Pathologies of the health care system

Another good op-ed from John Cochrane in the Wall Street Journal about health care, What to Do on the Day After Obamacare.

Cochrane agrees that many of the problems in health care are caused by previous government meddling:

Most pathologies in the current system are creatures of previous laws and regulations.

And, he again writes eloquently on how these previous laws and regulations distort the medical care and health insurance markets to cause the very pathologies that Obamacare supporter think more regulation will fix.

An esteemed finance professor agrees with me

There was an excellent opinion piece in the Wall Street Journal today from John Cochrane, finance prof at the University of Chicago.

In it, Cochrane repeats something I wrote in 2009 about the root cause of one key problem in health insurance: pre-existing condition restrictions.  This is Cochrane:

When the administration affirmed last month that church-affiliated employers must buy health insurance that covers birth control, the outcry was instant.  Critics complained that certain institutions should be exempt as a matter of religious freedom.

Critics are missing the larger point. Why should the Department of Health and Human Services (HHS) decree that any of us must pay for “insurance” that covers contraceptives?

I put “insurance” in quotes for a reason. Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill.

Insurance is a bad idea for small, regular and predictable expenses.

How did we get to this point? It all leads back to the elephant in the room: the tax deductibility of employer-provided group insurance.

The pre-existing conditions crisis is largely a creature of tax law.  You don’t lose your car insurance when you change jobs.

Here’s what I wrote in 2009:

President Obama proposes to fix the problem of health insurance companies not providing coverage to people with pre-existing conditions by forcing insurance companies to cover these people.

What’s the root cause of this problem?

The tax advantage companies have in purchasing health insurance plans over individuals.  Without this tax advantage, the health insurance industry would look more like the auto and home insurance industries.  We’d buy policies directly from insurers instead of being covered by employers and stay with those companies much longer.

In the last fifteen years, I’ve changed my health insurance provider ten times, twice due to changing employment and the other times due to my company changing providers or me switching from one plan to another within the company.  Luckily I haven’t had a pre-existing condition to worry about.

I use the same auto and home insurance company I used fifteen years ago, same agent too.  My choice to stay with this company has been wholly independent of my employer.

I recommend reading the whole thing.

“Letter on Corpulence, Addressed to the Public”

William Banting wrote a 16-page diet book in 1863 with this name.  I love that name.

It appears he had it all figured out then.  His advice turned out to be the same advice that a) helped me lose weight and keep it off (going 11 years now) and b) recently helped me improve my cholesterol levels.

His advice:  Eat less sugars and starch, eat more proteins and fat.  Why?  Because too much sugar and starch throws off your hormones and tells your body to store fat.  Proteins and fat don’t.  In fact, too much sugar and starch will lead to diabetes.  Hello, diabetes epidemic coming after several decades of sugar and starch consumption!

I’m reading Gary Taubes longer than 16-page book, Good Calories, Bad Calories.  If you don’t have time to read the whole book, read the Prologue.  In it, Taubes gives great highlights on the evolution in the diet world since Banting’s book.

In the rest of his book, Taubes exhaustively reviews the “scientific” literature on diets to show that much of the conventional diet wisdom (e.g. government guidelines, the calorie balance equation, eating a low-fat diet) actually has no scientific basis.  Shocking.

But, for your own health, here’s the summary:  Follow Banting’s advice.

When I lost weight, I attributed my success to a lot things because I changed a lot of things.  I balanced my calories.  I ate more often.  I watched my portions.  I reduced mindless eating.  And, I increased my intake of fat and protein and decreased my intake of sugars and starches.

In his other book, Why We Get Fat, Taubes said that people with weight loss success like mine tend to confound all the reasons, but there’s really just one, the last one.

It’s worth experimenting.  Cut back on sugars, breads and starches in your diet, eat a little more fat and protein and watch your scale.

Your Mom was right: It pays to practice

I recommend reading Geoff Colvin’s book, Talent is Overrated: What Really Separates World Class Performers from Everybody Else.  I found Colvin’s storytelling interesting and the information well-presented.

