From my latest Mises Canada post:
As I’ll be exploring in many future posts, Canada offers a great opportunity for U.S. economists interested in historical research. Because the U.S. and Canada are both wealthy countries with similar forms of government, their physical proximity sheds light on the effects of different policies.
Take the Great Depression and the impact of Franklin Roosevelt’s sweeping “New Deal.” …
Yet I had encountered defenders of Roosevelt who argued that…no other U.S. president had ever inherited such as mess as Roosevelt acquired from Herbert Hoover after the 1932 election. In other words, since FDR started out in such a quagmire, it’s not surprising that it took him longer to achieve recovery. These writers still wanted to say, “Roosevelt and his New Deal got us out of the Depression.”
It occurred to me to compare U.S. and Canadian unemployment. Here’s what I found…
I thought I should actually state my long-term vision for liberty.
==> Lew Rockwell explains why he’s an anarcho-capitalist.
==> Yet another post from me on the tax interaction effect, which might be easier if you are not a trained economist.
==> I totally get what Jason Brennan is saying in this post, but I still think it’s useful for libertarians to point out that taxes are theft. (Or if you think that’s a loaded statement, then: …for libertarians to argue that taxes are theft.) I mean, take just about any systematic social injustice. The only reason it exists is that a bunch of people think it’s morally OK. So the only way for opponents to argue the morality of it, is to try to show these same people that it actually conflicts with their moral code; they just need to think about it. Would Brennan have criticized the abolitionists, telling them, “Look, stop writing pamphlets that say, ‘It’s immoral to lock up a human being against his will’ or ‘It’s wrong to split families up at auction.’ That’s precisely what the argument is about, so you’re not helping, you’re just embarrassing yourself.” ?
==> At first this story–about a guy showing you how to take “selfies” that make it look like you have a girlfriend–is funny. Then it just gets depressing.
==> The Nullifiers have a plan to smoke out, er, thirst out, the NSA.
==> I admit I don’t read the site very much, so perhaps I’m way out of line, but I think this is the first time I’ve seen ThinkProgress take the side of the church against the State.
Incidentally, if you’re a public official trying to justify why you’re not letting a church feed thousands of homeless people, it’s probably a wakeup call for your life when you find these words coming out of your mouth: “If I want to cook and poison my own family and friends that’s OK, but when you’re open to the public that’s implying a certain standard of safety,” Walker said. “That’s the standard we have in place for all the homeless shelters in the city.”
In light of all the attacks on Stephen Williamson–Noah Smith has provided the best summary I’ve seen in his updates at this post–my inner defense attorney instincts have been activated. (Nicky, this is not Nam, this is blogging; there are rules.) So I offer the following testimony. Do with it what you will:
Dr. Williamson, if you’ll bear with me, I am truly trying to make sure the blogosphere mob doesn’t lynch an innocent man. So can you please clarify your position by telling me if I’m understanding you?
You are saying that if the Fed hadn’t engaged in QE, then price inflation (such as the increase in CPI from 2008-13) would have been higher than what we observed. Further, you are saying that the mechanism at work here is *not* that the Fed’s policy announcements of QE led investors and consumers to revise their forecasts about the economy; in other words, it’s NOT that people said, “Whoa, they’re announcing another trillion in asset purchases, so they must think we’re on the edge of a depression here. I’d better put off buying that plasma screen TV.”
Finally, you aren’t claiming to have discovered some knife-edge equilibrium result that wouldn’t survive a “trembling hands” perturbation. Rather, you are saying that given the situation the last few years, a burst of QE would quite naturally lead to lower price inflation; there doesn’t exist a more stable path toward an equilibrium of higher price inflation.
I realize you might not have worded everything the way I did, but do you endorse the above statements?
Then he answered:
My original post actually didn’t focus on QE, I merely wanted to suggest reasons why, if the Fed maintained policy at the zero lower bound for a long time, we need not observe deflation, and why we could see falling inflation. In the model, it’s a long-run proposition. Then, some people wanted to focus on the QE result in my working paper which is that, as a long run proposition, at the zero lower bound QE will lower inflation (while also raising consumption and making us better off, through a mechanism which involves relaxing collateral constraints. That idea ran away with itself, and people started putting words in my mouth.
1. There are some complications. For example, I haven’t worried about the short run effects of monetary policy. That’s going to complicate what we see in the actual time series of prices 2008-13.
