Pursuit of Truthiness

my gut tells me I know economics

Archive for the ‘America’ Category

Want single-payer? Figure out how to fix Medicare.

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The biggest barrier to single-payer in the US, other than politics, is the inefficiency of Medicare. Medicare alone spends more than $2000 per American but only manages to cover 14% of us. Yes, they are a particularly costly 14%- but some governments, like Greece and Portugal, manage to cover 100% of their population by spending similar amounts.

Medicaid spends just under $2000 per American and manages to cover 20% of the population. Together our two big government health programs spend about $4000 per American and cover 34% of the population. Almost every country with universal coverage manages to achieve it while their government spends less than $4000 per person.

This means that Medicare and Medicaid are collectively either 3 times better, or 3 times more inefficient, than the government health programs in other rich countries. Which do you think it is?

The problem isn’t that American taxpayers aren’t willing to finance universal coverage. The problem is that they already pay enough for a competent government to bring about universal coverage, but our government does not seem to qualify.

Written by James Bailey

March 1, 2017 at 11:11 pm

Stop Feeding the Trolls

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So many of the problems of this decade could be fixed by people learning not to feed the trolls.
Most obviously, internet comment sections would only be half as terrible as they are now.
Donald Trump wouldn’t have got the nomination without the huge amount of free airtime from news channels covering his latest outrageous statement.

Growing political polarization is partly due to how the straw man / weak man fallacy is amplified by trolls. Many actual news stories are about the outrageous thing some random Twitter egg on the other side said.
Terrorism would be cut in half if shooting a bunch of innocent people weren’t the quickest way to get famous.
I just wish there were an easy way to fix this without censorship. The necessary culture change sounds incredibly difficult, but I hope that with time we will learn how to adapt to social media and 24 hour news.

For a start, I plan to never do terrorists’ jobs for them by sharing stories of their terror. I encourage my friends to do likewise.

Written by James Bailey

July 22, 2016 at 3:12 pm


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A new article in the Journal of Wine Economics gives an informative and interesting history of beer in the United States, with a special focus on craft beer. While they do some statistical analysis at the end, most of the article tells a story that everyone should be able to understand. I could give you the basics of the story but I think their graphs do that best:

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We have gone from the dark ages of 1979 when Americans only drank Bud and Miller to the amazing variety of beer available today. Check out the article for stories of the people behind the craft beer revolution, and for an attempt to explain why it happened and why it happened in the states where it did.

Written by James Bailey

January 6, 2016 at 4:37 pm

Took our jobs, took our businesses? American entrepreneurs and immigration.

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Just about everyone has heard something of the debate over how immigrants affect the jobs and wages of natives. The general consensus in economics is that immigration has neutral to positive effects on the average native. This can happen because immigrants aren’t just substitutes for the native labor supply- they can also be complements for native labor, and their consumption increases the demand for American goods. Much ink has been spilled over the remaining contentious point of whether any major group of natives is harmed even if most Americans aren’t, with Borjas and some others finding that low skilled Americans see a slight wage decline, and Peri and others arguing they don’t.

One often-cited reason that immigration can benefit natives is that immigrant entrepreneurs start businesses that end up hiring Americans. But this point relies on one crucial assumption- that the immigrant-founded businesses aren’t simply displacing native-founded ones. While there has been a huge body of research on whether immigrants take American jobs and wages or not, there has been drastically less written on whether immigrants “take” American businesses. Perhaps immigrants willing to accept lower profits push out native businesses.

Keshar Ghimire, an economics PhD candidate at Temple University, answers the question in his innovative job market paper. A straightforward way to go about this would be to see whether states with more immigrant-founded businesses have fewer native ones. Keshar does this and finds that states with more immigrant-founded businesses actually have more native ones. But, he argues, this may simply be because some states are better for business and so attract both types of entrepreneurs, rather than immigrant entrepreneurs actually causing natives to start businesses.

To determine the real effect of immigrant businesses on native ones, he needs to find a change in the number of immigrant entrepreneurs in a state that wasn’t just caused by changing business conditions affecting everyone; it should be something that only affected immigrants. He finds such a change following the 1996 welfare reform. The national reform largely removed immigrants from eligibility for welfare. But 15 “generous” states allowed immigrants access to the new State Children’s Health Insurance Program (S-CHIP), which provides insurance for children whose families have relatively low income but who are too wealthy to qualify for Medicaid. Keshar finds that these states got a huge 22% increase in immigrant entrepreneurship. While my own work shows that health insurance isn’t always a barrier to entrepreneurship, one good study found that Medicare leads to a similar increase, so I find this plausible.

