Month: February 2015

Among advanced economies, the U.S. has a moderate tax revenue as a percentage of the GDP. This chart shows federal, state, and local taxes to be roughly 35 percent of GDP (33 percent is the estimate for FY2015).

With Obamacare, however, the government now forces citizens, either individually or through employers, to purchase health insurance from a set of government-selected vendors. How is that materially different from a European government forcing citizens to pay some extra tax and then providing (or paying for) health care?

If we consider health insurance to be a tax, we have to add in roughly 9% of GDP to the tax burden, bringing the total U.S. tax burden up to over 40 percent of GDP and government spending to over 50 percent (probably higher if the cost of government pension commitments were accounted for properly). Adding in the nominally private health insurance premium costs, the U.S. would have a smaller private sector than most European countries. We would be more government-dominated than Sweden, Germany, Greece, or the U.K. (Guardian table). We would be in the same ballpark as France and Denmark.

Does it matter? I think so. The share of the economy that is government-run should affect the growth rate that we can expect. Parts of the economy that are run by the government are insulated from competition and therefore don’t bother to strive for higher efficiency. So as investors we should look to buy stocks in countries that have a larger free market. That means putting less money in U.S. stocks and more in Australia, Eastern Europe, and Korea for example.

This can also lead to political unrest. Thomas Piketty’s Capital says that calamity ensues when the rich bastards’ rate of return on capital outstrips the growth rate of the economy, the potential source of the average worker’s pay raise. With a capital-rich but sclerotic government-dominated country like the U.S. has become, it could be the case that investors are getting their returns from fast-growing economies on the other side of the planet but they’re still living here in the slow-growing half-planned economy of the U.S. Piketty says that’s a recipe for burning envy and confiscatory wealth taxes.

Related:

• “Inequality Has Actually Not Risen Since the Financial Crisis” (New York Times, February 17, 2015); the top 1 percent are doing about the same, relative to the average American, as they were in the late 1990s, though the trend is up since the 1970s.

If you had always wondered “What happens when you take the intersection of the two most broken large systems on the planet?” we now have the answer! See “800,000 Using HealthCare.gov Were Sent Incorrect Tax Data” (nytimes):

About 800,000 taxpayers who enrolled in insurance policies through HealthCare.gov received erroneous tax information from the government, and were urged on Friday to hold off on filing tax returns until the error could be corrected.

The incorrect insurance information is used in computing taxes. Consumers can expect to receive corrected data in the first week of March. With the new data, officials warned, some taxpayers will owe more and some will owe less.

Officials said they did not know why the error had occurred.

Will 2014 be the year that historians cite as the point at which the American government had created a system that was too complex for Americans to operate?

Related:

• Why can’t the IRS do our taxes for us?
• Most perverse things about the U.S. tax code?
• “The Bell Curve revisited” (the 1994 book, wrongly characterized by journalists as being primarily about race, about how a large percentage of Americans did not have a sufficiently high IQ to prosper amidst the complexity of American society and economy at the time)

Bringing Up Bébé (Druckerman 2012) talks about trips by French children without parents:

One day, a notice goes up at Bean’s school. It says that parents of students ages four to eleven can register their kids for a summer trip to the Hautes-Vosges, a rural region about five hours by car from Paris. The trip, sans parents, will last for eight days. I can’t imagine sending Bean, who’s five, on an eight-day school holiday . She’s never even spent more than a night alone at my mother’s house. My own first overnight class trip, to SeaWorld, was when I was in junior high. This trip is yet another reminder that while I can now use the subjunctive in French, and even get my kids to listen to me, I’ll never actually be French. Being French means looking at a notice like this and saying, as the mother of another five-year-old next to me does, “What a shame. We already have plans then.” None of the French parents find the idea of dispatching their four- and five-year-olds for a week of group showers and dormitory life to be at all alarming.

I soon discover that this school trip is just the beginning. I didn’t go to sleepaway camp until I was ten or eleven. But in France, there are hundreds of different sleepaway colonies de vacances (vacation colonies) for kids as young as four. The younger kids typically go away for seven or eight days to the countryside, where they ride ponies, feed goats, learn songs, and “discover nature.”

