Eric Hanneken's Public Library

30 Nov 09

The Consumer Is Not the Customer: Both parties promise to preserve one of the central problems of the health care system

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health insurance employer politics Jacob Sullum

Three-fifths of Americans, the share with employer-provided
health insurance, are in the same situation. Since someone else
buys insurance for them, using money they would otherwise receive
as wages, they are in no position to shop around and typically do
not know the true cost of their coverage. This disconnect between
payment and consumption is one of the central problems with the
health care system, contributing to insecurity, rapidly
escalating costs, and the general lack of choice and competition.
Yet both Democrats and Republicans insist on preserving it.

The Poor-Rich Gap is Shrinking (Follow up on consumption data)

See also "The Economic Condition of Poor Americans (and the rest of us) Continues to Improve" by the same author.

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poor rich egalitarianism Steven Horwitz

that same data set does let me compare the percentage of households below the poverty line and the percentage of top quintile households with various consumer goods across years. Just for simplicity's sake, I have compared 2003 and 2005 along those lines below.
As you can see, the gap has narrowed in 10 of 13 categories.

28 Nov 09

After the Fall: What really caused the financial crisis?

Jeffrey Friedman reviews <em>A Failure of Capitalism</em>, by Richard Posner.

www.weeklystandard.com/...printer_preview.asp - Preview

Richard Posner financial crisis book review Basel Accords Recourse Rule capitalism regulation Jeffrey Friedman

The heart of Posner's case against "capitalism" is the following theory, which has been embraced by no less than the president of the United States: Perverse incentives, created by banks' executive-compensation systems, caused the crisis.
This leaves Posner to solve the puzzle of why rationally self-interested bankers seemed to ignore risk. But in the real world of contemporary capitalism, rational self-interest does not conform to the patterns it would follow under "a laissez-faire economic regime." Instead, rational self-interest follows the tens of thousands of pages of the tax code; it follows the millions of pages of the regulatory code. And these tortuous legal pathways are largely overlooked by Posner.
7 more annotations...
- Thus, he argues that the most important risky behavior prompted by the banks' compensation structures was that bankers increased their leverage ratios. But banks' leverage ratios are regulated by law, and this law, unmentioned by Posner, was probably the main cause of the crisis.
- Ten years after the Basel accords were implemented in the United States, the American regulators amended them. Under the "Recourse Rule," adopted in 2001, mortgage-backed securities were risk-weighted at 20 percent, requiring 60 percent less capital than actual mortgages required.
- If the reason that "banks" were leveraging up in the first place is, as Posner maintains, that they cared only about profits and ignored possible losses (because their executives and employees were compensated for short-term profits, regardless of the long-term risks), then banks should have bought AA securities every time: The AAs paid more than the AAAs--precisely because they were riskier.
  
  But in fact, only 19 percent of the mortgage-backed securities held by the banks were rated AA or lower. Eighty-one percent were rated AAA, yielding less short-term profit because they carried less risk. This one fact may refute the executive-compensation theory all by itself.
- Another inconvenient fact: If banks were seeking to maximize their leverage because they were heedless of the risk, then they should have driven their capital holdings down to the minimum allowed by law: 8 percent for "adequately capitalized" banks; 10 percent for "well-capitalized" banks, to which American regulators give privileges that most banks need. But in December 2007, as the crisis was getting underway, the average capital level of all American banks combined was roughly 13 percent--30 percent higher than the legal minimum.
- If anybody really knew in advance which ideas were good and which were bad, there'd be no point testing the ideas against each other through competition. But the hidden premise of banking regulations such as the Basel rules is that regulators can, indeed, know such things in advance.
- In 2001, the American regulators had decided that it would be more prudent for banks to hold AA or AAA rated mortgage-backed securities than to hold actual mortgages, so banks that made this switch were rewarded with 60 percent more potential profits.
- If one seeks the cause of a systemic problem, a logical place to look is among the laws that govern the system as a whole. Individual capitalists, of course, make mistakes all the time; we discover this when they go broke. And being human, they are as susceptible as anyone to herding around the conventional wisdom of their time and place, which is so often wrong. Thus, a systemic "failure of capitalism" is possible: In a "laissez-faire economic regime" capitalists could all make the same mistake.