So what happened to native entrepreneurs in the 15 states that got this big influx of immigrant entrepreneurs? Keshar finds that they were not scared off. There was no change in the amount of unincorporated businesses owned by natives in these states relative to the others. The number of natives with incorporated businesses actually went up- so much that every two new immigrant businesses lead to one new native business. It turns out that just like workers, businesses can complement each other rather than only compete.

In sum, more immigrant entrepreneurship actually attracts native entrepreneurs rather than scares them away. I hope that this finding will make it in front of states considering S-CHIP eligibility, and in front of the US Congress debating immigration- especially on whether we should create a “founder visa” easing the way in for those who plan to start businesses, as some other countries have.

Written by James Bailey

December 17, 2015 at 1:04 pm

Open Borders and the Welfare State: Must We Choose?

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“You can’t have both open borders and a welfare state” –Milton Friedman

Friedman’s concern is that immigrants are disproportionately poor, and would overwhelm the resources of the welfare state.

Friedman’s dictum has been widely accepted across the political spectrum. Modern liberals might like to have both open borders and a welfare state, but have settled for just a welfare state, partly out of this concern. Conservatives have used the trade-off to argue against both immigration and the welfare state, though neither is a goal many hold dear these days. A few people, mostly libertarians, actually want open borders and see the trade-off as an argument against the welfare state- noting that the welfare state isn’t really pro-poor if it supports the relatively rich first-world poor while keeping others trapped in third-world poverty.

But I haven’t seen many people question Friedman’s welfare/immigration trade-off in principle, except for open borders advocates noting that immigrants can be legally excluded from welfare (in fact to some extent they already are in the US).

But consider the United States- we have open borders within the country, from Maine to Hawaii. US welfare programs are largely administered at the state and local level, and the generosity of these programs varies widely (see Medicaid expansion, for instance). I’ve been all over the US, and I’ve heard many people complain about welfare being too generous, and worry about immigrants coming here just to get on welfare. But I can’t say I’ve ever heard someone complaining about people migrating from other US states to get on welfare in their state, even in a relatively generous state like New York or California.

Am I just living in a bubble, or do people really never worry about this? And if so, what does this imply for the Friedman immigration/welfare trade-off?

Written by James Bailey

November 7, 2015 at 6:45 pm

Emancipating Slaves, Enslaving Free Men

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The title comes from an Abraham Lincoln quote: “Towering genius… thirsts and burns for distinction; and if possible, it will have it, whether at the expense of emancipating slaves or enslaving free men”

I find myself wanting to save quotes every couple pages; I’ve tried to put only the best of the best here. Jeffrey Rogers Hummel presents a lot of interesting facts I never knew, and weaves them into a compelling thesis about slavery and the US Civil war- one that doesn’t really fit with any of the political or historical “sides”.

One part of this thesis is about the causes of the war. Hummel points out that “what caused the civil war” is really two questions: why did the South secede? and why did the North not let them go? The answer to the first is definitely slavery. The answer to the second is less clear, but seems to largely be mystical ideas of union.

Some awesome quotes that surprised me:

Many abolitionists supported secession: “[Abolitionist William Lloyd Garrison] went so far as to denounce the Constitution for its proslavery clauses as ‘a covenant with death and an agreement with Hell.’ During one 4th of July celebration, he publicly burned a copy, proclaiming: ‘so perish all compromises with tyranny!’ He believed that if anything the North should secede. That way it could become a haven for runaway slaves. The slogan ‘No Union with Slave-Holders’ appeared on the masthead of Garrison’s Liberator for years.” (p21)
“The Georgia legislature offered a reward of $5,000 to anyone who would kidnap Garrison and bring him south for trial and punishment.” (p25)

Pro-slavery Communists were a thing: “[George] Fitzhugh defended slavery as a practical form of socialism that provided contented slaves with paternalistic masters, thereby eliminating harsh conflicts between employers and allegedly free workers… ‘A Southern farm is the beau ideal of Communism.’” (p23)

