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By the way, today is NOT Mexican Independence Day.

It seems that SEIU Organizer on our campus, Joseph Holt, is no longer working on our campaign. I take this to be good news. I do not think we are going to get communication about what is going on here, but if they take the organizer off of the project and leave it in the hands of the faculty organizers, my sense is that things did not go well.


Follow the goods, not the money.

Follow the goods, not the money.

So, it is widely agreed that health outcomes in the U.S. are not better than in other countries, though if you adjust for various behaviors and risk exposures those differences go away. For argument’s sake, just assume the U.S. gets no better outcomes than its other wealthy country brethren (I am not sure why this matters, but that is for another day).

How would you measure how costly the U.S. medical system is? Would you look at how many dollar bills are spent? Or would you examine what real resources are used up in order to deliver said outcomes? Good economics suggests the latter. In a recent post by Tim Taylor, he links to an OECD study that includes information on resources used in each country. It includes:

Countries with a high number of doctors, like Germany, Sweden, and Austria, have 4-5 doctors per 1,000 people. The average for OECD countries is 3.3 doctors per 1,000 people. In the US, it’s 2.6 doctors per 1,000 people.

When it comes to hospital beds, Japan by far leads the way with 13.3 per 1,000 population. For comparison, Germany has 8.3 hospital bed per 1,000 population, France has 6.3 hospital beds per 1,000 population, the OECD average is 4.8 beds per hospital population, and the US has 2.9 hospital bed per 1,000 population.

When it comes to MRI scanners, Japan leads the way by far with 46.9 per million population, but the US isn’t far behind at 35.3 per million population. The OECD average is 14.1 MRI scanners per million population. CT scanners are a similar story. Japan again leads by far with 101.3 per million population, but the US is in the top three with 43.5 per million population.

To summarize, we get similar outcomes as other countries, but we require far fewer doctors and hospital beds to do this.  Doesn’t that make us extremely cost effective? Finally, has anyone seen a study that applies US prices to international medical procedures?  For example, I thought I once heard that average doctor pay in the UK was $75,000 or so (about 50,000 pounds). Maybe that is low. It’s pretty clear that US doctors earn twice as much as British doctors. How would British health spending change if we doubled the price we applied to all doctors?

To make this clearer, if it requires one doctor, similarly trained with similar opportunity costs, to heal one patient in America and the UK, then the cost of treatment is the same in both countries. It does not matter whether I pay a doctor four quadrillion dollars or four dollars, the social cost is identical in each case. The expenditures are merely a way to see which way net transfers are going.  You may not like the idea that the medical professionals in the US extract a greater share of the surplus from their customers than in other countries, but from that information alone you cannot say whether or not the U.S. is less efficient than its peers in delivering health care.


From the interesting bookThe Almost Nearly Perfect People, comes this one:

Sweden now has some of the most generous parental leave allowance in the world, with 16 months’ leave on 80 percent of wages guaranteed by law, to be taken whenever the parents feel like it up until the child is eight years old.

Without going into the labor economics here, or the taxes that would be required to cover this (actually, given what we know about labor demand and supply elasticities workers would be paying for this themselves one way or another) I was stunned not by the size of the benefit (80 percent of wages) or that it is available to men and women … but rather that you can take the benefit until the kid is EIGHT! Maybe I am crazy, but I would wait until my kid was 7 years and 4 months old, then my wife and I would take off for 8 months and travel the world with the kid. Anyone know how much of Swedish parental leave is taken when the kids are younger versus closer to 8 years old?

I’d give the book a grade of a C+ for those thinking about reading it. If you are familiar with Scandinavian history, there is not as much new in here as I had hoped to see, and the treatments are far shallower than I had hoped from such a book. To be fair, the point of the book was not to be probing and to go into the details of the various country’s economic and political policies, though I had wanted more of that.

My takeaway: I am fascinated with people’s fascination about the Nordic countries. I am also fascinated at how little most people seem to understand the U.S. including most folks who currently live here.

My other two cents: I believe that the pursuit of equality also exhibits diminishing marginal utility, and that the word “equality” is simply short-hand for, “we have not thought that hard about the subject.”