It’s clear that giving kids a degree of independence, and stressing a kind of inner resilience and self-reliance, is a big part of French parenting. The French call this autonomie (autonomy).

It’s not simply that Americans don’t emphasize autonomy. It’s that we’re not sure it’s a good thing. We tend to assume that parents should be physically present as much as possible, to protect kids from harm and to smooth out emotional turbulence for them. Simon and I have joked since Bean was born that we’ll just move with her to wherever she attends college. Then I see an article saying that some American colleges now hold “parting ceremonies” for the parents of incoming freshmen, to signal that the parents need to leave.

The latest opportunity to see if Druckerman is right comes courtesy of a five-year-old. Here’s a pattern that has been repeated about four times: She invites her five- and six-year-old friends to sleep over on her trundle bed. The other little girl agrees readily, especially if bacon and pancakes are promised for breakfast. If the father of the child is present, he agrees to the idea. If the mother is present, she says to her child “We’ll have to discuss it,” then explains to us “She’s never been away from me overnight and I don’t think she is ready for it.”

Folks:

I’m assuming that ArsDigita Community System (old book chapter; current version) cannot, nearly 20 years after its inception, be the right software for running a small online community anchored by a book. But that raises the question of what is the best software in a world where one can’t expect anyone to truly join any community other than Facebook.

Here are some things that the site needs to do:

• let people read chapters
• into the text of each chapter add the following:
  • link to Amazon so that they buy a Kindle version
  • Google Ads
  • widgets for readers to promote the page to standard places (Facebook, Twitter, Google+, StumbleUpon, what else?)
  • tags for Google Analytics
• question-and-answer forum with newer messages displayed in reverse chronological order and older ones categorizable in two orthogonal dimensions (so there are two dimensions for categorization but the categories in one dimension are not subcategories of the other)
• a blog for news articles about misc. topics (but maybe the blog should actually be the Q&A forum? Just let anyone post a new topic but require approval before a topic/question goes live?); this too needs to be categorized in two dimensions
• users registering for email alerts of new discussion forum postings, new blog entries
• ability to log in with Facebook credentials and other credentials (just to get the person’s name and email, not to go poking around among their friends or do anything else invasive)

I think this is basically the feature set of WordPress but I’ve never quite figured out how to make WordPress do the boring static web site stuff. Drupal also comes to mind but it seems like overkill if all that we need is a single blog and a Q&A forum plus some fundamentally static web pages.

What’s the community wisdom?

Thanks in advance for sharing your expertise.

Silicon Valley friends: What do you make of the lawsuit by Ellen Pao against Kleiner Perkins? (USA Today) The standard employment discrimination case, to my mind, starts with the principal-agent problem. It is another way for managers to cheat shareholder-owners, the same way that they might by moving the company headquarters to a different suburb in order to shorten their commute. The managers indulge their personal preference for hiring buddies, people that they think will be fun to work with, etc., regardless of the fact that more qualified workers are available at a lower price. But the Kleiner Perkins partners are compensated strictly according to their funds’ performance. (Perhaps still the standard “2 and 20” structure where they get 2 percent of the fund every year just for showing up and then 20 percent of any profits, even if the profits are driven by inflation and the fund underperforms the S&P 500.) So if Pao’s allegations are true, i.e., that she was doing a great job and producing profits, the greedy venture capitalists stand accused of intentionally making themselves poorer simply so that they would not have to look at an additional woman in the office (25 percent of Kleiner Perkins partners are female, according to Wikipedia, but it is unclear what the percentage would be for the entire office). Econ 101 would predict that those partners would have been happy to have a green Martian in the office if he/she were making money for them.

I haven’t set foot inside Kleiner Perkins for about a decade so I don’t feel qualified to comment on the likely merits of the case. What do Silicon Valley readers think?

Sidenote: Pao is married to Buddy Fletcher, a former hedge fund manager who was a successful plaintiff against Kidder Peabody, initially alleging race discrimination. Wikipedia says that prior to his marriage he was “in a same-sex relationship with Hobart V. ‘Bo’ Fowlkes Jr. for over 10 years” so presumably his lawyers had to choose between alleging that Kidder Peabody discriminated against him because of his skin color or his sexual orientation (at the time).

