Friday, March 22, 2013

Catholic Economist Critiques Economists

Pascal-Emmanuel Gobry, here on no less.

 The college wage premium vs the marriage wage premium. In contemporary societies, there is a strong college wage premium. That is to say, people who go to college make more money on average than people who don’t. While a minority of economists (including Cowen) have questioned why this premium should exist, the majority of economists generally take the existence of this college wage premium to mean that college is good and important, that more people should go to college, and that public policy has some role to play in promoting and subsidizing college attendance. I would bet a goodly sum of money that if you picked at random ten tenured economists from top-20 economics departments, and asked them to list what an 18-year-old should do to increase his chances of getting high wages, a majority would say “go to college.”

There also exists a marriage wage premium, which is roughly as significant and as consistent as the college wage premium. To say that the marriage wage premium doesn’t get the same amount of attention is an understatement. Economists recoil at the idea of praising marriage and supporting public policies that increase marriage. They are much more likely to dismiss the marriage wage premium as reflecting selection bias (it’s not that marriage makes people earn more money, it’s that people who would have earned more money anyway tend to get married) or intone that “correlation is not causation”–criticisms that apply equally to analyses of the college wage premium.  I would bet a goodly sum of money that if you picked at random ten tenured economists from top-20 economics departments, and asked them to list what an 18-year-old should do to increase his chances of getting high wages, none of them would say “get married and stay married”–even though the data on the marriage wage premium supports this conclusion to the same extent as it does going to college.


Usually if economists acknowledge the population growth problem, their preferred solution is to increase immigration–which aligns perfectly well with the “cosmopolitan perspective” Cowen praises. Leaving aside the fact that it’s a zero-sum proposition (those immigrants have to come from somewhere, and global population growth is slowing), these discussions often take an interesting turn. Even though I genuinely share economists’ enthusiasm for opening borders, when arguing that opening borders makes sense alongside a natalist policy, I have been accused of being against immigration, and possibly even a xenophobe. On its face, this is absurd. But if what we’re dealing with isn’t a public policy debate, but a clash of ideologies, where one ideology views as taboo the idea of public policy having an influence on the private sphere, then anger and accusation are a perfectly understandable reaction.

The pro-immigration view (which, again, I share) is as much a productivity view as a population view. The normal argument for immigration is that more people will allow for more specialization, which should raise productivity as people focus on the things they’re best at and learn from each other. That this is also an argument for increasing the birth rate seems not to occur.

Anyway–we can have all the arguments about increasing population growth we want: whether it is desirable, whether it is even possible, whether it is consistent with a liberal outlook (my answers: yes, let’s try, of course). My point here is that the subject is just completely ignored by the economics profession, and that this can be explained largely by the existence of bias.

Thursday, March 21, 2013

Some Notes on the Affordable Care Act

I respect point of view of people who want to provide medical care for the poor through government and it makes some logical sense but here are some rules in the affordable care act that make me feel like we are being scammed:
  • The mandate doesn’t apply to firms with fewer than 50 workers 
If it is impotent enough to make it a law that employers provide health insurance for workers why exempt some employers?  Won't this in the long run eliminate employers in those competitive low wage paying industries with between 50 and say 70 or 80 employees?  Outsourcing some services can help such businesses get under the 50 employee limit but it is sometimes less efficient.
  • The mandate doesn’t apply to employees who work fewer than 30 hours
If it is impotent enough to make it a law that employers provide health insurance for workers why exempt some workers? This rule nudges employers to hire more part time workers and fewer full time workers.  This is bad for the guy who ends up working two part time jobs instead of one full time job. 
  • The employee’s share cannot exceed 9.5% of wages for low- and moderate-income workers and an industry rule of thumb that employers must pick up at least 50 percent of the tab.
Considering Tax Incidence why would ACA require that the employee’s share of insurance costs not exceed 9.5% of wages.  Most everyone who studies it closely comes to the conclusion that employees pay for such benefits in reduced wages (that goes for the employers share of FICA also.)

Such rules make me feel like I am being scammed. If the employee will pay in the long run why try to hide that by making the employer no show it in the wage stub? If it is important enough to require employers to pay for health insurance why exempt some employers?

