BBO Discussion Forums: The budget battles - BBO Discussion Forums

Winstonm, on 2011-September-11, 17:30, said:

This is very much how I understood the argument of Krauthammer that I referred to earlier.

There is an old song:

I had a little money and I gave it to friend
He said he'd pay me double and that this was just a lend
Later he told me, that the horse was slow
Why he gave that horse my money, that's something I don't know

kenberg, on 2011-September-11, 17:34, said:

Well a lot of money has been going into the SMI fund from general revenues, and I can't say for sure that it was all for the unfunded part D and not part B. So I my memory might have failed me on that.

The problem with Medicare is long term because of the changing demographics, but that looming problem makes it more difficult to recover from the debt built up (foolishly) over the past decade.

I was reading about how the free market is supposed to work (at least according to Mises and Rothbard and them) and it occurred to me to wonder about something. It seems "the market" is the aggregate of interactions between producers and consumers — but virtually everyone is a producer in some sense (workers "produce" their work, for example). But, um, what do politicians produce?

blackshoe, on 2011-September-11, 22:11, said:

Like anyone in a managerial or executive position, the job of politicians is to determine allocation of resources (in this case our country's resources). Good decisions in this regard are very "productive" by reducing waste and creating efficiencies where public goods are attained at less cost (to individuals or society as a whole). Not all production is a physical product, obviously.

Certainly we can argue that many politicians seem not to be very good at their job, in that a great many of our national resources are squandered on military adventures overseas, that the manner in which our country obtains money is not very efficient for the economy (i.e. higher tax rates for individuals who can't spare the money than for billionaire investors who can't even spend their money), and that a great deal of time is wasted arguing about procedural things (i.e. Obama's many non-controversial judicial appointments) rather than directing our national resources to solve very serious economic problems (i.e. unemployment). But a well-functioning government potentially adds a lot of productivity (i.e. it is much cheaper to enforce food sanitation than to deal with mass sickness from poor public health, it is much cheaper to have a functional police force than for everyone to acquire firearms and spend the time/energy to defend their own property from thieves, it is much cheaper to provide low-cost preventative health care to everyone than to bog down emergency rooms treating preventable issues later when they have become much worse).

kenberg, on 2011-September-11, 17:34, said:

Well indeed, that is the idea of a pay as you go entitlement system. A kind of schematic set up can be imagined as all workers pay in a fixed % of their income, and the proceeds are divided among the elderly. If one was to hold demographics constant, and raise productivity per worker by 2% per year, then every generation would get back significantly more than than they put in, because the current crop of workers is always more productive than the current crop of elderly were when they were working. In the post war era this was even further enhanced by demographics which were significantly more sloped towards productive ages.

If productivity stagnates and demographics stay constant, then each generation should get back exactly what they put in. However, now entitlement programs are being hit by a triple whammy:
(1) Demographics are significantly skewed towards the elderly: This will increase for about the next 20 or so years, then start to fall back, according to consensus estimates*
(2) Peoples expectations are increasing very rapidly.**
(3) GDP is depressed.

* Population statistics are alwyas wrong, normally by a colossal margin.
** By this i mean that we could easily afford to give all our elderly 1970's levels of healthcare, but our healthcare technology has increased far faster than productivity in the wider economy, and hence we can no longer afford to give everyone everything that was possible in the way that we could before.

awm, on 2011-September-11, 23:21, said:

I'm not sure that this is quite it. There are lots of parts of the economy that exist either to make production more efficient, or because we just like it better. Corporate law is an example to the former. Companies will not be prepared to enter into complicated arrangements with other companies in order to produce joint ventures without a strong legal system and legal protections. This reduces fraud and increases trust between participants, and allows for a greater variety of trade agreements. Healthcare is mostly an example of the latter. We all just think that the world is a little (or a lot) better when the elderly are not left to die in their beds.

phil_20686, on 2011-September-12, 07:57, said:

I pulled out your ** item because I think that it is the crux, or at least one crux. Being 72, I am getting increased opportunity to see this close up. A friend recently died. I will not go into the details but he spent more than a month in a very high quality hospital getting very high quality care. There was a reasonable chance for success and indeed at one point it appeared that we were over the hump and all would be well. but it was not to be. I believe all decisions were right, there was a reasonable chance at success, but I suppose the cost was pretty high. One of the procedures had to be put off for a bit because the surgeon was out of the country attending to the needs of a king or a prince or some such. This guy probably does not come cheap.

