Another great video clip from IHI.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, June 13, 2011
Sunday, April 17, 2011
Frictionless Competion
Austin Frakt over at The Incidental economist states:Traditional Medicare, being immune from market forces (though not political forces) can counter that provider market power, essentially setting “below market” prices by fiat. (Don’t go thinking this is an affront to a perfectly competitive market. High provider market power is itself a deviation from a perfect market.)
I don't understand the fascination some economists have for the "perfectly competitive market."
In physics, I can see the advantage to improving our understanding of force and inertia by experimenting and theorizing in a frictionless system. But when it comes time to build machines in the real world, we'd be in big trouble not to account for friction.
Seems to me like the same thing goes for economics. Simplification has its advantages to understanding the economic principles and how they function, but when you get into the messy world of voluntary exchange between free individuals, with its innovators, early adapters, laggards and the rest, perfect competition does not and can exist. We can identify and account for the differences between the idealized system and reality, but any attempt to "correct" for the "failure" is try and substitute what someone thinks the world should be for what the world actually is ---and that is courting disaster.
Am I missing something here?
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Saturday, March 19, 2011
Public Choice made Entertaining
An economics student at San Jose State University makes economics understandable and entertaining.
If you like this one, be sure to check out his earlier productions here.
Shorthand Politics on Public Choice
If you like this one, be sure to check out his earlier productions here.
Shorthand Politics on Public Choice
Thursday, December 2, 2010
519 Reasons Why California is Broke
LIST OF STATE OF CALIFORNIA AGENCIES:
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* California Anti-Terrorism Information Center
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* California Bay Conservation and Development Commission
* California Bay-Delta Authority
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* California Business Agency
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* California CalVet Home Loan Program
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* California Charter Schools
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* California Coastal Commission
* California Coastal Conservancy
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* California Community Colleges Chancellors Office, Junior Colleges
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* California Criminalist Institute Forensic Library
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* California Delta Protection Commission
* California Democratic Caucus
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* California Department of Aging
* California Department of Alcohol and Drug Programs
* California Department of Alcoholic Beverage Control Appeals Board
* California Department of Alcoholic Beverage Control
* California Department of Boating and Waterways (
* California Department of Child Support Services (CDCSS)
* California Department of Community Services and Development
* California Department of Conservation
* California Department of Consumer Affairs
* California Department of Corporations
* California Department of Corrections and Rehabilitation
* California Department of Developmental Services
* California Department of Education
* California Department of Fair Employment and Housing
* California Department of Finance
* California Department of Financial Institutions
* California Department of Fish and Game
* California Department of Food and Agriculture
* California Department of Forestry and Fire Protection (CDF)
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* California Department of General Services,
* Office of State Publishing
* California Department of Health Care Services
* California Department of Housing and Community Development
* California Department of Industrial Relations (DIR)
* California Department of Insurance
* California Department of Justice Firearms Division
* California Department of Justice Opinion Unit
* California Department of Justice, Consumer Information, Public Inquiry Unit
* California Department of Justice
* California Department of Managed Health Care
* California Department of Mental Health
* California Department of Motor Vehicles (DMV)
* California Department of Personnel Administration
* California Department of Pesticide Regulation
* California Department of Public Health
* California Department of Real Estate
* California Department of Rehabilitation
* California Department of Social Services Adoptions Branch
* California Department of Social Services
* California Department of
* California Department of Technology Services (DTS)
* California Department of Toxic Substances Control
* California Department of Transportation (Caltrans)
* California Department of Veterans Affairs (CalVets)
* California Department of Water Resources
* California Departmento de Vehiculos Motorizados
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* California Emergency Management Agency
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* California Employment Development Department (EDD)
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* California Franchise Tax Board (FTB)
* California Fraud Division
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* California Housing Finance Agency
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* California Institute for
* California Institute for Education Reform
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* California Junta Estatal de Personal
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* California Lands Commission
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* California Major Risk Medical Insurance Program
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* California Military Department
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* California Resources Agency
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* California Safe Schools
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* California State Lands Commission
* California State Legislative Portal
* California State Legislature
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* California State Parks
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* Center for
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* Dental Board of
* Health Insurance Plan of
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* Jobs with the State of
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* Library of
* Lieutenant Governors Commission for One
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* Medical Board of
* Medi-Cal
* Osteopathic Medical Board of
* Physical Therapy Board of
* Regents of the
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* Veterans Home of
Don't forget to figure in all the pension costs.