The longest book I've read on my iPhone, so far (Cover via Amazon)

It seems to be similar to Malcolm Glidwell’s Outliers, which I have yet to read.  Like Gladwell (I think), Colvin concludes that deliberate practice (and lots of it) is the key.  Which means, that what really separates world class performers and everybody else is their ability to find and persevere through deliberate practice.

Several of Colvin’s stories gelled with observations from my own experience, on page 44 (of my edition) he discusses studies done on expert race horse handicappers.

…IQ just didn’t seem to matter.  “Low-IQ experts always used more complex models than high-IQ nonexperts,” the researchers found.  Not only did handicapping expertise fail to correlate with IQ, it didn’t even correlate with performance on the arithmetic subtest of the IQ test.

The researchers’ conclusion: Their results suggest “that whatever it is that an IQ test measures, it is not the ability to engage in cognitively complex forms of multi-variate reasoning.”

That last phrase is not one that most of us use very often, but it’s actually a very good description of what most of us do every day in our working lives, and what the best performers do extremely well.  You just don’t have to be especially “smart,” as traditionally defined, to do it.

I’ve seen this over and over again.  “Smart” people (as determined by school grades and IQ tests) who struggle in the real world as they try to fit it into the supposedly “complex” (but surprisingly simple, once you get past the jargon) models they learned in school and they’re often outwitted by folks that have more contextual experience giving them a much better feel for the dynamics of the situation.

In other words, the “smart” person probably wouldn’t think to consider to factor in details of the horse’s latest bathroom break when handicapping the race, while the expert handicapper probably does that without even realizing it.

I do have one point of contention to offer Colvin.  Later in the book, he explains that folks are taking longer to make significant contributions to their fields.  For example, in 1900 a study of innovators found that people began making contributions to their field at around age 23.  By 1999 that age increased to 31.

Colvin attributes this to having more material for these folks to have to master.

I think there’s another factor, that is a key part of Colvin’s book, but he fails to relate here — the amount of deliberate practice these folks have had.

My guess is that in 1900, folks found their fields at a younger age and were able to spend more time in deliberate practice in those fields, because they didn’t have as many other subject requirements in their education distracting their attention.

My guess is that I could have done without about half or more of the liberal arts education that I was required to take to earn my engineering degree and I wouldn’t have missed a beat.

Had I spent more time while I was studying to become an engineer, doing actual engineering work (as an apprentice or intern), I may have discovered several years sooner that engineering didn’t hold my interest.  I could have spent those years getting an earlier start on my other interests instead.

More debates like this, please

My family and friends are surprised to find out that I’m not a fan of TV-based political debates.   They figure that since I have an above average interest in politics, television debates must be like my Super Bowl, or something.

I prefer debates like How Much Government is Good Government? between New York Times columnist David Brooks and Representative Paul Ryan.   It’s written.  You can download it and read it on your iPad, Kindle or any device that supports .pdf.

I think TV debates don’t give a true picture of the candidate.  Its like trying to pick a wife while watching ladies perform in a roller derby.

There’s more opportunity in the written format to filter out the shenanigans and articulate a more complete representation of your positions and your criticisms of your opponents’ positions.

I downloaded the Brooks/Ryan debate for my Kindle iPhone app and read about 60% so far.  I’ll have more to say about it soon.

I do recommend it.   If you’re the least bit interested in politics, you will find it easy reading and interesting.

Ruled by poor logic II

Glenn Reynolds, writing in the Washington Examiner, (via Mark Perry of Carpe Diem), agrees with me about how poor logic leads to damaging policy.

Here’s a sample from the column:

If the government really wants to encourage people to achieve, and maintain, middle-class status, it should be encouraging things like self-discipline and the ability to defer gratification. But that’s not how politics works.

The whole thing is worth a read.

Daniel Hannan on Welfare

I highly recommend reading Daniel Hannan’s book The New Road to Serfdom: A Letter of Warning to America.  The fluency and adeptness at which he analyzes government and makes international comparisons is well worth it.  I’ve learned a great deal so far.  There will be more to come in that regard in future blog posts.

Hannan can also turn some nice paragraphs on domestic issues like welfare (emphasis mine):

It is a stock phrase of virtually every European politician, regardless of party, that “a society is judged by how it treats the worst off.”  Plainly, then, there must be something selfish — and possibly racist — about a people who keep voting for a system that treats the most needy so pitilessly.

