Radical Moderation

Could This Be Made Into a Business?

2012-01-23T16:04:00.000-05:00

Reports of Romney opening up a bit of wiggle room on mortgage modification got me to thinking about why somebody isn't making serious, organized money off of short sales--and helping homeowners at the same time. The market for this would the set of people who should strategically default, that is, homeowners whose houses are more than 10% underwater but who can still pay their mortgages. These people haven't defaulted yet for one of the following reasons:

They're emotionally attached to their homes and will do almost anything to avoid moving.
They're afraid of their credit rating taking a hit, thereby preventing them from buying another house.
They think it's morally wrong to default on your debts when you can pay.

So here's my question: why wouldn't a mortgage originator purchase short sales for these people with the (contractual) understanding that they would immediately sell back the house to the homeowner for a fixed percentage price greater than the short sale price, and give them a 100% mortgage at the prevailing price?

In a little more detail, here's how it would work:

Shorts 'R' Us approaches Joe Blow, the homeowner: "We understand from the tax rolls in your area that your house is 20% underwater. We'll broker a short sale with your lender, buy the house ourselves, sell it back to you at a profit to us, and give you a new mortgage.
Joe Blow signs a contract with Short 'R' Us. Joe Blow can get out of the contract if Shorts 'R' Us can't broker the short sale with the lender.
Shorts 'R' Us goes to the lender offering to buy the property in a short sale, of course disclosing the deal with Joe Blow, as required by RESPA.
Will the lender agree to this? If it's convinced that the alternative is strategic default, I don't see why not. They have to mark the mortgage as a loss, but if they carry the foreclosed property, they're writing down the same loss when they auction it off. Of course, if there are secondary lienholders, things get a lot more complicated.
The short sale goes through. Shorts 'R' Us buys the house and pays off the lender.
Shorts 'R' Us then immediately sells the house back to the homeowner for 2-3% more than the short sale value, and originates a new loan for the homeowner.
Shorts 'R' Us then sells the loan to the secondary market (or as much of it as is now allowed by Dodd-Frank).
Lather, rinse, repeat.

What's in it for the original lender? Well, he doesn't have to deal with the foreclosure, and he's got the crappy loan off of his books. He does have to recognize the loss, but, duh, is that really an issue at this point?

What's in it for the homeowner? He's got an almost-sustainable loan, with substantially reduced principal, although at a somewhat higher interest rate. (More on this in a moment.) He's got a fairly bad ding to his credit rating, but he probably doesn't care that much because he's got a new mortgage. As long as he pays as agreed for a couple of years, he'll be fine, even if he trades properties. Besides, a quarter of the country has the same ding on their credit rating. Who cares?

Let's now look at Shorts 'R' Us in a bit more detail. First, they're instantly making their markup on the buy-resell transaction, virtually risk-free. It's possible that the original mortgage lender will demand that they kick in some commission, which would either reduce their profitability or force them to demand a higher markup. Note that as the markup increases, you lose some chunk of your addressable market, because the homeowner's going to make the decision to do this based on whether his payments go down or at least stay the same. It's likely that the new mortgage has a higher interest rate, because it's instantly underwater, although not by much. What kinds of secondary markets are available may be somewhat limited, and the amount by which they're going to discount the loan is going to be a key variable. On the other hand, the credit quality of the loans is higher than it looks on paper, because the homeowners have been paying as agreed and they're motivated to stay in the homes, or they wouldn't be doing this.

To sum up:

Credits to Shorts 'R' Us:

The markup on the re-sell

Debits:

Commission to the original mortgage lender.
Discount on the sale of the loan to the secondary market.

What am I missing? This sounds like a slam-dunk business. Is there something that makes it illegal?

Follow the Web of Competencies Toward Personal and Professional Fulfillment!

2012-01-21T18:39:00.000-05:00

There's an excellent piece at Forbes by Daniel Jelski on re-architecting the higher education system. As I was commenting on it, I realized that there's something implied in the Open Education Manifesto that I should have spent a bit more time on.

We tend to think of education in terms of classes or courses: "Third grade Math". "Western Civilization", "High School Chemistry". "Nineteenth Century Romantic Poetry". But that's mostly a convenience for an outdated form of educational record keeping. When you peel off the cover of these courses, you find that they're a shorthand for a particular bag of competencies. Some of the competencies are obvious. For instance, in third grade math, you learn to multiply multi-digit numbers. In Western Civ, you learn a set of facts about classical civilizations, the Middle Ages, the Renaissance, etc. But there are other things you learn that aren't as easily quantified but may be more valuable. For instance, in order to multiply two four-digit numbers together, you have to have a slightly larger coding span than you did to learn your arithmetic facts. To understand Western Civ, you have to infer the role of demographic migration in shaping societies. Neither of these skills will ever show up as the title of a unit in a syllabus for the course, but they are more broadly applicable than the knowledge imparted in the course itself.

Your education teaches you not only static knowledge but a set of behaviors. The knowledge is often essential for correctly executing the behaviors, but the behaviors are what your eventual employer is looking for. In short, the employer doesn't want to know what classes you took. He wants to know a list of things you're competent to do.

A couple months back, there were a spate of posts (here, here, and here) that pointed back to a paper by Lauren Rivera, who researched hiring practices at super-elite organizations (high-end financial firms, white-shoe law firms, etc.) The key takeaway was that elite firms tended to hire only from super-elite universities, often from as few as four universities, not because they thought that the curriculum or educational quality was significantly better, but because acceptance into those universities was interpreted as a signal that the applicant possessed exceptional qualities. In other words, the firms were outsourcing their applicant screening to the admissions departments of the super-elite schools.

At the bottom of all of this is a very simple fact: Hiring excellent candidates out of school is a crapshoot, because there is no objective way to determine the candidate's actual competency in the tasks for which he's being hired. There are two huge problems here. First, the actual performance of companies is significantly reduced because a fair percentage of new hires don't work out. Second, and more important from a societal standpoint, access to elite jobs is highly constrained by acceptance to elite universities, which in turn is a consequence of the applicants fitting an extremely narrow set of criteria. And those criteria seem to be inculcated best when your parents had the same educational background. This has profound negative effects on social mobility. Per Scott Winship:

...evidence indicates that American children born since the 1950s have had lower educational mobility than children in Sweden and other Western nations. And recent research indicates that the link between parental income and educational advantages on one hand and child academic outcomes on the other is stronger in the United States than in other Western countries. So it may be that higher pay for better slots and narrower opportunities to occupy the best slots both now contribute to lower earnings mobility in the United States.

Megan McArdle concludes from this:

You can argue about why this is--are the upper middle class transmitting real skills, or pull? But does it matter? As an editor at The Economist once noted to me, it's actually rather more worrying if what they're giving their children is a strong education and an absolutely ferocious work ethic. An aristocracy that simply bequeaths money and social position to its children will eventually fall. [An] aristocracy that bequeaths the actual skills required to earn more money than everyone else is self perpetuating.

