Work, Social Production, and Inequality

Matt Yglesias links to an interesting discussion about the growth of activities that raise our standard of living without being captured in economic statistics. Wikipedia is a great example of this: it’s tremendously valuable to hundreds of millions of Internet users, but because it’s given away for free that value is not reflected in our economic statistics.

I think this general insight is right, but I don’t agree with John Quiggin’s conclusions about the social implications. In particular, Quiggin writes:

It seems unlikely that large inequalities in income are beneficial to anyone except the recipients of high incomes.

If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducing working hours.

The first point ignores the fact that rich people are a crucial part of many public-spirited enterprises. Jimmy Wales was able to finance the initial development of Wikipedia (then called Nupedia) because he had previously earned profits building commercial websites. The Ubuntu project, creators of an extremely popular Linux-based operating system, is supported to the tune of millions of dollars a year by successful entrepreneur Mark Shuttleworth. Brewster Kahle used the profits from his successful Internet businesses to build the Internet Archive, a crucial repository of public domain works. John Gilmore, who made his fortune as one of Sun’s first employees, has used his wealth to promote a variety of free software projects, including GNU radio and Gnash. I could provide plenty of other examples.

The important thing to recognize is that these projects could only exist because of the combination of their founders’ expertise and their money. Without cash, these folks would have been unable to provide the support necessary to get these projects off the ground. But even more important, these projects also wouldn’t have succeeded without their deep understanding of their fields. Only someone with years of experience in the software industry would have the judgment and the relationships necessary to make a project like Ubuntu successful.

In particular, if the policy option on the table is to reduce inequality by redistributing wealth from rich people to the government, there’s absolutely no reason to think that the federal government could support these kinds of projects with anything like the degree of success that these private actors have done. Congress has plenty of cash, but members of Congress and their staff haven’t the faintest clue what it takes to build an operating system. Moreover, they wouldn’t even know how to tell a competent operating system designer from an incompetent one, so if they sought outside expertise they’d likely get bad advice.

I think it’s a little bit surprising that Matt would endorse Quiggin’s argument about working hours. If you read Matt’s blog, it’s obvious that he works a lot more than the 1824 hours/year national average. I suspect that Matt works so much in part because his job involves goofing off on the Internet and because he’s excited about the mission of his non-profit employer. Moreover, I’d wager that a large fraction of Matt’s readers read his blog at their jobs while they’re theoretically “on the clock.” In other words, one of the most important but unmeasured ways that our standard of living has improved in recent decades is that more and more of us are blessed with white collar jobs with intellectually-engaging work, pleasant working conditions, and the flexibility to spend time at the office doing things like reading blogs.

Probably the best illustration of these trends is Google. Google is, of course, a fabulously profitable company. It’s also a company that’s famous for the long hours put in by its employees—one reason they offer their employees free food and other perks is so they’ll be less likely to go home in the evenings. At the same time, Google has a policy of “20 percent time” that officially encourages employees to spend company time working on personal projects that may or may not contribute to the company’s bottom line. And Google is also one of the most enthusiastic users and supporters of free software, employing a number of key free software developers such as Guido Van Rossum and Jeremy Allison.

There is, in other words, no particular reason to think that the growth of the non-monetary sector of the economy can or should lead to reduced working hours, on average. Rather than using higher wages or shorter working hours to attract employees, firms may increasingly compete for workers by giving workers more interesting work and more on-the-job flexibility. Indeed, it seems likely that an increasing fraction of the time the Labor Department considers as time spent “working” actually consists of employees reading blogs, editing Wikipedia, and otherwise contributing to the richness of the non-commercial sector of the Internet.

This Is Why Universal Coverage Is a Religion — and Not about Compassion or Saving Lives

I was invited to participate in an email/online/sorta exchange for the Washington Post yesterday.  Unfortunately, the effort was spiked after just a few rounds of emails.  But rather than let my participation go to waste, I thought I’d post one exchange that I think highlights why I’m not just being colorful when I describe supporters of universal health insurance coverage as the Church of Universal Coverage.  I could summarize the exchange, but I’m lazy.  So I’ll just copy and paste.

I wrote:

All the interest groups are meeting with all the right politicians and making all the right noises, thus the Church of Universal Coverage says the stars have aligned for fundamental reform… Everyone is at the table right now because no one wants to be on the menu.  But when the Democratic leadership makes its intentions clear, today’s love-fest will turn into a bloodbath.

