Okay, I watched the debate —- and jotted down responses as I watched. These jottings were made in real time while trying to listen to the candidates, and are, I’m sure, in many cases, not as well thought out as they ought to be. But here they are, unedited:
1) Romney off to pathetic start with tearjerker stories.
2) What is this fetish with small business? Why are small businesses more important than big businesses? Aren’t they mostly small because mostly they’re not very good?
3) Obama, asked to respond to “trickle down” issue, goes off talking about education. Can you say “non sequitur”, boys and girls?
4) Obama wants different tax rates for different industries (lower for manufacturing). What could possibly qualify as more “top down” economics than politicians in Washington deciding which industries to favor?
5) Romney totally buys into the class warfare with “high income people are doing fine”, we have to help the middleclass, etc etc. This is vomitworthy. With Romney’s peddling Obama-style class warfare, it’s hard to see why anyone would prefer him.
6) Romney says “all of the increase in energy has been on private land, not govt land”. Very ignorant. If there were more drilling on govt land, there’d be less on private land (assuming there’s any truth at all to Hotelling style models and how can there not be?)
7) Haven’t looked at numbers, but I bet Obama is exactly right that Romney can’t possibly cut taxes by 5 trillion and make it revenue neutral by closing deductions taken by the rich.
8) There goes Romney again with “I will not reduce the share paid by high income individuals”. In other words, we have no diversity of opinion on whether the tax code is too progressive as it is.
9) Romney off again on “we need to lower rates because of *small businesses*”. This fetish with small business is driving me nuts.
10) Wait a minute! Now Romney points to the top 3% of small businesses as the major job creators — but still ignores the big businesses?
11) Romney’s basic view on taxes — cut rates but also cut deductions — is of course exactly right, and nearly all economists agree on this. But those same economists will also say that rates on capital income should be much much lower than rates on wage income — and Romney is either too ignorant or too gutless to point this out.
12) Romney to cut PBS subsidies. Note that the Republicans have controlled Congress for much of the past 20 years and haven’t managed to do this.
13) Both of them seem extremely articulate if you don’t listen too closely to the content.
14) (at the 9:30 mark) Obama clearly winning, I think.
15) Obama semi-endorses Bowles/Simpson, which is much better than where he might have gone.
16) Obama attacks Romney on not agreeing to $1 of tax increase for $10 in spending cuts. Romney should respond: “That was in response to a question that didnt specify the spending cuts. Of course I can’t agree till you tell me what you’re cutting”.
17) Romney is right that Obama didnt run with Bowles/Simpson when he could have/should have, and that Obama is dissembling about this.
18) Romey appears to be hogging time. I don’t think is likely to play well.
19) obama right that we shouldnt subsidize oil, then undermines himself by giving a ridiculous reason (“they’re already making lots of money”). What matters is not what the oil companies are making, it’s the incentives at the margin.
20) Romney gets in superb zinger — Obama complains about subsidies to oil but subsidizes green energy at something like 10 times as much.
21) Romney should follow up on this zinger by explaining that these subsidies create disincentives for people to find creative, alternative, *unsubsidized* energy sources. It’s very important to make this point, because otherwise naive people think “ooh, green energy, good thing”.
22) Romney making the case for federalism in poverty programs —- Obama should point out that this is the same Romney who *complained* when Obama administration proposed giving states more flexibility on welfare.
23) Obama says his grandma could live independently only because of social security — and implies the same is true for elderly people generally. As if there was no alternative investment for the social security taxes people pay their whole lives? It’s impossible for us to save unless the govt does it for us???!?
24) Obama probably right about adverse selection issues with Ryan’s Medicare plan, but I haven’t looked at this or thought hard about it.
25) Obama: “The primary beneficiaries of Romney health policies are insurance companies”. This can’t be true. Competition (even in a highly regulated industry like insurance) limits profits. Short-term higher profits must mean long-term lower premiums.
26) Romney good on importance of competition in Medicare provision.
27) Obama: With Romney health care “the money has to come from somewhere”. Romney already explained that savings come from greater efficiency that comes from competition. Hope he reiterates this and points out that Obama seems not to have heard it the first time.
28) Romney does come back with an excellent comeback on this! (If govt can do it cheaper, people will choose that! Why not give them a choice?). This was a good good moment for him.
29) Romney: “you can’t have people starting up banks in their garages”. Why the hell not?
30) Romney good on deficiencies of Dodd Frank, but misses the bigger point that D/F does nothing to attack the problems that caused the current crisis.
31) Romney again with “I met a woman in NH; I met a couple in Appleton, WI”. For Christ’s sake, just tell us your policies and your rationale.
32) Romney: “How did he come into office with 23 million unemployed, unemployment rising, and put all his passion into Obamacare?”. Fair or not (I think it’s not) this is a big winner for Romney; he should have found a way to get it into the first half hour.
33) 10pm: I think I give the second half hour to Romney, but not sure.
34) Romney very good on differences between romneycare and obamacare.
35) Obama defending a board of experts to make health care decisions — romney should come back with “I thought you were *against* top-down economics”.
36) Generally speaking, this is substantially less frivolous than the average political debate. Probably Lehrer gets a lot of credit for that, but so, I think, do the candidates.
37) Obama dead right that Romney’s pro-competition proposals dont help if you’ve got a pre-existing condition. Romney claims he has that covered elsewhere in his plan; dunno if that’s true.
38) Romney attacking that unelected board pretty effectively, and absolutely right on this issue.
39) Romney showing some real passion on the power of competition in health care (and by implication more generally). Looking real good on this.
40) I repeat: They’re both on their game. Ignoring the content of what they’re saying, they both sound great.
41) Given the expectations game, this is probably real good for Romney.
42) Sounds like we get something like Bowles/Simpson with either guy.
43) Glad to hear a call-out to the 10th amendment!! Kudos to Romney.
44) Obama: The federal govt has the capacity to expand opportunity, etc etc. Of course this is true in some cases, but the view that this is very generally the case is a genuine difference. Good to see it aired.
45) Obama says we need more teachers; Romney says we need great teachers. O is wrong; R is right. Great to see this key difference aired.
46) Romney doing very well with “role of govt” question. Must have practiced for this.
