Monday, November 29, 2010

An Idea for the Lottery

The state lotteries have been called a tax on stupidity and predation on the poor but I have an Idea for a savings lottery, you have an account and you buy lottery tickets in the account. 50% of the money that you spend on tickets goes into an investment account, 10% goes to the retailer, 10% goes to the state  and 30% is paid out in winnings. 

Tuesday, November 23, 2010

Education or Schooling

Eliezer Yudkowsky at overcommingbias writes:
some young man or woman is sitting at a desk in a university, earnestly studying material they have no intention of ever using, and no interest in knowing for its own sake. They want a high-paying job, and the high-paying job requires a piece of paper, and the piece of paper requires a previous master's degree, and the master's degree requires a bachelor's degree, and the university that grants the bachelor's degree requires you to take a class in 12th-century knitting patterns to graduate. So they diligently study, intending to forget it all the moment the final exam is administered, but still seriously working away, because they want that piece of paper.

Some people will tell me that Cuba has better schools than the USA, so I ask do they live better. What is the purpose of schooling?

Do schooling and homework squeeze out learning, in net producing a less educated population? Alfie Kohn claims that homework does not help learning. Science and history are evidently fun to many people, as evidence see the success of the Discovery, History and Science channels.  So does homework squeeze out learning, useful science?

Is school just a long test?

Algebra for everyone

If you want to have algebra for the purpose of education rather than for testing who is smartest, algebra that all children pass.  You can do that by sticking to the simple principles of algebra. That is focus on the one rule and drill it into the students for years. The one rule is that you need to do the same thing to both sides of the equation. Algebra can be made both easy and useful. Leave the factoring of quadratic equations for the college bound such things are useless to 99% of people anyway.

ABS Link

My company

Medical Self Care Has Its Time Come

What do you do when you find some greatness in an article but cannot agree with most of its prescriptions?  I rewrote it into my own piece leaving out what I thought was pure nonsense. Below is my version of the article:

1. All health insurance plans promote irresponsibility to some extent. People begin to believe that their doctor is responsible for keeping them healthy, not themselves.  It might be good to not carry insurance at all but I recommend very high deductible insurance. Some might choose to go without insurance as they can pay after the treatment, most hospitals will set up payments. 

2. Health insurance is a scheme, with the healthy paying for the old and chronically ill and those with poor health habits, though I should add that smokers actually cost insurance plans less money over the long haul since they die sooner.  Clearly by logic more than half of people will pay less for health care if they do not carry insurance. 

3. With a large pool of money available, the insurance pot gets raided and doctors and hospitals overcharge since there is no market control. There is nothing the plan won't pay for, no matter how expensive, because the desperate public will demand it. You learn your mother has breast cancer. You will stop at nothing to see she gets the most advanced care, and the more her disease progresses, the more you will demand something be done, even unproven treatment.

4. High-tech care caused Americans to falsely believe their healthcare system is the best in the world, and they want more of it. Fancy imaging technology (cat scans, MRIs), unproven but less invasive particle beam radiation treatment, robotic surgery – all are in huge public demand. A Rand Corporation study showed high-technology is the main driver in the high cost of health care.

We are living a fantasy to believe American government can provide all the high-tech medical care that is available (example: latest New York Times article suggests $5000 disease gene testing for all).

5. About 85% of Americans have health insurance. To provide insurance to the remaining population, largely illegal immigrants, places financial and manpower strains on the delivery of health care that the industry is not prepared for. It was Winston Churchill who said: "The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery."

6. Because other countries provide universal health insurance is only to say the bills are paid. This represents provision (welfare) for doctors and hospitals. The system rewards treatment, not cure. Modern medicine has substituted markers of poor health, such as cholesterol, PSA, blood pressure, rather than true end points, such as survival or being drug free.

While many Americans envy countries that offer universal health care, most universal health care plans will soon fail. The National Health Service in Britain is about to implode.

The day is fast coming when health insurance schemes collapse and self care becomes the order of the day. But many Americans aren’t ready for this.

Certainly many Americans are angry at the passage of Obamacare. But a man I met at a Postal Annex store said he needed the insurance coverage and welcomed it, as he has problems with his joints and diabetes. He wanted the medicines that only the insured can afford.

