Medical Costs

A number of discussions about healthcare in the US note that the US spends more per capita on health care than any developed nation, but far less bang for its buck.  Reading Rajan, I finally found an explanation.  He describes the major and three minor causes.  

MAJOR CAUSES

1) High prices for inputs.  Basically, the shit costs more in the US than in other countries.  A hip replacement is twice as expensive in the US as it is in Canada.  Rajan notes that part of this is caused by higher salaries for doctors.  I'll add that the fact that the pharmaceutical industry has the largest number of lobbyists of any industry is probably related to high costs.  

2) Doctors and hospitals are paid for services provided rather than results.  Basically, people are having unnecessary procedures done because insurance pays the bill, when a smaller amount of care is actually required.  

3) The system adopts innovations, even when there's nothing to suggest that they work.  Rajan notes the use of $100 million nuclear particle accelerators to treat prostate cancer.  The accelerators have been proven very effective at treating rare brain and neck tumors, but not more so than less capital-intensive treatments that are used to treat prostate cancer.  Essentially, they're using a Ferrari for the daily commute when a Civic will do just fine.  

MINOR CAUSES

1) High administrative costs, approximately 10 times as high as other developed countries.  

2) Lack of operational efficiency.  Increased specialization by doctors shortens operation times, leads to better results, etc.  "Even though good surgeons in India earn about as much as surgeons in the United States, the cost of operations is often an order of magnitude lower."  

3) The threat of malpractice suits.  "Expenditures for Medicare beneficiaries in states with larger malpractice awards are about 5 percent higher."  Basically, doctors are recommending additional procedures to cover their ass and keep from getting sued.  

The Future of American Foreign Policy

Foreign policy pundits have been in a little bit of a tizzy lately, partly because Tim Pawlenty made a speech about foreign policy, and partly because our newfound drive towards austerity will inevitably impact the extent to which we meddle in the affairs of the rest of the world.  The debate typically focuses on a spectrum of intervention, with Obama/Bush-style liberal interventionism/neoconservative intervention on the hands-on end of the spectrum and Ron Paul's isolationism on the other end of the spectrum.  


It's interesting to me, because the discussion is always ideological in nature, and side steps the point of foreign policy.  The point of foreign policy is to advocate our self-interest within the community of nations.  The criteria by which to evaluate strategic actions should be as follows:


1) What is the desired outcome?
2) How feasible are options for achieving that outcome?
3) How expensive are options for achieving that outcome?
4) How critical is the matter to national security or strategic posture?


Political ideology will inevitably play some role in the decision-making process.  For example, following 9/11, the purely pragmatic response would be to broaden intelligence operations to gather better intelligence about non-national organizations, coordinate intelligence collection into a more coherent picture, treat terrorist organizations organizations as credible and serious threats to national security, and to gradually kill terrorists and dismantle the infrastructure of terrorist organizations through special operations, tactical missile strikes, economic sanctions against nations and organizations providing financial support, etc.  This response would have amounted, however, to political suicide, given the rage of a wounded nation.  So too was the decision to invade Afghanistan rather than Pakistan, which was a more significant supporter of Al Qaeda, politically oriented.  


The decision to invade Afghanistan rather than engage in a more diffuse counterterrorism policy or invade Pakistan, while politically motivated, were relatively sensible.  The details of the invasion of Afghanistan were not given due diligence with respect to the criterion identified above.  As stated, the desired outcome was a relatively secular, stable Afghan nation that could act as a mitigating force against Pakistani extremism, and which would not provide safe harbor to terrorists.  Because of the flawed calculus of the political actors involved, the feasibility of the course of action ultimately adopted as well as the criticality of the issue at hand were analyzed poorly.  


This failure was largely due to ideological distortions of reality.  To the Bush/Cheney/Rumsfield groupthink, democracy blooms like flowers after desert rain, the judicious use of limited force is an adequate precondition for this democratic bloom, and because of the limited resources required to install democracy, democratic crusades could reform the political and economic landscape of the region.  Obviously, this proved not to be the case, and a particularly expensive misstep.  


The last decade of war should have forced us to rethink our strategic paradigm.  It should be manifestly obvious that democratic institutions cannot be installed, but must rather be adopted by the governed populace.  Because the idea of democracy is generally popular, the installation of democracy by conquest is possible; however, the attempt to do so will inevitably involve the use of a great deal of non-military resources, as well as force the invading nation to deal with millennia of tribal and ethnic tensions, problems with corruption, all the burdens of domestic administration, etc.  It is a time, labor, and money intensive process that is largely dependent on the cooperation of a populace that is most likely hostile to the occupying force.  Accordingly, nation-building should be reserved for the most critical of national-security threats.  


