Cato at Liberty
Cato at Liberty
Email Signup
Sign up to have blog posts delivered straight to your inbox!
Topics
General
Al Gore — Master of Understatement
My nomination for quote of the day comes from former Vice President and current lecturer-in-chief Al Gore: “We now have the capacity to literally change the relationship between the Earth and the sun.”
Related Tags
HSAs Grow Faster than Critics’ Understanding of HSAs
An article in today’s Detroit Free Press reports that health savings accounts (HSAs) are catching on, and showcases some of the less-valid criticisms HSAs.
In the article, Jason Furman of the Center on Budget and Policy Priorities argues that a family of four with an annual income of $30,000 and the usual expenses is unlikely to be able to save $5,000 per year in an HSA.
There are a number of problems with that argument. For example, it doesn’t address the question, “Compared to what?” The alternative to HSAs is usually comprehensive third-party health coverage, which carries much higher premiums than high-deductible health insurance. If the family can’t afford to save, where are they supposed to get the money to pay those higher premiums? Also, there’s nothing in the HSA law that says a family must have $5,000 of cost sharing. The family’s cost sharing could be as low as $2,100. (Less cost sharing means higher premiums, but shouldn’t the family be able to make that tradeoff for themselves?)
The article raises a number of other criticisms of HSAs, all of which I address in a study released today by the Cato Institute titled, “Health Savings Accounts: Do the Critics Have a Point?”
Related Tags
Peruvian Elections and the Future of Latin American Populism
The upcoming Peruvian runoff elections for president may provide another sign that the wave of Hugo Chavez-style populism in Latin America has crested. The contest is between Alan Garcia–a former populist president who ruined the country during his term (1985–1990) with heterodox economic policies (Peru was set back 30 years in terms of per capita income; had 7,000 percent inflation in 1990; and much of the country was controlled by the Shining Path guerrillas)–and Ollanta Humala–an extreme nationalist and populist who, following the example of Chavez, led a brief but failed rebellion against the outgoing regime of President Alberto Fujimori in 2000. Humala´s popularity among the most disenfranchised of Peru´s poor, especially in the country´s interior, went virtually unnoticed among Peru´s elite and the press until last year. (Peruvian adjunct scholar Enrique Ghersi was alone in foreseeing this development in an op-ed in the Christian Science Monitor in 2003).
Garcia promises to run a responsible government that respects the constitution and the separation of powers, including the independence of the central bank. Humala promises nationalizations, a rejection of the free trade agreement with the United States pending in the congress, a constituent assembly to draft a new constitution, and the arrest of corrupt ex-presidents including Garcia himself.
Related Tags
Jump Ship!
Thursday’s New York Times Economic Scene article by Austan Goolsbee made the rounds late last week. Here’s Alex Tabarrok’s take. Be sure to read the comments. From the left, here’s Lindsay Beyerstein and commenters. Goolsbee presents research that shows that the state of the economy when you take your first job can have a long-lasting effect on future earnings:
Lost in the argument over whether young people today know how to work, however, is the mounting evidence produced by labor economists of just how important it is for current graduates to ignore the old-school advice of trying to get ahead by working one’s way up the ladder. Instead, it seems, graduates should try to do exactly the thing the older generation bemoans — aim for the top.
The recent evidence shows quite clearly that in today’s economy starting at the bottom is a recipe for being underpaid for a long time to come. Graduates’ first jobs have an inordinate impact on their career path and their “future income stream,” as economists refer to a person’s earnings over a lifetime.
The importance of that first job for future success also means that graduates remain highly dependent on the random fluctuations of the economy, which can play a crucial role in the quality of jobs available when they get out of school.
[…]
These data confirm that people essentially cannot close the wage gap by working their way up the company hierarchy. While they may work their way up, the people who started above them do, too. They don’t catch up. The recession graduates who actually do catch up tend to be the ones who forget about rising up the ladder and, instead, jump ship to other employers.
What’s really the advice here? Shoot for the top, or do a lot of switching? Goolsbee seems to be endorsing aiming for the top, but the last sentence above, about jumping ship, seems to support something else altogether.
In 1995, with my degree in Studio Art and the History and Philosophy of Art firmly in hand, I landed a plum “you want fries with that” gig at the Arby’s in the Iowa City mall. I guess I should be glad I didn’t try work my way up the Arby’s ladder!
Stanford’s Paul Oyer, whose study Goolsbee cites, says: “Try to get lucky. And also, think carefully about that first job because it can matter for the rest of your career.” Isn’t this is terrible advice?