SEIU Update, May 4

Two updates. First, I have been e-mailing the SEIU organizer, Joseph Holt, for over a week now asking him both about the status of the union card I (stupidly) signed and about the status of the election. I asked him to tear up my card (figuring that reducing the chances of an election even happening is a better way forward than being in an election and voting no) and also about the timing of the process. And shocker: total radio silence. Think about that. The union is propogandizing to all of the faculty about how they are cooperative, are here to give us a voice, are here to improve conditions, and yet they cannot (or refuse to) answer very simple questions about process to the very people they are trying to “help.”

Second, here is the message that the faculty organizing committee sent to the contingent faculty group yesterday. My reading of this is that the group has decided that they will only be trying to organize the “adjunct” faculty and not the full-time non-tenure trackers. This is obviously eminently good news for me if true, though I still believe that the entire movement is detrimental to collegiality, the university’s interests and the faculty’s interests. I e-mailed Professor Thomas about the status of the union drive, in particular if my reading of the letter is correct, but again have not heard a response back.

I actually cannot find Professor Thomas listed anywhere on the Warner school website, I would like to know from what position he is representing me?

From: Andrew Thomas <______@warner.rochester.edu>
Date: Tue, May 3, 2016 at 7:55 PM
Subject: Wrapping Up the Semester
To: Andrew Thomas <_______@gmail.com>

Dear Colleagues,
Last week several of you attended the forum held by the U of R Faculty Senate to hear administrators and faculty union representatives speak about our efforts to unionize contingent faculty here. Many good questions were asked and we wanted to formally share some of the answers to these with those who may not have been able to attend. Attached is an FAQ we sent around more than a month ago. Many of the answers are located within this FAQ. In addition:
How can faculty be sure they receive a ballot if an election is held over the summer?
If there is an election during the summer, faculty will be notified by both the administration and SEIU, at minimum via email. Faculty will receive a physical ballot in the mail based on the address they have on file with the administration. There is typically a window of time in which you can request a new ballot if for some reason you do not receive one. If you are traveling, you can request, through the NLRB, to have your ballot sent to any address you will be at. This is a fair, democratic process and our goal is to be sure everyone has a voice and a vote. These are the bedrocks of building a union.
What guarantees are there in bargaining a contract? How will we be sure we don’t lose benefits or pay?
First, it is important to note that as a faculty union organizing committee, we are steadfastly determined to leave no person behind in bargaining and will strive to make the bargaining process as fair, democratic and positive as possible. Around the nation, NO faculty union contract bargained by SEIU has seen losses in pay or benefits. ALL faculty have moved forward with across the board raises and initiatives. Second, we understand that there are no guarantees in bargaining. Although we are protected in many ways by labor laws, it is technically possible to move forward, backward or stagnate. However, as aforementioned, it is our solid commitment that we will only put forth and vote on a contract that moves all faculty forward. We would hope that would be your commitment in joining us, as well. We have strength and power in numbers, as we’ve seen across the nation.
We are moving forward as an adjunct organizing committee (wintercow emphasis added) to make improvements for ourselves and our students here at U of R. The pattern we have seen emerge at schools across the country such as Tufts and Ithaca College is that when adjuncts form and win their unions, their full-time contingent colleagues frequently follow in their footsteps. We hope this is the case here at the University of Rochester. We feel a collaborative relationship of working together is what will best serve our students and university. The goal of forming a union is to unite — not to divide. We encourage you to join together by forming a full-time contingent organizing committee to take part in the work of forming your own faculty union when ready to do so. Please feel free to reach out if you have any questions or would like to meet to discuss how you can help to spearhead efforts for full-time faculty.
U of R Faculty Organizing Committee

I cannot recommend more highly George Stigler’s old autobiography, Memoirs of an Unregulated Economist. You will find him to be far more thoughtful, humble, generous and circumspect than any crude caricature you will ever see of him. Reading these sorts of books makes me sad for what has happened to education on two levels. First, he describes, on nearly every page, the vigorous and vibrant intellectual discussions which used to be commonplace among students, among faculty and between faculty and students. While there may be “verbiage” shared by these groups today, the kind of deep intellectual consideration of issues he writes about is flat missing on colleges today, at least in any regimented way. Second, it is truly sad that we are not immersing students more deeply into the history of ideas in all of their fields of study. I understand the opportunity cost of doing so, and that there are probably better ways to structure curricula – but we at the university level should at a minimum keep options open for these pursuits, and as best as possible to allow students to stumble upon these histories should they be of the intellectually curious type.

