Archives: 04/2007

It’s Not the Uninsured, Stupid

That’s the title of an oped I wrote for today, the opening day of Cover the Uninsured Week.

In that oped, I point to academic research that casts doubt on whether policymakers should be focusing specifically on expanding health insurance coverage per se.  That research raises some difficult issues for the mandate-and-spend crowd that wants government to guarantee “universal coverage.”

I also focus on the main reason why too many people lack health insurance and conclude:

There’s a lesson here for those who want to cover the uninsured: focus on the incentives facing the 250 million Americans who have health insurance, not on the estimated 45 million who don’t. If the federal government stopped encouraging people with health insurance to be less careful consumers, then coverage would be more affordable, the number of people without coverage would shrink, and the quality of care would improve.

My colleague Arnold Kling thinks that, even though I’m right, I’m painting a big bullseye on myself.  Mmeh.

A “War” of Words

In this week’s Sunday Washington Post, Secretary of Homeland Security Michael Chertoff responds to former Secretary of State Zbigniew Brzezinski’s March 25 piece Terrorized by ‘War on Terror.’

Brzezinski described how the “War on Terror” meme is undermining the United States’ national interests, “a classic self-inflicted wound”:

The “war on terror” has created a culture of fear in America. The Bush administration’s elevation of these three words into a national mantra since the horrific events of 9/11 has had a pernicious impact on American democracy, on America’s psyche and on U.S. standing in the world. Using this phrase has actually undermined our ability to effectively confront the real challenges we face from fanatics who may use terrorism against us.

Though Brzezinski assigns more cynicism to the current administration in its approach to Iran than might be warranted, his insights are powerful:

The culture of fear is like a genie that has been let out of its bottle. It acquires a life of its own – and can become demoralizing. America today is not the self-confident and determined nation that responded to Pearl Harbor; nor is it the America that heard from its leader, at another moment of crisis, the powerful words “the only thing we have to fear is fear itself”; nor is it the calm America that waged the Cold War with quiet persistence despite the knowledge that a real war could be initiated abruptly within minutes and prompt the death of 100 million Americans within just a few hours. We are now divided, uncertain and potentially very susceptible to panic in the event of another terrorist act in the United States itself.

Susceptible to panic, indeed. With the groundwork for that panic laid by our own leaders.

Chertoff’s response is essentially a confession to Brzezinski’s insights. “Make No Mistake: This Is War” starts with the obligatory - and, frankly, tired - 9/11 reference:

As the rubble of the Twin Towers smoldered in 2001, no one could have imagined a day when America’s leaders would be criticized for being tough in protecting Americans from further acts of war.Now, less than six years later, that day has arrived.

His next step is a surprisingly tawdry attempt to link Brzezinski with the minuscule fringe of 9/11 conspiracy theorists.

Since Sept. 11, a conspiracy-minded fringe has claimed that American officials plotted the destruction. But when scholars such as Zbigniew Brzezinski accuse our leaders of falsely depicting or hyping a “war on terror” to promote a “culture of fear,” it’s clear that historical revisionism has gone mainstream.

Chertoff’s next shot is stunningly revealing.

The impulse to minimize the threat we face is eerily reminiscent of the way America’s leaders played down the Ayatollah Khomeini’s revolutionary fanaticism in the late 1970s. That naive approach ultimately foundered on the kidnapping of our diplomats in Tehran.

In translation: “Your caution with Iran, Brzezinski, brought down President Carter’s administration. We’re not making that mistake.”

Iran was a threat to the Carter administration, and Iran is a threat to the Bush administration. But is it a threat to our country? Secretary Chertoff appears focused on defending the current political regime, not on assuring the American people of their security.

There is much more to commend these two pieces. On the “war” question, Chertoff says: “Well, the short answer comes from our enemies. Osama bin Laden’s fatwa of Feb. 23, 1998, was a declaration of war … .”

Chertoff has apparently ceded control of the Department of Defense to bin Laden, who said in October 2004, “All that we have to do is to send two Mujahideen to the furthest point East to raise a piece of cloth on which is written al-Qaida, in order to make the generals race there to cause America to suffer human, economic, and political losses … .” It’s hard not to conclude that our relatively less powerful terrorist opponents are playing our political leaders like a fiddle.

Speaking of the Department of Defense, if there is an actual “War on Terror,” one would expect the Secretary of Defense to make that case.

An IMF Study Says the UK Is a Tax Haven

The International Monetary Fund has published a study that seeks to use a neutral formula for determining which jurisdictions are tax havens. The formula used is far from ideal, focusing primarily on the size of the financial services sector relative to the overall economy rather than specific policies such as privacy laws and/or information-sharing policies. But it is worth noting that the United Kingdom was placed on the list of major offshore centers. Does anybody want to guess when the Organization for Economic Cooperation and Development will put the UK on its “tax haven” blacklist? If you answered never, you get a gold star. The OECD is infamous for targeting small and relatively powerless jurisdictions, while giving a free pass to its own member nations - such as the UK, US, Netherlands, Switzerland, Luxembourg, Austria, and Belgium - that have tax haven policies (see this study from the Center for Freedom and Prosperity for more information). In any event, the IMF study is good news since it further exposes OECD hypocrisy and enables persecuted low-tax jurisdictions to more effectively resist pressure from high-tax nations. The IMF study also is good news, since it upsets leftists in the UK, as this column in the Observer illustrates:

The International Monetary Fund has effectively branded Britain a tax haven. The world’s most important financial organisation last week published a working paper seeking a definition of offshore financial centres. For the very first time it ranked Britain alongside the likes of Bermuda and the Cayman Islands - unregulated jurisdictions associated with illicit funds. …The City of London is the world’s largest tax haven… The UK has become a centre for illicit funds drained from many of the world’s poorer countries, and British offshore secrecy prevents those countries from running effective tax regimes.

