Category Archives: Economics

Robot Medicine

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I had my annual physical this week. That means two hours of my life wasted staring at the wall wearing an apron. I should not complain as the process for me is efficient compared to what others must endure. I get to the facility 15 minutes before my appointment and I’m sitting in a room somewhere within 30 minutes. In that time, I have submitted my urine sample and filled out some forms.

A pleasant black girl with neck tattoos took my blood pressure and had me strip and put on one of those ridiculous hospital gowns. I’ve always wondered why someone has not come up with a better hospital gown, but there’s zero motivation on the part of the medical profession to demand it. The medical business is not a business in the normal sense, where the suppliers compete with one another for customers.

I don’t actually see a doctor. Instead it is a nurse practitioner. Allegedly there is a doctor in charge of her and the other nurses, but I’ve never met him. I’ve never seen him. I’m sure he exists, but if not I would not be surprised either. The woman I see is nice, but a typical clock puncher. She comes to work for a check, not because she enjoys her work. To her, I’m just another meat stick on the schedule.

After twenty minutes of waiting, she arrived and commenced with the examination. That means taking my blood pressure, looking at my eyes and ears and feeling around for something weird. Most of the time she is in the room is spent asking me questions as she typed the answers into the computer system. Most of the questions seemed like they were for marketing purposes rather than anything to do with my health.

The point of this boring recitation of my annual physical is that very little of it requires me to interact with a human. Taking blood pressure can be done by a machine. I have one at home. Blood work is done by a machine. The clinic I use does their own blood work, allegedly, but there are huge national chains that do blood work for humans and animals.

As far as interpreting the results, the nurse I see is not bringing much to the table. She thinks my cholesterol is getting a little high, but Dr. Google and everyone I know has much higher LDL levels. I suspect there is a commission check in it for them when they prescribe these popular medications for cholesterol. Regardless, interpreting blood work is better done by a robot anyway. The same is true of the urine sample.

It seems to me that one place where the robot future should be a reality is in basic medical care. Instead of paying an arm and a leg for disinterested humans to act as a go between, let the patients talk to the robots direct. A mall kiosk could be used for blood pressure, urine and blood work. While you’re there you answer questions on a touchscreen. A week later the robot e-mails you the results and any recommendations.

Of course, the robot would also have access to your DNA. As we march into the humanless future, DNA will become the touchstone of medical science. Connecting the dots between genes and a wide range of diseases is a data problem, in most cases. Cheap collection devices in public places means masses of data to sort of collate.

Robot care would inevitably be cheaper and that means more people would get regular checkups by their local neighborhood robot doctor. If this sort of service were $50 a shot, most people would do it twice a year. Extend the services to things like flu shots, and nuisance things like colds and allergies and most of your basic care could be done on the cheap by the machines.

Another benefit is the payola schemes run by the pharmaceutical companies would be tamped down as robots are not easily bribed. During my visit, two sets of sharpies arrived peddling their wares. They were dressed in the best Men’s Warehouse has to offer and had arms full of freebies for the nurses.

It’s the same payola game the music industry used to play in the old days. It’s not technically bribery, but give a doctor free stuff and he is probably going to move your product. The medical profession denies it, but big pharma is not giving away tens of millions in trips, gifts and schmoozing because they are stupid. They do it because it works.

Of course, none of this is going to happen because the medical rackets are neatly aligned with the ruling liberal democrats. America does not have a government run system like Britain; it’s more of a partnership between the industry and the state. That way, we get the worst of both worlds. On the one hand there’s the avaricious private suppliers and on the other the mindless idiocy of government.

I’m fond of pointing out that we have all around us one of the greatest health care system on earth. American veterinarian medicine is better than what most humans enjoy on earth. It’s also cheap and plentiful. That’s because it is largely government free and parasitic lawyer free. Maybe when the robots take over, they can just kill all the lawyers and bureaucrats. Then maybe medicine will because a normal business again.

Free Trade Fantasies

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Yesterday the guy who wrote this piece tried picking a fight with me on twitter over my observation that some trade deals are good and some are bad.  Libertarians hear the phrase “free trade” and they fall into a trance-like state. I think if you labeled dog poop “free trade” they would gobble it up like candy. That would be after they name-dropped David Ricardo and Adam Smith.

I’ve never had a twitter fight and I would certainly be willing to give it a shot. The trouble is started by using uptalk which makes me think of punching people in the face. There’s nothing that screams smug pussy more than slapping a question mark onto a statement. I’ve made it a rule to ignore people who do it. Reading his twitter feed, I get the sense he wears his ignorance like a shield and there is no point in debating such people.

But, I don’t know him or his work so I could be all wrong. Still, life is too short to waste time on finding out. My sense is his site is mostly libertarian spank material and I have no interest in it. I know all the arguments and much of what libertarians say is reasonable, but a lot of it is nonsense too. Humans are not moist robots and our relationships are not transactional. Economic man has never existed and that’s why libertarianism has never been tried.

