Thursday, March 29, 2012

The Lumina Foundation Goal 60% College Grads by 2025

The Lumina foundation's goal is for 60% of Americans to be College Grads by 2025. 

"60 percent by 2025", I always think that if that is your only goal it is easy to attain.  You just make school easier and more enjoyable and of course cheaper.  I am sure with cooperation from the educational establishment that could be done, but I do not think that is what Lumina has in mind.  

Now if your goal is to have a smarter more knowledgeable population you might want to think about what you want people to know and what is the easiest cheapest way to get that knowledge to people.  It might not be though schooling.  As for smarter people that is a tough one.  For time better nutrition pushed IQs up but, we do not know how to do more of that then we are doing now and school seems to NOT be the answer to that.  

It is important to define your goals well.  

Wednesday, March 28, 2012

Lifetime Medical Spending

I often read statements like:
In the US the top 5% of medical spenders spend an average of $40,682 a year each, and account for 49.5% of all spending. (The bottom half spend an average of $236.)
I always think that is the variation in lifetime spending that matters most not the spending within a given year.  So I dug up this link.  It is for Canada but, though we spend much more in the USA, the  relative differences should be similar. There are a couple of nice charts in the document.  Here is some pertinent text:
In order to calculate the distribution of lifetime costs, we estimated the Markov models using Monte Carlo microsimulation trials (Figures ​(Figures44 and ​and5).5). As might be expected, lifetime costs are somewhat less skewed than are per capita costs in any single year. However, the distribution is far from normal; costs are not tightly grouped around the mean. For women, mean lifetime costs are $89,722, with a standard deviation of $38,776. Median costs for women were $86,125. Ten per cent of women incur lifetime costs of less than $43,843. For men, the mean is $64,052 with a standard deviation of $35,331. Median costs for men were $59,819, while 10% of men incurred lifetime costs of less than $22,450.
Interestingly many people’s lifetime spending is below $20,000.  The middle 50% starts at about $60,000 and goes to about $140,000.  The chart shows some at $260,000. I am sure that some people go way over the high number but their numbers are too small to show up.  

Tuesday, March 13, 2012

How to solve the Deficit

Lately I have been telling people that because SS, Medicare and Gov. education are rob Peter to Pay peter programs that it is technically easy to solve the deficit problem but it is politically impossible to address the problem until a real crisis hits.  Once a crisis hits you can welfarize SS, Medicare and Gov. education and the deficit goes away rapidly.

I pay about $4,000/year each to send my children to private schools but public schools spend about $13,000/year and since it is impossible to subsidize the middle class the middle class are paying every penny.

Government Spending is a Choice

It is choice.  As I outline here, it is easy to slash spending without hurting the poor.  We can raise taxes or lower spending  or some combination but right now it is difficult to do anything because the median voter is rationally ignorant and the problem is not felt enough by the median voter that a politician can win by addressing it sensibly.  Both side's politicians see either raising taxes significantly or lowering spending significantly as a loosing strategy.  

It Is not Capitalism (Economic Freedom) that is causing Unemployment

It Capitalism (I prefer economic freedom to the word capitalism) that is causing unemployment.   There is plenty of work to be done.  There are always wants.  The problem is that there is not enough spending or lack of demand which is a monetary system problem.  Our monetary system is a Government monopoly system and because of that it has problems supplying the correct amount of money.

Most people assume that money has always been issued by national governments but this is not so.  Before the civil war the  people used bank notes as money:.  Here is an interesting excerpt form Wikipedia on the subject:
During 1861, the opening year of the American Civil War, the expenses incurred by the Union Government far outstripped its limited revenues from taxation, and borrowing was the main vehicle for financing the war. The Act of July 17, 1861[1] authorized Secretary of the Treasury Salmon P. Chase to raise money via the issuance of $50,000,000 in Treasury Notes payable on demand.[2] These Demand Notes were paid out to creditors directly and used to meet the payroll of soldiers in the field. While issued within the legal framework of Treasury Note Debt, the Demand Notes were intended to circulate as currency and were of the same size as and, in appearance, closely resembled banknotes.[3] In December 1861, economic conditions deteriorated and a suspension of specie payment led the government to cease redeeming the Demand Notes in coin. Also, in 1861, at General Grant's Headquarters, Edmund Dick Taylor mentioned his idea for greenbacks.[4][edit]
          The Legal Tender Acts
The beginning of 1862 found the Union's expenses mounting, and the government was having trouble funding the escalating war. U.S. Demand Notes—which were used, among other things, to pay Union soldiers—were unredeemable, and the value of the notes began to deteriorate. On January 16, 1862, in a private meeting with President Lincoln, Edmund D. Taylor advised him to issue greenbacks.[5] Congressman and Buffalo banker Elbridge G. Spaulding prepared a bill, based on the Free Banking Law of New York, that eventually became the National Banking Act of 1863.[6] Recognizing, however, that his proposal would take many months to pass Congress, in early February Spaulding introduced another bill to permit the U.S. Treasury to issue $150 million in notes as legal tender.[7] This caused tremendous controversy in Congress, as hitherto the Constitution had been interpreted as not granting the government the power to issue a paper currency. "The bill before us is a war measure, a measure of necessity, and not of choice," Spaulding argued before the House, adding, "These are extraordinary times, and extraordinary measures must be resorted to in order to save our Government, and preserve our nationality." Spaulding justified the action as a "necessary means of carrying into execution the powers granted in the Constitution 'to raise and support armies,' and 'to provide and maintain a navy.'”[8] Despite strong opposition, on February 25, 1862, President Lincoln signed the First Legal Tender Act[9] into law, authorizing the issuance of United States Notes as a legal tender—the paper currency soon to be known as "greenbacks." In his correspondence, Lincoln credited Edmund Dick Taylor for his suggestion of the greenback currency, and named him "Father of the Greenback."[10]
Too much money will produce inflation too little money and you have a lack of demand or unemployment.  In a free economy with fee banks issuing their own currency, banks are motivated not to issue too much currency because they could fall off par with the negatives that come with that.  That are motivated to avoid deflation because that would represent lost opportunity to make profits.  