And self-legitimating. The old aristocracy was, I think, at least dimly aware that it wasn't quite fair for them to have what they had by mere virtue of being born to the right parents. But in the new aristocracy, it is rarely enough to just get born to the right parents; you also have to work very hard. (Higher earning men are now more likely to work more than 50 hours a week than are men in lower earnings quintiles.) Whatever the systemic injustices, it's also quite clear to everyone . . . even parasitic leeches of investment bankers . . . that their salaries only come as the result of frantic effort.

The ability of one's parents to confer such enduring advantages is obviously unfair. And while I don't want to say that a society cannot last that way--obviously, many have, for hundreds of years--I don't think it's healthy for society. It is hard to get civic engagement, or respect for the law, when the bottom 40% or so feels that the game is rigged.

This is a hell of a social consequence for what is essentially a data collection deficiency. The hiring managers at these companies are not idiots; if they have access to data that allows them to get a higher hit rate from new hires than they would by looking for good schools on the resumes, they'll use it. And the really sad fact is that they know exactly what they're looking for. With only a little reflection, I'm sure that they could reel off a set of attributes that their perfect new-hire would have. If only they had the data!

In an open education environment, there's absolutely no need to lump multiple competencies into a single piece of courseware. And even if they are lumped together, the testing and record-keeping for them is easy to separate. As a result, hiring managers can get exactly what they're looking for.

There's another potential advantage to fine-grained competency records: They're a pedagogical goldmine. Imagine a web of competencies, ordered by prerequisites, starting in early childhood and extending through the life of each indvidual. It starts with walking and talking and proceeds up through a set of motor skills, also through shapes, colors, numbers, and letters, then on into the set of academic skills learned in elementary school. But you don't have to just include academic skills. Physcial education and social skills could also be mapped and tested.

The result of such fine-grained, exhaustive record-keeping will almost certainly show that children that have difficulty with more advanced competencies have patterns of difficulty with more elementary skills. This will allow earlier invervention and remediation. It will also almost certainly allow teachers to classify children into various learning styles and allow optimal teaching methods and courseware to be applied to each child.

As children enter high school a good guidance counselor today uses experience, intuition, and testing to begin to feed students into educational paths that will ultimately result in a rewarding job for which the individual is well-suited. To say that the success of modern guidance counselors is less than stellar would be an understatement. But full competency records would take most of the guesswork out of this process, allowing students to enhance their strengths with sets of more advanced competencies that depend on those strengths. This process can continue throughout secondary education and on into higher education.

Except in this model, there is no higher education. There is merely a process of continuous enhancement, leading ultimately to a career. When the individual transitions from student to worker is now merely a function of where the chain of competencies for which he's suited--and best enjoys--finally qualifies him as a valuable employee.

Let's now think about an individual in an entry level job. He has that job because he's attained good scores on the competencies required by the job. But this individual is ambitious, and wants to move the next step up the ladder to a job with more responsibility. Because that job also has the competency requirements listed, he know exactly what additional education--or on-the-job experience--he needs to acquire. Investments in continuing education therefore become highly focused and require a minimum of additional expense. No more taking course that lead nowhere.

Even more important, the same process applies for displaced or dissatisfied workers. If it turns out you hate your job, or your career has just evaporated because a robot can do it better than you can, you're going to want to acquire the minimum new set of competencies that will qualify you for a job that meets your temperamental and remunerative requirements. Furthermore, your past history can provide a good indication of how likely you are to be successful if you choose retraining toward a particular career. Competency-based education therefore retrains displaced workers in the minimum amount of time, at a minimum expense, while simultaneously maximizing the chances of success.

Human beings are complex animals, exhibiting a complex set of interacting behaviors. But the number of behaviors associated with each individual is measured in the high hundreds or low thousands, not in the tens or hundreds of thousands. It is well within our current technology to enumerate those behaviors, organize them into logical progressions of new skills, and guide children and adults through those skills to attain employment that makes the best use of each individual's talents. The world is turning into a scary place, with technology steamrolling workers faster than the workers can keep up. Competency-based education and record-keeping provides a way to remove some of the fear from life in world growing ever more complex.

What I'd Like to Hear From Romney About the Free Market

2012-01-11T15:22:00.000-05:00

From RedState:

I don’t like seeing pro-free-market Republicans attacking the concept of what Bain does, any more than I liked seeing Romney attack Rick Perry from the left on entitlements. But just because the role of red-in-tooth-and-claw capitalists is a crucial and necessary one does not mean that they are likely to be popular candidates in today’s general election environment. Criminal defense lawyers, for example may be crucially necessary to our system of justice, but if they have represented a lot of unpopular clients, they are not likely to be politically viable. I continue to think that Romney’s business record is an under-explored political vulnerability (one Ted Kennedy used against Romney in 1994, but didn’t even use all the ads he cut) that the Democrats will exploit ruthlessly. And Romney’s existing defenses of that record are fairly weak. We should not be caught unawares by this in the summer and fall when it’s too late to pick another candidate. In many ways, it’s like the swift boat story. You’ll recall that the centerpiece of John Kerry’s electability argument in 2004 was his military record – not any policy proposal on national security, mind you, but the simple fact of his biography as a war hero. Given that Kerry had decades-old enemies from his activties as an anti-war protestor, it was unwise for Democrats to assume that this biographical narrative alone would go unchallenged in the general election. But that’s exactly what they did, and the Swift Boat Veterans’ ads (especially the ads using Kerry’s own Senate testimony from 1970) did terrible damage to Kerry.

Romney’s story is much the same. There’s no serious argument that Romney’s record of supporting free enterprise and job growth in his single term as Massachusetts governor is better than the records of Perry, Gingrich, Santorum and Huntsman; his claim to be a job creation specialist is grounded in his record at Bain, and just like Kerry’s war hero biography, this claim is bound to attract scrutiny. It would be foolishness in the extreme for Republicans to demand that nobody talk about this during the time when we’re choosing a candidate. The harder question, for free-market Republicans, is how to have a serious debate on this point without compromising our integrity and our principles.

At this point, I'd say that Romney is the only viable candidate to shake out from the Republican Bag o' Nuts, and that I'm more closely ideologically aligned with him than any other candidate--Republican or Democratic--that's on the field right now. And I think his public speaking and persuasiveness has improved by leaps and bounds over the last four years. You could call me a supporter and I wouldn't protest.

But he's still sooooooo cautious.

Mind you, caution is essential when every word out of your mouth will be carefully graded and selected for how good a cudgel it makes for your enemies. But the problem is that, per above, Romney's key advantages are not easily condensed to sound bites. Modern business--both big and small--is incredibly complex, because business systems evolve the same way that biological and social and economic systems evolve, and evolution is all about complexity. Unfortunately, evolution is also about survival and competiltion for resources, so modern business is incredibly ruthless.