47) Yes! Romney said “trickle-down government”!!! That’s exactly the phrase he should keep pushing. I’ve been saying this for weeks. Has he said this before and I missed it?
48) Romney doing great I think on whole cluster of issues right now, including “letting lower income kids go to school of their choice”
49) Romney sounded very very positive on education, etc, then Obama went for negative with “his budget cuts taxes and therefore must cut education….”. Makes Romney look big and Obama look small.
50) Obama repeats the canard that if we give more grants to college students, more will be able to go to college. This is completely ridiculous, and Romney should say so.
51) Romney getting better and better as we come up on the close. Gets in zinger about green energy companies owned by Obama contributors. Showing real passion on educational choice.
52) Going into closing statements, Romney clearly won the last half hour.
53) Closing statements: My attention wandered. Missed most of the content. But thought Obama looked a little tired and out of it; Romney looked strong.
“Aren’t they mostly small because mostly they’re not very good?”
Even if every business were run well I still think plenty of them would be small, unless “not very good” means they serve a small market or face fierce competition.
While you have many great thoughts, I don’t understand how people such as yourself are comfortable calling Romney ignorant when it comes to economics. I’m just going off his business record, but I’d have to say his grasp of economics might be slightly superior to yours. If I’m not going off his business record then I’ll just go off his business and law degrees from Harvard.
There are different standards for “small” — but I’ve always understood a small business to be owner operated, family operated, or partners who all work in the business. A small business doesn’t have a board of directors or shareholders who are not involved in the enterprise — the owners know the business, operate the business, and generally personally guarantee loans and lines of credit.
“Aren’t they mostly small because mostly they’re not very good?”
They simply don’t grow any bigger than the owner(s) can manage and maintain control. They tend to operate like families, they’re very flexible and can adapt to change rapidly. I’ve never known anyone interesting who has worked in both Fortune 500 and small business who ever chose to go big. Big business is all about limiting risk. Changes that can take a year to make in a public firm, a private firm can do in a day.
Consequently, in my experience, small business is where you will find immediate responses to changes in tax law, economic outlook, new business opportunities, and other incentives.
I’ve often wondered why economists don’t make the connection between small businesses, unemployment, and the collapse of the real estate market. Hernando DeSoto noted the “dual use of capital” in small businesses many years ago. When home prices fell by half, many small businesses lost their only source of credit — which was a line guaranteed by the owner(s) homes.
I agree with Martin-2. Many entrepreneurs, I think, just prefer not to get bigger than a certain size for lifestyle reasons.
I found it pretty amusing that at the beginning Romney basically argued that we should not listen to studies (I think he was refering to the Tax Policy Center study on his tax plan), because they are contradicting each other and then went on and on with his tear jerker stories and personal encounters.
“Hey, the data is confusing. Let´s listen to more anecdotes.”
“Aren’t they mostly small because mostly they’re not very good?”
… or simply don’t want to expand. Not every business owner feels that their interests are best served through continual expansion of “size”.
If they’re very good, and more customers come, they could hire staff and grow. Or, they could raise prices – that is, charge a premium for their excellence. I can see how the latter would benefit the owners. It’s less obvious that the former will always benefit the owners.
Thank you so much Mr. Landsburg, now I might be able to bear watching the debate after all!
You mention that economists agree that “rates on capital income should be much much lower than rates on wage income”. Can you (or some commenter) point to a paper that says as much and explains the reasons (perhaps in terms that a noneconomist can understand)? Or if the argument is simple, can someone mention it?
Steve,
Quick point on business – in Fair Play you said you couldn’t see why a business owner should be compelled to have to install a disabled elevator. I can think of one possible reason. In Harsanyi’s Amnesia Principle, there would be more disabled people than shop owners, so if you forgot who you are, and had to vote, then probabilistically you’d be better off favouring the disabled than the shop owner on this one.
RandomWords:
Here is one of many posts I’ve made on this subject; for more, you can Google (either on this site or more generally) for the phrase “Chamley-Judd”.
The obsession with small business is largely political. Voters feel well-disposed towards small businesses because they are run by people like them, so small business friendly policies are seen to be helping them. Big business is of course run by evil, greedy money grabbers, who are the enemy. Big-business friendly policies are received with great suspicion. (Not entirely without cause given the lobbying power of big business.)
When it comes to new jobs, I had swallowed the line that most jobs are created by small businesses. Obviously, a small businesss has more potential for growth than a big one, because it starts from a lower base, and of course there are more of them. A study shows that small businesses do create most jobs, but they also loose most jobs. The net greatest number of jobs since 1992 have been created by large businesses. ( http://www.stlouisfed.org/publications/re/articles/?id=2087
)
Point 50: why wouldn’t more grants lead to more going to college? If the grants effectively gave money to colleges that they would not otherwise have got, it is just another way to subsidise colleges. The colleges could just raise all the prices and keep the places the same, but this would give them more money, which would allow them to expand, and get even more grant money. In a recent post, you argued that colleges cutting prices would not lead to more places, but that is not the same thing at all.
Obama should have slammed Romney on health care. In my opinion, Romney is a hypocrite when he says he is on the moral high ground because he implemented his obamacare plan in his state and didn’t force it on the country. Two points: if it’s so good for your state, why specifically is it bad for the country? Just because it’s a larger geographical area? Tell us Mitt … Geography is so arbitrary.
Romney won’t touch 80% of federal spending but will balance a budget that’s 43% in deficit without raising taxes??
:/
“Romney says “all of the increase in energy has been on private land, not govt land”. Very ignorant. If there were more drilling on govt land, there’d be less on private land (assuming there’s any truth at all to Hotelling style models and how can there not be?)”
I disagree that it is ignorant. Marginal costs have risen on Federal land mainly through a tremendous slow down in the number of permits issued and the time it takes to issue them. Lease sales are the lowest ever (at least until the early 1980’s where data is posted) These are costs that actually could be eliminated without taking resources from anywhere else.
Reduction of costs for developing federal land would attract some capital that was going to private land. But it would also attract capital from development overseas. It would also attract capital from other industries. Total U.S. oil and gas development (combined federal and private) could increase significantly. Total world development would also increase.
@Josh: The voters in Mass favored it. This is not true in the country as a whole. No county of Mass sued to be excluded, several states have.