It rarely occurs to critics that there might be better ways to measure the efficacy of welfare state than by size of its budget.  Indeed, in a truly successful social security system, budgets ought to fall over time as former recipients are lifted into better and more productive lives.

This, of course, was the original rationale for welfare.  But it has been almost entirely forgotten in Europe, where dependency has become structural.  Benefits that were intended to have a one-time, transformative effect have instead become permanent, as recipients arrange their affairs around qualifying for subventions.  Millions have become trapped in the squalor of disincentives and low expectations.  In Britain, which is by no means as badly off as many EU members, the annual welfare budget, including the lump sum payments that, as in the United States, are called “tax credits,” comes to more than $200 billion a year.  Yet this huge contribution has little impact on either poverty or inequality.

These are good points.  As we keep chugging ahead with ballooning government deficits “that can’t be cut because they’re someone’s entitlement,” nobody seems concerned with why many of these entitlements have grown so large.  Why these programs that were intended to ‘get people back on their feet’ don’t quite seem to do that.  Why they become permanent fixtures and grow.

Then Hannan goes onto to analyze why the 1996 welfare reform in the U.S. was successful.  He gives several reasons, but one of the most important was localism in the administration of welfare.  Ultimately, the reform pushed welfare administration from a centralized federal level, to a local, in some cases, sub-state level, which has many benefits.  This is probably one of the best:

…localism under-girds the notion of responsibility: our responsibility to support ourselves if we can, and our responsibility to those around us–not an abstract category of the “the underprivileged,” but the visible neighbors–who, for whatever reason, cannot support themselves.  No longer is this obligation discharged when we have paid our taxes.  Localism, in short, makes us better citizens.

I thought this passage was powerful for a couple reasons.

First, there’s the suggestion that we ought to be responsible for our own affairs, if we can.  We seem to have a low standard of this these days.

Second, Hannan points out that we tend to act a bit more compassionate for those around us when we haven’t simply done our part by paying taxes.

In the past, families, friends and neighbors would watch out for each other.  If you needed a place to stay while you got back on your feet, you could count on a family member to provide that for you.  And, you’d probably make yourself useful around the house so that family member would know you appreciated their help.

Or maybe your neighbors would invite you to share some meals.  And you’d do the same when they needed it.

Not that this doesn’t happen now.  But, there seems to be no shortage for the attitude that it’s okay to let these responsibilities slip “because we paid or taxes.”

I’ll cut you some slack if you disagree.  But, I’d just ask that you watch for it.  It’s not always readily apparent.  Furthermore, think about what you’ve done to help a family member, friend or neighbor and why.

Recognizing the reason governments fail

Gary Becker has a piece worth reading today’s Wall Street Journal, The Great Recession and Government Failure.

Becker explains well government failures that contributed to the recession and its prolonged effects.  He also explains well why free markets work better than government (emphasis added):

The traditional case for private competitive markets goes back to Adam Smith (and even earlier writers). It is mainly based on abundant evidence that most of the time competitive markets work quite well, usually much better than government alternatives. The main reason is not that individuals in the private sector are intrinsically better than government bureaucrats and politicians, but rather that competitive pressures discipline market behavior much more effectively than government actions.

Competitive pressures in the private marketplace sort out failure better than in government.  It’s not perfect, just better.

Thank Goodness

I’m glad Steven Landsburg is blogging again.  His hiatus left a big hole in my blog reading routine.  This is from his welcome back post:

I know almost nothing of what’s gone on in the U.S. over the past several weeks, except for some vague sense that there was a brouhaha over raising the debt ceiling.

For now, I’ll just say that if we still have a Department of Commerce, then they didn’t cut enough. If we still have a Corporation for Public Broadcasting, or a National Endowment for the Arts or Humanities, then they didn’t even try.

I appreciate that sharp wit.  Landsburg is right.  They didn’t even try.

“Your Teacher Said What!?” Review

I’ve been looking forward to reading Joe and Blake Kernan’s book, Your Teacher Said What?! Defending Our Kids from the Liberal Assault on Capitalism.

