I’ve thought for a long time that the opulence of American higher education – universities with tuition greater than the average income of an American family, fundraising departments raising hundreds of millions to fund endowed chairs for tenured faculty who produce nothing of worth and will earn six figures well into senility, unnecessary administrative employees as far as the eye can see, with most of the actual work of teaching students being done by minimum wage adjuncts and TAs – is unsustainable. It simply makes no sense to have so much of our national wealth and resources tied up in doing so little, when it could be done for so much less.
This probably isn’t the reckoning I’d like it to be (though it would be delicious if said reckoning began in the UC system), but I think we’re going to see much more of this. When soft institutions meet hard times, Reality won’t much care how much it’s denounced in scholarly journals.
My freshman year of college, there were two roomates, Nick and Ian, who lived on my floor and liked to play minor pranks on each other. One of my favorites was when Ian left the room, Nick would get on Ian’s computer and change the wallpaper to some sort of gay porn. When Ian would come back, everyone on the floor could hear him shout, “Whaaaaaa!!!!!”
What made this so funny is that Ian had the exact same reaction every time this happened. No matter how many times Nick did this – and he did it a lot – Ian would never see it coming.
I think of Ian when I read economic stories these days, because it seems that in every single one of them, the news is “unexpected.” No matter whether the news is good or bad (and it’s not at all clear that a month where 200,000 people dropped out of the work force is good news as that story says it is), “experts” and “analysts” never see it coming.
Hayek might point out that we should use this as a lesson: all the stimulus and central planning elements espoused by “experts” are little more than guesses, whose consequences we can’t accurately predict, even in the short term. I don’t think our current leaders are much open to learning this lesson.
Prof. Althouse is, I think, correct that the NYT got played in part of its profile of Roger Ailes.
One thing that too often gets left out when discussing newspaper or magazine profiles of those those at Fox or in the new media is that these are [allegedly] for-profit organizations writing about their competitors. We probably wouldn’t take seriously a Ford employee’s profile of a Honda VP, but a Roger Ailes profile in the NYT or a story about Rush on CNN for some reason gets treated seriously. Perhaps if the NYT or CNN could be trusted to be honest, their stories about their competitors should be taken seriously. But in large measure the success of Ailes and Rush, and a whole swath of openly conservative journalists, is due to the fact that the NYT and CNN can’t be trusted to be honest.
Still, unlike previous economic recoveries, consumers, whose spending accounts for 70 percent of overall economic activity, aren’t expected to solely power this one. Businesses and the government are having to pitch in more.
Dear Ms. Aversa:
I’m not sure what you think “the government” is, but it cannot ”pitch in” to an economic recovery. It can take money from certain people and give it to other people; it can borrow money from certain people (thus preventing that money from being lent to businesses and consumers) and give it to other people. Or it can print additional money (i.e. take money from everyone by devaluing all money) and give it away. Not one of these things “pitches in” to an economic recovery any more than slicing a pie creates more pie.
I’m always impressed by the global warming lobby’s complete inability to understand human nature. The earth’s temperature is rising, they tell us, so we must change the high consumption lifestyle toward which free men have striven for countless generations and revert to 18th century CO2 output levels. When you realize what that means – less mobility, less meat, a colder house in the winter and a hotter house in the summer, women shaving their legs less often – you realize what a stunningly stupid marketing campaign that is.
Let me rephrase that for the less economically inclined: GLOBAL WARMING WILL REDUCE THE PRICE OF PROSTITUTES!
So you’ve got a choice. You can live in a teepee, eat sprouts, and ride an emission-controlled donkey to your town’s only prostitute, who charges extortionate rates, all so you can sleep soundly at night knowing that coastal villages in Bangladesh aren’t being flooded as badly as they might otherwise be. Or you can live in a big air-conditioned house, eat a steak each night for dinner, and drive a fast car to a red light district that has a wide selection of women at low prices, and send part of the money you save on prostitutes to the Bangladeshi Swimming Education Fund. Like our friends in “Hopenhagen,” I think the choice is clear.
