Steven Landsburg | The Big Questions: Tackling the Problems of Philosophy with Ideas from Mathematics, Economics, and Physics

Continue reading ‘Thursday Solution’

on July 26, 2018

in Math and Puzzles

. 38 Comments

Here are the answers to yesterday’s puzzle. The first correct solution came from our commenter Leo (comment #18 on yesterday’s post).

The assumptions of the problem were: Everything I say out loud can be deduced from my axioms. My axioms include the ordinary axioms for arithmetic, among other things. And I recently said out loud that “I cannot prove that God does not exist”.

The questions were: Can I prove there is no God? Can I prove there is a God? And is there enough information her to determine whether there actually is a God?

The answers are yes, yes and no: Yes, I can prove there is no God. Yes, I can also prove there is a God. And no, you can’t use any of this to determine whether there is a God.

To explain, I’ll use the phrase “logical system” to refer to a system of axioms sufficiently strong to talk about basic arithmetic (and perhaps a whole lot of other things), together with the usual logical rules of inference. It’s given in the problem statement that I am a logical system.

Here are two background facts about logical systems:

A. An inconsistent logical system can prove anything at all. That’s because it’s tautological that if P is self-contradictory, then any statement of the form “P implies Q” is valid. If I’m inconsistent, that means I can prove at least one statement (call it P) that’s self-contradictory. Then if I want to prove, say, that the moon is made of green cheese, I note that:

I can prove P
It’s tautological that “P implies the moon is made of green cheese”
Therefore I can conclude by modus ponens that the moon is made of green cheese.

B. No consistent logical system can prove its own consistency. This is Godel’s celebrated Second Incompleteness Theorem.

Now here’s the argument:

Down on the Farms

Published

on July 25, 2018

Continue reading ‘Down on the Farms’

. 30 Comments

Suppose there’s a guy in your neighborhood who routinely harasses strangers on the street, calling them ugly names, maybe threatening them with violence, but always stopping short of anything that’s actually illegal.

You consider this bad behavior, so you work to pass some laws that will discourage it. Maybe you criminalize the behavior; maybe you tax it.

The new laws turn out to be somewhat effective. The guy tones it down. He still harasses people, but only half as much.

Question: Do we owe this guy something? Should the taxpayers cut him a check so he won’t feel so bad about having to rein himself in?

I’m going to go out on a limb and guess that most of you will answer “no”.

Here’s why I ask:

The President of the United States believes that under current circumstances, much international trade is a bad thing and ought to be discouraged. Unfortunately, there’s a bunch of farmers out there who have been behaving very badly (i.e. trading with foreigners) and the law hasn’t done much to stop them. So the President has expanded the scope of the law to punish this bad behavior via tariffs. And then he’s turned right around and announced a plan to compensate the bad guys.

Wednesday Puzzle

Published

on July 25, 2018

in Puzzles

. 21 Comments

Here’s what you should know about me: I am basically a logic machine. There are certain axioms that I believe, and I never say anything out loud unless it can be deduced from those axioms via the rules of logic. (Fortunately, I can talk about many things, because my axioms include everything from the usual axioms for arithmetic to a rich set of beliefs about ontology, ethics, psychology, and everything else I care about.)

Here’s what else you should know: Last night, in the course of an imaginary chat with an imaginary Bob Murphy, I found myself admitting out loud that “I cannot prove that there is no God.”

First Puzzle: Can I in fact prove that there is no God?

Second Puzzle: Can I prove that there is a God?

Third Puzzle: Based on the information given, can you determine whether there is a God?

I’ll answer tomorrow, or in a few days depending on how the comments play out.

Click here to comment or read others’ comments.

The Elephant in the Brain

Published

on July 17, 2018

in Books

. 14 Comments

I haven’t been blogging much lately, but John Lanchester’s boneheaded review of Robin Hanson and Kevin Simler’s The Elephant in the Brain seemed to demand a response. But I see that Robin himself has saved me the trouble with his devastating refutation here.

This does remind me that I never fulfilled my intention to review the The Elephant myself. This fell through the cracks because I’d accumulated substantial notes while reading it, lost my notes, decided to search for them before reviewing, and then sort of fell temporarily out of the blogosphere for a while. But it is a genuinely terrific book; my lost notes contain a long list of minor quibbles, but the bottom line is that I learned a lot (about others and about myself) and had a lot of fun along the way. There was never a moment when I wanted to put this book down.

