Comments on economics, mystery fiction, drama, and art.

Tuesday, December 20, 2016

As the Republicans consider how to "repeal and replace" the ACA

Jon Kingsdale, who is a faculty member at Boston University School of Public Health has written a post for Vox  in which he makes quite clear that the Republican pledge to "repeal and replace" the Affordable Care Act (a/k/a Obamacare) will be very, very hard to fulfill; you should read his critique.  But then we get this:

It sounds implausibly optimistic, but the only way out of this dead end may be for Republicans to reform the ACA, even as they claim to have done away with it. There are many ways to do this, but my favorite is to punt the issue to the states, as Sen. Bill Cassidy (R-LA) has suggested. The basic idea is to preserve most of the federal funding for the ACA, but vastly expand its state waiver provision, allowing each state to design its own replacement — or not — with its share of the federal dollars. States could enact mandates and market reforms that mirror the ACA (as Massachusetts did, before Obamacare existed), or modify them, or take entirely different approaches. Such approaches might range from Medicaid for all uninsured to high-risk insurance pools for those denied individual coverage.

Well, if you want "implausibly optimistic," this would be it.  The notion that creating 50--51, counting DC, and even more when we consider the territories (Guam, the Marianas, Puerto Rico...)--separate health care insurance systems is a solution truly boggles the mind.  One of the factors that has made the US economy as strong as it has historically been is the ease with which people can move in response to opportunities--better opportunities in the places to which they move.  As economist Timothy Taylor has pointed out, mobility has been declining, and quite rapidly, in the US since the 1970s (from more than 20% of the US population moving from one place to another in the 1950s and 1960s to 12% in recent years).  As he points out, we don't have a good grip (empirically) on why this is.  But, clearly, anything that raises the costs of mobility will tend to reduce mobility,

And being faced with the prospect of losing one's existing medical insurance, having to negotiate the process of re-acquiring new health insurance, being faced with inconsistent and perhaps conflicting requirement about such things as continuity of coverage will raise the costs of mobility.  The US economy would become just that much less flexible, that much less responsive to new opportunities, that much less entrepreneurial.* 

Far from devolving health care to the states, the truly realistic--albeit radical--solution is to move immediately to a single payer, unified system, with adequate (i.e., probably better than today's average) coverage being universal and consistent across geography, across income levels, and across age.  Moving to single-payer would, ultimately, mean the end of Medicare and Medicaid--they would no longer be needed.  It would end the issues involved with medical care being highly dependent on where one lives, or who one's employer happens to be (this week, or this year).  But making the system even more complex is a scary an idea.

Not as scary as what I am afraid the Republicans are likely to come up with, but that's a different, but perhaps more pertinent issue.

*The decreased rate of new business formation in the US--the decline in entrepreneurial activity--is a separate, but extraordinarily important issue.

Monday, December 19, 2016

Universities are, mostly, about teaching. Not that these guys seem to have noticed.

Erik Brynjolfsson and John Silberholz's " ‘Moneyball’ for Professors?" is one of the most appallingly bad pieces of analysis of academic processes I have ever read.  Read it yourself and then ask yourself what one word about the responsibilities (and time use) of university faculty is missing. 

I'll give you a hint, by reproducing the paragraph in which they talk about the weaknesses of their "model."

"Of course, we need to consider some of the limitations we encountered. While we are encouraged by our ability to better forecast future research success, other criteria need to be measured in tenure decisions. For example, the proposed models do not account for scholars’ service to their universities or their personalities — criteria that cannot be easily quantified. Tenure committees must rely on imprecise measures when evaluating candidates on these factors. The analysis has other limitations too, including the relatively small number of scholars in the data set and the focus on only one field."

You noticed, right?  The word "teaching" does not appear.  In fact nothing about faculty interactions with students seems to have found its way into their "model" or into their discussion.  Unless I missed it, the words "students" and "learning" do not appear. I almost want to scream at them, "What the hell do you think universities DO?"

I realize that they are writing about MIT-equivalent institutions, but Jesus Christ Almighty.  That's, what, 1%? 2%?, of the college and university faculty in the US?  And the faculty they are talking about are teaching what percentage of the undergraduate students in the US?  I am literally livid that two guys with their reputations are so blinkered about what academia really is, and so tone-deaf about how this will play with people who do not--I almost typed "teach" here--who do not conduct research at MIT, its peer institutions, and their wannabbes.  I am becoming incoherent with rage.