David Brooks today focuses on the founding of a new magazine today, National Affairs, which will try to fill the gap created when The Public Interested closed. The magazine looks promising, but Brooks manages to do it a disservice in his column praising it. Discussing the mess that is California, Brooks wrote:
As Troy Senik points out in his essay, the California Constitution gives voters relatively direct control over fiscal decisions. The result is that Californians have voted to tax themselves like libertarians and subsidize themselves like socialists.
Reading Brooks alone, one might think that California was a low-tax state. But Mr. Senik’s article paints a rather different picture [emphasis added]:
To address a $42 billion shortfall in February of this year, the legislature enacted a package that included the largest state tax increases in American history, leaving California with the highest sales and personal income-tax rates in the country (though Hawaii would supplant its lead in the latter category in May). . . .
The Golden State’s signature optimism may be to blame: How else to explain the delusion that Californians could be taxed like libertarians, but subsidized like socialists? The result, of course, has been a fiscal crisis addressed with slashed spending on public services and increased taxes in the midst of a deep recession — a recipe for yet more discord and trouble. In a grim irony, Californians are now being taxed like socialists and subsidized like libertarians.
It looks as though Brooks muddled Senik’s point. Californians have tried to control tax rates through direct democracy and have spectacularly failed. How else would they have such sky high sales and income tax rates? A newspaper op-ed cannot convey the depth and subtley of a long magazine article, of course, but Brooks could at least try to keep from giving the wrong impression.
Came from a Texas Demcrat over the weekend. Asked whether House Democrats could support a health care plan without a “public option,” she said:
It would be very, very difficult, because without the public option, we’ll have the same number of people uninsured. If the insurance companies wanted to insure these people now, they’d be insured. The only way that we can be sure that very low-income people and persons who work for companies that don’t offer insurance can have access to it is through an option that would give the private insurance companies a little competition. The private insurance companies have been in charge so long that I think they feel that nobody else ought to be able to do it.
I heard this on Rush yesterday, and it’s been rolling around in my head since then. I’m trying to think of a better example of someone being utterly clueless about what she’s talking about, and I’m having a hard time. The best I can do is to say that this statement is to health care economics what the statement “When Brian Boitano built the pyramids, he beat up Kulbai Khan” is to historical accuracy.*
As Rush pointed out, the second sentence is like saying “If General Motors wanted everyone to have a car, we’d all have cars.” Why on earth do people think that economic statements that are laughably stupid in any other context are not laughably stupid when it comes to health care?
The “only way” to insure poor people is through a government-run plan? Off the top of my head, I can think of four other ways, and I’m not a very creative person. 1. Government pays for private insurance for poor people. 2. Government requires employers to pay for health insurance for poor people. 3. Government requires insurers to offer rates based on income and requires people to sign up. 4. Government simply pays bills for poor people without starting an insurance plan to compete with private insurers (i.e. Medicaid). Whatever the merits of these other ways, they don’t compete with private insurers, and they’re dramatically simpler than setting up a government-run health insurance plan.
The notion that private insurers need “competition” is the result of some Marxist hallucination, where the the evil “private insurance companies” act as one.It is, though, a highly competitive industry; go here and check out how many companies you can get quotes from. I got 125 quotes from 8 different companies (it’s also educational to enter different zip codes and see how much rates varies by state**).
Of course, if the real problem is a lack of competition in the insurance market, the obvious response would be to lessen regulation and allow more firms to compete. This did not appear to cross the Congresswoman’s mind.
Between the threat of their customers going elsewhere, and the threat of state or federal governments wiping them out of existence, “private insurance companies” aren’t in charge of crap.
“They feel that nobody else ought to be able to do it.” If any company that doesn’t presently sell health insurance (e.g. Jiffy Lube) were to start selling health insurance, then it too would become a “private insurance company.” So by definition, no one except a private insurance company can sell insurance. I guess if the federal government offered insurance, it wouldn’t be a “private insurance company,” but it doesn’t seem right to list the federal government – i.e. the largest entity in the world – under the “nobody else” category. Again, to the degree that there’s not enough competition in the health insurance market, that’s the fault of government regulation, not some nefarious scheme by “private insurance companies.”