Through the Antebellum era as Northern state governments become more anti slavery, Southern governments supported it ever more strongly, even against the wishes of slaveowners: “Nearly every slaves state reintroduced or tightened restrictions upon whites privately emancipating their chattels… advocating abolition became a felony in Virginia in 1836.” (p25)
“Only in the Southern United States [of all the Americas] did legislators try to bar every route to emancipation and deprive masters of their traditional right to free individual slaves.” (p44)

Runaways are the Achilles heel of slavery.
One response to this is mandatory patrols to catch them: “Loosely connected with the local militia, patrol duty was compulsory for most able-bodied white males.” (p48) Proslavery theorist (and socialist) George Fitzhugh noted these patrols “secure men in possession of a kind of property they could not hold for a day but for the supervision and protection of the poor [who couldn’t pay their way out of patrol duty].” (p48) Stephen Douglas, of Lincoln-Douglas debate fame, echoed this: “slavery cannot exist a day or an hour anywhere unless supported by local police regulations.” (p117)
Yet “The South’s compulsory slave patrols are one of the gaping holes in the scholarly literature.” (p72)

Hummel is quite economically literate, and provides a convincing model of the economics of slavery and the importance of runaways. “Although slaveowners merely earned market returns [because of competition], they had powerful incentives to perpetuate the peculiar institution. The total value of all slaves in the United States as of 1860 is estimated at between $2.7 and $3.7 billion… ‘Were ever any people civilized or savage, persuaded by any argument, human or divine, to surrender voluntarily two thousand million of dollars?’”
“The individual runaway both helped provoke secession- northern resistance to fugitive recapture being a major southern grievance- and ensured that secession would be unable to shield slavery in the end.” (p353)

Most societies ended slavery through voluntary and/or compensated emancipation. The US took its own peculiar path, a civil war among whites with largely uncompensated emancipation. But there is also the Haitian alternative of slave insurrection. “[Frederick Douglass’] influence caused a National Negro Convention meeting in Buffalo to reject by a single vote a resolution calling for slavery’s violent overthrow…. In 1858 [Lysander Spooner] circulated plans for fomenting slave rebellions… Northern conspirators would assist with money, arms, training, and volunteers.” (p59)
“The massive uprising that [John] Brown, Lysander Spooner, and David Walker each hoped for would obviously have resulted in much loss of life, but worth speculation is whether it could even have approached the civil war’s unmatched toll: one dead soldier for every six freed slaves… this who complacently accept this as a necessary sacrifice for eliminating an evil institution inexplicably blanch at the potential carnage of slave revolts.” (p355)

The Antebellum conflict over slavery lead both sides to discard the rule of law: The Fugitive Slave law of 1850 meant that “free blacks had no legal recourse if a Southerner claimed they were escaped slaves. The law consequently spawned an unsavory class of professional slave catchers, who could make huge profits by legally kidnapping free blacks.” (p94) In response, “Northern mobs, which once had directed their fury at abolitionists, now attacked slave catchers, broke into jails, and rescued fugitive slaves… the national government tried vigorously to prosecute the law-breakers responsible for such defiance, but northern juries refused to convict.” (p95)

This lawlessness became much more pronounced once the war began. In fact, we came very close to total banana republic territory: “Lincoln simply ignored [Chief Justice] Taney’s opinion [ruling against Lincoln’s suspension of habeas corpus]. He also wrote out standing orders for the Chief Justice’s arrest, although these were never served… Secretary of State Seward ordered a lightning statewide raid that jailed thirty-one [Maryland] legislators, the mayor of Baltimore, one of the state’s Congressmen, and key anti-Administration publishers and editors. At the state’s next election in the fall of 1861, federal provost marshals stood guard at the polls and arrested any disunionists who attempted to vote.” (p142-3)
Both sides turned to conscription, and in 1864 the Confederates began assigning soldiers to industrial work. “Insofar as these soldiers were conscripts, the Confederacy was running its factories on coerced labor. The internal logic of military conscription had led the nation of black agricultural slavery to the ironic but appropriate institution of white industrial slavery.” (p251)

Lee was not the only high-level confederate who disliked secession: “[Confederate President Jefferson] Davis had been only a reluctant secessionist, while Vice-President Stephens had actually fought against his state’s withdrawal from the union.” (p135)

When Southern states started to secede, it would seem that conflict over federal possessions in the states, like Fort Sumter, was inevitable; but in fact almost all of them passed over peacefully: “Union authority meanwhile evaporated from the deep South. Federal officials resigned in droves. State troops took possession of customhouses, post offices, arsenals, revenue cutters, and military posts… only Fort Sumter in Charleston and three other forts along the Florida coast had garrisons of sufficient size and determination to keep them in Union hands” (p136-7)