Anyway, after all the red Team-Blue Team stuff, he laments that many Republicans and Tea Partiers think trade has hurt the country. To libertarians, this is like learning that half the country believes in witchcraft. As I wrote earlier, the phrase “free trade” has a narcotic effect on these people.

Shockingly, the former Half Sigma has a post up that gets at the problem with libertarianism in general and free trade in particular. I don’t think his idea for socialized banking is a great idea, but the point about pure markets existing only in the imagination is important. Political systems work as long as they comport with reality. Libertarianism works only in a world with perfect economic men ruled by saints.

Similarly, free trade is a boon to both countries as long as both countries have the cultural ethics of Canada. That way, people in both parties can expect their claims to be upheld in both countries. When one party to a contract is not holding up his end, the state must step in and enforce the contract. When that party’s home government is just as corrupt or incompetent, you get something other than free trade.

Not all countries have Anglo-Saxon sensibilities. Canada is not going to invest much into competing with America because both countries are culturally similar so cooperation is natural and mutually beneficial. China, on the other hand, is vastly different from the US. They see American and Americans as competitors, even adversaries.

That’s not to say there should be no trade with China. Like progressives, libertarians tend to see things in black and white. You’re either in favor of unfettered trade with everyone or you’re a close minded protectionist. Only libertarians and lunatics think this way. Most people fall into the middle area that thinks prudent trade deals with friendly countries are good, while reckless trade deals with rogue nations are bad.

All of this is germane to the TPP deal Obama is pushing. This deal is mostly a give-away to globalopolies, rather than a trade deal. The reason it is a secret deal is to keep people from seeing what’s in it, obviously. You don’t do that if you think the details are going to win you praise from the public. But, a lot of it has been leaked through various channels and it is what one would expect from a deal drawn up by global corporations.

It’s a reminder that being for free trade is like being for leprechauns riding unicorns. All of these deals should be looked at skeptically. The debate is not between free trade and no trade. The debate is over over how much power we want to cede to global corporations and foreign governments. Sometimes it makes sense to do deals with less than sterling countries. Sometimes the interests of multinationals coincides with those of Americans.

It can only be decided on a case by case basis.

 

My View on Taxes

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A while back, I took fire for defending death taxes. My failure to enthusiastically decry inheritance taxes was seen as something close to a mortal sin. Maybe just a severe wounding sin. Still, it was a reminder that taxes have become freighted with emotion, particularly outside the Cult of Modern Liberalism. My sense is most liberals think very little about taxes these days. They are the people in charge and therefore take a managerial view of government revenues.

But, the people outside the Cult are another matter. As best I can tell, libertarians imagine a world of no taxes. The respectable libertarians, from what I gather, like the idea of a simple flat tax paid by all citizens. All income is taxed at 15% with no exceptions. I’m sure there are variations on this from other respectable libertarians, but the gist of it seems to be simplicity, but also a minimalist approach. Set the rate low and leave it low to force austerity on Washington.

Conservative Inc. is all over the map when it comes to taxes. The so-called Reformicons imagine all sorts of social engineering that can and should be done through the tax code. Ramesh Ponnuru has been obsessing over child tax credits for years. That’s the heart of the GOP view on taxes. Instead of spending on social programs, they create them in the tax code. They sell them the same way Democrats sell spending programs – free stuff for their voters.

At the heart of all of it is the belief that we can move closer to the promised land if we just arrange tax policy a certain way.

My Tax Philosophy

My first rule on taxes is they must be high enough to pay for government. Borrowing to finance current spending is just taxing the unborn – at best. In most cases it is damaging to the middle-class because excessive borrowing warps credit markets. That quickly leads to the sorts of logrolling shenanigans we see today where banks churn credit activity to skim a profit without providi9ng services.

Pegging tax collection to spending has a clarifying effect on public policy as the bill comes with the services. If everyone’s current tax bill suddenly jumped 50% to close the budget gap, we would be having a different debate about the size and scope of government. Everyone is always in favor of spending the other guy’s money, especially when the other guy has not been born yet.

Of course, the traveling partner with the first principle is transparency. Hidden taxes are a crime against the citizen.The reason governments hide their tax schemes is they know the public would not be happy. If we are going to have self-government, the self better have all the information. Otherwise, the citizens, as well as the rulers, are guessing at public policy.

The most obvious example of this is the business tax. These taxes are always passed onto the employees or their customers. Payroll taxes come out of wages. Corporate taxes show up in the price of the goods and services. If employees saw all of the taxes on their pay stub each week, there would be riots in the streets.

There’s another piece to this puzzle. Taxes are not voluntary. They are collected by force. That’s why the power to tax is the power to destroy. It’s also why powerful people grease politicians to avoid paying taxes. Corporate giants spend millions lobbying Washington and every other Western capital for tax breaks. You can’t have self-government if the rich guys are bribing their way out of their obligations.