Most of what was done probably could not have been don't twenty years ago. Nothing done was extravagant by modern standards, there was no prolonging of life for someone who for all practical purposes was gone, but twenty years ago it would not have been done because it couldn't have been done.

I accept that I will someday wear out and die. I am not in any hurry for this to happen. I think that most people my age accept the fact that spending a fortune to keep us alive for an extra two weeks is not reasonable but the situation is rarely that clearcut.



A few posts back I mentioned that a big problem is lack of realism. Of course that is also because the problems are difficult. It's a simple fact that we cannot afford to do everything that technology makes it possible to do. How to address this is a very sticky problem. In the case of my friend I believe we were well on the right side of whatever line there is, but that's not to say I know the proper location for that line.

awm, on 2011-September-11, 23:21, said:

Not a free market view, that first paragraph. I think the free market view is that government tends to increase waste and create inefficiencies, rather than the other way 'round.

As for "the manner in which our country obtains money", there was an author, whose name escapes me at the moment, who suggested that wealth can be acquired either through free and voluntary exchange (which he labelled "the economic means") or through coercion and theft (which he labelled "the political means"). In regards to the latter, he said "government is the organization of the political means". I suspect this is where libertarians get their "taxation is theft" sound bite. Be that as it may, I'm not sure I agree (and I am sure that free market economists don't agree) that the examples you cite are truly examples of advantages of "a well functioning government".

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blackshoe, on 2011-September-12, 09:14, said:

As I mentioned earlier, I think that you'd be much better served familiarizing yourself with actual economics texts rather than whatever political screeds you're using.

I'd like to recommend a simple thought experiment for you:

Look at all the criticisms that your "free market economists" level against the evil, evil government.
Then take a look at any kind of large corporation.
I think that you'll see some remarkable similarities.
The corporate planning exercises that large companies use are almost identical to old central planning methodologies used in Eastern Europe.

Simply put, the whole government/free enterprise distinction is pretty much meaningless.
Issues such as size of the organization and whether or not workers are institutionally aligned with policy ends are much more important.

(As a practical example, Soviet style central planning worked pretty well back in the early days of the revolution, back when the workers actually bought into the model and were willing to provide accurate information to the planners. In a similar vein, I'd argue that the US military is a pretty good example of a central planning system that historically worked very well at providing basic services for the troops. (The procurement system is *****ed beyond belief, however, areas like the education system for dependents and the like scaled pretty well)

good piece on Sully's blog today

http://andrewsulliva...ren-thesis.html

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I'm in favor of looking back at the wisdom of Jefferson and others. We need to take it all in, as a whole. Jefferson's idea of a free market was running a large plantation based on slave labor. He lived in the world he lived in. But times change. Foreign policy, for the Founders, largely meant minding our own business. Well, except for Manifest Destiny. Again, times change.

Jefferson advocated a government that derived its just powers from the consent of the governed. Since it is unlikely that any such power will have universal consent, what does this mean? It appears to mean that "the people", in some manner, can give the government powers even if some object. Now Jefferson and others were, I believe, a little wary of democracy in an extreme form, but it would appear he thought "the people" should somehow pass laws for "the common good". Taxing people to build highways probably has the consent of the people, it is for the common good. I don't think one should cite Jefferson to support the idea that this is theft.

I guess we are in for some sort of foundational discussion as politics rolls on. I see many on the right as having totally gone off the deep end. They believe they speak for both Jesus and the Founding Fathers. There is room for doubt.

Yes, times change. Manifest destiny was a Nineteenth Century idea, though some aspects of it still hold sway.

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In an interesting aside, L. Neil Smith, in the libertarian sf novel The Probability Broach, postulated an alternate Earth in which the Federalists lost power rather early in North America. Instead a libertarian society arose. All this because their version of the Declaration of Independence differed from ours by one word: Theirs said "government derives its just powers from the unanimous consent of the governed". One could argue this would never work, but in a representative republic it can come close (read the book).

I did not quote Jefferson to support the idea that taxation is theft. I quoted him to support the idea that the examples Adam gave are not truly those of a "well functioning government".

Rand proposed that government has three functions: objective application of retaliatory force against citizens who initiate force against other citizens (the police function), objective application of retaliatory force against foreign nations or nationals who initiate force against our citizens (the military function), and the arbitration of disputes (the civil court system). Works for me, although libertarians believe that at least two of those functions (police and courts) can be handled by the free market. As for the military, Eldridge Gerry, in the debates on the Bill of Rights in the House of Representatives, described a standing army (which we have in fact had in this country since the end of WWII) as "the bane of liberty". I'm pretty sure Eisenhower, who warned against the "military-industrial complex" would have agreed with him, at least up to a point. I'm sure Mr. Gerry's ghost was appalled when the militia was finally "nationalized" via the formation of the National Guard in the early 20th century.

