Private Voucher Schools Less Racially Segregated

Reaffirming earlier research, new studies of the voucher programs in Cleveland (.pdf) and Milwaukee (.pdf) find that private voucher schools are less racially segregated than the public schools in their districts.

This should come as no surprise. Economist Thomas Nechyba (.pdf) has shown that public schools’ geographically-based student assignment system lowers not only school-level integration, but neighborhood integration as well. By de-coupling school choice from place of residence, considerably higher levels of integration become possible and, as the research shows, actually take place.

As in so many other cases, the argument that government-run schooling is necessary to promote integration is precisely backward. Government schools are an impediment to integration and to the achievement of minority students.

Anyone who truly believes in the ideals of public education should support the free market reforms that can actually fulfill those ideals, and abandon the government-run monopoly system that so consistently fails to advance them.

Silly Patient, Power Is for Experts!

Yesterday, I lamented that market critics simultaneously (1) argue that information asymmetries mean that patients are too ignorant to control their health care dollars and decisions, and (2) argue for policies that keep patients ignorant.

As if on cue, Ezra Klein pounced on the same hook I used: a column by David Wessel that cited a study showing that elderly patients are often highly satisfied with their care even when the technical quality is sub-par. Klein argues the study is proof that “consumer-directed health care is a silly idea.” 

Or, perhaps, those findings show that the policies Klein supports (e.g., government-provided coverage) are keeping patients ignorant.

Klein writes, “patients have no capability to separate good medicine from bad…for all their good intentions, [they] are easily fooled by a firm handshake, a pleasant nurse, and a well-decorated waiting room.” Klein continues, “If doctors need watchdogs, then we need to empower institutions or individuals with the education and ability to actually watch over them.” 

Presumably, Klein thinks a free market would not do so. But if that means the government should monitor quality, how would Klein insulate that effort from the political influence of providers, whose incomes would depend on what the watchdogs decide? Are politicians never fooled by a ($2,000) handshake? Which is easier: to fool all of the people all of the time, or to fool 535 people at any given time?

Baby Steps

Yesterday, the DEA announced that it would allow doctors to write multiple, post-dated painkiller prescriptions for chronic pain patients. This is good news. The prior restrictions were odious, and heartlessly required people suffering from chronic pain to make multiple trips to doctors and pharmacists to get their medication.

This problem is worse than it sounds. Because the DEA’s witchhunt has scared physicians away from palliative therapy, many of these patients have to drive several hours to find a doctor who is willing to treat them. Doctors willing to administer the most promising chronic pain treatment — high-dose opioid therapy — are even harder to find.

But yesterday’s decision doesn’t go nearly far enough. And the DEA seems to be trying to use this one concession to show its “reasonableness,” thus heading off criticism over the larger, more important issue — it’s overly aggressive pursuit of doctors.

Here’s what won’t change: The agency will continue to substitute its own judgment for the medical opinions of doctors. It will continue to define some high-dose treatments as off-limits, and it will continue to use malpractice standards, meant for civil litigation, in criminal court. The DEA also still refuses to give doctors a set of guidelines they can follow to guarantee they won’t be prosecuted, thus giving the agency a great deal of leeway and leaving doctors who engage in the experimental high-dosage treatments in legal ambiguity. The agency will also continue to deny doctors a “good faith” defense to prosecution.

DEA administrator Karen Tandy, who has a history duplicity on this issue, made some misleading and downright false comments in a USA Today story yesterday on her agency’s change in policy:

The new policy statement does not include a specific list of do’s and don’ts, but the DEA Administrator Karen Tandy says doctors should be able to glean from the listing of prosecutions on the agency’s website what it takes to violate the law. 

This is ridiculous. Instead of actual guidelines to see if they’re complying with the law, doctors are instead being instructed to read up on a “rogue’s gallery” of DEA trophies to determine if their own prescription habits are potentially criminal. That would be like the IRS refusing to give any real guidelines on how much money we owe the government, but instead refering us to a list of the “20 biggest tax cheats of all time” for guidance.

More Tandy:

Out of more than 1 million doctors who are registered with the DEA to prescribe such narcotics, the agency prosecuted 67 last year for prescription abuse. Tandy says the DEA has targeted doctors who have strayed far outside accepted medical practice, including some who have prescribed medically unnecessary drugs for cash or sex, some who have demanded kickbacks, and invented patients or fed their own addictions. 