“But here they are, unedited”
Life lesson #1: edit. :)
As an example: “31) Romney again with “I met a woman in NH; I met a couple in Appleton, WI”. For Christ’s sake, just tell us your policies and your rationale.” Kidding, right? And yet just a bit later you do seem aware of the importance of rhetorical and sympatico stuff like this:
“49) Romney sounded very very positive on education, etc, then Obama went for negative with “his budget cuts taxes and therefore must cut education….”. Makes Romney look big and Obama look small.”
If Romney *just* gave his policies and his rationale he’d seem cold, uncaring, out of touch, and would convince almost no-one. We do not vote for policies for the most part. We also vote for the man. Isn’t that why you were pleased with his passion, not his rationale, over education?
The only reference I heard to the 10th Amendment was when Romney was trying to attack ObamaCare while defending RomneyCare. People who have been following the news may recall that the Supreme Court upheld (most of) ObamaCare. So as far as I can tell, Romney’s suggestion that the 10th Amendment applies to this context was flatly inaccurate.
Feel free to advocate for federalism as a policy preference – I often do — but please leave the 10th Amendment out of it.
KenB: on the national level, we hae representatives who vote in our place, and that is what happened on this issue, correct? So I guess we’ll see if the people liked the way their representatives voted.
“pro-competition proposals dont help if you’ve got a pre-existing condition” (37)
“adverse selection issues with Ryan’s Medicare plan” (24)
Frankly speaking, “pre-existing condition” means at that point we’re really not talking about “insurance”, but someone who needs some form of pure public assistance.
It would be refreshing if we could focus public policy on helping those who need help, rather than masking the redistribution.
But I understand why no candidate would want to attempt to make that argument in a debate.
@Josh: We do, and (I hope) we will. But you were making a point about Romney’s supposed hypocrisy on RomneyObamaCare, which I rebutted. If the situations differ substantially it is not hypocritical to hold different opinions in each case.
Okay, hypocrisy might have been the wrong word. But I think my point still stands that as far as i know Romney has offered no real reasons for why his plan would be BAD (regardless of how it gets voted in, which was by the people in his state and our reps nationally) nationally while being good for his state. How it was voted in shouldn’t matter because as we’ve agreed all laws get voted in differently a the state and federal levels, so that to me is somewhat of a separate issue. It seems like his main issue actually is with the voting system nationally. He seems to think the law is bad because it wasn’t voted in directly by the people. Maybe ive misheard him.
@Josh: I think Romney signed RomneyCare mostly because it was popular and served his political interest to do so. I think he opposes Obamacare mostly because it is unpopular and serves his political interest to do so. I suspect deep down inside he thinks both were poor policy, but that’s just a (generous) guess. Mitt is a “pragmatist.”
How do you pronounce the “Chamley” in “Chamley-Judd”? I must cite the “Chamley-Judd result” in verbal arguments at least once a month, and I’m worried that some day I’m going to do it to someone who actually knows what it is and how to say it.
Thank you. Too many economist bloggers are too eager to remove themselves from political analysis. It is a rare treat to see someone like you who enjoys the sport.
Somebody needs to point out sometime:
The Declaration of Independence, along with “pursuit of happiness” and “endowed by our Creator,” is NOT the law of the land. That would be the Constitution, which does not contain those phrases.
Among the powers granted to the federal government in the Constitution, there is no provision for education or the federal support of education, much less health care.
Right Ryan,
To the extent that a healthcare plan covers “pre-existing” conditions, it is no longer insurance. But Obamacare not only transfers wealth from the healthy to the sick, from the young to the old, and from the rich to the poor, it also transfers wealth from medical care to non-medical problems like birth-control, the $10,000 costs of carrying an ankle-biter to term and elective circumcision.
So Obama wants to increase the subsidy to other manufacturers but reduce them to petroleum companies.
The phrase “shipping jobs overseas” grates on me.
#25 jimbino said “To the extent that a healthcare plan covers “pre-existing” conditions, it is no longer insurance”
I don’t believe this to be true. As a member of a group plan (which qualifies as insursance in my book) today and before obamacare, your preexisting conditions are covered. If you have a heart problem and start a new job with a group plan, you will get coverage and your heart problems will be covered.
the whole point of obamacare, whether it works or not, is to compel everyone to have insurance thus providing the benefits of being In a group to the individual and the group.
Steve –
On small business: it is true that small businesses create all the net new jobs in the economy. However, we can get more specific than that: new firms create all the net new jobs in the economy.
My recent policy piece looks at this phenomenon and concludes that rising fixed costs are the most plausible connection between high profits, low startups, and high regulatory burden in the years since the recession. (http://www.heritage.org/research/reports/2012/10/why-the-slow-economic-recovery)
Politically, it’s hard to make newborn firms a centerpiece of a campaign. First of all, there aren’t too many of them (usually about half a million a year; now less than 400,000 a year). More importantly, nobody identifies himself as someone who failed to get a job because a startup failed to overcome regulatory barriers. That’s “what is unseen”, per Bastiat.
What’s important is policy, not the sales pitch. Policies that keep fixed costs low will lead to greater supply and greater consumer surplus. In politi-speak, that translates to “more jobs”.
Carbon dioxide. Plus, thanks to Carly Rae Jepsen, it’s too noisy to hear the tellers.
Josh #27 — “to compel everyone to have insurance thus providing the benefits of being In a group to the individual and the group”
In all honesty, when someone joins the group with a pre-existing condition, it benefits them but it’s a transfer from the rest of the group.
Compelling such transfers by mandating broader pools also benefits politicians with the votes of those who can expect to be subsidized.
I’m just saying (since I think I brought it up initially, not sure who Ryan is) that “insurance”, strictly speaking, only works conceptually as something you purchase *before* a serious condition arises. Pooling people together who share similar risk characteristics (as far as can be determined) is the mechanism that makes it possible for *all* members of a group to benefit in a probabilistic sense. The type of group plan you describe is a special kind of arrangement where e.g. a company agrees to take all comers (but from a select subgroup of the population), with the trade-off that they also reserve the right to change benefits each enrollment period (unlike with an individual policy). That can’t work en masse in the way you might hope.
