Recent Reads, 2018-07-04 — July 4, 2018

Recent Reads, 2018-07-04

  • Enrico Moretti, The New Geography of Jobs

    Combines a popularization of some economic theory—of the sort that you’d read in Fujita, Krugman, and Venables, for instance—with the sort of boilerplate that you’d expect out of any popular work of economics nowadays. The author has to travel to see how Innovation is being done in various cities, for instance. This is all just filler. The author is an economist in good standing, and Krugman himself seemed to like it, so who am I to say that it’s underwhelming?

    The basic premise is that we’re being sorted into thriving cities and failing cities, and that this sorting is self-reinforcing: people move to where other college graduates are, for instance, which only reinforces the strength of cities that already contain a lot of college graduates. As a big Boston booster, I’m happy about this. I’m unsure in a couple directions, though. First, the book makes some pretty strong conclusions about San Francisco, Boston, and New York, and on the other side about Detroit and Flint. But what about cities whose economic future is less certain, like Pittsburgh? Other than that these cities are teetering on a knife’s edge, which could lead them to either of two disparate futures, I don’t know what to conclude. As Moretti mentions at one point, economists have a term for this: “multiple equilibria”. For our purposes, this just means that self-reinforcing processes can either lead to self-reinforcing success or self-reinforcing failure. It’s probably good that Moretti didn’t try to make any predictions about the Pittsburghs of the world; predictions are above his pay grade.

    A second question concerns what we’re to do with his Seattle-versus-Albuquerque example. Microsoft was established in Albuquerque but soon moved to Seattle, with fateful consequences for the economic success of the latter city. Albuquerque continues to linger in the doldrums. Seattle rose from a backwater to where it is today.

    So what does that all tell us about Detroit? Is Detroit today like Seattle before Microsoft?

    Maybe the answer is ¯_(ツ)_/¯.

  • Timothy Snyder, The Road to Unfreedom: Russia, Europe, America

    The main thing I took away from this book is that we can only have a functioning democracy if our institutions support a basic respect for the truth. Putin succeeds by destroying the very concept of an objective reality, and by brazenly lying in front of everyone. The connection with Donald Trump is clear, and terrifying.

    This book also pretty firmly cemented for me the idea that Trump is directly in the thrall of the Russian government.

  • Norbert Wiener, God & Golem, Inc.

    I didn’t really understand what was going on here. I also didn’t really understand what was going on in Wiener’s more-technical book Cybernetics. The thing about Wiener is that he’s one of the 20th century’s most brilliant scientists and mathematicians, with a beautiful Victorian style. Ideas that are seemingly quite obvious to him are not obvious at all to his readers, or at least this one.

  • Tim Weiner, One Man Against the World: The Tragedy of Richard Nixon

    I’ve read quite a number of books about Nixon now: All the President’s Men, of course, about the Watergate coverup, and then the same authors’ The Final Days, about the collapse of the Nixon White House that followed on the final Watergate revelations; and then John Dean’s yeoman-like The Nixon Defense, which gets down to the nitty-gritty of what Nixon said exactly when, on which tapes.

    No book before Weiner’s, in my experience, even approaches his skill at connecting the Vietnam War to Watergate. The paranoia of the Nixon White House comes through on every page, and we see the bombing of Indochina escalate in lockstep with the man’s rapid mental decay. I can’t recommend this book strongly enough, both for its important historical clarifications and because it’s written with the driving force of a novel.

  • Kate Manne, Down Girl: The Logic of Misogyny

    This is an astoundingly poorly written book. That’s a shame, because the fundamental premise deserves to be more widely understood: misogyny isn’t about individual people being misogynists. Misogyny, in Manne’s telling, is about what happens when men believe that women owe them something—for instance, affection, or sexual favors, or housework—and that expectation is violated. To quote her list of gender-coded possessions:

    Hers to give (feminine-coded goods and services): attention, affection, admiration, sympathy, sex, and children (i.e., social, domestic, reproductive, and emotional labor); also mixed goods, such as safe haven, nurture, security, soothing, and comfort; versus His for the taking (masculine-coded perks and privileges): power, prestige, public recognition, rank, reputation, honor, “face,” respect, money and other forms of wealth, hierarchical status, upward mobility, and the status conferred by having a high-ranking woman’s loyalty, love, devotion, etc.