Here is Stigler on whether colleges are signals, and what their role is:

I am convinced that at least half of what one learns at a college or university is learned from fellow students. They live together and argue among themselves with vigor and candor that are inappropriate in discussions with faculty members, even tolerant ones. If one could attract good students without good faculty, one could run a fine university very economically.

Thus said the economics professor! Here is his (prescient) view on why online education will not soon replace the in the flesh and blood real deal (it seems a Hayekian tacit knowledge point to me):

One benefit of associating daily with another person is that communication of ideas becomes much more efficient. Even though Jones and I have always spoken English, and may even have gone to the same graduate school, each of us thinks somewhat differently; we each have a different order in which we think and probably a different pace in expressing ideas. Family members use words that have special meanings for them. A reference to “Z” brings to mind a tedious bore or a remarkable procrastinator; in our family, “Lizzie Bean” was to lead out immediately all one’s aces in bridge. So it is with every person, and that is why intimate association makes communication between people efficient and accurate. If I had known David Ricardo, I would be better able to understand his written words. That would be a help, because to this day the meanings of his theories are much debated.

That uncertainty, however, is also what makes lots of modern intellectual pursuits fun! Here is Stigler on the modern Social Justice Warriors taking over our campuses:

Good communication is essential to the great university. The faculty is too strong to be ignored, and too diversely opinionated to be a conceivable administrative body. Only rational discussion can achieve some measure of agreement. I believe that the excellent machinery of communication was one large factor in the much better history of events at Chicago during the widespread rebellions of the late sixties than at most other universities, for our faculty united behind the expulsion of a large number of young barbarians. The more radical of the rebelling students of the late 1960s were barbarians: They were prepared to suppress free speech and other traditional liberal values with violence in order to advance their intransigent demands., Yet they were less guilty, I think, than the large number of faculty members who, while criticizing coercive tactics, openly sympathized with the students’ desire to politicize the university. Indeed, without this widespread sympathy the student movements would have been much less effective and would not have left a permanent legacy of political engagement and strong partisanship in academic institutions.

I am sure THAT sentiment would go over well if repeated on campus today. Here he is on opposition to the creation and acquisition of new knowledge:

Max Planck said that a science progresses by having the old professors die off. I assume that he would have agreed, however, that shooting old professors would not hasten scientific progress.

Here he is on economists’ marketing capabilities:

Economists have been remarkably successful in selling their product this century. Every large business has at least one economist, and the largest business of all has a Council of Economic Advisors, which on suitable occasions is allowed in the White House. The only addition to the list of Nobel Prizes since its founding is Economics. Economics is often the most popular undergraduate major in colleges, it is believed to equip one for law school or business school. All of the tedious humor about the differences of opinion among economists (five economists will have six opinions, two from Keynes), or their infatuation with abstract thinking (“it’s all right in practice, but it won’t work in theory!”), are really envious jibes. Denunciation of America is almost the only bond that unifies European intellectuals, and criticism of economics is the chief bond joining the other social sciences. How much sweeter is envy than pity.

On public attitudes toward universities:

The publicly acknowledged benevolence of academic institutions and personnel is a source of wonder to me. The public’s attitude is illustrated by the fact that a federal judge may teach at a university, but is denied other forms of nonjudicial employment … this attitude has survived the obvious self-serving eagerness of the physical scientists to spend half of the nation’s income if given the chance. The social scientists would settle for what the physical scientists are already getting, thus displaying proportionate greed.

On economists pontificating outside the bounds of their “expertise:”

Probably the best way to approach this state would be to require academic scholars to publish their nonprofessional work anonymously. That practice would serve two ends. Anonymity would deprive the work of an authority that is attached the author’s professional status and probably should not be attached to writings outside his area of professional competence. Moreover, the employing institution would not be drawn into the maelstrom of current events. This recommendation may sound utopian, but it was how the premier journals of Great Britain were conducted in the first half of the 19th century.

