Tag: Matt Yglesias

Matt Yglesias Cools Out the Marks

Ben Smith has a mostly excellent piece titled, “Obama Prepares to Screw His Base”:

[T]he health care overhaul known as ObamaCare [is] calculated to screw his most passionate supporters and to transfer wealth to his worst enemies.

The passionate supporters are the youth, who voted for him by a margin of 60% to 36%, according to exit poll samples of people 29 and under. His enemies are the elderly: Mitt Romney won 56% of the votes from people 65 and over…[W]hat follows may come as an unpleasant surprise to many of the president’s supporters. The provisions required to make any sort of health insurance plan work — not just ObamaCare, but really any plan of its sort — require healthy young people to pay more in health insurance than they consume in services, while the elderly…consume far more than they pay in…[T]his year will be spent laying plans to shift the burden further toward the young…

And so this vast transfer or resources from young to old — just the latest in a long line of these transfers — hasn’t been discussed much because it is totally uncontroversial.

The piece falls shy of totally excellent because Smith incorrectly asserts, contrary to the economics literature, that young people have to subsidize old people for health insurance markets to work. Smith correctly notes that ObamaCare screws young people, but thinks that’s unavoidable, if unfortunate. Since there’s no reason to screw young people at all, ObamaCare is even worse than Smith portrays it.

But Matt Yglesias takes the cake. ObamaCare does not screw the young, he writes. Sure, millions of young adults will pay more for health insurance, even after accounting for ObamaCare’s subsidies. But young adults shouldn’t sweat the triple-digit premium hikes ObamaCare forces them to pay solely for the benefit of subsidizing older people who have more resources than they do. Why? Because today’s young adults will benefit later when ObamaCare does the same for them at the expense of subsequent generations. You know, if they don’t die first. What could go wrong?  

Social scientists have a term to describe the role that people like Yglesias play in a confidence game. It’s called “cooling out the mark.” In his classic 1952 article, sociologist Erving Goffman explains. See if you can find any similarities:

The confidence game – the con, as its practitioners call it – is a way of obtaining money under false pretenses by the exercise of fraud and deceit…

The typical play has typical phases. The potential sucker is first spotted and one member of the working team (called the outside man, steerer, or roper) arranges to make social contact with him. The confidence of the mark is won, and he is given an opportunity to invest his money in a gambling venture which he understands to have been fixed in his favor. The venture, of course, is fixed, but not in his favor. The mark is permitted to win some money and then persuaded to invest more. There is an “accident” or “mistake,” and the mark loses his total investment. The operators then depart in a ceremony that is called the blowoff or sting. They leave the mark but take his money. The mark is expected to go on his way, a little wiser and a lot poorer.

Sometimes, however, a mark is not quite prepared to accept his loss as a gain in experience and to say and do nothing about his venture. He may feel moved to complain to the police or to chase after the operators. In the terminology of the trade, the mark may squawk, beef, or come through. From the operators’ point of view, this kind of behavior is bad for business. It gives the members of the mob a bad reputation with such police as have not yet been fixed and with marks who have not yet been taken. In order to avoid this adverse publicity, an additional phase is sometimes added at the end of the play. It is called cooling the mark out. After the blowoff has occurred, one of the operators stays with the mark and makes an effort to keep the anger of the mark within manageable and sensible proportions. The operator stays behind his team‑mates in the capacity of what might be called a cooler and exercises upon the mark the art of consolation. An attempt is made to define the situation for the mark in a way that makes it easy for him to accept the inevitable and quietly go home. The mark is given instruction in the philosophy of taking a loss.

So remember, young voters. ObamaCare doesn’t screw you. ObamaCare is good for you.

See you next time.

ObamaCare’s Preventive-Care Subsidies: Neither Free nor Cost-Effective

Matt Yglesias criticizes my comment in today’s USA Today when he writes, “making preventive health care free to the patient is…very cost-effective.”

Except it isn’t “free” to the patient.

And it isn’t cost-effective. The evidence strongly suggests we would “buy” as much health if we just waited for people to get sick and treated them then.

Do Forced Mortgage Writedowns Create Wealth?