Corruption is always a part of human affairs. That’s never going to change no matter how you arrange things. You can limit corruption by removing the temptations that come with the power to exempt some citizens from taxes, regulations or laws. You can’t sell favors if you have no favors to sell. A sensible tax code removes, as much as possible, the favors the pols can sell to their rich friends.

Who Gets Taxed

More than half of Americans avoid paying federal taxes. They pay sales taxes, payroll taxes, fuel taxes and so on, but they avoid incomes taxes, despite having income. This is often pointed out by Conservatives and libertarians as a defect in the current tax code. Liberals, of course, argue that any tax on the poor is unfair because the poor are, well, poor.

What’s missing from tax discussions is who gets taxed and why. The egalitarian fantasy is that every man gets a vote and therefore has an equal stake in society. No such society has ever existed or ever could exist. Human societies are hierarchical. At the top you have the people in charge. At the bottom you have the people who do as they’re told. To pretend otherwise is self-delusion.

The people at the top have the most to lose if things fall apart which is another way of saying they have the greatest investment in the complex social arrangements paid for by taxes. At the other end of the social order, the people at the bottom have the least to lose. Being a peasant for one king is no different, in general, than being a peasant for some other king. The people in a typical American ghetto don’t care who is in charge, just as long as the EBT is charged on time.

Anthropologists have long noted that it is the wealthy who bear the bulk of the costs of social complexity. This spans all cultures and all times. The mathematics of social organization are immutable. In order to have a wealthy ruling class, you need a complex social structure. That social structure will always cost more than you can tax the peasantry – vastly more. That’s why the rich pay the bulk of taxes.

Taxing the rich at higher rates and higher amounts is inevitable, but the poorest of the poor have some stake in society. Taxes are the cost of citizenship. If you are not paying taxes, you are not a citizen. This has been true in all times and all places. No one taxes slaves or beggars. You simply cannot be considered a citizen in a modern society unless you pay taxes and you can’t have non optimo jure cives in a modern society so everyone pays something.

Conclusion

As you can see, I’m amenable to estate taxes because they are transparent, simple and fall predominantly on the rich. The trouble here is the pols can easily auction off exceptions and loopholes. Warren Buffet has been preying on family business for decades, mainly due to the inheritance tax and the many loopholes created in the tax code.

Otherwise, I’m open to any tax scheme that is clear, simple and difficult to corrupt. Government is not free so we have to pay taxes. Taxing food, children, dead people, kittens or whatever is not a moral issue, it is a math issue for me, just as long as the tax is clear, simple, applied to everyone and most important, pays for all of government today.

The Greek Complexity Problem

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Watching the Greeks cast about for a way to make math go away has been fascinating to me. Everyone knows the Greeks can never repay their debts. Everyone knows they will never make the reforms required to keep receiving aid from the rest of Europe. Yet, everyone keeps pretending otherwise and not just for appearances. It seems they really believe that mathematics will yield to wishful thinking.

Anthropologists assume that in modern times, complex societies cannot collapse. They can weaken and go through a process of reform, but they cannot collapse. The reason is every society is adjacent to another complex society. Collapse would lead to being taken over by a neighbor. Even a screwed up society like Greece will suck it up and do what is necessary to fix their walls and rebuild their core rather than become a province of Turkey or Bulgaria.

But, we don’t know that. It is just assumed to be true because it has always been true.  Things are true until they are not. Not so long ago, it was inconceivable that a member state would face financial collapse and now the Greeks are now preparing for bankruptcy.

Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking.

The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said.

“We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said.

A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €245bn.

The warning of an imminent default could be a negotiating tactic, reflecting the government’s aim of extracting the easiest possible conditions from Greece’s creditors, but it nevertheless underlined the reality of fast-emptying state coffers.

Default is a prospect for which other European governments, irritated at what they see as the unprofessional negotiating tactics and confrontational rhetoric of the Greek government, have also begun to make contingency plans.

In the short term, a default would almost certainly lead to the suspension of emergency European Central Bank liquidity assistance for the Greek financial sector, the closure of Greek banks, capital controls and wider economic instability.

Although it would not automatically force Greece to drop out of the eurozone, a default would make it much harder for Alexis Tsipras, prime minister, to keep his country in the 19-nation area, a goal that was part of the platform on which he and his leftist Syriza party won election in January.

No one really knows what will happen if the Greeks default. There will be lots of hooting and hollering. Capital will rush out of the country as Greeks try to stash their savings abroad, but that’s most happened anyway. The banks will fail and close down. The economy, for a short period will seize up. Civil unrest will be inevitable. A military coup is not out of the question, as in times of turmoil, the guys with the guns tend to have an edge.

