[I]n the absence of a robust private US market, my assumption is that the government will focus on the apparent at the expense of the hard-to-measure. Innovation benefits future constituents who aren't voting now. Producing it is very expensive. On the other hand, cutting costs pleases voters this instant. This is, fundamentally, what cries to "use the government's negotiating power" with drug companies is about. Advocates of such a policy spend a lot of time arguing about whether pharmaceutical companies do, or do not, spend too much on marketing. This is besides the point. The government is not going to price to some unknowable socially optimal amount of pharma market power. It is going to price to what the voters want, which is to spend as little as possible right now.
I won't summarize it. It's a long post and it speaks for itself. I'm not as sanguine about reform, generally. I think that the 1/6 of Americans that are uninsured are a really big deal (and I'm sure Megan thinks so to). But I happen to think that the right answer is the one that insures that 1/6 as directly and inexpensively as possible, avoids moral hazard as much as possible, and doesn't create massive market distortions for the percentage of Americans that can actuall afford their own coverage. But that's probably not what we're going to get.
The terrifying answer to this question is "maybe it does!"
Proponents of a public option for health care argue that the private sector has proven itself unable to control the rising costs of health care, and that government is uniquely able to strong-arm better prices. There's something to be said here (that I'm not exactly qualified to comment on) about private, employer-provided and tax-free health insurance creating distortions in how much people have to pay for what they get, and this generally driving up the cost of care. But this doesn't explain why private health insurers (and they are enormous, with enormous amounts of baraining power) wouldn't have incentives to keep costs down, even if YOU don't.
This morning on Morning Joe, Howard Dean tried to explain it:
His answer: CEO salaries!
Does this make any sense? Why should CEO salaries have any relation to health insurance companies' incentives to keep costs down? Your typical greedy corporation should want to do both, after all. Keeping down costs has the effect of drawing more business, increasing equity and leaving more cash on the table for big, fat CEO salaries.
Proponents also argue that creating a public option is the way to deal with this problem. But Medicare is already an enormous program with huge amounts of bargaining clout. What cost-control power will a new public option have that Medicare (or for that matter, equally enormous private insurers) doesn't?
The most dramatic change would likely come from changing medical malpractice liability so that doctors will have less incentive to throw every expensive test at a problem. Right now the cost of avoiding malpractice suits is being passed along to insurance companies which are, in turn, passing it along to the employers which are providing insurance to their employees. A public option only stands a chance of lowering costs if those doctors are less vulnerable to medical malpractice claims. But then ask yourself "Do I want to see a doctor that is really difficult to sue?"
There's an interesting parallel between the recent debate about the F-22 and the current debate over health care. Health insurance (all insurance) is a hedge against risk. An individual looks at the potential that they may become sick in the next ten years. Say the risk of catastrophic injury is 10% over 10 years, with a cost in the event of injury of $100,000, so total "cost of injury" once the risk is factored in is $10,000. In hedge against this risk, the individual should be willing to pay $1,000 a year for 10 years. In order for the insurer to make any money (or pay overhead, processing, etc.) and individuals are willing to pay this because the marginal utility of safety against catastrophic illness is slightly higher then $1,000. Say, $1,010 a year and everyone is happy.
What does any of this have to do with the F-22? The F-22 is a dogfighter. It's probably the best dogfighter every built. But there is currently no other airforce in the world that can effectively contest our current dogfighters, let alone a super-advanced, super-expensive next-gen dogfighter. The F-22 is essentially a hedge against a peer-competitor that might arise in the future, likely China. The problem is that, unlike catastrophic illness with a risk of 10%, we can see China coming. The price of fighting a war with China and losing is, lets say, 10 trillion dollars in today's money. Enormously catastrophic. But if China wants to build a dogfighter that can challenge the F-22, there are enormous hurdles it has to jump over first, with clear markers that make such a development easy to observe from the outside. So lets say the risk of China developing a sufficiently sophisticated dogfighter without YEARS of advance warning is 1%, and a hedge of $100 billion would be appropriate.
But that's not the end. Let's set the likelihood of war with China fairly high at about 10% (no two nuclear powers have ever been to war.). Now, combined with the 1% likelihood of China developing an F-22 rival without us noticing, despite years of leadtime, the total likelihood of "being caught with our pants down" in a war with a China armed with a dogfighter capable of challenging the F-22 is now 0.1%. With the total cost of the war at $10 trillion, the appropriate hedge would be $10 billion. The total cost of the F-22, prior to current cuts, was $62 billion. And even that assumes that the F-22 is the effective hedge, and without it we would be facing certain Chinese victory (even generously setting the odds of that at 50%, we're down to a $5 billion hedge).
