Pursuit of Truthiness

my gut tells me I know economics

Archive for the ‘contrarianism’ Category

Why I Don’t Post About The Latest Outrage

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Most of all, because when a dozen of my Facebook friends are already posting about the same thing, it would be boring to repeat them.

But I also seriously wonder if making that 13th post might do more harm than good. Not just because it might lead people to hasty over-reactions that do obvious harm. But because talking about problems doesn’t always have therapeutic effects; sometimes it can very directly make things worse.

First, because it can be bad as therapy. Second, because making it seem as if the outrageous behavior in question is common makes people more likely to do it– even for the worst crimes. Finally, because making it seem as though more people are victims facing an unjust world they can’t do anything about removes their internal locus of control, leading to all manner of worse outcomes.

Near my house, there is a billboard that keeps a running count of how many transgender people have been murdered this year. I assume it was put there by some well-meaning group that sees raising awareness as a necessary first step to reducing the number of murders. But suppose there was a group whose goal was to make transgender people live in fear, scare others away from transitioning, and encourage more copycat murders- wouldn’t they want to put up the exact same billboard?

Next time you see some story that makes you angry, think before sharing it with everyone else. If it makes you feel better to post it, then I suppose you might as well, but please don’t post merely out of a misguided sense that you are necessarily making the world a better place by doing so.

Written by James Bailey

October 2, 2016 at 11:59 am

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

How should Republicans respond to King v Burwell? The Judo solution for the ACA.

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Any time now the Supreme Court will rule on the legality of Affordable Care Act subsidies through federal health insurance marketplaces.

A ruling for the administration means we keep the status quo (barring some weird saving construction), so there is nothing for Republicans to respond to.

But what should they do if the court rules for the plaintiffs, and 37 states lose their ACA subsidies?

Cave

The caving option is to do a straight renewal of the subsidies; some Congressmen are discussing doing this at least temporarily. But this means giving up a great bargaining position.

Kick Over The Stool

The die-hard conservative option is to do nothing, and hope the ensuing chaos reflects worse on the Democrats. As Jon Gruber has said, the key components of the ACA stand together like a three-legged stool. Without the subsidies, the individual mandate becomes a cruel tax on the poor, and without the mandate (or if people choose to ignore it and pay the fine, as many will without the subsidies) guaranteed issue and community rating mean people can game the system (wait to sign up for insurance until you get sick), creating the mother of all adverse selection problems. If Democrats get more of the blame for the wreck that the health insurance system will become with ACA-minus-subsidies, then Republicans might get the votes to repeal the ACA entirely. But I doubt this would be the case.

One-for-One Trade

The more responsible solution is a compromise- reinstate the subsidies legislatively in return for getting rid of a different part of the ACA they find more offensive. But what would this be? Gruber is right that the major parts of the ACA hang together, and removing one major part by itself is worse than either repealing or keeping the whole thing. Removing only the individual mandate, or only guaranteed issue, or only community rating would be very bad ideas.

I think the employer mandate is the best candidate for one big piece that could be safely removed- and it is the one Democrats are unlikely to go to bat to fight (indeed, we’ve seen the absurd spectacle of the Obama administration trying to delay this part of their own health bill while Republicans sue them to implement it). But would this be such a big victory? It would help business and labor markets, but the employer-based system is still by far the largest alternative to government insurance, and politically it may be unwise for Republicans to weaken it- especially if they continue to attack the parts of the ACA that support the market for individual insurance.

One-for-Many Trade

Rather than killing one other big piece of the ACA in return for reinstating subsidies, Republicans could find more success by making many marginal changes to the ACA. Make the subsidies a bit less generous (it is kind of absurd that they currently go up to 400% of the poverty level), cut back a bit on the Medicaid expansion (as most Republicans at the state level have been doing anyway)- reduce Federal contributions a bit, and cut eligibility a bit. Allow a bit more rating in health insurance, especially for health behaviors that are partly in peoples control (like weight).

Add Instead of Subtract

Even better, in the unlikely event that Republicans are willing to spend this chance to do something constructive rather than go after a partial repeal, would be to move forward a new health policy proposal. This could be one of the oldie-but-goodie conservative health reform proposals, like making it easier to sell insurance across state lines, or equalizing the tax treatment of individual and employer insurance. It could be a random new proposal, like getting rid of innovation-hampering Certificate of Need laws. But, if I can be allowed to dream for a moment, they could take this chance to move forward the free-market elements of the ACA.

