Monthly Archive for March, 2006

HP Going To Mexico

Today from 3 — 6pm is my last final for this quarter. Soon after, I hop on a plane to Monterrey, Mexico to visit my grandma. I won’t be back until April 02, so no blogging until then.

Quote Of The Day

“Advocates of the European model point to the pockets of poverty in the United States, but may not realize that poverty cannot be abolished without recourse to measures that produce the social pathologies that we observe in Europe. Social mobility implies the opportunity to fail. If society protects jobs, the employment opportunities of ambitious newcomers are reduced and they may end up at the embittered margin of society. Thus, it is not poverty that breeds extremism; it is social policies intended in part to eradicate poverty that do so, by obstructing exit from minority subcultures. If Muslims in European societies do not feel a part of those societies because public policy does not enable them to compete for the jobs held by non-Muslims–if instead, excluded from identifying with the culture of the nation in which they reside they perforce identify with the worldwide Muslim culture–some of them are bound to adopt the extremist views that are common in that culture. The resulting danger to Europe and to the world is not offset by long vacations”. —Richard Posner, discussing the differences between the U.S. Economic model and the European economic model with regard to immigrants, specifically Muslim immigrants, over at the Becker-Posner blog

Quote Of The Day

“Krugman’s failure to relate the European model to Europe’s Muslim problem is telling. To point to the upside of Europe’s social model without mentioning the most serious downside is to provide bad advice to our own policymakers. The assimilation of immigrants by the United States, compared to the inability of the European nations to assimilate them–with potentially catastrophic results for those nations–is not unrelated to the differences between economic regulation in the United States and Europe. Because the U.S. does not have a generous safety net–because it is still a nation in which the risk of economic failure is significant–it tends to attract immigrants who have values conducive to upward economic mobility, including a willingness to conform to the customs and attitudes of their new country. And because the U.S. does not have employment laws that discourage new hiring or restrict labor mobility (geographical or occupational), immigrants can compete for jobs on terms of substantial equality with the existing population. Given the highly competitive character of the U.S. economy, in contrast to the economies of Europe, employers cannot afford to discriminate against able workers merely because they are foreign and perhaps do not yet have a good command of English. By the second generation, most immigrant families are fully assimilated, whatever their religious beliefs or ethnic origins”. —Richard Posner, discussing the differences between the U.S. Economic model and the European economic model with regard to immigrants, specifically Muslim immigrants, over at the Becker-Posner blog

Quote Of The Day

“There is an ongoing debate among economists over whether social mobility is greater in the United States or Europe. The general evidence on this does not offer a definitive answer, but there is little doubt that most immigrants believe opportunities for themselves and their children are greater in the United States. This is why America is the first choice of most immigrants whenever they can choose where to go, and it also explains the different attitudes of immigrants in Europe and America. As Posner emphasizes, most immigrants, non-Muslim as well as Muslim, feel far more accepted in the United States than in Europe, are less segregated here in both their living arrangements and employment, and appear to advance more easily toward higher level jobs”. Gary Becker, Nobel Prize winning economist, discussing the difference between the US economic model and the European economic model over at the Becker-Posner blog

Quote Of The Day

“Clearly, the European system of employment helps the “insiders” with good jobs, and works against “immigrants” and other newcomers ,or “outsiders” in labor markets. …The labor market restrictions, however, make it hard for immigrants to obtain jobs in the legal economy, so either they are unemployed, or they work in the flourishing underground economies of Europe, where they avoid paying taxes. Apparently, the French intentionally do not collect data on unemployment rates of their Muslim population, but economists there tell me they believe it is more than double the official overall French rate of over 10 per cent unemployed”.Gary Becker, Nobel Prize winning economist, discussing the difference between the US economic model and the European economic model over at the Becker-Posner blog

