Posts tagged with: political economy

Blog author: jcouretas
posted by on Thursday, March 10, 2011

A new commentary from Acton Research Director Samuel Gregg. Sign up here to get the latest opinion pieces delivered to your email inbox on Wednesday with the free weekly Acton News & Commentary.

Deficit Denial, American-Style

By Samuel Gregg

Until recently it was thought the primary message of the 2010 Congressional election was that Americans were fed up with successive governments’ willingness to run up deficit-after-deficit and their associated refusal to seriously restrain public spending.

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

And yet despite all the passionate rhetoric from Americans about the need to diminish government-spending, the Wall St Journal-NBC News poll suggests that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare as deficit-reduction measures. As the Wall St Journal’s own commentators noted: “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’

Unacceptable? Think about that word. Do large numbers of Americans really believe there is something morally evil about significant reductions to welfare-spending under any circumstances? Since when – apart from Greece and other models of fiscal rectitude – have welfare payments assumed the status of an absolute right subject to no qualification? Have we really gone so far down the path of economic-Europeanization?

Granted, the same poll suggests much larger numbers of Americans are willing to raise the retirement age to 69 and means-test social security. But is that the best Americans are willing to do?

Spain’s unreconstructed-1960s-lefty Socialist government has just lifted Spain’s retirement-age to 67. Unsurprisingly, that won’t fully kick-in until 2027, long after Spain’s political class and their tame voting constituencies have met their Maker and no longer need to live off their children’s futures. But can Americans who proclaim their attachment to free enterprise and personal responsibility really do no better than left-wing Western Europeans?

Back in 2007, the journalist Robert J. Samuelson summarized the situation perfectly. “Most Americans,” he wrote, “don’t want to admit that they are current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they’ve been promised simply because the promises were made. Americans do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Presidential campaigns are invariably accompanied by a great deal of posturing. It would be helpful, however, if some serious candidates for the nation’s highest office in 2012 – Republican or Democrat – would use their moment in the spotlight to educate Americans about what’s at stake.

One former American vice-president once reportedly insisted, “Deficits don’t matter.” Unfortunately, there is mounting proof he was wrong. After examining data on 44 countries over approximately 200 years, two economists recently found evidence suggesting that developed nations with gross public debt levels exceeding 90 percent of GDP (i.e., America) find that their medium-growth rates fall by one percent, while average growth declines by an even greater proportion.

That’s worrying because while deficit-cutting matters, wealth-creation matters even more if we are to dig ourselves out of our fiscal hole. America now seriously risks seeing its burgeoning welfare costs suffocating the productive sector of the economy that makes social welfare possible in the first place.

Incidentally, it won’t be the rich who suffer. It will be the poor. In their laudable concern for the weakest among us, Americans ought to remember that and start matching political rhetoric with consistent fiscal action.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

Jordan Ballor has already done a fine job of commenting on A Call for Intergenerational Justice, and I’m sure that others will be chiming in on the PowerBlog as well. I’d like to focus on a couple of points that stand out to me from an initial reading of the document.

I suppose it says something about a document when you can’t finish reading the title without alarm bells going off. “Intergenerational Justice” is a fine sounding term, but what does it mean in the context of the statement? While it isn’t spelled out in any detail, my best guess based on the text and the known political positions of many of the signers is that “intergenerational justice” refers to a continuation of the various Federal entitlement programs that make up the lion’s share of the mandatory portion of the Federal budget. To wit:

“Effective programs that prevent hunger and suffering and empower poorer members of society must continue and be adequately funded.” 

The only program specifically mentioned in the document is Social Security. The authors of the statement believe that the program can be modestly changed, but no indication is given that any radical reform will be tolerated:

“We must make Social Security sustainable. We can slowly increase the retirement age, modestly reduce benefits for more wealthy seniors, and increase the amount of income taxed to pay for Social Security.” 

I think it’s fair to infer from the limited detail provided by the writers of this statement that there is little enthusiasm for major reform of the core Federal entitlement programs that ultimately lie at the root of our debt problem, and no consideration of the idea that these programs may have been ill-concieved, or that the Federal government might not be an appropriate vehicle for meeting such basic human needs. The programs are there, and for the demands of “intergenerational justice” to be satisfied, they must remain in place.

