October 2006

October 31, 2006 4:38PM

The Great Crocodile Dies

P. W. Botha, who was prime minister of South Africa as the struggle against apartheid reached its climax, has died at 90. In 1988, I attended a conference organized by South African libertarians in neighboring Swaziland. When I arrived at the conference and approached the registration table, the first thing I saw was a stack of bumper stickers reading “I ♥ PW.” I was appalled — libertarians proclaiming their support for the boss of the apartheid state?


Then I got closer and realized it wasn’t a heart, it was a tomato, as in “I

Media Name: tomato2.jpg

PW.” Why a tomato? My hosts explained to me that the bumper sticker expressed solidarity with a protester who had thrown a tomato at the State President. Well, that’s better, I thought.


Botha was pushed out of power soon after that by F. W. de Klerk, who freed Nelson Mandela from jail and negotiated the end of apartheid.

October 31, 2006 4:37PM

The Upside of Nature’s Wrath

Fourteen months after Katrina devastated large swaths of the Gulf Coast, the Commerce Department has finally gotten around to promulgating new regulations that could relax antidumping and countervailing duty restrictions for a temporary period after the next national emergency.


In the weeks following Katrina, some observers (including this one) pointed to the absurdity of maintaining restrictions on foreign cement, lumber, and steel when the costs of those crucial building materials comprised a substantial chunk of the projected reconstruction bill. Of course, trade restrictions raise the cost of production to U.S. businesses and the cost of living for U.S. citizens everyday. But the effects of the hurricane provided an extreme example of the lunacy of trade restrictions, which is what was necessary to get the Commerce Department to acknowledge that its protectionist trade policies carry real costs.


The scope of circumstances that will trigger temporary lifting of trade remedy restraints prospectively is a bit unclear, but it requires the president to authorize Commerce “to permit the importation of supplies for use in ‘emergency relief work’ free of antidumping and countervailing duties.” Considering that emergencies are typically met with a costly (and often mismanaged) federal response, a regulation that actually mandates loosening the federal noose is welcome news indeed.


Now, all we need is a president who will consider it “emergency relief work” to educate policymakers about the predictable impact of constrained supply on price. 

October 31, 2006 3:33PM

Income Data Misquoted and Fundamentally Flawed

An op‐​ed in the Washington Post on Sunday included data purporting to show that the rich are grabbing an increasing amount of the income earned in this country.


Jacob Hacker of Yale University cites data from economists Thomas Piketty and Emmanuel Saez supposedly showing that “the share of national income held by the richest 1 percent of Americans–stable at about 32 percent throughout the middle decades of the 20th century–began to rise sharply in the 1970s and by 2002 had surpassed 40 percent.”


Actually, the Piketty Saez data show that it is the top 10 percent whose share supposedly rose from 32 to 40 percent.


More importantly, a forthcoming Cato paper by Alan Reynolds shows that the Piketty‐​Saez data, based on federal tax return information, is a deeply flawed source for such income “distribution” analyses.


For example, because of tax law changes since the 1970s, a huge share of business income that used to be reported on corporate returns is now reported on individual returns. Reynolds finds that much of the supposed rise of the share of income at the top is simply a result of this paper shuffling regarding where business income is reported.


This Piketty‐​Saez data has been frequently misused by Paul Krugman, the Economist magazine, and many other news outlets to draw grand conclusions about how the gains of U.S. economic growth have supposedly only gone to the those at the top. Reynolds study shows that that is probably not true. At least, his findings show that reporters and pundits should be very careful in using any data that claims to show changes in income shares over time.


Certainly, they should not use sloppy language like Hacker’s phrase “income held by the richest.” Income data shows an annual flow–it is not “held” like wealth. Note that “richest” also refers to wealth holdings, not annual income flows. 