Tuesday, December 13, 2016

Was Marx Really Wrong About This? Or, What Brad DeLong Seems to Have Gotten Wrong

Brad DeLong has hoisted from his archives a post from May Day, 20013, about what Karl Marx got right and wrong.  It is, in many ways, DeLong at his best.  He has clearly read Marx carefully, and sympathetically, but without illusions.  Unfortunately, sometimes the world conspires against you.  One of the things he does is discuss three things he thinks Mark got wrong.  Here's the third of those:

Marx believed that the capitalist market economy was incapable of delivering an acceptable distribution of income for anything but the briefest of historical intervals. As best as I can see, he was pushed to that position by watching the French Second Republic of 1848-1851, where the ruling class comes to prefer a charismatic mountebank for a dictator--"Napoleon III"--over a democracy because dictatorship promises to safeguard their property in a way that democracy will not. Hence Marx saw political democracy as only surviving for as long as the rulers could pull the wool over the workers' eyes, and then collapsing. I think that Western Europe over the past fifty years serves as a significant counterexample. It may be difficult to maintain a democratic capitalist market system with an acceptable distribution of income. But "incapable" is surely too strong. Beveridgism or Myrdalism--social democracy, progressive income taxes, a very large and well-established safety net, public education to a high standard, channels for upward mobility, and all the panoply of the twentieth-century social- democratic mixed-economy democratic state can banish all Marx’s fears that capitalist prosperity must be accompanied by great inequality and great misery.

I want to suggest, gently, that the events of the last 18 to 24  months call into question DeLong's optimism here, three specific events that suggest an alternative, less optimistic conclusion.

First, there is the intellectual challenge to the question of whether a" capitalist market economy" can " acceptable distribution of income for anything but the briefest of historical intervals."  Thomas Piketty's Capitalism in the Twenty-First Century raises that very question, and Piketty concludes that the great leveling that occurred in (call it) the middle third of the 20th century was the exception.  Obviously not everyone agrees with Piketty, but he has raised a serious set of questions about the long-term level of (in)equality in capitalist economies.

The second challenge is Brexit and the wider emergence in Europe of challenges to the idea of a united Europe.  The rise of nationalist, exclusionary, racist/fascist political movements across the continent, and the rejection, if only by a narrow margin, by British voters of Britain's membership in the economic union--in large part because of fears of the "open borders" approach to the movement of people within the union, suggest that the "democratic mixed-economy democratic state" is itself under attack in Europe.

Third, of course, is the even more open attack on the democratic state that seems to me to underlie the election of a preening, bigoted, grasping plutocrat as president of the United States.  Again, we see the xenophobia, the desire for closed borders.  We see the cynical use of real failures of government (and of economists, who forgot that potential Pareto improvements might mean a very large number of people being made worse off) to maintain and sustain a "large, well-established safety net, public education to a high standard, [and] channels for upward mobility."  That use of these failures is to divide people by class, ethnicity, and gender, and use those divisions to enrich the richest members of the society.

It's possible to feel a lot more sympathy for Marx's position, if not for his analysis of  how we got there and how we can escape, than DeLong (and, to be honest, I) felt three and a half years ago.

Wednesday, December 07, 2016

Even the CEO of a major American corporation doesn't necessarily know what he's talking about

This is why we need a diligent news sector. 
AT&T Inc. Chief Executive Randall Stephenson also spoke positively of the economic benefits of a Trump presidency Tuesday....He expressed hope that “a more moderate approach to some of these regulations is in the making under a Trump administration.” Mr. Stephenson said the U.S. is the “highest tax country in the developed world” and that capital investment, as a percentage of gross domestic product, is at its lowest level since World War II.
 From a story in the Wall Street Journal, referenced here.

The reality is not very hard to discover; a quick look at the national income and product data at FRED will show you what reality is.  Or you can look at this hand little chart:

Yep.  Clearly GPDI in the range of 17% is less than at any itme since World War II.  If by World War II you mean the 1990s.

Friday, December 02, 2016

Willfully or not, this MSNBC piece distorts the BLS employment situation report and subtracts from the sum of human knowledge

So MSNBC has a post up with this headline:
What are 95 million Americans doing out of the labor force?

In which the reported proceeds to write this:

“…the nettlesome problem of too many people who find it's just easier to collect welfare and other transfer payments rather than go back to work…”

Let’s start with some reality checks: 

The unemployment rate is a measure of the percentage of people who are not employed, but who are actively seeking work. If you are not actively seeking work, you are not counted as unemployed. So, for example, my wife is not actively seeking work. She will probably never again actively seeking work. She should be counted as unemployed? Of the 60+ students in my two classes this semester, over 50 are not actively seeking work. They are attending college full time. They should be counted as unemployed? Most of those 95 million people are either retired or full time students.

 The real issues arise in three places. One is "discouraged workers," people who would like to work, but have quit looking because they are, well, discouraged by their prospects. There is an alternative unemployment rate, calculated and published every month by the Bureau of Labor Statistics that includes them.

