RedStateEclectic

The Long and the Short of It

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My favourite economist, Steven Kates, explains:

It’s been five years of this Keynesian mess with the notion that economies are driven from the demand side. At the start it was direct government spending. As an approach to recovery it has comprehensively failed as no one now denies. So we have now gone to the monetary policy approach with Quantitative Easing, pour money out into the economy and low interest rates will finally lift things up. Also not working but no one quite knows why. So here’s why. Economies are driven forward by increases in value adding supply and by absolutely nothing else. Others can tax, steal or otherwise appropriate the productivity of others and squander what they get. But this will NEVER lead to a recovery, not ever. So we have kept rates low and watched as nothing has happened.

Anyway, it’s that time of year again. Macro follies continue and no one seems to have learned a thing. And it’s not just consumer spending but all unproductive spending that is a draw down on productivity. Consumer demand is, of course, the reason for bothering with any production at all. But if we are thinking about growth and employment, consumer and government demand has nothing to contribute, nothing whatsoever. Nor does mis-directed investment spending. No do low interest rates. But we are persistent if nothing else.

The source.

And here the summary of the relevant economic history and theory:

 

Obama and His Mother

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I cannot find the post written, I suspect, at the beginning of Obama's first term, in which I prognosticated that the political mood in America was soon going to experience a depressive dent from stark disillusionment about the character of Obama and his policies. Much later than I had expected the disillusionment seems to be setting in.

Remember President Barack Obama's mother? Though the airwaves currently echo with his vow "If you like your plan . . ." I keep remembering Obama's account of his mother being denied coverage by her insurance company as she lay dying of cancer.

The moving and infuriating story was a staple on the 2008 campaign trail. His mother had insurance, he explained, but when she came down with cancer, her insurance company claimed her disease was a "pre-existing condition" and refused to pay for her treatment. In a debate with Sen. John McCain, Obama said: "For my mother to die of cancer at the age of 53 and have to spend the last months of her life in the hospital room arguing with insurance companies because they're saying that this may be a pre-existing condition and they don't have to pay her treatment, there's something fundamentally wrong about that."

There would be, if it had been true. But when New York Times reporter Janny Scott researched the issue for her biography of the president's mother, she discovered letters proving beyond doubt that Cigna never denied Stanley Ann Dunham coverage for her disease. The dispute was over a disability plan that would have paid some of her other expenses.

The White House did not deny Scott's account, but shrugged it off as something that had happened long ago. Not so long that it couldn't be milked one last time though, for a 2012 campaign film. In "The Road We've Traveled," the message remained unchanged -- a greedy insurance company had cut off Obama's mother at her moment of maximum vulnerability, and it cost Dunham her life.

The source.

The dupability and the almost non-existing vetting standards with regard to Obama's presidential aspirations are simply astounding.

 

An example of puffery is the description of Mr. Obama as a former "professor of constitutional law." Mr. Obama was a part time instructor at the University of Chicago law school, without the title or status of professor. And, according to blogger Doug Ross, he wasn't very popular with the real professors.

"I spent some time with the highest tenured faculty member at Chicago Law a few months back," Mr. Ross wrote in March 2010. "According to my professor friend, [Obama] had the lowest intellectual capacity in the building. ... The other professors hated him because he was lazy, unqualified,"

The source.

 

See also The Community Organizer Giveth, and the Community Organizer Taketh Away, The Healer - America's Telocratic President, and (in particular for his reputation at the University of Chicago - watch the segment between time marks 0:23 and 2:18) A Ship with the Engine Off.

Health Care - Beyond Repair?

Congratulations to the Coyote whose blog has turned 9 years old on Sunday. For years I have been in the habit of amply stealing from Coyote's excellent offerings - mind you, always acknowledging the source. Today, I am celebrating the blog's birthday with another massive robbery:

Progressives are passing around this chart from Brookings as an indicator of "what is wrong" with the US healthcare system.

This is how Kevin Drum interprets the chart:

In other words, the supposed advantage of PRT—that it targets cancers more precisely and has fewer toxic side effects—doesn't seem to be true. It might be better in certain very specialized cases, but not for garden variety prostate cancer.

And yet, new facilities are being constructed at a breakneck pace. Why? Because if they build them, patients will come. "They're simply done to generate profits," says health care advisor Ezekiel Emanuel. Roger that.

This is an analysis that may be true, but let's take a moment to consider how strange it is. Forget health care for a minute. Think about any other industry. Here is what they are effectively saying:

1. Industry competitors are making huge investments in a technology that has no consumer value
2. The competitors in this industry are all making investments in this technology so rapidly that the industry is exponentially over-saturating with capacity.

And from these two facts they conclude that the profits of industry competitors will increase??

Let's for a moment say this is true -- an enormous investment that has no customer utility and that is made by so many players that the market is quickly over-saturated actually increases industry profits. Let's take a moment to recognize that this is BIZARRE. We have to be suspicious of some structural issue for something so bizarre to happen. As is typical of progressives, their diagnosis seems to be that private actors are somehow at fault for being bad people to make these investments. But these same private actors, even if they wanted to, could never make this work in any other industry, and besides there is no evidence that hospital managers are any worse people than, say, cookie company managers. The problem is that we have fashioned a bizarre system through heavy government intervention that apparently makes these pointless investments sensible to otherwise rational actors.