So Romney needs a simple explanation for what it is that he did, and what it is that business in a free market does, and why, ruthless though this may be, this ultimately contributes to human progress better and faster than any planned "humane" alternative. That's hard to do without acknowledging that the last five years have scored very high on "ruthless" and very, very low on "humane".

Perhaps a way forward is suggested by David Brooks in his recent missive in faint praise of Rick Santorum:

Mr. Santorum understands that we have to fuse economics talk and values talk. But he hasn't appreciated that the biggest challenge to stable families, healthy communities and the other seedbeds of virtue is not coastal elites. It's technological change; it's globalization; it's personal mobility and expanded opportunity; it's an information-age economy built on self-transformation and perpetual rebranding instead of fixed inner character. It is the very forces that give us the dynamism and opportunities in the first place.

Mr. Santorum doesn't yet see that once you start thinking about how to foster an economic system that would nurture our virtues, you wind up with an agenda far more drastic and transformational.

If you believe in the dignity of labor, it makes sense to support an infrastructure program that allows more people to practice the habits of industry.

If you believe in personal responsibility, you have to force Americans to receive only as much government as they are willing to pay for.

If you believe in the centrality of family, you have to have a government that both encourages marriage and also supplies wage subsidies to men to make them marriageable.

If you believe social trust is the precondition for a healthy society, you have to have a simplified tax code that inspires trust instead of degrading it.

If you believe that firm attachments and stable relationships build human capital, you had better offer early education for children in disorganized neighborhoods.

If you want capitalists thinking for the long term and getting the most out of their workers, you have to encourage companies to be more deeply rooted in local communities rather than just free-floating instruments of capital markets.

I generally take a dim view of all forms of social conservatism, because it boils down to the government imposing a set of social solutions instead of letting the social solutions evolve to fit the conditions. But Brooks is on to the most palatable marriage of libertarianism and social conservatism that you're likely to find. True or not (and it's mostly true), the free market going to be perceived as a vast, howling wasteland, littered with the hulks of gutted businesses and the corpses of formerly decent jobs. The only way to survive in that wasteland is to take shelter in your family and your community.

Romney has to make the case that, Darwinian though the free market may be, it is superior to all of the alternatives. This is a hard case to make, because the natural response to this is, "Well, yes, I'm mostly in favor of a free market, but couldn't we cushion the blow if we just did this... and this... and this..." In fact, this has been exactly Obama's set of talking points. He's a great believer in the free market, as long as it can be constrained so that there's no down-side.

It can't be done.

The free market is made up of a large number of agents. Those agents compete for resources, just like any biological system. And, just like any biological system, the agents that can't acquire resources have to die. There's a slightly subtle point here: if the unsuccessful agents didn't die, the resource distribution would have to be fair, and a fair distribution guarantees that the successful agents can't grow. In effect success for some requires death for others.

Fortunately, we're talking about companies and jobs here, not people. When the job dies, the person goes and finds a new one, because the successful agents grow and proliferate. The only alternative--the "fair" alternative--must inevitably result in less growth, and therefore less opportunity for each worker to grow as well.

Obama will further argue that there's a middle ground, where businesses fail, but where the successful businesses are constrained to protect the common weal. This is partially true; you can identify certain pathologies of the free market (monopolies, undercapitalized banking, naked derivatives trading, to name three) outlaw them, and still have a robust system. But growth is closely tied to freedom of action. The more constraints you place on economic agents, the less mobile they become in the free market space, the less likely they are to seize on truly productive opportunities, and the less they'll grow.

Obama believes that there are a nearly unlmited number of constraints that would improve the system, and that the sooner they are discovered and implemented, the more the system is improved overall. He doesn't understand that the harm that the constraints do escalates exponentially in proportion to their number.

This last point is key to Romney's success. He needs to say as loudly as possible that the term "regulated free market" is almost--not quite, but almost--an oxymoron. Crafting this message is incredibly difficult, because it's non-intuitive. But he simply can't be successful without getting this across.

Which leaves us with the short-term social consequences of unfettered capitalism. Per Brooks, this can be made into an opportunity to unite the social conservatives with the libertarians if it's done sensitively and adroitly. The message has to be that families can be trusted to protect themselves as long as jobs are available, and as long as the public space is a level playing field for the best social ideas. The basic compact needs to be that government won't impede job growth, and it will admit that it doesn't know anything useful about social engineering. Then it's up to each family to turn off the TV, monitor their children's internet usage, attend their school board meetings, and talk to their neighbors.

Disruption. Adaptation. Evolution.

2012-01-11T14:11:00.000-05:00

I recently ran across Charles Stross's post on how to build a near-future science fictional world. Stross thinks that the future is merely new layers on top of old stuff. The only way an old layer of stuff gets discarded is if the new layer of technology/culture/whathaveyou can completely replace the old one, and even then you have to wait for the old stuff to decay.

That's close, but it's not quite right. Having recently read Tim Harford's Adapt: Why Success Always Starts with Failure, I've been thinking a lot about disruptive events as a framework for looking at how cultures change.

First, a few words on disruptions. We tend to think of a disruptive innovation as one that suddenly invalidates an existing market, but that's not really what happens. Most disruptions start out as an innovation in a market that's adjacent to, but not congruent with, the market that's eventually going to get killed. The innovation is usually crudely featured and not even close to competitive with the state of the art of the disruptee, but it offers a specific capability that a small segment of users desperately need. Harford's example of this was web-based mail, particularly gmail. Web mail started out life with bad distribution list management, poor threading, no calendaring, trivial formatting capabilities. In short, it was utterly unsuited for the enterprise market, which was dominated by Outlook. But web mail offered one feature that was vital to a certain class of user: the ability to log on from any browser, anywhere, and interact with mail. For the user that roamed from computer to computer, device to device, and couldn't afford to install Outlook everywhere he went, the advantage of location-independence offset the crudity of web mail system.

Of course, Microsoft was an early entrant into web mail with Hotmail. But it never made sense for MS to invest in Hotmail, because they always got a better return investing in knocking out the next 150 features in Outlook to satisfy the Fortune 1000 customers than it did to divert resources to Hotmail. Google, on the other hand, didn't have a cash cow to protect, so they slowly enriched the Gmail feature set until it's now on the cusp of being able to "suddenly" disrupt the enterprise email market. I'm confident that 5 years from now, Outlook sales will be down sharply. 10 years from now, Outlook will be quaint. 15 years from now, it will have vanished. So disruption always sneaks up on you.

The email example is instructive, but it's a fairly modest disruption when we're dealing with the difference between web mail and client-server mail. But disruptions can impact the culture in huge, unanticipated ways when use of the new, disruptive innovation changes one of our core cultural processes.

