Economics Obama

Liberal Schizophrenia

Obama’s first 6 years have been characterized by government gridlock, budget deficits and, depending on your perspective, steady but slow economic recovery. Democrats, as the Party that still believes public policy should be tied to objective reality, need to get our collective head straight concerning what this experience tells us about deficit spending and economics. Most people, by now, are aware that there are Austrian, Keynesian and Monetarist schools of economic thought. In summary which is sure to keep me out of any institution that studies economics, Austrians favor almost no government intervention to smooth the business cycle, Keynesians advise running deficits during a recession and surpluses during a boom and monetarists (like Milton Friedman) focus on monetary policy, striving to preserve the supply of money in the economy by printing money during a recession (when the money supply naturally shrinks) and taking it out of circulation during a boom. For a much clearer summary, watch Tyler Cowen’s videos on the topic.

Now, from the Republicans I hear two assertions which are consistent with each other, although tenuously tethered to reality.

  1. Obama’s Presidency has been marked by runaway spending and debt and
  2. Recovery has been tepid

For Republicans, who don’t pay much attention to economics (“ivory tower eggheads”), this all makes lots of sense. Government spending hurts the economy by crowding out private investment (except for military spending, because how better to boost recovery than by blowing stuff up?). So, Obama’s tax-and-spend liberalism is responsible for our current “malaise.”

Liberals, on the other hand, try to challenge both points, contending that

  1. Obama is not a big spender and
  2. Recovery is robust

But, taken together, these are entirely inconsistent with our Keynesian perspective. To Keynesians like Greg Mankiw, Paul Krugman and ThisWeekInStupid, cutting spending during a recession is exactly the wrong idea. If Obama and his mixed Congress had been cutting spending, we would expect it to slow the recovery. So, to claim both of the above is playing right into Republican hands.

It’s also not reality. A clear-eyed assessment reveals that spending has been unprecedented. US national debt as a fraction of GDP reached levels not seen since World War II  reaching 122% of GDP in 2012. We at ThisWeekInStupid are not deficit hawks, but this is a lot of money by any accounting. Often I see liberals pointing out that big spending had begun by the time Barack Obama took office. After all, the debt-busting 2009 budget was signed by George W. Bush, based on his recommendations in February 2008 and, since fiscal 2009 begins in October 2008, almost one-third of the budget was spent before Barack Obama was inaugurated. Some even use this fact to claim that Obama has been reigning in the runaway spending of the Bush administration. This is cynical and transparently false. The 2009 budget should only be used to demonstrate that bipartisan economists agree that a boost in government spending, even deficit spending, was the right prescription in 2008.

Barack Obama could have recommended less spending in the years following. To his credit, he did not. Democrats should embrace the fiscal policies of Barack Obama, including his deliberate deficit spending, and continue to emphasize that a slow, steady recovery is exactly the kind that tends to last. Obama is a Keynesian big spender, which is exactly why we can expect better times ahead.

Class Taxation

Inversions and Rick Santorum

There’s been a recent rise in a tax-saving gimmick called “inversions.” An inversion is the purchase of a small international company by a large US-based company in order to transfer profits to another country with lower corporate taxes. After buying a smaller company based in a low-tax country, the large US-based company transfers patent ownership to, or borrows money from the smaller firm. Interest payments to the smaller company can be deducted from US-based income and interest received in a low-tax country is taxed at a lower rate. In the case of patents, the off-shore company can collect lucrative patent royalties while being taxed at a lower rate. The result of both is a lower overall tax rate for the company. It’s these kinds of strategies that allow large corporations like Boeing and GE to pay almost no taxes.

This is not a new phenomenon, but has stepped up in recent weeks with familiar companies like AbbVie and Walgreens contemplating such a move. So, the question is, why the sudden interest? Thisweekinstupid’s answer is that there’s a downside to hiding profits over seas. In order to pay those profits to share-holders as dividends, you have to bring that money back to the United States and in doing so, it will be taxed at US rates. This is why companies such as Apple and Google are accumulating large piles of cash in subsidiaries based in Ireland or the Cayman Islands. But what good does that cash do these companies? The answer is, not much. Periodically, you hear shareholders grumbling about these inaccessible profits, and calls for companies to “repatriate” the capital, pay the taxes, and give shareholders a dividend. So far, the companies have resisted. The critical question is why.

One possible answer is Republican electoral success. Companies are hoping that Republicans will, at some point, declare a tax discount or even a “holiday” for repatriated capital–that at some point in the future, Republicans will manage to shove through Congress, a law that (temporarily, probably) allows capital brought back to the US to be taxed at some lower rate. The last time this happened was in 2004. At that time, the argument was that this capital trapped in other countries could be used to revitalize the US economy. Yes, it not fair, we told ourselves, but if it’ll get American working again, we’ll do it. And so, we allowed foreign cash brought back to the United States to be taxed at just 5.75%, rather than the 35% corporate rate that the time.  The Congressional Research Service studied the effects of that policy and concluded that companies that repatriated capital did not hire more, did not devote more funds to research and development, but did give larger salaries and bonuses to CEOs and other high level executives. Even the conservative Heritage Foundation has dubbed that experiment a failure. And yet, in 2014, here’s Mitch McConnell calling for a “one-time” tax holiday to pay for highway repairs.