Absent from the discussion, however, is any mention of the intergenerational injustice that these social programs represent in the first place. For instance: I’m in my mid-thirties. I cannot remember any time since I became politically aware that I believed Social Security would be solvent and able to provide benefits to me when I reach old age. Politicians and commentators have been talking about the coming collapse of Social Security since I’ve been reading political commentary. Various temporary fixes to the program have been enacted, but none of them fix the structural problems that plague the program and lead to the ongoing crisis – they just shove the inevitable bankruptcy back by a decade or two (and the same is true of Medicare and other similar entitlements).

And this is nothing new. Today, I just happened to pick up John Samples’ The Struggle to Limit Government and read the following passage describing the arguments over Social Security in its early years:

The intergenerational character of Social Security attracted criticism from the start. M. Albert Linton, an insurance executive and advisor to the program, argued that Social Security would create a large and intolerable burden on future generations. He noted that Social Security’s experts planned eventually to devote as much as 20 percent of taxable payroll to benefits, a sum that the generation of 1939 had not devoted to the program. Why should the current generation be allowed to commit future generations to a burden it would not now impose on itself? Linton’s admonition had no effect on Social Security officials. During a presentation about the future of the program, the council’s chair, J. Douglas Brown, remarked, “Après moi le déluge.” Future generations could take care of themselves; the experts of 1939, not to mention the politicians running in 1940, had little interest in what happened to people who did not exist. 

So, Wallis et al., what say you? If the programs you so desire to save were designed in a way that took no account of their sustainability or of the wellbeing of future generations, and if those same problems persist today and even threaten to completely overwhelm the Federal fisc, why the insistence on saving them? Is there no other way to provide for human needs than through a bureaucracy? It strikes me as odd to demand the maintenance of fiscally crippling entitlements in the name of intergenerational justice when just treatment for future generations was of no concern to the designers of the entitlements in the first place.

One additional point from the “Call” jumped out at me from the “Core Proposals” section. Specifically:

“We must reform the tax code. We should remove many special exemptions, end many special subsidies, and keep the tax code progressive.” 

There is a lot to agree with in that statement – the Federal tax code is monstrous, and it is very likely that there is no one person with the capability to understand it in all of its intricacy. It is filled with all manner of loopholes, exemptions, and subsidies, and needs to be brought under control if we have any hope of understanding exactly how Washington obtains and distributes its revenue. But why the insistence that the tax code remain “progressive”? Why must that be part of any “Christian” proposal to address our nation’s debt crisis? Is progressive taxation truly just? When I read that statement, I recalled reading a contrary opinion from one of my favorite theologians and commentators, R.C. Sproul, on just this issue:

Alexis de Tocqueville, when he came and examined the great American experiment of democracy, said two things can destroy this experiment: One is when people learn that their vote is worth money, that you can bribe people to get their vote or that you can use the vote to somehow shelter yourself from financial or other obligations imposed upon others. Have we taken the blindfold away from lady justice? Are we not all equal under the law? 

On the contrary, we have an income tax structure today that is inherently unjust. We almost never hear anybody discuss this injustice. But when God set up a system of taxation, He did things differently. God said I’m going to impose a tax on my people and it’s going to be ten percent from everybody: The rich man and the poor man are not going to pay the same amount. The rich man’s going to pay much more than the poor man, but they’re both going to pay the same percentage. They’re both going to have the same responsibility. That way the rich man can’t use his power to exploit the poor man, saying, “I’m going to pay five percent, but you’re going to pay fifty percent.” The rich weren’t allowed to do that. Nor were the poor allowed to say, “We’re going to pay five percent and the rich are going to pay fifty percent because they can afford it.” What that is ladies and gentlemen is the politics of envy that legalizes theft. Anytime you vote a tax on somebody else that is not a tax on yourself, you’re stealing from your brother. And though the whole world does it and though it’s common practice in the United States of America, a Christian shouldn’t be caught dead voting to fill his own pocketbook at the expense of someone else. Isn’t that plain? Isn’t that clear? And until we get some kind of flat tax, we’re going to have a politicized economy, we’re going to have class warfare, and we’re going to have the whole nation’s rule being determined by the rush for economic advantage at the polls. Don’t do it. Even if that means sacrificing some benefit you might receive from the federal government. Don’t ask other people at the point of a gun to give you from their pockets what you don’t have. That’s sin.