    Manne takes this very expansive definition and lets it encompass even such seemingly trivial behaviors as mansplaining. She also counts it as misogyny if your wife cheats on you and you attack the other man:

    when this sense is challenged, thwarted, violated, or threatened, this is often the trigger for misogyny toward her—or, in some cases, violence against male rivals who have trespassed on his supposed property. He might also seize what he thinks he is owed by her: that is, what he is supposed to have been given by a woman, and what is then supposed to be his for the taking.

    Call that misogyny if you will. Whatever it is, it doesn’t seem like misogyny. Manne would probably deny my right, as a male, to tell her what is and isn’t misogyny, so do what you will with this.

    Only if you really enjoy reading lifeless academic prose should you bother with this book. I expect that Manne, in making the rounds of the book-tour circuit, will either talk about this book on a podcast or write up a blog post about it; it would be better to find one of those and save yourself the aggravation of reading this book.

  • G.A. Cohen, If You’re an Egalitarian, How Come You’re So Rich?

    Cohen charts his migration from Marxist to Rawlsian and back to a position that nicely mixes Christianity with Rawls. He argues that you can’t be as indifferent to the individual moral behaviors of individual humans as Rawls would have it—that you need to take something from Christian teaching, and care about the inner life of the human as well. Merely building a basic structure, à la Rawls or Marx, isn’t enough. Merely building a just society isn’t enough; you need to give away much of what you own, as well.

    There’s also something to Cohen’s argument structure that I find enjoyable here. He’ll periodically stop to sketch out an argument of Rawls’s or Marx’s, and write it down in precise “if A then B” form. He intersperses this blueprint-drawing with delightful anecdotes from his own upbringing in Canada and the U.K. This is one of the nicer combinations of abstract philosophizing and real human-interest story that I’ve ever read.

    I moved on from here to Cohen’s Marx’s Theory of History. Somewhat similar structure, but certainly more rigorous and less breezy. I’ve found it slow going.

  • Abraham Pais, Subtle is the Lord: The Science and the Life of Albert Einstein

    I barely understood a word of this. It’s a hardcore scientific biography. If you’re not clear on what a covariant and a contravariant tensor are (and I’m not), then this book will make no sense to you. I’m sure it’s great if you have the right background.

  • Quinn Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism

    As Slobodian tells it, neoliberalism wasn’t born to remove the shackles of government from the market. Instead, it was born to build a protective shield around the market—to protect the market from the twin ravages of nationalism and democracy. As the World Wars ended, empires fell, and a new order had to be established by which free trade would be allowed to function between the newly established states. Meanwhile, the people demanded protection from the market. How could capitalism continue to function when subjected to these new stresses? The market needed to be walled off from democracy. It needed a constitution, by which the people’s ability to interfere with economic order would be strictly controlled.

    This book should probably be read alongside Eichengreen’s brilliant Globalizing Capital. That book maps out what happens to governments as democracy ascends; they no longer have the power to defend exchange rates at all costs, and now must use some of their resources to provide for their people. The gold standard fell away precisely because governments had to listen more to their people. I suspect Slobodian would say that exactly this sort of populism is what scared Hayek and the other fathers of neoliberalism.

  • James Comey, A Higher Loyalty

    Worth reading, if only because everyone talks about it and few people read it. It’s good to be one of the people who actually knows what he or she is talking about.

    I certainly left the book feeling a lot better about Comey than I did before I went in. He paints his career with the FBI as being essentially about preserving the agency’s reputation at all costs. He’s an institutionalist, and he asks us to judge all his actions relative to that goal. The main reason everyone hates him is that he announced to the world, mere days before the election of 2016, that the FBI would be reopening its investigation into Hillary Clinton’s emails. In his telling, he had no choice: had he not told the world about the reopened investigation, after having previously declared that investigation closed, the FBI would be accused of having withheld important information from the American public just before an election.

    If nothing else, it certainly seems that Comey was in a no-win situation. So if nothing else, I have sympathy for the position the man was in.

  • Tim Wu, The Attention Merchants: The Epic Scramble to Get Inside Our Heads

    This is an enjoyable history of 20th- and 21st-century media, framing radio and television and the Internet as, essentially, technologies that trade in a limited currency called “attention”.

