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Could I ever become a Democrat?

Here is a symposium on whether progressives can believe in economic growth as a primary value.  The impetus is Gene Sperling's new and intelligent book The Pro-Growth Progressive.  Here is a summary of the book.  Here is a recent Sperling article.  Scroll down MaxSpeak for left-wing criticism of Sperling.

Sperling pushes for markets and trade, but gives government a greater role in insuring against risk.  This includes "wage insurance," more job training, and managed forms of free trade and globalization.  On net his influence will be positive, but I have the following problems with his arguments:

1. He assumes that spending more on education will result in a better educated and more productive populace.  The U.S. data do not support this view, although he does adduce some good evidence on the benefits of preschool. 

2. He assumes that government-sponsored job training -- including "pre-emptive" training (i.e., before you lose your job) -- is effective.

3. He never puts on his right-wing public choice hat to consider what his proposed policies would end up looking like in the real world.  He feels no shame in postulating dozens of finely honed micro-interventions, all implemented by ugly and brutish politicians and interest groups.

4. We are never told what we must forego to do all this.

5. He ties himself in emotional knots anytime his preferred policies are not unanimous pure Pareto improvements.  He has to get over the fact that Democrats hurt people too.

6. When arguing against the Bush budget deficits, he ignores Cowen's Third Law: "All propositions about real interest rates are wrong."

He does nail market-oriented views on the issue of risk; we don't have a good explanation of why private insurance markets do not function better.  But since single-payer national health insurance violates every economic law known to mankind, I am again unsure how I could leap on the Democratic bandwagon.

By the way, here is Reihan Salam on where the Republicans should go (Matt Yglesias comments here).  He is another smart guy, but I just don't believe that any political party can be mass-captured by the intelligent and brought around to sanity.  Parties exist, in part, to enforce feelings of interpersonal solidarity and to make people forget about critical thinking.  We cannot avoid parties in a democracy, but there is already too much interest in parties as a vehicle for ideas.   

Posted by Tyler Cowen on November 10, 2005 at 06:39 AM in Political Science | Permalink

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Comments

Party loyalty is creepy.

Posted by: aaron at Nov 10, 2005 8:21:39 AM

Is pre-emptive training ineffective or is there simply no data?

Posted by: Steven Schreiber at Nov 10, 2005 9:28:58 AM

I'm often reminded of Mike Royko's great comment about government intervention.

Let's list the things that the US government does well.

1. Wage war.

As you can see, it is a very short list.

Posted by: Frank Borger at Nov 10, 2005 9:52:33 AM

Yeah, Sperling's clearly nuts with his musings about education. Soon he's going to be advocating massive government subsidies for public universities and lifetime employment for some of their employees. Wait...

Posted by: timg at Nov 10, 2005 9:54:46 AM

The first sentence above gives me pause. I'm fairly pro-growth, and I suspect that anybody here understands that economic growth is a "means" to reach other good "ends" ... but the sentence highlights to me where the hoi polloi frame their argument ... I think on growth as an "end," good or bad. Or as an absolute, always good or always bad.

Posted by: odograph at Nov 10, 2005 10:42:01 AM

'Could I ever become a Democrat?'

Reminds me of the question put to Brendan Behan upon his renouncing of Catholicism; 'Now that you've left the Church, will you become a Protestant?'

To which he said, 'I may have lost my faith, but I haven't lost my self respect.'

Posted by: Patrick R. Sullivan at Nov 10, 2005 11:57:31 AM

Good rationally self interested economists have no business voting anyway.

Despite theory, single payer national health insurance seems to wrok bettter than what we have. That's probably more of an indictment of the current system than of anything else. It's booring to advocate the less awful over the more awful, but generally rational. That probably applies to current Democrats and single payer health care.

Posted by: michael vassar at Nov 10, 2005 12:03:10 PM

Do I read you correctly that you are willing to ignore the wealth of empirical evidence showing how single-payer health insurance systems in other countries handily outperform our own system simply because the data is inconsistent with some form of economic theory you hold dear? That doesn't sound like you.