October 31, 2006 1:56PM

Health Care Involves Non‐​Monetary Costs, Too

The Fraser Institute of Vancouver, B.C., has released its 16th annual “Waiting Your Turn” report on waiting times for health care in Canada’s state‐​run Medicare system. The median wait for surgical and therapeutic services increased slightly over the 2005 median to less than one day shy of their all‐​time high of 17.9 weeks in 2004. Throwing more money at the system doesn’t seem to make a difference; the Frazer Institute has documented that waiting times often increase with increased spending on Canada’s Medicare program.


This year’s report had special significance for me. Four Sundays ago, I tore my ACL playing soccer. The following Tuesday, I saw an orthopedic surgeon. On Wednesday, I had an MRI. (As a cash‐​paying patient, I had people offering to cut their MRI list price in half.) The next Tuesday, I saw the orthopedist again. He diagnosed the torn ACL and recommended surgery, which he could schedule as early as November 9th. That’s 4.6 weeks after injury, 3.3 weeks after diagnosis. 


Nadeem Esmail, the lead author of the Fraser report, helped me work out how I would have fared in Canada. Esmail estimates that, “not counting issues actually getting the referral to a specialist from a GP in the first place,” a typical Canadian could expect to wait:

  • 16.2 weeks to see an orthopedic surgeon,
  • 10.3 weeks for an MRI, and then another
  • 16.5 weeks for ACL reconstruction surgery.

All told, that’s 43 weeks; I could expect to have my ACL reconstructed in early August 2007. And with a six‐​month recovery time, I’d be good as new by February 2008.


As it turns out, I’m not having the surgery done on the earliest possible date. I’m able to walk without too much pain, so I’m taking some time to strengthen my knee, and to research procedures, surgeons, and prices. Not all waits are problematic. 


But it’s nice to have the choice. Were I forced to wait until next August for surgery, that would impose significant costs on me and on others. I would be living in pain, with limited mobility, and might further injure my much‐​weakened knee. My wife would have to endure nine additional months of complaining. Plus, think of all the games my soccer team might lose. 


America’s health care sector is full of waste, but when people say that Canada’s system is cheaper, they’re leaving out some very real non‐​monetary costs. Canada’s Supreme Court acknowledged those non‐​monetary costs in a 2005 opinion that struck down Quebec’s ban on private insurance:

Dr. Eric Lenczner, an orthopaedic surgeon, testified that the usual waiting time … for patients who require orthopaedic surgery increases the risk that their injuries will become irreparable.… [He] also stated that many patients on nonurgent waiting lists for orthopaedic surgery are in pain and cannot walk or enjoy any real quality of life.

The ban on private health insurance effectively kept people from spending more money on health care to reduce health care costs. (The story of the man who defeated that ban can be found here.) 

Only the individual patient can tally those non‐​monetary costs and weigh them against the cost of treatment. If we’re really interested in lowering health care costs, we need to give the patients the money, and let them choose the lowest‐​cost option.

October 31, 2006 1:46PM

Kahn on ‘Net Neutrality

Venerated deregulator Alfred Kahn weighs in on “ ‘net neutrality” — the proposal to have Congress and the Federal Communications Commission decide the terms on which ISPs could provide service, and whom they could charge for what. Net neutrality regulation is advanced primarily by the political left. Here’s Kahn on his bona fides:

I consider myself a good liberal Democrat. I played a leading role under President Carter in the deregulation of the airlines (as Chairman of the Civil Aeronautics Board) and trucking (as Advisor to the President on Inflation), against the almost unanimous opposition of the major airlines and trucking companies and–let’s be frank about it–their strongest unions. Among our strongest allies were Senator Ted Kennedy, Stephen (now Supreme Court Justice) Breyer, and such organizations as Common Cause, Public Citizen, the Consumer Federation of America and Southwest Airlines.