Also why should the costs of providing for healthcare fall in the short run on employers of low wage employees and in the long run consumers who buy products produced by low wage employees rather than on all taxpayers.

Sunday, March 17, 2013

Morgan Warstler's Attemp at Making a Workable Hourly Wage Subsidy

Moragan Warstler has attempted to create an hourly wage subsidy without needing to verify hours.

I realy like the idea of an hourly wage subsidy to replace or at least reduce many of the welfare programs that we currently have.  It seems like it is a far more efficient way to support low earners.   

The problem with implimenting and hourly wage subsidy is that if we had to check and see if a person is working number of hours that they claim it would too difficult to even consider. 

Morgan has come up with a method that might alight incentives in such a way that this problem could be reduced.
An hourly wage subsidy is better than a base income guaranty and an income subsidy like the EITC in that it does less to reduce the  incentive to work than other subsidies. It also is superior to unemployment insurance, food stamps and AFDC and could be much cheaper for the taxpayers.

His basic plan is described at The Money Illusion and below.

The Basic PlanUsing the Paypal and Ebay platforms, the US govt. should establish a Guaranteed Income of $240 per week. Anyone who wants to work registers, receives a Paypal Debit Card, and each Friday at 5PM has their GI deposited.
All GI recipients have their labor weeks auctioned online.
Job offers begin at $40 per week ($1 per hour).  Offers increase by .50 cents per hour ($20 increments).
At $40 per week, there’s no able bodied / able minded person that some rational returns bidder won’t find use for.  The 70 yr old woman in a wheelchair who wants to work to keep busy?  Plenty of teleservice operators have work for her to do from home for $1 per hour.
Note: I solve for the criminally lazy.  Identifying and fixing them is one of my plan’s advantages. I’ll get to it a bit later in the What Abouts plan.So minimum take home cash under GI is $7 per hour or $280.  $240 is the social commitment paid out of taxes and $40 is the winning job offer.
To perfectly align incentives, for each $20 per week offer increase over $40, the govt. gets back $10 of our $240 social commitment, and the auctioned employed keeps $10.
So, on a offer of $100, the govt. is paying $210 and the auctioned receives $310.  A offer of $200, hits the govt. for $160 and auctioned receives $360.
The system ends at $10 per hour.  The maximum offer allowed in the GI Auction is $280 and the govt. is still kicking $120 netting the auctioned $400 per week.
Here is the actual schedule I’m suggesting:
Winning BID        GI paid by govt.              Payday: GI + BID
$40                      $240                               $280
$60                      $230                               $290
$80                      $220                               $300
$100                    $210                               $310
$120                    $200                               $320
$140                    $190                               $330
$160                    $180                               $340
$180                    $170                               $350
$200                    $160                               $360
$220                    $150                               $370
$240                    $140                               $380
$260                    $130                               $390
$280                    $120                               $400
At this point people tend to have lots of questions.  Since I’m writing this to woo progressives let’s starts here.  Companies like WalMart will now  need to pay more than $400 a week, to keep workers from choosing GI.Here are the basic rules:Recipients can choose to take lower paying jobs.
Recipients cannot be made to work outside a radius of 5 miles.  This is a guesstimate.
Bidders must also establish their real identity and deposit money into system before they bid.  No more craigslist roofing scams paying after the fact.
Bidders and auctioned cannot be related or cohabitating.
Bidders must accurately describe the job (check boxes) and cannot add to it after winning bid or require work not checked.
Feedback will be given both ways. If you are familiar with Ebay buyer / seller feedback, you understand what this accomplishes.  It makes it the whole thing work.   If you are not familiar with Ebay, get familiar with it before you state your opinion on this plan.
There are no taxes paid by employer or employee.  There are basic workplace protection requirements. Umbrella insurance is sold on Ebay for folks bringing labor into their home.
Upon meeting some fair criteria, the criminally lazy can be suspended from GI program. Perhaps 6 weeks as first suspension.
Only individuals and incorporated SMBs earning less than $3M per year can bid.   This is not subsidized labor for Fortune 1000.  Under this plan, their labor costs go up.  I am proposing Internet based  Distributism.