  • Bill Browder, Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice

    This is the story of how Browder became the largest foreign investor in Russia and got himself kicked out of the country. We know Browder today because the Russian government tortured and killed Browder’s tax accountant, Sergei Magnitsky. Browder spent months fighting the Obama administration to pass the Magnitsky Act, by which those involved in Magnitsky’s death lose their assets held abroad.

    This book tells the story of Browder’s rise to wealth, the agonizing death of his friend, and of Browder’s fight to ensure that his friend’s death wasn’t in vain. I couldn’t put it down.

How to make moral judgments about others when their will isn’t entirely free — October 7, 2017

How to make moral judgments about others when their will isn’t entirely free

In college, I dated a woman who was, it turned out, quite seriously mentally ill. She had Borderline Personality Disorder, which led to her engaging in reckless sex, spending, etc. She cheated on me. It was awful.

How much does the mental illness — the fact that there’s a label attached to her collection of behaviors — excuse those behaviors? Actually, let’s ignore the actual diagnosis and the actual label. Let’s just take it as given that the underlying understanding of her mind is correct: that it is harder for her to avoid certain risky behaviors than it is for the rest of us. Let’s suppose that she could, if she tried very hard, avoid those risky behaviors, but that it takes a lot more work for her than it does for others. How justified are we in thinking ill of her? How much does the illness excuse?

Or take another, quite different situation which I think shares a lot of similarities with the above. Lots of people live in car-dependent places. Consequently, their daily lives involve their inflicting more damage on the environment than do those who live in denser, more-walkable areas. On the one hand, we may want to pass moral judgment on them: their actions are harmful to all of us, and to our children. On the other, what leads many people to live in car-dependent areas are structural problems, namely that mass transit in this country is poor and that housing in dense, walkable areas is expensive. People could, perhaps, choose to live where their environmental damage is lower, but that choice comes with a cost. In some places (I’m thinking of San Francisco here), the choice is too costly to be reasonable for many people. So they buy a car, live out where the land is cheaper (and where their children can play in the backyard, etc.), and harm the environment more than they would in the city.

The similarity between these two situations is that the more-virtuous choice is costly. In some cases it may be prohibitively costly. The mentally ill person may be aware of the damage he or she is inflicting on others, but the biochemical hurdle may be too high to get over. The person living in the suburbs may be able to move closer to the city, but only by swallowing a majority of her income in rent. Yes, in both cases they’re making a “choice”, but it’s a choice in which their hands are largely forced.

Past some extreme, I think many of us intuitively forgive people who misbehave, when their misbehavior seems to come from forces beyond their control. When we hear that a drug dealer chose that path because his community offered no legitimate paths to earn a decent income, we’re willing to forgive — even though he could, with effort, probably have found a legitimate path out. At some point we acknowledge that the effort exceeds what can reasonably be expected of a human being.

At the same time, our hands are always, to some degree or another, forced. I’m born into my circumstances and you’re born into yours. I’m born with my biochemistry and you’re born with yours. Not all behavior is forgivable. Biochemistry doesn’t excuse everything.

Is there just a threshold above which we implicitly forgive people their trespasses? Certain innate limitations — your society denying you a decent legitimate wage; a mental illness for which you’re heavily medicated; a built environment that makes walkable living unattainable for all but the wealthiest — may forgive a lot of behavior that we’d otherwise frown on.

Another way to look at it is that human behavior isn’t one-dimensional: the choice isn’t between living in the suburbs and living in the city; you can choose to live in the suburbs so long as city life is unattainable, and also fight like hell through your city and state governments to ensure that city life becomes affordable to those of lesser means.

I have no particular conclusion here. It occurs to me that actual moral philosophers, who actually know what they’re talking about, have probably written on this topic in an interesting way. I’d love some pointers.

A grotesque mediocrity — January 24, 2017

A grotesque mediocrity

Of the writings dealing with the same subject at approximately the same time as mine, only two deserve notice: Victor Hugo’s Napoleon le Petit and Proudhon’s Coup d’Etat. Victor Hugo confines himself to bitter and witty invective against the responsible producer of the coup d’etat. The event itself appears in his work like a bolt from the blue. He sees in it only the violent act of a single individual. He does not notice that he makes this individual great instead of little by ascribing to him a personal power of initiative unparalleled in world history. Proudhon, for his part, seeks to represent the coup d’etat as the result of an antecedent historical development. Inadvertently, however, his historical construction of the coup d’etat becomes a historical apologia for its hero. Thus he falls into the error of our so-called objective historians. I, on the contrary, demonstrate how the class struggle in France created circumstances and relationships that made it possible for a grotesque mediocrity to play a hero’s part.