To your point that economic theory doesn't explain well why the market isn't very good at supplying insurance, I always thought that both the short and the long answers were "adverse selection". I read on a blog recently (Yglesias?) that it is odd how republicans love to talk about moral hazard, but really dislike talking about adverse selection.

Let me add that a single-payer system is not the only means to reign in adverse selection problems in health insurance, but all means to that end involve some pretty heavy government intervention.

Posted by: Commenterlein at Nov 10, 2005 12:12:22 PM

"...since single-payer national health insurance violates every economic law known to mankind"

Can you elaborate? And an answer that's just a list of economic theories (not how they apply) would be a pretty lazy answer.

Posted by: Joe W. at Nov 10, 2005 12:25:57 PM

"Let's list the things that the US government does well: Wage war."

-------------------------------

Frank,

I'm not so sure about that one. Vietnam, Nicaragua, Iraq...?????

Huh?

Posted by: hobo at Nov 10, 2005 12:41:02 PM

Wow. Cowen got pretty much pwn3d by Kevin Drum. I wonder whether Cowen will have the guts to respond?

Posted by: Alex at Nov 10, 2005 12:41:54 PM

Shorter Tyler to the rest of the developed world: 'Who are you going to believe -- me, or your lyin' eyes?'

Quoth Sullivan: "Reminds me of the question put to Brendan Behan upon his renouncing of Catholicism---"

Actually, that's a misquote of the question put to Stephen Dedalus in Joyce's 'A Portrait of the Artist as a Young Man'; but we knew already that since it's a citation from Paddywhack, it would be completely wrong. The following line is relevant to this discussion, though:

"What kind of liberation would that be to forsake an absurdity which is logical and coherent and to embrace one which is illogical and incoherent?"

Posted by: ahem at Nov 10, 2005 12:42:30 PM

I think the cost-benefit ratio of other countries' single-payer plans are at least partially propped up by the insane expenditures in the U.S. This is certainly borne out in the prescription drug data, where cost savings enforced by SP plans in other nations are shifted to US consumers - an unfair trade restriction if I ever saw one.

If the US went to SP, we would probably see a significant renegotiation process between other SP systems and the pharmaceuticals; our health costs would go down, and theirs would increase. What effects this would have on innovation, I have no idea...but it looks like patent reform would have a bigger effect than a SP shift.

Perhaps this effect is what Tyler was referring to?

Posted by: R2 W at Nov 10, 2005 12:59:08 PM

think of it this way -- if we already had France's health care system, would we be sitting around saying, "You know how we could improve this system? Let's have a half-assed system of private health insurance, comprehensive insurance for over 65s, and some insurance for the poor, and leave out 40 million people completely"

I used to feel the same way about the econ 101 stuff, but this really opened my eyes

http://www.gladwell.com/2005/2005_08_29_a_hazard.html

and don't even try to nitpick this. you'd only be fooling yourself

Posted by: c. at Nov 10, 2005 12:59:22 PM

"Wow. Cowen got pretty much pwn3d by Kevin Drum."

It was not so difficult in this case.

Especially since Cowen's previous sentence is: "He does nail market-oriented views on the issue of risk; we don't have a good explanation of why private insurance markets do not function better."

Perhaps that suggests the source of Cowen's problem? Indeed - it seems to suggest that there are NO useful "economic laws known to mankind" on the subject. Perhaps Cowen may be correct that single-payer violates all cases of a null set? Rather a trivial observation to base an opinion on. And single-payer would of course also be supported by all those cases as well. To say nothing of the weight of empirical evidence from the rest of the world...

Posted by: Silent E at Nov 10, 2005 1:00:43 PM

As far as the US goes in waging war efficiently, I suggest "Brute Force" by Ellis.
Over at alternatehistory.com I am trying to get Japan to win the second world war,
and not doing so well.

Posted by: wkwillis at Nov 10, 2005 2:20:29 PM

"But since single-payer national health insurance violates every economic law known to mankind"

Yeah? Name one economic law it violates.

P.S. Even Hayek was not opposed to universal government-provided health insurance.

Posted by: enfant terrible at Nov 10, 2005 2:22:39 PM

I suspect Mr. Cowen has a nice fat corporate health insurance policy and thinks that is the result of "economic laws", you know, the one that says, "Them that has, gets."

