Philip Greenspun’s Weblog

About two years ago, Massachusetts implemented a health care reform scheme very similar to the one being proposed in Washington. Everyone would be forced to buy insurance. If they couldn’t buy insurance, the taxpayers would pay for it. Since everyone would now be insured, health care providers wouldn’t get stuck with expenses for the uninsured anymore. This was supposed to result in cost reductions. A hospital wouldn’t have to charge paying customers more to compensate for those who didn’t pay. Insurance rates would fall but the total amount of money collected by insurance companies would remain about the same (more customers times less money).

How did it work out? Todays Boston Globe story “Health costs to rise again” show that we succeeded in getting more people into the system as paying customers. Prices, however, will rise by about 10 percent and will be the highest in the United States (and therefore the world). They will be double what they were in the year 2000:

“State health care reform has had some unexpected results,’’ suggested Tim O’Brien, senior vice president at Blue Cross Blue Shield’s headquarters in Boston. “The actual costs have been much higher than what were anticipated when health care reform went into effect in 2007.’’

The article mentions that a state commission proposes paying HMOs for annual care rather than for individual procedures, just as proposed in my personal health care reform plan. However, no steps have been taken in this direction.

In the discussion of the costs of the Massachusetts reform, no calculations are typically made of the costs incurred by each taxpayer in the state in securing a certificate proving that he or she has paid for insurance, the costs of organizing that certificate in with one’s tax filings, the costs of the people at insurance companies who have to prepare and mail out these certificates (and replacements as necessary), the cost of postage for mailing, the salaries of people in state government who try to figure out if someone is breaking the law by not buying insurance, the pensions for those people, the salaries of government workers who dispute with taxpayers as to whether or not they have complied with the law, the accountants and attorneys that taxpayers hire to defend themselves agains the public employees accusing them of not complying with the law by buying insurance, etc., etc.

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Canon released the world’s first practical full-frame (24x36mm) digital single lens reflex camera, the EOS 1Ds, late in 2002. Canon currently sells a greatly improved version of this camera, the 5D Mk II, for $2700.

Suppose that you introduced a similar product 7 years after Canon. Though you were 7 years late, you decided to price your me-too camera at $7000. Because you don’t have a lot of in-house technical expertise, you buy the critical sensor from an external supplier instead of designing and making it the way that Canon does.

Would you expect the world to stop and pay attention to your product?

Check the discussion in the photo.net Leica forum about the just-announced Leica M9, then do a Google search for “Leica M9” to see the 325,000 documents talking about this sensational innovation (basically an old Leica rangefinder body with a Kodak (are they still in business?) CCD sensor stapled to the back). If General Motors and Chrysler were this good at marketing they wouldn’t have any trouble paying back our $100 billion!

[Note that CCD was what Japanese companies were using 10-15 years ago. A CMOS sensor is the heart of a modern Canon, Nikon, or Sony digital SLR.]

[November 2009 Update: The December issue of Popular Photography has arrived in the mail. This issue put the Sony A850 and the Leica M9 through their standardized test protocol. The Sony is the world’s cheapest full-frame digital SLR, selling for $2,000 (compared to about $2,650 for the Canon 5D Mark II). The Leica is the world’s most expensive, at $7,000. How did the cameras compare on Pop. Photo’s test bench? The Sony, with a 24 MP Sony-built CMOS sensor, achieved “low” noise through ISO 1600. This is greatly inferior to the 5D Mark II, which had a very similar noise measurement at ISO 6400 (two f-stops more sensitive). The Sony delivered 3135 lines of resolution and a superb “7.7” on color accuracy, albeit still inferior to Canon’s.

How did the Leica perform, at 3.5X the price of the Sony? Noise from the 18MP CCD sensor became “moderate” at ISO 1600 and “unacceptable” at ISO 2500. The noise of the M9 at ISO 800 was comparable to the Canon 5D Mk II at ISO 6400. Leica’s color accuracy and resolution were significantly inferior to the Sony.

How did Popular Photography deal with the embarrassingly poor image quality results of the $7000 Leica compared to the Japanese cameras? “They’re completely differently tools for completely different styles of photographer. We don’t categorize the M9 as a pro model–think of it as the ultimate (deep-pocketed) enthusiast’s camera.”]

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Barack Obama has taken pains to assure Americans that illegal immigrants won’t be able to buy health insurance on his new exchange. They’ll still get free emergency care but they will be prohibited from paying the world’s highest prices for health care. What else are illegal immigrants going to be denied now? Will they be barred from the Apple Store and prevented from spending $3000 on a laptop? Prevented from buying Leica cameras? No haute couture, only prêt-à-porter?