Tandy is hyperbolizing. Included among those she says “have strayed far outside the accepted medical practice” are William Hurwitz and Bernard Rotschaeffer. The case against each of these men is far from conclusive. Pain activists like Siobhan Reynolds and Dr. Frank Fisher regularly send out new examples of doctors prosecuted by the DEA. In a few cases, it looks like the doctors were clearly unethical. In most, the evidence is far from conclusive and appears to be more attributable to the DEA’s ignorance of how high-dose therapy works, or that its own policies are chasing doctors away from this treatment, causing the few doctors left in the field to have no choice but to see more patients and write more prescriptions.

Tandy’s “67 of one million” statistic is also misleading. The one million number is the total number of physicians, in any line of practice, who are licensed to prescribe narcotics. The number who specialize in pain treatment is far, far lower. And the number willing to engage in high-dose therapy — the only therapy that seems to work on chronic pain — is much lower still. That 67 comes from an already small and dwindling pool of doctors willing to administer this promising line of treatment. Given that the DEA makes a big deal out of each arrest, including holding press conferences and putting out statements to the media, it isn’t difficult to see how each arrest would make it yet more difficult for pain patients to get adequate treatment.

More Tandy:

The DEA investigates doctors “who knowingly and egregiously put drugs into the hands of traffickers and abusers,” Tandy says. “This isn’t just questionable behavior. There is no gray area here.” 

There most certainly is. See the case of Dr. William Hurwitz, one of the DEA’s most sought-after and hard-won trophies. An appeals court recently set Dr. Hurwtiz’s conviction aside, finding that the government was wrong to deny Dr. Hurwitz to mount a “good faith” defense against charges that he prescribed painkillers to drug addicts.

More Tandy:

Tandy says she doesn’t want to tell doctors how to treat patients. “The DEA does not belong in the practice of medicine. We want doctors to be able to prescribe drugs when people are in pain. We’re trying to give them a comfort level.” 

But if the DEA has its own definition of what is and isn’t “accepted medical practice,” and — worse — won’t tell doctors what that definition is when it comes to prescribing painkillers, thus leading doctors to err on the side of undertreatment, we have most certainly entered the realm of drug cops dictating medical practice.

The DEA has taken a lot of heat from pain activists, academics, media critics, and civil libertarians on this issue. Yesterday’s minor shift in policy should by no means be the end of the debate.

For more on this issue, see here and here.

A Compelling State Interest in… Fabulous Decor?

I know, this one’s outside my bailiwick, but can you blame me? Apparently New Mexico has forbidden interior designers from calling themselves “interior designers” unless they are officially certified by the government.

What, exactly, is the compelling state interest for such a ban? Are New Mexico legislators fearful that citizens will suffer irreversible harm from bad Feng Shui? “You’ve lined up your dining room table with your couch?!? Are you mad!?!”

Or have they developed such a keenly felt artisitic sensibility that they must spare New Mexicans from a return to the “Interior Desecrations” of the 1970s?

As a forthcoming Cato Institute paper reveals, state licensure of professionals is a bad idea even in important areas like teaching (“Giving Kids the Chaff: How to Find and Keep the Teachers We Need”). That it is even contemplated in interior design is, at the very least, decidedly tacky.

Hat tip, Jacob Sullum.

Pork or Bags of Cash?

I’ve been noodling through a government reform thought experiment, but can’t seem to reach a conclusion. See what you think…

The reform would address that most nefarious dynamic: When the benefits of government spending are concentrated and the costs are dispersed, government will grow and spending will increase.

Mancur Olson described this dynamic more than 40 years ago in The Logic of Collective Action. Steve Slivinski, in his new book Buck Wild, summarizes Olson’s idea as follows:

Olson pointed out that the disparity in incentives between taxpayers and what we now call “special interests” results from an inherent disadvantage of the larger group (i.e., taxpayers) compared to the smaller group (i.e., recipients of public dollars) in its ability to organize to defend its interests. It is this inherent bias in favor of the small special interest groups that provides a very robust explanation of why we still have Big Government, even though many taxpayers would prefer smaller government. “It would be in the best interest of those groups who are organizing to increase their own gains by whatever means possible,” writes Olson. “This would include choosing policies that, though inefficient for the society as a whole, were advantageous for the organized groups because the costs of the policies fell disproportionately on the unorganized.”