John Dewey, The Public and Its Problems — December 20, 2014

John Dewey, The Public and Its Problems

The only mildly interesting thing about this cover is that it turns the ampersand between 'public' and 'its' into a music staff, which then flows left to right across the page, underlining 'The public' and 'its problems'.

John Dewey says that the term ‘public’ isn’t vacuous: if I buy a used car from you, that’s a transaction between two private actors that doesn’t radiate (arguably) beyond the two of us. What counts as ‘public’ are exactly those transactions whose effects spill beyond those involved in them. The state is called into being to regulate actions which are public in this sense. This defines government not by its origins or its particular means of accomplishing what it accomplishes, but rather by a set of effects that it wants to regulate. This is Dewey’s philosophy throughout [book: The Public and Its Problems]: look always at effects as a way of clarifying things. (Does this make him a pragmatist? A consequentialist? Anyway, consistent with what Dewey himself might say, the label doesn’t matter so long as we all know what we’re talking about in any specific case.)

But then it gets confusing, first because, obviously, you can make the case that most any transaction has consequences that spill beyond the immediate actors. (Let’s do like the economists do and call these ‘externalities.’ There are both negative and positive externalities, depending upon whether we like the consequences.) I buy a pack of cigarettes from the corner store, then go and smoke one of them on the street corner; should the cashier at the bodega be required to pay for his role in my covering passersby with secondhand smoke?

The second reason why this definition of ‘public’ gets confusing is specific to Dewey’s book. When my dentist puts surgical implements in my mouth, that’s purely private; but society has an interest, Dewey says, in regulating dental licensure generally. So far as I can tell, he doesn’t really pursue this distinction between the act and the general environment in which the act takes place, but it seems rather important. It’s also interesting that he doesn’t pursue the direction that some libertarian economists would take, namely that (in the age of Yelp especially, let’s say) the fear of a bad reputation is a sufficient replacement for licensure. But in any case: if one private transaction isn’t public, then what makes many such transactions, considered in the aggregate, public? You and I can both think of obvious explanations here, so there’s no real need to pursue them. And perhaps it’s for the best: maybe Dewey didn’t exist in a time of fatuous libertarians, so he didn’t feel obliged to justify himself to them. It was a better time for everyone.

We live, and Dewey lived, in an era when industrialization had upended much of what we thought about the public and about community. The doctrine of individualism, which did much to break the bonds of society, was born at the same time as steam-power, and in Dewey’s telling this is not coincidental: inventors had unlocked great potential in man through the use of labor-saving machinery, yet mercantilism and royalty conspired to prevent its full use. Individualism was meant to break free from this, and save man from stifling collectives. But ironically, says Dewey, the doctrine arose just as man’s individual identity was being submerged within giant institutions run by industrialists. Individualism, in this telling, is the thin transition layer between eras of repression.

After industrialization, people moved off to live in cities, thereby destroying the close personal connections that they might have had with their neighbors. In that earlier era we might have had a ‘community’; now we don’t. The small-scale community has been replaced with a large-scale mob. A large number of people, each watching the same television program, does not a community make. People like Walter Lippmann would then say, well, to hell with the community; you can’t organize a functioning government out of an ignorant mass. Lippmann would say, let’s have rule by the technocratic élite. Dewey pushes in the opposite direction: reconstruct community out of that mob. And the way to do that, in the modern era, is by means of the same mass communication that so lamely connects us.

The community of physical scientists, which has flourished during the era of industrialization, is one model for the great community that Dewey envisions. He says that we’ve mastered the physical sciences but done little with the human sciences, and that mastering the human sciences is a necessary step on the road to building the great community. I hear in here an optimistic story of how, say, business cycles can be controlled. I can’t draw you a complete picture of how we got from there to here, but I would hazard a guess that economists as a group are less optimistic than Dewey was, nearly a century ago, about the prospects of economic control.