I highly recommend it. It exceeded my expectations.  I found it well-written, easy-to-read, entertaining, critical, well researched and fair.

In the book, Kernan describes how he handled presenting ideas of about liberty, free markets, business and the government to his daughter.  We can all benefit from it.

For those unfamiliar, Joe Kernan is the morning host of CNBC’s market and business program Squawk Box and an unabashed capitalist.  His daughter is (or was) ten-years-old and attends public schools.

Despite the title, the book doesn’t focus a great deal on what Blake’s teachers say.  Though, in the book he gives credit to her teachers for doing a fine job of teaching everything other than liberty, markets and business (an example of where he is fair).

Here’s another example of his fairness (p. 3).

When Barack Hussein Obama took the oath of office, I admit I understood the proud cheers of the hundreds of thousands of people lining the parade route in Washington that day.  I didn’t vote for the guy, but I’m not a complete dolt, and I could see how his election said something pretty positive about America.

The hangover didn’t take long coming.  My hangover isn’t the result of concerns about the president’s birth certificate. Or worries that he is some kind of Manchurian candidate in the pay of a foreign power.  I don’t think he’s Muslim, or racist, or anticolonialist, or un-American.

No, my problems with the president are on an entirely different plane: I hate what he’s doing to my children’s future, and I don’t have to think that Barack Obama is the devil to know that he has a very different idea than I do about what America should look like when Blake and Scott are adults.

It’s a belief thing.  Penelope (Kernan’s wife) and I believe in free markets–that the best economic decisions are made by the largest number of individuals acting in what they believe to be their own interests.  President Obama and most of his administration believe in an economy that depends on the cleverest people acting in what they believe to be the interests of everyone else.  We believe in voluntary associations.  They prefer compulsory ones, at least when it comes to health insurance or union organizing.

This sets the stage.  Kernan is not out to make unsubstantiated personal attacks.  Rather, he presents why he thinks his beliefs are right.

In one chapter, Kernan dives into anti-business portrayals and caricatured markets in movies like WALL-E and Avatar.   He concludes:

…I still don’t understand the reflexive hostility of the entertainment business to free markets and capitalism.  Maybe the best explanation is that the writers, directors, and actors who produce our filmed entertainment are allowed (maybe even encouraged) to retain a child’s view of the world.  Like ten-year-olds, they retain a belief in obvious heroes and villians, in perfection as a place where things don’t change (especially as the result of human action), and in happy endings.

A little later, Kernan defines Progressivism (p. 127):

The desire to regulate economic life might be the defining characteristic of Pregressive philosophy.  It combines a mistrust of the free market in allocating resources; an appeal to a vague and indefinable virtue (“fairness”); a desire to achieve perfection in economic outcomes; a deference to experts over the judgement of ordinary folks; and, best of all, a chance to tell other people what to do.  Oh, heck, let’s just say it: Regulation is progressivism.

It is also the perfect way to illustrate just how much Progessive thinking depends on treating adults like kids.  Because kids love regulation.

“Blake?”

“Yes, Dad?”

“You know cigarettes are bad for you, right?”

Eyes roll upward.

“And you know that people aren’t allowed to smoke in restaurants or lots of other places, right?”

“They shouldn’t be allowed to smoke anywhere.”

“Why not?”

“Because it’s bad.”

These two previous passages spurred the idea that many people form their sense of how government, business, markets and the economy work when they are about 10-years-old.  And, they don’t reconcile these views with the real world often, even against compelling evidence.

This brings to mind folks I know who haven’t realized that markets have made available, even to folks with modest income, a standard of living unmatched on this planet, ever.

Or folks who haven’t yet realized that all politicians should be considered narcissists only interested in their own political gain.  I admit, this one took me some time.  I spent too many of my younger days defending “my” politicians for their disappointing behavior before I realized that was a waste.  Assuming all politicians are in it for themselves dispels with the vacuous “I really like that guy” vote and helps you focus on whether or not you agree with the politician’s positions.

If it’s true that many folks think of government using their 10-year-old logic, this may make Kernan’s book one of the most important of the year because it provides nice advice on how to deal with this.