I don’t write any of this to call into question the Christian commitment of any of the signers of “A Call for Intergenerational Justice.” In fact, I have little doubt that the signers of the document do indeed have a deep concern for the poorer members of society that they hope to defend in their actions. I’m more interested in pointing out that this document is exactly what its subtitle claims it to be: “A Christian Proposal for the American Debt Crisis.” Emphasis on A. It is not the Christian proposal; it is simply one of many responses that well-intentioned Christians can have to our current crisis. And it is entirely possible that well-intentioned people can have blind spots or propose economically flawed solutions to pressing problems. That seems to be a big part of what’s going on here.

Blog author: jcouretas
posted by on Monday, January 10, 2011

Catching up on some recent Acton commentaries. We welcome a new writer, John Addison Teevan, who is director of the Prison Extension Program at Grace College. He also teaches economics and Bible courses at the Winona Lake, Ind., school. This column was published Dec. 29. Sign up for the free, weekly email newsletter Acton News & Commentary here.

A Tithe for Uncle Sam

By John Addision Teevan

Political leaders talk as if the money Americans keep (not paid in taxes) belongs to the government and that our keeping money they could tax is an actual cost to them. This kind of distorted thinking has led us into the fiscal irresponsibility that threatens to destroy our country.

It is, of course, fair to say that there are many exemptions that, if eliminated, could bring in more tax revenue. But Congress prefers a tax code of convoluted exemptions and tax breaks that they create and sustain to keep various interest groups coming to their offices. Taxpayers love breaks such as the homeowners’ exemption that allows taxpayers who itemize to deduct their mortgage interest. Although paying less in taxes is in general a good thing, all such exemptions confuse the process, contribute to an impossibly intricate tax code and keep lawyers, accountants and tax prep software companies prospering. The amount we spend on tax preparation in terms of actual cost and time wasted compared to a simplified tax code is worth billions.

The most extreme example of the fallacious notion that government has a right to its citizens’ money is the idea is that the cost to the government of not taxing the disposable income of all Americans at 100 percent is $11.5 trillion (as if we’d bother working if we faced a 100 percent tax rate). Economist Arthur Laffer noted that the government might collect little in taxes if the tax rates were either very low or very high, because in the latter case Americans would adjust their income according to tax incentives. Government officials unfortunately tend not to think in terms of incentives but of rules and therefore assume, contrary to Laffer’s findings, that higher tax rates always bring in more revenue.

Taken to its conclusion, this thinking leads tragically to socialism. If we think the government is the best source of compassion for the needy and the engine of economic growth, then it makes sense to set taxes at high rates so the government can do all good things for the people. One small faction that I read about in an Ohio paper wants Uncle Sam to hire all unemployed people and then print the money to pay them. This childish scheme is really a variation of the more respectable idea that tax cuts “cost” the government in the same way that spending on defense or health care does.

The foolishness of the concept can be illustrated by analogy with a church. Imagine a congregation of 100 families with a budget that reflected an estimated tithe on $65,000 average family income. Using government thinking, the church budget could be $650,000 (10 percent of 100 x $65,000), even if the actual offerings to the church were only $300,000. This is based on the fairly reasonable idea that the people owe their church 10 percent of their income.

Here’s how government budget thinking might work in that church.

Budget: $650,000. Expenses: charitable relief for church members: $350,000 (54 percent), staff: $150,000 (22 percent), building expenses: $50,000 (8 percent), ministry expenses: $50,000 (8 percent); debt retirement: $50,000 (8 percent).

What is that $350,000 for ‘charitable’ relief for church members? That is the part of the tithe that the members should have given to the church, but did not. Rather than ignore it, the church would reckon it as both income and expense even though not a single dollar changed hands. Government thinking sees any foregone revenue as an expense so that the largest item in this budget is the (fictional) $350,000 expense as if the church spent that money on its own parishioners.

