Category: Public Policy

This evening, I attended a showing of Michael Moore’s movie Sicko

I wasn’t expecting much, so maybe it was easy to exceed my expectations. But I was pleasantly surprised that the movie wasn’t far more painful for me to watch. Although certainly not without its flaws, it has something to add. And the movie was well-made, humorous in places, poignant in others– effective and provocative.

Moore is quite critical of insurance companies and HMO’s– and quite complimentary of the health care systems of France, Cuba, Canada, and England. With that combination, you would expect him to be optimistic about the United States moving toward single-payer health care. But his cynicism toward our government– in particular, the often-unsavory relationship between politicians and interest groups– leads him to criticize our system (correctly in many cases) without embracing government as a practical means to his desired end.

Some examples? Early-on, he mentions that Medicare fails to cover a lot of things (although he fails to pile on by talking about the program’s extraordinary expense). And he points to the government’s selective provision of health care to the heroes of 9/11. He also notes that the government provides awesome health care for the detainees at Guantanamo. (He could have bolstered this with the observation that our troops receive health care that is largely illegal in the states– since interest groups have restricted competition from competent providers like physicians’ assistants and nurse practitioners.) Implicitly, he notes the absurdity of restricting trade in pharmaceuticals, health care services, and health insurance. In a word, he isn’t happy with the status quo, but he’s not at all optimistic that our government can or will fix the problem.

The problem with health care– from the point of an economist– is that government is too heavily involved in health care: in addition to the above examples, we could also list Medicare, Medicaid, and most notably, government’s subsidy of health care insurance (as a non-taxed form of compensation).

Because of the subsidy, ironically, those who can afford health care insurance have too much of it. First, by definition, something that is subsidized will be purchased too much (at least in terms of efficiency). Second, imagine how insurance typically operates: it covers rare, catastrophic events. In contrast, health care “insurance” covers everything from allergy shots to cancer. By way of analogy, car insurance of this type would cover everything from door dings and oil changes to severe car accidents. And what would happen to the cost of oil changes, the paperwork associated with oil changes, etc.? We’d have exactly the same sort of mess we have in health care.

With government’s current level of involvement– very far from a market-based system– one can make an argument that a single-payer plan would be an improvement over the status quo. But of course, one can also argue that a single-payer plan would be even worse. A quick look at our education system and the post office indicate that a government-run monopoly is unlikely to deliver decent quality with any kind of efficiency or without special interest politics. This seems to be Moore’s dilemma in the proverbial nutshell.

Sure, there were examples of poor analysis in the movie. For example:
-There was a strange reference to “full employment” in England (when all of Europe struggles with significantly more unemployment than us– due to various employer mandates Moore seems to appreciate);
-He repeats the common reference to U.S. infant mortality rates (vastly oversold since we treat premies different for the purposes of that statistic);
-He repeats the tired canard that schools just need more money (while they already spend more than $10K per student; how much more money do you want to inject into a government-run entity with tremendous monopoly power?); and
-His analysis of other countries seems to miss the important factor that their populations are smaller and more homogeneous than ours.

And I suppose that other viewers– perhaps most who would see Moore’s film– could see a call for bringing socialized medicine to the U.S. in Moore’s work. But a more nuanced reading of the film points to an idealistic but laudable desire that our health care system would be something better– without holding out much hope that our politicians will be able to deliver us closer to that outcome.

— Also see Dr. Don Condit’s Acton Commentary: What’s Wacko about Sicko? — Ed.

Blog author: jballor
Thursday, April 3, 2008
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Rod Dreher links to a piece by Cato’s Brink Lindsey, “Culture of Success.” The conclusion of Lindsey’s piece is that familial culture is more important to child success in school and economic achievement than external assistance, in the form of tuition grants or otherwise:

If more money isn’t the answer, what does have an impact? In a word: culture. Everything we know about high performance in all fields of endeavor tells us that, while natural talent is a plus, there is no substitute for long hours of preparation and hard work…. Apply these lessons to doing well in school, and it becomes clear that the class divide in academic achievement is fundamentally a cultural divide. To put it in a nutshell, the upper-middle-class kid grows up in an environment that constantly pushes him to develop the cognitive and motivational skills needed to be a good student; the low-income kid’s environment, on the other hand, pushes in the opposite direction.