Quote Of The Day

“Workers themselves increasingly recognize the reality that there is no free lunch through unionization and are increasingly voting to be non-union. But the word has yet to reach many among the intelligentsia, who still think of labor unions as institutions that benefit the working class. You can always benefit particular segments of any society at the expense of some other segment but unions do not benefit even the working class as a whole — just those who are current union members — at the expense of other workers, current and future….People on the inside looking out benefit at the expense of people on the outside looking in. Losers include not only less experienced and lower skilled workers, whose output would not cover the cost of the minimum wage, but also future workers who may find fewer job opportunities in the unionized industries”. —Economist Thomas Sowell on a three part series titled, Something For Nothing

Quote Of The Day

“To appreciate how cockeyed America’s Dubai-phobia is, you have to spend a little time here, as I did this week. The truth is, this is one of the few places in the Arab world where things have been going in the right direction — away from terrorism and Islamic fundamentalism and toward an open, modern economy. That’s why congressional opposition came as such a surprise here. People in the UAE think they’re America’s friends. The ports deal was part of the UAE’s embrace of things Western. Wednesday night, I traveled with the minister of higher education, Sheik Nahayan bin Mubarak, to the dusty city of Al Ain to attend a Mozart festival at which the Vienna Chamber Orchestra performed. And I visited the American University of Sharjah, created nine years ago as a beacon of liberal arts education. On a wall next to the chancellor’s office is a photo of the twin towers in New York, taken by one of the students on June 8, 2001. “There are no words strong enough to express how we feel today,” reads a statement signed by UAE students”. —David Ignatius, Washington Post Columnist

Quote Of The Day

“Are we truly to believe Hillary’s insistence last week that she knew nothing about Bill’s counseling of his friend and benefactor the crown prince of Dubai, Sheik Mohammed bin Rashid al Maktoum, on the ports deal? Do Bill and Hillary Clinton ever speak to each other, or do they just attend funerals, fundraisers and Billy Graham crusades together for photo-ops? Bill is, after all, a regular in Dubai. The crown prince — that is, the government — contributed to his presidential library and pays him $300,000 per speech. Recently, Yucaipa, an American company that has Bill Clinton as a “senior adviser” and pays him a percentage of its profits, formed a partnership with the Dubai Investment Group to form DIGL Inc., a company dedicated to managing the sheik’s personal investments. No doubt Bill Clinton was brought in to cement this lucrative deal from which he — and therefore Hillary — will likely make millions” — Dick Morris, former Bill Clinton adviser

Quote Of The Day

“The place to begin in thinking about the issue [of school vouchers] is with the difference between the state’s mandating and subsidizing a service, on the one hand, and providing the service itself, on the other hand. The government can require that children be vaccinated and pay for their vaccination without manufacturing vaccines. Similarly, it can require that children attend school and pay for their schooling without operating schools, something it doesn’t seem to be particularly good at; politics and teachers’ unions drive up costs and drive down quality. The government would have to impose minimum standards on all voucher-supported schools, as it does now on private schools, but that is different from ownership and control. The government used to regulate railroad rates, but, unlike the practice in many other countries, it did not own the railroads. A voucher system is a first step toward privatizing education. Means-tested voucher entitlements would enable parents to select a school even if they had no private means. Many rich people would continue to send their kids to fancier schools than vouchers would pay for, but that would be no different than under the current system of public and private education” —Richard Posner, responding to comments over at the Becker Posner blog

The Truth About The Gender Gap

Boston Globe columnist Jeff Jacoby writes:

Of the last seven presidential elections, Republicans have won five — three times with more women’s votes than the Democrats. For all the rhetoric about the mighty gender gap — Democratic strategist Ann Lewis once called it ”the Grand Canyon of American politics” — Republicans seem to bridge it without difficulty.

That’s because women aren’t monolithic voters, as O’Beirne emphasizes, and they don’t march in lockstep to the beat of liberal drums. The best evidence of that is the electoral gap that really does matter in American politics — the gap separating married women from those who are single.