To borrow an example from Steve’s book, the National Endowment for the Arts had a 2004 grant budget of $47.4 million — equal to about 0.01% of income taxes. The NEA awarded 1,970 grants that year, so the average grant amount was $24,000. Grant recipients would thus have considerably more financial incentive to lobby for continuing the NEA than individual taxpayers, who on average contribute less than a buck per year to the program, would have to lobby for discontinuing it.

This dynamic is made worse by the common belief that if a government program is cut, its money will be rerouted to some other program instead of returned to taxpayers. Consider, for instance, the lightly-trafficked regional airport in my hometown, which is using a forthcoming, large federal grant to finance a major expansion of its runway. When local residents complained that the expansion was a waste of taxpayers’ money, project defenders responded that the federal government would spend it in some wasteful fashion anyway, so why not do so locally?

The “organized group” that gains the most from Olson’s dynamic is politicians. Because they control the public fisc, they receive the entreaties and gratitude of special interests, and they parlay that gratitude into campaign contributions and electoral support. The result is that politicians and special interests mutually benefit from this dynamic while taxpayers are stuck with the bill.

Nor does the dynamic require bad actors. Special interests can act on the sincere belief that their causes benefit society, and politicians can share that belief or else be brought to embrace it by the quasi-Darwinian forces of elections. In short, Olson’s dynamic appears to be a natural part of the political system.

Unfortunately, it’s a very costly part, as Duke University’s Mike Munger described earlier this summer in an essay on econlib.org. (Will Wilkinson discusses Munger’s essay here, and Munger chats about it on Russ Roberts’ EconTalk here.) Special interests — whether units of government or private entities — will invest resources in lobbying and other efforts to gain the government money. Those investments, in aggregate, may pay off for the special interest (because the government money received offsets the cost of the successful and unsuccessful lobbying efforts), but significant resources are wasted from the perspective of society.

To understand this, suppose a special interest spends L dollars a year on lobbying, and that lobbying yields G dollars in government money. If L < G, the special interest will continue its lobbying, because the cost is offset by the government money received. But the cost to society for the special interest obtaining G is G + L (because society ultimately funds the special interest) + various deadweight losses D from taxation.

 Hopefully, the benefit purchased by the grant will outweigh G + L + D. But there are many cases where that appears not to be the case — consider Ted Stevens’ $231 million “Bridge to Nowhere” for the 50 people of Gravina Island, Alaska. So, society is stuck with paying G + L + D for a benefit that sometimes isn’t even worth G.

Government spending, in theory, is supposed to be for public goods — goods for the benefit of the general public that are not sufficiently provided through private markets because they are neither rivalrous nor exclusive. (There are all sorts of fights over how to understand “sufficiently,” but we need not worry with that here.) However, projects like the Bridge to Nowhere and other instances of pork-barrel spending are better understood as either club goods (goods that are exclusive) or private goods (goods that are rivalrous and exclusive).Neither of those latter two categories of goods seems an appropriate candidate for government provision — or, at least, for federal government provision. Yet it is those two groups of goods for which special interests are willing to spend L in order to gain G.

Can we somehow break up this dynamic, reduce L, and increase the likelihood that public spending goes to true public goods instead of dubious club and private goods?

To do so, we would have to overcome Olson’s dynamic. That would require:

  1. assuring that the money saved from foregone spending is returned to taxpayers (or, at least, to the public),
  2. reshaping the budget system so that politicians are politically rewarded for the money they save, and
  3. aggregating special interest “pork” spending so that taxpayers will have greater incentive to organize.

Hence, my thought experiment: What if individual politicians were given the choice between spending the money allocated to pork barrel spending on actual projects, or handing that money directly to their constituents?

Think about this on the federal level. In essence, each congressional district has its own pork fund (funded in accordance with the congressman seniority, party affiliation, political favors, etc.) that it divvies up among local and national special interests. What would happen if each congressman were given the choice of, instead of simply funding pork, handing out some or all of the money to his constituents?

Public choice analysis asserts that the congressman would follow whichever course of action is most likely to get him reelected. If the politician’s laundry list includes some meritorious public goods that would benefit his community (and thus earn his constituents’ gratitude), he would direct some of the money to those goods. He may also continue to fund some of the club and private goods, if he believes enough voters have a strong-enough preference for them.