Human beings are a lot simpler than you might imagine. We like to think of our lives as complex, ever-changing tapestries of experiences and interactions with our environment. But the brain's great talent is to categorize varied experiences into as small a set of conditions as possible, then react to those conditions using as small a set of behaviors as possible. Yes, those behaviors are executed with minor variations for the unique portions of each condition, but that's the brain's other great talent: it can adjust a learned behavior in real-time without having to invent a completely new behavior.

This set of learned behaviors is actually pretty small. You can create a complex culture with a small number of learned behaviors: Driving a car. Eating at a table. Meeting a new person. Using a toilet. Taking a shower. Tucking your kids into bed at night. Playing catch. Going on a date. Buying something. Engaging in ritual. Believing--or not believing--in God. Reading. Making an argument. Solving a problem. Dealing with your emotions.

This is obviously only a fraction of the things that people do, but I'm willing to bet that it's closer to 1% or 2% of the total list of behaviors than it is to .001% or .002%. Of course, these learned behaviors are assisted by a few doozies that are instinctive or semi-instinctive, including such things as language, sex, locomotion, eating, etc. But, even though those behaviors are incredibly complicated, they're still fairly finite, and they act as primitives upon which the culturally instilled behaviors rely.

Right about now you'll be asking, "What the hell does this have to do with disruption?" The answer is that the goods and services we consume have deeply-ingrained cultural behaviors underlying them. There are tens of thousands of products that dovetail perfectly with how we've learned to prepare and communally eat food. Other tens of thousands play to the ways we were taught to socialize and attract mates. Still other products assist our ability to identify and solve complex problems.

In general, products that don't dovetail well with our set of cultural behaviors don't do very well in the market. But the same processes that cause disruptive products to succeed as they evolve adjacent to more established products can sometimes cause a new, disruptive behavior to be learned adjacent to an established, culturally pervasive behavior. Cultural disruptions are much rarer than market disruptions. Returning to the web mail example, the cultural behaviors of using written language to express yourself to another isn't much different between snail mail or client-based email or web mail. But when you marry the convenience of communicating in text from mobile devices, even though the modes of written expression that you can engage in are vastly more limited than in a letter or email, you begin to see the beginnings of a major cultural disruption, radiating out along several different behaviors. People who wouldn't dream of composing a letter or email in public are now perfectly content to spend 30 seconds texting someone, with all the attendant rudeness associated with it. Formal written language gets mutilated because texting is so awkward that linguistic shorthand has to be developed. And, possibly most significantly, linguistic-based reasoning itself gets changed from an expository form, where large thoughts are formed, expressed, and responded to, to a more interactive form, where simple thoughts bounce back and forth between two or more people to form a sort of gestalt or groupthink.

Just as with product disruptions, the insertion of a cultural disruption doesn't immediately destroy the old forms of behavior, because the old forms are better suited for the majority of the culture that's still oriented around the old environment. But, even while letters and books and email still make up the majority of the words being written, and while the state of the art of these behaviors becomes increasingly refined, the texters and tweeters and, to a lesser extent, the bloggers and even the PowerPointers are rapidly evolving a new, rich set of cultural behaviors that will ultimately become superior to expository prose and will therefore sweep it away. We sure as hell aren't there yet, but it'll happen.

So Stross is right about the layers of new stuff, but only up to a point. Disruptive layers ultimately digest the old layers next to which they evolved.

It's worth looking a little more at today's culture through the lens of cultural disruptions. They're harder than you might think to spot, because all disruptions appear to be innocuous at first, and the amount of time required for them to affect the culture significantly can be tens or even hundreds of years. At some point, I'd like to make a list of all of these, but for now, I'd like to concentrate of the most serious cultural disruption of the last thousand years: the rise of electronic media.

We're used to media now. It pervades our culture. But it's important to realize that media has not only disrupted the culture by increasing the flow of information to the individual by at least four orders of magnitude; it's also changed our habits of thought.

Human beings are evolved to process information in real time. See the sabertooth tiger, run away. Spot the tasty berry, eat it. Find your offspring, protect it. None of these things require complicated reasoning or abstract thought. And yet abstract thought conferred such a survival advantage that it became highly conserved. From the rise of language, to the neolithic revolution, up through the civilizations of the ancient and classical world, and even through the rise of the printing press, the renaissance, and the early industrial revolution, the culture conferred greater and greater rewards on those who could think abstractly and use language and writing to communicate those thoughts to others so that they could be acted upon.

So we've got 3 or 4 million years of evolution that has tailored human beings to use an "immediate paradigm": see, hear, act, repeat. And that was significantly disrupted by a new, culturally agile "expository paradigm": talk, listen, read, imagine, think, communicate, act. The vast majority of cultural progress is based on the expository paradigm. Effectively, cultural progress was based on words. And not just any words: it's based on exposition and reasoned arguments.

This brings us up to 1909 and the first mass radio broadcast by Charles Herrold.

Suddenly, mass culture could be impacted not just by exposition but by conversation. Drama, which previously had been available only to small audiences, became available to a mass audience. Movies and television soon followed, with visual depictions of stories and the conversations that went along with them.

Note that we're still firmly rooted in Stross's "new things are layered on old things" paradigm at this point. But the seeds of the disruption are now sown: for the first time since the neolithic revolution, there are now cultural constructs that can appeal to humanity's evolved, immediate see/hear/act paradigm. They're crude constructs. They're one-way. And the expository, carefully reasoned forms of communication aren't in much danger of being supplanted. But a new paradigm, a "media paradigm", much more closely aligned with the evolved immediate paradigm, is in place.

Fast-forward to today. The expository paradigm is holding on by its fingernails. Give children a choice between a book and a video game and a majority will choose the latter. The video game fits the more natural media paradigm, and is therefore much more easily assimilated by a child than the expository paradigm used by the book. And it's not that the video game isn't educating and developing the child, both cognitively and culturally. But it isn't training the child to function in the expository world. We are, in essence, about at the same point in media's cultural disruption that web mail is in its market disruption. The old paradigm is still dominant for getting real work done, but the smart money is already trying to figure out how to get the same work done in the new paradigm, because it's seen to be inevitable.

Unfortunately, in the case of media, figuring out how to get the same work done with media that is currently being done with exposition isn't obvious. The world still runs on advances in science, technology, philosophy, ethics. But the media paradigm doesn't have good replacements for most of the thought that goes on it these disciplines, the majority of whose advances are still firmly rooted in exposition. The net result is likely to be a temporary slowdown in innovation as the culture develops the tools to accomplish the tasks that only the expository paradigm can still do, in the new media paradigm.

There are glints of light at the end of the tunnel. Real science can now be accomplished through simulation, which is fundamentally a media tool, albeit one grounded on a simpler, more immediate kind of expository reasoning. The aforementioned revolution in texting and social media is slowly evolving a new way to interact with complex problems. Web resources like Khan Academy on other computer learning systems are slowly enriching children's training in the expository paradigm by driving it through media channels.