Now, ThisWeekInStupid is not stupid. We know that both parties are almost wholly-owned subsidiaries of corporations. But history seems to suggest that it’s most often Republicans who favor lower tax rates or tax holidays. Last election cycle, Rick Santorum mentioned this all around the country as part of his economic plan. There was a vast, untapped reservoir of money, he said, that could be channeled back into the US economy if we’d allow, just this once, another tax holiday. In recent years, the justification for an “extraordinary” measure like Santorum’s proposal has largely disappeared, but lower tax rates for corporations has been on the Republican agenda since Barry Goldwater and before.

It’s not accident that inversion mania coincides with improving Republican fortunes. The New York Times now gives the Republicans a 60% probability of controlling the Senate after the 2014 elections. With a 2016 Presidential election right around the corner, if you were a multinational corporation, now might be the time to start stockpiling your tax free profits in off-shore subsidiaries.

Now, perhaps paradoxically, ThisWeekInStupid is in favor of replacing our current system with very small corporate tax rates with dividends and capital gains taxed as ordinary income. This makes taxation of company profits more progressive since the dividends and capital gains of billionaires could be taxed at a higher rate than your granddad’s IRA or your family’s 10,000 nest egg. This would, of course, allow multinationals to avoid the taxes they would have paid under the current system unchanged. But, perhaps it’s best to reform the broken system in one swift stroke and let the capital flow to unhindered to where it’s most needed.

The key, in our opinion, is to avoid “extraordinary” measures. If it were made clear to companies and their stockholders that the same system will be in place for 30 years, you might see the boost in repatriation that McConnell and Santorum hope to create.

Economics Foreign Policy Philosophy

Unintended consequences

You don’t have to be long around Republicans before they teach you the “law of unintended consequences”–the principle that, sometimes, things don’t go according to plan and sometimes they have the opposite effect of the one you intended. In a discussion of public policy, once your opponent resorts to the “law of unintended consequences” you know you’ve won the argument. You can interpret this to mean

1. Your idea seems like a good one.

2. She can’t think of any reason it won’t work, but…

3. It might not work.

Which, of course, is true about every good idea, ever. It even applies to the idea of doing less. The idea of reducing regulations is equally subject to the law of unintended consequences. For example, deregulation of media and telecommunications in 1996 has been, generally, a disaster with terrible unforeseen repercussions including ruining music, hampering the internet and giving money a louder voice in politics.

But still, the “law of unintended consequences” is preached to and by Republicans and Libertarians every day. To avoid “unintended consequences,” conservatives prefer to make their mainstay ideas which are manifest bullshit from the beginning. If I can’t rule out that a policy will give different results than the ones I intended, the best policy, they seem to argue, is to pursue nonsensical or even Machievellian goals, hoping to stumble into good results.

But in Republican minds, the law of unintended consequences doesn’t apply to things like privatizing social security or defunding the EPA, and it especially does not apply to foreign policy (arming the Syrian opposition? What could go wrong?). So, the next time you hear your Republican friend say “well, but you know the law of unintended consequences, don’t you?” don’t get frustrated. Simply apply your palm to your face and walk away victorious.

Faith Race

Can people change?

I may be missing my audience with this post. I don’t have much hope many people will care about the later lives of two dead opponents of civil rights. But the stories of these two men are both not only fascinating to me as a microchasm of American race relations, but also inspire me to hope that people, myself included, can change. So, here’s an introduction to Governor George Wallace and Senator Robert Byrd in the 1960s.

George Wallace: Champion of Segregation

George Wallace came from a political family and was active in politics from a young age. At age 33, he was an Alabama Circuit Judge and issued an injunction against the federally-ordered removal of segregation signs from train stations. By 1962, he was elected Governor of Alabama. In his inaugural speech he used the line which often defines him:

In the name of the greatest people that have ever trod this earth, I draw the line in the dust and toss the gauntlet before the feet of tyranny, and I say segregation now, segregation tomorrow, segregation forever.

In 1963, after integration of Alabama schools was ordered by a federal court judge to admit black students to the University of Alabama. Three students–Vivian Malone Jones, Dave McGlathery and James Hood— were admitted, but as Jones and Hood arrived to register, Governor Wallace personally blocked their entrance to Foster Auditorium, where registration took place. After federalizing the Alabama National Guard, John F. Kennedy ordered Wallace to step aside. After some bluster, he did.

Robert Byrd: Exalted Cyclops?