Lindsey, to his credit, recognizes the fact that these sorts of trans-generational, cultural and familial concerns typically lie outside the competence of his own libertarian ideological camp:

We insist on the central importance of individual responsibility for the healthy functioning of a free society. Yet, by the time people become legally responsible adults, circumstances not of their own choosing — namely, how they were raised and whom they grew up with — may have prevented them from ever developing the capacities they need to thrive and flourish.

I’m disappointed to find that Lindsey then makes the move to say that on that basis there exists “the possibility that government intervention to improve those circumstances could actually expand the scope of individual autonomy.” I’m not disappointed because the statement is false (it is in fact true), but because the government isn’t the first place we should look to find solutions to cultural problems. What about other institutions, most especially the church?

Dreher’s post is lengthy and worth a read in full, in part because it takes Lindsey’s piece as a point of departure to bring in a number of other insights and sources. Dreher writes of the government’s relation to culture among the poor,

…I don’t believe all the government programs we could possibly imagine will fundamentally change their condition, because their condition is not fundamentally a matter of material deprivation.

Culture is more important than politics, as Moynihan said. But he also said that politics can save a culture from itself. What kind of politics could save inner-city black culture from itself? Ideas? Because we certainly need them in society at large, not just the black inner city.

Dreher also echoes my question: “Here’s what I don’t understand: where are the churches in all this?”

Where are they? If they aren’t actively engaged in responsible urban evangelism, which many are, then they are probably doing (A) nothing or (B) lobbying the government to do something. A is bad and B might be worse.

Dolly Parton was featured on American Idol this week. One of the songs a contestant performed from her body of work was the song, based on her real-life experiences, “Coat of Many Colors,” and it teaches a lesson directly relevant to this topic.


Here’s the last verse, after the children make fun of her for her coat:

But they didn’t understand it
And I tried to make them see
That one is only poor
Only if they choose to be
Now I know we had no money
But I was rich as I could be
In my coat of many colors
My momma made for me
Made just for me

Blog author: dwbosch
Thursday, April 3, 2008
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Ted Turner in the Atlanta Journal-Constitution today: (via)

One way to combat global warming, Turner said, is to stabilize the population. "We’re too many people; that’s why we have global warming," he said. "Too many people are using too much stuff." Turner suggested that "on a voluntary basis, everybody in the world’s got to pledge to themselves that one or two children is it."

Admitting that he’s "always suffered from foot-in-the-mouth disease," Turner added, "I’ve gotten a lot better, though. It’s been a long time since anybody caught me saying something stupid."

There’s an obvious retort here; I’ll leave that to you smart folks.

Will also leave Jordan to weigh in on the population control stuff. But I will point out that Turner is one of those guys for whom overpopulation is a problem (for whatever reason), but who never seems eager to be the first to leave the gene pool.

[Don’s other habitat is the Evangelical Ecologist]

Blog author: jballor
Wednesday, April 2, 2008
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Citizens Against Government Waste (CAGW) has released their “Pig Book” for 2008, which is an “annual compilation of the pork-barrel projects in the federal budget. The 2008 Pig Book identified 11,610 projects at a cost of $17.2 billion in the 12 Appropriations Acts for fiscal 2008. A ‘pork’ project is a line-item in an appropriations bill that designates tax dollars for a specific purpose in circumvention of established budgetary procedures.”

According to CAGW, “despite last year’s ethics and lobbying ‘reform,’ pork-barrel earmarks – the currency of corruption in Washington, D.C. – are alive and well.”

Senators of note (PDF):

Clinton: 281 projects, $296.2 million
Levin, Carl: 255 projects, $301.4 million
McCain: 0 projects, $0.0 million
Obama: 53 projects, $97.4 million
Stabenow: 220 projects, $232.5 million

Blog author: jballor
Wednesday, April 2, 2008
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In recent years the UK has emerged as a key player in both genetic experimentation and in corresponding legal battles over the extent to which the government ought to regulate such research. The latest news coming from across the pond involves passage of a bill legalizing the creation of human-animal hybrids with certain restrictions (regarding type and length of survival).