However, Obamacare, or even the pre-existing healthcare system, would not make him any healthier. But this man, along with many other Americans, has no perception of this.

Drugs will be prescribed for him that calm symptoms but never restore health and in fact may create new diseases. Some drugs cause the very disease they are intended to treat.

Obamacare pays more doctor and hospital bills, but it will also increase utilization and overall costs and it burdens the economy with higher health insurance premiums. AT&T reports Obamacare will cost them an extra $1 billion a year. For the 85% of Americans who were already covered by health insurance, Obamacare is a step down in availability of care. But recognize, the system is collapsing and unaffordable regardless of the insurance scheme in place.

Obamacare only adds to the nation’s growing healthcare bill. Medicare is not only insolvent, but it has $60 trillion of future obligations it cannot meet. The day is fast coming when health insurance cards will be worthless. American government will have to default on its promise to provide health care for all, especially its retirees, Obamacare or not.

Yes, other countries provide universal care, but they aren’t facing a population bulge of Baby Boomers now entering Medicare age, nor do other countries have so much unnecessary care (estimated $700 billion of needless care in the Medicare system, the Congressional Budget Office estimates). For example, PSA tests, mammograms and coronary angiograms have recently been reported to be of marginal value or over-prescribed.

Private practice American medicine can’t be compared to other countries that provide universal care. In those countries, their doctors on a fixed salary. More and more US doctors are now opting out of private practice and taking a salaried job.

However, the American public mistakenly believes their insurance companies are holding out on them and they are undertreated and deserve more care, not less. With Obamacare, Americans will experience more rationed care.

7. Waiting lines for care will predictably lengthen as there simply aren’t enough primary care doctors to handle the increased patient load. Americans are going to have difficulty getting used to delayed care instead of the accustomed care on demand.

Wait-a-while medicine is part of most universal health insurance programs worldwide. For example, in Canada, once target budgets are expended, patients wait months for a cataract removal/lens implant operation. During that wait time, if you fall and break your hip because you couldn’t see a step while walking in the dark, and then you succumb to pneumonia while laid up from the hip surgery, no one will blame it on delayed care.

8. Universal care just delivers more needless and ineffective care. Americans involved in the healthcare debate are arguing over the wrong issues. Americans want freedom to choose their health plan, their doctor, their hospital. This is not the problem. If you have no money, you can no more have the freedom to choose your doctor and health plan than to choose whether you would like to buy a Chevy or a Cadillac at the car lot. You can’t have these freedoms when treatment is no longer affordable. And why does the American public keep clamoring for care that doesn’t work and is even harmful?

The only three proven medical technologies are vaccinations, antibiotics, Trauma care like  mending broken bones; replacing cloudy cataracts;  repairing decayed teeth, drugs for the mentally ill. The rest are questionable.
Forty years of telling the cholesterol lie makes it difficult to undo the false cholesterol phobia. For example, eggs, loaded with cholesterol, have not been found to raise circulating cholesterol levels. For the majority of U.S. adults age 25+, consumption of one egg a day accounts for less than 1% of coronary heat disease risk. Health insurance pays for many false cures and unproven medical technologies. Universal health care seeks to pay for more of the same.

Americans have a knee-jerk reaction when they hear of panels who will decide whether your loved ones receive care in the last days of their lives. But Americans fail to realize hundreds of thousands of old and dying Americans are prescribed medicines that reduce pain but hasten death.

9. Self care is an underutilized option. However, Americans have been trained to run to the doctor when anything ails them. The typical senior American is taking a number of inappropriate medications and afraid to stop taking any of them.

Self care is not something doctors and hospitals want to promote. One would think managed care plans would promote self care because they would theoretically get to keep more per capita money that way, but they want to keep costs high so their cut of the financial pie remains lucrative.
Even in countries which provide universal payment for health care, there is increasing awareness that self care is a better route to take. One consultant in Britain says "the time has come to break the national dependency upon the National Health Service….. which denies the confidence to take control of their own and their families’ health."