Robert Byrd’s first leadership roles were in the chapter of the Ku Klux Klan in his home town of Sophia, West Virginia. He eventually became the top official in the chapter (Exalted Cyclops). In 1946, at age 28, he wrote this gem to segregationist Senator Theodore Bilbo:

I shall never fight in the armed forces with a negro by my side … Rather I should die a thousand times, and see Old Glory trampled in the dirt never to rise again, than to see this beloved land of ours become degraded by race mongrels, a throwback to the blackest specimen from the wilds.

In 1964, he joined other Democratic Senators in a filibuster of the Civil Rights Act.

Into every life…

By 1972, George Wallace had been elected Alabama governor twice and completed an unsuccessful 3rd party bid for President in 1968. While campaigning in a bid for President, he was shot 5 times. One bullet hit his spine, leaving him paralyzed from the waist down. He would remain so for the rest of his life.

Robert Byrd, by his own account, experienced a crisis of faith in 1982 when his teen-aged grandson was killed in a traffic accident.

For both men, life taught them some things they didn’t know in their twenties and thirties. Byrd recalled that his experience with losing a grandson brought him to the realization that “African-Americans love their children, too.” Wallace describes being “born again” some time after his attempted assassination.

For both men, this new wisdom translated into markedly different public policy. For most of his later career, Senator Byrd’s voting record was dubbed perfect by the NAACP. In Wallace’s last term as governor, he made a record-setting number of appointments of Black men and women to state posts. Both men made concerted efforts both to distance themselves from racist groups, to encourage others to avoid their mistakes, and to make clear their remorse at their role in the oppression of Blacks. Wallace attended the 30th anniversary of the Selma-to-Montgomery march, addressing the crowd and asking their forgiveness. “May your message be heard,” he said. “May your lessons never be forgotten. May our history be always remembered.” How it must have pained Wallace to think of his name forever associated with bigotry and racial violence.


I sympathize with those who might express skepticism with this change of heart for both men. They each continued to make decisions which continued to reveal hints of racism or at least racial ignorance. It’s certainly possible that they’re simple opportunists whose views changed with public opinion. But Wallace and Byrd are both men who demonstrated their ability to take a bold stand against the popular tide. Byrd was the Senate’s staunchest opponent of the Iraq War. At the height of American anger and fear, he exhorted toward calm and care. Both have been outspoken advocates for progressive racial policies to audiences who did not welcome the message.

It would be a shame to let the behavior of these 30-somethings dictate our view of them for the rest of their lives. A nation that takes such pride in its Christian foundations, should rejoice at these stories of redemption and should emulate the example, especially of Governor Wallace, in admitting and seeking to rectify our mistakes at both a personal and a national level.




I love you, but your incessant atheo-splaining is tiresome.

I’ve been watching a bit of Bill Maher recently. I appreciate his wit when it comes to things like fiscal policy. But, like a junky, he can’t help but return to his true favorite compulsion–bagging on God. I’m not opposed to a sensible, respectful discussion of the merits of faith. What I object to is the constant strawman-ing wherein Bill first tells me what I believe, then tells me why that’s bad. A recent example is here. Bill tells Ross Douthat, conservative politico, NYT columnist and Catholic, that not believing all of the Bible is somehow cheating. The entire exchange is worth watching as Douthat articulates a very reasonable Christian position, but the exact wording from Maher is

If [the Bible is] not 100% true, I would say the whole thing falls apart.

Confronted with a Christian whose faith has room for things like evolution and a metaphorical interpretation of some of the Bible, Maher becomes suddenly desperate to put Douthat back into the comfortable box in which he’s used to putting theists. I’ve had a few of these conversations myself where I’m expected to defend, to an atheist friend or acquaintance, the faith of the last Christian she talked to. I know this is sometimes done in interest of time, because not many atheist have interest in the fine points of my faith. But I need you, atheist friends, to appreciate that Christians (or Muslims, or Jews, etc.) are not a monolith. There’s staggering variety in the beliefs of Christians worldwide. For example, returning to Maher’s statement, even among Christians in the United States who report attending church every week, only 54% think every word of the Bible is literally true.

People of faith are also surprisingly self-aware. I recall one conversation with a colleague in graduate school. I studied experimental physics which occasionally left us some down time while various things heated up or cooled down or measured this or that. In one such lull, my colleague, who knew I was a Christian turned the conversation to religion. He did not believe in God and ventured, sheepishly, to ask, “Have you ever thought that…maybe…you only…um…believe in God because that’s how you were raised?” This question, stated with such hesitation is riotously funny to me. Only the non-religious could assume that someone pursuing a doctorate in physics at a prestigious university could have grown up in a religious home and never pondered this question. He is a good friend and was only trying to spare my tender feelings, but his question grows out of the assumption that theists like me only believe because we haven’t thought it through.

I’ve dealt with this enough to coin a new term for this phenomenon. Hitching a ride on the recently coined “mansplain” I submit

atheosplain \ˈā-thē-ō-ˌsplān\ v.t. To begin your conversation with a religious person by first educating them on the tenets of his or her own faith.