As it stands, the federal government appears to be incapable of balancing income and spending. Right now it is collecting about 16 percent of GDP in taxes and spending well above 20 percent, creating an immense government borrowing gap. Many politicians’ proposed solution is to demand that the existing tax regime be repealed in favor of higher rates; we can’t “afford” the lower rates, they argue. In an economic downturn, however, raising taxes is a surefire way to suppress recovery.

Addressing the spending side of the budget equation is politically painful, no doubt, but it is unavoidable. America faces difficult challenges as we try to grow out of the recession. Having the government think soberly about its tax income and budget expenses would be a good start.

Blog author: jcouretas
posted by on Thursday, December 16, 2010

In “Human Nature and Capitalism” on AEI’s The American, Arthur C. Brooks and Peter Wehner look at three different “pictures” of what it means to be human and point to the one, foundational understanding that has undergirded the flourishing American culture of democratic capitalism:

“If men were angels,” wrote James Madison, the father of the Constitution, in Federalist Paper No. 51, “no government would be necessary.” But Madison and the other founders knew men were not angels and would never become angels. They believed instead that human nature was mixed, a combination of virtue and vice, nobility and corruption. People were swayed by both reason and passion, capable of self-government but not to be trusted with absolute power. The founders’ assumption was that within every human heart, let alone among different individuals, are competing and sometimes contradictory moral impulses and currents.

This last view of human nature is consistent with and reflective of Christian teaching. The Scriptures teach that we are both made in the image of God and fallen creatures; in the words of Saint Paul, we can be “instruments of wickedness” as well as “instruments of righteousness.” Human beings are capable of acts of squalor and acts of nobility; we can pursue vice and we can pursue virtue.

And they draw a parallel to institutions of government where democracy, with all of its flaws, also works itself out to be the most fitting form of government under this model of human nature. When I engage with critics of the market economy, I use the following Churchill quote but substitute “market economy” for “democracy.” Valid, I think, because we have some disastrous experience with political systems that do not operate in concert with a more or less open market.

Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time. — Winston Churchill (House of Commons, Nov. 11, 1947)

Brooks and Wehner:

… our “picture of human nature” determines, in large measure, the institutions we design. For example, the architects of our government carefully studied history and every conceivable political arrangement that had been devised up to their time. In the course of their analysis, they made fundamental judgments about human nature and designed a constitutional form of government with it in mind.

What is true for creating political institutions is also true for economic ones. They, too, proceed from understanding human behavior.

It is hard to overstate the importance of this matter. The model of human nature one embraces will guide and shape everything else, from the economic system one embraces (free-market capitalism versus socialism) to the political system one supports (democracy versus the “dictatorship of the proletariat”). Like a ship about to begin a long voyage, a navigational mistake at the outset can lead a crew to go badly astray, shipwreck, and run aground. To use another metaphor, this time from the world of medicine: A physician cannot treat an illness before diagnosing it correctly; diagnosing incorrectly can make things far worse than they might otherwise be.

Those who champion capitalism embrace a truth we see played out in almost every life on almost any given day: If you link reward to effort, you will get more effort. If you create incentives for a particular kind of behavior, you will see more of that behavior.

A free market can also better our moral condition—not dramatically and not always, but often enough. It places a premium on thrift, savings, and investment. And capitalism, when functioning properly, penalizes certain kinds of behavior—bribery, corruption, and lawlessness among them—because citizens in a free-market society have a huge stake in discouraging such behavior, which is a poison-tipped dagger aimed straight at the heart of prosperity.

Read the full article on The American.

Blog author: jcouretas
posted by on Wednesday, November 3, 2010

A new article from Acton Research Director Samuel Gregg published today in Acton News & Commentary. Sign up for the free, weekly email newsletter here.

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A Tale of Two Europes

By Samuel Gregg

The word “crisis” is usually employed to indicate that a person or even an entire culture has reached a turning-point which demands decisions: choices that either propel those in crisis towards renewed growth or condemn them to remorseless decline.

These dynamics of crisis are especially pertinent for much of contemporary Europe. The continent’s well-documented economic problems are now forcing governments to decide between confronting deep-seated problems in their economic culture, or propping up the entitlement economies that have become unaffordable (and morally-questionable) relics in today’s global economy.