Meanwhile, we taxpayers in Massachusetts are stuck with the bill for housing Obama’s Aunt Zeituni. The Wikipedia entry on this illegal immigrant has a good explanation of how she has avoided deportation thanks to the U.S. court system taking years to process even the simplest cases, e.g., Should a woman who has already twice been ordered deported, but did not leave, be… deported? (Put some judges and lawyers like that into a tire factory and pretty soon you need tariff walls to protect them against the Chinese.)

Massachusetts taxpayers have been paying for Aunt Zeituni’s housing for six years. Ever since Barack Obama’s ascendancy to the White House, we’ve also been paying for extra police details to deter the curious and the press. The Obama family inflicted further cost and inconvenience on folks in this state during their family vacation in Martha’s Vineyard, when roads and airspace were shut down for up to a week.

What could Barack Obama do to help Massachusetts? He owns a 14-room, 6500 square foot house in Chicago (using fossil fuels to heat 6500 square feet for a family of four in one of the coldest parts of the U.S. is apparently a demonstration of one’s commitment to reversing global warming) that presumably sits vacant nearly all year. The house is guarded 24/7 by Secret Service agents. The street is closed to non-residents. Why can’t Aunt Zeituni live there? She wouldn’t be bothered by the rabble or the press. She wouldn’t be a drain on Massachusetts citizens.

If Barack Obama wants to convince Americans that his health care plan won’t burden national taxpayers with the cost of caring for illegal immigrants, wouldn’t it be good for him to relieve the taxpayers of Massachusetts of the cost of caring for his illegal immigrant relative?

Via this posting I hereby offer to pay for Aunt Zeituni’s round-trip transportation to Chicago. I will pick her up in her public housing complex, drop her off at the new Southwest Airlines terminal at Logan Airport, buy her a ticket on Southwest, and arrange for my friend Jen to pick her up at Midway. Jen will drop Aunt Zeituni off at the Secret Service barriers and they can escort her to Obama’s house. We will reverse the process to get her back to Boston for her February 4, 2010 immigration hearing (source).

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I was teaching a helicopter instrument flying lesson today and the student commented that the air traffic controller on Boston Approach sounded like he had a cold. I said “I’m not sure how he could have caught anything. His office is way up in Merrimack, New Hampshire and at an average salary of $117,000 per year (plus benefits) he should be able to live in a house that is at least a few hundred feet away from any neighbor.”

We got to talking about the morality of government paying its workers so much more than the private sector would and giving those workers pay raises during the depth of a recession, raises that would be paid for, in part, with taxes on people earning $25,000 per year.

I had an epiphany then. Some people complain about the government redistributing wealth from rich to poor. But as government employment grows to become an ever larger percentage of the American workforce, the very existence of government is redistributing wealth in the opposite direction. For example, government workers in California get paid, including pension liability, more than double what private sector workers earn (more). As the California government gets bigger and/or its pool of retirees (many can retire at age 50) grows, the government inherently is a mechanism for stealing from the poor (Walmart workers, landscapers, restaurant workers, operators of small businesses) and giving to the rich (schoolteachers, policemen, firefighters, bureaucrats at all levels).

The government needs to take some money from the rich and give it to the poor because the government’s habit of paying “public servants” 2-4X what it needs to is one of the principal causes of impoverishment.

[Anticipating some comments of the form “the poor don’t pay much income tax”, let me point out that poorer Americans pay a large proportion of their income in sales tax, property tax, excise taxes, and various fees. Both a poor person and a rich person pay the same $13.70 toll to travel on the Massachusetts Turnpike and ensure that its average toll taker can earn $71,000 per year (plus benefits and pension), but the $13.70 is more sorely missed by the poor person than by the rich person.]

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In “TSA: Taxes Spent Absurdly”, Becky Akers asks “How do you turn an industry that costs $700 million annually into one that eats $6 billion?” The answer turns out to be “Nationalize it, as Congress did airport screening after Sept. 11, 2001.” She goes on to note that “The TSA’s nearly 50,000 screeners have delayed, frustrated and harassed passengers at airport checkpoints from Maine to Hawaii. What they haven’t done after eight years and $48 billion is catch a single terrorist.”

Akers is certainly understating the cost of aviation security imposed after 9/11. At our little airport there is a state trooper employed to fingerprint student pilots. An average Massachusetts State Trooper, including pension, is paid over $200,000 per year. A couple of airport employees help with background checks, security education, and issuing badges. Until a student or renter gets a badge, which takes at least four weeks, the customer must be escorted by a flight school employee at a cost of perhaps $25 per hour. The customer who does a thorough pre-flight inspection of an airplane may take all of the profit out of the rental.

Then the airport management decided that student pilots shouldn’t be allowed to keep their badges at home. What if they abandoned flight training and never returned to the airport. The flight school would have to pay an employee to file away each badge after a student’s flight and then hand it back when the student next showed up at the airport.