First, Oyer assumes that maximizing lifetime income is our goal, which is absurd. I imagine you should try to get a job you will like. And it is lucky indeed to hit the career bullseye with the first throw. So you should simply assume that you won’t get lucky, won’t get the dream job out of the gate. Even if you do get the dream job, you’ll likely find that it’s not such good luck after all, and find yourself dreaming a different dream. It will take a while to find the right fit, so plan for that.
Still, even if your goal is lifetime income maximization, the article seems to indicate that you should bail from your first job just as soon as you can get one that pays more. Your earnings are path-dependent as long as you stay on the same path. So don’t. Switch paths. The days of 35 years, a gold watch, and a pension are long gone.
Anyway, why even try to get lucky with your first job? If I’m giving advice to undergrads, I’m going to tell them to study something they really enjoy—something they’ll get satisfaction from for their rest of their lives. I don’t use it on the labor market, but my art history major is and will continue to be a source of enjoyment to me. About the first job: don’t think ladder, think springboard. (However, if you’re studying something interesting but not very marketable, make sure you get some real work experience in another area, so you don’t find yourself in the dread category “educated but unskilled.”) As I mentioned before, people are afraid of volatility, but many would be happier if they took more risks. In a society like ours, a good diploma from any decent college, grad, or professional school is pretty much all the safety net you’ll ever need, especially when young and childless, so the risk of job-switching isn’t actually very risky at all.
Europe’s Public Health Crowd Hunkers Down to Fight the Scourge of “Secondhand Drinking”
Via the excellent Spiked Online:
The campaigns to combat the effects of ‘passive smoking’ are widely credited for Europe’s growing number of smoking bans. Now alcohol is in the sights of the public health lobbyists, and they have invented the concept of ‘passive drinking’ as their killer argument.I have seen a leaked draft report for the European Commission, which is due to be published some time in June. It makes claims about the high environmental or social toll of alcohol, the ‘harm done by someone else’s drinking’. The report is likely to inform proposals for a European Union alcohol strategy later this year.
[…]
By October 2004, the theme was established in a Eurocare submission to the Commission. ‘Alcohol not only harms the user, but those surrounding the user, including the unborn child, children, family members, and the sufferers of crime, violence and drink-driving accidents: this can be termed environmental alcohol damage or “passive drinking”.’
This of course is a replica of the roadmap the prohbition movement used at the beginning of the last century, though Spiked author Bruno Waterfield does draw one distinction, invoking John Stuart Mill:
Once the temperance movement believed man could be saved. Today, it joins with the public health lobby to treat drinking as a form of social pathology rather than a question of moral redemption. Once, public health had the aim of protecting society against disease. Today, the ‘new public health movement’ seeks to protect society against people themselves.
Today’s public health outlook on drinking dovetails neatly with other powerful contemporary trends that emphasise human vulnerability or undermine trust between individuals. Linking drinking to free-floating risks, independent of the intentions of individuals, is a characteristic of today’s anti-humanist climate. But 200 years after his birth, we can take heart from the works and legacy of Mill. He stood against the tide in his day and won. We owe him a debt and we owe the future of freedom a duty to make our own stand against the new public health alliance of the twenty-first century.
I warned in a Cato paper a few years ago about the rise of the neoprohibition movement here in America. Think it couldn’t happen again? Consider this little nugget, pulled from the DEA’s website:
A word about prohibition: lots of you hear the argument that alcohol prohibition failed—so why are drugs still illegal? Prohibition did work. Alcohol consumption was reduced by almost 60% and incidents of liver cirrhosis and deaths from this disease dropped dramatically (Scientific American, 1996, by David Musto). Today, alcohol consumption is over three times greater than during the Prohibition years. Alcohol use is legal, except for kids under 21, and it causes major problems, especially in drunk driving accidents.
Mark Thornton took on apologists for alcohol prohibition in a Cato paper way back in 1991.
An Otherwise Helpless Consumer Public?
In 1971, a federal court expressed the rationale behind the federal Food, Drug, and Cosmetic Act when it wrote that the law was “enacted for the protection of an otherwise helpless consumer public” [United States v. Lit. Drug Co., 333 F.Supp. 990, 998 (D.N.J. 1971)]. But would consumers be helpless without the Food and Drug Administration certifying the safety and effectiveness of drugs, biologics, and medical devices? A recent National Public Radio report suggests the answer is no.
The one area where Congress has reined in the FDA’s regulatory authority has been dietary supplements. The FDA has no authority to regulate the content or safety of dietary supplements before those products are sold. Since the FDA doesn’t require testing, there is no testing. Right?
Wrong. A for-profit firm called ConsumerLab.com tests dietary supplements with an eye toward catching unsafe or mislabeled products in the lab before they harm anyone. ConsumerLab.com provides reports on its findings to consumers who pay an annual fee, but it provides information on product recalls at no charge.