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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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I’ve drafted a review of Highest Duty, Captain Sullenberger’s autobiography. Comments/corrections would be appreciated.

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These photos of a modern California housing development shows a neighborhood where the automobile and garage come first.

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Lost in the news coverage of the Toyota acceleration debacle is the value of a good programmer. Consider that Nissan and the German car makers (perhaps because they use components from Bosch?) all have a line of a code that says “IF the brake is pressed THEN ignore accelerator input and set throttle to idle”. It wasn’t a top executive who put that line of code in, but a humble computer programmer. The Toyota programmers didn’t do this and now their company is losing perhaps billions of dollars in long-term sales and profits (the value of the company in the stock market has dropped by approximately $20 billion).

In http://www.nytimes.com/2010/02/18/business/global/18toyota.html, the Toyota top executive is reduced to characterizing the already proven-to-fail system as “fail-safe”:

“Toyota uses many sensors to ensure its electronic throttle systems are fail-safe,” Mr. Toyoda said. The company has conducted “rigorous tests” of the system to make sure it did not trigger sudden acceleration, he said.

Is it possible that we’ll see more respect given to programmers when the dust settles from this?

[Separately, I experimented with my 2007 Nissan sedan, touching the brakes while flooring the accelerator. This is the one time in three years that I have looked at the huge tachometer hogging dashboard real estate! It slowly rolled from 2500 RPM to 1200 or so.]

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I’ve drafted a review of I.O.U.: Why Everyone Owes Everyone and No One Can Pay. This is an explanation of the financial collapse of 2008-? by an English novelist that has gotten excellent reviews in newspapers and magazines.

Comments/corrections would be appreciated.

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