Author: philg

Readers of Paul Krugman’s New York Times column will be interested to read this New Yorker magazine profile of the economist. Here are the items that jumped out at me:

• Krugman is childless, but he and his wife have two cats.
• Krugman was a passionate supporter of John Edwards in the 2008 Presidential election.
• Shortly after 9/11, Krugman was quick to blame airline-funded airport security operations for the tragedy, saying that the federal government should have been screening passengers because the airlines were too stingy. I.e., he may be considered the founder of the TSA. Krugman did not assign any blame to the FBI, which ignored tips from simulator instructors about young Saudi men wanting to learn how to fly Boeing airliners but not how to land or take off.
• Krugman is a science fiction fan who attends sci-fi conventions occasionally.
• Krugman was rather apolitical, though a huge fan of FDR, until King Bush II ascended to the throne in 2000. Bush’s reign of incompetence enraged Krugman.
• “Krugman and Wells pulled out of the stock market ten years ago and never went back.” If literally true, they sold when the Dow was about 11,000 (higher than now) and put the money into bonds, which have gone up hugely due to plunging interest rates. This makes the married couple two of the shrewdest and most successful personal investors in the U.S.
• … and this is the most inexplicable one… Krugman’s wife teaches yoga in their Princeton house and Krugman does occasionally join the class for old people, but “avoids the classes for somewhat younger and mostly female people” (the writer makes no attempt to explain Krugman’s aversion to being surrounded by young women wearing form-fitting clothing)

The article gives a good summary of Krugman’s main work as an economist. A central idea is that there is a big economic advantage to a city or region in having an already-established industry of some sort. There is no particular reason for carpet mills to be in Dalton, Georgia but once they are there and surrounded by a cluster of skilled workers, it would be difficult for another town to compete. Someone who had taken Physics 101 might rephrase this to say that there is a lot of inertia in an economy that requires skilled workers. If Krugman is right, the U.S. economy is doomed to stagnation and Krugman’s proposals for even more massive government spending won’t help. What does it mean to have 15 million people unemployed, many of them continuously since 2008? It means the U.S. now has a cluster of people whose skills are cashing unemployment checks from the government, living off relatives, and watching TV. These skills are not likely to be valuable to a company setting up a new factory. If you wanted to get in on the expanding renewable energy market, would you rather set up your factory in a town in China where everyone knows how to make windmills, solar cells, and lith-ion batteries or in a town in the U.S. where people need to be reminded what it is like to go to work every day?

Krugman expresses sadness that stimulus spending was not increased by another $1 trillion or more. But consider how the stimulus money was spent: paying salaries and raises for unionized civil servants, such as police officers and teachers (older posting); building and repairing roads and other infrastructure. Our government workers are not especially skilled compare to their counterparts in other countries. It costs us more to build roads, bridges, and buildings than what they spend in China. Would the folks who built the infrastructure for the Beijing 2008 Olympics feel the need to come over to the U.S. and hire Americans with experience resurfacing Interstate highways? Would the people who run schools in Korea want to come over here and somehow hire Americans with experience teaching in U.S. public schools?

Krugman fans: Has Krugman explained exactly how increased government spending will in the long run build up the kinds of clusters of skilled workers that he himself says that a country needs in order to prosper? [Note that I mostly stopped reading Paul Krugman because I couldn’t understand his reasoning (October 2009 posting).]

In the same issue is an article that explains that if Krugman’s writings make you sad, you won’t get any help from psychotherapy or antidepressant medications, both of which have been shown to be ineffective.

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My mole inside the American health care system called today with a story. She was at a mid-sized hospital seeing a patient who had come into the emergency room with a heart attack. She determined that the patient needed a stent. The hospital could not put a stent in. She called a bigger hospital’s doctors-only hotline to arrange a transfer. They promised to send an ambulance within 20 minutes. After 30 minutes, they called back saying that the ambulance can’t come for 60-90 more minutes. “Every minute counts with heart attack,” said my mole. She came up with a solution that she had never tried during her years of practice: calling 911 to get out of the hospital rather than to go in. The longest part of the call was her trying to explain to the 911 operator that she was already in a hospital emergency room and needed to get someone out. When the 911 ambulance arrived they made her go with the patient to the bigger hospital. Then she had to catch a ride back to the original hospital where she was still on call.

Separately, a friend of a friend wrote up this story about going to the emergency room in Mexico. The charge for the ER visit and stitches seemed rather steep, at $900, so I’m wondering if it was a private hospital rather than a government-run one. The ambulance was cheap, at least ($60 round-trip).

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… “New Jersey Sheriff Scolded for Confronting Professor in Classroom”

Related: September 2009 posting about public employee unions and their pensions.

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I drove through a few tollbooths on the Mass Pike and the electronic toll system flashed a yellow “call FAST LANE” at me instead of the familiar green light. So I called up “April, ID #99883” and she explained the system to me:

• FAST LANE mailed me the transponder back in August 1999.
• The transponders are known to last for 7-10 years
• FAST LANE had my email address in their computer system also the date on which they provided it to me, but they do not send out an email notification after, say, 10 years, that the transponder is likely to fail soon.
• When the transponder fails, and the customer continues to drive through the FAST LANE lanes, they use their video imaging system to connect up the license plate with the account and debit appropriately, but they also tack on extra fees. Given that you go through three tolls just to get from Logan Airport out to 128/95 (the Boston belt highway), the fees can add up quickly.
• If you do drive through an attended booth with the transponder still in the car, you get charged twice, paying once in cash and once with the transponder (if it happens to work that time). So it isn’t practical to pay cash unless you can be certain it is one of the booths with no sensor.

In response to “how would I have known about the potential for extra fees in the event of a failure of the equipment that FAST LANE itself provided?”, April replied that “We told you about it in the terms and conditions that we mailed to you.”