Unlike the gender gap, there is nothing illusory about the marriage gap. Married women are more likely to vote Republican; unmarried women are more likely to vote Democratic. In the most recent presidential election, unmarried women voted for John Kerry by a 25-point margin, while President Bush won the votes of married women by an 11-point margin — a marriage gap of 36 points.

”Want to know which candidate a woman is likely to support for president?” asked USA Today in 2004, as the Kerry-Bush race was heading into the home stretch. ”Look at her ring finger.”

The full article can be found here.

Quote Of The Day

“But the externality cannot be fully eliminated by passing a law that would require Wal-Mart and other employers of low-income employees to insure all their employees. This is clearest in the case of minimum-wage employees who at present are not insured. Since the labor cost that an employer incurs is the sum of the wage he pays and the cost of any fringe benefits, forcing the employer to incur a total labor cost of $12,000 for an employee worth to the employer only $10,000 will simply cause that employee to be fired, with little prospect of obtaining another job; so he will lose his health insurance and be thrown back on Medicaid. Suppose instead that the employer is willing to incur a total labor cost of $12,000 for this employee, but the latter prefers a cash wage in that amount and no insurance, and now suppose as before that the employer is forced to insure him. The employer will reduce the employee’s wage to $10,000, which may inflict significant hardship because the employee needs the cash more than he wants insurance (if he has no assets, he may well not need or want any health insurance). Notice the perverse redistributive effect: the average taxpayer, who is indeed made better off because the employee is now paying for his own health care, is wealthier than the average low-income employee”. —Richard Posner, discussing the effects on the poor from forcing Wal-Mart to pay for health insurance over at the Becker-Posner blog

How To Make Health Care Cheaper

The Wall Street Journal points us to an interesting area of Health Care where prices have been going down while quality has been going up:

One leading theory on health-care inflation suggests that part of the problem is that consumers don’t generally spend their own money on health care. Rather, it’s paid for by “third parties” — either by insurance paid by employers or by the government — giving individuals little incentive to pay attention to price. And giving doctors and hospitals little incentive to be clear about either price or quality. That’s the thinking behind new health-insurance products such as Health Savings Accounts, which allow individuals to reap tangible benefits by making cost-conscious medical decisions.

But will HSAs help keep costs down? And what would a price-sensitive health-care market look like? Some answers can be found by looking at the market for medical procedures that aren’t usually covered by insurance today. Take cosmetic surgery and dentistry, both widely used and available. Plenty of consumer satisfaction and no cost crisis there.

Another good example is LASIK, the revolutionary laser surgery that over the past decade has restored many former eyeglass or contact-lens wearers to near perfect sight. No doubt most readers have noticed the advertisements and aggressive price competition for the procedure in recent years. And it turns out competition works.

The nearby chart tells the story. In early 1999, shortly after LASIK was first approved by the FDA, the average price for the procedure was about $2,100 per eye. By the end of last year, it had fallen about 20% to $1,687. Innovators have also responded to the demand for the service by developing a newer and more precise LASIK technology called “wavefront-guided” LASIK. Naturally, they charge more for this better, more accurate technology, but not much more than the standard procedure originally cost.

In short, the existence of a real market for the LASIK procedure has produced rapid improvements in technology and stable-to-falling costs. Between 1999 and 2004, by contrast, overall annual health expenditures per person in the U.S. increased to nearly $6,300 from $4,400, and the increase is being felt acutely by employers and their workers.

The LASIK experience also refutes the criticism of HSAs that individuals without comprehensive insurance coverage are likely to underconsume health care to their own detriment. If so many people are willing to ante up for optional procedures like LASIK, surely they’ll be able to get used to more direct spending on urgent medical needs as well. Just as surely, everyone stands to benefit from a health-care marketplace in which LASIK surgeons and dentists aren’t the only medical providers competing aggressively for business.

Proponents of government-run health care keep insisting that medicine is different from everything else in the economy in being immune to market forces. But the LASIK example shows that where a market in health care is actually allowed to function, with transparent pricing and incentives to spend wisely, the market works very well. The goal of public policy should be to make sure there’s such a market across the entire health-care industry.