(HT Ol' Al via jd on OActivists google group)
Wednesday, November 24, 2010
Natural Economic Experiments
In trying to make the case that economic freedom is the best way to end poverty while centralized planning of the economy by government fiat is a cause of poverty, the following "natural experiments" are frequently refereed to:
East vs. West Germany
North Vs. South Korea
China Vs. Taiwan and Hong Kong
Now there is a new one:
California vs. Texas
"California has become a cautionary tale of mismanagement of what by all rights should be the country’s most prosperous big state. Its poverty rate is at least two points above the national average; its unemployment rate nearly three points above the national average...Texas’ trajectory, however, looks quite the opposite. California was recently ranked by Chief Executive magazine as having the worst business climate in the nation, while Texas’ was considered the best. Both Democrats and Republicans in the Lone State State generally embrace the gospel of economic growth and limited public sector expenditure...Since 1998, California’s economy has not produced a single new net job, notes economist John Husing. Public employment has swelled, but private jobs have declined. Critically, as Texas grew its middle-income jobs by 16%, one of the highest rates in the nation, California, at 2.1% growth, ranked near the bottom. In the year ending September, Texas accounted for roughly half of all the new jobs created in the country."
Read more here.
Friday, September 10, 2010
Food for Thought
"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings."
-Ludwig Von Mises, Human Action
HT: Dennis Gartman in today's "The Gartman Letter" via Carpe Diem
Sunday, June 27, 2010
Debate on Dead Aid
I just finished reading Dead Aid by Dambisa Moyo.
Her primary thesis is that not only has aid not helped to end poverty (a view also held by William Easterly: The White Man's Burden and The Elusive Quest for Growth, Peter Bauer, and others) but on balance, aid does more harm than good.
Moyo has a PhD in economics, interestingly obtained under the tutelage of foreign aid advocate, Dr. Paul Collier (The Bottom Billion).
The book is short and quickly glosses over multiple topics. For someone unfamiliar with the history and controversies surrounding foreign aid, this book could be one good place to start --but as a defense of her thesis, it falls short. Her arguments are plausible, especially for someone already skeptical of government intervention into economic affairs. A convincing presentation, however, would require much more empirical data and analysis in order to substantiate the claims.
Wanting to obtain an opposing point of view, I asked my favorite Keynesian for his recommendation--and he sent me the link to Stephen Lewis' segment in the following debate. I highly recommend watching at least the opening statements of this star panel which in addition to Lewis includes Moyo, Collier and Hernando de Soto (The Mystery of Capital).
The 2009 Munk Debates: "Be it resolved, foreign aid does more harm than good"
Part 2 of 15
Part 3 of 15
Part 4 of 15
Part 5 of 15
Thursday, June 10, 2010
Capitalism is Perfect
In an excellent response to Thomas Frank's attack on Capitalism, Wendy Milling states:
Since politics concerns the nature of government, and the essence of government is force, the full politico-economic application of property rights is a system in which government protects an individual's property rights from violation by others, but does not itself violate them. Capitalism is the politico-economic system of private property rights. It connotes a system whereby property rights (and hence, the other rights) are respected objectively and completely.
Capitalism is perfect...
Assaults on capitalism are rooted in a crybaby metaphysics, and they rely on obfuscations, equivocations, and an attitude of militant evasion. One trick is to make inappropriate demands of capitalism, then stomp and pout and denounce capitalism when those demands are not met.
One of the irrational demands made on capitalism is to provide infinite abundance, usually in some particular object of the demander's whim. The world has finite resources, and man has limited time and is not omniscient. There cannot be an infinite abundance of anything. This is not a flaw in any proposed politico-economic system (especially capitalism, which provides the greatest abundance of all of them), and in fact has nothing to do with systems qua system at all. It is a feature of reality.