I think especially with faith, which is often something people have come to through very long, winding and difficult paths, it’s important to allow people to self-define. Respect the journey even if you’ve arrived at a different destination. This advice applies to religious people, too. We should respect that atheists are on a journey as well. Atheists, you may be underestimating the interpersonal connection you’ll make by asking questions of a believer about their faith. Let’s talk. I promise not to preach (again, I can’t speak for all Christians) and to listen equally respectfully to your explanation of the source of your morality and the meaning in your life, whatever that be. Then, you can proceed to tell me why I’m wrong. And so, for you, Mr. Maher:

New Rule. If you’re going to tell me why my belief is ridiculous, you first have to take five minutes to understand what I believe.

America Morality

On Exceptionalism

My children are exceptional. They just are. I’m sorry if you don’t like to hear that. I will always choose them over your children. You should get used to that.

My children are exceptional in that I am prepared to work and sacrifice that they may become amazing people. But no matter what kind of people they become, I will love them. When I say that, I mean that I will always hope for wonderful things for them in a way that I will never feel for your children. Don’t get me wrong. I appreciate your children’s talents and successes. They’re great. But they’re not my children. Objectively, I know mine won’t always perform better than your children but I’m prepared to stand by them even when they come in last place. I’ll even cheer for your children or coach them or encourage them, but not like I cheer for mine. I’ll take their side in a disagreement. Probably I’ll do this more than I ought, but there are plenty of people ready to thwart my children. They deserve at least one consistent ally.

I realize that you feel the same way about your children and that there’s a certain symmetry that makes my conclusion (that my children are the best) no more valid than yours. You’re entitled to your wrong opinion.

But mine is a wide-eyed love. I see the mistakes my children make. Not to see them would be to fail them in my responsibility to make them better. I do not blindly defend my children’s actions, nor do I always submit to their wishes or follow their plans. Again, to pretend they always do right is not love. It’s laziness and bad parenting.

So, too, with my country. I love the United States more than any country in the world. I’ll always hope for her success in every arena. When we do wrong, as a country, I’m going to speak up. That how much I love the USA. There is a set of people who think that pointing out the ways the America has done wrong is not patriotism. They think I should deny the Tuskegee experiment and redlining and Stonewall and the Battle of Blair Mountain and just keep waving the flag as if nothing ever happened. I fear for those people’s children. Because that’s not love. It’s cowardice. It takes work and courage to love a country that’s not perfect.

There may be a lot of fine things about your country (unless you’re Belgian. Belgium is the worst.). Some things about your country are undoubtedly better than mine (again, except for Belgium). But it will never be my home. I know America has given us atrocities like the trail of tears and Nagasaki and Iraq and Fergie and Iraq again, but it also gifted the world a lot of nobility and beauty and peace including my beautiful childhood. And so, I’ll sing my lungs out when the Star-Spangled Banner plays. And I’ll paint my face red, white and blue and chant “I believe that we will win!” And I’ll fight for her on varied battlefields.

The other thing I love about both my children and my country is their potential to be even greater. I’ll do what I can to make them all beacons of truth and righteousness. Because that’s what love looks like.

Economics Taxation

Tax the Dead!

Inheritance tax is, by far, my favorite tax. If you concede that there’s any reason for government spending, spending the money of people who don’t eat, work, spend money, recreate or procreate is the best scenario of all. Which is why I was surprised to read un-stupid Harvard economist Greg Mankiw defending massive inheritance in the New York Times.

The way Mankiw goes about it is also perplexing. He begins with the idea of “consumption smoothing.” I find this odd since consumption smoothing and a related concept, diminishing marginal utility, are powerful ideas for justifying heavy taxes on the rich and even brazen wealth redistribution. Mankiw explains it clearly

People get utility from consuming goods and services, but they also exhibit “diminishing marginal utility”: The more you are already consuming, the less benefit you get from the next increase in consumption. Your utility increases if you move from a one- to a two-bathroom home. It rises less if you move from a four- to a five-bathroom home.

An extension of this is that taking $1000 from a very wealthy person and giving it to a very poor person increases the overall happiness of the universe. To the rich man $1000 might mean an extra day in Vail with the family–a nice thing. To the poor man it might mean dental work, college tuition or not getting evicted–all quite essential things. So, taking that extra vacation day from the rich man to fix the poor man’s teeth is a net gain for the universe. So far Mankiw is off to a poor start in justifying massive, inter-generational wealth accumulation.

Zombie capital

A common response to this idea, and the one Mankiw employs, is that wealthy people, on average, use their money more wisely. That’s how they got so wealthy. Speaking about a collective average, rich people make better financial decisions. They watch their dollars carefully and hustle when those dollars need it. They have the skills to turn those dollars into more dollars, often by producing the things you and I need and want. Again, I’d like to be very clear that this is not the case 100% of the time. A serious discussion could be had about whether it’s even true most of the time. But I think a strong case can be made that “rich people” are a group selected for their ability to make the things and render the services people are willing to give the most money for. This is, however, not the discussion I want to have here. My point is much simpler.