For less critical issues, such as those posed by the Arab Spring and various repressive reactions to populist movements, significantly less effort should be put forth.  Libya, for example, is not particularly critical to our interests.  The choices were realistically limited to "blow shit up and hope for the best" and "don't blow shit up and hope for the best."  The most realistic outcome was a prolonged civil war.  The decision to bomb Libya as part of an international coalition is not particularly flawed, inasmuch as it shows that we are team players and care enough about democracy to bomb a bunch of people.  Our commitment to military action in Libya should have been for only the shortest term, given the high probability of what Thucydides called stasis.  


Libya, however, was a special case.  Limited military action was likely to have significant effects in favor of rebel forces.  In Egypt, the risk of large-scale violence against he population was small, the military seemed disinclined to unconditionally support Mubarak, and there was no realistic chance that military action would have significant benefits.  With countries like Bahrain and Syria, action will most likely lead to nothing more than chaos, wasted time, money, and effort, and regional instability that is unlikely to resolve itself into a favorable outcome.  So why bother?  


Realistically, both liberal and neoconservative interventionism lead the US into easily avoidable quagmires and depend too heavily on the use of force.  Isolationism does too little to defend our interests.  The ideal balance requires us to effectively evaluate and prioritize threats, preferably before they become major problems, and to engage them through diplomacy and humanitarian aid where possible, surgical force if necessary, with war as only a last resort.  

Why I Like Nietzsche

Someone asked me this question, and the answer is going to run longer than was necessarily appropriate for the forum in which it was asked.   So here we are.  


My answer is related to teleology, which in turn requires a brief discussion of epistemology.  I would argue that TRUTH as a an inflexible, immutable, absolute thing died long ago, with the introduction of Kierkegaard's ethical moment of faith and subsequent existentialist and phenomenological elaborations on the limitations of knowledge and the nature of human freedom.  I would describe human freedom as the tiny bit of choice that we have within the confines of physiological and physical imperatives and the immanent fallibility of cognition or consciousness.  Our perception of a given moment is necessarily limited to our point of view, at this time, in this place, with change being subjectively determined as something moving or what have you relative to our point of view over successive moments.  Our interpretation of a given moment is the cumulative subjectivity of a lifetime of experience that has persuaded us, rightly or wrongly, that things behave in a certain manner and with a certain sort of consistency.  Our fallibility is manifest and legion.  


With these fundamental limitations on the efficacy of truth, then, we go about our daily business.  As political animals, our lives are fundamentally social.  There is, then, and interplay between the individual and the society in which that individual is seated.  Moreover, society as a whole is composed of nothing but many, many individuals.  Accordingly, the ethics or character of a given society is simply the consensus its constituent individuals.  The densely populated part of a scatterplot, with outliers being defined as geniuses or lunatics or various other terms of admiration and disparagement, depending on how well that particular individual sells the merits of his or her idiom to society as a whole.  The difference between Lady Gaga and a crazy bag lady who sings well is mostly a difference in salesmanship.  


That being said, a society as a whole is teleologically oriented towards improvement of some sort.  The growth of wealth, power, the subjugation or incorporation of other societies, an improved quality of life for its constituents:  the list of possible improvements goes on and on (although whether they are considered improvements is largely dependent on the collective determination of the society.  Thus subjugation of others was prized by the Romans, but less so by current society).  


Because society is composed of a number of individuals, its teleological success is dependent upon individual choice.  Teleology at the individual level is directed at creating some change or innovation that pushes the common consensus in the direction of a collective improvement.  Obviously the efficacy of this effort towards improvement is situated in material circumstance and human fallibility, which leads to a wide variety in the sort of attempts at improvement made.  Lebron James tries to further this improvement by being really good at basketball and joining the Heat, then failing to win a national championship.  Osama bin Laden tried by engaged in terrorism, with the ultimate aim of establishing a Sunni emirate (never mind that historically, emirates were quickly destroyed by tribal tensions).  Einstein contributed by pushing the boundaries of human knowledge.  I contribute by serving my country, reading a lot, and writing a blog with fifteen to thirty regular readers.  


To my way of thinking, this individual teleological effort needs to be grounded in some sort of ideology (which isn't quite the right word for what I have in mind) to give it structure, allow us to evaluate the nature and intent of effort, and provide succor during times of uncertainty.  Existentialism fits the bill nicely, inasmuch as it emphasizes individual choice as situated in a concrete reality.  Kierkegaard, while laudable, is somewhat circumscribed by the historical circumstances in which he wrote (I qualify this by saying that I haven't read enough Kierkegaard to authoritatively denounce him, and that he is certainly worth reading).  Accordingly, he tends to frame individual choice within a religious and social fabric that is too restrictive for my taste.  Sartre has the opposite problem; he posits an unlimited freedom that is simply insubstatiable given the interaction between physical and cultural reality.  Jaspers shows promise, but I haven't read enough of his work to definitively say.  The same goes for Schopenhauer.  