To the average Greek, this could feel like the end to the world, but it does not qualify as a collapse by the standards of anthropology. Greece is in no risk of dissolving. A coup would just mean new leaders in charge of the same society. Similarly, Tsipras crowning himself king would simply be a modification of the organizational chart and small one at that. Reform would simply be handed to an authoritarian.

It’s tempting to pin the reason for all of this on democracy. Critics of democracy have always pointed to the quote allegedly from Alexander Fraser Tyler, “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.” In short, democracy becomes organized looting that accelerates into chaos.

That’s pithy and useful, I suppose, but not accurate. It’s easy to pin the blame on the freeloaders and loafers. Democracy may increase their influence, but it also strengthens more responsible elements in society too. Modern elections are always over some problem that needs solving and the winner is almost always the one promising a solution.

Even in Greece, the main parties representing the ruling elite tried to force through changes in the face of their fiscal crisis. When all of your options on the ballot are calling for the same things, democracy has been suspended. It was only when the main parties failed to come up with a way to address the crisis that the lunatic parties moved to the fore, offering nothing of substance, just a catharsis.

It seems to me that what is happening in Greece is a part of a longer process that is happening in the West. The Greeks joined the Euro for a reason. The Euro, of course, was not created to give bureaucrats something to do during the day. The whole project, including the addition of Greece, was an attempt to solve a problem.

Publicly, the problem they claim to be addressing is the long history of conflict in Europe. Economic cooperation, then a single currency and eventually, political unity. That’s the part above the waves. The part below the waves is the diminishing returns of the organizational model developed over the last two centuries. They are grasping about for some way to make work the mathematics of social democracy.

The math of social democracy is all about diminishing marginal returns. The first big programs like public education and aid to the poor had big returns, far more than the costs. Subsequent investments in complex social management netted smaller returns, but still more than the costs. Over time, the inertia of progress forced greater investment in complexity, aimed at mitigated or ameliorating the human condition, well past the point of diminishing returns.

In this regard, the Greeks are an example of what lies ahead for all of Europe and the West. They joined the Euro because it looked like a solution to their problem, but it only delayed the inevitable. Now they desperately try to kick the can further down the road, but there’s not much road left. What comes next is anyone’s guess. Perhaps it will simply be a disorganized dismantling of decades of social complexity, a national version of a reorganization through bankruptcy.

Death Spirals

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Go, go, go, said the bird: human kind

Cannot bear very much reality.

So said Eliot and he was certainly correct. Much of what we take for human culture is an elaborate defense mechanism allowing us to avoid facing the reality of our existence. I suppose there’s nothing wrong with it. Our species has carried on a good while now so there must be something of value to the trait. Still, it is not without its downside.

An example is in this story on US health care.

The Supreme Court decision in King v. Burwell, the case challenging the Obama administration’s decision to award tax credits for health insurance sold through federally established exchanges, could turn on the question of whether a ruling that ends the tax credits on federal exchanges might cause something known as a “death spiral” in health insurance markets.

The good news is the answer is probably no, but the bad news is that’s only because the death spiral has probably already started.

A death spiral generally occurs when insurers are forced to raise premiums sharply to pay promised benefits. Higher premiums cause many of the healthiest policyholders, who already pay far more in premiums than they receive in benefits, to drop coverage.

When healthy policyholders drop coverage, it leaves the insurer with little choice but to raise premiums again because they now have a risk pool that is less healthy than before. But another premium increase means many of the healthy people who remained now drop their policies, too, and this continues until the only people willing to pay the now-very-high premiums are those with serious medical conditions.

Europeans, to their credit, have accepted the fact that the laws of supply and demand apply to health care, just as they do every other product and service. That means there must be a rationing mechanism. Europeans prefer their authoritarianism straight so they turn the rationing over the to the state. Americans can’t accept that supply and demand applies to health care so we keep inventing new crackpot schemes that promise to suspend the laws of nature.

Health care reached the point of diminishing returns about fifty years ago. 100 years ago America spent 3% of GDP on health care and people lived to about 60. Today we spend about 15% on health care and people live to about 80. A good portion of that increase in life expectancy is due to better food and less violence. It is axiomatic that as things like health care improve, the cost of further improvement escalates. The marginal return on investment declines.

This is true in all areas of human endeavor. The initial burst of productivity from the Internet was cheap. The phone lines existed and most Americans could read and write. As we have gone on, the cost of further productivity gains have escalated as new infrastructure has to be built out and new skills mastered. Again, this is phenomenon that social science has documented for a long time. Marx, while not framing it the same way, was talking about it in the surplus value of labor theory.

The fact is, we have about as much health care as we need. Until genetics begins to offer up solutions that reset the baselines, spending more on current health care is a negative investment. That’s the defect of the central planning model of Europe. There’s no hope for new technologies to reset the baselines and spur new high return investments. It’s why all the heavy lifting is done in the US these days.