Matt Yglesias recently added his voice to the long running calls for principal reductions on underwater mortgages.  His argument is that such would create additional spending.  Or as he puts it, “I think that if people in Phoenix got a principal writedown on their mortgages, they’d have more disposable income and might go to the bar more.”

What Matt, and others calling for forced principal reductions, miss, or choose to ignore, is that while a mortgage represents a liability to the borrower, it is an asset to someone else.  Matt’s logic, which I agree with here, is that an increase in one’s net wealth (via a reduction in one’s liabilities) should increase one’s consumption.  To complete the analysis, however, we must extend that same logic to the holders of the asset, so that a reduction in the value of their asset (the mortgage) should reduce their spending.  Taking x from A and giving x to B is not going to increase A+B.  To assert otherwise is to engage in Enron-style social accounting.

Now if you want to argue that the borrower has a higher marginal propensity to consume than the investor (say, a retiree living off a pension) then provide some support for that position.  It is just as likely that those on the losing end will take efforts to protect themselves from this loss, decreasing overall social wealth.  So what one has to show is that the marginal propensity to consume for the borrower is so much larger than that for the investor that it offsets any costs from the investor trying to protect his investment from theft.

Now if you simply favor redistribution of wealth for its own sake, just say so.  If you hate investors and love defaulting borrowers, then just say so.  Personally, I don’t believe the role of government should be to take from A to give to B.  I just ask that we stop pretending, in the absence of compelling evidence, that redistribution of wealth is the same as wealth creation.

The Government Shouldn’t Try to Manage the Communications Marketplace

Matt Yglesias takes my recent post gathering three links a little too seriously. Beyond their subject matter—the proposed merger of AT&T and T-Mobile—the theme running through the links was that they were all to the TechLiberationFront blog, not that “the federal government should not try to manage the development of the communications marketplace.” My humor is a little odd. Not everyone gets to come along….

But it’s true that the federal government should not try to manage the development of the communications marketplace. So I’ll defend that, and first principles, which Yglesias claims to have reached their limits when it comes to communications.

First, I’ll refine my thesis: the government should not manage the communications marketplace.

What is a “marketplace”? The handiest web dictionary has the following two relevant definitions: “1. An open area or square in a town where a public market or sale is set up. 2. The world of business and commerce.”

To “manage” such a thing [“to take charge or care of: to manage my investments”] would be to have a hand in much or all of it—not just meta-rules about the terms of buying and selling, but what may be sold on what terms, often up to and including price and quality.

Given these ordinary meanings, I think “manage the communications marketplace” has a relatively broad connotation, and the argument that the government should not manage the communications marketplace is easy. The give-and-take of the market is a better way to discover consumers’ true interests and to apportion resources to serve them. For all the effort and smarts they put into it, government regulators are at a serious disability compared to the market’s manifold forces. More often than not, regulators serve the interests of the corporations that are well organized to win their succor, and they nurture their own interests in maintaining and growing power.

If Yglesias holds the contrary view, that the government should regulate the price, quality, and content of communications services, I welcome that debate, including its free speech dimensions. (There’s a “first principle” worth keeping in mind.)

But he actually doesn’t take that position, not openly at least. He says, instead: “The federal government has to have some kind of policy vis-à-vis the electromagnetic spectrum.” From there, management of the entire communications marketplace is a few bootstraps away.

The electromagnetic spectrum is one input into the communications marketplace. Spectrum is a challenging policy area because we are unused to treating it as anything other than a federally controlled resource.

My thinking is not dictated by the choice Congress made in the Radio Act of 1912, though. It’s important to imagine what rules and tools for dividing up radio spectrum might have emerged had the federal government not assumed power over it. I would prefer to try to move in that direction. (I don’t exclude commons treatment of some spectrum as appropriate, btw.) The historical accident that the government presumed to control radio spectrum should not metastisize into government control of communications.

Holding communications policy as close to first principles as we can, including John Locke when we can, is not the same as intoning “government bad, markets good.” But if the two approaches reach a congruent result, so be it.

