A Quibble with Kling

Arnold Kling points out a disagreement we have over whether Americans spend too much on health care. There is no doubt that Americans spend more on health care than any other country. But why is that necessarily a bad thing? There is no “right” amount to spend on health care or anything else. The United States spends more on athletic shoes than any other country. No one speaks of the athletic shoes crisis.

Economists consider health care a “normal good,” meaning that spending rises or falls with income. As incomes rise, people demand more and better health care. America’s wealth determines its spending on healthcare. And we receive value for our money. If you’re sick, American health care is still the best in the world. For diseases such as cancer, heart disease, and AIDS, outcomes are far better in the U.S. than in other countries.

Of course much health care spending is wasted. Many of the drugs, procedures and services we purchase are relatively useless. Some may even do more harm than good.  But who is best placed to make that decision? After all, health care purchasing is based on a wide range of personal preferences, not all of which are measurable in terms of outcome. Pain tolerance, time away from work, desire to pursue certain activities, and even peace of mind may all influence my decision. Only individual consumers can really make such decisions — and there really is no wrong answer.

Where Arnold is right is in pointing out that those decisions are currently distorted by our third-party payment system. Because those purchasing health care are able to pass the bill onto third parties, the usual market disciplines don’t apply. We consume health care with even the most marginal perceived value. That is why health-care reform must focus on giving consumers a greater stake in the decision-making process.

If consumers were spending more of their own money on health care, would total spending go down? Probably. But, then again, I don’t care — and neither should the rest of us.

Five Years in Prison for Online Gambling

Next week, a law takes effect in Washington State that makes Internet gambling a Class C felony, punishable by up to five years in prison. It’s the same class of felony reserved for child pornographers, animal torturers, and people who make threats on the governor’s life.

Lawmakers and state officials say the intent of the law isn’t to go after gamblers themselves. One wonders, then, why the bill was necessary. The “bet taking” side of online gambling is already a federal crime, and has been for years. That’s why gambling sites are incorporated and located overseas.

The only conceivable reason why a bill might be needed would be to clear up the ambiguity on the “bet placing” side of the transaction. No one seems to know whether the user-end of online gambling is legal. This bill is quite clear on that – the placing of bets via the Internet is now a felony in Washington. Indeed, one official conceded to the Seattle Post-Intelligencer that vice agents have already begun breaking into the homes of people gambling online to warn them that the activity is illegal. They’ll now be able to arrest them too.

In addition to the usual paternalistic objections, the bill also raises significant privacy concerns. How will state officials know who’s gambling unless they’re closely monitoring citizens’ online habits? Will they begin snooping through ISPs?

The other option would be to track the finances of suspected gamblers. That’s even more troubling. Most gaming sites now conduct transactions with U.S. customers through offshore payment services like Neteller or FirePay (U.S.-based PayPal was threatened out of the business by federal prosecutors via the PATRIOT Act). In industry jargon, these are called “ACH” transactions. They’re more commonly known as a “virtual check.” But banks can’t trace the nature of ACH transactions. They can only trace the name of the vendor. A customer could be using Neteller or FirePay to purchase just about any good or service online. But it’s conceivable that merely using either service could be enough to set off red flags for state investigators.

Though predicated on concerns about problem gambling and children’s access to gaming sites (virtually impossible, by the way), it’s probably worth noting that the Washington law has been pushed with heavy backing from the state’s bustling bricks-and-mortar casino industry. Sort of undercuts the notion that moral aversion to gambling is motivating all of this. The politically powerful horseracing industry won an exemption from the ban too.

If there’s a bright side to the bill, it’s the public reaction to it. Comments posted on the state legislature’s website aren’t just overwhelmingly negative, they’re scathing. In fact, polls show most Americans are by and large opposed to state and federal attempts to prohibit Internet gambling.

More on the folly of Internet gambling prohibitions here and here.

Toward a Liberal Federalism?

Apropos of the Marriage Amendment issue: one of the happy accidents of the Bush administration is that the president has been so determined to centralize social policy in the United States that he’s actually made some liberals appreciate the virtues of federalism.  See this piece by the New Republic’s Franklin Foer or this one from Stanford’s Richard Thompson Ford for examples. 

Early on in his administration, President Bush promised to:

make respect for federalism a priority in this administration.  Respect for federalism begins with an understanding of its philosophy.  The framers of the Constitution did not believe in an all-knowing, all-powerful federal government.  They believed that our freedom is best preserved when power is dispersed.  That is why they limited and enumerated the federal government’s powers, and reserved the remaining functions of government to the states.

Respect for federalism would require respecting the voters of Oregon when they set up a law allowing terminally ill patients to end their suffering with the help of their doctors. Respect for federalism would require respecting the voters of California and 10 other states that allow cancer patients, AIDS patients and others to use medical marijuana.  Yet on these issues and many other issues that the Constitution leaves to the states – crime, education, marriage – President Bush has fought very hard to increase Washington’s involvement – usually in ways that offend Blue State sensibilities.

With the Red Team doing the centralizing, it’s only natural that the Blue Team would look favorably on a more decentralized system.  I’ve always been a bit uneasy about some of the liberal justifications for federalism, such as Justice Brandeis’s “laboratories of democracy” argument.  Just who are the lab rats in that metaphor?  (Note that Foer lists Elliot Spitzer as one of the bold experimenters liberals should emulate.) 

But the virtues of federalism are plain, and appreciating them shouldn’t depend on who’s up or who’s down.  Federalism makes it easier for Americans to escape unwelcome state experiments with fiscal and social policy.  It enhances the political power of individual citizens by allowing important decisions of governance to be settled closest to where Americans live and work. And it avoids making politics a centralized war of all against all, where each contested moral issue is settled in a one-size-fits-all fashion at the level furthest from the people.