I'm not sure Jefferson ever used the phrase "the common good". I am sure there is no unanimous agreement on what the term means.

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I think it's time we as a nation had such a discussion. Without partisan politics, without political backbiting. I don't have much hope for it, though. As for the right, yes, some have gone off the deep end. There is no doubt in my mind that no one currently alive speaks for either the Founding Fathers or for Jesus. OTOH, the left has its share of whackos, too. And then there's the idea that "left" and "right" don't adequately describe the political spectrum, which is more likely to have many dimensions than it is to have just one. Jerry Pournelle and others have suggested several two dimensional spectra, and I think it was Pournelle who said that even two is inadequate.

blackshoe, on 2011-September-12, 12:04, said:

Of course there are crazies on the left, but it is not proportionate. It seems to me that "discussion without backbiting" has gotten difficult because one of the two major parties in the US has become dependent on a large group of right-wing crazies, pretty much as described in the Sullivan piece Richard mentioned.

But we can have a civil discussion here.

I don't consider right-wing crazies to be conservative at all: using "conservative" to describe them is Orwellian. Sullivan's description is closer to the mark:

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I've been in business all of my life, believe in the free market and fiscal responsibility, don't believe in military adventurism, and am an actual conservative. I say that a limited but strong government is exactly what we need: otherwise we could have stayed with the original Articles of Confederation.

I noticed that you did not address the specific examples that Adam gave. For example:

awm, on 2011-September-11, 23:21, said:

Don't you think that is true?

From what I can see, the government provides vital services like this (and others) more effectively than does the free market. It's possible to believe in the free market without maintaining that it is the solution to every problem.

As a conservative businessman, I absolutely support strong consumer protection laws and strong environmental protection laws, strictly enforced. Those laws set the framework for honest competition in the free market. So long as they are equally applied, no ethical business is hurt.

In my view, the whiners who complain about too much governmental regulation (and I know some) are simply too incompetent to run an honest business. Going back to Adam's example, folks should not have to worry about getting spoiled food, for example, and honest grocers shouldn't have to compete with those who want to make a buck by selling it.

blackshoe, on 2011-September-12, 12:04, said:

Why should I give a rat's ass what Rand thinks? Do you honestly believe that Rand's philosophies have any relation to the US Constitution or, for that matter, any nation state currently in existence?

I personally happen to like the Supreme Court's decision regarding the General Welfare clause of the 16th amendment as articulated in United States versus Butler which ruled that

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should be interpreted as follows:

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This would be Thomas "Louisiana Purchase" Jefferson?

blackshoe, on 2011-September-12, 09:14, said:

It's difficult to come up with a correct economic theory if you start from an axiom which is demonstrably untrue.

Certainly there are areas where government is more wasteful or less efficient than private industry. But there are also areas where the opposite is true. The situations where government is most necessary typically suffer from "tragedy of the commons" game theoretic situations, or involve massive economies of scale, or involve situations where morality conflicts with free market principles.

Food safety is a good example. No one really wants to eat contaminated food and get sick. Thus virtually everyone (aside from perhaps a few farmers who grow all their own food) benefits from having food inspectors and standards. There are significant advantages to having a small number of experts do this rather than everyone trying to inspect the entire production process of everything they eat. Can this be handled well by private enterprise? Certainly we could imagine a privately-run organization which inspects food, then makes the results of such inspections available for a subscription fee (say). However, it will be difficult for such a firm to make money. If most other people subscribe to such a service, I can then rely on the market to drive those restaurants or markets which sell unsafe food out of business. Thus there is little reason for me to pay for my own subscription. Even if only a few people have an actual subscription to the service, I can simply rely on word-of-mouth (or a friend's subscription) rather than getting my own. Even though I really don't want to eat contaminated food, as long as the inspection company is in business I can probably manage this without giving the inspectors any money. Of course, this leads to a problem and the inspection service might now go out of business. Perhaps more likely, they will start taking payoffs from the food producers to "look the other way" when they notice shoddy health practices. The net effect is that food safety inspections just don't work as a private enterprise. Nonetheless, we are (almost) all better off to have these inspections and most of us would be willing to pay a few dollars every year to make sure that reliable inspections occur (although obviously if these inspections would occur anyway without my contribution, I might rather keep my money). This is the sort of area where a government-based approach works wonderfully and creates efficiency.