2. I wouldn’t rule out announcement effects from QE. The effects I’m talking about could be quantitatively small, and all you’re seeing are signaling effects of QE. Maybe it’s only the policy rate that matters, and QE is just signaling future policy rates.
“Finally, you aren’t claiming to have discovered some knife-edge equilibrium result that wouldn’t survive a “trembling hands” perturbation.”
Definitely not. When Krugman was discussing “little arrows,” he seemed to have a well-specified notion of dynamic stability in mind. I addressed that. There’s no stability problem in that sense at all. As to the other “stability problem,” that was just some nonsense.
“Rather, you are saying that given the situation the last few years, a burst of QE would quite naturally lead to lower price inflation; there doesn’t exist a more stable path toward an equilibrium of higher price inflation.”
I would put it differently. The original issue that I was focused on, was the idea that there is another long-run equilibrium with higher inflation, but the liquidity trap equilibrium was indeed highly stable. It’s so stable in part because of policy errors the Fed is making, or it’s own misunderstandings.
A lot of people are reading things that other people are writing about what I’m writing, rather than actually reading my writing unfiltered, and that’s bound to be confusing.
I added the bold above, which was precisely why I asked him.
In the past (not going to bother digging it up), Krugman has argued that the Republicans who were desperately trying to avert the onset of ObamaCare were belying their own arguments. If they actually thought it would be a disaster, Krugman argued, then they should let it get implemented, because then everyone would see how awful it was, and it would get repealed, much to the chagrin of the Democrats.
I’m not kidding, that’s really what he argued. In case you’re not seeing why that’s so absurd, Krugman unwittingly spells it out when he blogs today:
For almost two months, the debacle of healthcare.gov allowed conservatives to live the life they always wanted. Health reform was a dismal failure; Obama would go down in history as a laughingstock; government can’t do anything; viva Ayn Rand!
Meanwhile, the technicians were working on what was always a technical IT problem, not a problem with the fundamental structure of the law. And while things are far from completely fixed, the crisis is clearly over. Obamacare will have millions of beneficiaries by the time open enrollment ends; it will add many more in the 2015 cycle. Health reform is pretty much irreversible at this point. [Bold added.]
Let me add one final clarification on the above point: No Tea Party partisan ever denied that handing out federal money to millions of people, would create millions of people who supported the government program. That was part of the objection all along, that once this thing started, it would be impossible to turn off, no matter how awful it was.
Next, young progressives who really love ObamaCare and trust Paul Krugman should take pause at this throwaway line:
Apparently, however, many people on the right are still stuck on the notion that Obamacare is doomed, indeed that it’s collapsing as we speak. The latest version is the supposed “death spiral” of young people not signing up.
As Ryan Cooper says, don’t count on it. There are lots of good reasons for the young to sign up, including the fact that it’s the law. [Bold added.]
Incidentally, I can’t remember the last time I heard anybody mention this–certainly none of the people explaining how great ObamaCare is going to be–but let me quote from healthcare.gov to make sure we all realize what’s in store:
The penalty in 2014 is calculated one of 2 ways. You’ll pay whichever of these amounts is higher:
* 1% of your yearly household income. The maximum penalty is the national average yearly premium for a bronze plan.
* $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
The fee increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and later years it’s 2.5% of income or $695 per person. After that it is adjusted for inflation.
(Note you are exempt if you are below 133% of the federal poverty line.)
Now why would they have the (minimum) fee at $95 per person in 2014 when it first kicks in, but by 2016 it rises to $695? Is that because something changes in the underlying actuarial tables? Of course not. It’s because they wanted the initial fee to be something extremely modest, so the media could focus on that. If you surveyed Krugman and Yglesias’s readers and asked, “What will the minimum individual mandate penalty be in 2016 for not having health insurance?” what do you think the median response would be?
Also, note that even in 2014, the tax for not having insurance is either $95 or 1% of household income, whichever is higher. So, if you’re a young person out there who currently doesn’t have insurance, unless you make $9,500 or less annually, you’re paying more than $95. (I think it’s technically adjusted gross income, but you get my point.) This whole thing is unbelievably deceptive.
Oh, the government’s official term for this tax is “individual shared responsibility payment.”
But remember everyone, the only reason anybody could possibly oppose this, is hatred of poor sick people.
In a story that’s making the rounds, the NYT reports on outrageous hospital bills:
With blood oozing from deep lacerations, the two patients arrived at California Pacific Medical Center’s tidy emergency room. Deepika Singh, 26, had gashed her knee at a backyard barbecue. Orla Roche, a rambunctious toddler on vacation with her family, had tumbled from a couch, splitting open her forehead on a table.