The book, for those who have somehow managed not to hear about it, is about the hidden motives for human behavior — the motives we hide from each other, and the motives we hide from ourselves. The table of contents promises to enlighten us about how hidden motives drive our body language, laughter, conversation, and our choices in consumption, art, charity, education, medicine, religion and politics — and the book delivers on those promises with a heady mix of sparkling logic and striking evidence. There are plenty of fun facts you’ll be repeating at cocktail parties, and plenty of deep insights that will make you smarter forever.

Letter from an Infantryman

Published

on July 8, 2018

in Outrage, Personal and Tragedy

. 11 Comments

I found this among my father’s papers. He wrote it as a 20-year old infantryman who had been in combat for about six months.

I am struck by the eloquence, and doubly struck that he managed to be eloquent in the medium of pen-and-ink, with no copy/paste/delete and not even any crossouts:

Monday, Jan. 8 (1945)

Dear Mother and Dad:

Well, the new year has arrived and with it, sadly enough, have come no great changes. The war is still being fought, I and millions of other boys are still several thousands of miles away from home and our loved ones, and it almost seems as if there will never be an end to this useless, heart-breaking, killing war.

Whether a man is German, American, or French, he looks just the same when he is wounded, dying or dead. The battlefield bullet is a great leveler; it can make the biggest man very small or the weakest man a hero, but in this war most of the heroes are dead.

We who are actively engaged in defeating the enemy would not hesitate to lay down our arms and surrender if we thought that the people who make the peace will fail to make it permanent. The mere thought that our comrades may have died for nothing, that we may have a brief pause from this war so that we can raise sons to fight another war would cause us many sleepless nights. The last thing one dying soldier said to me was that he was dying on the battlefield so that his son would not.

I may sound very bitter and full of resentment and frankly I am. This war should have been averted in 1918 and the ensuing years, but instead of preventing war, the American people actually encouraged it by ignoring everything that was going on around them. For the sake of all the men who have gone through this hell, we must not let this happen again. We must not have allowed so many of our boys to have died in vain.

I can’t possibly express the resentment these boys feel when they hear about these “Victory in Europe Celebrations”, and when they hear about the lotteries that are held to determine the date of the European victory. Here their own sons are being killed, maimed and crippled for life, and they trouble themselves with such trivial tripe. What is the matter with the American public? Is it entirely aloof to this war?

Perhaps I don’t sound like a twenty-year-old kid anymore, but I’ve seen things that I shall never forget, ghastly things that I shudder to think about. I think that a just punishment for any of these “Victory in Europe Celebration” planners would be to pick up a soldier’s boot on a battlefield and find the foot still in it, or sweat out just one artillery barrage. If they could just realize what is going on they would spend all their spare time praying for the safety of their boys and thanking God that America has been spared everything but an army.

Aside from being a little angry, I’m feeling fine. I’ve received several of your packages and everything is swell. I know that God has been answering your prayers, and he will continue to watch over me.

Love, Norman

End of an Era

Published

on July 8, 2018

in Personal

. 20 Comments

Norman Landsburg (1924-2018), a survivor of the worst ravages of the Great Depression, a survivor of the trenches in France, where he landed in the wake of the Normandy invasion (and, according to what I think I’ve just learned while going through his papers, was awarded two bronze stars that he never once mentioned to his wife of 68 years or any of his three children), who transcended a series of hard knocks that would have led many to despair and struggled every day, often against mighty odds, to make a better life for his family, succumbed tonight to complications from Alzheimer’s disease.

His bullheadedness was his greatest vice and his greatest virtue. I owe him a couple of good slaps upside the head (not that I ever got one from him, but he deserves them anyway) and eternal gratitude for the way he eased my setting forth and filled my world with possibilities. Neither debt will ever be paid.

The Case Against The Case Against Education

Published

on April 27, 2018

Continue reading ‘The Case Against The Case Against Education’

. 34 Comments

I am quite unqualified to review Bryan Caplan’s blockbuster The Case Against Education, by virtue of the fact that I have not (yet) found time to read all of it. But I think I have a pretty good idea what’s in it, and an even better idea of what others are saying is in it. So this will be a review not of Bryan’s book, but of the various paraphrases that are floating around the internet. Those paraphrases might or might not be accurate representations of Bryan’s thinking, but they deserve to be treated as arguments in their own right. So this will be a review of those arguments.