Economic Freedom and Representative Government

www.iea.org.uk/...upld-book507pdf - Preview

liberty government economics politics F. A. Hayek pdf

The Economic Condition of Poor Americans (and the rest of us) Continues to Improve

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poor egalitarianism Steven Horwitz

So whatever one hears about stagnating wages and the like, the bottom line is ultimately what we can afford to buy and have in our households to improve our lives. By those measures, life for the average American is better today than 35 years ago, life for poor Americans is much better than it was 35 years ago, and poor Americans today largely live better than the average American did 35 years ago. Hard to square with a narrative of economic stagnation or decline.

25 Nov 09

Health Care Reform in Massachusetts: Still a Bad Idea

reason.com/...health-care-reform-in-massachu - Preview

Massachusetts health insurance socialism cost politics

Health care reform advocates
have taken, in recent weeks, to noting that insurance premiums on
the individual market in Massachusetts—the state where a variant
on proposed national reforms is already in place—have fallen in
recent years.
In 1996,
Massachusetts passed an earlier set of reforms—community rating
and guaranteed issue
2 more annotations...
- given that the individual markets in most of
  the country are not already regulated by community rating and
  guaranteed issue provisions, this effect is unlikely to show up
  across the country. And if enough people choose to pay the
  penalty and opt out of coverage, it's possible that the effects
  of reform could actually lead to
  both premium increases and decreased coverage.
- Either way, I suspect that, as in Massachusetts, under reform
  legislation, the overall average price for premiums will rise
  significantly and overall levels of
  health care spending will grow to be even more of a problem
  than they are now.

How Much Does A Decade of Health Care Reform Cost? It Depends on What You Mean By "First Decade."

reason.com/...how-much-does-health-care-refo - Preview

health insurance socialism cost federal budget deficit debt politics

In other words, according to data provided by the CBO, starting
up the entire reform apparatus is going to cost more like $1.8
trillion over its first real decade of operation.

These Boots Are Made for Talking: The fuzzy math and goofy logic of government-goosed employment

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employment jobs government macroeconomics economics Jacob Sullum

But the most fundamental flaw in the president’s stimulus hype is
the notion that more jobs are always better (which also underlies
his claim
that global warming will be a boon to the economy as long as we
spend lots of money to mitigate it). According to this standard,
if the government really did find a supplier who spends 520
man-hours to deliver one pair of work boots, it should buy as
many as possible.

Skeptics doubt Mexican data on military abuses: Figures contradict U.S. numbers; complaints rise as drug war rages

Figures contradict U.S. numbers; complaints rise as drug war rages

www.washingtonpost.com/...AR2009112201991_pf.html - Preview

Mexico United States drug prohibition cartel crime police military torture politics

The Mexican military has come under scrutiny because of a surge in complaints against soldiers, including allegations of torture, beatings and illegal raids and arrests. The Mexican army is leading the fight against the powerful drug cartels as part of President Felipe Calderón's U.S.-backed strategy to put 45,000 troops into the streets and employ soldiers as police.
Human rights monitors in Mexico and the United States describe the handful of convictions as proof that Mexico's military is incapable of prosecuting abuses among its officers and troops. The army pursues cases before secretive tribunals and refuses to release basic information, such as the names of the accused.

Salvia and Salivation: Is this trip worth a warm mouthful of spit?

Jacob Sullum tries Salvia divinorum, and reports.

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Salvia divinorum salvia drug psychedelic Jacob Sullum

The alcohol-based tincture tastes awful, like
chlorophyll mixed with gasoline, and it stings, even when diluted
(per the instructions) with a bit of water.
The smoked method is much easier, especially with a water pipe,
and more rewarding. Within a few seconds the world is vibrating,
reverberating, echoing. Familiar objects are transformed. Looking
down at my bent leg, I see a stoop on a city block lined with
brownstones. Beyond the cityscape, the shoes sitting on the floor
of my office resemble comical cartoon characters. Looking out the
window, I stare at the knot on an oak tree, where I see the head
of a human-sized cat wearing a knight’s helmet, a wizard with a
flowing beard, and a wolf with glowing eyes. I can make the
images shift at will.
1 more annotations...
- Even at 6x, the effects are interesting enough that I would try
  it again, although I’d prefer mushrooms or LSD if they were
  easier to get. I tend to agree with Rick Doblin, president of the
  Multidisciplinary Association for Psychedelic Studies, who says
  salvia can trigger “a peacefulness and an expansiveness,” but the
  experience is not “as profound or deep” as those offered by other
  psychedelics. “Its popularity has been increasing because so many
  other things were banned,” he says. “Very few people would be
  going to salvia if they had alternatives.”