Crazy Abraham Lincoln facts: “Among the ‘rules and regulations’ that Lincoln’s militia unit adopted were: ‘no man is to wear more than five pounds of cod-fish for epaulets, or more than thirty yard of bologna sausages for a sash; and no two men are to dress alike.’” (p157) “The highest commander is assumed responsible under most circumstances for operations under his control. American Presidents can sometimes escape the full force of this dictum because they delegate military responsibilities to subordinates and then take a hands-off attitude except for major objectives and policies. Only Lincoln, of all wartime Presidents, interfered in day-to-day military matters… one of the reasons Northern generals in the west usually performed much better is because they were too far away for Lincoln to foul things up.” (p174) “My paramount objective in this struggle is to save the Union, and is not either to save or destroy slavery. If I could save the Union without freeing any slave I would do it” -Lincoln (p207-8)

The Confederates may have made an even bigger military blunder right from the beginning by eschewing guerrilla war: “the Confederate high command never entertained any thoughts of conducting the kind of war for national liberation that Americans had fought during their revolution and that has become commonplace in the modern world… although much of the South would have remained exposed to invasion, Union willpower would have been patiently worn down through insurmountable logistical obstacles, continual hit and run harassment, and the countryside’s implacable hostility.” (p179)

We are usually taught that slavery was ended by Lincoln’s Emancipation Proclamation and the North’s victory in the war. But slavery may have been doomed as soon as the South seceded and the North started encouraging runaways: “’The institution of slavery is already so undermined and demoralized’ wrote Linton Stephens to his brother, the Confederate Vice-President in October of 1863, ‘as never to be of much use to use, even if we had peace and independence today’… Liberation, so often presented as something the Union did for blacks, was as much something they did for themselves.” (p212)

At least by the desperate times of 1865, the Confederates were willing to give up on slavery: “the Davis Administration promised full emancipation to the British and French governments in exchange for recognition.” (p281)

Louisiana makes many appearances, none of them flattering: “In the words of a Carpetbag governor of Louisiana, ‘I don’t pretend to be honest. I only pretend to be as honest as anyone in politics… Why, damn it, everyone is demoralizing down here. Corruption is the fashion.” (p314)

Somehow I had no real idea who Salmon P. Chase was before reading this book. Turns out he was a Governor and Senator from Ohio, US Secretary of the Treasury under Lincoln, Chief Justice of the Supreme Court, and founder of 3 political parties- including the Republicans. “Chief Justice Salmon P. Chase, in one of the most astonishing cases of intellectual honesty on the part of a public official, implicitly branded his own prior actions as Secretary of the Treasury unconstitutional when the court struck down the Greenback’s retroactive legal-tender provision.” (p330)

Either a slave revolt or compensated emancipation might have had much better outcomes than the Civil War: “Rather than revolutionary violence wielded by bondsmen themselves from the bottom up, a violence that at least had the potential to be pinpointed against the South’s guilty minority of slaveowners, the Civil War involved indiscriminate State violence directed from the top down. Nor would an insurgency’s economic devastation likely have reached the war’s $6.6 billion cost (in 1860 prices), about evenly divided between the two sides. The North’s portion alone was enough to buy all slaves and set up each family with forty acres and a mule.” (p355)

Dennis Hastert and the Wisdom of James Madison

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If I understand the history correctly, in the late 1990s, the President was impeached for lying about a sexual affair by a House of Representatives led by a man who was also then hiding a sexual affair, who was supposed to be replaced by another Congressman who stepped down when forced to reveal that he too was having a sexual affair, which led to the election of a new Speaker of the House who now has been indicted for lying about payments covering up his sexual contact with a boy.  –Orin Kerr

It turns out that during the late ‘90s both parties were lead by lying philanderers. My first reaction is to mock the idea of “public service”, and say we have seen one more example of how the worst get on top. But upon further consideration, I’d say this is evidence of just how well our political system works- as Madison said, we want a system of government that can deal with the fact that men aren’t angels. The late ‘90s featured leaders very far from angels, yet it is remembered as a golden era for the country- peace, balanced budgets and a booming economy.

Written by James Bailey

May 31, 2015 at 2:57 pm