**For example, here in Texas I can get a hospital-only plan for $40/month, or more thorough insurance plans for $80-100/month (the plan I actually have is around $90). If I enter in Springfield, Mass., the lowest premium it offers is $220; using Massachusetts state-run website to find a plan yields a price range between $186 and $485. For Texas, I can only find one policy above $287. Do people in Massachusetts really get that much more out of their health insurance than I do?
So the wife and I are at a point in our lives where we can consider some of life’s major purchases: a first home, if prices dipped low enough, or, barring that, a new car.
And what a deal for us, right, being in the buying market at just the time that the government is throwing piles of stimulus money at anyone willing to open up their wallet? As first time homebuyers, we would get $8,000 of stimulus money; and, of course, everyone is going nuts trading in their “clunkers.” But if my hunch is correct, this may actually be a terrible time for us to make a major purchase.
Houses
1. Government interference screws with pricing in direct ways. It’s not like home sellers are unaware that first time home buyers get $8,000 for buying a house. Virtually every ad I’ve seen has mentioned this incentive. While not every home buyer is a first time home buyer, enough of them are that this has to artificially increase the price (I’d guess $3,000 – $4,000). This increase in price would probably wipe out a significant portion of our benefit from the government money.
2. Government interferences screws with prices in indirect ways. By giving a subset of people $8,000 to buy a house, the government is getting people into the home buying market who otherwise would not be. This artificially increases demand, driving up the price above what it should be.
3. There will be a let down. A big reason we would consider buying a house is as a medium-term investment. If we bought a home now, it’s hard to imagine its value not going down in the short term, once the government subsidy stops increasing the value of the home, and all of the first-time buyers brought into the market by the $8,000 incentive leave the market. Whether it’s profitable for me to buy a house then becomes a function of how much that short term decline is, how long we intend to keep the house, and how fast we think housing prices will recover. All these things might still make this a profitable venture for a five-year investment, except . . .
4. There will be another foreclosure boom,. It’ll be smaller than this one, and it will be in different places than this one. But it seems impossible that the factors I just listed (lots of first-time home buyers being coaxed into a market they wouldn’t otherwise venture into, buying houses the values of which have been artificially inflated by government subsidy, with a short term decline in value) would not lead to another boomlet of foreclosures in a few years. Which would again drive down the value of homes on the market (absent another government subsidy), and make it difficult to sell a home.
5. Because of this massive interference, market prices are hard to determine. Whether the above speculation is right or wrong, the fact is that we simply cannot get an accurate gauge of the housing market. Perhaps the bottom has really fallen out and the stimulus money is keeping it afloat for a few months before it sinks some more. Perhaps the stimulus really has saved the market and it will go up from here. Either way, it’s impossible for amateurs like myself to make informed decisions. It would be unwise to make such a large purchase in an environment where we cannot accurately determine the value of what we’d be getting, so we’ll sit this one out.
Cars
1. The government is driving up the future value of used cars. By destroying lots of “clunkers” that would otherwise be for sale in a year or so, the government will create an artificial shortage of cheap used cars, which should drive up the value of some (but not all) used cars. Cars that fall on the lower side of $10,000 (like mine!) should benefit the most from this.
2. The goverment is creating an artificial bubble of new car demand. I’ve seen convincing analysis that the Cash for Clunkers new car selling boom isn’t creating all that many additional car sales, but mostly just compacting into a period of weeks car sales that would otherwise have occurred over a period of months. This means there’s almost certainly going to be a let down in sales after the period is over, increasing the bargaining power of those who wait (particularly if, as I’ve heard at least one Congressman foolishly predict, auto makers ramp up production in response to this sales boom – normally I’d say that’s too stupid to happen, but we’re talking about auto makers here).
3. The government is creating positive market incentives for people who aren’t me. My car definately does not qualify as a “clunker”; I get better mileage than virtually all of the new cars out there. I could sit around pointing out the moral issues of the government rewarding those who have been using inefficient cars while providing no reward to those of us who have driven clean, efficient vehicles and might like newer ones; but the reality is that the government is providing incentives for some, but not all of us to enter the new car market. All told, it’s actually providing incentives for some of us to stay out of the new car market. So we will.