After a few days pondering I have begun to doubt weather this plan is better than a basic minimum guarantied income. A person would be able to collude with an employer to get the $240 without working, so why not just write a $200.00 check each week to each citizen and eliminate the minimum wage. 

Often when we talk about people not working they really are working, they are just not working in the taxed economy. They may be working illegally for cash, or they may be working for in-family consumption which is the case for house wives and these people often work quite hard. There is no reason that production for in family consumption should be disadvantaged.  So the advantage over minimum income guarantee may not be big enough to overcome the expense and complication.  

Having now ready the more complete  plan I think the enforcement against employer  employee collusion would be too difficult to enforce and the idea of making the punishment harsher (you propose making hiring people to not work a felony) is not a good approach because of difficulty of enforcement is a bad idea. In fact I think it is might be more effective to make he punish light like maybe a $1,000 fine might make people more likely to turn someone in. We do not want more felons than we already have. 

Another advantage of a guaranteed minimum income is that it could replace Social Security along with AFDC, food stamps, subsidized housing and unemployment insurance.

I like the plan but I am still bouncing it around in my head. All plans to help the poor have downsides, the question in my mind is does the fact that it nudges people to work more overcome the advantages of a income subsidy or the much simpler minimum income guarantee. 

BTW in either case recent immigrants would need to be ineligible for the program.  

I still find the idea is very interesting, perhaps so tweaks can overcome my objection. Anyway thanks for the effort. 

Friday, March 15, 2013

The Incidental Economist on Raising the Eligibility Age for Medicare

This is from The Incidental Economist

Some of us have spent years trying to drive home the point that many Americans haven’t shared in rising life expectancy, making policy recommendations like a rise in the Medicare age a really bad idea;

Medical care is smaller contributor to longevity than life style. So if the goal is to increase longevity, and it seems true that for blue collar workers that the earlier they retire the younger they die (it is though that this id due to the fact that retirement allows for more time to drink, doesn’t this undermine the story a bit? Perhaps postponing Social Security and Medicare eligibility and making harder to get on disability will cause some to work longer and this will increase their longevity.
I think that we can agree that money does not increase longevity in everyone but that some people respond to having more money by engaging in behavior that reduces longevity.
Also although it is surely true that :

Americans haven’t shared in rising life expectancy

Like for example those who are hit by trucks at an earlier age but that is not what he is saying. I think that he is saying that those people of low social economic status are not sharing in the increase is life expectancy and that I doubt. Even if it is true is despite an increase social services and access to healthcare.

 When I was growing up I knew a man who on almost everyday when he did not need to work the next day would drink beer all night and into the next day. If he was off 2 days he would drunk 2 If was off 3 days he would drunk 3 days. days. He would falling over drunk and would sometimes loose the car and his family would have to go look for it. (I for one do not understand how he lived as long as he did). But he would always sober up for work. Now this man managed to give up alcohol altogether and live a long life but that is not true for all  heavy drinkers.  So what would a delay in SS and Medicare do to the life expectancy of such a man?

BTW in Calton a low SES part of Glasgow Scotland the male life expectancy is 54 years.  Clearly these people are drinking themselves to death and access to healthcare is universal in the UK. 

This is from Gene Steuerle's blog "The Government We Deserve"
As it turns out, however, more years of retirement benefits don’t benefit the poor proportionately more than the rich. Yes, the poor have lower life expectancies, but other elements of Social Security offset this factor. A greater share of the poor doesn’t make it to age 62, so a smaller share of them benefit from expansions in years of retirement support. More importantly, those who are poorer are more likely to receive disability payments that aren’t affected one way or the other by the retirement age; hence, again, a significantly smaller share of them benefit from more retirement years. Other regressive elements such as spousal and survivor benefits also come into play for reasons I won’t further explain here. Empirically, these various factors add up in such a way that increases in years of benefits help those who are richer and those who are poorer in ways roughly proportionate to their lifetime incomes.

Wednesday, March 13, 2013

Social Security and the Left's Success

Arnold Kling and Tod Lindberg On the Left’s Success touch on my favorite subject lately that is the strange and illogical structure of Social Security. 