This brings me back to the supply and demand aspect. Rationing is best done by price. People want BMW’s more than they want Dodge Darts and that is reflected in the price. No everyone can have a BMW so the clearing price determines who gets a BMW. In the American health care system, this process is retarded by government intervention. The result is rising prices and diminishing services. That’s the real death spiral, the death spiral of the monopolist.

America has the greatest health care system on earth. It is super cheap, with lots of options and a high degree of customer satisfaction. It is called veterinary medicine. American pets get better health care that 95% of the world population for pennies. The reason is there are few barriers to suppliers so there are many options along the price curve. There’s also incentives to innovate. My Vet has world class lab equipment because it helps attract business.

But, we would rather pamper our pets and starve out children than accept the reality of the human condition.

Corinthian 15

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Shay’s Rebellion, The Whiskey Rebellion, Nat Turner’s Rebellion, The Know-Nothing Riot of 1856, The Boston Police Strike, Bonus Army March, Zoot Suit Riots, The Watts Riots. There’s a long tradition of men (and women!) taking matters into their own hands and striking out at the state or society over grievances.

Now, we have the Corinthian 15.

Mallory Heiney, a 21-year-old former student of the now-defunct Everest College, is part of a group of students refusing to pay back their student loans.

Heiney wrote an op-ed article in The Washington Post in which she described the lies Everest allegedly told her as well as the insufficient education she says she received.

Heiney called Everest a “debt trap.” When she explained to her adviser that she couldn’t afford student-loan payments while in school, she was assured she could defer the payments on her $24,000 in student loans until post-graduation, according to her article.

That ended up being untrue, she said. Heiney said she was on the hook to start paying interest payments on her loans two months into her program.

The program also allegedly failed to provide her with a quality education. She said her teachers did little more than read aloud from textbooks, and she was unaware of basic concepts required to pass her nursing licensing exam. She said she was able to pass only by “spending hours researching the test questions online and watching YouTube videos.”

Heiney and 15 other students who attended the Corinthian College system have banded together to fight what they describe as predatory student-loan tactics by the financial aid offices and a failure to provide quality education.

The members of the group, referred to as the Corinthian 15, feel justified in their refusal to pay back their loans. They believe they are fighting for students everywhere who are manipulated by unfair university practices and are riddled with student loan debt as a result.

“In 1955, Rosa Parks refused to give up her seat on a bus,” Heiney wrote in her article. “This soon led to the revolutionary Montgomery bus boycott. If those who came before us can take a stand in the face of persecution, harassment, beatings, imprisonment and even death, I will certainly stand in the face of wage garnishment and a tarnished credit report.”

Ah yes, Rosa Parks. That’s who comes to mind whenever I think of former students not paying their school debts. At least she did not compare herself to Jesus. I guess that’s something to celebrate.

Other former students are joining in, at least publicly, so maybe it is a thing. Then again, default rates are through the roof, over 15% according to various sources. It seems to be a tough figure to pin down because of the blend of private and federal lending. This report is the best I could find in five minutes of searching. Banks look to keep default rates below 2% as a rule. Anything higher is considered a problem.

Howling lunatic Elizabeth Warren is back again with another scheme to hand tax payer money to students who are in debt. That’s really not quite right as her scheme is about transferring tax payer money to her pals in the academy. No one ever seems to ask why college has become so wildly expensive. It’s just assumed to be an unalloyed good. No price is too high for the laying on of hands at the academy.

The sad reality of American higher education is that it has become a workfare program for the lesser lights of the managerial elite. If you have something on the ball you head off to the law of finance. If you are not terribly bright you end up in the economics department at local college. Most of what goes on at our colleges has nothing to do with training young people for productive work. That’s why tuition rates have skyrocketed.

But, that’s a subject we’re not permitted to discuss.

Now, whatever sympathy I may have for young people and their families facing modern college costs, I’m having a tough time mustering empathy for Ms. Heiney. The outsized sense of self-importance displayed by this young woman, the ring leader of this micro-protest, is a bit much. She is an adult and she foolishly entered into a bad contract. That’s not the fault of the taxpayers or the people who lent her the money.

That’s the trouble with the moaning about college debt. The people doing the moaning seem to be in a perpetual state of adolescence. Generation Onesie, raised by helicopter parents, expects the rest of us to pick up after them, tend to their boo-boos and organize our lives around them. The vibe that comes through in these stories about school debt is an overweening sense of entitlement.

Ironically, the institution inculcating this solipsism in the young is the source of their troubles, the colleges and universities. Go onto a modern college campus and it is a weird Potemkin village that operates nothing like the world around it. I always get the same feel as I get when I’m at a resort. It’s West World for young adults.

Elite universities are the worst. Just look at the graduation rates of these places and it is clear that failure is not an option. No one ever bothers to notice that schools allegedly offering the most challenging and rigorous education, have a near zero attrition rate. BUD/S training prides itself on its 65% failure rate. Ranger school is similar. Duke, in contrast, takes pride in its 99% graduation rate.