If Yglesias holds the view that the government should manage the communications marketplace, he should say so forthrightly. One suspects that he wanted to feature the ad hominem insinuated into his short post. (“Of course the Cato Institute isn’t allowed to reach any other conclusion.”) It certainly sells with his commenters! But there are very good reasons to keep the government from controlling the communications marketplace, and there is much work to be done wresting control of spectrum from the government as well.

The Moral Equivalent of Monarchy

Matt Yglesias plumps for monarchy, based on – what else? – human nature:

[I]t seems inevitable in any country for some individual to end up serving the functional role of the king. Humans are hierarchical primates by nature and have a kind of fascination with power and dignity. This is somewhat inevitable, but it also cuts against the grain of a democracy. And under constitutional monarchy, you can mitigate the harm posed by displacing the mystique of power onto the powerless monarch. We follow the royal family with fascination, they participate in weird ceremonies, they have dignity, they symbolize the nation, we all talk about them respectfully, etc. Meanwhile, the Prime Minister gets to be just another politician. Admittedly the one who’s most important at this given moment in time. But that’s no reason not to jeer at him during Question Time. He’s not the symbol of the nation who’s owed deference. He’s a servant of the people and people who feel he’s serving them poorly should say so.

Dignity and power?

Dignity, sure. I admit, I am fascinated by dignity. I delight when formerly servile people regain it. I love, without apology, the dignity of being an American, under which our “weird ceremonies” happen chiefly of our own volition. I love the dignity of the immigrant shopkeeper – she might not have much, but what she has is hers, she’s worked for it, and she knows it. I love the dignity of a good book, a well-baked loaf of bread, or Dvořák’s Ninth. I love the dignity of suburbia, and of bohemia. I’ve known them both, and what they have in common is this – large stretches of time in which you are left to your own devices. That’s dignity.

But power? In a wide swath all around it, power destroys dignity. That’s not just an unfortunate side-effect. That’s the whole point of power. That’s what it does. It’s telling that Yglesias manages to praise power unstintingly – but only among a group of preposterous twits who’ve long ago stopped wielding any significant power themselves. Except, evidently, the power to fascinate the power-hungry.

Is it human nature to love power? Maybe for some. Indeed, I could hardly explain otherwise the continued presence of coercion in the world. Thinkers far greater than I have come to the same conclusion, so let’s just leave it at that.

Not everyone, though, is quite so keen on power. As Ravi Iyer, Jonathan Haidt, et al. have recently suggested, one self-identified group – libertarians – has a high degree of skepticism regarding authority, tradition, and conformity. Self-described libertarians place a high value on individualism, personal choice, and reason, even sometimes at the expense of other values, like emotion or community. In short, when we see a king, we don’t say “Wow!” We say – “Why?”

Even if you’re not a libertarian, it’s probably a good thing that someone is out there asking that question for you. That’s particularly so if Yglesias is right, and if most humans are hard-wired to idolize. Even a few false idols can be pretty costly. Having people around who encourage us to see them can do us a lot of good in the long run.

As I’m sure I don’t have to point out, the mistrust of kings, of those so-called gods on earth, runs deep in the American tradition. As Thomas Jefferson put it:

[T]he mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of god.

Modern science is increasingly finding that humans aren’t equal in a positive, descriptive sense. You and I are emphatically and obviously quite different, from the genetic level on up. Modern political experiments have shown that we should not try to make ourselves materially equal by rearranging society, either. The results of all such projects have been atrocities.

But claims about human equality really do shine in one area. They say, as Jefferson did, that your notions of the superior man are probably delusions, and that we should be aware of our embarrassing tendency toward them. Personally, I’d no more bow to the queen of England than I would to the doorman at the Ritz-Carlton. They both have fancy clothes, and a retinue of servants attending them, and time-honored traditions that they uphold. Bully for them. But also for our power to place them, at least once in a while, on the same level.

Is an Education Free Market Really ‘Totally Insane’

Matt Yglesias thinks my assertion that we would be better off economically if education money stayed with taxpayers rather than going to public schools and universities is “totally insane.” Ouch!

Now, I can actually understand this, because many people have difficulty envisioning things other than what they’ve always known. But have I really gone all Crazy Eddie? If government didn’t spend taxpayer dough on education, would the poor be much worse off than they are today? Can we never over-invest in schooling because education is just so important? Does the college wage premium mean we should never ratchet down subsidies for college education? And is it at least possible that spending more and more public dough doesn’t lead to more or better education – by which I mean actual, valuable learning – as much as more waste?