Nietzsche, on the other hand, argues for a sense of human freedom that is grounded in physical reality; implies a hierarchy of thoughtfulness, freedom, and effort; grudgingly admits the necessity and benefit of hierarchies below the superman; correctly identifies good and evil as human constructions; and notes the role of aesthetics in rendering intelligible the unintelligible vicissitudes of fortune.  This is not to ignore the many areas in which he is problematic, but simply to say that at his best, he is without peer.  


In any case, individual teleology is only one piece of the pie.  As Sartre so aptly notes, hell is other people, and the abutment of distinct teleological efforts creates conflict, as does the fact that an individual's effort is often contrary to the benefit of the collective good.  So there are other variables that need to be factored in to the equation.  


But such is life.  If things were simple and clear-cut, it would take all the fun out of living.  

Nation Building

There's been quite a bit of discussion about President Obama's announcement that we plan to withdraw 33,000 troops from Afghanistan, whether it's a good idea, the role the military should play in voicing dissent, whether removing troops will prevent the development of a stable Afghanistan, etc.  All of this is somewhat besides the point.  The time to effectively shape an Afghan nation passed during the Bush administration, smothered in its crib by the decision to continue to foster tribalism, warlordism, and corruption.  Even if we left a stable state, it would be destroyed by Pakistani policy in short order, inasmuch as given the geographic and cultural impediments to a centralized government, a sanctuary within another sovereign nation for violent, anti-state actors renders the survival of an Afghan nation impossible.  


The critical failure, and a common one in the recent history of our foreign policy, is the failure to understand nation-building as a holistic process.  The assumption of Western powers is that a nation is a sum of legally defined government structures, codified law, property rights, infrastructure, and economy.  What is forgotten is that there are social structures that must be developed to allow these physical and legal structures to function as intended.  As it currently stands, Afghans have no concept of an Afghan state.  They have very visceral concepts of tribal organizations, family ties, regional politics, and their local existence.  Our efforts to build Afghanistan have done nothing to broaden their horizons.  


There is no reason for a Tajik or Hazara or any of the other groups in the Northern Alliance to assume that their government as a whole has a vested interest in them as Afghans.  Rather, Pashtun politicians have formed patronage networks benefitting other Pashtuns, Tajiks have formed patronage networks benefitting Tajiks, Hazara politicians have patronage networks benefitting Hazaras.  This is not a state.  Aid money is quickly lost to the corruption inherent in these patronage networks:  our billions in aid is more than adequate to build roads to facilitate commerce and unify the country.  Where are the roads?  Aid money was more than adequate to materially improve the lives of every single Afghan.  Where are the material improvements?  


Nowhere.  The corporeal manifestations of a state have been stolen by tribal interests to the benefit of the few at the expense of the many.  The abstract manifestations of the state have been paid lip service with no serious attempt to make them meaningful and real.  Of course, many of these things are dependent on a stable security environment, which means that the time to develop them, to plant the seeds of a national conscience instead of fractured local interests was 2001-2006.  What help did the United States offer this effort then?  


We are currently paying for our past transgressions, which narrowed the future of Afghanistan to different shades of bad outcomes.  The brunt of the cost, however, will be paid by the Afghan people when Afghanistan descends into stasis, civil war, and sectarian violence, with the elite few enriching themselves at the expense of the many.  


The only effect of Obama's aggressive troop withdrawal will be to hasten the inevitable chaos and violence.  The nature of Afghanistan's future was however already decided.  

The Bourgeoisie

Read this.  Mr. Stephenson natters on and on, so I will provide you a brief summary before discussing, for those of you who don't want to read the whole (bloated) thing.  Guy starts going on walks.  Guy walks to Walden Pond and back (round trip 12 miles).  Guy thinks about global warming/climate change.  Guy continues walking, and notices that nature is pretty nice.  Guy notices that a bunch of people died in floods in Pakistan, and that bristlecone pines are getting sick.  Guy is apparently equally concerned by both trends.  Guy has spiritual epiphany, walks to Walden Pond again, then joins some group that's fighting climate change (less effectively than Captain Planet, by the sound of it).  


His journey into the land of walking begins like this:

A year or so before, in the spring of 2006, I was emerging from a "personal crisis"—in my case, I was battling burnout and anxiety. And in my effort to regain "balance," I not only decided to quit drinking (something I should have done, no doubt, much earlier), but I started meditating in the mornings before going to work, before the sun was up, and I re-explored the Zen and Taoist classics that I'd first dipped into in my twenties, traveling around Asia.

I don't understand people like this.  By all appearances, Mr. Stephenson is a happily married family man with a house and a good job that has put him in the upper middle class.  Congratulations, good sir, you are one of the wealthiest people in the world, with the fewest problems.  You are not the single mother of three children, working full time, with two baby daddies who don't pay child support.  You didn't have to listen to a squad of soldiers burning alive inside their Bradley fighting vehicles because you weren't allowed to send out a quick reaction force to save them after their convoy got hit by an IED.  You're not one of the 20 million unemployed or 30 million uninsured Americans.  You're not part of the hundreds of millions of people living on less than $2 a day.  Your life is soft and easy.  Shut the fuck up about your personal crises and count your blessings, because you live a life that is the envy of the majority of the people in the world, you pampered, bourgeois turd.   