And here, Stigler near and dear to my heart, discusses the now, Rule #1 in the disingenuous internet “arguer” playbook – launching serious people down deep rabbit holes …

That episode led me to reflect upon the nature of scientific criticism. Nothing is easier than to suggest new work to a scholar. Was the result under question not contradicted by the French (or better, Russian) experience? Would the results change if account were taken of the ethnic composition of the population? AD INFINITUM. Each such suggestion-criticism can be produced almost costlessly but may require many months of time to investigate. I was led to propose that critics would be rewarded if their suggestions are fruitful and taxed for part of the investigation when they are wrong. I was told by my colleagues that my suggestion, if adopted, would reduce the scholarly community to silence. I suppose that means that the price for successful suggestions was too low. 

And finally,

When someone says, “History proves,” that phrase should be replaced by, “I propose to assume without a shred of evidence.”

Picking up on a theme from two years ago, let’s consider again the argument in favor of progressive (re)distribution of income from the wealthiest to the poorest.  The argument I made back then was that on basic behavioral grounds, the assumption that taking a dollar from the rich and giving it to the poor would increase aggregate utility does not follow. And it does not follow precisely for the reasons behavioralists tell us. First, there is no reason to believe that another dollar to an already rich person provides less utility than a dollar to a poor person. There is no theory that can conclude that.  Second, and perhaps more important, is that loss aversion may reverse the results aimed for by the transfer of wealth. People suffer more utility loss from the loss of a dollar than they gain from the securing of a dollar.

Those objections have never been adequately dealt with. And to those I’d like to add two more.

  1. The idea that there is diminishing marginal utility in consumption is not exactly the same as whether there is diminishing marginal utility in the purchasing media. We may be getting a little ahead of ourselves here – but when we learn basic economics, we end up teaching something like the second slice of pizza gives us less satisfaction than the first, and the third in turn gives us less satisfaction than the second. This is most definitely not the same as saying that the third dollar gives us less satisfaction than the second which gives us less than the first.

    Now, if (and this is ironic, isn’t it) you want to assume that all markets are supremely perfectly competitive, that all economic agents are always optimizing with full information 100% of the time, and that they cannot adjust their consumption in any way to make themselves better off at the current income and price levels that prevail, then maybe the conflation of diminishing marginal utility of consumption and diminishing marginal utility of dollar bills would be acceptable. But critics tell us regularly (and I do not disagree) that the idea of perfectly competitive markets is a myth, and that it is not even remotely possible that we are optimizing all of the time.

    If we WERE optimizing all of the time, consumers would end up allocating their (marginal) dollars so that, at the margin, the very last dollar spent on every single item provided them with exactly the same amount of satisfaction.

    But if we are not going to be comfortable making that assumption, then it does not follow that the satisfaction provided by spending that last dollar on apples is the same as the satisfaction we would have gotten spending it on pears. In other words, since a dollar allows us to purchase ANYTHING on offer in the entire economy, if in fact there are diminishing marginal gains to additional dollars, they would have to set in at consumption levels far beyond anything any normal person could ever achieve. So, while, right at this moment, if you had me spend one additional dollar on coffee (I am on my third cup) it would not make me happy, that does not mean that taking a dollar from me would not diminish my happiness. That dollar enables me to buy a piece of a book, a few minutes of a phone call, some cleaner for my eyeglasses, and so on. Since resources are scarce, it is implausible that I have already reached a point of satiation in all of those things and more. And if the (re)distributionists are going to nonetheless argue that I get less satisfaction from reading the next book than someone else (who would be receiving my dollar) who would use that dollar to purchase bacon, they are going to be left with a morally bankrupt argument that boils down to, “we just know that person X likes bacon more than you like books.” There is no other foundational theory to rest such an assumption on aside from it just being an assumption, a preference, a non-universal value.