Hanushek Tonight

Published

on April 23, 2018

in Events

. 2 Comments

With apologies for the late notice: Eric Hanushek of Stanford University, the great pioneer in the applications of economics to evaluating educational policies, will speaking tonight in Wegmans Hall, room 1400, on the University of Rochester campus. The general public is invited.

Title: Can we put a Price on Student Achievement? Financial Returns for Academic Success

The event will begin promptly at 6:30PM. The general public is welcome.

Where I’ll Be

Published

on March 14, 2018

in Events, Math, Personal, Philosophy and Religion

. 4 Comments

I’ll be speaking this Saturday at the Freethought Festival in Madison, Wisconsin (follow the link to register!) on the topic “Truth, Provability and the Fabric of the Universe”. I’ll be glad to see you there.

Click here to comment or read others’ comments.

Like the Groundhog, He Emerges

Published

Continue reading ‘Like the Groundhog, He Emerges’

on February 24, 2018

in Outrage and Personal

. 33 Comments

Regular readers of this blog will have noticed by now that my blogging has been mostly dormant for a while. This is partly because I’ve been working on multiple book projects (e.g. this one), partly because I felt so disillusioned after the outcome of the election season, and partly because I’ve felt like I’ve already said much of what I have to say. But sometimes you can’t resist.

This is the City Mattress store on Monroe Avenue in Brighton, New York:

My wife recently wanted to buy a mattress, drove by the store, and noticed that there were no hours posted in the window. The next day, she guessed at the opening time, happened to get it right, went into the store, and mentioned to the friendly manager that it would be nice if they could post their hours. The manager agreed that being able to post their hours would be very nice indeed, but that the town of Brighton had forbidden them to do so on the grounds that it would “make the store look like a sub shop”.

Question 1: Please study the picture above. How probable do you think it is that you’d mistake it for a sub shop? (Your answer should be a number between 0% and 100%).

Question 1A: By how much would your answer to Question 1 change if this store had its hours posted in the window?

Question 2: If you did happen to mistake this store for a sub shop, how much damage would you feel you’d incurred? (Your answer should be the number of dollars you’d have to lose to feel equivalently damaged.)

Incidentally, the lack of an hours sign inconveniences not only people like my wife, who wasn’t sure when to show up. The manager mentioned that every night at closing time, they have to turn away new arrivals who, due to the lack of a sign, were unaware of the store hours.

The Brighton Town Supervisor is Mr. William Moehle. This is a picture of his house:

Alex Tabarrok!

Published

on February 19, 2018

. 2 Comments

I am delighted to announce that Alex Tabarrok, of George Mason University and marginalrevolution.com, will be speaking at the University of Rochester this Wednesday (February 21) on the topic “Is the FDA Safe and Effective?”. The event will start promptly at 6:30PM in Goergen 101, and is open to the public.

Click here to comment or read others’ comments.

Good Intentions; Bad Policy

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Continue reading ‘Good Intentions; Bad Policy’

on January 18, 2018

in Current Events, Economics and Policy

. 29 Comments

I learn from Scott Sumner’s blog that in many California cities, residents with past marijuana convictions will jump to the head of the line for licenses to sell the drug legally — this by way of compensating them for past persecution.

Scott approves. I don’t, for two reasons:

First, if you want to compensate people for past persecution, the right way to do it is with cash, not by misallocating productive resources. If there must be licenses, they should be allocated to those who can use them most efficiently, regardless of any past history.

Second, drug dealers have never been the primary victims of anti-drug laws. They can’t be, because there is free entry and exit from that industry. Anti-drug enforcement leads to exit, which in turn leads to higher profits for those who remain — and the exit continues until the profits are high enough to compensate for the risks. One way to think about this: All those “persecuted” drug dealers were, in effect, employing the government to stifle their competition, and paying a fair price for that privilege in the form of occasionally being convicted and punished themselves.