A corollary demand is the erasure of all poverty, suffering, and, by logical extension, inequality among man. Appealing to an irrational sense of guilt, this trick ascribes to political systems an implicit, incompatible mission: Make it so that absolutely everyone is healthy, educated, happy, and has all the resources he wants (or some do-gooder wants for him). It then pronounces capitalism as flawed when such conditions do not materialize. Some degree of economic malady exists and will continue to exist under any system, including capitalism. It is not the responsibility of capitalism to eliminate, and it is not a feature of capitalism, but of a special facet of reality: Man's free will
Read the rest here.
Friday, April 2, 2010
A Lesson in Profit
Check out the article "A Lesson in Profit" by Gen LaGreca and Marsha Enright published on 3/31/10 in The Daily Caller. Using the success story of Henry Ford, the authors critique Obama's erroneous disdain for profit, and the free market in general.
Gen and Marsha--
Thank you for this important lesson. Throughout the health care reform debate, I kept hearing the phrase "profits before people" with the implication that the two are in conflict. Similarly, the denigration of "fee for service" in medicine as the cause of rising costs and prices while ignoring that the bulk of economic exchanges in a free market are "fee for service" and lead to increased efficiency and lower prices.
Both of these criticism are at root anti-profit. But as you point out, profit is simply the reward for successfully offering a good or service while keeping your own costs less than the price people are voluntarily willing to pay. To be against profits, is to be against benefiting by offering to others something of value.
Marx's exploitation theories have been disproven in economics (von Mises, Reisman and others) and in practice (USSR, Cuba, S. Korea)--and yet they linger on in the minds and hearts of many. Until people understand the tremendous value and benevolence of profts and the profit motive, we will be condemned to continually play whack-a-mole with wealth-robbing legislation.
Three cheers for profits! And three cheers for your article which shows us why!
UpDate 4/5/10: See also: Profits Are for People by Richard Ralston
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Thursday, January 28, 2010
Obama's State of the Union.
State of the Union in One Sentence: "We need to rise above fear, hesitation, and partisan politics–to give the government all the power it needs to solve all our problems." from Voices for Reason.
Cato Institute exposes Falsehoods and Misleading Statements:
Cato Institute exposes Falsehoods and Misleading Statements:
Friday, January 8, 2010
Mr. Summers' Sound Advice
Either Larry Summers is no longer saying the same things he said in 1996, or President Obama is not listening to his economic adviser.
Excerpts from Summers testimony to the IDB Conference on Development Thinking and Practice, Sept. 4, 1996, highlight five crucial lessons for economic prosperity.
Lesson One: Inflation
The recession has brought us dropping prices for most of 2009 with a slight uptick (1.84%) for November, the last month for which there is available data. But that statistic is referring to price inflation *--which tells us nothing about the presence of an underlying monetary inflation which degrades the purchasing power of our currency. The extremely low Fed target rate (0.0-0.25%), along with the astronomical increase in the monetary base during 2008, indicate that an increased money supply is in fact keeping prices artificially high (e.g. falling less than they would have with a stable money supply) and interest rates artificially low.
Remember this graph? (The smaller graph magnifies the change from 2007 to now.)
Lesson Two: Price and exchange controls
What about letting the market set prices for goods...ummm like executive compensation, or doctor's and hospital charges, or insurance premiums? How's does that reconcile with cap-and-trade for fossil fuels, or subsidies for alternative energy?
Lesson three: Open Markets
How does the imposition of duties on Chinese-made steel pipe and tires, or the “Buy American” Section 1605 of Obama's first stimulus package, the American Recovery and Reinvestment Act of 2009, fit with Summers' advice?
Lesson four: State-run enterprises
What would you call these? GM. Health Insurance Exchange. Public Option. Fannie Mae/Freddie Mac. Banks. Banks. And more Banks.
Lesson Five: Excessive and inappropriate regulation
Banks again: FDIC, Federal Reserve Board, Basel I and Basel II, Bank Secrecy Act, Real Estate Settlement Procedures Act of HUD, etc.
And Health Care: HIPAA, ERISA, JCAHO, CMS (formerly know as HCFA), ASTM, all licensing of hospitals, practitioners, devises, FDA, ASTM, CCHIT, EHR/IM, HIPSS--to name a few.