But, I suspect, the congressman would detect a strong voter preference for receiving bags of cash instead of dubious-value government goods and services. And that intense preference, I think, would reduce pork barrel spending. That, in turn, would reduce special interests’ incentives to pursue that money, which would reduce L.

But is my suspicion wrong? Would politicians prefer to hand out cash to large numbers of constituents or cut the ribbon for Bridges to Nowhere (after handing out cash to construction companies)?

Moreover, if I am right that handing out cash to constituents is more appealing, would the unintended consequences of this reform (e.g., politicians using the handouts to redistribute wealth to the median voter) be worse than its benefits?

Thoughts?

Health Policy Straw Man

In today’s Wall Street Journal, David Wessel writes:

It’s fashionable these days, particularly in Washington, to argue that the best way to improve the quality and restrain the cost of health care is to make the market for health care more like the market for everything else.

It’s also fashionable for opponents of free-market health care to caricature the case for market-based reform. 

I don’t know where Wessel comes down in that debate.  But he does employ a favorite straw man of those who oppose market-based reforms: that the case for markets “rests on the belief that health care is – in most respects – like any other product.” In fact, the case for markets does not rest on that assumption. 

That assumption is obviously false.  As Charles Phelps writes in his leading textbook Health Economics, health care markets face challenges such as extensive government intervention, uncertainty, asymmetries of information, and externalities.  Also, health care is scary, involving life-and-death decisions.  Of course, each of these dynamics is present in many markets.  What makes health care unique is how many of these factors converge in one place.

The case for markets is that markets do the best job of dealing with all those sticky wickets.  Take asymmetric information.  Critics say that the knowledge gap between doctor and patient is so great that consumers cannot be assured of quality.  But information asymmetries occur everywhere; every day, I am positively besieged by them.  I don’t know how to sew, much less build a car or a computer.  But those information asymmetries between me and a seamstress or Subaru or IBM do not prevent me from driving to work fully clothed and blogging about health policy.  Markets thrive on informational asymmetries, which are an essential part of specialization. 

So why is it that when consumers need to close that knowledge gap, or at least obtain assurance that they’re getting a quality product, they have an easier time doing so when it comes to Subaru than their doctor? 

Part of the reason is probably medical professionals’ traditional reluctance to compete with one another on the basis of price and quality.  But the larger problem is that government has insulated patients from the costs of their medical decisions.  With patients asking fewer questions about cost and cost-effectiveness (i.e., value), the rewards for generating that information are smaller.  (And herein lies an irony:  Opponents of market-based reforms argue that information asymmetries are an enormous problem, and then turn around and support further cost insulation, which exacerbates that problem.) 

That largely explains the interesting study Wessel cites, which found that patient satisfaction does not necessarily correlate with what the experts deem high-quality medical care.  It should be noted that measures of patient satisfaction and recommended care should not correlate perfectly; patients often have good reasons for not wanting what the experts consider “the best” care.  But excessive insulation at once contributes both to patient ignorance and to providers being able to get away with delivering sub-optimal care.

Divided Government May Help Restore the Republican Party

For the moment, the Democrats are expected to win control of one or both houses of Congress in the congressional election this fall.  That may have two strongly beneficial effects on the Republican Party:

  1. More congressional Republicans will rediscover their commitment to fiscal responsibility when most of the proposals for increased spending originate in a house of Congress controlled by the Democrats.  For the past five years, in contrast, congressional Republicans approved almost all proposals for increased spending by the Republican president or their party colleagues. 
  2. More social conservatives will rediscover their commitment to federalism in order to protect the authority to address value issues by state governments when it becomes clear that there is no political opportunity for federal decisions on these issues.  With the first unified Republican federal government in 50 years, in contrast, social conservatives have been motivated to propose federal political decisions on these issues for which there is no national consensus.

The combination of a long unnecessary war, the fiscal excesses disguised as compassionate conservatism, and an intolerant social agenda has almost destroyed the traditional Republican political coalition, leaving many of us without any enthusiasm for the candidates and policies of either party.  The first step to restoring the Republican Party, ironically, may be a Democratic victory in the congressional election this fall.

Several years in the political wilderness may do much to clear the mind.