When it really mattered — during the first and second world wars — we certainly did manage to control the economy plenty well. That’s a story about which I’ve read little. I know its broad outlines, and some of its details; in [book: Bowling Alone], I think it was, the author notes that eighty percent of American males were involved in the war effort during World War II. It might even be more specific or greater than that: it might be 80% of all Americans (including, say, women working in explosives factories at home), or it might be that 80% of all males served in uniform. But in any case, a significant fraction of Americans’ labor was redirected into total war. This must have meant that a significant fraction of labor which had been involved in producing food for domestic consumption was now solely producing it for soldiers on the front lines. Likewise at every scale of economic production, from shoes up to civilian aircraft. Since the economy had now converted most of its slack resources (human and otherwise) into military production, there was a great risk of inflation. The government responded to this by limiting wages, imposing rationing, etc. So when we need to harness collective energies, we can. The rest of the time, we choose not to. (This would be of a piece with Piketty‘s depressing observation that inequality has only really decreased when war has taken the asset-owning class’s assets and blown them up. It’s also of a piece with all of [book: Bowling Alone].)

The challenge, then, is to construct a community without the impetus of war. When people feel peace within their communities and their society, they will feel peace in their own minds. The life of an individual human is inseparable from the life of his or her community; sickness in the one will lead to sickness in the other. I take from Dewey a very optimistic view of how to return peace to humans, and to human civilization.

Questlove on the last killing — November 25, 2014

Questlove on the last killing

i dont know how to not internalize the overall message this whole trayvon case has taught me:

you aint shit.

that’s the lesson i take from this case.

you aint shit.

those words are deep cause these are words i heard my whole life:

i heard from adults in my childhood that i need to be “about something” other than all that banging and clanging and music i play all the time”….and as i got older i heard i wasn’t as good as “so and so and so and so” is at music. —i mean the “you a’int shit” stories i got—jesus its a wonder i made it.

so…rich asks “wait…you’re not surprised are you?”

i wasn’t surprised at all, but that doesn’t mean it doesn’t sting any less.

i mean i SHOULD be angry right?—i remember when Sean Bell’s outcome came out and i just knew “oh god new york is gonna go up in flames”—and like….noone was fuming… was like “shrug….no surprises here….that’s life”

so rich asks: “like are you surprised….that you aint shit”

i meant it hurts to hear it and i said “im not surprised at the disposition but who wants to be reminded?….what fat person wants to hear they aren’t pleasing to the eye. or what addict wants to hear they are a constant effup?—who wants to be reminded that shrug its just the way it is?

so i guess im struggling to get at least 1% of this feeling back from all this protective numbness ive built around me to keep me from feeling because at the end of the day….im still human….


ESPPs: magical free money — November 23, 2014

ESPPs: magical free money

Akamai has an Employee Stock Purchase Plan, which I’ve tried very hard not to think of as magical free money. But I think it basically is. It works like this: you set aside some fraction of your after-tax paycheck, and every six months the company uses that money to buy the company’s own stock for you. There are some limits on how the ESPP can be structured: the company can give you the stock at a discount, but the discount can’t be any more than 15% off the fair market value (FMV); you can’t get more than $25,000 in stock (at FMV) per year; and Akamai (in keeping, apparently, with general practice) imposes a further limit, such that you can contribute at most 15% of your eligible compensation.

To see how great the return on this is, consider first a simplified form of an ESPP. You put some money in, then wait six months; the company buys the stock, and you sell it immediately. They gave it to you at a 15% discount, i.e., 85 cents on the dollar. So basically you take your 85 cents, turn around, and sell it for a dollar. That’s a 17.6% return (1/.85 ~ 1.176) in six months. To turn that into an annual rate, square it. That makes it a 38% annual return.

Introducing some more realism into the computation makes it even better, because your money isn’t actually locked up for six months. In practice, you’re putting away a little of your money with every paycheck. So the money that you put in at the start of the ESPP period is locked up for six months, but the money you put in just before the end of the period is locked up for no time at all. The average dollar is locked up for three months. So in exchange for three months when you can’t touch the average dollar, that dollar turns into $1.176. Annualized, that’s a 91.5% return.

Doing this in full rigor means accurately counting how long each dollar is locked up. A dollar deposited at the start is locked up for 6 months; a dollar deposited two weeks later is locked up for six months minus two weeks; and so forth. It looks like this:

End of pay period 0: You have $0 in the bank.