Dead, wealthy people do not do any of those things.

They don’t make financial decisions. They don’t invest or hustle or manage or innovate. They haven’t any “sweat equity” left to give. So, the discussion here is about the children of wealthy people. The statement that people with wealthy parents are better users of money is a much more tenuous proposition. Mankiw himself does not shy away from this proposition and it’s here that he goes thoroughly off the reservation. His contention is that large accumulations of money are necessary for economic growth and that the poor do not accumulate capital because they count on “regression to the mean” improving the standard of living of their children. Because of diminishing marginal utility, they prefer to spend money on themselves immediately over saving it for their children who will most likely be richer.


Wrong on all counts. Firstly, many small accumulations of capital are every bit as effective as one large lump. A basket watched by 100 eyes is much safer. Many studies have shown that the collective wisdom of many individuals is often more accurate and reliable than that of experts (isn’t this your line, free marketeers?). One tremendous point of progress in our financial system is the democratization of finance. Ironically, even as middle-class incomes have stagnated and financial instruments have become more opaque, the ability of ordinary folk to participate in markets has grown. Today, anyone with $500 can invest in a wide variety of equities and derivatives cheaply and quickly. Most recently, we’ve seen pooled “small money” beginning to replace “angel” money and venture capital on peer lending sites and kickstarter. Employee-owned businesses are making a comeback as well. Small money is the future. What we need is more investor education on how to make your small money work for you. Ours would be a much healthier economy if more people were investing small amounts.

With all thy getting, get understanding

Next, when you count investments in human capital, the poor are great savers. Education is a capital investment. And the poor and middle class do it with abandon. I’ve watched families mortgage to the hilt to land in the right school district or to make outrageous tuition payments. It’s even clearer when you include all of the unpaid labor that goes into raising and education children. This exchange of money and time for human capital is every bit as valid as the investments of the super-rich. Even families raising children at a subsistence level are providing a necessary future resource to the economy. The poor tend to have more children and they make less money, so they spend a much larger fraction of their wealth on tomorrow’s workforce. The question I would rather have heard Mankiw address is whether our national investment portfolio includes too much or too little of these human capital investments.

The first sign of under-investment in workers and education would be a wide gap between employment rates for skilled and unskilled workers. In 2013, workers with just a high school diploma are unemployed at a rate of 7.5%. In that same year, just 2% of workers with a professional or doctorate degree were unemployed. Adding to this, the under-educated make up a much larger fraction of the unused potential workforce on disability or in prison who are not counted in the unemployment statistics. Given the importance of education in our information economy, there’s a strong case to be made that the ways the poor spend their money (on raising and educating children) are exactly what our economy needs more of and that their tax burden should be reduced to boost long-term growth.

I think what Mankiw is trying to say is that inheritance taxes discourage saving by taxing those most prone to save (at least in the sense of saving actual dollars). It is important to pay attention to how public policy affects individuals’ decisions to save or consume. However, there are many ways to encourage saving and not many of them are as disgusting as giving someone tens of millions of dollars because of the circumstances of her birth. If we’re interested in encouraging saving and investment over consumption, why not take a page from our gentle socialist friends across the pond? In UK, everyone is allowed the equivalent of $16,000 per year in tax-free capital gains. This means that most of the working middle class do not pay any tax on their investment income in their younger years since most of their income is wages. Talk about an incentive to save! Why not pay for at least some of this via a heavy tax on inheritances and “let each receive accord to her merits”?

The inheritance tax has almost no downside. It is, in every way superior to every other tax I can think of. Tax the dead. They don’t even vote!

Economics Education Taxation

Why your otherwise smart professor is a socialist

I saw a video the other day from the American Enterprise Institute about the morality of capitalism. Capitalism, to paraphrase, clears access to the satisfaction that comes from achieving something. Being given the same thing brings us far less happiness. Government, then, takes something from someone to whom it brings a lot of joy and gives it to someone to whom it brings very little. Further, it removes the motivation for those receiving welfare to seek the joy of production and achievement. Yuck! How can we be so heartless?

It occurred to me as I was watching that, while I’ve achieved many things in my life, the American Enterprise Institute might scoff that them.  You see, I work for big companies or worse, universities, where I do research that never makes the New York Times and won’t be featured in a product next year–or next decade. Even the work I do for private companies is often funded by public grants given either to my company or to our customers. Like the villains in the video, I’m often not pleasing “customers” so much as the government committees who review grant applications.

