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No magic here

July 29, 2009 1 comment

President Obama came to town today to stump for his new health care package in a “town hall meeting” of the type that are quite de rigueur these days. WRAL has the story.

And what appalls me is that this entire health care move seems to be ignoring one simple fact: economics is a zero-sum game.

Example, from the article: “Obama pledged that the health care legislation he is seeking will bar insurance companies from denying coverage because of pre-existing medical conditions.” Why do the insurance companies deny these people coverage? Is it because they’re horrible misers who enjoy seeing people in pain? Of course not.

Covering people with pre-existing conditions is more expensive than a healthy person. Since the insurance company has to take in more money than they give out to stay in business, they have to set a premium that will ensure they don’t lose money on this person. So if they have to take this person with a pre-existing condition, they also take the risk that they’ll have to pay a lot to cover their bills. Currently, they just won’t take the risk and just won’t cover you. If they lose that option, the options become to charge you a very high premium to offset the probable high costs of insuring you, or raise rates for everyone else to cover you.

Politicians probably want the latter option, so they can say that they got you insurance, and blame the rate hikes to everyone else on “those greedy CEOs!”

The money has to come from somewhere. Economics is a zero-sum game.

Another example: supply and demand. Again, from the article: “Insurance companies would have to obey limits on the out-of-pocket costs they could demand, and would not be permitted to charge co-pays or other fees for preventive care such as checkups or mammograms.”

Does anyone really think this will mean that these things will magically become free?

You’re still going to pay, just in a different way. You won’t pay the doctor’s office the copay any more, the insurance company will. And since the insurance company still needs to make a profit, they’ll just raise your rates: probably by an amount as much as the copay. Instead of paying when you go to the doctor, you’ll pay the copay in 12 nice little monthly chunks.

Also, the full version of that first quote is, “Obama pledged that the health care legislation he is seeking will bar insurance companies from denying coverage because of pre-existing medical conditions and include numerous provisions to hold down the cost of care for consumers.

So, price ceilings.

A price ceiling set below the free-market price has several effects. Suppliers find they can no longer charge what they had been charging for their products. As a result, some suppliers drop out of the market. This represents a reduction in the quantity supplied. Meanwhile, consumers find that they can now buy the same product at a lower price. As a result quantity demanded increases. As a result of these two actions, quantity demanded exceeds quantity supplied and a shortage emerges, unless rationing or other forms of consumption controls are enforced.

Gee, I can’t wait.

Note: I’m no big fan of the way healthcare works currently, and it’s obvious that some change is needed. Maybe the government can supply that. But even the government can’t magically change the rules of economics.

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Both sides of the coin

Over at Hazel’s place, she talks about an Ancient History class that sidetracked in to moral valuations of a one person, one vote direct democracy. Leaving aside the fact that only certain people got votes in Athens (i.e. not the slaves, h/t dad), I wrote in response to her post, (which you should read):

It all comes down to division of labor: in the late 1700s it consumed too much time to attempt to get a vote from every citizen. It would be impractical.

As much as it might seem like it has, that still hasn’t changed: if we were to hold an Election Day every month, it would be a huge logistical undertaking and reduce the national GDP (think of how much time off would have to be taken to stand in a line to vote once a month instead of once every four years (in the general case)). Online voting sounds good, but isn’t going to happen. Every piece of software has bugs, and a bug in this software would swing the course of the nation. Noooo thanks.

But let’s even suppose that there were a secure way of voting via the internet. No lines, no waiting, just do it whenever.

The voting is only the end of the deliberative process: ostensibly our Congressweasels first read, then contemplate, then vote on the bills. In a direct democracy, steps 1 and 2 would be cast by the wayside for most people, leading to the rule by the fickle mob. “Health care, yeah, I could use free health care! I vote yes!”

The notion of a Republic (electing people to read, study, and vote on your behalf) that allows you to spend your days producing, and only a small portion of the time diving deep in to politics is a sound one. However, it relies on the notion that the politicians can be trusted to act like honest human beings.

Ostensibly, every republic is a quasi-direct democracy: senators are supposed to take in to account communication that they receive from their constituents, giving those constituents a bit more direct control.

I wonder how many of these armchair Founding Fathers have ever written a letter to their Congresscritters?

Since then, a counter-example has occurred to me that shows the problems of having a republic that is too indirect: the electoral college. Wait a minute, though. The electoral college has certain fringe benefits, like diluting the pure advantage of a larger population, right?