But the gap is still huge and, unlike Stross's new-layered-on-old hypothesis, there are likely to be real deficits in education for the foreseeable future. In education, in effect, the new is cannibalizing the old, because we don't know how to develop a child's cognition in both paradigms simultaneously. Until we figure that out, the disruption will continue.

Too Much Money in Politics? On the Outside or the Inside?

2011-10-26T13:22:00.000-04:00

I'm largely unsympathetic to campaign finance reform because it's a form of price control and, as we know (rule #1), price controls cause shortages. But it occurred to me that it's odd that the finance reform crowd only whines about how lobbyists use campaign money to scuttle policies that are good for the public at large in favor of those that are good for the lobbyists' clients. Because this is merely money on the outside of the government that's used to get to the real money that's on the inside.

Lobbying is cost effective because, when successful, every dollar spent in lobbying is returned a hundred- or thousand-fold. Once a client has burrowed through the thin outer skin of the government, it can feed in the ocean of tax dollars sloshing around on the inside.

So if you really want to do something about campaign money on the outside of the government, the first thing to do is to reduce the money inside the government. If you want more government in the public interest, you have to stop making the government so attractive to private interests.

The Second Most Important Economic Rule of Thumb

2011-10-25T13:16:00.000-04:00

Rule #1 is, "Price controls cause shortages." But for some reason Rule #2 has only recently crystallized for me:

Economic Rule #2: Whenever the government subsidizes something, its price goes up.

Let's look at some examples from recent history:

Companies were subsidized through tax policy to provide health insurance; medical costs went up.
Healthcare was further subsidized by Medicare and Meidcaid; medical costs went up a lot.
Student loans were subsidized through Federal loan guarantees; the cost of higher education skyrocketed.
Ethanol production was subsidized; the price of corn, and all of its dependent foodstuffs, went up.
Home ownership was subsidized through federal loan guarantees and cheap bundling of mortgages through Fannie and Freddie; we had a housing bubble.

I'm sure I could add another fifteen or twenty examples of this if I wanted to do some research, but you get the idea. Why is this true? The answer is simple: Free money. It may come out of our tax dollars, but the ability to get not only your own tax dollars but a hunk of everybody else's is at worst a good deal and at best the basis for a lucrative business model.

So: Suppose I'm a doctor, and I charge my patients $10 a visit (hah!), because I know that it's what they can afford if they're going to buy my service on a regular basis. Then I read in the paper that Medicaid will pay for $10 an office visit, and I know that 25% of my patients are on Medicaid. To me, I now know that my patients have, on average, an extra $2.50 that they'll happily give me without changing their buying habits at all. So I raise my price to $12.50 and office visit.

The reason for the price increase is obvious, but there's a deeper, more corrosive dynamic at work under the surface. In the example above, there are winners and losers. For the 25% of patients on Medicaid, they now have an extra $7.50 that they wouldn't otherwise have had. But for the 75% of patients not on Medicaid, they've each lost $2.50 in spending power. The doctor's doing great, the Medicaid patients are doing better, but the other 75% of the doctor's patients are getting screwed. We've destroyed real purchasing power by picking a few winners (the Medicaid patients and the doctors) and disadvantaging a vastly larger number of losers (the other 75%). And in the end, because we've favored the few at the expense of the many, more people need Medicaid, which drives prices even higher, which further impoverishes the many, and the beat goes on.

But it's even worse than that: The doctor increased his prices because he knew how much money was out there to be had. So the net result is that the economic value of the subsidy is completely destroyed by the price increase.

So, what does this tell us about a philosophy of government? Are subsidies ever justified? We clearly want to have some form of social safety net. That implies that we subsidize the poor, but we have to understand that we need to be extremely careful about how we allow the subsidies to flow back into the economy, or they simply become worthless.

But lots of subsidies are instituted for policy reasons, to encourage some sort of behavior that the government finds desirable. These are effectively worthless, because the price increases will always wipe out the value of the subsidy, causing the economic activity that was being encouraged to decrease back to its equilibrium level. In short, policy subsidies are worthless in the long run.

There are still lots of collective action problems that only government spending can address. But behavior modification is never going to be the government's strong suit.

A Couple of Comments on the New Malthusian Limit

2011-10-13T14:48:00.000-04:00

I've been thinking a bit more about whether productivity growth rates can permanently outstrip economic growth rates, and what that means if it happens. Comments from me here and here.

I'm starting to wonder if we're not about to bump up against a new kind of Malthusian limit. The old one had increased output leading to birth rates that exceeded food supply, which caused collapse. Is the new version of this improved technology leading to productivity rates that exceed growth rates, causing the number of available jobs to collapse? And does the collapse of jobs presage the collapse of population? Of civilization?

I'm also wondering: what other Malthusian-ish transitions might we have gone through? Clearly there was a point near the Neolithic revolution where we stopped being one of the variables in a predator-prey equation, which seems like a pretty big transition. Are there others? Can we foresee others in the future?

Why Are We So Risk Averse?

2011-10-03T17:33:00.003-04:00

From Neal Stephenson:

In his recent book Adapt: Why Success Always Starts with Failure, Tim Harford outlines Charles Darwin’s discovery of a vast array of distinct species in the Galapagos Islands—a state of affairs that contrasts with the picture seen on large continents, where evolutionary experiments tend to get pulled back toward a sort of ecological consensus by interbreeding. “Galapagan isolation” vs. the “nervous corporate hierarchy” is the contrast staked out by Harford in assessing the ability of an organization to innovate.
Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this “new” idea is, in fact, an old one—or at least vaguely similar—and has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it’s patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have “first-mover advantage” and will have created “barriers to entry.” The number of seemingly promising ideas that have been crushed in this way must number in the millions.

What if that person in the corner hadn’t been able to do a Google search? It might have required weeks of library research to uncover evidence that the idea wasn’t entirely new—and after a long and toilsome slog through many books, tracking down many references, some relevant, some not. When the precedent was finally unearthed, it might not have seemed like such a direct precedent after all. There might be reasons why it would be worth taking a second crack at the idea, perhaps hybridizing it with innovations from other fields. Hence the virtues of Galapagan isolation.

The counterpart to Galapagan isolation is the struggle for survival on a large continent, where firmly established ecosystems tend to blur and swamp new adaptations. Jaron Lanier, a computer scientist, composer, visual artist, and author of the recent book You are Not a Gadget: A Manifesto, has some insights about the unintended consequences of the Internet—the informational equivalent of a large continent—on our ability to take risks. In the pre-net era, managers were forced to make decisions based on what they knew to be limited information. Today, by contrast, data flows to managers in real time from countless sources that could not even be imagined a couple of generations ago, and powerful computers process, organize, and display the data in ways that are as far beyond the hand-drawn graph-paper plots of my youth as modern video games are to tic-tac-toe. In a world where decision-makers are so close to being omniscient, it’s easy to see risk as a quaint artifact of a primitive and dangerous past.