Donny
I think of the difference between business and economics as somewhat like the difference between being a pool shark and physicist. One skill uses the other, but good pool players don’t need to understand the math behind their shots, good physicists may not have enough hand eye coordination to apply their knowledge. Some are good at both, and knowledge of one field can certainly boost learning in the other, but sucess in either doesn’t require knowledge and ability in the other.
Yes, Iceman, it was you who brought it up. I’m a total non-believer in insurance, since it returns between 2% (title insurance) and 80% (theoretical Obamacare limit) on the premium dollar.
If we had a free market in insurance, all insurance would die as a result of the Death Spiral, once the smartest and healthiest caught on to the scam and especially where the insured has private information not available to the insurer.
Obamacare represents a serious transfer of wealth from the young to the old, from the healthy to the sick, from men to women, and from expatriates (who are subject to Obamacare “tax” with no care whatsoever) to stay-at-home hypochondriacs.
The most exploited under Obamacare is the young, healthy, male living overseas and the bandits are the old and breeding, hypochondriac women. At least it’s better than Social Security, which steals from the single, childfree Black man and transfers the stolen wealth in part to White breeders’ children and indolent spouses. But at least you still get your Social Security payments if you leave this kleptocounty to travel or live overseas.
Josh #27:
I think of health insurance more like a contractual co-op/commune agreement. E.g. A group of farmers might form a co-op where they pool their resources so that the they can share their expenses.
Health insurance companies help the commune by determining how much each member of the commune should contribute to cover expenses the commune might incur. Health insurance companies also act as the holder/distributor of the shared resources.
I think this is part of what makes libertarians so upset. In general libertarians are not big fans of co-ops and communes, particularly when joining isn’t optional.
@Will A: I think you’re wrong about this bit: “In general libertarians are not big fans of co-ops and communes, particularly when joining isn’t optional.” Drop the comma and the particularly though and you’re spot on. Libertaians buy insurance, join clubs, join co-ops, and some congregate to worship imaginary friends. It is *entirely* the compulsion they dislike.
LTNS.
Josh,
If I was a state governor, I would favor making abortion illegal. If I was president, I would veto any bill that came forward for a national law making abortion illegal nationwide. It’s really as simple as one word: federalism. It’s not hypocrisy or bad faith that I would implement one law at the federal level, but not the state level. It’s a recognition of the division of power and the limited authority of the federal government as provisioned in the constitution.
The state governments have a lot more leeway in what they can do. The US constitution is clear as to what powers the federal government has.
Plainly put, the federal government doesn’t have the constitutional authority to implement a national health care system. The enumerated powers are clear and limited. And yes the SCOTUS justices who voted in favor of the PPACA voted in bad faith.
Ken #35:
Now that Obama has embraced the term Obamacare, it will be interesting to see if those who are against it turn away from that term and use ACA or PPACA as you did.
And conversely, if those who used to call it ACA now call it Obamacare.
Yes Ken and Ken B,
It’s the compulsion that’s distasteful I myself never pledge any allegiance, stand for any anthems, join any clubs or celebrate marriages, birthdays and funerals.
All the above are mere religious and superstitious exercises. I would, however, join in celebration of a divorce, which I understand is getting popular nowadays.
What irks me currently are all the discounts given to students and children. They should pay their fair share; in the case of children, they should be charged double for the aggravation. It’ll be a sad day when they let children sit at bars for free!
Will A , #33
Fine, I assume you also are okay with turning away people from emergency rooms who are dying or need urgent care? If you arent for turning people away, then I don’t think your argument makes economic sense. Why not force people or at least try to pay for the potential care they may be forcing upon us anyway? If you are ok with letting people just rot/die with no care if they can’t pay, then you win.
Josh, insurance is a way of hedging your bets against risk.
Say there are 10 people and they each have a 1 in 10 chance of losing $100 in the next hour. They decide they want insurance against this, since for any one of them losing $100 would be devestating, while losing $10 is not nearly so bad, so they all pitch in $10 to an insurance pool. One of those 10 people looses $100, except he gets to pay for it out of the insurance pool, and only really loses the $10 he put into the pool (which everyone loses).
That’s insurance – it’s about spreading risk, not just sharing costs.
Similar scenario, except this time everybody knows exactly who is going to be losing $100. The rest of the group can opt out of the $10 payment because they have no risk. If they pay it anyway they are very nice people, but that isn’t insurance. It’s charity.
Your group plan hides the second scenario inside the first. The reality is that if you didn’t have to pay for people’s pre-existing conditions, your insurance premiums would be lower.
I personally think we aught to pay for people’s pre-existing conditions, however I also think it is incredibly deceitful to call that insurance.
@Josh:
Just because his plan was good for his state does not mean it is the best solution out there. Surely Obamacare fails on the cost front. It’s very good at shifting costs and not very good at reducing them.
It doesn’t make economic sense. It is essentially zero-sum on a population. If that population deems the cost shifts more just or preferred that is their choice.
The emphasis on competition is getting at the true issue of reducing net cost to the country.
Whether coverage of preexisting conditions is truly insurance or not is a matter of semantics. Someone already pointed out the amnesia thought experiment. In that regard, cover preexisting conditions because you might be the one to have it. You may someday lose your insurance for whatever reason, get a condition, and need insurance.
That said, if you force insurers to accept that, they will merely shift costs around. You can’t just force an insurance company to take on unprofitable business.
Bigjeff5,
Your understanding of insurance and math are wanting.
NFIP national flood insurance, for example, returns some $0.65 on the premium dollar. That means that each of 10 people with a 1/10 average risk of loss needs to pay $16 to participate in your insurance game. Of that $160, the insurance company pays your guy $100 for his loss, keeping the rest.
Insurance, of all kinds, is paid for by young, Black, male, healthy perspicacious idiot to support the White, sick female hypochondriac indolent careless breeder.
Jimbino,
Your description of insurance is perfect when applied to Social Security!
Social Security is the greatest transfer of wealth from Blacks to Whites since slavery.
#26 Me too! After all, how is someone supposed to do a shipping job if they never travel overseas? Hey, those boats don’t just stay in port, you know!!
@Phil #40 It is essentially zero-sum on a population.
I can’t see how redistributions of costs can possibly be zero-sum.