The primary victims of anti-drug legislation are potential consumers who were deterred by artificially high prices. How do you compensate those victims? You can’t. In a population of 1000 people who have never used drugs, it’s quite impossible to identify the 200 or 300 or 400 who would have happily indulged if only the price had been lower.

The Tax Bill

Published

on December 16, 2017

Continue reading ‘The Tax Bill’

. 34 Comments

Compared to an ideal tax code, it’s awful.

Compared to the pre-existing tax code, it’s a vast improvement.

Compared to my expectations going in, it’s a pleasant surprise. It required some real political courage to pass this thing, and political courage always surprises me. There’s also a lot of good sense in it, which sometimes surprises me even more.

Compared to what I suspect we could have had, if only that same good sense and political courage had been harnessed by a president who was capable of understanding the bill’s content, participating in its formulation, and selling it to the public, it’s something of a disappointment.

Scott Sumner does a superb job of summarizing the good, the bad and the neutral. Instead of quoting him extensively, I’ll (strongly) encourage you to go read the original. A few additional remarks:

Matters of Money

Published

on December 8, 2017

Continue reading ‘Matters of Money’

. 36 Comments

I have some questions about how money works.

I’ll start by talking about Bitcoin, though my questions are more general than that.

As you are probably aware, Bitcoin is a cryptocurrency that is currently trading for US Dollars at the rate of (depending on the exact moment when you’re reading this) somewhere between $15,000 and $20,000 per Bitcoin.

As you are somewhat less likely to be aware, Bitcoin Cash is another cryptocurrency that is currently trading for US dollars at the rate of something less than $2000 per Bitcoin Cash token. Despite the similar name, Bitcoin Cash is (now) entirely separate from Bitcoin. It originated in a “hard fork”, where each holder of Bitcoin was given an equal amount of Bitcoin Cash for free (so if you were holding, say 50 Bitcoins, you got 50 Bitcoin Cash tokens). After the fork, the two currencies have evolved, and will continue to evolve, separately.

The technology of Bitcoin Cash is very similar to the technology of Bitcoin. It offers the same sorts of anonymity, security, and so forth. There are some reasons to believe that in the future, Bitcoin Cash will be a bit easier to trade than Bitcoin (though that is not true in the present), and there are some other technological differences between them, but I’d be surprised to learn that those differences are accounting for any substantial fraction of the price differential.

The total supplies of Bitcoins and of Bitcoin Cash are currently about equal (because of the way that Bitcoin Cash originated). In each case, the supply will gradually grow to 21 million and then stop.

Too Many People?

Published

on November 28, 2017

in Economics and Video

. 43 Comments

It was both an honor and a pleasure to deliver the annual Hayek Lecture at the Institute for Economic Affairs last week. Here’s the video:

Click here to comment or read others’ comments.

WTF?! Indeed!

Published

Continue reading ‘WTF?! Indeed!’

on November 16, 2017

in Books, Economics and WTF?

. 3 Comments

Like most bloggers, I assign each of my posts to one or more Categories, which are listed in small print somewhere near the top of the post. Among the categories I use are “Economics”, “Politics”, “Policy”, “Math”, “Logic”, “Cool Stuff”, “History”, “Oddities” and “WTF?”. The last of these is perfect for this post, which is written to call your attention to Peter Leeson‘s rollicking new book WTF?!: An Economic Tour of the Weird.

(Edited to add: I see now that the jacket copy on Leeson’s book describes it as “rollicking”. Apparently I’m not the only one who thought this was the right adjective here.)

Leeson, some of whose work I’ve blogged about here in the past, takes us on a tour of some of the world’s seemingly most inexplicable behavior — both historical and contemporary — and uses economic insight to render that behavior explicable after all. His explanations are generally plausible and provocative, though I’m sure many an insightful reader will find plenty to argue with. That, after all, is part of the fun.

Here are the blurbs from the back of the book:

Exploding Debit Cards

Published

on November 13, 2017

in Innovations

. 15 Comments

A Guest Post

Bennett Haselton

The government sometimes issues stimulus checks in the hopes that the windfall will induce people to spend and stimulate the economy. Regardless of the merits of this idea generally, the effectiveness is partly reduced because people choose to save the money rather than spending it.

So: What if, instead of issuing stimulus checks, the government issued “exploding debit cards”, which have to be spent in a given time period or the cards cease to work?