Costa Ricans and Jamacans are almost as health and long lived as Americans with far less medical care.  In the medicine vaccination yeild, I would guess, over 90% of the benefits.  The rest of care helps here and there but if you have been vaccinated you got most of it.  That is why Costa Ricans and Jamacans are almost as health and long lived as Americans

My Bet on Toyota's Sudden Acceleration Problem

"The reason the NHTSA couldn't find the cause of sudden acceleration in Toyota isn't because they lack the technological expertise, it's because the problem doesn't exist (at least beyond the obvious mechanical issues like pedals getting caught on floor mats)."

"The symptoms and demographics of "unintended acceleration" are amazingly exactly the same as they've always been since long before cars had any sophisticated electronics. Funny how this new supposed electronic problem should exactly mimic another problem that's been seen for years. Not only that, but the symptoms surprisingly defy logic and physics in exactly the same way - somehow suddenly brakes which when fully applied can stop any modern car even at full throttle, somehow yet again stop working just when they're needed the most. Coincidence? Wouldn't you expect if it were really a new problem with the modern advanced electronics that just maybe it would produce problems previously unseen as well as not disproportionately hitting old people?
Who knows, maybe if NASA can finally put all this obvious nonsense to rest with a thorough debunking it will be worth it. But as it's hard to prove a negative, it will likely just end up with some noncommittal "can't rule anything out" BS and just be a total waste of money and time."

Posted by: Brian Courts

Why the Government does what it Does

A commenter (with the handle Drewfus) on overcoming Bias wrote the following:

"I don’t think the purpose or motivation of these wars is access to resources, defense against terrorism, WMD’s or really anything particularly concrete. It’s more about confidence. Confidence that the political leadership remains in control of our destiny, and that they have secured the country from physical attack. Social life is just a succession of confidence tricks. Keynesian economics tricks us into believing the government has the economy under its control, and that even if we didn’t avoid recession this time, well, it would have been much worse if the government had done nothing. Same with terrorism. All that airport security really did help to keep the bad guys under control – our leaders have told us so. The medical profession has our health care needs under its control – why else would the government want to spend so much money on it? It must work!" Drewfus

Freedom is Counter Intuitive

You would think that a country could do better with a central plan than with no central plan! But it seems to not work out that way.  One would think that having more that one car company is redundant (or more than one currency (BTW we really have one real bank the federal reserve bank) you could eliminate all that redundancy, redundant design departments, Marketing departments (isn't marketing/advertising a complete waste to society? etc. All those economies of scale and all. 

Are we not just better off to demand that people do not take drugs that are not OKed and approved by the central planers?  Are we not better off to ban the sale of recreational drugs like heroin and why not alcohol too?

Isn't it counter productive that in a free society even BP has rights and can go to court and get a law banning deep water drilling struck down.  That we the people should have an energy plan and it should not include BP! 

Doesn't it seem crazy that the USA used to allow anyone without TB into the country? 

And yet freedom seems to do well wherever it is tried.  Freedom is not perfect because people are not perfect but it sure beats the alternatives.

Responce to crique of Gold and Ron Paul

1. Though Ron Paul talks about the gold standard and 100% reserve banking, what he says he would implement is free banking, he believes that the people should be allowed to choose the form of money that they would like to use.  
He believes that people’s choices would lead to 100 percent reserve gold standard banking, I do not. In the case of the Scottish free banking era (about 1750 to 1850)  the system moved progressively away from gold through fractional gold reserves and the option cause.  Just before the end of Scottish free banking system, the Banks kept gold reserves below 2% and the option clause allowed them to deny gold in case of a run. On the other had bank capital* was typically over 30%.  Thus the system was moving toward money backed by only bank assets.  

2.  According to Christine Romer (no right winger) the depression of 1890 was not nearly as bad the Great depression.  So the worst depression occurred after the creation of the Federal Reserve and as far as a financial system collapse the worst ever was the one that just occurred in 2008.  The system is obviously fragile with serious feedback problems.   

3.  In the current monopoly currency system the failure of one bank weakens all the others.  This sort of feedback is what led to the collapse in 2008.  We need a monetary system where the failure of one  bank strengthens all the other banks.  I believe that fee banking would evolve into such a system.  