 The second is people who are employed part time, but want full-time work. Think of them as partly employed, partly unemployed.  There is an alternative unemployment rate, calculated and published every month by the Bureau of Labor Statistics that includes them.


The third is people receiving disability benefits and not working. Now, this depends on whether you think that the disability system is "broken," that there are a whole lot of people receiving disability benefits who could be--and who ought to be--working. My own reaction to what I know about the disability system is that to get disability benefits, one really does have to be disabled. So I don't take this to be a big deal. (Others may disagree.)

  (You can find those alternative measures of unemployment here:  U6, which is the broadest measure of underutilization of labor is down from 9.6% in November 2015 to 9.0% in November 2016.)  In fact, the number of people not in the labor force has increased  by less than 1% over the past year, while the relevant population has increased by nearly 2%.
Finally, the notion that millions of people can collect "welfare" (there is almost no cash assistance for people able to work any more) and the "other transfer payments"--SNAP (a/k/s Food Stamps), renter's assistance (woefully underfunded)--is all but laughable.

When crap like this winds up being widely disseminated, it reduces, rather than adding to, the stock of human knowledge.

Data on the percentage changes number of firms, employees, total payroll, and payroll per employee, by state, 2010-2014

A comment I read recently to a Facebook post commented on the large number of business failures that had occurred in California.  Now, the raw number of business failures is not exactly an interesting piece of information.  California had the largest number of firms in 2010 and in 2014 (690,000 and 725,000); it could easily have had the largest number of business failures and the smallest percentage of businesses that failed, simultaneously.  What is more interesting, I think, is to look at the data on the percentage changes in the number of businesses, in employment, and in payroll, by state.  Here. I’m using data for 2010 and 2014.1

First, for the US as a whole, the number of firms grew by 1,6% between 2010 and 2014, which is not a particularly exciting rate of growth.  Employment in these firms grew by 8.1%, which is about 2% per year, reasonable but not extraordinarily rapidly.  Total payroll grew by 20.2%, and payroll per employee by 11.9% (payroll per worker grew by about 2.7% per year, on average). 

For the most part, this is just a data dump.

Growth in the number of firms

Which states experienced the fastest (slowest) growth in the number of firms?

The five states with the fastest growth in the number of firms were (2010 rank in # of firms in parentheses)
North Dakota (48), +11.8% over the 4 years
Texas (4), +6.4%
Utah (33), 6.2%
Florida (3), 5.9%
California (1), 4.9%

Three of the fastest growing states were also in the top five states in number of firms in 2010.  Only one was a conspicuously small state.  (As already noted, the US average was 1.6%.)

The five states in which the number of firms contracted most rapidly (again, 2010 rank in parentheses)
New Mexico (38), -2.7%
Vermont (47), -2.7%
Mississippi (35), -2.9%
Alabama (26), -3.1%
West Virginia (42), -5.8%

All five of these stated ranked in the bottom half of the country in number of firms in 2010, and two were in the bottom 10.

Growth in Employment

The five fastest growing states in terms of employment were
North Dakota (48), +22.4%
Texas (4); 12.9%
Utah (33), 12.4%
Florida (3) 12.43%
Colorado (16), 11.6%

(California ranked 7th.  The US average was 8.1%.)

The slowest growth in employment also looks a lot like the slowest growth in the number of firms:
Maine(39), 2.4%
Alabama (26), 2.3%
New Mexico (38), 0.4%
Hew Hampshire (41), 0.1%
Vermont (47), -1.2%

(West Virginia had the 6th slowest growth in employment (2.6%).

Growth in Payroll

North Dakota certainly has had a very good few years:
North Dakota (48), 64.7%
Texas (4), 29.7%
Washington (13 ), 26.8%
Oklahoma (28), 26.2%
Utah (33), 26.0%

(Colorado ranked 6th and California ranked 7th.  Florida ranked 11th.  The US average was 11.2%.)

The five states with the slowest growth in payroll:
Alabama (26), 11.9%
New Hampshire (41), 11.2%
New Mexico (38), 10.8%
Connecticut (27), 9.9$
Vermont (47), 9.4%

West Virginia had the 9th slowest growth in payroll; Maine had the 6th slowest growth.)

Payroll per Worker

This measure has a greater representation of small states, and of places in which employment did not necessarily grow all that rapidly; 4 of the 5, though, have significant energy sectors.  But North Dakota once again leads the pack:
North Dakota (48), 7.7%
Washington (13), 3.9%
Montana (40), 3.8%
Wyoming (49), 3.6%
Oklahoma  (28), 3.6%

(California ranked 10th, Colorado 15th.  The US average was 2.7%.


1. Data for 2010 can be found at
Data for 2014 can be found at