This would seem to have several advantages over stimulus checks:

Rather than cutting checks knowing that some of it will be spent, the government is handing out cards knowing that almost all of it will be spent. This means the dollar amount can be less in order to achieve the same stimulus effect. (Even though this is a political consideration, not an economic consideration.)
It gives the government more fine-tuned control over when the money is spent — you can issue the cards to different subgroups at different times and require the groups to spend the money in separate time frames.
Since the card balance is difficult to convert to cash, this reduces the chance that the money will be spent on illicit purchases the government may want to prevent.

Some people would still find ways to work around it — perhaps by buying goods they could re-sell for cash, or selling their cards for cash (if merchants are lazy about doing ID verification), or buying goods and then returning them for store credit — but, given the effort required, the number would be much lower than the number who would simply save their stimulus checks instead of spending them. (Many people would prefer to save, but the goal here is to achieve a specific economy-wide outcome, not to give every person what they would prefer.)

Not everyone agrees with the merits of issuing stimulus checks. But it seems that any argument in favor of stimulus checks would be an even stronger argument for using exploding debit cards instead. Am I missing something?

Book Title

Published

on November 4, 2017

in Book and Self-Promotion

. 33 Comments

For a book of brain teasers with economic morals, how do we collectively feel about this title?

Rational Explanations: 100+ Puzzles to Make You Smarter About Economics

I’m interested in whether we like it, but more interested in whether we think it will sell books.

Click here to comment or read others’ comments.

Winston Churchill Foresees Donald Trump

Published

on November 2, 2017

. 37 Comments

Those who are possessed of a definite body of doctrine and of deeply-rooted convictions upon it will be in a much better position to deal with the shifts and surprises of daily affairs than those who are merely taking short views, and indulging their natural impulses as they are evoked by what they read from day to day.

Churchill, The Gathering Storm

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Too Many People?

Published

on October 26, 2017

in Events and Self-Promotion

. 18 Comments

While most Americans are celebrating Thanksgiving, I’ll be in London, giving the annual Hayek Memorial Lecture sponsored by the Institute of Economic Affairs. Topic: Is the World Over or Under Populated, and How Would We Know? Tickets are required but free, and are available here. If you come to the talk, don’t leave without saying hello!

Click here to comment or read others’ comments.

Weight Loss Advice From Big Name Economists

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Continue reading ‘Weight Loss Advice From Big Name Economists’

on October 23, 2017

in Current Events and Economics

. 5 Comments

In my dream, Greg Mankiw and Larry Summers are advising a friend about weight loss.

Mankiw says: If you eat fewer calories, you’ll lose weight.

Summers replies: Not so fast! Sometimes if you eat less ice cream, you crave more cake. Then your calorie intake won’t change and you won’t lose weight. Greg’s advice is fine as an academic theory, but I doubt it will work in practice.

(Note here that Greg never mentioned ice cream in the first place.)

Of course Greg is 100% right, both in theory and in practice. If you eat fewer calories, you will lose weight. Summers responds that if you don’t eat fewer calories, you might not lose weight. True, but entirely off the mark.

I mention this because Mankiw had a recent blog post where he argued that if you cut taxes on capital income you’ll see a big rise in wages. (I happen to have blogged about this twice already in the past 24 hours, but those posts are irrelevant here.) Summers has replied that Mankiw is right in theory but likely to be wrong in practice, and lists three reasons. The first of those reasons comes down to saying that if you cut the corporate income tax, corporations are likely to end up paying more in other taxes, so you haven’t really cut the capital tax after all.

(Note here that Greg never mentioned corporate taxes in the first place.)

Okay, fine. So if you haven’t cut the capital tax, then Greg’s observation doesn’t apply. Likewise, if you haven’t really cut calories, you shouldn’t expect any weight loss. That’s not remotely a refutation.

Mankiw Followup

Published

on October 23, 2017

in Economics

. 20 Comments

Earlier today, I blogged about Greg Mankiw’s calculation on the effects of capital tax cuts.

Following a tax cut, Mankiw computes the ratio of the long-run increase in wage payments to the short-run shortfall in government revenues, and, with reasonable assumptions, shows that this ratio has an astonishingly high value of 3/2.

I know how to make that ratio even higher.