Ms. Heiney, who no one would mistake for an Ivy League graduate, nevertheless assumed that all that was required of her was to sign some forms, show up as requested, repeat what was was told to her and the world would be her oyster. This is the thread that runs through all of the complaints about school debt. No one takes responsibility for anything. Instead, strangers are expected to pick up the bill for the mistakes of these people.

One of the best lines Penn Jillette ever uttered was that government makes weasels of us all. You see it with college. The massive government loan system has turned the colleges into dependency rackets. Everyone involved is looking to separate the suckers from their money. The process produces waves of young adults expecting a good life at the expense of others.

The simplest and quickest way to end the problem is to end the government role in financing college. In short order, colleges will get cheap again, so that young people from modest backgrounds can work their way through school. Of course, we’ll need to find something for the Womyn’s Studies gals to do, which is why this will never happen. The ruling class needs a place to dump its misfits and that’s the college campus.

College Blues

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I think the only reason to read the NYTimes (or any other agit-prop daily) is to get a heads up about what the Left plans to do to us next. It’s like the scene from Men in Black where Agent K reads the supermarket tabloids for the real news. In the case of the NYTimes, there’s no news, just warnings.

This is from a few weeks back and I saved it figuring there would be other warnings from other places. It could make for blog post material. The other day I saw this on ZeroHedge. My bet is the Liberal Democrats are going to be testing a bunch of these ideas for the 2016 election. The idea is to promise the young free money so they will be vote for the Left. Inevitably, the other side will offer up their own basket of goodies to the millennials.

The NYTimes idea has been kicking around for years. I recall “new” Democrats yammering about this back in the 80’s. Their big idea back then was a thing called Teacher Corp. The students who went into teaching would get their loans forgiven. I forget the name of the other plan for non-teachers, but it was basically a lifetime tax. The graduate would pay a special tax for the rest of their working life to pay back the tuition.

These ideas all sound great if you are an economic illiterate. When you subsidize demand, prices rise. When you throttle the growth of supply, then prices rise even faster than the subsidy. That has been the policy in the US for decades. Free money from the state is given to student to use for college. Colleges wisely raised their prices to account for the free money. The state keeps upping the free money and the colleges keep raising prices.

Maybe there’s a connection?

If the government created a BMW purchase plan where everyone is eligible for a $5000 subsidy if they buy a BMW, the price of BMW’s will go up by $5,000. The reason is BMW is not stupid. They know that demand will suddenly spike so they can sell all of their cars at the former price plus the new premium. They may even cut supply to reduce costs.

That’s what has happened in America. At the end of WW2, we had eight Ivy League schools and 139 million people. Today we have eight Ivy League colleges and 339 million people. The student bodies of these schools are the same size as they were 70 years ago.

At the bottom end, we have many more state schools and many more seats in state schools, but the price is vastly greater, even accounting for inflation. The California system used to be free for California residents. That’s not longer the case. Amazingly and I’m sure it is a coincidence, most state colleges charge what students are able to borrow under Federal programs.

The trouble is the central planners are in a trap. The delinquency rates on the trillion in student debt are going up. Tuition rates are unsustainable as new students cannot borrow enough to cover the costs. Even if they could, the delinquency rates would just climb faster. Universities, for the most part, are trapped in a cost model that requires raising tuition rates at multiples of the inflation rate.

The doomsday crowd is way over the top on most things, but they may be right about student loans and the whole college racket. The little guys will be the first to go as they often have no reason to exist in the first place. The Sweet Briar closure is a typical example.

The fact is, no amount of clever policy can change reality. People with debts they cannot pay, don’t pay them. When costs rise to the point where prices are unsustainable, people stop buying the product. As the old saying goes, things that cannot last eventually end.

How To Fix The Money

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I read ZeroHedge on a regular basis. I think I would be very rich if I could bet against their predictions. As the old joke goes, they have predicted five of the last three recessions. They are not entirely off base, but the world has not collapsed and its not going to collapse, most likely. What they get right is that most of our troubles are linked to the currency arrangements. Floating fiat currency has unleashed all sorts of new forces that policy makers cannot comprehend.

Money is a store of value. Going to the market with my goats to trade for shoes is a big hassle. I have to find someone who wants goats, but also has shoes. The ability to store the value of those goats into coin makes the whole thing easier. Giving central banks the right to arbitrarily alter the value of the coin is, in effect, the right to arbitrarily alter the value of my goats and by extension, my labor. That’s another way of saying the Feds get to alter the value of me. That’s a terrible weapon with unknown unknowns. Sorting through all of these unknown results has befuddled our rulers for several decades now.

Even so, the world has not changed all that much. The currency manipulation is due, in large part, to the need for governments to raise money. The corporatist state needs a lot of money to buy off interest groups, satisfy grievance groups, pay for cradle to grave custody of the citizens and empire maintenance. Normal taxing is limited by economic growth, which is about 5% per year after inflation. US debt has grown ten percent a year since 1980, so it is not hard to see what has been happening.