Gittin’ ‘er done, collectively

When I achieve things, I share credit with thousands of people. Can this collective achievement be as satisfying or valuable as the individual achievement described in the video? Your professor and I think so. We are used to being a small cog in an absolutely enormous machine and we recognize that some things can only be done this way. My grandfather had a tiny role in the early flights of the Space Shuttle–a very big deal that improves your life whenever you turn on your GPS or check the weather report. But if you listed the contributors to that project, Grandpa would surely be buried somewhere in the back with the dolly grip and craft services. He didn’t mind that at all. Whether it’s better play a small part in our mission to space or a large part in a Jamba Juice franchise can certainly be debated.

These collective works we’re about are far-reaching and critically important. One day we’ll announce cold fusion and a cure for cancer, saving the planet and literally millions of lives. Someone who put together the last piece of the puzzle will be on the cover of Time. But behind her, there’ll be legions of scientists who will sit back in their easy chairs with a self-satisfied grin, knowing they’ve done good work and ever so glad they didn’t take their uncle’s advice to drop this ivory tower nonsense and become a day trader.


Health Care Immigration Terrorism

We treat (insert hated group here) better than our veterans!

No one beats Republicans for hyperbole. And I mean no one. Hyperbole in the right-leaning media makes Joseph Goebbels look “fair and balanced.” Right-wing hyperbole has done more damage to America than the Rosenbergs, child pornography, McCarthyism, and The Bachelor combined.

I kid. But they do tend to get ahead of themselves. And so, of course, when it came to light that military veterans at VA hospitals were put on a secret waiting list for treatments to hide the dire situation from oversight, the right fired up the ol’ hyperbolic comparison engine and got to work, producing ideas like these:



Not to spoil the surprise, but Michelle thinks undocumented aliens have a much better time than veterans.

I’ll address both of these momentarily. First, I think it can be debated whether care in the VA is in any degree worse than at conventional hospitals. A recent RAND study showed better-than-average care at VA hospitals. For a variety of chronic and non-chronic conditions, VA patients received the AMA recommended treatments more often than at conventional hospitals. Two studies of patient mortality by the National Institute of Health revealed VA hospitals to be on par with or slightly better than non-VA hospitals. A synthesis of several studies by VA researchers concluded that VA hospitals perform better on process-of-care metrics and equally on risk-adjusted mortality than non-VA hospitals.

Now, I think Michelle and (gulp) Louie Gohmert have a point in that we do a great disservice to our American servicemen and servicewomen in sending them to war all to often. We need to be much more careful in counting the real costs of our wars. I’m proud of our nation for leading the way in treating the mental and emotional scars of war and I hope we continue to resource research and treatment of PTSD and other combat related mental illness.

Come for the employment exploitation; stay for the medical neglect

But Michelle, Louie, come on. Before we get to the illegally incarcerated terror suspects, let’s talk about the plight of illegal aliens. They pay taxes but don’t vote or collect Social Security. They are, overall, less likely to commit crimes, but more likely to be the victims of crime. They have little recourse to authorities in disputes with employers and so work in poorer conditions for lower wages. They also use health care resources at a much lower rate. Although immigrants (documented and undocumented) make up 10.7% of the US population, they use just 8% of health care dollars. Of course, immigrants do tend to be younger and therefore healthier, on average, accounting for some of this. But Nadereh Pourat, director of research at the UCLA Center for Health Policy Research, found that illegal immigrants are less likely to go to the doctor, even if they have health insurance for fear of deportation. According to Steve Camarota, director of the moderately anti-immigrant, Center for Immigration Studies, the United States spends about $4 billion per year on health care for illegal immigrants, or about one-fourth of the federal subsidies of crop insurance given to wealthy farmers last year. Since many undocumented immigrants are agricultural laborers, ThisWeekInStupid thinks we should just call that even.

The biggest contributor to poor health care outcomes for undocumented immigrants is that almost half are uninsured. Since they are more likely to be uninsured, health care for immigrants comes more often in free community health clinics and emergency rooms where wait times are much longer and outcomes are significantly worse. Chronic conditions, like the ones that kill most Americans–diabetes, heart disease, etc.–are likely to go completely untreated until problems are very severe. In 2009, Dr. John Z. Ayanian of the National Academies’ Institute of Medicine testified before Congress, summarizing several hundred studies of health outcomes for the uninsured thusly:

Uninsured Americans frequently delay or forgo doctors’ visits, prescription medications, and other effective treatments, even when they have serious disease or life-threatening conditions. … Because uninsured adults seek health care less often than insured adults, they are often unaware of health problems such as high blood pressure, high cholesterol, or early-stage cancer. Uninsured adults are also much less likely to receive vaccinations, cancer screening services such as mammography and colonoscopy, and other effective preventive services.

The result of this lack of access, noted Dr. Ayanian, is that working-age adults are 25% more likely to die prematurely than their insured counterparts.

Now, undocumented immigrants have committed a crime. That’s undeniable. But it’s important to remember that the things they’re doing–working, paying rent in Tuscon, going to the hospital, sending their children to school–are completely legal for you not because you do them differently or because you do less harm or more good than they do, but rather because of where you were born. Some are content to give this fact a “them’s the breaks” shrug and continue on their ungrateful, entitled way. That, in the opinion of ThisWeekInStupid, is quintessentially un-American.