The Mankiw Plan is: Cut capital taxes today and watch wages rise tomorrow. The Landsburg Plan is: Cut capital taxes tomorrow and watch wages rise the next day.

Under the Landsburg Plan, the short-run government revenue shortfall (today) is zero, while the long run increase in wages is positive. That gives me a ratio of infinity, which beats Mankiw’s 3/2 ratio by a factor of … infinity.

This is not meant to cast doubt on Mankiw’s result (which is entirely responsive and relevant to the current public debate he was addressing); it is meant to cast light on what’s driving it. When you cut taxes, government revenue falls by more in the long run than in the short run. The long run fall in revenue is what’s driving the wage growth (as I showed in my earlier post), and what drives the result is that the long run fall in revenue is greater than the short run fall. If you can drive down the short-run fall, you can drive up the ratio.

Click here to comment or read others’ comments.

It’s All About the Rectangles

Published

Continue reading ‘It’s All About the Rectangles’

on October 22, 2017

in Current Events, Economics and Policy

. 27 Comments

Greg Mankiw has a provocative post on how wages are affected by a cut in the tax rate on capital income. The short version: The effect is huge. If the government commits to a permanent tax cut that costs it $1 in revenue this year, then in the long run, annual wage payments will rise by $1.50 (and the annual revenue shortfall will be even less than $1).
.

That strikes me as huge. Wages grow by more than government revenue falls — in fact, by a factor of about 1/(1-t), where t is the initial tax rate. Mankiw’s $1.50 comes from plugging in an initial tax rate of 1/3.

Although Mankiw’s calculation is simple, straightforward and convincing, it managed to drive me crazy for a substantial chunk of a day, because I didn’t really understand what was driving it. Now I do. So let me explain.

Help!

Published

on October 2, 2017

in Book, Personal and Self-Promotion

. 66 Comments

Readers: I need your help!

More than once, my blog readers have proved themselves to be cleverer, smarter and more insightful than I am about a great many things. I need your cleverness, intelligence and insight now more than ever.

Yesterday, I delivered a manuscript to my editor at Houghton-Mifflin. Sometime in 2018, this manuscript will become a book. What it needs is a title!

The book is a compendium of puzzles and brain teasers designed to teach lessons about economics, statistical inference, and related matters. A recurring theme is that what’s “obvious” is often wrong. Here is a brief excerpt from the introduction.

The title should be catchy, clever, attention-grabbing and indicative of the content. What, specifically, should that title be?

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Vladimir Voevodsky

Published

on September 30, 2017

in Heroes and Math

. 9 Comments

Time is scarce, and lately I’ve been devoting it mostly to things other than blogging — but I feel the need to emerge from hiding just long enough to acknowledge the shocking death today of the extraordinary mathematician Vladimir Voevodsky at the age of 51.

Voevodsky is best known for finding the right definition of motivic cohomology sometime around the year 2000. This was a Holy Grail, the quest for which had been set in motion by the earth-shattering vision of Alexander Grothendieck. I happen to have been leafing through my well-worn copy of Voevodsky’s book on Cycles, Transfers and Motivic Homology Theories (co-written with Andrei Suslin and Eric Friedlander) when I heard of his death.

More recently, Voevodsky had turned his attention to logic and the foundations of mathematics. Here is video of his talk “What if the Current Foundations of Mathematics Are Inconsistent?”

A brief obituary is here. A brief mathematical autobiography, written by Voevodsky, is here. I might return and add a few personal reminscences.

Click here to comment or read others’ comments.

Unhealthy

Published

on June 23, 2017

Continue reading ‘Unhealthy’

. 38 Comments

I have not read the Senate “health care” bill, but from the various summaries around the web, I am confident that Barack Obama is exactly correct in his pronouncement that this is not a health care bill. Republicans seem to be supporting the bill because it stems the tide of income redistribution and Democrats seem to be opposing it for the same reason.

But a health care bill that does nothing but change the distribution of income is (again in Obama’s words) not a health care bill. It’s an income redistribution bill, and a fairly stupid one at that. If you want either more or less redistribution, the way to do that is to adjust taxes on rich people and payments to poor people, not to muck around with the health care system.