Here is a quite from Tod Lindberg:
The Left shares the suspicion of government power at the heart of classical liberalism, but only up to a point. Individuals need rights to protect them from overweening government intrusion, true, but government power in the proper hands can do good, and indeed the proper hands must wield the power of government in order to do the good of pursuing equality.
Few on the Left are willing to grant that their critics are likewise reasonable — in other words, that the Left has anything to gain from taking its critics seriously. That leaves the Left in search of an explanation for why it hasn’t won over its critics. The Left has three main explanations. The first is ignorance, in the sense that its critics lack sufficient knowledge of how society could be improved and why what the Left seeks would constitute improvement. For this category, there may be hope in the form of remedial education. The second is stupidity; its critics are simply unable to understand superior wisdom when they face it. There is little hope for them, alas. The third is venality — that its critics know better but seek to defend their position of personal privilege anyway. The only way to deal with these critics is to defeat them politically.

And here is Arnold Kling:
 I see this hard-line stance evident in the progressive’s resistance to any suggestion for reducing government spending. You cannot suggest cuts in the short run, because that would mean austerity. You cannot suggest trimming entitlement promises, because Social Security is sacred and control over health care spending is a job for technocrats. 

Speaking of Social Security and the left, I find it interesting that the left believes they must buy off and fool the rationally ignorant voters to keep them from destroying the program.  The belief is that even though it is absurd that SS pay out bigger pensions to the rich they fight to keep the program as it is to by off the voters because they do not trust the voters too keep programs that are targeted at helping the poor.  They also feel the need to fool the voters by hiding half of the tax by making employers right the check so that it does not show up on pay stubs but they like it that half of the tax is visible so they can tell the retirees that you deserve SS because you contributed. (Though to me "contributed" implies volition so to me it is not a contribution buy a tax.)

This makes SS far more expensive that it could be which limits the help that can be done for the poor.  Keep in mind that you can only tax so much before you get to the wrong side of  the Laffer curve.

I think that we can trust Americans more but perhaps I am wrong, seeing that there is more support for Medicare than for Medicaid, though Medicaid makes far more sense than Medicare.

Monday, March 11, 2013

Created Mature

There is an old story around protestant Christian churches that we are such a fractious lot that some church once split over whether Adam had a naval or not. Well a while back I was introduced to an idea that makes whether Adam had a naval or not is a somewhat important issue (though not worth splitting a church over).

The idea is that God created the world in seven days but with a billion years of history in it.  That would mean that every fossil found, every layer of rock in the Grand Canyon is akin to Adam’s navel. Now someone might ask, why would God make the earth that way.  I do not know but it appears from creation that God loves diversity.  Look into the stars, they are all diffident and there are billions of them.  The expanse of the universe goes on for trillions of miles.  The depths of the sea and jungles contain so many creatures diverse and some bizarre.  Look into the smallest things and there seems to be something smaller down to cells and then to molecules and then atoms to then electrons and subatomic particle and who knows for sure that the subatomic particles are not made up of something smaller.  So why not natural history as far back the human mind can conceive and as fare forward as eternity. 

Thursday, March 7, 2013

Mungowitz on the Left Singularity

 Mungowitz links to a  series, by Nick Land on the Left Singularity
A 10-part series, by Nick Land:  On "Dark Enlightenment."  (I've linked to Matt Leslie's presentation of it, which is where I found it, and also because the original links don't work, it seems.)

I do not think that I buy the Left singularity but I has long interested me that the right seems to just forbid people to do things while left Demands that we do certain things.  I.e. it is not good enough for the left that you do no harm to people because of their race but you are to reserve spots for all the races, you are to love all the races not just leave them alone.  Being a Christian I believe that we should love everyone regardless of race but is that something that Governments can and should demand?

Another example the right says do not use recreational drugs or we will punish you (I think that is misguided BTW). The left says that if you do drugs we must treat you. We must treat you and get your children at an earlier and earlier age and socialize them to not use recreational drugs and (to tie it to a recent left policy suggestion) do well in school.

* A singularity, of any kind, is the limit of a process dominated by positive feedback, and thus driven to an extreme. 

* They define the left Singularity as: Increased repression brings increased leftism, increased leftism brings increased repression, in an ever tighter circle that turns ever faster.  This is the left singularity