While some European governments have begun implementing long-overdue changes in the form of austerity-measures, welfare-reforms, and labor-market liberalization, the resistance is loud and fierce, as anyone who has visited France lately will attest.

No-one should be surprised by this. Such reforms clash directly with widespread expectations about employment, welfare, and the state’s economic role that have become profoundly imbedded in many European societies over the past 100 years. Yet it’s also arguable this is simply the latest bout of an on-going clash of economic ideas which goes back much further in European history than most people realize.

Certainly the contemporary controversy partly concerns the government’s role during recessions. From this standpoint, Europe (and America) is rehashing the famous dispute between the economists Friedrich von Hayek and John Maynard Keynes in the 1930s about how to respond to the Great Depression. Should we, as Hayek maintained, react by giving markets the flexibility they need to self-correct? Or do we prime the pump à la Keynes? (more…)

On the The American Spectator website, Theodore Roosevelt Malloch reviews Wilhelm Ropke’s Political Economy, a “brilliant, analytical intellectual history” from Acton Research Director Samuel Gregg.

We are extremely grateful then to the brilliant researcher and scholar, Samuel Gregg of the Acton Institute, for a concise, penetrating, and thorough analysis of Röpke’s contribution to intellectual life. It breaks new ground, is highly readable, and adds considerably to the economic literature. It should become mandatory reading for every student of political economy.

As the intellectual author of Germany’s post-World War II economic resurrection, Röpke is an under-appreciated thinker who informed policymaking. Gregg rightly calls him a Smithian, as he was against the unlimited power of the state. Put positively, he was much more. Röpke was an “economic humanist” of the first order. He historically showed how the Great Depression came to limit economics as a science and how collectivism is incompatible with authentic human freedom.

The purpose of Gregg’s masterful book is to provide a descriptive and critical introduction to Röpke’s understanding of political economy. This is unquestioningly an exercise in historical recovery. The focus is on four subjects that concerned Röpke up until his early death in 1966. They are: the challenge of business cycles, the unending growth of the welfare state, full employment and inflation, and international economic relations.

Read Malloch’s “The Great Wilhelm Röpke” on the American Spectator website.

We’ll be posting excerpts from Sam’s new book in the days ahead.

As part of its First Principles series in Political Thought, the Heritage Foundation has published The Moral Basis for Economic Liberty by the Rev. Robert A. Sirico, president and co-founder of the Acton Institute. You can read the paper online or download as a PDF.

Abstract:

Today, those who defend free markets and capitalism often do so solely on managerial or technical grounds, but economic liberty needs a moral defense as well. Defense of economic liberty without reference to morality will ultimately prove injurious to liberty itself. Rightly understood, capitalism is simply the name for the economic component of the natural order of liberty. It means expansive ownership of property, fair and equal rules for all, economic security through prosperity, strict adherence to the boundaries of ownership, opportunity for charity, wise resource use, creativity, growth, development, prosperity, abundance. Most of all, it means the economic application of the principle that every human person has dignity and should have that dignity respected.

And a key insight:

So long as economic liberty—and its requisite institutions of private property, free exchange, capital accumulation, and contract enforcement—is not backed by a generally held set of norms by which it can be defended, it cannot be sustained over the long term. Into the moral vacuum left by capitalism’s defenders rush notions hostile to economic liberty, notions drawn largely from the values and vocabularies of interventionism and socialism.

Further, if a principled defense of markets based on the sanctity of private property and the virtue of voluntarism is absent from public life, it is very likely that the moral center of the buying public has begun to slip as well. In any market, the kinds of goods and services producers provide reflect the values of the consuming public. What consumers are willing to purchase will determine what kinds of goods and services are most prominent in the market.

The Public Discourse recently published my article, Rethinking Economics in the Post-Crisis World. Text follows:

In the wake of the financial crisis, we need an economics with greater humility about its predictive power and an increased understanding of the complicated human beings who, when the discipline is rightly understood, lie at its center.

Apart from bankers and politicians, few groups have received as much blame for the 2008 financial crisis as economists. “Economists are the forgotten guilty men” was how Anatole Kaletsky, former economics editor and current editor-at-large for the London Times, put it earlier this year when explaining why “a bank with just $1 billion of capital [would] borrow an extra $99 billion and then buy $100 billion of speculative investments.”