Mr. Stephenson continues on to vomit quite a bit of purple prose.  I get it.  He has a degree in the humanities.  I can tell that he has a degree in the humanities because he read "Zen and Taoist classics" in his twenties, just like every other humanities major.  If he had been a science major, he might have realized that global warming probably will not destroy a hayfield in Massachusetts, inasmuch as it is projected to actually increase crop yields in the US, although Florida and New Orleans will get hosed in exchange. 


 You can tell that he wasn't a political science major, because if he was, he probably would have qualified his limited lamentations about the loss of life in the Pakistan floods with a statement about the total lack of investment in domestic infrastructure by the Pakistani government, its failure to heed warnings that changes needed to be made in its flood control and irrigation systems, and its continued failure to address the problem.  Instead, I get the impression that he was a comparative literature major, or something similarly useless (if he had been a philosophy major, he would at least have had critical thinking skills).  


Mr. Stephenson describes at length how he started to read Thoreau and had an epiphany about the need to reform our souls regarding global warming, which ends with him "becom[ing] involved in a nascent grassroots initiative in my town to raise awareness and increase discussion of climate change and to begin building local sustainability."  Missing from his spiritual kinship with Thoreau is the part where Thoreau actually took action.  He was an active member of the underground railroad.  He was actually arrested for civil disobedience.  He was not a member of the suburban bouregoisie who walked around the neighborhood a little, compared himself to a famous literary titan, and then increased awareness and discussion.  Thoreau actually did shit.  Mr. Stephenson just wrote about a vague epiphany and alluded to some grassroots organization that most likely has a membership limited to only the well-to-do.  


Normally this (self-identified) navel gazing would be amusing.  Unfortunately, Stephenson's awkward comparison of slavery to global warming, while pompous and self-serving, is probably the only part of his nauseating drivel that's worthwhile.  In terms of lives lost and quality of life decreased to starvation and serfdom, the effects of global warming will make the institution of slavery in the US look like some candy-assed imitation of misery.  We're talking about hundreds of millions of people directly and immediately impacted, not counting second and third order effects.  Global warming is something that legitimately deserves our serious attention.  


Stephenson's self-congratulatory tale of tribulations imagined and epiphanies unimpressive, however, does the topic little justice.  Global warming has to be a collective effort.  It needs to be sold to blue collar workers who don't care that Bangladesh will be submerged.  Where's the discussion of widespread public transportation so they don't have to pay for a car, and insurance, and gas?  Where's the discussion of the damage that brown haze over Southern California does to their lungs?  Where's the employment opportunities building windmills?  Where are the tangible effects that will improve their lives and make them care?  


Nowhere.  Stephenson is too busy sucking himself off to make an argument that will catch the majority's attention.  

More Wisdom from the CBO

I stumbled across this, which led me to this, which in turn led me to this.  Long story short, our current policies are leading us to doom and ruin in the form of tremendous deficit spending, but if we make a sharp turn towards responsible spending, the disaster won't happen.  The last link is to a variety of deficit reducing suggestions that the CBO brainstormed, and although it's like 250 pages, it's worth taking a look at some of the suggestions.  It should be noted that it would be a lot easier to reduce the deficit through increased taxation, and it seems like the CBO has sensible suggestions.  A few highlights:


-Privatizing the Tennessee Valley Authorities electrical utilities functions would save $3.6 billion between 2012 and 2021 (this is the time frame for all the savings that I'll list).


-Reducing the size of the strategic oil reserve from 727 million barrels to 650 million will save $6.9 billion.  Based on historical data, we don't actually need to have that much oil on hand, the face that we keep finding oil reservoirs all over the world (not just the Middle East) means that the market is less volatile than in the seventies when the SOR was implemented, and the volume of oil that's bought and sold world wide is such that even using the entirety of the SOR won't do much to change prices (it's stated purpose).  


-Eliminating the Conservation Stewardship Program saves $10.5 billion.  The CBO hints that this program is mostly pork for industrial farms.  


-Reducing the premium subsidy in the Crop Insurance Program from 60 percent to 50 percent saves $11.8 billion.  


-Reducing the share of farmer's acreage eligible for USDA payment by 20 percentage points saves $9.5 billion.  


-Lowering loan limits for Freddie Mac and Fannie May saves $3.5 billion, increasing guarantee fees saves $26.5 billion.  Both of these things will give private corporations that do the same thing room to breath by reducing competition with a government-sponsored entity.  


-Adding a public plan to Obamacare health insurance exchanges saves $26.7 billion while increasing revenue by $61.2 billion.  