The problem is that Congress is insensitive to price. If "the USA" was a single, rational actor consuming insurance (and that's all a fighter program really is) it would have cancelled the F-22 in 1991 when the USSR collapsed. But Congress isn't a cost-sensitve actor. Rather than hedge effectively against national risk, Congress hedges against "risk of failure in re-election campaign" where showering F-22 related jobs on their districts is more important than safeguarding the nation's coffers.
None of this is to say that Congress can't effectively create a national program for health insurance. But when "keeping costs down" is asserted as a rationale for national health insurance, we should be more than a little skeptical.
There's a bit of a dustup online over the price of XBLA games. Kotaku, among others, is claiming that XBLA is becoming more expensive. The Consumerist chalks this up to increased damand for games, even while admitting that digital distribution elimits the supply side of supply/demand.
Needless to say, it's more likely that neither are true. While "games" as finished units have increased in price over the last year, it's unlikely that the increase is due to an increase in "demand" as such, but rather that XBLA has proven itself able to effectively sell more expensive games, and so developers are less hesitant to investing more resources to create a stand-out product. Of course, maybe developers are more experienced, and it takes the same amount of "time and effort" to create a $15 game that it used to take to create a $10 game. Why should that matter? After all, experience and efficiency is a resource in and of itself, and has its own associated expenses. An hour by an experienced developer could easily be worth 1.5x the time of a novice.
You can imagine a model where prices are invariate to the expense of the project, like movie tickets, where you'd pay $10 for every game, no matter how expensive to produce, and games targeting different units would simply make widely different profits. Like a movie ticket, in a sense you're getting a "deal" on a blockbuster which cost some 200 million to produce, while an arthouse flick is a premium good. But I can't think of very many pricing schemes that work this way. Usually, the more work that goes into something, the more it costs.
In fact, if anything, it's likely that these games are getting cheaper. Developers are getting more experienced, there's more competition, more risk-taking. And if it costs me $15 instead of $10? I won't care, so long as the game appears to have an increase in quality of about 1.5x.
Kate and I used to visit one of these on the Upper East Side with some regularity for brunch on Sunday to fend off the looming-Monday blues during our NYC teaching days, and worked like a charm, every time.
Reihan Salam, blogging for Andrew Sullivan this week, has tipped his hand regarding the role of comic books during his formative years. A similarly afflicted geek, though in the far less nurturing environment of suburban Indianapolis, I credit comic books with my love of footnotes. Open a comic book, and you enter a world of references. Mentions of battles and characters dating back decades, after which, you're treated to an exact citation.
What should I do with myself? I've harbored thoughts of going into academia since graduating from college. But why? People are often imprisoned by the things they know. People only recognize certain options as valid, so they make choices from the relatively limited menu of options they see, rather than recognizing that there is a multitude of occupations and endeavors in the world. The unknown is far larger than the known. I've known that and thought that for a long while. Is it possible that I've falled victim to it, myself? I'm currently taking a class at the Law School as part of my CIR Masters program. It's really opened my eyes to what law school and the practice of law amount to. Why have I never really seriously considered it? I'm baffled.
On Monday, after a prolonged absence from Hyde Park, I return to school. It's been a long time coming. I'm starting a 1-year MA program with the Committee on International Relations at the University of Chicago. It will be a lot of familiar faces, but hopefully with a slightly different mix.
Of course, the real point of this post is that I wanted to try this:
The experience of applying to graduate school has been a real eye-openner. I had what I thought was a reasonable expectation, that as a graduate of the U of C with honors in my department and in the college, that I would stand a good chance of being admitted to an upper-level PhD program. Unfortunately, this doesn't seem to have been the case. The more research I do (such as visiting sites like the Grad Cafe) the more I find that there is a large amount of gamesmenship involved in the application process of which I was simply unaware. Other candidates contacted programs months in advance, asking potential advisors about their ability to take on new advisees as well as their feelings toward the applicant's particular area of interest. Maybe I'm naieve, but I thought that a certain amount of the early work one does in graduate school was designed to help a student with these matters after being admitted rather than before.
On further reflection, however, PhD programs suffer from an important information problem that over-achieving applicants help to rectify. Upon being presented with hundreds of applications for a handful of slots, there are several factors weighing on the committee - the strength of a student's academic record, letters of recommendation, writing sample, etc. However, given the sheer number of applicants and the level of competition, narrowing this pool down remains a difficult task. Students willing to contact the department and make available extra information help to set themselves apart from this enormous pack of qualified people. While such actions also make oneself vulnerable, they offer the potential to set one's self apart in from the committee. As admission to a PhD program is a tremendous investment on the part of the instituion, this information only helps to fortify the decision-making process.