4.  The current system is not robust to changes in the demand for currency.  Currency is not as different from checks as we tend to think.  If banks floated their own currency rises in demand for currency could be accommodated without contraction of the money supply.  If you think about it in a free banking system, if people drained their demand accounts and horded currency the banks would not need to contract as they do today.  Money in currency would be no different  to the banks than money in a demand account.  

 * Bank capital is equal to the value of bank assets - bank liabilities.   Your mortgage is a bank asset and the money in your checking and savings account are bank liabilities. 

The Testing Function of Schooling Often Squeezes out Education.

  • Schooling is not equal to Education
  • The principles of most subjects including the real though subjects; physics, chemistry, accounting, statistics etc. are quite simple but people do not learn them well due to the need to make the subjects rigorous.
  • It is amazing what simple, practical, useful information typical college graduates do not know. 
  • Why when people discuss schooling and how we need to better educate the population, do they seldom ask or say "what it is that people do not know or cannot do that would benefit them so greatly in life", but rather they make statements like "We need more college grads" or "Our students do less well in international comparisons".  It seems we never ask "What is the most efficient way to get valuable knowledge and skills to people.  I think it is because think that getting the knowledge and skills to people without credentials is a waste. 
  • If schools exist to educate why do they do so much testing.  Worse they seem very willing to blab the results of all their testing to other organizations. 
  • Education is free but credentials are rather expensive.   You can listen to  MIT and Harvard lectures free on-line and you could always go an listen to some classes for free. 
  • My grand parents went to 1 year of school each, yet they ran a successful barber shop and they seemed more educated than many college grads I know.   
  • I know college grads who refuse to believe that 100 mpg carburetors do not exist.   That despite my attempts to explaining the Carnot limit to them.  On the other hand my grand parents could easily understand such things. 

How Could the States Experiment with Health Care and Why Should They

If I had my way Government would get completely out of health care but I do not see that as politically viable so I propose that the states rather than the Federal Government experiment with a program to provide insurance.

If any Government body should be experimenting with providing health care it should be the states rather than the federal government.   The sates control medical licensing and that means that they control costs to a large extent.   States do things like refusing to accept medical licenses from other states and countries that drive up costs.  States refuse to accept medical insurance plans that are accepted in other sates this also drives up costs.  If the Federal Government provides the money for heath care the states are not encouraged rightly license to maximize the cost benefit trade offs . 

The big obstacle to the states providing health care is the danger that a state would attract the sick and poor from other states.  A plan to avoid attracting sick people from out of state to the state would be needed. 

The plan could include some period of time to establish residency.  For example a state could have a 2 year period to establish residency before one is eligible for existing conditions.  Insurance companies already police this sort of thing so it is possible. 

To make the plans cheaper and less desirable to out of state people the insurance could be kept simple and minimal.  Much medical care in the USA yeailds very low or even no benefit,  a state plan could opt out of paying for such procedures.  Since people trust Government more that insuarcne companies they could get away with refusing more care.  An example or care that might be eliminated  is heart bypass, there is no evidence that heart bypass surgery produces better benefits than less invasive and much cheaper care, except if the blockage is in the upper left ventricle (and even then the evidence is weak).  Heart bypass is rarely done outside of the USA  In the USA though heart bypass is commonly done for all kinds of blockages.  The state policy would allow those who wanted to pay for such procedures to do so out of pocket but it would not pay for such procedures. 

The states could also establish high means tested deductibles. Here is an article that proposes a $50,000 annual deducible.  Here is me advocating a deductible based on income.

States could initiate some other experiments to save money. Here is Dean Baker's proposal to reign in costs.

Sunday, November 7, 2010

Retirement Spending

Lately there has been a lot of discussion of what the appropriate rate of spending in retirement is.  My suggestion is that as far a stocks go you can safely spend your dividend plus half of the companies' retained earnings.  Companies retain earnings because they have good investment options for that money.  If the investments are in fact good that will increase the value of the company and future dividends and so you should not lose value.   So why them do I say its only safe to spend half of the retained earnings 2 reasons: 1. Inflation means new capital inputs cost more than the depreciation of existing inputs. 2. Companies have historically not been good reinvesting retained earnings.

Now all of that is assuming that your stock investing is focused on dividend and future dividends.  Thus that you favor companies that have a long record of increasing dividends.