The Posh Life of a Terror Suspect

And now for Guantanamo. Picking on Louie Gohmert is no fun. But he was retweeting this story by J.D. Gordon of Fox News. As proof of his claim that we’re nicer to Gitmo terror “suspects” than to veterans, he cited the idea that the ratio of prisoners in Gitmo to physicians is higher than the ratio of veterans to VA physicians in the US. Now, this idea was quickly debunked since the doctors in that tally also treat the soldiers on the base. For many reasons, it’s awfully stupid to declare detainees at Guantanamo Bay have it easy.

Since 2002, 779 men have been detained at Guantanamo Bay. Eight have died. Six were reported by the military as suicides. In comparison with the Phoenix VA, who are currently treating 123,000 patients, that means you are 8 times more likely to die as a healthy 26-year-old sent to Gitmo than as a veteran on a secret waiting list at the Phoenix VA Hospital.

The majority of detainees at Guantanamo Bay have not been charged with any crime. Some are under 18 years old. All are neither judicial prisoners, nor prisoners of war, leaving them with uncertain legal protections. Forty-six prisoners are currently designated for open-ended detention since they are too dangerous for release, but the government has insufficient evidence to try them.

Allegations of torture at Guantanamo Bay, which are many and from varied sources, are difficult to verify. The International Committee of the Red Cross reported in 2004 that prisoners were subjected to humiliating acts, solitary confinement, temperature extremes, stress positions, sleep deprivation and beatings that were “tantamount to torture.” They additionally reported that at least some of the time of these Guantanamo Bay physicians was spent preparing prisoners for “enhanced interrogation” or supervising the same. The New York Times reported the statement of an FBI agent that prisoners at Guantanamo Bay were sometimes left shackled in the fetal position, in their own urine and feces for 18-24 hours. In 2004, an American soldier posing as a prisoner during a training exercise was beaten enough to cause traumatic brain injury and seizures. It turns out even soldiers at Gitmo are treated worse than veterans at the VA.

You’ve probably heard that several dozen inmates at Guantanamo Bay have staged a hunger strike, on-going now for several years. These prisoners have been force fed to keep them alive. Although the video-recordings of force feeding detainees are not available, the actor Mos Def volunteered to be force fed for the camera. I have great respect for Mos Def as an actor, but I think you’ll agree this is legitimately a horrible experience. No one would blame you for not playing the video below, especially if your children are looking over your shoulder.

Take a moment to let this fact sink in: Fox News thinks we should be treating Guantanamo detainees worse.

Now, ThisWeekInStupid is not a pacifist site. We believe a great country often needs defending. But, if there were a nation less than 100 miles from the United States that captured and held young men, charged them with no crime, tortured them and gave no timeline for ever releasing them, wouldn’t our great nation be inclined to intervene? Even at the cost of American lives? I love and revere my nation and am forever grateful for what it’s given me, but I am ashamed we haven’t managed to halt this situation even on our own soil perpetrated by our own soldiers.

So, it’s clear that veterans in Phoenix and likely other hospitals were (and continue to be) treated shamefully, to be sure. But, let’s not lose our heads.



#BecauseMath Economics

Spontaneous order is always awesome

As I take aim at Friedrich Hayek, on a site called thisweekinstupid, I do it with some trepidation. Hayek was a well-spoken, skilled and innovative economist. That doesn’t mean he didn’t occasionally get it wrong. And in the unfortunate case I’ll discuss today, Hayek is found contributing to a potent and damaging piece of stupid that characterized much of the late 20th century–the cult of the invisible hand.

Beauty and power, spontaneously
Beauty and power, spontaneously

Pros and cons of spontaneous order

In the 1950s natural sciences like physics and especially biology began to notice that large systems made from simple parts could work together to create surprising and miraculous results. The brain is the most exciting example of this. Although some neurologists will likely disagree, the dynamics of a single neuron are simple. On receiving a pulse of energy from a nearby neuron through its dendrites, it sends a pulse to other neurons through its axon. This pulse is then received by the dendrites of other neurons. No one would look at that simple system and guess that a collection of those interactions would produce human thought. That miracle of complex macrodynamics from a multiplicity of simple microsystems is what Hayek called “spontaneous order.” Hayek and others believed fervently in the power of spontaneous order to improve people’s lives. Hayek called it a “fatal conceit” to imagine that a designed system could match a spontaneously ordered system for efficiency.

During the Goldwater/Reagan revolution, this became the justification for opposing government economic interference in almost any form. Any top-down tweaking by government moves the economy away from the spontaneous order, which is assumed to be the most efficient possible. It was also a convenient defense against the primary ideological foe of the United States–the Soviet Union. To those of the Austrian school, the economic failure of the Soviet Union was definitive proof of Hayek’s idea.