Depositors and investors would be motivated to watch their banks but it would be rare for a bank failure to cause a total loss to depositors.  Since people trust companies less than they trust Government, people would not be inclined to horde bank issued money in a downturn but if they did and the money started to get more valuable the issuer would be motivated to buy more assets and make more loans so as profit from its rising currency.   This would increase demand when it is needed.  

In such a system the failure of a bank would strengthen all the remaining banks and it would make it impossible for all banks to go down at once. 

Once Again an Advocate Of Stimulus Uses These Numbers

Dean Baker on the Financial Crisis mentions his support for fiscal stimulus.  

On the stimulus, I am willing to accept Dean's numbers that $300 billion/year saved/created 3 million jobs. That is $300 billion / 3 million jobs = $100,000 per job! Most of those jobs paying below $30,000/year! Why anyone would think that was a good policy based on those numbers I do not know!
I would think that it would be much better to try a combination of monetary expansion and replacing the minimum wage, some welfare and unemployment insurance with a wage subsidy.


ScheduleBase Teller Scheduling

Bank Teller Scheduling Software Delivers Major Time Savings to State Bank & Trust Branches

Schedulebase because of it its accessibly from anywhere, power and ease of use is a great tool for the scheduling of bank tellers.

On the Government Takeover of Money

The Government Takeover of Money of the creation and issuance of money in the civil war period is to me the greatest illustration of this famous Hayek quote:  

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
- F. A. Hayek: The Fatal Conceit: The Errors of Socialism (1988), p. 76. 

Arguable it lead to the Great Depression and to World War II.  

The Incentive Bubble

The Incentive Bubble

I agree that there seems to be and incentives bubble but it is my observation that it always takes a while for free people to try, adjust and maybe discard ideas.  People will adjust to the incentives.

It is good to not interfere with people's rights to try new things even if they some times lead to failure or in this case skewed income and create some bad incentives.  For example even if the 2008 financial collapse was due to deregulation (an open question), that does not mean for sure that the deregulation was bad.  You can think of the collapse as school master.  I would hope that had the politicians not bailed out the firms, that the collapse would have taught people not to lend to the likes of Lehman and the other investment banks.   Very educational.  It is often the case that a change in deregulation leads to very negative short term results as people are slow to adjust but the do learn.

I think that part of the incentive/compensation problem is the cultural belief in supermen.  Perhaps this comes in part from watching sports where a LeBron James is a real superman who can carry a team, but business is not like that.  Jim Cramer and Jack Welch, are not so important.  Even Steve Jobs and Bill Gates though very good at what they do are not like LeBron James, there was quite a bit of serendipity that went into their success so paying huge compensation for CEOs is probably not a good policy.  In Fact Carl Icon takes over companies and replaces the high paid CEO with one of his lower paid people and the impact is generally not negative.

Besides the the incentives problems with CEOs the incentives of mutual fund and money mangers seem particularly bad even more so than CEOs.  The get paid even when the under perform the market as they usually do.

One of the big problems with trying to control executive compensation is that it is a small part of profits.

Now in defense of the overpaid in business they often do not consume much of the money that they get.  Much of their money it goes into investments that make us all better off and to call for government intervention is a mistake because the incentives in government are even worse and politics evolves slower.

BTW one thing that one can do is invest with Carl Icon (IEP).

How Is this for an Un-thought Idea, Privatize the Fed

John Goodman made a blog post describing how bad the Government insurance programs that are breaking the Federal Government budget are but he leaves out FDIC.   Here is my very short critique of the FDIC  and a possible solution.
The FDIC charges the same premium to an institution that is leveraged to an insane extent as to an institution that is modest.  This is bad policy.  Perhaps the Federal Reserve should be privatized, made into a for profit organization and should provide insurance to member banks.    The Federal Reserve could insure the banks because it cannot run out of many because it has the ability to create money.  Each american could be given shares in the resulting organization.  We would need to change the legal tender laws so that the threat of competition would keep it in line but it might work.  It has been shown that even the threat of competition can be enough to keep a monopoly in line.