[A little background on comparative risk management: The four-seat planes that the students are renting can carry approximately 400 lbs. plus the pilot and fuel. A terrorist with a tractor-trailer, by contrast, can carry approximately 100,000 lbs. of whatever weapons or explosives he chooses. Aviation is subject to new regulations every year while there are virtually no regulations on purchasing or renting a truck and loading it up in the privacy of your own home, field, or warehouse.]

On Sunday we had to cancel a sightseeing tour that we had scheduled. The Boston Red Sox moved their game from 1:35 to 12 noon, which meant that we could not get anywhere near downtown Boston at 11:15 am, due to the “Temporary” Flight Restriction imposed after September 11th that prevents aircraft from flying within 3 nautical miles of a professional or NCAA Division I sports stadium. This is on the theory that a determined terrorist won’t mind engaging in destruction and murder from the air, but will carefully check the NOTAMs to make sure he isn’t violating a regulation. Unlike with the Presidential TFRs there are no F-16s or surface-to-air missiles to protect spectactors at such an event and a terrorist in a jet would travel through the 3 nautical miles in about 30 seconds. The FAA does not broadcast these TFRs. Nor does the FAA identify professional sports or NCAA Division I stadiums on its charts. To be legal, a pilot flying at lower altitudes would have to figure out where stadiums are located and check the schedules for every college and professional sports team that might be playing along his or her route of flight. [Note that the professional sports teams owners had been trying to get a restriction for many years in order to obtain a monopoly on in-stadium advertising and eliminate competition from airplanes towing banners. After September 11 they were able to get it for “security”.]

When a college or professional team wants to fly its own helicopter in or out of a stadium, they have to research the process for obtaining a waiver. They have to draft the waiver, which requires specialized aviation knowledge, after discussions with a pilot. The waiver application goes to the TSA to be reviewed by a taxpayer-funded employee.

If something isn’t done exactly right, either the FAA or TSA will have to prosecute a pilot for violating the policy against banner towers that had to be drafted instead as a security policy. Now at least five Americans are occupied in the dispute: (a) judge, (b) bureaucrat, (c) lawyer for government, (d) lawyer for pilot, (e) pilot. Instead of developing solar power systems or more efficient ways to make tires, five Americans are arguing about whether a pilot should have known that Wake Forest was having a football game and where Wake Forest’s stadium was.

I recognize that this posting relates only to a tiny slice of the American economy, but it is a slice that I have direct experience with. I imagine the rest of the economy is suffering from similar new regulatory burdens. The government adds regulations but almost never removes any, so the possible ways to violate a regulation grow every year. (This was a point made in the reviled book Bell Curve; in the old days it was pretty obvious what was a crime and easy to avoid running afoul of the law even if your IQ was 80; nowadays the legal system is so complex and prosecution so uncertain (marijuana and crack cocaine are equally illegal but somehow people are supposed to know that possession of marijuana is less likely to be prosecuted) that dumber-than-average people are screwed.)

One theory for how Americans can survive competition with Chinese workers who are better educated and get paid less is that the U.S. somehow has a more favorable environment for business and people have more freedom to do whatever it is that they need to do. As government keeps adding regulations, many of them in the name of security, one wonders if our environment is indeed more favorable.

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Dictionary: Socialism–Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.

Yesterday’s New York Times: “the government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small. … government spending accounts for a bigger share of the nation’s economy — 26 percent — than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. … To Mr. Obama’s critics, thousands of whom took to the streets of Washington this weekend to protest a new era of big government, all these efforts are part of a plan to dismantle free-market capitalism.”

Who decided to print trillions of dollars and give them to banks? The Bush Administration. Who decided to print hundreds of billions of dollars and give them to AIG? The Bush Administration. Who decided not to tell General Motors and Chrysler to work out their problems in bankruptcy court like any other company not smart enough to recognize the implications of pension and health care guarantees (see While America Aged)? The Bush Administration started with the Detroit bailout.

A theory consistent with the facts is that King Bush II knew that the next president would be a Democrat, due to the endless depressing Iraq/Afghanistan war. He therefore intentionally wrecked the economy and then took over much of it in order to make the next administration look like socialists.

Going by the numbers and facts, an economic historian would have little choice but to classify the U.S. circa 2009 as a socialist nation. Government at all levels spends a greater percentage of GDP than does China’s (source), for example, and the government either directly owns or assumes financial risks for a lot of our largest enterprises. How did we get here? It was a Republican plot to make Obama look like a socialist, by the clever strategy of converting the U.S. into a fully socialist economy prior to January 20, 2009.