-Limiting medical malpractice torts saves $49.5 billion and adds $12.9 billion in revenue.  CBO specifically recommends capping noneconomic damages at $250,000, capping punitive damages at $500,000 or twice the economic damages (whichever is greater), the statute of limitations for malpractice being one year for adults and three for children, a fair-share rule in which each of the negligent parties pays for his percentage of the negligence (as opposed to joint-and-several liability, in which all parties are equally culpable, which means that one doctor  can be held as financially responsible as his partner for his partner's negligence, even if the negligence wasn't the result of institutional practices), and permission to introduce other sources of income as evidence (life or health insurance payments that mitigate the economic burden of the negligence).  


-Raising the age of eligibility for Medicare to 67 saves $124.8 billion.  


-Requiring drug manufacturers to pay a minimum rebate for drugs covered under part D of medicare (which apparently was a previous requirement that was removed when the drugs were reclassified) saves $112 billion.  


On the revenue side of the house (for 2012-2021)


-Raise the income tax by one percent for the top three quintiles (individuals earning more than $83,000 annually and couples earning more than $140,000) increases revenue by $139 billion.  If you raise it for just the top two quintiles (individuals earning more than $174,000 and couples earning more than $212,000) revenue increases by $115 billion.  


-Raising capital gains tax by two percent adds $48.5 billion.


-Gradually eliminating mortgage interest deduction adds $214 billion.


-Ending deductions for state and local taxes adds $862 billion.  


-Limiting the tax benefit for itemized deductions to 15 percent adds $1.18 trillion.  


-Including investment income from insurance and annuities (apparently some insurance policies let you invest part of your payment, which pays dividends) adds $259.5 billion.  


-Taxing social security and railroad pensions the same way defined benefits pensions are taxed adds $438.4 billion.  


-Increasing corporate income tax rates by one percent adds $100 billion.  


-End subsidies for exploration and development costs for extractive industries (mining) saves $10 billion.  


-Adding a value added tax (which all the other OECD countries have) increases revenues by $2.5 trillion if the tax is relatively all-inclusive or $1.39 trillion if its scope is narrower.  


-Increasing the excise tax on motor fuel adds $291 billion.  


-Accelerating and modifying the excise tax on high-premium health insurance adds $309.5 billion.  


-Repealing the individual mandate in Obamacare adds $282 billion.  


-Reinstating the superfund taxes adds $19.4 billion.  


-Taxing greenhouse emission increases revenue by $1. 2 trillion.  The rest of the developed world has already implemented some version of this system.  


On a humorous side note, the Bush tax cuts were officially called "The Economic Growth and Tax Relief Reconciliation Act" and the extension of the Bush tax cuts were "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act."  If they are made permanent, they will increase the deficit by $3.242 trillion dollars between 2012 and 2021.  


Some of the ideas that the CBO came up with sound like terrible ideas that will damage our long-term economic prospects, but there's also quite a few good ideas in there.  I recommend nibbling at their report a little bit at a time.  There also seems like there's close to $1 trillion (or more, I didn't actually add it up) to be saved if retired government employees and military personnel are required to share a large portion of their healthcare costs, which seems like a reasonable request given the fact that they pay basically much less than the average civilian.  

Uh Oh

Apparently that nuclear disaster in Japan might have been a bigger deal than we originally thought.  Probably not good.  Japan has apparently earned the wrath of the radiation gods.  

Bootstraps, or the Lack Thereof

I'm still reading Fukuyama, and reached this paragraph:

In a Malthusian economy where intensive growth is not possible, strong property rights simply reinforce the existing distribution of resources.  The actual distribution of wealth is more likely to represent chance starting conditions or the property holder's access to political power than productivity or hard work.  (Even in today's mobile, entrepreneurial capitalist economy, rigid defenders of property rights often forget that the existing distribution of wealth doesn't always reflect the superior virtue of the wealthy and that markets aren't always efficient).

This comes in the context of discussing the development of a centralized state in ancient China, and the development of a bloated class of politically connected landowners in a preindustrial agrarian economy in which a lack of technological innovation led to a corresponding lack of gains through increased efficiency. Fukuyama argues that because of the lack of technological innovation, an increase in land owned did not create increased efficiency through economy of scale, as it does currently (industrial farms are more efficient because they can invest in capital like large-scale irrigation systems and fancy tractors that family farmers cannot afford).  

In preindustrial agrarian societies (essentially all preindustrial societies), there is a cycle in which land ownership is expanded into large scale property holdings, renting portions of their property to individual families, who often became serfs or indentured servants as the result of a bad crop.  Inevitably, these people became disenchanted with the system repressing them, and typically an uprising followed which results in regime change, etc.  At a certain point, if the society has developed an extensive merchant class, the merchants use these sort of uprisings as leverage to gain a seat in government.  

The question is, does technological innovation with an corresponding increase in gains through efficiency and a diverse economy derail this process of the disillusion, dissent, revolt, reset?  This true Animal Farm of economic woe leading to revolt and reform?  I would argue that it does not, but rather that gains in efficiency as well as a diverse economy delay these outbursts by providing outlet for frustration in new business, but don't fundamentally resolve the problem of a majority of societies resources aggregating at the top, with a decreased quality of life for the majority.  