I hope that the Republican assault on federalism leads to a resurgence of decentralist liberalism.  I fear that, as with the Right, the Left’s interest in subsidiarity will last about as long as its exile from federal power.  Yet hope springs eternal. 

Individualism Is Racist?

About a month ago, a Seattle blogger noticed that the Seattle Public School District’s website had some rather nutty definitions of racism. Among them, that “having a future time orientation” (academese for having long-term goals) is among the “aspects of society that overtly and covertly attribute value and normality to white people and Whiteness, and devalue, stereotype and label people of color.”

Huh?

It also said that only whites can be racist in America and that it was “cultural racism” to “emphasiz[e] individualism as opposed to a more collective ideology.”

Double huh?!?

A perfect storm of piqued and perplexed blogging ensued, but the news departments of the Seattle Times and Seattle Post-Intelligencer didn’t seem to be picking up on it. So I wrote this piece that ran in the Seattle P-I this morning.

In a “pop” heard round the Sound, the plug was pulled on the offending page before 8:00 am local time, though the Google cache of it is still around for the benefit of the curious.

The original nutty page has now been replaced with an apology for any offense caused, which is nice. It isn’t going to help in the long run though.

As long as there is only one official system of schooling, for which everyone must pay, everyone will demand that it reflect their own views and reject views they oppose. In a pluralistic society, that’s just not possible. The inevitable result is an endless battle over the content of the curriculum.

The solution, as I point out in the P-I op-ed, is school choice.

Hat tip to my research assistant Jessie Creel and an Agitator post by Radley Balko.

The End of “Reform” at the New York Times?

The reporters and editorial writers at the New York Times are powerful advocates of imposing new restrictions on campaign spending. They typically refer to the leaders of interest groups like Common Cause as “advocates of campaign finance reform.” That helps the cause of restricting campaign finance. After all, who could be against “reform”?

So it is noticeable when the New York Times calls the partisans of restrictions something other than “reformers.” In today’s edition, a Times reporter twice called them “advocates of changing campaign financing.”

It is both a revealing and misleading choice. It is misleading because these people seek more restrictions on campaign finance. To be sure, they expect new restrictions will lead to changes in campaign finance, but what they actually hope to do is impose new rules that restrict campaign spending.

Here’s the revealing part: The Times has never before called the Shays-Meehan-Common Cause crowd “advocates of changing campaign finance.” They are usually called “reformers.” (I checked on Lexis-Nexis). Why the new name?

The “advocates of changing campaign financing” along with congressional Republicans are trying to eliminate 527 groups; today’s article concerns one skirmish in that war. That effort against 527s is expected to harm the Democrats who used the groups extensively in 2004.

So if a person pushes restrictions on speech like McCain-Feingold that were expected to help the Democrats, the New York Times called them “advocates of campaign finance reform.” If the same person demands restrictions expected to hurt the Democrats, the Times dubs them “advocates of changing campaign finance.”

I know the New York Times would never have a partisan purpose in advocating restrictions on political speech. Still, this new term for their former friends does create a disturbing appearance of partisanship.

Reckless Justice: The Marriage Protection Amendment

Here’s a new topic for Chairman Sensenbrenner’s suddenly awake Judiciary Committee: “RECKLESS JUSTICE: Does the Marriage Protection Amendment Trample the Constitution?” Of course, the case seems open and shut. In the landmark Lopez case a decade ago, Chief Justice Rehnquist opened with the basics: “We start with first principles. The Constitution establishes a government of enumerated powers.”

Marriage law has always been reserved to the states in our federal system. Law professor Dale Carpenter calls the Marriage Protection Amendment, which the Senate will debate and vote on next week, “a radical intrusion on the nation’s founding commitment to federalism in an area traditionally reserved for state regulation” in his Cato study released today.

Conservatives claim to believe in federalism, until the states do things they don’t like. Then they turn into New Deal liberals, believing that the federal government should correct the errors of the 50 states. The proposed Marriage Protection Amendment would not just protect states from being forced to recognize same-sex marriages made in other states, as some proponents claim. It would forbid any of the several states from deciding – through court decision, legislative action, or even popular initiative – to extend marriage to gay couples. Depending on the interpretation of its language, it may even ban civil unions and domestic partnerships.

Of course, it’s not good lawmaking to propose an amendment to the Constitution whose language is so unclear, even to its supporters. But then, this really isn’t lawmaking. Majority Leader Bill Frist knows the amendment won’t pass the Senate next week. It failed in 2004 and is likely to get only a handful more votes this time. A majority leader usually doesn’t bring legislation to the floor that he knows will fail. Frist must have some other purpose in mind in bring this amendment up for a futile vote.

Crisis of Abundance Watch

Joe Kristan is reading Crisis of Abundance and blogging the experience. He writes

Crisis of Abundance says

“An important characteristic of premium medicine is that many procedures have a low probability of affecting the outcome. In fact, often the procedures do not even affect the treatment plan.”

Digital mammography seems an apt illustration of this point. It is more effective for only a minority of patients, and the treatment for a cancer discovered digitally doesn’t differ from that discovered on film. Yet as it is the latest technology, and in short supply, the digital technology will cost more. It’s an illustration of “premium medicine” that could have come right out of C of A. And, as C of A notes, spending on imaging services is growing twice as fast as health spending as a whole.

He is referring to an article in the Wall Street Journal on digital mammography.

Mike Tanner says it’s fine that Americans spend a lot on health care. I would agree if it were an income effect. The problem is that with 85 percent of our health care services paid for by third parties (a stat which I got from the Tanner-Cannon book), I think it’s largely a substitution effect, based on an implicit price to the consumer of zero.

If you want to comment on this issue, go to the Amazon page for Crisis of Abundance. Scroll down for the discussion forum.