On the other hand, if your goal is to make the health care system more efficient, then you’ll want a health care bill. What would it take to make the health care system more efficient? For one thing, it would require making people less reliant on insurance and more reliant on their own savings (probably in the form of Flexible Saving Accounts and Health Saving Accounts) so that their choices are constrained by an awareness of costs. This Senate bill, it seems, does absolutely nothing to address those issues. In fact, from what I’ve read, it leaves in place the tax deduction for employer-provided insurance (thereby continuing to incentivize people to buy too much insurance) and (at least according to some news articles) adds new taxes on Health Savings Accounts (thereby incentivizing people to rely even more on insurance). If we’re supposed to be marching toward more efficient health care, this sounds like a step backward, not forward.

A Momentous Week

Published

on May 12, 2017

in Current Events, Heroes, History and Math

. 8 Comments

The most exciting news of the past week had nothing to do with James Comey or Donald Trump.

The University of Montpelier has released high-quality scans of about 18,000 pages of notes and scribbles by Alexandre Grothendieck. If you’re competent in both French and the art of deciphering handwriting that was never meant to be readable except to the author, you can while away some hours sifting through them here.

It would be an understatement to say that Grothendieck was never shy about revealing and publicly analyzing his thought processes, but these notes are presumably less filtered than the tens of thousands of pages he chose to share in his lifetime. FOr the many who are already sifting through them, and for the many more who are waiting to hear the reports of the sifters, they will yield new insights into one of the most extraordinary minds in human history.

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Politico Economy

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Continue reading ‘Politico Economy’

on March 29, 2017

in Economics

. 30 Comments

Matthew Nussbaum of Politico tweets that:

There are 50,000 coal miners in the United States. There are 520,000 fast food cooks. Coal miners seem to loom a lot larger in our politics. Wonder why.

If Mr. Nussbaum had read pages 36 and 37 of The Armchair Economist, he’d know the answer. Coal mines are in pretty much fixed supply; new fast food joints are created all the time. Therefore new coal mining jobs are far harder to create than new fast food jobs.

So if conditions get better for coal miners, that’s good for existing coal miners. By contrast, if conditions get better for fast food cooks, more people will become fast food cooks, driving down the wages of existing fast food cooks and negating the improved conditions.

That makes it worthwhile for coal miners to lobby for better conditions, but not for fast food cooks. What’s relevant is not so much the current population of coal miners, but the ease with which that population can expand.

Information, Please

Published

Continue reading ‘Information, Please’

on March 15, 2017

in Bad Reasoning and Policy

. 58 Comments

Why do we need a national health policy, any more than we need a national grocery policy or a national automobile policy or a national matchmaking policy?

Over on another recent thread, one of our commenters keeps pointing to allegedly unique “information issues” in the market for health care. So let’s see how unique those issues really are.

First, there are issues like adverse selection. The very fact that you’re buying insurance makes sellers suspect you’re sick, and they charge accordingly. Therefore if you’re not sick you overpay, and because you overpay you’re likely to underinsure.

That issue is not unique to health insurance. It also plagues the markets for car insurance and homeowner’s insurance, along with plenty of other markets. The very fact that you’re selling a used air conditioner makes buyers suspect there’s something wrong with it, and they lowball their offers accordingly. Therefore, you can’t get a good price even for a perfectly good air conditioner, and because you can’t get a good price you’re less likely to list it for sale in the first place. That’s exactly the same adverse selection problem (with buyers and sellers reversed), but there’s no general clamor for a national used-air-conditioner policy.

That’s not to say that adverse selection is unimportant, or that we shouldn’t try to address it, and it’s not deny that it might loom larger in some markets than others. But it’s far from unique to the market for health insurance.

Another information issue — one being flogged endlessly by a persistent commenter in that other thread — is that providers generally know a lot more than their customers do about the merits of various medical procedures. This is presented as if it were a reason for providers (e.g. doctors, insurance companies, or federal program administrators) to make key decisions, as opposed to presenting the customer with a price list from which to choose — the same method that seems to work perfectly well in restaurants, auto repair shops and lawyers’ offices.

But all of this overlooks the biggest information issue of all which is this: Only the customer knows whether he’d prefer, say, three weeks of pain relief to, say, a new car stereo, or whether he’d prefer, say, a slight lifelong reduction in heart attack risk to, say, an extra five restaurant meals every year.

The Dire Prognosis

Published

on March 7, 2017