The full article can be found here.

Update: Harvard economist Greg Mankiw has more.

Quote Of The Day

“Since an HSA requires a large deductible, they are best when combined with a form of catastrophic insurance; that is, medical insurance that pays only for large, expensive, and unusual medical problems. For this reason, and to cut down free riding by the uninsured on taxpayers, I believe everyone should be require to have catastrophic medical insurance–with the very poor covered by Medicaid. The premium on such catastrophic coverage might be allowed to be deducted from taxable income, the way HSA contributions are”. —Gary Becker, Nobel Prize winning economist, discussing his views on health care over at the Becker-Posner blog

Should We Ban All Motels?

Mark Steckbeck, professor at Hillsdale College, writes:

The virtue of a free market economy is that it serves disparate tastes and talents—wants and skills. Hotels and motels, for example, differ in their locations, amenities offered, cleanliness, etc. In fact, some are utter fleabags many of us might deem unseemly. But they serve the wants of others, especially those with few or no other housing alternatives such as migrant workers and the near homeless. These customers obviously find inexpensive motels their best alternative, notwithstanding my objections.

If a minimum quality standard was legislated on motels (let’s say in the name of justice to protect the poor), forcing them to provide middle class quality and ammenities, are the customers of inexpensive motels made better off? If we force owners of motels to provide a certain level of service and quality—say a “living” quality—that forces some hotels raise their rates or to shut down, are their customers made better off? Is anyone made better off by eliminating the best market alternative currently available to them? If hoteliers refuse to treat their customers to the standards compatible with my interests I don’t want them around any way. That makes the poor better off, right?

If you say no, how is this any different than someone saying this about Wal-Mart:

Look, no one should have to work in a Wal-Mart; I just plain don’t care if the state loses the jobs that the chain might ‘create’. What’s the point of having those jobs when they don’t pay a living wage and don’t provide any sort of healthcare? Not to mention the way they destroy the workers’ souls.

Steckbeck concludes with:

Although I’m sure the author didn’t intend it, his argument is a callous disregard for the poor and the unskilled. The effect is to say, “Let’s remove the only employment alternative available to many Wal-Mart workers, and for many the bottom rung needed to acquire experience and skills necessary to obtain higher paying jobs. Yeah, let’s just get rid of those.”

You may not like the job or the compensation package, but like the example of inexpensive motels, remove their best alternative and they are made worse off. Be grateful that you have the skills and opportunities that allow you to earn a decent compensation package, but don’t destroy someone else’s best alternaitve because it isn’t compatible with your idea of fairness. How noble and righteous is it to make the people who lack the skills and opportunities currently available to you worse off?

The full article can be found here.

Quote Of The Day

“The root of Old Europe’s problems is that it is in denial regarding the nature of the society it has constructed. In the first instance, European nations are capitalist, not socialist. It takes capitalism to have socialism, in the sense that without capitalism you get Cuba and North Korea and Albania when you try to redistribute. How many politicians in Old Europe are ready to defend capitalism against the utopian left? Not one prominent man or woman. Old Europe thinks that it has reached a sort of end-of-history—people dream of moving beyond capitalism to a more “humane” world. Witness the 35 hour week. The 35 hour week will go down in history as the point at which France raised its hands, capitulated, and sank into a slumber. Let’s hope that the rest of Europe wakes up before the continent’s relative decline leads to protectionism and drags the rest of us down”. —Timothy B. Smith, associate professor of history and chair of undergraduate studies at Queen’s University, Ontario, discussing the fate of Europe in the libertarian blog Cato Unbound

Quote Of The Day

“Numerous inner-city charter and private schools are proving that the gaps can be narrowed, even closed, when rigorous pedagogy is practiced by teachers in teacher-centered classrooms where knowledge is regarded as everything. But most ed schools, celebrating “child-centered classrooms” that do not “suffocate discourses,” are enemies of rigor”. — George Will, in an article in Newsweek titled, “Ed Schools vs. Education