Tuesday, September 25, 2012

Employer Provided Health Insurance?

Why doesn't State Farm's logo look like this?

You should be able to go to your local State Farm agent (or to whoever provides you with your individual insurance) and say, "I would like some health insurance along with my fire, auto, and life insurance, please." But you can't, really. Why not? 

Thursday, September 20, 2012

The Short Run

I think good monetary policy can go a long way to smoothing out the business cycle, and even easing financial crises in the short run. At the beginning of the 2008-09 financial crisis, I believe the Fed could have done more monetary stimulus than it chose to do. I believe the restraint on that front was due to political constraints. Instead, the government choose to engage in stimulus spending/borrowing. The Bush and Obama administrations both had similar perspectives on this, although the Obama administration was slightly more aggressive on certain fronts (e.g. auto bailouts). On the eve of QE3, though, here is a nice reminder that the short run is short. Really. (HT: MR)

Monday, September 10, 2012

Bad Incentives in Financial Aid

I blogged a bit last week about why artificially lowering the interest rate on financial aid for college or increasing grants to potential students may not help all students, but instead lead to rising tuition, higher taxes, or inefficient amounts of schooling.

Today the WSJ reports on bad incentives in the process for applying to financial aid (through both colleges and the government). Of course, the article isn't pitched as a call for changing the bad incentives, but as a guide for parents and students on how to maximize their aid.

Most of the bad incentives come from the following facts about aid:
1) A rule of thumb: a 10,000 dollar reduction in income leads to an increase of about 3000 dollars in aid.
2) The only year of income looked at is the year before the student enrolls in college.

Friday, September 7, 2012

Thoughts on the Big Speeches, DNC Night 3

Two overarching themes that deserve more thought:

1)  "Investment" is a code word for general spending or wealth transfers in far too many places in the speeches. Most of the "hard decisions" cited in the speeches involves some kind of "investment" for a particular interest group. Giving away "free" money is NEVER a hard decision. Nor is saying taxing the rich will pay for it -- even when it won't.

2) Equal Opportunity DOES NOT IMPLY Equal Outcomes. Unequal Outcomes DO NOT IMPLY there was Unequal Opportunity. Even people with the same background can make different choices. This issue was brought up a little bit in "Toward a Moral Economy" which I blogged about here. Can you look at the final score and if one team wins by too much, declare the rules unfair? I think the answer is no.

Thursday, September 6, 2012

Voice Vote and Bill Clinton

Some thoughts on DNC, Day 2:

1) Lately I have been thinking a little bit about what effect leaders have on altering the outcomes of the democratic process. In particular, how elected leaders may hamper the ability of voters to express control through voting (e.g. ballot box stuffing, corruption).

Yesterday at the DNC, the Obama administration instructed the platform committee to bring up an amendment to insert language mentioning God and stating Jerusalem is the capital of Israel back into the official platform after Democrats were getting flak for having removed those lines from 4 years ago. They needed 2/3 "ayes" to pass the amendment. Here is the video. I think the Chairman counted his vote as at least 1/6 of the total votes cast. The woman next to him clearly didn't think it passed (note she says the Chairman has to let the delegates do what they are going to do after the second attempt). 

Presidential Decision Making and Subsidizing Higher Education

This is a continuation of the previous post.

The second thing that stood out to me last night about the DNC speeches other than comments about Obamacare, was this explanation from the First Lady on how the President makes decisions:
And as President, you can get all kinds of advice from all kinds of people.
But at the end of the day, when it comes time to make that decision, as President, all you have to guide you are your values, and your vision, and the life experiences that make you who you are.
And later, an example:
And believe it or not, when we were first married, our combined monthly student loan bills were actually higher than our mortgage.
We were so young, so in love, and so in debt.
That's why Barack has fought so hard to increase student aid and keep interest rates down, because he wants every young person to fulfill their promise and be able to attend college without a mountain of debt.
So in the end, for Barack, these issues aren't political – they're personal.
His decisions are based on personal experience rather than evidence and logic -- and that's the problem. Economic decisions based exclusively on personal experience are almost surely going to lead to bad policies. As individuals, we have a really bad "feel" for how the economy as a whole really works, and as just one cog in a larger machine too often fail to appreciate how policies that look great if applied just to one of us look silly and can lead to disastrous outcomes if applied to everyone.

Wednesday, September 5, 2012

Obamacare at the DNC

Last night was the first night of the Democratic National Convention. I watched about an hour and a half of it. Two main points stuck out to me: a claim about the effects of Obamacare, and an explanation by Michelle Obama about how her husband makes decisions. I'll address the first here, and the second in the next post.

First, in Kathleen Sebelius's speech, she repeats a line that has been the cornerstone to the argument in favor of Obamacare:
[I]f you already have insurance you like, you can keep it.
This is a big Democratic talking point. (Actually, the whole speech is nothing but a list of talking points strung together, but that's another post.) The President has said it before, as well:
Let me be clear: If you like your doctor or healthcare provider, you can keep them. If you like your health care plan, you can keep that too. (President Obama, July 15, 2009)
This is the prime example of wishing the law did something it does not -- or if you believe the intent is more sinister, deliberately misleading the public. The claim is clearly not true because not all plans will legally qualify and there will be/have been behavioral responses to the law both by people and firms forcing people to change their coverage. For instance, see herehere, and here.

If it were true, and people could voluntarily keep everything about their health care and insurance the way it is now, the law would have had a good shot at being welfare improving by revealed preference. In consumer theory, if a person's choice set changes, and he can still choose the bundle he had before, then he must be better off because if he changes his consumption bundle, it's because he likes the new option better. Sadly, this is not the case for Obamacare, no matter how much Sebelius and the President wish it to be.