Needless to say, I'm disappointed. I'm forced to reevaluate myself as a candidate for graduate studies. I'm also forced to look for alternate avenues to enhance my profile as an applicant. If any readers of this blog (are there any readers of this blog) have suggestions, please let me know. If you have any friends who are in graduate school or are applying, please forward this along.
Can Rudy Giuliani become the GOP nominee for president? It's the question that colors the entire republican nomination process. For months, pundits have dismissed Giuliani's chances with simple dismissals such as "Republicans always nominate the next guy in line (McCain)" or "As soon as the base finds out about Rudy's positions on social issues, his numbers will fall." Standing at the beginning of March, these judgements look less and less sound. Polls now show a widening gap between Giuliani and the oft-presumed front-runner McCain in the neighborhood of 20% among Republicans. The difference between reality and the conventional wisdom leads us to two questions: 1)"Does the Republican base know enough about Rudy's social positions for this to be factored into the race?" and 2) "Do Rudy's social positions actually prevent an unbeatable obstacle in his pursuit of the GOP nomination?"
I'll try and take them one at a time. 1) If the answer to this question is "yes" than question 2 is a mute point. If the base already knows Giuliani doesn't show it's views on social positions, then Rudy is home free. His numbers are rising and nothing short of a major gaffe is going to endanger them. If the answer is "no" then Giuliani is presented with a major problem, leading to question 2. If Giuliani has to overcome his differing social issues in order to be viable, how can he sell them to the base in a way to remain in the running?
2) Most pundits would say the answer to question 2 is "yes." I think the length of this campaign actually plays to Rudy's advantage, despite the conventional wisdom. Most pundits seem to believe that the longer Republicans are reminded about Rudy's social positions, the more likely they are to desert. However, even at this early stage of the campaign, the more Rudy is discussed (and always prefaced by his left-leaning positions on social issues) the higher his numbers seem to rise. This may not continue over time, however. Rudy's numbers will eventually level off and may fall after coming under sustained assualt by his opponents. However, I feel that the conventional wisdom seems to say that Rudy would govern America with exactly the same policies as he governed New York. This seems naieve. The answer to Rudy's social predicament is one word: Federalism.
Federalism is a lost tenet of the Republican platform. When out of power, it was easy for Republicans to demand that power be devolved to the states. Policies out of Washington were often anethema to Republican principles. However, after gaining control of congress and finally the presidency, it became all to easy to sweep federalism under the run in favor of good old fashioned republicanism (note the small "r") - order and morality at the expense of devolved authority. It spoke to hollow promises on the part of Republican politicians, revealing federalism as a means to an end rather than a core principle.
Giuliani, however, can make a convincing case for the resurrection of federalism in the Republican party. When you look around the country, states have taken the initiative on issues such as health care and the environment in a really remarkable way that speaks to the lie that action by the federal government is necessary in each of these arenas. Giuliani can say, with a great degree of credibility that issues like gun control, gay rights and reproductive issues were right for New York, but he would know better than to say they are right for everyone. The people of New York supported tight gun control. The people of the Northeast might feel the same way. But there is no reason to impose such a law on the people of states which disagree. This is the core of federalism and a very pragmatic stand on the part of a politician which would effectively take his social views off the table.
All Rudy has to do is make it clear that in a Giuliani administration, it wouldn't be the job of a president to decide social issues for each state. It's entirely consistent with all of his positions and entirely consistent with being pro-choice, even if Roe v. Wade were to be overturned in a more conservative court. This would have the secondary affect of assuaging the concern in the libertarian wing of the Republican party about Giuliani's statist leanings and could go along way toward knitting back together the fragmented Reagan coalition.
Rudy's candidacy is, I believe, the most facinating prospect in the entire field thus far. The potential strength of a pro-choice, pro-gun control, etc. Republican candidate for president is far more surprising than the strength of Barack Obama in the Democratic party, whose strength has been the subject of countless hours of talk by the talking heads. Only recently have pundits began to take Rudy's candidacy seriously. I was long frustrated by the dismissal of Rudy by the media and am glad to see this slowly changing. The next 10 months will be telling, but Rudy has a path to victory through federalism. His candidacy and, I believe, the nation would be greatly benefited if he were to follow it.
P.S. If the title of this post whet your appetite, enjoy this video, courtesy of the Beautiful Loser himself.