End of pay period 1: You deposit $1. Now you have $1.

End of pay period 2: You deposit $1, and you earn a rate r on the money that’s already in the bank. So now you have 1 + (1 + r) dollars in the bank.

End of pay period 3: You deposit $1. The 1 + (1 + r) dollars already in there earn rate r, meaning that they grow to (1 + (1 + r))(1 + r) = (1 + r) + (1 + r)2. In total you have 1 + (1 + r) + (1 + r)2.

In general, at the end of period n, you have 1 + (1 + r)2 + (1 + r)3 + … + (1 + r)n-1 in the bank. That simplifies nicely: at the end of period n, you have (1 – (1 + r)n)/(1 – (1 + r)), or (1/r) (-1 + (1 + r)n) dollars in the bank.

At the end of the n-th period, you get back (1/.85)n dollars for the n dollars that you put in. So what does r have to be so that you end up with n/.85 dollars when period n is over? You need to solve (1/r) (-1 + (1 + r)n) – n/.85 = 0 for r. Use your favorite root-finding method. I get r=0.02662976. That’s the per-period interest rate. (It’s also known as the Internal Rate of Return (IRR).) In our case it’s a 6-month ESPP period, with money contributed every two weeks, so there are about n=13 periods. So the return on your money is ~1.026613 in six months, or 1.026626 in a year. That comes out to about a 98% return. Which is, to my mind, insane.

The full story would be both somewhat better and somewhat worse than that. Somewhat better, in that the terms of our ESPP are even more generous: when it comes time to buy the stock, Akamai buys it for you at the six-months-ago price, or the today price, whichever is lower. So imagine you have $12,500 in the ESPP account, that the stock is worth $60 today, and that it was worth $40 six months ago. You get shares valued at $40 apiece, minus the 15% discount. So the company buys shares at .85*$40=$34. It can buy at most $12,500 in shares (at FMV), so it can buy floor(12500/40)=312 shares. Cool. Now you have 312 shares, which you can turn around and sell for $60, for a total of $18,720. That is, you put in $12,500, and you got out $18,720. Magic $6,220 profit.

The “somewhat worse” part is that you pay taxes on two pieces of that. First, you pay taxes on the discount that they gave you (since it’s basically like salary). Second, if you hold the stock for any period of time and pick up a capital gain, you pay tax on that; if you held the stock for less than a year, that’s short-term capital gains (taxed at your regular marginal rate), whereas if you hold for a year or more you pay long-term cap gains (15%, I believe).

I’ve not refined my return calculation to incorporate the tax piece, but I doubt it changes the story substantially. First, it’s hard for me to imagine that the taxes lower the rate of return from 98% down to, say, 15%. Second, any other investment (a house, stocks, bonds, a savings account) would also require you to consider taxes. And since the question isn’t “Is an ESPP good?” but rather “Is an ESPP better than the alternatives?”, I suspect that taxes would affect all alternatives equally. It strikes me that ESPP must win in a rout here — which would explain why the amount you can put in the ESPP is strictly limited; otherwise it really would be an infinite magical money-pumping machine.

A thought prompted by the iPhone 6 — September 20, 2014
Why doesn’t Blue Cross fly me to Nebraska? — April 9, 2014

Why doesn’t Blue Cross fly me to Nebraska?

This paragraph in a Vox post about Vermont’s single-payer plan pokes at a question I’ve had for a long time:

> American doctors spend lots of money dealing with insurers because there are thousands of them, each negotiating their own rate with every hospital and doctor. An appendectomy, for example, can cost anywhere from $1,529 to $186,955, depending on how good of a deal an insurer can get from a hospital.

My mental model of this part of health care is that there are four players: the patient, the insurer, the employer, and the provider. The insurer negotiates a price with the provider for a given procedure. The employer picks an insurer, based on price and various other things. (I’m ignoring the VA Medical System, which is like the UK’s National Health System; I’m ignoring Medicare, which is like Canadian single-payer; I’m ignoring the individual market; etc.) I … well, I just work where I work, and in practice I’m not going to pick my employer based on how cheap a deal they get on appendectomies.