Looks like we'll have to learn those lessons all over again, because those currently in power clearly weren't paying attention.
* For an interesting look at how the meaning of inflation has altered in the past few decades, check out this brief article:"What is the Real Definition of Inflation?" Because economic texts and common usage now define inflation as a rise in the general price level, it is necessary to clarify just which "inflation" you are referring to.
Update on Money Aggregates:
See today's Carpe Diem on M2 and M3. It's going to be another interesting year.
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Excerpts from Summers testimony to the IDB Conference on Development Thinking and Practice, Sept. 4, 1996, highlight five crucial lessons for economic prosperity.
It’s clear that there are no short-cuts in development. We have learned some profound lessons from those countries that have tried them.So how are we doing?
The first is that inflation produces no enduring output benefit but carries a wide variety of costs...
The second lesson is that price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time...[A]ttempts to preserve price controls induce otherwise avoidable rationing schemes and goods shortages...
A third lesson is that closed markets lock in inefficiencies and, in the long run, suppress real wages. Import substitution has been discredited as an approach to development. It has led to protection that often has been used not to nurture nascent industries but to safeguard the interests of the wealthy and well-connected...I would even include in this last group the relatively well-off labor groups that work for protected enterprises.
A fourth lesson is that state-run enterprises, including state-owned banks, have a disappointing record of performance. While there are exceptions, the reality is that politics usually intrude in the operation of a public enterprise, and efficiency, financial performance and quality of service are often sacrificed...
A fifth lesson is that excessive and inappropriate regulation can strangle an economy and corrupt markets. Even if they start small and are well-intentioned, regulations tend to propagate, as both the regulated and the regulator start to see mutual advantages in their relationship...
To boil down these five lessons, we must: One, avoid inflation -- macro stabilization is an essential first step; Two, let markets set prices for goods, services and currencies; Three, open trade regimes and allow economic integration; Four, privatize state-owned companies; Five, reduce the size of government by eliminating excessive regulation. (Emphasis added.)
Lesson One: Inflation
The recession has brought us dropping prices for most of 2009 with a slight uptick (1.84%) for November, the last month for which there is available data. But that statistic is referring to price inflation *--which tells us nothing about the presence of an underlying monetary inflation which degrades the purchasing power of our currency. The extremely low Fed target rate (0.0-0.25%), along with the astronomical increase in the monetary base during 2008, indicate that an increased money supply is in fact keeping prices artificially high (e.g. falling less than they would have with a stable money supply) and interest rates artificially low.
Remember this graph? (The smaller graph magnifies the change from 2007 to now.)
Lesson Two: Price and exchange controls
What about letting the market set prices for goods...ummm like executive compensation, or doctor's and hospital charges, or insurance premiums? How's does that reconcile with cap-and-trade for fossil fuels, or subsidies for alternative energy?
Lesson three: Open Markets
How does the imposition of duties on Chinese-made steel pipe and tires, or the “Buy American” Section 1605 of Obama's first stimulus package, the American Recovery and Reinvestment Act of 2009, fit with Summers' advice?
Lesson four: State-run enterprises
What would you call these? GM. Health Insurance Exchange. Public Option. Fannie Mae/Freddie Mac. Banks. Banks. And more Banks.
Lesson Five: Excessive and inappropriate regulation
Banks again: FDIC, Federal Reserve Board, Basel I and Basel II, Bank Secrecy Act, Real Estate Settlement Procedures Act of HUD, etc.
And Health Care: HIPAA, ERISA, JCAHO, CMS (formerly know as HCFA), ASTM, all licensing of hospitals, practitioners, devises, FDA, ASTM, CCHIT, EHR/IM, HIPSS--to name a few.
Looks like we'll have to learn those lessons all over again, because those currently in power clearly weren't paying attention.
* For an interesting look at how the meaning of inflation has altered in the past few decades, check out this brief article:"What is the Real Definition of Inflation?" Because economic texts and common usage now define inflation as a rise in the general price level, it is necessary to clarify just which "inflation" you are referring to.
Update on Money Aggregates:
See today's Carpe Diem on M2 and M3. It's going to be another interesting year.
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