Andres Martinez of the New America Foundation (who owes me a taco al pastor) responded:

I am a proud member of the church, Michael.  As New America’s own recent study on the urgency of reform – which reads like a strong courtroom closing argument – noted, how can the world’s most prosperous nation afford to have tens of thousands of its citizens die each year because they lacked access to health care?  Health care reform is a moral imperative, so your reference to a church (um, even if sarcastic) is appropriate…

I replied:

The Institute of Medicine estimates that every year, about 20,000 Americans die because they lacked health insurance, but as many as 100,000 die from preventable medical errors.  What moral code compels the Church of Universal Coverage to solve the first problem before addressing the second?

Elise Gould of the Economic Policy Institute (whose working paper, “Who is Adversely Affected by Limiting the Tax Exclusion of Employment-Based Premiums?”, I am keen to read) chimed in:

In an answer to Michael’s post about the deaths caused by lacking health insurance as compared to those from preventable medical errors, I’d argue that it’s much easier to solve the second when you have people in a common system (i.e., solving the first).

Me again:

To say that universal coverage will make it easier to reduce medical errors is pure fantasy.

The principal reason we have too many medical errors is that fee-for-service payment dominates America’s health care sector, and fee-for-service rewards medical errors and punishes efforts at error reduction.  The reason fee-for-service dominates is government.  Medicare – the single-largest purchaser in the world – pays largely on that basis.  Ditto Medicaid.  And the federal tax code encourages fee-for-service by insulating consumers from the cost of their health coverage.  If you think it’s hard for government to change payment systems now, just wait until universal coverage gives government even more control over payment systems and makes even more providers dependent on those decisions for even more of their income.  (As an aside, when consumers control their health care dollars and choose their health plans, they can change payment systems in a heartbeat.)

This is why universal coverage is a religion: supporters believe that universal coverage has magical, supernatural powers to suspend political reality and the laws of economics.  I do not exaggerate.  See here and here.

Health care reform is a moral imperative.  But universal coverage is not a moral imperative, nor is it about compassion or saving lives.

For those who are interested, the Anti-Universal Coverage Club is still accepting new members.

Debating the War on Drugs in Mexico

Yesterday I was invited to Pajamas TV to discuss the increasingly violent situation in Mexico, where the drug-related death toll continues to skyrocket. The other guest was journalist Matt Sanchez.

The discussion rapidly turned into a debate with Sanchez on the merits of drug legalization as an alternative to the current mayhem. If you’re interested in the topic, the video is available here, and the audio here.

Len Nichols Is Wrong: This Debate Is about Socialized Medicine

Over at “The New Health Dialogue Blog,” my friend Len Nichols writes:

I am disappointed to hear the health reform conversation devolve once again into a contrived debate about a single payer, government-run health system. This is an old dispute about “socialized medicine” and one that has already been settled in the minds of a critical mass of policymakers.

A couple of things strike me about his post.

First, this debate is obviously about socialized medicine, and to argue anything else is absurd. We have a president who advocates single-payer. That president just held a health care summit to which he invited other single-payer advocates, but not a single free-market advocate. As I explain in this paper, all the bluster about “public-private partnerships” is an intellectually dishonest smokescreen. Nichols and other members of the Church of Universal Coverage hate the term “socialized medicine” not because it inaccurately describes their policies, but because it accurately describes their policies and rankles a large segment of the American public. Rather than adjust their policies, they are trying to convince the public that policies generally considered socialist really aren’t.

Second, this “old dispute” obviously has not been “settled in the minds of a critical mass of policymakers.” If that mass of opinion were truly critical, then (by definition) the fact that some are crying “socialized medicine” wouldn’t bother Nichols at all.

I think I’ll shoot my friend an email and invite him to speak at a Cato Institute policy forum where we can discuss whether President Obama is trying to move us closer to socialized medicine.

FutureGen: Economic and Political Decisions

People who support expanded federal intervention into areas such as energy and health care naively assume that policymakers can make economically rational and efficient decisions to allocate resources. They cannot, as a Washington Post story today on FutureGen illustrates.

The story describes the political battle over the location of a $1.8 billion ”clean coal” plant. I don’t know where the most efficient place to site such a plant is, or  if such a plant makes any sense in the first place. But the story illustrates that as soon as such decisions are moved from the private sector to the political arena, millions of dollars are spent to lobby the decisionmakers, and members of Congress are hopelessly biased in favor of home-state spending regardless of what might be best for the national economy as a whole.

President Obama has promised to ramp up spending on such green projects. So get ready for some huge political fights over the big-dollar spoils, and get ready for some monsterous energy boondoggles.