  2. The argument of the (re)distributionists is that global utility increases from redistribution. Take a dollar from Wintercow, his utility falls by less than the dollar being given to Summercow. QED. Not so fast. When you simply execute income transfers, remember that you are going to be doing nothing to the productive capacity of an economy (ignore Laffer-type effects). Poorer people will have more income and richer people will have less. The prices of things that the rich buy, due to lower demand, will fall a bit. At the same time, since we live in a world of scarcity, the prices of things the poor buy, due to higher demand, will rise a bit. So, while some of the losses to the rich will be dampened, the gains to the poor will be dampened. But what now happens to the people who are not poor, but close to it, but now face higher prices for the important things they need to buy? Will not their utility fall, and fall as much as the gains to the poor who have received the (re)distribution? You may also argue that the near rich see utility gains, and that those gains nearly offset the losses to the actual rich. By my mind, taking into account the equilibrium impacts on prices, there may be no net change in utility from the redistribution at all. In that case, the argument for redistribution cannot come on aggregate utilitarian grounds but must come from elsewhere.

Call me crazy for expecting these ideas to be dealt with.

  1. Evidence for Hanson’s filter? I find this one terrifying.
  2. Here is Marty Weitzman on negotiating global minimum carbon prices. The difficulty, as I see it, is that the “extra benefit” that country A receives from countries B through Z reducing carbon, can in fact, be negative.
  3. Gary Gorton on safe assets.  I know I am conflating terms here, but if the safest bank instruments are subject to runs, then maybe they are not safe. I am firmly in the John Cochrane camp on this one.
  4. The kinds of inequality that matter: mortality inequality, for example. What has happened over time? Sure to be front page news. “we show that among infants, children, and young adults,
    mortality has been falling more quickly in poorer areas with the result that inequality in mortality has fallen substantially over time.  This is an important result given the growing literature showing that good health in childhood predicts better health in adulthood and suggests that today’s children are likely to face considerably less inequality in mortality as they age than current adults. We also show that there have been stunning declines in mortality rates for African-Americans between 1990 and 2010, especially for black men. “
  5. Incentives matter. The behavioral experts are, as they say, “too cute by half.”
  6. Even Adam Smith knew there were limits to the productivity gains to be had in a pin factory.
  7. MV=PY? Not in colonial America! Another fascinating paper by the widely underappreciaed Farley Grubb.
  8. This is the second paper in the past month showing “efficient cheating.” I would score this one for Caplan over Hanson on the purpose of education.
  9. More evidence that the middle class has “hollowed-out.”
  10. ObamaCare coverage.

My latest e-mail to the union organizer, Joseph Holt, has been unanswered for three days now.

Dear Joe,
I would like an update on how the union drive is going.
How many contingent faculty are you targeting?
How many do you need to sign cards in order to authorize a vote?
How close are you to a vote happening?
When is the vote going to happen?
Has there been any discussion of who is going to be part of the bargaining unit?
I have not had any correspondence from SEIU or other contingent faculty on the status of the drive for almost a month and I would appreciate understanding where things stand.
Here was the last post on the issue. Here is a longer summary.

As you probably all know, social security is a transfer program, not a retirement program. Aside from eliminating the program entirely, which advocating for would have you removed from polite company, here are some things to consider about it.