Instead of exponential credit growth, how about the government sell ads on our money? They could offer Walmart, for example, the chance to sponsor the twenty. Instead of Jackson on the front, it could the Walmart logo with “Brought to You By Walmart!” Singles could be festooned with ads from small companies. Since each run could have different sponsors, your handful of singles would have a bunch of different ads. Given the booming strip club culture in America, these ads would sell like crazy. “This pole dance brought to by the Federal Reserve and the good folks at Budweiser!”

Of course, another way to do this would be to let big companies offer their own currency. A big reason central banks are forever fiddling with currency values is to satisfy the demands of global corporations. Europeans have always preferred authoritarian government, but Americans would rather have global corporations to the shoving around of the citizens. That way we can pretend to be a self-governing republic. That means the state has to “do a lot of favors” for the global operators.

The truth is, we are breaking up into corporate camps anyway. The MacCult calls themselves “Apple families”so letting them have their own currency is not a great leap. Look at how irritating they are with ApplePay and that has been out for just a few months. That would make it easy for the MacCult to spot “haters” because those would be the people using GoogleBucks or MSMoney. It would have to be backed by stock or other assets, but it worked in the 19th century during the free banking era.

The Doctor Shortage

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Imagine you are presented a few career options early in your life. The first option is one that will require years of study and a high IQ. You possess a high IQ, but there is some risk that yours is not high enough. You cannot know until you get far along in the process. The eventual end point of the process is a career that may be spiritually fulfilling, but has decreasing social status and only an above average salary. In other words, by mid-life you can have a big house, the sports car and the trophy wife, but you’re going to spend more than a decade slaving away in poverty.

That’s option #1.

The next option is one that requires about half the study time as the first option and far less of an apprenticeship. You have to be smart, but not genius level smart. Standard test scores will tell you if you have what it takes to make it in this path. By the time you have established yourself, you will surely make an upper-middle class income and could easily be making much more. It’s a high status job and a lot of fun, but not spiritually fulfilling. It just lets you live a 2% lifestyle and get going at it by the time you’re in your middle twenties..

That’s option #2.

Now, we have the final choice. This is path that does not necessarily require a high IQ, but it helps. There’s really no way to wash out so you go as far as your skills will take you. It is never going to be high paying or high status, but you can have a nice middle class income. There will be times when you have to scrimp and save. You will have to do without some things. But, the spiritual and psychic rewards are limitless. This career will be your sanctuary from the world and bring you a lifetime of happiness.

This is option #3.

In medieval times, these options would have been the choice between a high ranking clergyman, an aristocratic soldier and a monk. That’s if you were born with magic blood. Nobles had these choices, but even then the choices were often made for you by the patriarch or by circumstance. If you were born a commoner, then you spent your life harvesting filth and complaining about the violence inherent in the system. But, we live in an era in which there is still some effort to try and scoop up the talented from the lower orders.

That means young men and women take standardized tests so colleges and universities can begin to sort out who is and who is not managerial class potential. We’ve not yet reached the point where career paths are assigned and that may never happen as it is contradicts the interests of the managerial class, who pride themselves on being a self-selected meritocracy. Choosing your own path is a big part of their class identity so that is something that will likely remain a feature of their ideology.

The question then, getting back to where we started, is which of the three choices would most people choose. In modern times, physician is clearly option #1. Advancing far in the medical rackets requires a high IQ, a long time in school and a very long and unpleasant apprenticeship. The reward at the end is pretty good, but no better than option #2. In fact, bankers and banker’s lawyers usually make vastly more than comparable doctors. It is only at the low-end do we see doctors and nurse practitioners compete economically with lawyers and brokers. At the high end, no doctor can compete with a VP at Goldman.

The final option is the lifestyle option. You’re a smart guy from a good family, but you like smoking weed and surfing so you open a surf shop. Alternatively, you have what it takes for the first two options, but have a passion for some new business that is many years from taking off, but you’re going to be on the cutting edge, even if it means a long struggle. Think Ben & Jerry’s Ice Cream or custom bike frame makers. There are, of course, trust fund types who have the money to be as weird as they like. John Heinz IV is a blacksmith and Buddhist.

That brings us back to those first two options. We have made becoming a doctor impossibly difficult. Worse yet, we have made it unrewarding. Socialized medicine has this habit. The result is the native talent opts for the second option. Being a hotshot lawyer is just an all-around better  life than being a doctor. It’s why share holder meetings are packed with attorneys now. In the fifties, they were packed with doctors. In Britain, a quarter of physicians are foreigners. Not foreign born, but foreigners.

The same is happening in the US.

The United States faces a shortage of as many as 90,000 physicians by 2025, including a critical need for specialists to treat an aging population that will increasingly live with chronic disease, the association that represents medical schools and teaching hospitals reported Tuesday.