Supreme Court Will Not Hear al-Marri Appeal

The Supreme Court previously granted certiorari to the appeal of Ali Saleh Kahlah al-Marri, the only enemy combatant taken into custody domestically and detained in a military brig. The Court of Appeals for the Fourth Circuit held that he could continue to be detained as an alleged al Qaeda operative without trial. The Supreme Court reversed its decision to hear the case today.

The Obama administration moved him back into the civilian criminal justice system, and denied that it was doing so to keep the lower domestic detainee precedent intact. It argued that denying review while vacating the Fourth Circuit’s decision would serve the ends of justice. Apparently, the Court agreed.

As I have said before, domestic counterterrorism is a law enforcement task, not a military one. The Washington Post and New York Times both wanted the Supreme Court to hear the case and rule that domestic detention is unconstitutional.

Obama’s actions seem to indicate either a lack of interest or a disagreement with the sweeping power claimed by President Bush, that presidents can simply whisk off any person in the U.S. — including citizens — to a military prison without a trial. But now that the Supreme Court has declined to rule on the executive’s claims in this case, we will not have the benefit of a Supreme Court precedent repudiating the executive’s overreach. Whether or not Obama tries to repeat what Bush did, another president will likely try to do it again. Not good.

Vouchers vs. the District with ‘More Money than God’

Editor’s Note: This post was updated on March 9, 2009.

This week, education secretary Arne Duncan referred to DC public schools as a district with “more money than God.” Perhaps he was thinking of the $24,600 total per-pupil spending figure I reported last year in the Washington Post and on this blog. If so, he’s low-balling the number. With the invaluable help of my research assistant Elizabeth Li, I’ve just calculated the figure for the current school year. It is $26,555 per pupil.

In his address to Congress and his just-released budget, the president repeatedly called for efficiency in government education spending. At the same time, the Democratic majorities in the House and Senate have been trying to sunset funding for the DC voucher program that serves 1,700 poor kids in the nation’s capital. So it seems relevant to compare the efficiencies of these programs.

According to the official study of the DC voucher program, the average voucher amount is less than $6,000. That is less than ONE QUARTER what DC is spending per pupil on education. And yet, academic achievement in the voucher program is at least as good as in the District schools, and voucher parents are much happier with the program than are public school parents.

In fact, since the average income of participating voucher families is about $23,000, DC is currently spending almost as much per pupil on education as the vouchers plus the family income of the voucher recipients COMBINED.

So Mr. President and Secretary Duncan, could you please sit down with Democratic leaders in the Senate before next Monday’s vote on an amendment to keep funding the DC voucher program, and reassert to them your desire for efficiency and your opposition to kicking these children out of a program that they depend on?

Here are the details of, and sources for, the DC education spending calculation:

Excluding preschool, higher education, and charter schools, the main education expenditures in the District are as follows:

Office of the Deputy Mayor for Education $4,917,325
DCPS (k-12 relevant items only, see below) $593,961,000
OSSE (k-12 relevant items only, see below) $198,277,000
Office of Public Education Facilities Modernization $38,368,800
Non-public Tuition** $141,700,442
Special Education Transportation** $75,558,319
Capital funding $239,033,000
Total DC k-12 budget $1,291,815,886
DCPS official total enrollment (incl. special ed.) 48,646
Total per pupil spending $26,555

Budget Sources:

DC budget FY2009, Agency budget chapters, part 2

DC Budget FY2009, Capital Appendices, part 2

DC Budget FY2009, Operating Appendices, part 2

Enrollment Source:

Linda Faison at DCPS, e-mail, March 5, 2009

The non-k-12 items excluded from the OSSE budget were:

            amount      code     description

$36,697,000  A245 public charter financing and support
$85,943,000  a430 early care & education administration
$6,322,000  a431 childcare program development
$14,544,000  a432 pre-k and school readiness
$459,000  a433 early childhood infants and toddlers
$2,036,000  a434 income eligibility determination
$37,000  a440 career & technical education
$34,397,000  a475 DC Tag
$726,000  a470 post secondary educ & workforce readiness
$4,574,000  a471 career and tech education
$3,237,000  a472 adult and family education
$1,800,000  a477 adult scholarship

The non-k-12 item excluded from the DCPS budget was:

            amount      code     description

$58,780,000  2200 early childhood education

Transfers from OSSE to DCPS (count in OSSE budget, but not in DCPS budget):

Revenue code Amount

706 $18,172,000
727 $90,290,000
728 $1,370,000