A La Carte Cable and the Economics of Abundance

Ars Technica reports that FCC chairman Kevin Martin is once again pledging to force cable providers to offer “a la carte” cable programming. I’ve found discussing this issue frustrating because people have surprisingly strong intuitions about it. Indeed, with the possible exception of “independence from foreign oil,” I can’t think of a single policy idea that is simultaneously so wrong-headed and so popular across the political spectrum.

But it is wrong-headed. People have this intuition that when they sign up for cable, they’re “forced” to pay for MTV to get Nickelodeon. Or conversely, that they’re “forced” to pay for Nickelodeon to get MTV. They seem to imagine that if they could just pick and choose cable channels individually, they’d be able to get the content they want and lower their overall cable bill.

The problem with this line of reasoning is that almost none of the cost of providing cable service to you is dependent on the number of channels you take. In economics jargon, cable channels have close to zero marginal cost. Once the content has been produced and the coax has been laid, it costs little or nothing to give every customer access to every channel in the bundle rather than only certain channels. So if they stop sending you Nickelodeon, it doesn’t reduce the total cost of providing you with your service. So why would you expect a price break?

Indeed, there are lots and lots of examples of bundled products and services that no one in his or her right mind would demand be unbundled. For example, why am I forced to buy the sports section with the business section in my morning paper? Why am I forced to buy evening and weekend minutes with my cellular phone plan? Why was I forced to buy a variety of software products with my new laptop? Why am I forced to take an all-you-can-eat Internet connection rather than paying for only the minutes I need?

These add-on products all have near-zero marginal cost, so it doesn’t cost the company anything extra to provide them to all customers. Indeed, in some cases, it would actually cost more to provide them on an a la carte basis. Imagine the nightmare of being a paper boy if each customer got to decide which sections of the paper he would take.

I think that’s a pretty straightforward argument, but people still seem to find it deeply counterintuitive. It occurs to me that this is an example of a point that Mike Masnick over at TechDirt has been making for a quite a while now: people find reasoning about goods with zero marginal cost deeply counterintuitive. People seem to have a strong intuition that anything that has value must also have cost, and so even if it appears to be free, you’re really paying for it somehow. But with information goods, which can be duplicated an unlimited number of times, that’s not true. Duplicating it really does cost close to nothing, and so it’s socially efficient to make it as widely available as possible.

So the right way to think about cable bundling, I think, is that you get several channels you don’t particularly want for free along with the ones you do want. Requiring a la carte programming simply takes away those free channels. People have an intuitive sense that those channels aren’t really free — that they’re really paying for them somehow. But that intuition is wrong. The extra channels really are free. And prohibiting cable channels from giving them to you really is a bad policy.

Mike has a long series of interesting posts on the economics of abundance here.

Some People Probably Shouldn’t Have Health Insurance

In an e-newsletter sent today, Grace-Marie Turner of the Galen Institute writes:

“No one is arguing that children shouldn’t have health insurance….”

Sigh.  Looks like I’ll have to say it again:

Sick people don’t need insurance. Insurance doesn’t make sick people healthy. They need medical care. They may even need subsidies. So why not try to provide them those things, rather than wreck the markets for both health insurance and health care?

Have a happy Cover the Uninsured Week

‘Consoler-in-Chief’

I don’t blame President Bush for visiting Virginia Tech the day after the shootings. It probably made some people feel better, and it didn’t do any harm.   

However, it is not healthy for mainstream elites to talk about the presidency as they do in this article from Wednesday’s Washington Post:

“At times like this, [says David Gergen, the president] takes off his cap as commander in chief and puts on the robes of consoler in chief.”

“It’s important for the country to see the one person they decided on as a leader out front and speaking for them in moments like this,” said Joe Lockhart, who served as press secretary for President Bill Clinton.

Leon Panetta, Clinton’s chief of staff, agreed: “In many ways, he is our national chaplain.”

In this case, nothing that comes out of the president’s visit is likely to affect any American’s liberty interests.  But in a larger sense, the expectation that there ought to be a presidential response to any highly visible public event has had a dramatic impact on American liberty over the course of the 20th century and into the 21st.

Here’s an interesting piece from Slate on the Great Coolidge’s resistance to responding to the Mississippi Flood of 1927:

Governors, senators, and mayors asked him to visit the flood zone. “Your coming would center eyes of nation and the consequent publicity would result in securing millions of dollars additional aid for sufferers,” the governor of Mississippi wired. But Coolidge demurred. He declined requests from NBC to broadcast a nationwide radio appeal, and from humorist Will Rogers to send a telegram to be read at a benefit. Taking center stage, Coolidge feared, would feed demands for a greater federal role in dealing with the calamity.

Keeping cool like Coolidge was no longer possible by midcentury. In 1956, political scientist Clinton Rossiter wrote approvingly that faced with “floods in New England or a tornado in Missouri or a railroad strike in Chicago or a panic in Wall Street … the people turn almost instinctively to the White House and its occupant for aid and comfort.”

It’s that reflex that makes the solutions to highly visible news events increasingly federal, increasingly presidential, and, in some cases, increasingly military. There’s something to be said for Silent Cal’s Waspy reticence.