Rhode Island for example has .3% of the population of the US (1,050,788/304,059,724) but has .7% (4/538) of the vote in the Electoral College. That’s almost twice as much!

Except California still has almost 14 times the number of electors, meaning that population in this case does end up winning out. Which is, I think, a good thing.

See, the electoral college provides a broken incentive system that encourages the notion of swing states: the process of identifying the states that

  1. Have a significant number of electoral votes, and
  2. Could have a majority that goes either way (i.e. could “swing”), and
  3. Have a winner-take-all system that means a simple majority in the state gets all of the state’s electoral votes

Why is this bad?

These maps show the amount of attention given to each state by the Bush and Kerry campaigns during the final five weeks of the 2004 election. At the top, each waving hand represents a visit from a presidential or vice-presidential candidate during the final five weeks. At the bottom, each dollar sign represents one million dollars spent on TV advertising by the campaigns during the same time period.

I understand there are downsides to switching away from the Electoral College system (e.g. centering campaigning around high-density population centers) but it is hard to imagine any system that would effectively disenfranchise so many people. A Democrat in Texas might as well not have a vote; likewise a Republican in New York.

In my opinion, this is a case where the republic has made the democracy too indirect, to the detriment of the country.

Even a simple change would go a long way to rectify this problem: proportional electors. Let’s illustrate with an example: California had 55 electors in the 2008 Presidential election. The vote split was 8,274,473 to 5,011,781, in favor of Obama. Call it a 5-3 split, where Obama got five votes for every three McCain got. So why doesn’t McCain get every three electors for every five Obama got? California still uses a winner-take-all electoral vote apportionment system. (For those of you not playing the home game, that split would have made the electoral votes 21 to McCain, 34 to Obama.)

But the way it is, California, the most populous state in the nation, with ten percent of the electoral college votes got next to no attention by Bush and Kerry in the last weeks of the election because they knew there was no point: the Republican voters in California wouldn’t be heard.

Categories: Uncategorized

July 17, 2009 2 comments

Imagine my surprised when I checked the website this past week to find last week’s Technician includes an astounding amount of editorial content that I concur with. Where I’m usually at odds with these guys over what should be done, this week, I can wholeheartedly agree about things that shouldn’t be done.

Item the first, Paul McCauley’s piece about how ridiculous it is to spend so much media time on relatively trivial topics like Michael Jackson’s, compared to the importance of other topics, such as the economy. I’m sure he’ll get hatemail for that one, just as dad did when he rhetorically asked via Facebook status if we could lay off the Michael Jackson thing given that it was two weeks past. Jackson seems to have become a very polarizing figure, if only in death.

Item the second, the unsigned editorial about how Orientation is an expensive waste of time and resources. I really have to agree. I don’t have particularly unfond memories of my Orientation, but I mostly remember sitting through hours of lectures about not sexually harassing classmates and not cheating on tests. We did register for our first semester of classes, but it was all done online. No reason to have to travel to campus for that.

I also don’t remember Orientation being a pain because I didn’t have to take time off of work, and I didn’t have to travel a long distance to attend. Instead of sitting around my house, I sat around the dorm.

If I might derail into blind speculation, I would wonder if orientation isn’t more for publicity than education. Encouraging parents to come along gives the University time to really sell them on what a good investment they’re making (because I would guess that odds are high that the parents at Orientation are the ones bankrolling the education.) Or maybe it’s even as simple as losing points on the all-important national rankings by doing without the hallowed institution of Orientation.

I’ve often disagreed with the Technician staff before (the instance that springs to mind is McCauley’s well-written defense of his position against concealed carry on campus. But that was always about the merits of doing new things. In this case, I can agree that the status quo is pretty dumb.

Of course, there never is a real consensus on these things: the letters to the editor this week indict both the articles that I concur with. One says that we need to talk about celebrities on the news to avoid our world becoming “a dreary, lifeless place, full of dull, lifeless (though very realistic) people, now numb to all that surrounds them.” Egads.

There are also a few letters that defend Orientation, citing the useful activities that it includes (mostly the admittedly-complex and initially intimidating process of registering for classes). Okay, fine: make it a day thing where you go around campus and register. But repeatedly putting us in to lecture halls to try and sell us on what a great school we’re attending? That seems a bit of a waste.

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