Take our transition into industrial farming as an example.  The widespread implementation of expensive machines at the beginning of the 20th century led to the eradication of the family farm as a way to earn a living.  Obviously there was a drought and a glut of other factors involved, but it cannot be ignored that agriculture, which employed the majority of Americans, ceased to be viable for most people.  This represents an increase in efficiency, which is good, but the side effect was massive unemployment and the Great Depression.  It should be noted that FDR's New Deal failed to spruce up the economy, and that only after WWII, with the corresponding massive increase in American manufacturing capability, did we return to prosperity.  Moreover, post WWII America engaged in a significant program of wealth redistribution (in the form of exceptionally high tax rates on the wealthy) and education (in the form of the GI Bill).  Essentially, the key to success was creating a new primary means of employment for America and broadening education significantly.  

Now, let's look at today's economy.  Manufacturing has ceased to be the major employer, partly because of the automation of factories and partly due to discount foreign labor.  It was replaced relatively painlessly by the service sector, but increased efficiency allows service sector jobs to be outsourced or automated as well, and the current recession demonstrated that a significant number of jobs could be removed without ill-effects in overall productivity when the GDP returned to pre-crash levels.  


Herein lies the problem:  increased efficiency in a given industry, or even the sum of industries in the US, does not add up to increased efficiency for the US economy as a whole.  Its side-effect is unemployment and decreased wages, which ultimately erode the tax base (increased economic efficiency corresponds to increasingly efficient tax lawyers).  The increasingly efficient few become increasingly wealthy, while everyone else is left behind (not necessarily for any fault of their own, it might be added).  


The role of the government should be to level this playing field to a certain extent, by providing opportunities for those left behind to be retrained into individuals capable of performing in the new job market, while also systematically supporting innovation to open up new frontiers in an increasingly diverse economy.  The "pull yourself up by your bootstraps" mentality is a classic piece of Americana, but I don't think anyone has bootstraps anymore.  

Give Me Private Property, Because It's Liberty!

I stumbled across this little gem, which doesn't really have anything to do with anything important, but is nevertheless an interesting read.  Well-argued, and what not.  The thing that tickled my fancy most was the concept of an ill-defined liberty as the most valuable characteristic, and more importantly the idea of individual liberty.  The author of the article does a good job of invalidating Nozick by switching to a different plane of immanence and discussing tax structure, the GI Bill, etc, but even without clubbing Nozick over the head with the wisdom of hindsight, it is possible, and even easy, to disarm the alleged arguments.  


Individual liberty is simply the ability to do what we want to the best of our abilities.  If there were only one person, the limits placed on liberty would be the laws of physics (gravity: it's the law), an individual's innate abilities, and the environment in which he or she was living (is there food? Is there water? How hot is it?  Am I fighting a host of predators?)  It's safe to say that a single individual enjoying a liberty only infringed upon by physics, physiology, and his environment is significantly repressed by the tyranny of an inscrutable and amoral nature. This individual spends a lot of time looking for food and water, and worrying about the need to fight bears, or what have you.  He would be so busy engaging in those activities that he wouldn't have much time to reflect on the benefits of liberty (hierarchy of needs).  


Fortunately, individuals alone and unafraid with (relatively) unfettered liberty are aberrations rather than rules in human history (if there was only one, how would he or she make more?).  We are social creatures who have, throughout history, been engaged in a collective effort to wrestle physiology and the laws of physics into submission.  This collective effort has primarily been characterized by warfare and repression, and somehow after millennia of this sort of behavior we've reached a point where the West is characterized by domestic tranquility, for the most part, and peace with other Western nations (usually, and as a result of two spectacularly large wars).  We've accomplished this by establishing governments capable of restraining the baser impulses of our fellow human beings, and then limiting the power of those governments to repress us.  


The individuals who formulated our popular contemporary conception of liberty did so from leisure that was possible only because of the existence of collective action, because of a relatively restrained government, and to further the idea of a governmental balance between potent and restraint as codified by law.  The libertarian idea of a free market of individuals defending their liberty is ridiculous.  

A Pyrrhic Victory?

A while ago I commented on the importance of the recent goings on in the Eurozone.  It appears that various finance ministers have their doubts about extending the Greeks a 12 billion euro loan to prop up their imploding economy.  As well they should, although admittedly, their decision seems mostly to be pending passage of further austerity measures and privatization of Greek national assets.  Apart from the fact that austerity measures demonstrably deepen recessions, and ignoring Stiglitz' criticism that the IMF (which is playing a role in the negotiations) invariably advocates austerity and privatization because the IMF's attention is solely on deficits and inflation without paying attention to other aspects of an economy, there should be a bit of rethinking as far as dealing with the Greek situation goes.  