Unfortunately, it seems Ygelsias didn’t follow any of the links I provided in the post containing the line he objected to, which furnished some valuable data answering these important questions. And, by the way, it really was just one line he seemed to dislike – the point of the post was to argue against spending yet more taxpayer dough on an education-centered stimulus, not for complete separation of school and state. And, of course, tax-credit-based school choice leaves taxpayers in control of their money without eliminating support for education.

But let’s start answering our questions in more depth so that Mr. Yglesias and others can start to think outside of the “how we’ve always done it” box.

First, let’s hit one critical point: Spending taxpayer money on government schooling does not actually mean you get better education. Let’s look at that graphically:

Here you can see nearly four decades of precipitously increasing expenditures on K-12 education plotted against student performance. And what does it reveal? No correlation between the Death Valley of academic achievement and the Everest of spending. Ever-more taxpayer dollars have gone into the government education system, but the system hasn’t improved at all. Why? Because the educators receiving the money have no need to get better – they’ve gotten ever-more dough no matter what, in large part because many people simply assume that increased government spending on education equals better education. But if you spend hugely greater amounts and get no better results, that seems like it would be an economic drain, no? Which was exactly what I was arguing.

How about higher education?

On a per-pupil basis, over the last quarter-century spending on public colleges and universities has been steady overall, while aid per student at all schools has gone way up. And what do we have to show for that?

The first thing is  incredible tuition inflation – the bane of American higher education. On a per-pupil basis, since 1988 real aid per student has risen 144 percent, while prices have inflated 81 percent at four-year-private schools and 145 percent at four-year publics. It seems, at least in part, that colleges and universities raise their prices because, well, the aid makes sure they can.

Surely, though, the schools use that money to provide more people with ever-better educations? Maybe, but much of the new money seems to have gone just to hiring more administrators, freeing professors from teaching so they can conduct research, and erecting ever more fabulous amenities. Which brings us back to the economic point: Maybe taking money from taxpayers to subsidize all this empire-building and waste might be an economic loss because taxpayers would otherwise spend the money more wisely. Maybe they’d invest in companies that provide better, cheaper products; give money to charities; buy education from stripped-down – but more educationally effective –  schools; or use it for countless other things they need or want.

But what if all this subsidizing – even with its attendant waste – resulted in impressive educational outcomes? Then maybe, just maybe, it would be an economic net gain.  But things look pretty bad: The six-year graduation rate for bachelor’s degree seekers is just 57 percent; roughly one-third of first-year students need to take remedial courses; and literacy dropped (see p. 38) roughly ten percentage points for Americans with at least a bachelor’s degree between 1992 and 2003. Oh, and that wage premium? It could very well include massive credentialism: It might be that you now need a bachelor’s degree for jobs that require only skills or abilities you could have attained on the job or in relatively brief specialized training. But at this point even half-way decent prospective employees would be expected to have gone to a four-year college.

Enough conjecture, though. Let’s go to the videotape – an actual effort to isolate the effect of government higher-ed spending on economic growth. Economist Richard Vedder has done this, and what he has found is that the more a state spends on higher education, the lower its rate of economic growth. Why? Among other possible things, it seems that when education is largely funded by third parties – especially third parties who have no choice in the matter – it decreases schools’ and students’ motivation to act efficiently. So sure, build that on-campus water park – I ain’t really paying for it!

Looking at things this way – contemplating the myriad costs, not just the assumed benefits, of taxpayer funding of education – it seems maybe my ideas shouldn’t be assigned a cell between the Joker and the Riddler quite so quickly.

But what about the equalitarian argument? Forget about economic efficiency – what about justice for the poor?

First off, I’d note that freer, more efficient economic systems tend to be better for everyone, rich and poor alike. You can read all about that here. But we need look no further than American history to see that people – including the poor – will get educated without government help. Before there was widespread government schooling there was widespread education. Indeed, by 1840 – when Mann’s common-school movement was still in diapers – it is estimated that 90 percent of adult whites in America were literate, a very high level relative to Europe. And the nation was hardly the Monopoly Man at the time. In other words, poor people got educated on their own.