When was that? “In August of 1999.”

How many pages were they? “Eight pages of single-spaced type. It is like a book that you can read. We can change the terms and conditions at any time. It says that right in the book.”

I asked if FAST LANE mailed out a new copy of the terms and conditions when they were changed, because in all the time that I’d been a customer I could not recall ever receiving an update. “No, but if you call we’ll be happy to mail you out a new copy at any time.”

It is tough to know if this posting can be considered a story about doing business with the government. April said that FAST LANE was a private corporation, but it is owned by the Massachusetts Department of Transportation. A search with the Massachusetts Secretary of State did not bring up any seemingly likely private companies with the name “FAST LANE”.

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At a party in Somerville on Saturday night, we were talking about the constitutionality of the federal government’s proposed requirement that everyone buy health insurance (see The Dirty Dozen book review). A woman of about age 30 said “I would be dead without health insurance.” She explained that she had required a two-day stay in the hospital not so long ago. I pointed out that she had paid at least $60,000 in health insurance during her lifetime and that, aside from this one incident, she had never required anything more than routine care. Surely she could not have run up $60,000 in charges in two days?

After paying out all claims, health insurers have enough money left over to pay nearly half a million employees (source; UnitedHealth is a typical example) and still declare consistent profits. So it should be obvious that the average consumer of health insurance does not come out ahead. Premiums for a single 30-year-old here in Massachusetts are approximately $3600 per year (source; ever since Massachusetts passed a law requiring everyone to buy insurance we have had the highest insurance rates in the U.S. (and therefore the world; source)). Even a “catastrophic” $100,000 illness can be paid for with 30 years of premiums, or fewer years if you assume that you were able to earn interest or investment returns on money set aside.

Our almost-always-healthy young woman was unconvinced. I asked her if she would be better off with her employer (a university-affiliated research institute) paying her $3600 more every year rather than buying insurance for her. “No, because if they didn’t have to buy insurance for me they would just pocket the money; they wouldn’t pay me anything extra.”

I thought about arguing that in a classical free market, employers relieved of the burden of paying for health insurance would have more money to spend. With more money, they’d bid up the salaries offered to workers. Since her salary was already above the minimum wage, it was clearly being determined by some sort of competition among employers.

However, I reflected that classical Economics tells us that in a free market there can be no involuntary unemployment. Looking around in the U.S., this is not exactly what we see. Mancur Olson has some persuasive explanations, but it is not exactly clear how to apply his theories to the question of what would happen if the U.S. ended the employer-paid tax-exempt health insurance experiment that we began during World War II.

Perhaps the reason that we can’t sort out health care policy is that so many of us think that we have gotten something of tremendous value from health insurers. We don’t want to keep paying 500,000 Americans to work at health insurers but we still want the benefits that we think these folks have bestowed upon us.

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A year ago I had dinner with with two Harvard undergraduates (blog posting). Over after-dinner ice cream they came up with what I thought was a wise and clever explanation for how the U.S. economy will recover: as times get tougher, Americans will start working harder. I checked back with them this evening, reminded them of what they’d said, and asked whether they were still optimistic about a U.S. economic recovery.

One of the undergraduates said “I do think that people would work harder, but there aren’t any jobs. I’m worried.” What about federal government deficit spending? “I’m predicting massive inflation and then Japan and the Chinese will have to invade.”

Significant events since February 2009: (1) his father has retired and found that the pension doesn’t keep up with inflation as well as advertised, and (2) Herrell’s, the ice cream shop where we heard his epiphany, went broke after 27 years in business.

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Folks:

In hopes of getting some more helicopter students to fly at East Coast Aero Club, I’ve done a video interview with our most recent student. Please let me know whether you think it is effective and what additional questions I should have asked.

Thanks.

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I went to a neighborhood party last night and talked with a 50-year-old woman who is preparing to reenter the workforce after rearing three children and two step-children. She has always loved English (Brittany Spears’s favorite subject in high school because “it is something you can use every day”) and is getting a master’s degree in teaching English so that she can look for a union/government job as a high school English teacher. She is required to take only six classes over one year to get her degree. One required course out of the six is called “diversity”. She is not doing well in the class. “We aren’t learning any specific techniques that could help us teach people of different races or backgrounds. There is only one correct answer to every question posed by the professor and at first I wasn’t giving it. The professor was pigeonholing me as an ‘old white woman’ who couldn’t adapt, but eventually I figured out what was expected and now I’m saying stuff that I don’t believe just so that I can get a good grade in the class.”

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In answering a reader question, I visited the Bureau of Labor Statistics page on computer programming jobs. It contains some seemingly contradictory statements:

• “Computer software engineers are among the occupations projected to grow the fastest and add the most new jobs over the 2008-18 decade, resulting in excellent job prospects.”
• “Employment of computer programmers is expected to decline by 3 percent through 2018.”

Can these be reconciled? Digging deeper into the text, it seems that the BLS bureaucrats have come up with a way to distinguish between “software engineers” and “mere programmers”.

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Enjoying your $10 bottle of fine varietal French wine? This New York Times article reveals that the 750ml of wine inside cost 46 cents. This is a bit of a scandal because the French were supposed to supply a finer grade of pinot noir for closer to $1. Fortunately, apparently even none of the experts at the importer/packager could taste the difference. Regardless of the quality of wine, the federal government collects a 21 cent/bottle tax (source). In Massachusetts, we pay an additional tax of about 10 cents on 750 ml (source). So we thought that we were paying $10 for $1.30 worth of wine and taxes but it turns out that we received instead about 75 cents worth of wine and taxes.

[According to this BBC article, the fraud was discovered because the producers exported more pinot noir to Gallo than the entire region was capable of producing.]

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