The illusion of eliminating uncertainty from corporate decision-making is not merely a question of management style or personal preference. In the legal environment that has developed around publicly traded corporations, managers are strongly discouraged from shouldering any risks that they know about—or, in the opinion of some future jury, should have known about—even if they have a hunch that the gamble might pay off in the long run. There is no such thing as “long run” in industries driven by the next quarterly report. The possibility of some innovation making money is just that—a mere possibility that will not have time to materialize before the subpoenas from minority shareholder lawsuits begin to roll in.

Today’s belief in ineluctable certainty is the true innovation-killer of our age. In this environment, the best an audacious manager can do is to develop small improvements to existing systems—climbing the hill, as it were, toward a local maximum, trimming fat, eking out the occasional tiny innovation—like city planners painting bicycle lanes on the streets as a gesture toward solving our energy problems. Any strategy that involves crossing a valley—accepting short-term losses to reach a higher hill in the distance—will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.

I have long thought that a too-perfect flow of information might be socially (if not economically) deleterious. Exhibit A for this is the self-selection that occurs in the blogosphere, where the difference between what the community will tolerate and honest disagreement and what it considers trolldom is vanishingly small. Ditto for political discourse, where the cycle required to attack an opponent's statements, which used to be weeks, has shrunk to minutes. But I have to admit that I hadn't really thought about the internet as a huge idea buzzkill.

On the other hand, the near-pefect flow of information files the rough edges off of genuinely good ideas, so that they're brought to market more efficiently. But any idea with too many rough edges--which is pretty much any large project--is likely to be milled down to nothing.

In Which the Blindingly Obvious Becomes, Oddly Enough, Blindingly Obvious

2011-09-29T13:05:00.000-04:00

Michael Lewis has a piece in Vanity Fair that kinda rocked me back on my heels. It's nominally about debt in California--at all levels of government, but the interesting part comes from an interview with neuronscientist Peter Whybrow:

“Human beings are wandering around with brains that are fabulously limited,” he says cheerfully. “We’ve got the core of the average lizard.” Wrapped around this reptilian core, he explains, is a mammalian layer (associated with maternal concern and social interaction), and around that is wrapped a third layer, which enables feats of memory and the capacity for abstract thought. “The only problem,” he says, “is our passions are still driven by the lizard core. We are set up to acquire as much as we can of things we perceive as scarce, particularly sex, safety, and food.” Even a person on a diet who sensibly avoids coming face-to-face with a piece of chocolate cake will find it hard to control himself if the chocolate cake somehow finds him. Every pastry chef in America understands this, and now neuroscience does, too. “When faced with abundance, the brain’s ancient reward pathways are difficult to suppress,” says Whybrow. “In that moment the value of eating the chocolate cake exceeds the value of the diet. We cannot think down the road when we are faced with the chocolate cake.”

The richest society the world has ever seen has grown rich by devising better and better ways to give people what they want. The effect on the brain of lots of instant gratification is something like the effect on the right hand of cutting off the left: the more the lizard core is used the more dominant it becomes. “What we’re doing is minimizing the use of the part of the brain that lizards don’t have,” says Whybrow. “We’ve created physiological dysfunction. We have lost the ability to self-regulate, at all levels of the society. The $5 million you get paid at Goldman Sachs if you do whatever they ask you to do—that is the chocolate cake upgraded.”

The succession of financial bubbles, and the amassing of personal and public debt, Whybrow views as simply an expression of the lizard-brained way of life. A color-coded map of American personal indebtedness could be laid on top of the Centers for Disease Control’s color-coded map that illustrates the fantastic rise in rates of obesity across the United States since 1985 without disturbing the general pattern. The boom in trading activity in individual stock portfolios; the spread of legalized gambling; the rise of drug and alcohol addiction—it is all of a piece. Everywhere you turn you see Americans sacrifice their long-term interests for short-term rewards.

What happens when a society loses its ability to self-regulate, and insists on sacrificing its long-term interest for short-term rewards? How does the story end? “We could regulate ourselves if we chose to think about it,” Whybrow says. “But it does not appear that is what we are going to do.” Apart from that remote possibility, Whybrow imagines two outcomes. The first he illustrates with a true story, which might be called the parable of the pheasant. Last spring, on sabbatical from the University of Oxford, he was surprised to discover that he was able to rent an apartment inside Blenheim Palace, the Churchill family home. The previous winter at Blenheim had been harsh, and the pheasant hunters had been efficient; as a result, just a single pheasant had survived in the palace gardens. This bird had gained total control of a newly seeded field. Its intake of food, normally regulated by its environment, was now entirely unregulated: it could eat all it wanted, and it did. The pheasant grew so large that, when other birds challenged it for seed, it would simply frighten them away. The fat pheasant became a tourist attraction and even acquired a name: Henry. “Henry was the biggest pheasant anyone had ever seen,” says Whybrow. “Even after he got fat, he just ate and ate.” It didn’t take long before Henry was obese. He could still eat as much as he wanted, but he could no longer fly. Then one day he was gone: a fox ate him.

The other possible outcome was only slightly more hopeful: to hit bottom. To realize what has happened to us—because we have no other choice. “If we refuse to regulate ourselves, the only regulators are our environment,” says Whybrow, “and the way that environment deprives us.” For meaningful change to occur, in other words, we need the environment to administer the necessary level of pain.

Did our value system only work because it was designed for scarcity? Or would the old-timey Christian values of hard work, community, cooperation, and charity still function, if only they hadn't been eroded by abundance? Is there any market-based solution that will encourage long-term thinking? Are we approaching another Malthusian limit where the wealth of our society no longer causes a self-limiting population explosion, but instead fuels a self-limiting explosion in consumption? Or is this all nonsense, and all we need is the ability for everybody in the society to understand compound interest?

If this thesis is correct, it has vast implications for the future success not only of government in the developed world, but of market-driven economies in general

Why Medicare Cost Control Will Never Work

2011-04-25T19:28:00.000-04:00

As part of a series of ongoing attempts to sharpen my argument for why Medicare as structured can't work, even if you institute cost controls, let's briefly return to our repeated attempt to graph the average health care cost for one extra year of life, at various ages.

But this time I have a picture! This semi-log graph plots age against how much health care costs, on average, to live one extra year. (Note that all of these numbers are going to be arm-waves, and they're going to be averages. Look at the shape of the curves, not the actual numbers, and you'll get the idea.)

Let's look at this. First, note that all of these curves end abruptly at some value. This value is the average life expectancy for someone born in the year specified for the individual curve, but there's a better way to think of this number: It's the point at which medical science simply can't help you any more, no matter how much money you're willing to pay. This number is important, because today it denotes the only consensus value for when public policy says it's OK to stop paying to extend people's lives. In other words, by policy, we assume that everybody's life has infinite value, but we acknowledge that at some point we luck out, because everybody dies before they can consume so many medical resources that the whole system collapses.