For example, suppose a certain medical procedure costs $100. Two people need it, Abe, who has $10000, and Link, who has $10. Clearly Abe will go for it. Link, however, can’t afford it. They value the procedure at $150 each – that is, that’s the least they’d accept as cash in lieu of undergoing the procedure, or (for Abe) the most he’d be willing to pay for it.
Abe undergoes the procedure, paying $100 but reaping $150 in benefits. Link doesn’t. Net social gain is +$50.
However, if we redistribute costs via a compulsory insurance scheme or socialised medecine or whatever, then things change. Suppose the procedure is now free for Link and Abe, but Abe pays an extra $200 in tax to support the new healthcare bill.
So, they both go to the doctor and get cured. Both gain $150 in value. However, Abe is $200 out of pocket. Net social gain is +$100.
The redistribution has produced a net social gain. You could easily design it to produce a net social loss too, but I can’t see how you could get a zero-sum game except in very artificial situations – such as when the redistribution had NO impact on people’s consumption choices.
@Phil #41 You can’t just force an insurance company to take on unprofitable business.
Course ya can. You can even make it worth their while, if you give them a carrot along with the stick. That’s why Romneycare and Obamacare also have an individual mandate.
Steve, in all seriousness romney is trying to get elected not educate the people about where most of the jobs in america come from. Both you and I know that big business is the backbone of the economy, and that the large profits made off of these companies are good for the economy. HOWEVER it sounds incredibly cruel and callus to favor the large companies and doing so will just pave the way for an obama reelection.
Nicely done blow by blow. I think you captured most of the debate quite well, but you frelling pissed me off right at #2 when you said
“2) What is this fetish with small business? Why are small businesses more important than big businesses? Aren’t they mostly small because mostly they’re not very good?”
To imply that business are small because they aren’t good is myopic to the extreme. Clearly, you have spent your time in academia, and not the business world. There are a great many people who start small business, and are quite good at what they do. They have no desire to grow their companies so that they no longer produce the products that inspired them to start companies in the first place. I am one of those people. I like the product I produce, I employ 5 people, and I make an income that I’m comfortable with. I have no desire to grow beyond this. At first, I thought your implication was insulting, then I realized that you simply have no idea what it means to actually produce products in the open market. You have your own idolized version what the free market means, but your comments clearly show that you are just one more detached academic flailing at understanding the real world around you.
@ John Shea (22)
“I must cite the “Chamley-Judd result” in verbal arguments at least once a month, and I’m worried that some day I’m going to do it to someone who actually knows what it is and how to say it.”
It could get even more awkward if you encounter someone who actually read it and noticed rather quickly that neither the “labor” nor the “capital” this and similar studies mentioned are the labor and capital we usually think of in real life situations.
Real life labor income is mostly return on past investment in skills accumulation (aka human capital) and real-life capital income can be (if we are talking about capital gains, “capital income” is a broader term and in many cases indeed should not be taxed) in large part a labor income of an investment decision maker.
For example, that would be the difference between Mr. Romney’s income on his carefully selected and generally skillfully managed investments in Bain capital’s portfolio companies and the income of someone who invested in treasury bonds around the same time.
As a matter of fact, anyone who actually googled Chamley-Judd as Professor Landsburg suggested in #9 probably had a good chance to form an own opinion on the unanimity of economists on this (as claimed in
“…all economists agree on this. But those same economists will also say that rates on capital income should be much much lower than rates on wage income…”)
For those who did not, or for those who actually want a lengthy study with many formulas to validate something which is more or less common sense, here is link that pops up rather quickly when you google the original 80’s study (it is also slightly more recent than that one)
http://mpra.ub.uni-muenchen.de/33209/1/Tax-Incidence.pdf
There are as I know some more studies like this, they are far from complete or perfect in my view, but so much for the (many times repeated) “all economists agree” claim.
Which reminds me of the “Father of five sons” quote from Mr Romney from this debate :)
@ judah b
Fully agree. Presidential debates are not a lecture to a roomful of (hopefully) willing students interested in economics.
It not “an obsession with small business”, but the optimal and probably the only working strategy for a (relatively) pro-business candidate to promote his cause in the current environment. Mr Romney has already been extensively labelled as a rich, pro-big business out-of-touch guy by his opponents – does he really need to reinforce their message in his allotted debate time?
Mr Romney appears skilled at compromise, he gets criticized for this a lot, but it is also probably why he got nominated.
Even if he had some intention to educate rather that fight for the post by all legal means available, probably the “47%” incident taught him not to…
As I remember from my attempts to criticize it here, most people here support equal suffrage – so candidates playing strategic games instead of speaking from their true convictions are yet another example of the price you pay for it.
A Taiwanese take. http://www.youtube.com/watch?feature=player_embedded&v=iNhUI8ktHuw
6) “assuming there’s any truth at all to Hotelling style models and how can there not be?”
I just finished reading Lin “Insights from a Simple Hotelling Model” and it appears that, in fact, there is not much truth to his model in relation to world oil markets.
Josh #38: “If you are ok with letting people just rot/die with no care”
We can agree to pay the health care costs of people who can’t afford it, whether at the ER or elsewhere, whether we do this via charitable means (libertarians have no objection here) or public assistance, whether point-of-sale or through some pool we set up in advance. The point is it matters little what form this takes, it’s a transfer not insurance in any meaningful sense. Why not better to be honest about the transfer nature of the ‘moral obligation’?
“Why not force people or at least try to pay for the potential care they may be forcing upon us”
The people who *can afford* to pay but may choose not to (generally the young and healthy) are not *as a group* costing the rest of us anything. Hence the transfer.
Mike H #45: “Course ya can [force insurers to take on unprofitable business].”
All we know in America 2012 is that we can force certain individuals (who are unlikely *as a group* to be net consumers of health services) to pay a tax toward defraying the health care costs of others (at least as long as we don’t call it a tax when attempting to pass the bill). The “carrot” of course is just a bribe to insurers to keep them in the black, because (at least in America version 2012) we still can’t force companies to stay in an unprofitable business…like how we can squeeze reimbursement rates but can’t force providers to accept Medicare patients. Still leaves the basic point that shifting costs around or refusing to pay costs is not the same thing as reducing costs.