  1. The system is in far better shape than Medicare. Medicare is the big elephant in the room. I would gladly trade off more capitalism in medicine for less capitalism in retirement savings. After spending the last week in and out of various medical facilities, none of them able to discuss cost and price with me, and ALL overflowing with patients and stressed out doctors and nurses, it is quite clear to me that we need more competition, not less, and a different way of thinking about helping needy people afford basic medical care than the way we are doing it today. But that is for another series of long posts.
  2. A quick, short-term, but not complete, fix would be to extend the retirement age. It bears repeating that when social benefits started being paid (to a much smaller population) in 1940, life expectancy at birth was close to 63. Conditional life expectancy, upon reaching retirement, was not nearly as high as it is today. So the program was designed under a very different demographic regime (including birth rates too). Retirees simply did not live long enough to collect lots of benefits. That is obviously very different today with life expectancy at birth in the 79 year range and conditional life expectancy upon reaching 65 running another 20 years. Can someone else show me a program or product that was created in 1940 that remains nearly unchanged today in the face of massive changes in the underlying customer demographics and economics?
  3. My colleague here at UR believes that the US is starving the world of much needed safe, secure debt. If I were to accept the premise of the argument, then here is how I would propose we accommodate. I think the US should borrow an incredible crap-ton of money today. I think they should use the proceeds to pay off the present value of all current and future retirees’ “claims” in social security system (Medicare too?), and then abolish the entire system entirely. If the government wants to pass a law saying that these newly awarded funds be earmarked for retirement savings, then fine. I’d immediately abolish the payroll tax, and if the government needs to raise revenues to replace that, and to pay off the debt (service would be cheap remember, and at negative rates, we’d be PAID to do it!), either adopt a progressive consumption tax, or beef up the income tax and make the entire tax system more transparent.
  4. My portion of the social security payroll tax is 6.2% and the employer portion is 6.2%. By the way, that is a sham. Most of that incidence is borne by workers. Assume that the net burden is 12%. For a family like mine, therefore, the annual social security tax burden falls somewhere in the range of $10,000 to $20,000 per year. Suppose we take the middle end of that range for fun, about $15,000 per year. If we, instead of sending that to the government, only to be doled out to some other retiree (or some ag subsidy as it may, those funds enter the general fund), we were commanded to “take care of our parents”, we could instead simply take $15,000 from our paychecks and hand it directly to our parents. My wife and I still have 4 living parents however, and the $15,000 does not go an incredibly long way. So unless families had more kids than just two, their social security contributions are not likely to be enough to support parents. On the other hand, I am from a family of 6 kids and my wife is from a family of 3 kids. Even if the average SS taxes from each of us is $10,000, that is plenty of money for us to take care of our parents. Here’s an idea – if you do not have children, you should not be eligible for social security.
  5. For argument sake, suppose that my average social security contribution since I started working (age 22, less 5 years for school) has been $10,000 per year. And suppose that amount continued to be collected and invested until I was 67, I’d have $1,334,000 if I managed to secure a 5% real return. If I managed to have that asset in an interest bearing account, I’d be able to generate $53,000 per year in pre-tax income and still preserve the entire value of the asset to be transferred to my estate or some charity. If I decided to pay out the entire thing (excluding interest) so that it ran to zero by the expected time of death, I could generate $78,470 per year. If you are worried that poor people would not be able to accumulate this kind of a retirement nestegg from their social security earnings alone … tax the wealth that has accrued at the time of death and use those funds to supplement the retirement funds of the poor.

I don’t actually believe in doing any of these things, and for sure I can flesh them out a lot more, but it’s fun to toss stuff up against the wall and see how it looks.

On Shame

Perhaps the least appreciated idea in the western world today is the importance of shame.

When I get my act together, I hope to begin a series on the topic. In a world populated with opportunism, and in a world where it seems a not insignificant portion of support for government is thinly veiled attempt (successful) to “get my own while the gettin’ is good” I find it utterly astonishing that the people who take advantage of others do not have any shame about it, and that those who are getting hammered by these actions are not much more seriously promoting the idea that this is shameful behavior.

What is surprising is that I seem to sense it in all parts of life. Think about your own work office. I am sure you know fellow workers who take every short-cut, who take the easy assignments, who take advantage of every little perq, and so on. Do they not have any shame about it? Do others, who are less opportunistic, not in some way try to shame these actions?

Is shameful behavior on the rise or has it always been this way?

Is our tendency to call out shameful behavior on the wane or have our attitudes always been the same?

One of my meta-beliefs about the world is that government-laws, etc. follow custom. I really do believe changes in culture, attitudes, custom precede that what gets enshrined in formal institutions and not the other way around. If we want to see less opportunism in government, and less institutionalization of people living “high in the hog” (think of ridiculous public sector pensions) then that can only start with a change in attitudes in all phases of life about what is shameful. People have to feel shame, else they are going to be bordering on nihilistic sociopathy. Indeed, I have been accused of being such a person for worrying about shame the way I do. I think “they” have it backward.

Finally, I don’t know how I can not sound like a complete elitist douche when making these points. I admit I am a very fallible person and not necessarily above the fray, so to speak. But I think these sorts of questions are vastly underconsidered possibly because they are hard to measure and stick into formal models.



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