If you were born in, say, 1820, before any semblance of modern health care, medical care cost virtually nothing, because it was pretty useless. You were born, you lived, and you died at about age 35. Medical science couldn't extend your life at all.

By the time people were born in 1920, we'd gotten over the first hump: You paid considerably more for childhood and early adult health care, but that allowed you to live up until age 45 with routine maintenance. After 45, though, health care got linearly more expensive, until you died around age 70. In other words, we could do some stuff for you to make sure you lived to old age, but by the time old age set in, medicine was powerless to do much for you.

A baby boomer born in 1950 not only paid more for childhood and young adult health care, but, when they began to age, their health care became exponentially more expensive. Now death could be staved off once old age was achieved--at least for a while, and given heroic amounts of money. Life expectancy rose into your early 80s. This is close to where we are today.

So what about the kids born in the next 10 or 15 years? We might guess that intervening at a younger ages will be necessary to ensure a very long and healthy life, but still, as they age, we can guess that the cost of each additional year of life will increase. However, we can also guess that the cost of living to the same age will cost less and less over time, so each extra year of life is cheaper for the 2025 kid than it was for the 1950 kid--at least to start with. But we can also expect that the new, jazzy medical science that lets Mr. or Ms. 2025 live to (in this case) 110 costs more and more, eventually far surpassing the 1950 curve.

OK, all you calculus fans: If you integrate under the curve for as far as its defined, you derive the total amount spent on health care for each individual over his entire life.

Now, imagine if you will, that we eventually extend life indefinitely. Is there any reason to think that the trend of ever-increasing expense for ever-longer life will be interrupted? We can certainly expect that the cost of living to the same age as some cohort born earlier will cost less as technology improves, but there are two things that completely trash this from a policy perspective:

The cost to achieve ever-longer life continues to rise.
It goes on forever.

When integrating under the curve yields an infinite value, the only way that society can afford to pay for your medical care is if you produce at least as much value as you consume in health care. (I could add in food, clothing, and shelter, but they're all mouse nuts compared to the health care.)

So we're now finally in a position to posit the Radically Moderate Laws of Health Care Costs:

Law #1: For each individual, the average cost of extending life by some increment is greater than or equal to the cost of extending life by the previous increment.

and

Law #2: The only way you can live forever is if you pay for it yourself.

I think that covers it.

Let's now think about cost controls for Medicare. As long as we maintain the current policy of paying for everything, forever, you may be able to flatten the curve, but you can't avoid Law #1. (In practice, if you flatten the curve too much, you wind up with shortages, which ultimately reduces life expectancy. So you can make Medicare costs sustainable, but only if you're willing to shorten their lives.) So, at some point, Medicare has to be capped. Not cost controlled--capped. We're going to decide that we'll only pay so much as a society to extend the life of each of our citizens. After that, Law #2 kicks in.

But of course there's a good side to Law #2: As (rich) people demand--and pay for--better and better technology, the life extension cost curve flattens more and more, making longer and longer lives available even to those depending on the government for health care. In other words, they get more bang for their capped buck.

So there you have it: the topsy-turvy world of health care policy, where living longer is a public policy disaster, and the best way to extend life for future generations is to limit it for prior generations. But even so, this so far outstrips the results of cost controls that there's really no alternative.

Is There a Way Forward for the Nuclear Industry?

2011-03-15T11:28:00.006-04:00

I write this on day #5 of the post-tsunami Fukushima Daiichi nuclear crisis. As of right now, here's where we seem to be:

Unit #1 has had a loss-of-coolant accident (LOCA) that has presumably resulted in partial core damage. Tokyo Electric Power (TEPCO) has had to do repeated emergency ventings of steam, and Cs-137 and I-131 have been detected in the environment, both around the plant and further downwind, indicating that the cladding around the fuel rods has been degraded enough to have the steam reacting directly with fission products. There has been a hydrogen explosion in the building that surrounds the actual containment, but the containment--and more importantly the reactor pressure vessel--remain intact. TEPCO, however, has been unable to establish normal recirculation of coolant to the reactor and has resorted to pumping seawater directly into the reactor in an effort to cool it, making the reactor itself a write-off. However, because there is no circulation, TEPCO is periodically having to release radioactive steam to get the pressure low enough to pump in more water.

Unit #3 has almost exactly the same story as unit #1: Same LOCA, same partial core damage, same hydrogen explosion in the outer building, same seawater feed-and-bleed, although everything happened about a day later than in unit #1.

Unit #2 has also had the same LOCA, but it appears that the condensing torus below the reactor has partially failed, going from 3 atmospheres of hydrostatic pressure to only about 1. During the actual failure, very high levels of radiation (tens of milliSieverts an hour) were detected outside the buildings, but this has since declined. This seems (to me) to be consistent with unfiltered reactor stream going straight into the environment without being first filtered through the torus. I'm a bit hazy on exactly when the torus is used for stream venting, but I'd kind guess that the idea here is to quench as much of the steam as possible before it goes into the environment. If there's less water in the torus, we can expect the vented stream to be more radioactive in the future, but not as radioactive as when the radioactive stuff already in the torus spilled out, presumably mostly in liquid water.

Unit #4, which was shut down for maintenance, has had a fire in or near the cooling ponds for spent fuel. If the spent fuel became uncovered and caught fire, then radioactive particulates will have been wafted into the air during the fire, producing a fairly high-dose radiation cloud. The fire is now out. I'm assuming that it's not a huge deal to keep the cooling ponds at all 5 reactors covered up, but the fact that the fire occurred either means that this is harder than I'd expect or somebody is suffering from task overload. It'd be hard to blame them if it's the latter.

Up until today, the highest reading I'd heard for environmental radiation was about one milliSievert (mSv) per hour, but during the torus incident, levels as high as 8 mSv/hr were observed, falling back to about a third of that (let's called it 3 mSv/hr). For comparison, levels of 250-1000 mSv per day are considered enough to produce mild radiation sickness, so it's entirely possible that workers have spent enough time on-site to be moderately poisoned.

Radiation has been detected offshore by both the Seventh Fleet and on land in Tokyo proper, where levels are reported (on the cable news networks) as being approximately 10 times normal background, which would be something like 14 microSieverts (uSv) / day. For comparison, a chest X-ray imparts about 40 uSv. This is obviously not healthy but it's far from disastrous.

Readers of this blog (all 2 of you) will know that I'm about as pro-nuke as you can be. In terms of comparative risk, nuclear power is by far the safest form of energy ever invented. As a global warming non-denier/non-alarmist, I think that, if you're really serious about reducing CO2 emissions, nuclear power is the only option that will scale up in any reasonable time frame. And as a follower of geopolitics, I'm convinced that, in a world where world energy demands are going to skyrocket from increasing affluence in south and east Asia, adoption of nuclear power could be one of the only hopes for maintaining the fragile Pax Americana.