Now then. Who has the incentive to keep things cheap? Well, I do, I guess, inasmuch as I have some “skin in the game”, which is why the terrible state of the art in health insurance is that I pay more and more and have a very large deductible. (Hey, at least I won’t go bankrupt! I mean that half-seriously.) My employer does, to some extent. For one thing, they pay the majority of my health-insurance premium; they’d like to pay less of that. For another, every dollar they pay toward health insurance is a dollar they can’t pay toward salaries, and every dollar they take away from salaries decreases their odds of getting good candidates.

Where the rubber really hits the road on prices is the insurer. The less the insurer can pay for appendectomies, the more profit they make. To the extent that the insurer can just pass costs along to the patient, the insurer doesn’t really care what it’s paying for appendectomies. The more urgent the care, the more the insurer can pass it along to the customer, maybe. (I’ll gladly bankrupt myself to pay for an emergency appendectomy.)

Let’s assume that the insurer can’t just pass costs directly along to the patient. And let’s assume that neither the insurer nor the provider has unlimited bargaining power: the insurer can’t pay $0.01 for an appendectomy, and the provider can’t charge $1 million for it.

If the insurer negotiates a rate of $100,000 with one provider for a given procedure, and negotiates a rate of $1500 with another … why not pay me to fly to the cheap hospital? Suppose it’s in North Dakota while I’m in Boston. Why not pay for the plane ticket, pay for the airfare, and — hell — compensate my employer for the value they lost while I was gone. If I estimated that all of that together, plus the cost of the procedure at the cheap hospital, would cost the insurer $10,000, I think I’d be radically overestimating it. But that’s $90,000 less than they were going to have to pay. So: good for them!

Maybe emergency procedures are a bad example: if you need them now, you need them *now*. Even there, though, I wonder whether it would be medically justified to stick me in a chartered flight to North Dakota. Maybe there’d be a whole fleet of medical airplanes run by the insurance companies. Just spitballing here!

Two other notes:

1. All of the above, I think, shows that “consumer-directed health care” is nonsense. The insurer is still going to be the locus of the cost savings, under any system (and whether that insurer is the U.S. government or a private company). There’s just no reason to expect that the consumer can do anything here. Maybe consumer-directed health care means that I’ll go to my podiatrist a little less often. If I need that appendectomy, though, I need that appendectomy.

2. Somehow that Vox piece goes through 3,000-plus words, by my count, without once explaining what *has to* be the most interesting question about single payer in Vermont: how did they bring the insurers and the hospitals on board? How did they get around the hospitals? There are vague nods in the direction of Vermont being liberal, and the movement being grassroots. And they mention that the hospitals aren’t happy with this. (*Really?*) But how did they neuter the hospitals here? How did they neuter the private insurers? Or did they? I’m worried that skipping this part of the story is an occupational hazard at Vox. They’re trying very hard to explain “just the facts”, and there are only so many words they can pack in. If we get to the level of What Is The World Wide Web? it’s going to take us a while to get up to “how did Vermont and Canada claim victory over the pre-existing health-industry power structure?” I’ll wait patiently, but that kind of depth seems a ways off.

Looking forward to the uselessness of the 2016 election — March 29, 2014

Looking forward to the uselessness of the 2016 election

Some facts about the 2016 election:

* Probably most everyone you know has already figured out which party he or she will vote for.
* The actual person with the “(D)” or the “(R)” after his or her name doesn’t much matter. What matters is the party. Your candidate, when he or she is in office, will have to do what his or her party wants. Moreover, your candidate will probably *want* to do what his or her party wants, and it’s good that this is the case: if you vote for a Democrat, you know generally that this person will be in favor of expanding the welfare state — or will at least support welfare-state expansion more than will the candidate with the “(R)” after his or her name. The Republican candidate will praise the virtues of small businessmen, will demand that Obamacare be overturned, and will promise to cut your taxes.
* If you live in California or Massachusetts and you vote for a Republican, or if you live in Texas or Mississippi and you vote for a Democrat, your vote doesn’t matter. You may as well not vote in the general election. Your vote in the primary, though, does matter.
* The press coverage will be filled every day with lots of irrelevant personal details. If you thought the coverage of the Malaysian Airlines flight was absurd, you get to look forward to two years of nonsense, starting in earnest once the midterm elections are over in November. The twenty-four-hour news cycle isn’t going to fill itself.
* If the economy is doing well in the year before the election, you should expect that the Democrats will do well; if it’s not, you should expect Republicans to do well. This isn’t deterministic, of course, but it’s a strong relationship.
* Whatever party you’re part of will be right and good and logical and rational; whatever the party on the other side is will be wrong and evil and illogical and irrational. I say this for all values of “you” including “me”. I wish this weren’t so, but it is.
* Your party might well put forward a candidate who excites you into believing that This Time Is Different — that you’ll get the liberal or conservative stalwart you’ve always wanted, that the welfare state will expand to protect everyone or will be gutted and freedom returned to the people. In reality the government you’ll get is the government you had. There are many veto points in American government. And as our society gains institutions like a system of political parties or a military-industrial complex or a private health-insurance industry, those institutions make it harder and harder to change anything fundamentally (go read Skowronek on this point).