Related:

• Should the SEC make it illegal for public companies to employ men?

If you’re a Gary Shteyngart fan, you’ll want to read this New York Times Magazine article where he writes about a week spent watching Russian television. Tough material to work with but Shteyngart succeeds in my opinion. If you’re curious to know about psychoanalysis, the article provides a window into the modern practice.

This is also a great article for Bostonians looking for ideas on how to spend the next few blizzards…

Related:

• March 2014 post about Little Failure
• second post about Little Failure

Scott Walker is in the news for wanting to cut the budget of the University of Wisconsin by 2.5 percent and/or tweak the mission statement to include vocational readiness (nytimes).

A vocational mission for the university doesn’t make a lot of sense in a state where child support is typically a flat 17 percent of the defendant’s pre-tax income, without any limit. A person who wants to have the spending power of, e.g., a veterinarian, doesn’t need to go to the University of Wisconsin’s vet school. He or she can simply have sex with three veterinarians (married or single, drunk or sober), obtain custody of the resulting children, and then collect roughly one third of each vet’s after-tax income (17 percent pre-tax being approximately 33 percent after tax). Wisconsonians can go to college and work to do things that they love and find personally rewarding; if they want cash they can get it more straightforwardly and securely from having children.

What about the cuts? Is 2.5 percent really that bad? Since universities don’t strive for operating efficiency and since they are big employers, subject to an ever-increasing array of costs, absent structural changes the university probably needs at least 4 percent more each year just to stay even. So a 2.5 percent cut is likely a 6.5 percent cut compared to what the university had been planning. Could the university absorb these cuts and still operate in the traditional “stick speaking human in the front of a classroom full of listening humans” manner? Sure. In the book Higher Education? the authors back out the numbers and find that colleges are paying professors between $242 and $820 per teaching/office hour. You can’t spit in the street in Madison without hitting a PhD, many of whom would be delighted to work as adjuncts for a lot less than that. The simplest ways for the university to respond to budget cuts would be (1) eliminate tenure so that it doesn’t have to pay a lot of professors that it doesn’t actually want, and (2) offer to pay anyone qualified a straight $50/hour to teach classes. They could then look at cutting back on some of the administrative positions that they’ve added over the past few decades.

Old people (like me!) love to talk about how comparatively lame the younger generation is. But during the various Boston blizzards we managed to watch two versions of True Grit: 2010 and 1969. The older movie is, in my opinion, so cheesy by comparison that it calls into question any right that older generations have to criticize the young.

There are some parts of the old movie that I did like, e.g., the children swinging in the playground during the hanging of three criminals, and the table full of guns and ammo belts just outside the courtroom (like the pile of cell phones that they would have today). But the entire thing seemed to be filmed more or less in the middle of the day and in terrain that was not plausibly Oklahoman.

[Separately, what do gun owners think of the 1969 movie? The sheriff points her father’s pistol at Mattie as part of the process of returning it to her. John Wayne then waves the pistol around wildly on a crowded street. At the end of the movie Mattie points the gun at John Wayne while trying to hand it to him at the gravesite. I’m not a gun expert, but wouldn’t people who carry guns all day know a little more about basic safety?]

“The real reason why the US is falling behind in math” is a math professor’s take on “Why Johnny can’t do math.”

This is consistent with my experience as a tutor in the Cambridge Public Schools. High school students would be given about 50 identical problems on one page, each one starting with the equation of a circle with a goal of finding the center and radius. There was some sort of trick that one could use and they were better at it than I, but they struggled sometimes with arithmetic on the coefficients. I would ask them to back up and graph one of these equations so that I could understand it and they would say that they didn’t want to, didn’t know how to, etc., even though they all had graphing calculators. The goal of the school was to get the students to the point where they could crush the MCAS and some other standardized tests but the problems had nothing to do with what I would call “math” (and I was an undergrad math major before I found that I had to agree with Barbie that “math is hard [and frustrating]”).