Less Than Zero: The Case for a Falling Price Level in a Growing Economy

www.iea.org.uk/...upld-book98pdf - Preview

deflation inflation price money economics George Selgin pdf

24 Nov 09

How Little We Know

Russell Roberts argues against giving more power to regulators for the purpose of reforming capitalism. Regulators were part of the problem, and there is no reason to believe they will be wiser in the future.

www.invisibleheart.com/How%20Little%20We%20Know.pdf - Preview

regulation moral hazard financial crisis bailout mortgage housing government politics economics Russell Roberts pdf

Would ObamaCare Kill Medical Innovation?

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innovation health drug profit socialism politics video

Many regard the profit motive as cruel, but might it actually produce compassionate results? After all, America has generated vastly more medical innovations than other nations.
If America follows the lead of the rest of the world and clamps down on profits in health care, who will make tomorrow's wonder drugs?

Automatic Document Feed/Photo Scanner?

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scan document organization office

Is Health Care Reform Really Deficit Neutral?

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health doc fix Medicare spending federal budget deficit debt politics

Not if you include the cost
of the "doc fix"—the permanent change
to Medicare reimbursement rates for doctors—that the House yanked
out of their reform package so that its bad fiscal news wouldn't
show up in their allegedly deficit neutral health care bill.

CIA Secret 'Torture' Prison Found at Fancy Horseback Riding Academy

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CIA terrorism interrogation torture crime Lithuania

The CIA built one of its secret European prisons inside an exclusive riding academy outside Vilnius, Lithuania, a current Lithuanian government official and a former U.S. intelligence official told ABC News this week.

Where affluent Lithuanians once rode show horses and sipped coffee at a café, the CIA installed a concrete structure where it could use harsh tactics to interrogate up to eight suspected al-Qaeda terrorists at a time.
The prison opened in Sept. 2004.
1 more annotations...
- On Tuesday, the CIA again declined to talk about the prison. "The CIA's terrorist interrogation program is over," said CIA spokesman Paul Gimigliano. "This agency does not discuss publicly where detention facilities may or may not have been."

Joose It Up! (While You Can!)

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Joose alcohol caffeine nanny state drug Jacob Sullum

The Food and Drug
Administration is
threatening to ban alcoholic beverages that contain caffeine,
saying the combination has not been proven safe.
In any event, the FDA has no power to stop the mixing of such
politically incorrect cocktails, or to bar the preparation of
scary innovations like "Irish" coffee or Rum and Coke
(street name: Cuba Libre). All it can do is make an empty gesture
by arbitrarily banning the newer (and therefore presumptively
more dangerous) drinks, which offend professional meddlers less
because of their pharmacological action than because of their
producers' brazen speech.

Why did regulators bother with Utz-Snyder's deal? Companies called off merger that could have benefited consumers

As is all too common, the author maintains his faith in an enthusiasm for antitrust laws.

www.baltimoresun.com/...ancock18nov18,0,3996592.column - Preview

antitrust merger business government regulation Federal Trade Commission FTC

This month Snyder's of Hanover and Utz Quality Foods, both in Hanover, just over the state line from Carroll County, halted a planned merger after regulators intervened.

In deciding to extend its review of the deal, the Federal Trade Commission sought documents that would have cost the companies millions of dollars and months of uncertainty.

"They were asking for a lot of data - obviously a very expensive process" says Utz President Tom Dempsey. "We looked at it and said, 'We've got to make a business decision here.' We just decided this isn't something we're prepared to go forward on."

Too bad. The merger, which the companies said would have been layoff-free, could have given them fighting weight to compete against monsters Frito-Lay and Kraft. It would have been good for Hanover, where they employ a couple of thousand people.

Not in anybody's imagination (except maybe an antitrust regulator's) could it have hurt consumers.

Between them Frito-Lay and Kraft control well over half of the U.S. snack market. Frito-Lay makes the eponymous chips and other junk food. Kraft makes Ritz and Triscuit crackers and Mister Salty pretzels.

Snyder's market share, by contrast, is about 2 percent. Utz's is even less. Combined, they would control a smaller portion of the snack business than Microsoft's share of Web-search activity.

23 Nov 09

Government Responds to Economic Woes by Making More Bad Mortgage Loans

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bubble housing mortgage crisis economics Robert Higgs

5 myths about homeownership

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home house housing real estate

Many of us own because it is a way to commit to saving by building equity over time, but we should not expect to make large profits. Housing is an expensive durable good, and durable goods are costly to maintain. The main reason to own is because you really like your home, not because you think it makes you money. It doesn't.