentment of homeowners with safe loans who feel others are being rewarded for risky behavior. She said, however, that the plan would help many, but not all, and that's appropriate at a time of plunging home prices.
"Is it fair to everyone? Perhaps not," she said. "But I think frankly we're beyond that."

State of Emergency

This operates on too many levels to count...