Consider all of these just rules of thumb, not truths handed down on tablets. But I think they’re all safe bets. I’m particularly sad about the tribalist aspects: despite my best efforts, we’ll probably end up thinking that the guy who disagrees with us about the Affordable Care Act is not only a bad candidate whom we can’t support, but is in fact the Antichrist, whose one and only hope in life is to take women into back alleys and perform coathanger abortions on them. Because that’s what They all want, right? To take away women’s hard-won freedoms. That is, when They’re not also trying to return black people to the back of the bus and keep poor people down.

Maybe few of us think this explicitly (though I’ve met a fair number of my fellow liberals who do); most of us do implicitly. How many of us believed that a Romney administration would be not only a bad one, but would in fact be a nightmare from which the country would never wake? If we didn’t explicitly believe this, then why did the election seem so fraught?

So maybe that’s another bullet point to add to my 2016 predictions:

* This election will be Very Important Indeed; maybe The Most Important Ever. This election will be a watershed: on the one side, a bright future for America; on the other, bleakness and a return to the dark ages.

I don’t entirely mean to make light of it. Elections matter. The re-election of Barack Obama in 2012 meant that the Affordable Care Act came into being; had Romney been elected, there’s a chance that it would have been overturned. If nothing else, President Romney would likely have done all he could to slow its implementation. Speaking only for myself, the Affordable Care Act alone justified re-electing President Obama. And inasmuch as I could only trust a Democrat to implement the ACA, I would have voted for anyone with a “(D)” after his name. And inasmuch as I live in Massachusetts, it doesn’t matter whom I voted for in the general. And to the extent that economic fundamentals determine who wins, my vote matters even less. Elections matter, but it’s good to have some perspective on where your vote fits in the grand scheme of things.

I’m just not at all looking forward to the entirely predictable course of the next 2.5 years. The last time around, I swore that I wouldn’t read the news in the year leading up to the election. Maybe I’ll be able to keep to that promise this time, and double down on reading books about things that matter.

Oh, whom am I kidding? I’ll do the same stupid things this time around that I always do.

The Affordable Care Act and 2014 — November 8, 2012

The Affordable Care Act and 2014

We’ve all been hearing that the Affordable Care Act will come online in 2014, so I thought I’d take a moment and read the bill text to see where ‘2014’ shows up. Turns out it shows up in a lot of places, actually: 164 different pages in the 906-page bill, by my count. But this, on a quick scan, seems like where 2014 rubber hits the 2014 road:

(1) IN GENERAL.Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an “Exchange”) for the State that
(A) facilitates the purchase of qualified health plans;
(B) provides for the establishment of a Small Business Health Options Program (in this title referred to as a “SHOP Exchange”) that is designed to assist qualified employers in the State who are small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market in the State […]

Then there’s the dreaded “mandate” — section 1501, starting on p. 124. It amends Chapter 48 of the Internal Revenue Code, in part, as follows:

(1) IN GENERAL.If an applicable individual fails to meet the requirement of subsection (a) for 1 or more months during any calendar year beginning after 2013, then, except as provided in subsection (d), there is hereby imposed a penalty with respect to the individual in the amount determined under subsection (c).

I read that to say that you need to have coverage (“minimum essential coverage,” as it happens — a term defined starting about halfway down on page 130 and extending for about a page) for every month of every year after 2013 — which would be 2014 and after, if I have my math right.

So that’s where 2014 comes from. When January 1, 2014 rolls around, Obamacare will be here to stay. By the time the midterm elections happen in November of that year, Obamacare will have spent 10 months rectifying one of our great national tragedies: that there are about 48 million uninsured Americans.