Nice point on the potential welfare gains (or losses) from redistribution, but of course there are lots of ways to get there (see above) which are (at best) zero-sum on the cost side which I think was Phil’s point. Of course increased usage can increase costs and offset the potential gains.
Phil King #40: “the amnesia thought experiment [suggests] cover preexisting conditions”
The issue of pre-existing conditions points to other particular flaws in our health care / insurance system, like corporate provision and the resulting non-portability, that are eminently fixable via much simpler means than the ACA.
Following on iceman #54, John Cochrane has proposals to the effect of fixing the pre-existing conditions issue (he calls it “health status insurance”, I think).
RE: “37) Obama dead right that Romney’s pro-competition proposals dont help if you’ve got a pre-existing condition.”
Why? I think competition is an excellent refining fire to remove the impurities.
Once we get back to real competition can you not imagine an insurance company playing on this by exploiting its “heartless competitor?”
As competition increases, rates decrease, which means adverse selection decreases which means the pool is deeper which means pre-existing conditions won’t be nearly as damaging to insurance companies.
The fact that people have to change insurance when they change jobs or become newly employed is caused by tax incentives related to employer-provided insurance and is not part of a free market. And covering preexisting conditions includes cases where someone switches jobs or joins the job market and is considered to have a “preexisting condition” only because they got the condition under their previous policy and if they had kept the same policy all along (which they probably would have in a free market) it wouldn’t have been preexisting. (HIPAA already covers some but not all of this.)
There’s also the problem of people having a preexisting condition and not being able to get insurance that covers even conditions that don’t stem from the preexisting condition or which have only some probability of such. And insurance companies which see that you “didn’t list your preexisting condition” and deny you benefits for a condition that is unrelated to the preexisting condition. Of course in a perfect market this would not happen but the market is not perfect.
And anyway, the whole “pre-existing condition” bogeyman is largely just that – a monster we’ve created.
My wife had a pretty serious pre-existing condition that she needed major surgery for and she was able to get insurance without any problems.
Certainly it can pose a problem at times, but nothing like the scope our political rhetoric makes it out to be.
No.
As competition increases, rates decrease, and insurance companies must try ever more ruthlessly to ensure that they do not offer insurance to people who might actually incur heath care costs. Thus, the pressure to discriminate against people who are likely to get sick INCREASES and the penalties to firms that do not comply INCREASES.
Of course, most of this effort to discriminate against the sick is socially wasted; it’s profitable to the firm, but profitless to society that must bear the cost of providing care to sick people in any event. That’s the nature of adverse selection.
I really don’t see the difference between giving incentives to people to buy liability insurance for their driving mishaps and giving people incentives to buy (and provide) insurance for when they need emergency care. In both scenarios I believe tr idea is you’re out there imposing risk on society so please pay into a pool to compensate others for doing that.
Auto liability insurance is not mandatory: in Texas and California, for example, provision is made for a person to show “financial responsibility” by posting a bond equal to the minimum liability insurance. Thus a good driver, once having posted the bond, will never again have to pay a cent to an insurance company.
Furthermore, when you take that round-the-world cruise, you do not have to carry car liability insurance back home on the car you’re not driving.
Neither Medicare nor Obamacare works like that: neither permits a person to opt out by posting a bond. Even worse, both require you to pay or be penalized, even while you are on that cruise,
where neither Medicare nor Obamacare will be available to you if you get sick or have an accident!
@ Mike H
You are wrong on both counts. It’s not like Abe only spends on the procedure and nothing else. The money he doesn’t give to Link goes to something else.
Simply put, if the total expenditure of the nation doesn’t go down due to Obamacare, it’s not doing anything. That is the measure of success for healthcare policy.
And just because you give a mandate along with unprofitable business doesn’t mean you’ve forced unprofitable business on the company. If they want to they will shift the cost onto the consumer.
Steve, what’s your problem on #6? You don’t think it’s relevant that Obama is taking credit for a rise in domestic oil production, that occurred precisely on those areas where he doesn’t control? (I’m assuming Romney’s basic stat was right.)
Did Romney say, “Now if you had allowed for more drilling on federal land, Mr. President, then in the new general equilibrium, production on private land would have followed the same path”? Maybe he thinks that, but he didn’t say it, and total output would certainly be higher (and spot price of crude would currently be lower) if Obama gave green light to unrestricted drilling on federal land. So why was Romney’s response so ignorant?
“As competition increases, rates decrease, and insurance companies must try ever more ruthlessly to ensure that they do not offer insurance to people who might actually incur heath care costs.”
Not even close. If rates decrease, the risk/loss ratio changes and more people will choose to carry insurance than otherwise would have, widening the pool. The rates are lower, but more people are paying in, resulting in increased revenues for the insurance company.
Never has there been a case where true competition exists and the consumer becomes worse off because of it.
Following this logic, insurance companies would face unending incentive to keep lowering prices, resulting in ever-increasing revenues. A moment’s reflection should persuade you that 1) eventually the effect of reducing prices is to reduce revenues, not increase them, and 2) firms want to maximize profits, not revenues.
Look, anyone who is interested in the topic of adverse selection can google it and accept what they read there, or not. I doubt there’s anything I can say on the subject that hasn’t been said better by someone else.
Bob Murphy: Have you read this post of Steve’s?
http://www.thebigquestions.com/2011/03/21/strategic-reasoning/
It’s about tapping the strategic petroleum reserve, but I think you can apply the same reasoning to allowing drilling on federal lands.
Bob Murphy:
total output would certainly be higher (and spot price of crude would currently be lower) if Obama gave green light to unrestricted drilling on federal land.
I don’t get this. Oil is an exhaustible resource. Allowing drilling on federal land does not change the supply of oil and it does not change the demand for oil, so how can it change the price of oil?
Or to put this another way: Hotelling tells us that in the absence of supply and/or demand shocks, the price of oil has to rise at the rate of interest. The rate of interest is what it is, and doesn’t change just because part of the oil supply moves from below-ground to above-ground. So the path of oil prices is determined independent of whether you allow drilling on federal lands.
(The only exception would be if the President is capable of instituting a *permanent* ban on drilling, effectively taking the oil under that land out of the oil supply. But surely nobody believes that the current President can set drilling policy for 30 years in the future.)