But on closer examination, the assumption that spontaneous order is always elegant or beneficial seems to come from nowhere, and certainly not from any of the natural sciences. As we look at other examples, we find spontaneous order is, indeed, powerful. But sometimes spontaneous order can be fatal. A herd of cattle can be thought of as a complex system made of simple parts. We could describe the behavior of cows quite simply: Move toward grass; avoid obstacles. But, spurred by the wrong external stimulus, those simple dynamics can cause a stampede as one cow starts to run enticing others to run to get out of its way. Here, the order that arises spontaneously is certainly unexpected in that it does not follow in a straightforward way from the micro behavior. In this, a herd of cattle is like a snowflake or a brain or an ecosystem. But in the case of cows, the macro behavior is not beneficial. Although the microdynamics were about avoiding injury, the resulting stampede can cause cattle to be trampled and killed.

Spontaneously ordered transportation

So, which kind of spontaneous order is our modern economy? Here’s modern-day libertarian John Stossel extolling spontaneous order and its wisdom in leading America away from transportation by train in favor of cars.

At last month’s State of the Union, President Obama said America needs more passenger trains. How does he know? For years, politicians promised that more of us will want to commute by train, but it doesn’t happen. People like their cars. Some subsidized trains cost so much per commuter that it would be cheaper to buy them taxi rides.

The grand schemes of the politicians fail and fail again.

By contrast, the private sector, despite harassment from government, gives us better stuff for less money—without central planning. It’s called a spontaneous order.

Cars may be the right answer for many communities, but transportation innovations can be a very clear example of the failure of spontaneous order. That is to say, the order arises, it’s just not helpful. Examine the problem of electric cars. My conservative friends have posted pictures to Twitter and Facebook of four or five completely unused car charging stations, usually at government buildings. “Typical government waste,” they’ll say.

Thanks, Obama!
Thanks, Obama!

They think the market has spoken, and maybe it has. But the other side of the story is that the least convenient aspect of owning an electric car is finding a place to charge it. This certainly reduces the number of electric cars on the road. When a car buyer (one simple part in our complex system) is shopping, she, hypothetically, considers an electric, but since there are no charging stations where she works, she decides on internal combustion. Meanwhile, someone at her work proposes installing charging stations in the parking lot. They take a stroll through the parking lot and find that very few employees own electric cars. So they decide against the charging stations. And around and around we go. More electric cars and more charging stations might be the optimal solution, but the individual actors, pursuing their own interest, can’t get there. Certainly the company can take a chance and build the charging stations hoping more employees are enabled to buy the electric cars they want, but that risk undeniably reduces the chance of us getting there.

For some other examples of the inefficiencies of spontaneously ordered system, check out my post on public goods.

Lessons from simulation science

In simulating complex systems, we call this a local minimum. Very often a complex system can find itself in a configuration that is not the global best configuration, but from which any small change looks worse. This is a local minimum. When considering electric cars, the status quo (no electric cars and no charging stations) is better than either a) some electric cars with no charging stations or b) no electric cars and some charging stations. So each individual player sees it in their interest to stay right where they are.

Consider this ball rolling on an odd-shaped surface.

The lowest potential energy configuration for the ball–the place it “wants” to be–is at the bottom of the valley marked 3, but in some places on the curve, point 2 for example, the ball sees a hill on either side. It’s in a “stable equilibrium.” If I want to move the ball to the true lowest energy state, it needs a push up the hill. It needs to be moved toward higher energy in order to find a better state.

Our electric car economy is the same (or might be). The economy of transportation is sitting at point 2. Everyone’s myopic view tells them unilateral action is wasteful. Charging stations installed at libraries and government buildings are an attempt to push us up the hill to see if we’ll fall into a better global minimum. It looks like “typical government waste” because we’re not looking at the whole curve. All we see is the hill in from of us. It might work or it might not. Only a global view could hope to predict. But only a fool concludes that the order found organically is always best. In game theory, this kind of stable, non-optimal state is called a Nash equilibrium after John Forbes Nash, Jr. profiled in A Beautiful Mind.

Simulating large systems is what I do for a living. Hayek didn’t have the benefit of huge supercomputers to predict what complex systems will do, but from my experience, assembling a system of millions of interacting parts, turning it on and expecting it to organize itself into an optimal configuration in a reasonable time without any help from me is insanity. When we want to optimize complex systems like static fluid flows or magnetic materials, we have to nudge them to pop them out of local minima or steer them speedily through what would otherwise be a slow spiral toward optimality. We try solving pieces of the problem independently, then stitching them together. Sometimes we reset things to an alternate starting configuration and see if that leads to a better place. (The economic implications of that should keep wealthy capitalists up nights). From where I sit, to expect something as complex as a national economy to optimize its resources without any help demonstrates profound ignorance of the dynamics of complex systems.

We should neither discount the power of spontaneous order, nor place unwarranted faith in it. That’d be stupid.