Out here in the real world, if you lose your job, you lose your insurance (if your previous job even offered insurance). If you get divorced, you often lose your insurance. If your employer's insurance company decides to raise premiums 50% in one year and your employer balks, you lose your insurance. If you're self-employed, you very likely can't get insurance for less than $1000 a month per family, and that insurance will usually exclude nearly everything that you'd go to a doctor for. (Mine excludes any prescription that doesn't happen during a hospital stay, that is, all prescriptions I get. But then, it's also got a $10K deductible even for hospital stays, so ...) If you have any illness or condition at all, and you can't get group insurance, you will probably either get a policy that excludes that condition forever... or they won't give you a policy at all and you are uninsured. When you're uninsured, you not only have to pay every penny of your healthcare, you generally pay twice as much as the insured pay because your provider has negotiated deals with all the insurance companies to charge them less, and the doctor has to make it up somewhere, hence charging me $160 for a routine office visit that my insured friend's insurance company pays $60 for.

People die because they don't have insurance or have inadequate insurance, because health costs are so astronomical that many hospitals can no longer afford to treat you without you paying in cash ahead of time. Sure, there are public hospitals, and they'll stabilize you and send you home-- they're not going to give you a kidney transplant for free.

Hmm. Now what economic law created a system like this, where employers are responsible for insurance, huh? A really stupid law, if one exists. But this is what life is like out there in the "free market", and I just think most people who are against a Canadian or German style plan have that luxury because they have good insurance... for the moment. It can't last-- more and more employers are saying it's not worth it to provide medical insurance. Your employer could be next, and then good luck finding someone to insure your kid's asthma, much less your spouse's cancer treatments.

Posted by: aaa at Nov 10, 2005 2:34:32 PM

Tyler: "But since single-payer national health insurance violates every economic law known to mankind,..."


Tyler, why do you assume that us Democrats even want you?
After all, you have a natural home in the Republican Party;
and you can even pretend that you're libertarian, if it salves your conscience.

Posted by: Barry at Nov 10, 2005 2:48:03 PM

This thread has me convinced that Marginal is better without comments, or at least that this is not the kind of post which should have comments here.

Posted by: washerdreyer at Nov 10, 2005 2:51:59 PM

This is an odd post; as others have noted, there is a large and well-established literature on adverse selection and asymmetric information which discuss precisely why private insurance markets don't function better. Much of this literature predates my birth.

Posted by: Kimmitt at Nov 10, 2005 2:56:49 PM

This thread has me convinced that Marginal is better without comments

Yes, it's much easier to live in economist fantasyland when nobody can point out reality to you.

Posted by: John Y. at Nov 10, 2005 3:04:14 PM

"single-payer national health insurance violates every economic law known to mankind"

When a scientist says something violates a law, he means it can't happen. E.g., a perpetual motion machine would violate the first and second laws of thermodynamics, therefore there never has been and never will be a perpetual motion machine.

But we all can see with our own eyes that Canada, a liberal democracy with a capitalist economic system, has single-payer national health insurance.

Ergo, single payer national health insurance violates no economic laws. If someone has posited a law that it would violate, the supposed law is false.

Science is big on reality. Ideology, on the other hand, goes the other way: the laws come first, reality is a distant second.

Posted by: JR at Nov 10, 2005 3:20:55 PM

"Cowen's Third Law: "All propositions about real interest rates are wrong.""

That should be Cowan's third fallacy.

In the absence of perfect international capital mobility, or Ricardian Equivalence, an increase in the govenment deficit will increase the real rate of interest when the economy is at potential output. At least that is the position that was maintained by N. Gregory Mankiw when he was not shilling for the Bush administration.

Posted by: Captain Video at Nov 10, 2005 3:22:22 PM

"Tyler Cowen writes:Since single-payer national health insurance violates every economic law known to mankind, I am again unsure how I could leap on the Democratic bandwagon."

What Cowen's assertion demonstrates is that his knowledge of economics is very deficient. No wonder he is a Republican.

Posted by: Captain Video at Nov 10, 2005 3:26:34 PM

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