“I don’t get this. Oil is an exhaustible resource. Allowing drilling on federal land does not change the supply of oil and it does not change the demand for oil, so how can it change the price of oil?
I don’t get it either, and I work in the oil and gas industry. However, the civil war in Libya
did causewas followed by a spike in the price of oil – but wouldn’t your argument suggest otherwise?“Never has there been a case where true competition exists and the consumer becomes worse off because of it.”
This may be true, but it is also true that never has there been a case where true competition exists. There are always externalities, lack of information etc which invalidates the models of free markets.
As Nobody.really says, adverse selection exists, and is a factor in health insurance markets. It is inevitable that this will to some extent raise the price of health care above a theoretical efficient level, because some resources will be wasted in companies trying to select low risk customers.
I believe that the true cost of the USA system is actually huge, largely because the companies have gone down the route of selecting employees as the low risk pool. This has been encouraged by Govt., employers and unions to result in a “perfect storm” of inneficiency. Employers are happy to keep employees in their employment, insurance companies keep the risk pool low because the employed are generally healthy, and the unions get kudos for arranging health cover for their members. In fact, everybody loses big time. I keep saying this, but it bears repetition – the USA Government spending on healthcare is higher than other countries with almost entirely socialised healthcare. That means that citizens of other countries pay less in taxes to support healthcare, and they don’t have to pay insurance on top. They are free to move jobs, set up business on their own, take a few risks with their careers. How much innovation is lost to the USA because people feel they must stay in employment because of the health plan?
The current USA market is not a free one – it is massively regulated. But even without regulation, it would necessarily contain some inneficiencies. It might be that a properly free market would be better than socialised healthcare, but it seems pretty clear to me that what there is at the moment is not.
A drilling ban is a ban on trade, isn’t it? I guess it’s the first time I see it endorsed here, even if indirectly…
“Hotelling tells us that in the absence of supply and/or demand shocks, the price of oil has to rise at the rate of interest. The rate of interest is what it is, and doesn’t change just because part of the oil supply moves from below-ground to above-ground. So the path of oil prices is determined independent of whether you allow drilling on federal lands.”
Well, I am pretty sure it can be explained more simply, but of course we can also look at it from the Hotelling’s rule angle.
Indeed in the original 1930’s paper Harlold Hotelling used “force of interest”. Later papers however seem to utilize the advances of the valuation theory since that time and use the term “discount factor” or at least “rate of return” or similar.
So the important question (as usual when discussing valuations) is what discount rate (or “rate of return”) to use.
To me, the appropriate rate of return is the market rate of return on this specific asset (underground oil reserves). And this does change materially when the oil “moves above ground”. A market rate of return on any asset is composed of the risk-free rate (time value of money) and the risk premium of this asset. This second portion (perceived risk) is affected seriously when the government intervenes. Risks of drilling/extraction bans, higher taxes in future to which your extraction will have to be postponed, etc, adds to uncertainty and hence to the expected risk premium.
So the discount rate and accordingly the price does change (which is easily observable and verifiable).
If someone believes the appropriate rate of return here would be not the return on the respective asset but some other exogenous “interest rate” I would love to hear which and why.
Steve
I don’t get this. Might it not change the the supply of oil extractable at cost C for any given C? Consider the Alberta tar sands. Lots and lots of oil extractable at a certain price. Declare it parkland, ban extraction. You expect no effect on oil prices? There’s a lot of federal land …
On oil, maybe part of the disconnect is that the market (rationally?) values “above ground” (i.e. “proved developed”) differently from “under ground” (e.g. “unproved undeveloped”). Political unrest in places like Libya or Nigeria has immediate above ground impacts, and presumably the market doesn’t have to view the disruption as permanent to have ST impacts on pricing e.g. based on direct replacement cost.
Austin and NR – on adverse selection, I think this gets a bit overblown. Yes it’s a fact of life but in my view not fatal to the very notion of private insurance, where providers are allowed to differentiate (less loaded than “discriminate”) and price accordingly (kinda the definition of ‘free market’). Constructing more risk pools based on reasonably discernable factors could arguably result in fewer “wasted” resources – and potentially more people covered at both ends of the risk spectrum — than if, say, they are constrained to “in” or “out” decisions for a single pool. (But of course then we have the political problem of some people paying more than others.) Perhaps that’s what Austin means by competitive forces inducing more healthy people to join a market.
Josh – “In both scenarios [driving and ER care] I believe the idea is you’re out there imposing risk on society so please pay into a pool”
I see two problems with the analogy:
1) again with medical care the people who *can* pay but choose not to tend to be those who *as a group* do not impose net costs (schemes like the ACA rather want them in the pool to subsidize others);
2) driving a car poses a clear risk (physical and financial) that others can avoid only at great cost (like not leaving the house?), however your getting sick only represents a *self-imposed* financial burden on others. We may view that as a strong public moral obligation toward those who can’t afford coverage, but calling it insurance is semantics. And while we might feel justified in taking a different approach for those who could afford coverage, in any event I find that a weaker basis for jumping back to regulate the underlying behavior.
@ Josh #38:
I don’t know what I said that implied I was in favor of turning people away from care.
I am in favor of universal health care and would prefer that the world pool its resources so that everyone could have access to decent health care.
In essence I would like a world wide co-op that everyone would be required to buy into so that everyone could be covered. So I guess you can say that I am about as close to an anti-libertarian as possible.
If you feel like the entire world should pool its resources so that everyone can have health insurance, then there is no argument between us.
If however, you feel that just the United States should pool its resources together and other countries can decide for themselves, then in my opinion you are worse than a libertarian. You are a tribalist and no different than Romney who says that it is the states who should decide whether their citizens should be forced to pool their resources.
@ Nobody.Really # 65:
“A moment’s reflection should persuade you that 1) eventually the effect of reducing prices is to reduce revenues, not increase them.”
I’m not sure you understand the nature of competition. Price is not the only factor, but services as well. A company can undercut its competition by either 1) offering the same service for a lower price, 2) offer a better service at the same or even slightly higher price, 3) appealing to our sensibilities in a way that another company doesn’t.