In my last commentary on the crisis, I linked to an article arguing in favor of debt forgiveness.  This should be considered more seriously than it has been.  Consider that Greek debt was projected to rise to 156 percent of GDP by 2012.  The bailouts described in the article are simply additional loans used to pay for the current loans, on which Greece is in danger of defaulting.  This is the international equivalent of using one credit card to make payments on another credit card.  It makes very little sense.  Moreover, by engaging in extensive privatization, the Greeks are sacrificing the long-term revenue that those assets are capable of yielding, without any guarantee that capital won't flee the country after privatization.  They are reducing direct government revenue while potentially eroding their future tax base.  


Even if the Eurozone grants the Greeks additional bailout money, they are simply deferring Greek debt.  It will be a Pyrrhic victory for the Greeks.  

Did You Know?

I've moved on to a new book, and it is quite excellent.  Francis Fukuyama decided to summarize the history of political organizations in two volumes, beginning with prehistory.  It's one of those books that teaches you something that you didn't know on every page.  Did you know:

-The bureaucracy typical of a developed, modern, nation-state was first implemented in 300 BCE in China? 

-It has been demonstrated that a form of morality evolves spontaneously alongside endeavors based on teamwork, motivated solely by the self-interest of the parties involved?

-Humans, and other animals, are biologically wired to demonstrate altruism towards genetic kind as well as reciprocal altruism?

-Tribal organization did not arise until the development of argriculture?

-Prior to tribes, hunter-gatherer societies are organized into bands or family groups?

-Native Americans in the Pacific Northwest developed tribal organizations without developing agriculture due to the abundance of natural resources?  

-Band organizations have no private property or defined leadership?

-"Depending on climatic conditions, hunter-gatherer societies have a population density of 0.1 to 1 persons per square kilometer, while the invention of agriculture permits densities to rise to 40-60 persons per square kilometer"?

-Agnation is the social form of patrilineal descent that traces lineage exclusively through the male line, and in which women move in with the male side of the line?  

-"In the agnatic systems of China and India, this involved severing her ties with her birth family almost completely.  Marriages were thus often a moment of sadness for the wife's parents, compensated only by the pride price they were paid for their daughter.  The woman had no status in her husband's family until she gave birth to a male offspring, at which point she became fully integrated into the husband's lineage, praying and offering sacrifices at her husband's ancestral tomb and protecting her son's future inheritance"?

-"Matriliny simply means that it is the husband who leaves his descent group upon marriage and joins that of his wife.  Power and resources are still largely controlled by men"?

-Matrilinies are "typically found under one specific set of environmental conditions, such as rainfall horticulture where gardening is done primarily by women"?

-The success of tribal organizations, and specifically large tribal organizations of thousands of people spread over a large area, is predicated by segmentary development (each subsection of the tribe is a self-sufficient segment that typically unites with other segments to wage war, but otherwise is relatively autonomous) and the development of ancestor worship?

Now you know.  And knowing is half the battle.  

Legitimately, this book should probably be required reading at some level of education, inasmuch as it covers a large span of history using history, IR theory, biology, archaelogy, anthropology, and philosophy to describe the development of political organizations into the modern nation-state, most specifically in an attempt to explain the prevalence of democracy as the dominant paradigm of governance, and the difficulties involved in developing a democratic (or even functional) state.  It also seems to avoid eurocentrism fairly successfully.  

Predicting the Future

I just finished Making Globalization Work, which I highly recommend, and have a few final thoughts about it before I move on to another book.  It was written in 2006, so it doesn't take the latest stupendous collapse of the Western economy into account, but the macroeconomic discussion does a good job of identifying some problem areas that led to the collapse, particularly in the chapter about the global reserve system.  In discussing the move away from the US dollar as the reserve currency of the world, Stiglitz notes

...perceiving the riskiness of the dollar, more and more investors will decide to shift more and more of their money out of dollars into euros, yen, or where possible, the yuan...As this happens, more and more downward pressure is put on the dollar.  Simultaneously, as investors pull their money out of American securities, stock prices will fall or stagnate...The consequencs of increases in medium- and long-term interest rates may be particularly serious, given the high level of indebtedness of individual households, many of whom took out large mortgages in response to the unusually low interest rates.  What matters is not the average level of indebtedness but the number of households that will face difficulties in meeting their debt obligations.  The increasing frequency of mortgages having interest rates that are variable makes this particularly worrisome.  The march out of the dollar may be orderly and smooth...Or it may be disorderly, in a crash.  

Although Stiglitz is not specifically bearish about the housing market (bubble), he does note that broader economic forces were shaping what, in hindsight, turned out to be a disastrous lending policy with large-scale effects.  Regarding the effect that an increased shift to the euro as a reserve currency will have

As central banks hold more euros as reserves, the value of the euro will increase, making it harder for Europe to export and opening it up to a flood of imports.  It will have an increasingly difficult time maintaining full employment.  And with unemployment already so high, and with its central bank focusing exclusively on inflation and not at all on unemployment or growth, there is good reason to be worried about Europe's macro-economic prospects.  