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In a couple of postings from my trips to Africa in 2007 (link1; link2), I wrote about how the Dark Continent’s slow connection speed to the worldwide Internet was making it unlikely that businesses would invest in Africa. The owner of the fiber optic cable linking London to South Africa, for example, is a crony of the rulers and is able to charge 100X the price per bit per mile compared to any other undersea cable anywhere in the world. Now it seems that Africa’s Internet woes are not limited to connectivity with Europe, the U.S., and Asia. Even internal data transfers are slower than via carrier pigeon, according to this ABC News article.

With communications speeds so slow and costs literally 100 times what people in other countries pay, coupled with air transportation costs that are at least 4 times higher (due to government-imposed restrictions on competition), the question is not “How come Africa is in such bad economic shape?” but rather “Why is there even a single free market business in Africa?”

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… until Americans are paying more for a set of tires than Indians pay for an entire car (Tata Nano; also the subject of an analysis of what our Detroit bailout money would have bought). According to this New York Times story, President Obama has imposed a 35 percent tariff on Chinese tires, not because they were doing anything unfair, but simply because some American factories are unable to compete on price and quality, at least with their current union labor contracts. If you’re managing one of the businesses that is not fortunate enough to command Washington’s attention, e.g., a software company, you now have to pay your workers extra so that they can buy tires to get to work. This comes on top of the extra money that you have to give them because they are required to participate in the world’s most expensive health care system and the extra money you have to pay them so that they can pay enough property and state income tax to make good on public employee pension commitments from 30 years ago (more).

Separately, EMC, the data storage company, announced that it would invest $1.5 billion to expand its services, customer support, and research and development operations. Is the money going to be invested in Massachusetts, where EMC is headquartered and where we already have achieved the kind of health care reform currently being proposed in Washington? This Boston Globe article says that the money will be invested and the jobs created in India.

For an American of my age (45), there is something humiliating about being engaged in a trade war with China. The Chinese were supposed to be rural peasants in rags, too poor to feed themselves, and oppressed by Communism, the world’s worst system of government. Now it seems that our Democracy, supposedly the world’s best system of government, has transferred much of our wealth to cronies of the rulers (Wall Street executives, Detroit automakers, specific labor unions, health insurance companies (soon)). The evil and inefficient Communists, by contrast, spent their stimulus money on solar power and lithium battery technology and infrastructure. The Chinese economy is recovering nicely (source) while we continue to stagger. Can we afford to start a trade war with these guys? Aren’t we eventually going to need to buy renewable energy and battery technology from them?

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Virtually every product sold in America that requires consumers to have expert computer system administration skills has experienced rapid growth among early (geeky) adopters and then hit a sales wall. Even VCR programming was something that most Americans couldn’t be bothered to learn. The first million people who bought VCRs read the manual carefully and time-shifted all of their favorite shows. The next 200 million bought them, lived with the flashing 12, and rented tapes.

Let’s consider iTunes. A music-loving consumer purchases 400 albums worth of music from Apple. Assume there are 10 tracks per album at a cost of $1.30 per track. That’s a $5,200 contribution to Steve Jobs’s Gulfstream fund (will pay for about one hour of fuel and overhaul reserves). These are downloaded to the consumer’s $3,000 desktop Macintosh and used to feed his home music system. The hard drive dies. If our consumer is one of the 80 percent of home computer users who don’t have a backup regime in place, this $5,200 investment in Apple’s low-quality compressed music files evaporates. (Of course, our music lover might have a copy on an iPod, but in order to protect the recording industry from its consumers, Apple software prevents him from copying the data back from the iPod onto his new $3,000 Macintosh.)

After a few such incidents, you’d think that word would get around and people would stop paying big money to listen to music while they pick cotton on Steve Jobs’s plantation.

How could a product that requires home computer users to be expert sysadmins continue to enjoy expanding sales? Especially as an increasing number of consumers have migrated all of their data onto cloud-based services, such as Hotmail, Flickr, Google Docs, etc.

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On this 8th Anniversary of the 9/11 attacks on the United States, I’d like to devote a little space in this Weblog to remembering the heroes of that day. For me, the essence of heroism is choosing to take a personal risk, especially, but not necessarily, a physical one. A hero is someone who chooses to help others despite the risk of a terrible negative consequence for himself. Anyone who walked into the World Trade Center after the first airplane hit, in order to help those who were originally inside, meets my definition of hero. A good example of a civilian who did this is Rick Rescorla, profiled in “The Real Heroes are Dead”, a February 11, 2002 New Yorker story that I recommend highly. Any of the firefighters and police who went in could have called in sick or otherwise found an excuse to run in the opposite direction.

So I’m giving thanks today that I live in a society in which there are so many who step up to the hero level when the situation requires it.

[My personal 9/11 story is not inspiring. I was on a camping trip in Nova Scotia for most of September 2001 and missed almost everything.]

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