This is not to say that everything should be government-run, or that the government is somehow always more efficient. Most innovation in terms of coming up with new products and such does come from the private sector. For example, if the government ran automotive companies we would probably have rather expensive cars and would not see the massive improvements in automobile safety and energy-efficiency that we have seen over the past decades. On the other hand, if automobile companies were not required by law to make safer cars (and were not vulnerable to lawsuits if people die in accidents in ways that could've been prevented by safer cars), then we would probably not see safety improvements either. So in that case government regulation can produce benefits (better safety, lower hospital bills, etc) even though a government takeover would be massively inefficient.

PassedOut, on 2011-September-12, 12:53, said:

"Reactionary" is probably a better description.

Here is Jerry Pournelle's take on the political spectrum.

PassedOut, on 2011-September-12, 12:53, said:

Well, maybe. Times do change, and I suspect, as did Smith in The Probability Broach, that the Articles of Confederation would have had to change with them.

PassedOut, on 2011-September-12, 12:53, said:

Well, it sure sounds good, but I'm not sure that a deeper analysis than I can give it wouldn't show that it isn't. For example, see Bastiat's Parable of the Broken Window.

PassedOut, on 2011-September-12, 12:53, said:

Sticking the word "vital" in there does tend to color the debate a bit, doesn't it?

One of the problems with debates on economics and government is that we have experiences of some things, and no experiences of others. No one alive today has seen a true free market, for example. And some of the backward looks into history claim that "see, this was a free market, and it didn't work," when in fact what they're looking at wasn't a free market at all.

Seems to me the Golden Rule would set the framework for honest competition in the free market quite well, without any government involvement — if people would follow it. And as for "no ethical business is hurt", I refer you again to Bastiat's Parable.

PassedOut, on 2011-September-12, 12:53, said:

And in the free market, neither the consumers nor the honest grocers would have to worry about that for long, since the incompetent whiner would be out of business pretty quickly. Suppose also that our legal system was better set to hold Mr. Whiner responsible for whatever damage he caused to others. One interesting suggestion I've seen is that if you owe someone something, and cannot pay, you go to work for them — or perhaps for someone else — with some mutually agreeable contract until the debt is paid. This is an extension of the idea that each individual is personally responsible for his own actions. I suppose it's not perfect (what is?) but it's interesting.

awm, on 2011-September-12, 19:25, said:

I did not say that "government is inefficient" is an axiom, nor, I think, do the free market economists.

awm, on 2011-September-12, 19:25, said:

I suppose the space race was an example of "massive economies of scale". Maybe. I suspect that the "tragedy of the commons" is not very common. I'll have to do some research on it, though. As for "morality" conflicting with free market principles, I don't see how that's possible, unless you hold that Willy Sutton's "morality" is just as valid as anyone else's. I don't believe that, though. Last post, I mentioned the Golden Rule. Seems to me that's morality enough for the free market.

awm, on 2011-September-12, 19:25, said:

Underwriter's Laboratories has been around for more than a century. They don't seem to be hurting. And your scenario of "I don't have to subscribe, because others do" is short sighted and irrational.

awm, on 2011-September-12, 19:25, said:

Maybe. I'm still not convinced. Franz Oppenheimer suggested there are two means by which man satisfies his desires: one is by free market exchange (which he labelled "the economic means"), the other by coercion and theft ("the political means"). He described the state as "the organization of the political means". Maybe that's an overreaction — Jefferson certainly felt that government has a place in our lives, as did Rand, and many others. But I don't think either Jefferson or Rand felt that the state (or any other group, for that matter) has any right to impose its desires on people by force. Yet that is how government works.

This is an old but on going debate in real life and on the forums.


Is the Central gov. better at capital allocation than capitalist markets.


See the whole capital allocation debate vs human rights debate as in health care.

iN THE EXTREME:

one side says they leave the poor to die in the streets alone
other side says you steal from the productive to give to the lazy or create the dependent who politics/class will live off of and enslave.

blackshoe, on 2011-September-12, 20:22, said:

How would "holding Mr. Whiner responsible" be done without regulations and enforcement? And wouldn't doing so require eliminating the protections that people running corporations have today?

Are you saying that in a truly free market, people would not build factories on rivers and send their polutants downstream? Nor pump toxins into the air?

By the way, your critique of my use of the word "vital" in that sentence was on the mark. Point taken.