Three members of the governing cabinet were “reportedly considering resignation if forced to back the Bill.” Controversy arose over the call from Roman Catholic bishops in the UK to allow MPs and cabinet members a “free vote” on the bill, allowing them to enjoy freedom of conscience as informed by their faith.

Since the creation of the first hybrid embryo was announced yesterday, religious leaders are calling for the creation of a national bioethics commission.

This has brought some strong reactions from critics of the Catholic and generally “pro-life” position.

My own views were lately characterized as representative of the “Roman Catholic and generally free market think tank, the Acton Institute,” and were then conflated with the reasoning of evangelical scientist Cal DeWitt (with whom I do share denominational affiliation).

According to the Reason piece, the distinction I make between the treatment of plants and animals is “based upon the idea that while God commanded Noah to save animal lineages, the Almighty said nothing about preserving plants on the Ark.” (Update: Joe Carter does a thorough and articulate job of dissecting Bailey’s article here).

In fact, in the piece in which I outline a theological framework for evaluating GM foods, I don’t mention Noah at all. And in proposing a similar framework for evaluating the treatment of animals, my only reference to Noah has to do with the inauguration and the terms of the covenant, not with the fact that the animals were preserved on the Ark.

Christian reasoning about the general treatment of animals and concerns with the role of human stewardship are not based on some obscure biblical text, as Bailey’s dismissive allusion would lead us to believe. There is an overarching biblical theme that has to do with human responsibility over the natural world, plants and animals included.

Rev. Leonard Vander Zee, for instance, uses a reference coming at the very end of the book of Jonah as a point of departure, linking it definitively to the foundational “dominion” mandate in the first chapter of Genesis. He summarizes developments in human stewardship and science this way:

State universities used to be known for their programs of “animal husbandry.” What a wonderful term. To husband the animals is to care for them, to provide for their welfare, as well as to use them for human benefit. In the past few decades, most such programs have become departments of animal science, which makes it possible to look on animals as laboratory specimens we can manipulate.

We needn’t agree with the particular conclusions that Vander Zee draws in order to agree that responsible stewardship is a biblical mandate. Clearly the idea of “animal husbandry” is closer to the biblical picture than “animal science.”

The core problem that Bailey and others have with this theological and moral insight is not that it draws too fine a distinction, but that it proposes to set any limits to research at all. That’s why religious opposition to certain kinds of research (or farming practices, for that matter) have to be construed as wholesale opposition to learning, science, and advancement.

But instead, we might also note with Aquinas that the abuse of something does not destroy it’s legitimate use. Christians do believe that scientific knowledge is a legitimate pursuit and indeed a divine calling. But that doesn’t mean that there aren’t limits to legitimate practice. And identifying and defining those limits is precisely what these disagreements are all about.

With great ability comes great responsibility. With apologies to Browning, we might say that man’s scientific reach has exceeded his moral grasp.

Blog author: eschansberg
Tuesday, April 1, 2008
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Last month marked the 75th anniversary of the beginning of FDR’s “New Deal”.

The Great Depression is the most famous event in U.S. macro-economic history. Most or all of my students know that it happened in the first half of the 20th century. They have no sense of what caused it– except perhaps to lay blame on the 1929 stock market crash. And they have a vague sense that the New Deal policies of FDR were helpful in ending it.

Because their impressions of the New Deal are limited, it is relatively easy to communicate what economists know about the Great Depression and the New Deal.

The Great Depression was noteworthy for its length and depth. A typical recession– probably what we’re dealing with now– is relatively short (e.g., 6-9 months in length) and features a slowdown in economic activity (negative output growth with reduced income and production). The most notable feature, politically, is a modest increase in unemployment. Even unemployment of 6-7% is enough to induce howls of pain from the unemployed and unlikely promises to make things better by a range of politicians (e.g., the recent macro “stimulus package”).

That said, some recessions are (much) more severe than others. For example, in fighting the inflation of the mid-late 1970s, we ended up with double-digit unemployment in the early 1980s. In further contrast, the Great Depression lasted for more than a decade and featured unemployment as high as 25%.