Greed and sheer imprudence played a role, but so too, Kaletsky argued, did those (unnamed) economists who posited that their models proved that events such as the collapse of Lehmann Brothers in 2008 or Long Term Capital Management in 1998 were mathematically likely to happen once every billion years.

Kaletsky’s broader point was that contemporary mainstream economics had been sufficiently discredited by the financial crisis that the entire discipline required what he called an “intellectual revolution,” or it risked being dismissed as a rather suspect sub-branch of statistical analysis and mathematical modeling.

Kaletsky is hardly alone in arguing that economists need to rethink key aspects of their discipline. Though unwilling to call for a total paradigm shift, the Economist recently opined that the financial crisis has raised profound questions of coherence about two areas of economics: macro-economics and financial economics. “Few financial economists,” the Economist observed, “thought much about illiquidity or counterparty risk, for instance, because their standard models ignore it.” Likewise, the Economist commented, “Macroeconomists also had a blindspot: their standard models assumed that capital markets work perfectly.”

All this is certainly true. But the key expression to note here is “their standard models.” (more…)

With all this talk of health care reform this year, I couldn’t help but do some digging into the real aspects of the proposals. Ranging from the completely disruptive universal medical care plan from California Governor Arnold Schwarzenegger to the socialist-like plan from Senator Ted Kennedy (D-MA) in the 110th congress, health care is big on the agenda for 2007. I am afraid that if the policies proposed by Schwarzenegger and Kennedy are passed, future generations will witness a detrimental effect on our economy. Kennedy’s home state of Massachusetts, being the first state to provide universal health care to its citizens, has already seen negative aspects in regards to business and job creation.

These arguments for universal health care come disguised in many forms, but all contribute negatively to the economy. The idea of making health care affordable and available to citizens is an excellent idea, however, Governor Schwarzenegger’s and Senator Kennedy’s ideas are the wrong way to go.

Forcing employers to provide health care and penalizing them for not providing coverage is not the right direction to head.

The state of Massachusetts employs a combination of subsidies and penalties to make insurance more affordable and to force people to buy it. The law requires employers with 11 or more full-time employees to offer health coverage or be subject to a $295 fee for each employee, as well as face being billed for services their uninsured employees get.

Because of this policy, employees are going to lose other benefits and suffer pay cuts, or even be fired. The cost of medical insurance is extremely high. The real solution rests in not forcing employers to provide coverage, but to make insurance more affordable.

The answer lies in eliminating all of the fraudulent law suits filed every day by money-hungry lawyers who are completely destroying the medical system. As lawyers sue doctors, malpractice insurance premiums increase. The number of personal injury litigations has steadily increased at a rate of 12% since 1975.

Jury Verdict Research, a database of plaintiff and defense verdicts, says awards in medical liability cases increased 43 percent in 1999, from $700,000 to $1,000,000. Jury awards in medical malpractice claims jumped 43 percent in one year—from $700,000 in 1999 to $1 million in 2000. Juries are compensating plaintiffs more generously than in the past. From 1994 to 2000, Jury Verdict Research found that more than half of medical malpractice jury awards were for $500,000 or more.

Seeing the direct correlation between health care cost and the cost of medical malpractice insurance for doctors (driven up by law suits), the root of the problem is obvious. This must be attacked before anything else. If Senator Kennedy and Governor Schwarzenegger want to see real progress, their plans must be disregarded and tort abuse must be solved first. There are various other aspects to their plans that are also misinformed and misdirected, but I’ll save that for another time.

Although it is played by about 15 million Americans and amounting to a $1.5 billion a year industry, and even though it is a growing business and worth talking about, this post is not about the real-world economics of fantasy sports.

Instead, this post is about the typical structures of fantasy leagues, particularly football (the most popular), and what these leagues can tell us about the participants’ most basic economic assumptions or impulses. I will argue that the default model in fantasy sports is one of an authoritarian and interventionist governing body, which severely restricts fantasy commerce.

But just who are we talking about? As Marketplace reports, the typical fantasy sports players are “male, they’re about 36, and they own their homes.”

So what are the basic structures of fantasy leagues? (more…)