Judo Flip

The fact that many of the ACA ideas were first advanced by the conservative Heritage Foundation and enacted by Mitt Romney has become a political talking point for the left, but it wasn’t simply a coincidence or a big mistake. Before the ACA, the market for individual insurance was largely broken. It is a tough economic question how to apportion the blame for this across markets vs misguided government regulations- but the judgement of voters was clear, and the flaws of the market for individual insurance were a consistent impetus for left-wing solutions up to and including single-payer.

Despite the ACA’s many flaws, it has succeeded in making the market for individual insurance functional enough. Individual insurance could be more convenient, it could certainly be cheaper, but now it basically works. And this changes everything.

Why should the government operate a Medicaid program directly, providing insurance that many doctors refuse to take and that recipients hardly value, when for a similar cost they could give away vouchers for gold-level private insurance plans that doctors will actually accept? Arkansas realized this early on, and got permission from the feds to let Medicaid recipients choose real private plans, freeing them from a low-quality government monopoly.

Republicans should support this privatizing potential of the ACA, and change federal Medicaid rules to allow all states to do this. Or if they really want to push the envelope- and I’d want to study the Arkansas experience much more before supporting this- they could make vouchers for individual plans the new default for Medicaid, and require states to get waivers to do anything else. This would judo flip the ACA into a tool for a huge reduction in the role of government in health insurance.

Written by James Bailey

June 23, 2015 at 10:49 am

Is Paying Taxes Immoral?

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The US Government is a huge organization that performs many many actions. I think almost anyone could come up with something the government does that they don’t like. I think many people could come with something the government does that is downright evil: bomb Afghan farmers, imprison innocents, pass on money to even worse governments or groups.

Given this, I am surprised that I can’t recall a single person arguing that it is immoral to pay taxes. Sure, people will grumble about losing their money or about how the government will just waste it. But no one argues that you have a moral obligation to make sure that less of your money goes to evil purposes- whether by working so little (or giving away so much) you incur no tax obligation, finding every possible loophole, or simply illegally evading paying taxes. Why not? Do you not have blood on your hands for financing the government’s murders and other evil deeds?

I avoid the force of this argument by being (or aspiring to be) utilitarian. You have to average out all the effects of paying taxes to determine the morality of it. The government does many good things and very many morally neutral things to balance out the bad. Plus avoiding all taxes would be quite costly to me, and my utility counts too.

But many people don’t think this way. They refuse to flip the switch in the trolley problem. They boycott corporations for running sweatshops, or giving money to causes they don’t like, or various other perceived evils. Shouldn’t they think paying taxes is immoral, and do what they can to avoid it?

Written by James Bailey

September 17, 2012 at 3:13 pm

Lotto Tickets- A Potentially Good Investment

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Neither normal people nor economists can make much sense of those who buy lottery tickets hoping to make money.  To rescue the lottery from being an “idiot tax” they think of other reasons to play, such as the lottery being “entertainment” or a convenient way to donate to education.  However, in some reasonably common circumstances, the lottery makes perfect sense as an investment.

To see why, you have to calculate the implicit marginal tax rate people face.  The explicit marginal tax rate is what you see when you pay taxes, and for low-income people in the United States it is small.  The implicit tax rate is what you get by considering both taxes paid and subsidies received.  Many government subsidies in the US target the poor, which is nice, but it means that as people work more they receive fewer subsidies- reducing their incentive to work more.  Sometimes, earning more income from work will actually reduce what you are able to consume by making you ineligible for benefits- this means you face an implicit marginal tax of 100% or more.

Why does this matter for the lottery?  By one calculation (shown in the chart below, which I haven’t checked myself, but is close enough to being true for my argument), a significant number of people in the US see nearly no benefit from increasing their income from $15,000 to $40,000.  Say you have a job that pays $20,000.  Getting a second job or investing “responsibly” will not increase your income above $40000 and so will not make you better off.  A winning lottery ticket, however, could shoot you out of the “dead zone” and make you money you actually get to keep.  If you are stuck with a near-100% implicit tax rate until you can drastically increase your income, the lottery makes sense for you.  You just make sure the potential payoff is big enough to get you clear of the poverty trap, so go big or go home.

Written by James Bailey

April 5, 2011 at 10:53 pm