One quick way to note the limits of the New Deal: unemployment was 19% in its 6th year.

Markets may have trouble “adjusting”, but they don’t have that much trouble. So, it is wise to look at government policy during the 1930s to fill out one’s hypothesis of cause/effect about the Great Depression. Economists point to four major policy blunders:

1.) four tax increases, including the initiation of Social Security’s payroll tax on income– a tax on labor, thus making it more painful to hire workers

2.) a shrinking money supply– not from the Fed actively reducing it, but from passively sitting by while confidence decreased, lending activity dropped, and the amount of money in the system fell (in contrast, note the Fed’s activity– or even hyper-activity in recent days)

3.) the Smoot-Hawley Tariff Protection Act of 1930 is generally considered the primary catalyst for the stock market crash of 1929– as investors looked forward to the devastating impact this would have on international trade and the significant impact it would have on our economy

4.) the imposition of laws that would prevent wages and prices from adjusting downward (as they need to do in a recession): most notably, price floors (e.g., in farming), wage floors (the minimum wage), and a spate of pro-union legislation.

Bad policy was responsible for the bulk of the Great Depression– and perhaps is entirely responsible for its length and continued depth.

Finally, the most famous part of the New Deal could not have been all that effective. The government worked hard to create jobs– most famously, through the Works Progress Administration (WPA). And it was successful in part. But in doing so, it must have destroyed at least as many jobs. To note, where did the money come from to create the jobs? From the private sector– where economic activity was squashed and jobs were destroyed as a result. Government spending is typically a shell game– moving resources from one area to another, creating some and destroying other. Moreover, government rarely does things in an efficient manner, so one would expect the net effect to be negative. And again, if one looks at the results, it is clear that government policy was not a cure for a struggling economy.

With Amity Shlaes’ recent book, The Forgotten Man: A New History of the Great Depression, I’ve seen two interviews (with her) and an op-ed (by her) on the topic.

As Christians, we believe that history matters. As an economist, I know that economic history matters. May we study both– to learn both the good and the bad from our past.

In yesterday’s Wall Street Journal Europe, Alberto Mingardi of Istituto Bruno Leoni (and long-time Acton friend) lists some of the reforms Italy needs to boost economic growth, which is forecast at a measly 0.6 – 0.8 percent for 2008.

Mingardi advocates a number of tax cuts and a more determined privatization of state assets. Some of these issues are being discussed – timidly – in the current election campaign; Mingardi also focuses on de-regulation and de-bureaucratization, issues heretofore neglected by Italian politicians.

Current labor regulations are “so numerous that no one can even give their precise number. No one can comply with rules they don’t even know about.” Mingardi adds that “it’s safe to say at least half the statutes currently in force should be repealed, as their only effect is to create confusion.”

A recent study shows that it takes on average 696 days to dismiss a worker in Italy compared to only 19 in the Netherlands. Critics of de-regulation would argue that Italian workers are therefore better protected. Wrong. Unemployment is 5 per cent in Holland compared to 6 per cent in Italy.

This may seem counter-intuitive but makes economic sense. If I know it will be impossible to fire an unproductive worker, I will be much less likely to take a chance on hiring any worker I don’t personally know. Hence, the Italian model of “family capitalism” and higher levels of unemployment.

Italian bureaucracy also exacts high costs on business creation. According to the World Bank, the cost of opening a business is 18.7 per cent of per capita income compared to only 0.8 per cent in the United Kingdom and 0.3 per cent in the Republic of Ireland. Moreover, an Italian business spends an average of 360 hours per year filing taxes whereas in neighboring Switzerland 63 hours suffice. (Not surprisingly, Switzerland is the economic envy of Europe.)

Workers also pay for onerous regulations. Everyone in Italy nowadays complains about stagnant wages, these are clearly the result of decreasing productivity caused by bureaucratic disincentives for businesses to invest and grow.

An overwhelming bureaucracy undermines both individual liberty and the public interest. It punishes the creative spirit of the entrepreneur by obstructing investment and innovation, and harms society by killing the potential for growth and employment. The irony is that regulation and bureaucracy are often enacted in the name of social values.