In addition to this, if a company isn’t competitive, it goes out of business and a new one rises to take its place. If it can’t figure out a way to stay in business, that’s its problem not ours.
There are two things we know for sure: 1) if demand exists, supply will rise to meet it, and 2) Competition works and the consumer is always better off because of it.
The key to all of this, of course, is that the market must be allowed to work. If we preemptively act against the market by regulating based on a misunderstanding of how it works, as you are suggesting, we end up in very mess we find ourselves today.
More regulation is not the answer. More education about how the market works is.
@ Harold # 69:
I agree completely. Remember, this all started because I made the claim that if we went towards a more free-market model of health insurance, pre-existing conditions would not be nearly the problem they are right now.
This is not to say there still won’t be inefficiencies because of adverse selection. Certainly there will. But people with pre-existing conditions would be able to find health insurance.
Adverse selection largely exists because, in the current environment, people are forced to *hide* their condition because they know they won’t get insurance otherwise. Because they hide, they initially pay the rates of a low-risk person.
Then, once they’re in, they’re a drain on the pool forcing rates to rise, which induces the healthy, low risk people to drop out, leaving only the expensive, high risk people in the pool.
But – if the market for insurance is allowed to flourish, the incentives change and the nature of competition will ensure that people with pre-existing conditions can still get insurance.
They will be will be able to *tell* the insurance company they have a pre-existing condition without fear of being denied. Their rates will almost certainly be higher of course, but they know that. They’re not after free or even cheap insurance, they’re just after insurance.
A type of price-discrimination will materialize and adverse-selection won’t be nearly as big of a problem.
I’m not saying everything will work perfectly and people won’t still lie and their won’t be still be inefficiencies, but the incentives will change for the better. If we get the incentives right everything else is just window dressing.
Ahem. “there” not “their” in the last paragraph.
“However, the civil war in Libya did cause was followed by a spike in the price of oil – but wouldn’t your argument suggest otherwise?”
My guess is that still doesn’t necessarily change how much all the oil in the world is worth. There’s less to go around in the short term, but… there’s also less consumed in the short term. Not sure where to go from there, but the latter part seems significant. Short term demand didn’t change, short term supply did, but long term supply is the same as ever, and we’re not as close to the “end point” of all oil as we _would_ have been if there hadn’t been a sudden drop in supply. So we’re not quite as close to the point where prices will start to skyrocket because there’s so little left that’s easy to get to. Still not sure where to go from there.
Another thing that occurs to me: assuming that oil consumption keeps getting more efficient over time, us having used less in the short term (because the short term supply was interrupted) makes the remaining supply go farther. So, when dealing with a finite resource, temporary supply interruptions today could have at least some upsides down the road, no?
Will A #75 – “who should decide whether their citizens should be forced to pool their resources”
This certainly did not seem to be Josh’s position, but since libertarians favor minimizing the use of force, it need not be inconsistent for them to prefer confining it to the level of a state versus a country or the world. What a charge of “tribalism” seems to miss is a respect for the idea that not everyone shares the same view of what’s best (and maybe a little humility in the face of uncertainty). Something about 50 laboratories.
BYW with respect to your personal preference for universal access, to some the keyword “decent” (the necessary but mushy qualifier to keep this from being a meaningless slogan like “everyone gets an iPhone”) seems dangerously static in the context of incentives for innovation. Would anyone today be happy with what was considered “decent” medical care (or communication technology) 10, 20 or 50 years ago? In that sense this sounds a bit like inter-generational “tribalism”.
For those who care, I have taken the fight to Free Advice.
iceman #81:
“it need not be inconsistent for them to prefer confining it to the level of a state versus a country or the world”
I live in California with a population of 37,000,000. Is this an acceptable limit of confinement for libertarians?
California libertarians are going to say, “50% of voters approved an initiative requiring us to buy CA Health insurance, but I it’s all good because it was done at the state level. At least we have the freedom to purchase our own policy in addition to our California Insurance plan”
@Will A: re 83. This is silly Will. What matters is the separation and limits on power, not the population. And Libertarians would only say this is constitutional, not good.
It isn’t a matter of accepting or even endorsing to say if you’re against coercion, you prefer that ‘only’ 37mm people are coerced rather than 300mm (or apparenty you prefer 7 billion). As I understand it, libertarians generally feel that to the extent government actions will be / need to be taken, this is best done on as local a level as possible. E.g. easier to have influence or even move elsewhere. This just isn’t that esoteric of a point.
iceman:”This just isn’t that esoteric of a point.”
Alas experience has proven that anything involving separation of powers, limitation of powers, enumeration of powers, or the tenth amendment is more esoteric than quantum physics in hieroglyphics.
@ Ken B #84:
iceman said, “but since libertarians favor minimizing the use of force, it need not be inconsistent for them to prefer confining it to the level of a state versus a country or the world”
I didn’t read this as being about what is constitutional, but about minimizing the use of force. I.e. it is preferable for a group of citizens at a smaller level of government to force all citizens at that level of government to purchase health insurance.
I’m still trying to figure out libertarians though. I guess iceman’s statement was about what is constitutional and that preferable is libertarian code for constitutional.
What is foreign to me (probably another setup for you) is how a person would find something more preferable because it is constitutional.
I don’t think that federal government should be allowed draft citizens into a federal militia. I also don’t think that states should be able to draft it’s citizens into a state militia.
It wouldn’t occur to me to say that it is preferable for the federal government to draft people since it is constitutional.
However I guess using libertarian meaning of preferable this sentence does make sense:
It is preferable (i.e. constitutional) for the federal government to draft people because it is constitutional vs. states drafting people for state militia.
Thanks for the education. If there are other libertarian code words, feel free to pass them on.
Will A: “If there are other libertarian code words, feel free to pass them on.”
There are a few Will: indvidual, respect, humility, limits, doubt, rights. All new to you I believe. I hope you’ll get the meanings from context as you follow along.
:)
My point was simply that when forced to choose, most people tend to *prefer* the lesser of two “evils”. Some also believe our Constitution sought to embody this principle via a respect for state’s rights, however it still applies even where one may personally believe both options are unconstitutional.
Small has to do with number of employees, not size of the company. Instagram, for example, was a billion dollar company with around 6 employees.