These quotes come in the context of a larger discussion about the problems with reserve currency.  Apparently, the reserve banks of foreign countries purchase treasury bills against a currency, the US dollar or the euro in the above examples, which is in essence loaning money to the US or Eurozone.  Stiglitz talks most significantly about the dollar, inasmuch as it has been the reserve currency of choice for several decades now, and argues that treasury bills were essentially a low interest loan to the US that was used to finance large scale deficit spending and was inextricably tied to the US' status of default consumer for the world's goods and our perpetual trade deficit.  


The point that I gathered from this is that crises are predictable, but these predictions share Cassandra's curse inasmuch as they are largely disregarded for ideological reasons, and because the preventative measures required to stave off the crisis are either generally unpopular or harmful, in the short term, to major corporate interests.  In short, governments are neglecting their role as the defender of the common good.  Without some authority to keep them in line, corporate interests will always pursue a selfish course that fails to take the grand scheme of things into account.  Theoretically, Adam Smith's invisible hand should prevent this from creating a problem, but for a free market economy to function the way it is alleged to function, perfect information, perfect markets, and perfect competition are required, and all of those things have never and will never happen.  Moreover, corporate money is consistently used to weight legislation, trade agreements, tariffs, etc. in their favor, limiting the freedom of markets even more than the reality of circumstances.  


Another, and related, point that I drew from the book is that there is a strong relationship between social justice, economic policy as regards globalization, and the stability of domestic economies.  Many of the policies that Stiglitz advocates in his book are clearly argued primarily because they are socially just policies.  Many of the policies he advocates will not be immediately beneficial to the US.  Ultimately, however, the interconnectedness of the global economy has shrunk the world to the point that socially just economic policies that defend the least powerful of the world's citizens benefit us all in the long run, and will have powerful stabilizing effects on not only the economies of developing countries, but also on the US economy.  


Stiglitz realizes that some of the policies will be politically challenging and face significant obstacles.  Herein lies the ultimate failure of our governments:  they are unable or unwilling to convince us to pursue a course that is in our best interests, even if realizing those interests will take decades and even when that course doesn't pass the sniff test of the everyman's common sense.  We have politicians, not leaders, and they legislate and bicker and take the easy path to reelection rather than persuading and inspiring and making substantial changes in pursuit of the common, and sustainable, good.  

Money Doesn't Exist

Courtesy of Joseph Stiglitz:

Historically, gold was used as "money"--the medium of exchange for pieces of gold.  Then it was discovered that "fiat money"--pieces of paper that could be converted into gold--was far more convenient, and governments and cnetral banks issued this money.  At first it was thought that there had to bee full backing--for every dollar of fiat money issued, the government or the central bank had to hold a dollar's worth of gold.  Then it was discovered that this was not necessary; all that was required was confidence in the currency.  Confidence meant that other individuals would be willing to accept the money in payment, and confidence could be achieved with only partial backing.  At first, it was thought that confidence coiuld only be achieved by using gold as backing; then it was realized that the currency (or debt)of strong economies--initially Britain's sterling, and for much of the period after World War II the U.S. dollar--could be used. 

In short, we've reached a point at which money has no value except the value that people give it through consensus.  This lets us do all sorts of fancy money-making things that would not have otherwise been possible, but the downside is that sometimes you, say, inflate the average prices of housing, do complex, incomprehensible things with the debt to finance the housing, make absurd profits off of the continual increase in housing prices (an increase that is nothing more than the idea that houses must get more expensive), and make increasingly risky loans to finance housing purchases that artificially inflate home values, increasing the profits that you earn, until the whole thing falls apart because it was built on the idea of money rather than a realistic estimation of worth tied to some, or many, concrete things.  

With all the reading that I've been doing about economics/financial markets etc. lately, the most definite conclusion that I've reached is that the majority of the people who work in the money industry are pack animals who tend to follow trends, and who lack things like wisdom or a broader perspective to help them ensure that their actions make sense and are sustainable and beneficial over the long run.  

I'm of the opinion that the role of government is to restrain the more ignoble impulses of its citizens for the good of all, and to the extent that this "Gold Rush in, panicked rush out" mentality so prevalent in the financial industry has the potential to destroy global or regional economies, it seems like this might be one of those instances in which increased regulation is appropriate.  


The fact that money is imaginary has given us a lot of flexibility and broadened economic opportunities, but there should be a concerted effort to ensure that imaginary money doesn't flee to far from a grounding in the tangible, lest the profits turn out to be dust and moonbeams.  And a man with moonbeams in his hand doesn't have much at all.  


ALSO:  I've started the considerable task of reading the Obamacare legislation, so you can expect future thoughts on that magnificent edifice of glutted legal writing.  

To Whoever Keeps Reading My Blog With Linux...

Keep fighting the good fight, dude.  You're making me nostalgic for high school when my buddy had like five computers in his room, three of which were running linux.