The nation’s shortage of primary care physicians has received considerable attention in recent years, but the Association of American Medical Colleges report predicts that the greatest shortfall, on a percentage basis, will be in the demand for surgeons — especially those who treat diseases more common to older people, such as cancer.

In addition to the growing and aging population, full implementation of the Affordable Care Act in all 50 states would increase demand for doctors as more people are covered by insurance. But Obamacare’s impact will be small — just 2 percent of the projected growth in demand, the organization said. The supply of doctors also will grow but not nearly as quickly as the need, officials said.

“An increasingly older, sicker population, as well as people living longer with chronic diseases, such as cancer, is the reason for the increased demand,” Darrell G. Kirch, the AAMC’s president and chief executive, told reporters during a telephone news briefing.

In the study of collapse, there are few fixed rules. The one thing on which everyone seems to agree is the ruling classes are no longer able to cope and adjust to changing circumstances. Why this happens is tough to fathom, but simply being wrong is a good starting point. The Athenians were wildly wrong about the Syracuse campaign, despite warnings from respectable members of society. Wrongness has inertia.

With regard to health care the majority of the managerial class is locked into 19th century ideas about how to micromanage an economy. No one in charge can imagine anything other than a micromanaged system so they deploy all available resources in the effort to perfect their system. The more they try to fix the system, the worse it gets. We’ve reached a point where the inputs result in unexpected outputs. A few more cycles and the inputs have no result. The system seizes up and then it collapses.

 

The Fallacy of Free Trade

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Way back in the 80’s, I used to tell people we would rue the day we let Congress give up its power to manage trade. Tariffs and restrictions have well know costs and they don’t always serve the interest of the people. I read Smith’s analysis of English corn laws and I fully agree that tariffs rarely accomplish their stated goal. The world is richer when countries allow the free flow of goods between them – generally speaking. There are exceptions and they are big exceptions.

That’s the trade-off. Congress gets to play games with trade in exchange for addressing those exceptions. Free trade with Canada, for example, is a no-brainer. The free flow of goods and people between our two countries is good for both of us. Free trade with Mexico, on the other hand, is fraught with problems. Mexico is a failed state run by narcotics traffickers. Here we are all these years later and maybe it is starting to dawn on our rulers that trade is not a set it and forget it thing.

President Barack Obama has called on Congress to grant him fast-track trade authority for his Trans-Pacific Partnership free-trade agreement. The administration insists the authority, which would give Congress only an up-or-down vote on the agreement, is needed to get the best possible terms from its trade partners along the Pacific Rim.

During his 2008 presidential campaign, Obama promised to renegotiate and improve the North American Free Trade Agreement (NAFTA). But it now looks like what he really meant is to expand on that flawed trade model and extend it to other countries.

Twenty-one years after NAFTA and four years after Obama’s 2011 U.S.-South Korea Free Trade Agreement, there is abundant data documenting how this trade model has been disastrous for most U.S. businesses, farmers and workers.

Since the pacts were implemented, U.S. trade deficits, which drag down economic growth, have soared more than 430 percent with our free-trade partners. In the same period, they’ve declined 11 percent with countries that are not free-trade partners. Since fast-track trade authority was used to pass NAFTA and the U.S. entrance into the World Trade Organization, the overall annual U.S. trade deficit in goods has more than quadrupled, from $218 billion to $912 billion.

The United States now has an annual $177-billion trade deficit in goods with its 20 free-trade partners. Over the past decade, however, U.S. export growth to countries that are not free-trade partners exceeded the growth of free-trade partners by 24 percent.

The trouble has always been cultural. Canada can be relied upon to follow the rules. The Canadian government will police itself and respond to requests from our government when something is amiss. China, on the other hand, is a bandit culture and the Chinese government sees America as an adversary. Naturally, they cheat on every deal. Mexico is a failed state and lacks the ability to police themselves, even if they wanted. Free trade with these countries sets us up to be patsies, which has been the case for decades now.

The thing with tariffs is we knew the costs up front. The cost of protecting a domestic industry could be calculated. As a matter of public policy, the people decide if the price is warranted. It’s not always logical, but the costs are at least predictable. Unfettered trade brought unknown unknowns that are just starting to be understood. Those unknown unknowns have costs. The new global elite, for example, is unconstrained by national governments. The result is a class of global pirates seemingly beyond the reach of the state.

Public policy is always about trade-offs. Life may not be a zero sum game, but it is close enough to think of it that way. That means a policy that benefits one group will do so at the expense of another. Limiting trade with Mexico may drive up the cost of lawn care, but it also means you can go into an emergency room that does not look like a bus station in Tijuana. Regulated trade with China may jack up the cost of your iPad, but it also means keeping poisoned pet food from China off US shelves.

These are trade-offs to be debated by the people’s representatives. Turning them over to technocrats at the WTO is to make a mockery of self-government and open us up to predation.