But how could this be? Certainly part of the answer was that many poor people emphasized education, and much education occurred in the home. It was also provided by religious institutions, as well as philanthropists. And, of course, poor communities sometimes got together to establish their own schools.

But that was then and this is now, right? Education is much more complex because the world is much more complex. How could poor people get an education today if government didn’t provide it?

Well, for one thing, education need not be nearly as complex and expensive as it is. All those computers and other bells and whistles? There is hardly overwhelming evidence that they do any good – they may just be a huge waste of money. Meanwhile, many relatively barebones private schools seem to do just as good a job or better at educating students. Oh, and there’s that charity thing again: Religious schools provide low-cost education to millions of kids, and it could be lower if they didn’t have to compete with “free” public schools. And despite massive government subsidies to higher ed, private philanthropists give tens-of-billions of dollars to colleges and universities every year – imagine how much they might give if government didn’t say it would do the job! In other words, there is absolutely no overwhelming argument – to say the least – that just because the world is  more complicated government must run schools and pay for education. Indeed, huge, bureaucratic, plodding government is about the least well-equipped entity to handle complication and fast change.

And guess what? There is a profit-motive to furnish education to poor students with demonstrated academic aptitude: If someone lends money to a poor student to go to college so she can get an education that enables her to increase her future earnings, both parties will end up profiting. And let’s not overlook India and numerous other developing countries, where many of the poorest people in the world, using their own money, attend for-profit schools that outperform the free public schools. And why is that? Because the parents whose valuable money is being spent have huge incentives to hold schools accountable, and schools have to respond to parents to stay in business.

But maybe all that’s not enough for Mr. Yglesias. Maybe he needs to also be reminded of what he himself noted:

The current state of schooling in America is already bad enough in terms of ill-serving poor people.

That’s for sure! Currently, wealthy people can choose schools: they do it by buying a house in a good district or paying for private schools. Meanwhile, poor parents are often trapped in awful schools because they can’t afford to buy a McMansion for tuition. In higher education, flagship public colleges and universities have disproportionately middle- and high-income student bodies. And student aid? With creation of tax credit programs you have to have sufficient taxable income to use, as well as loans like PLUS that have no income maximums, aid has been targeted higher and higher up income scales. Meanwhile, the tuition inflation that all that fuels appears likely to scare low-income people away from higher education more than any other group.

Finally, let’s not forget that it was government that for centuries prohibited millions of people – especially African-Americans – from receiving either an equal education, or any education at all.   Without question during those times many private Americans would have discriminated in the provision of education, but government required discrimination by both bigot and good man alike.

So the current education system — which tends to be bent toward the will of the large, voting, middle- and upper-income blocs – already massively underserves the poor, and quite possibly makes it much harder for low-income Americans to compete with rich people than if everyone paid for schooling themselves. The system also injects huge distortions and inefficiencies into education, hurting overall economic progress. Of course, this is not an open-and-shut case – few things are in public policy – but you sure need to do more than just call removing government from education “insane” to counter it. Unfortunately, that’s not something it seems too many people – including Mr. Yglesias – are prepared to do.

Obama’s ‘Perfectly Clear’ Iraq Policy

As someone who has his own snarky tendencies, I am really starting to have a hard time discerning when Matt Yglesias is being serious and when he is being sarcastic these days.  For example, he writes of President Obama’s Iraq speech last night that

I think Barack Obama’s Iraq policy was perfectly clear as of last week—war kinda sorta ending on August 31, 2010 and more honest-to-god ending in December 2011—so I wasn’t exactly glued to the set to watch his speech last night.

So Obama’s “perfectly clear” Iraq policy is that “the war” “kinda sorta ended” yesterday, and will have a “more honest-to-god [than kinda sorta?]” end on New Year’s Eve next year?  But when does it just plain end?

Or maybe the best way to clear this up would be if I could put Tom Ricks’ question to Matt: “How many U.S. military personnel will be in Iraq four years from today – that is, Feb. 25, 2014?” Or if we’re assuming one term, by January 2013?

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