On telecommunications competition:

In telecommunications, cable and telephone companies compete increasingly with one another, and while the two largest wireless companies, Cingular and Verizon, are affiliated with AT&T and Verizon, respectively, some 97 percent of the population has at least a third one competing for their business as well; and Sprint and Intel have recently announced their plan to spend 3 billion dollars on mobile Wi‐​Max facilities nationwide. Scores of municipalities led by Philadelphia and San Francisco, are building their own Wi‐​Fi networks. And on the horizon are the electric companies, already beginning to use their ubiquitous power lines to offer broadband–to providers of content, on the one side, and consumers, on the other.

His conclusion: “There is nothing ‘liberal’ about the government rushing in to regulate these wonderfully promising turbulent developments.”

October 31, 2006 1:45PM

The Great Chain of Status?

Last week Henry Farrell over at Crooked Timber objected to the key point of my recent article in Policy (related Cato podcast here), which is that status-seeking need not be a zero-sum game, because there are indefinite dimensions of status competition. (And therefore, the government need do nothing to mitigate the alleged harm of status competition.) It is true that there can only be one winner of every race, but there is no cap on the number or kind of races. The greater the number and variety of races, the more likely it is that everybody will be able to find one in which they can win, place, or at least show. Henry replies:

Wilkinson’s claim implies, unless I misunderstand him badly, that it doesn’t matter very much to me if I’m a despised cubicle rat who can’t afford a nice car and gets sneered at by pretty girls, because when I go home and turn on my PC, I suddenly become a level 75 Night Elf Rogue who Kicks Serious Ass! Now this example is loaded – but it’s loaded to demonstrate a serious sociological point that Wilkinson doesn’t even begin to address. These indefinitely proliferating dimensions of status competition are connected to each other in their own implicit meta-ranking, which is quite well understood by all involved. Being a world-class scrabble-player isn’t likely to win you much respect among people who aren’t themselves competitive scrabble-players; the best you can expect is that someone will write a book that pokes fun at your gastro-intestinal problems . It’s a very different matter if you’re a world class soccer player; you’re liable to be invited to all sorts of fun parties, hit upon by beautiful people, stalked by the paparazzi and the whole shebang. Being a world class blogger is somewhere between the two, albeit certainly much closer to the scrabble-player than the soccer star. Even if you’re king of your own mountain, you’re likely to be quite well aware of the other mountains around you that make yours look in comparison like a low-grade class of a gently sloping foothill, or perhaps even a slightly upraised knob in the middle of a steep declination. You’re similarly aware of those less well-advantaged foothills or knoblets whose owners you can look down upon.... In short, people are highly aware of the relative rankings of their obsessions.

I am unmoved.

Read the rest of this post »
October 31, 2006 1:40PM

Lovely Hospital, Doc — Be a Shame if Anything Were to Happen to It…

I recently came across a transcript of National Economic Council director Al Hubbard’s remarks to a hospital trade group back in March. In it, Hubbard discusses Bush administration policy regarding price transparency in health care. That policy was later fleshed out in an executive order, which mandated that federal health programs furnish beneficiaries with information on prices, etc. The administration stopped short of imposing a similar mandate on the private sector.


But Hubbard’s comments to the hospitals let us know where the president is headed. And it was Hubbard’s…shall we say…rhetorical agility that I find priceless:

The president’s approach has been…that through persuasion we can get the [health care] providers of this country to start providing accurate, easy‐​to‐​use information and we don’t have to go to legislation, because, you know, legislation is a very crude tool to accomplish things and we would much rather let the free market, and you all individually, com[e] up with the best way of approaching transparency as opposed to Congress and the federal government telling you how to do it. But the president has also made it clear that if the provider community is not receptive to providing transparency that we will turn to Congress and ask them to support transparency.

When is persuasion not persuasion? When it’s a threat. Later, in an answer to a question, Hubbard dispensed with the subtleties:

And by the way – and I hate to use this blunt club as a threat – if you don’t, it’s going to be imposed upon you. It is going to be imposed upon you.

In other words, Pres. Bush thinks that the market should do whatever it wants, so long as it’s exactly what he wants.


Which is exactly the same as not being for a free market at all.