On a quiet Saturday in May, nurses in blue scrubs quickly ushered the two patients into treatment rooms. The wounds were cleaned, numbed and mended in under an hour…
Then the bills arrived. Ms. Singh’s three stitches cost $2,229.11. Orla’s forehead was sealed with a dab of skin glue for $1,696. “When I first saw the charge, I said, ‘What could possibly have cost that much?’ ” recalled Ms. Singh. “They billed for everything, every pill.”
The NYT article goes on to explain the cause: “Hospitals are the most powerful players in a health care system that has little or no price regulation in the private market….[M]ergers and consolidation have resulted in a couple of hospital chains…to command high prices from insurers and employers.”
No, that’s not really a good explanation.
The reason it’s so obvious to people that something is wrong, is that we can all sense that it doesn’t take a 10 years of medical school and residency to give somebody three stitches without causing an infection. So it shouldn’t carry a price tag of $2,229.11 for such a procedure.
If there were a wide open market for health care services, it’s not possible that a hospital could charge such a price. They would have to cut prices or let outpatient clinics in shopping malls take over such routine procedures.
But instead of getting government roadblocks out of the way, it looks like Americans will go along with ever increasing political “solutions.” The cost overruns and bottlenecks will pile up, the insurance companies and hospitals will continue to anger their customers, and then “health economists” will say this just proves the need for a single payer system to get rid of the waste.
Then we’ll have low prices like the single-payer Pentagon gets from its contractors.
I will be regularly blogging at the Mises Canada site. It’s run by Redmond Weissenberger, who is an Austrian but with a special focus on the energy sector and climate policy. (In general I do a lot of work for Canadian outlets because oil and natural gas are so big up there.) Redmond is also one of the publishers of The Dollar Vigilante, FYI.
My first of many posts critiques a commentary by Joe Romm:
Those following the climate change policy debate know that the Center for American Progress’ Joe Romm is one of the most vociferous bomb-throwers out there. Romm warns of true calamity from unmitigated climate change, and regularly attributes perfidy to his intellectual opponents. Not surprisingly, he is one of Paul Krugman’s go-to guys when it comes to this stuff.
However, Joe Romm is an actual scientist–he has a PhD in physics from MIT–and so he usually respects technical nuances. Yet in a recent discussion of carbon taxes, Romm gets the issue exactly backwards.
The mystery is revealed at Mises Canada.
OK, my post about Williamson’s QE argument left some people confused. It sounded like I was saying that price inflation causes people to want to hold more money. Huh?
The problem here is confusing higher prices with rising prices. The two are obviously quite related, but they’re not the same thing. I’ll state two principles, then illustrate with a really simple example that will make you slap your head. (Sorry.)
(1) Other things equal, higher prices (which is the same thing as a lower purchasing power of money) will make people want to hold larger cash balances.
(2) Other thing equal, a higher rate of price inflation will make people want to hold smaller cash balances.
Now the story: You are initially in equilibrium, holding $1,000 in money. (If you care, you specifically have $160 in currency in your wallet, and $840 in your checking account.) At 9am on a Monday morning, you suddenly become absolutely convinced that all prices will double by 9am Tuesday, at which point they will resume their original, gradual rise. What happens?
You drive down to the coin shop with your checkbook. You empty out your checking account by buying silver coins. You also spend the currency in your wallet, saving only a single $20 bill in case some emergency comes up during the day. You don’t want to be stuck holding dollar bills (or their equivalent in your checking account) when all prices suddenly double.
Then, on Tuesday, after everything has settled back down, you sell off your silver back for dollars. You load up your wallet and checking account again. But going forward, you end up carrying $2,000, because for all the reasons you originally held $1,000, now you need $2,000 to “do the same job.”
Back to Williamson: He notes that empirically, the massive bursts of QE–in which the central bank creates more money while sucking certain bonds out of the private sector–have gone hand in hand with lower rates of price inflation. So he is arguing that this makes sense, because in order to get the public to hold more money, you have to reduce the rate of price inflation. You can see how that’s just the inverse of Effect (2) above–and the opposite of my story about getting rid of your cash when you expect a one-shot blast of high price inflation–but clearly he is leaving something out of his explanation. (Or at least, that’s what a bunch of us are arguing.) You can see me ask Williamson this directly here.