One problem is that in any normal industry, consumers would simply refuse to buy, or at least refuse to pay a very high price, for services that have little or no value. But in health care, we have completely eliminated any consumer visibility to prices. Worse, we have eliminated any incentive for them to care about prices or really even the utility of a given procedure. This proton beam thingie might improve my outcomes 1%?  Why not, it's not costing me anything. Perhaps the biggest problem in health care is that the consumer has no incentive to shop. Obamacare does nothing to fix this issue, and in fact if anything is taking us further away from consumer shopping and price transparency by working to kill high deductible health insurance and HSA's.

There is only one other industry I can think of where capital investment, even stupid capital investment, automatically translates to more profits, and that is the regulated utility business. And that is what hospitals have become -- regulated utilities that get nearly automatic returns on investment.

In a truly free market, if these investments made no sense, one would expect very soon a reckoning as those who made these nutty investments go bankrupt. But they obviously don't expect this. They expect that even if it turns out to be a bad investment, they will use their political ties to get these costs built into their rate base (essentially built into reimbursement rates). If any private or public entity refuses to pay, you just run around screaming to the media that they want to deny old people care and let sick people die. Further, the government can't let large hospitals go bankrupt because it has already artificially limited their supply through certificate of need processes in most parts of the country.

The Left has proposed to fix this by creating the IPAB, a group so divorced from accountability that it can theoretically make unpopular care rationing decisions and survive the political fallout. But the cost of this approach is enormous, as it essentially creates an un-elected dictatorship for 1/7 of the economy. Which tends to be awesome if your interests and preferences line up with those of the dictator, but sucks for everyone else. Which category do you expect to be in? (Oh, and let's not forget how many examples we have from history of benevolent technocratic dictatorships - zero.)

The much more reasonable solution, of course, is to handle these issues the same way we do in cookies and virtually every other product -- let consumers make price-value tradeoffs with their own money.

The source.

The Vision of the Anointed and Science in the Public Square

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I encourage our audience to read Thomas Sowell's The Vision of the Anointed, a book that deals in systematic fashion with the techniques of self-delusion and manipulation of the public, of which the global warming scare is a significant contemporary instance, as Richard Lindzen explains in the below video clip. In the last chapter of Sowell's book, "Optional Reality," the author observes:

The vision of the anointed (less charitably known as statist do-gooders) has become

independent of empirical evidence. That is what makes it dangerous, not because a particular set of policies may be flawed or counterproductive, but because insulation from evidence virtually guarantees a never-ending supply of policies and practices fatally independent of reality. This self-contained and self-justifying vision has become a badge of honor and a proclamation of identity: To affirm it is to be one of us and to oppose it is to be one of them. Moreover, the pervasiveness of the vision of the anointed at all levels of the American educational system ensures future supplies of people indoctrinated with this vision and also convinced that they should "make a difference"--that public policy-making is to be seen as ego gratification from imposing one's vision on other people through the power of government.

From: Sowell, T. (1995), The Vision of the Anointed. Self-Congratualtion as a Basis for Social Policy, New York, NY: Basic Books, p. 241

The inestimable Richard Lindzen on "what happens to science in the public square."

Apologies: for some reason the video commences 9 minutes into the lecture, to get to the start (which you should not miss) you will have to adjust the time mark manually.

 

See also Against Political Biology.

Assets Like a Balloon Like a Blowball

Painting by Jimmy Lawlor.

Charles Hugh Smith wonders:

Why are asset bubbles constantly popping up around the globe? The answer is actually quite simple. Asset bubbles are now so ubiquitous that we've habituated to extraordinary excesses as the New Normal [...]

Asset bubbles are inevitable when the pool of good investment opportunities is much smaller than the pool of credit-money sloshing around seeking a higher yield. It really is that simple. It's astonishingly easy to create hot money: just create the money in a central bank and then make it available to financiers, investment banks, global corporations and other Financial Elites at near-zero real rates of interest.

It's considerably more difficult to create a good investment opportunity: an investment that is worthy of the risk must have a sound base in fundamentals such as cash flow, return on investment, etc.

[...]

The problem is central banks have created a vast pool of credit-money seeking a return that is far larger than the pool of sound investment opportunities. In a world burdened by over-capacity in almost every sector, hot money is driven to seek the next emerging asset bubble as the only place to skim a yield.

The source.

See A Balloon Like a Blowball.

I just realized that for the last 5 years ('09-'12) we've posted a series of predictions for the upcoming year. In my somewhat busy life lately, I managed to lose track of that tradition this year.

So, I've now created a "2013 Prediction" category, and I invite all of my collaborators to contribute.  I will write more later, but here's my first prediction:  my life is not going to get less busy in 2013. ;-)

Here's a little bit of information about what's going on that's keeping me a little occupied. 

LLE

 

Better Late Than Never?

I just realized that for the last 5 years ('09-'12) we've posted a series of predictions for the upcoming year. In my somewhat busy life lately, I managed to lose track of that tradition this year.

So, I've now created a "2013 Prediction" category, and I invite all of my collaborators to contribute.  I will write more later, but here's my first prediction:  my life is not going to get less busy in 2013. ;-)

Here's a little bit of information about what's going on that's keeping me a little occupied. 

LLE