But that may all be out the window now.

I am still confident that the crisis in Fukushima will ultimately be brought to a less-than-catastrophic conclusion. It's gonna be worse than 3 Mile Island, but way, way, way, way better than Chernobyl. In many ways, it will be the best existence proof we have that, even when pretty much everything that can go wrong does go wrong in the middle of a 1000-year black swan event, the impact to the environment is quite minor.

But the amount of hysteria that has been whipped up by the media on this story simply is not going to subside without a long-term impact on public opinion. These people have been absolutely despicable in their eagerness to translate a pretty serious situation into a catastrophe in the interests of selling a few more eyeballs to their advertisers. I have a hard time faulting these guys for wanting to make money--that's what they're in business for, after all--but one would hope that a little bit of action in the public interest would be appropriate. Apparently not. I'd like to say that I'll consume less mainstream news, but mainstream news is still the predominant source for information, all bloggy pretense aside. These people suck, but they suck in a mission-critical kinda way.

So what now?

First, let's be clear that something went seriously wrong with the engineering. One unit having a LOCA during a giant tsunami is one thing; 3 having almost identical failures is evidence of a systemic design flaw. I've seen very little coverage of this point yet, and it is going to be the single most important lesson learned out of this whole mess.

I can think of only two failure modes that might be responsible for this. The first, and less likely, is that the heat exchangers for all units were fouled by the tsunami. These are boiling water reactors. In a BWR, the coolant water actually boils, creating (slightly radioactive) steam, which is expanded through turbines to generate electricity. The steam is then condensed (cooled) in a heat exchanger, so that the reactor pump can pump relatively cool liquid water back into the reactor. (You want to use the same water over and over if you can, because it's mildly radioactive with N-17 and tritium.) This basic recirculation loop forms the cooling cycle for the reactor.

The heat exchanger needs cool water, presumably from the ocean, to cool the purified steam/water in the reactor itself. If, perhaps, the heat exchanger is damaged because it's getting nothing but tsunami muck, then it can't re-condense the stream to liquid water. No liquid water means that the recirculated pump won't work. Voila! LOCA.

But I'd think that providing fail-safe mechanisms to get cool water would be easy to provide. Perhaps the earthquake and tsunami wiped out redundant piping for the heat exchangers? Or maybe the inlets got buried in debris? I'm guessing--no clue.

The second, more likely--and more alarming--possibility is hinted at in an article from the New York Times, on Sunday:

Christopher D. Wilson, a reactor operator and later a manager at Exelon’s Oyster Creek plant, near Toms River, N.J., said, “normally you would just re-establish electricity supply, from the on-site diesel generator or a portable one.” Portable generators have been brought into Fukushima, he said.
Fukushima was designed by General Electric, as Oyster Creek was around the same time, and the two plants are similar. The problem, he said, was that the hookup is done through electric switching equipment that is in a basement room flooded by the tsunami, he said. “Even though you have generators on site, you have to get the water out of the basement,” he said.

This would be a pretty serious design flaw. And it's also a plausible one: If I were designing a redundant system, I'd consider what I had in front of me: A seawall designed to accommodate a 7 meter tsunami, a diesel backup system, and a battery backup. And I'd assume that those systems would allow me enough time to fly in a portable generator if everything went pear-shaped. But I could see myself overlooking the fact that the electrical connections I start out with are the only ones I'll ever get to use, because the switching area is flooded out.

So, at the very least, there's going to be a significant "lessons learned" phase to any rehabilitation of the nuclear industry. It will be incredibly painful, because the industry has marketed itself as having thought of everything. That won't fly, now. Instead, they're going to have to re-brand themselves a bit more humbly. That's a bit of a tight-rope act. Nuclear power needs to be perceived as being absolutely bullet-proof.

The other piece of fallout, if you'll pardon the expression, from the unit #4 fire is that the waste problem is going to go from being something that reasonable people could pooh-pooh to an absolute showstopper. I predict that we'll have legislation outlawing the use of temporary cooling ponds for anything other than waste that's simply too hot to move, and I'm also willing to bet that ponds will be mandated to be retrofitted with hermetic, fire-proof containments. That's a big expense, and it's also yet another licensing hoop to jump through. At the end of the day, I think the argument that a centralized storage facility isn't really necessary just went out the window. At the same time, I'll bet that this accident significantly weakens the case for closed-cycle reprocessing, which of course is really the proper solution to the waste disposal problem.

Ultimately, the one thing that may save the nuke industry is the fact that containment held: "Look everything went wrong, and we destroyed the plant, but the amount of radiation released was minimal." Making that case will require a lot of careful marketing and much more education on when radiation is and isn't dangerous. The public is scared to death of this stuff, and the media is more than happy to prey on their fears in the interest of ratings. This is going to be a tough slog.

UPDATE 1:19 PM CDT: The radiation dose level for a while was higher than I understood (search for the "15 March, 2011, 11:25 UTC" update):

At 00:00 UTC on 15 March a dose rate of 11.9 millisieverts (mSv) per hour was observed. Six hours later, at 06:00 UTC on 15 March a dose rate of 0.6 millisieverts (mSv) per hour was observed.

These observations indicate that the level of radioactivity has been decreasing at the site.

As reported earlier, a 400 millisieverts (mSv) per hour radiation dose observed at Fukushima Daiichi occurred between Units 3 and 4. This is a high dose-level value, but it is a local value at a single location and at a certain point in time. The IAEA continues to confirm the evolution and value of this dose rate. It should be noted that because of this detected value, non-indispensible staff was evacuated from the plant, in line with the Emergency Response Plan, and that the population around the plant is already evacuated.

Update 3/20/11: Here's a handy-dandy radiation dosage chart.

Fun With Public School Statistics

2011-03-11T15:52:00.004-05:00

Since it seems to be a day where I'm actually blogging, I've been meaning to post links to some excellent analyses of public education by Dave Burge at Iowahawk. Part 1 dealt with how Wisconsin and Texas public schools actually stack up against each other when one controls for race/ethnicity, and part 2 answers some criticisms that were raised against part 1.

It's way too easy to look at bulk statistics and draw erroneous conclusions, even when you know better. I'd glad that somebody had enough on the ball to do the arithmetic.

(I'd blog on what I thought about the Wisconsin union business if I weren't floating in an Ambien-induced bubble of no better than semi-reality, but I am. Chronic insomnia is a bitch. Maybe later... after I've slept... Oh, wait... I have... I think...)

The Japan Earthquake and the Fukushima Daiichi Nuclear Plant

2011-03-11T14:41:00.005-05:00

From World Nuclear News:

Later, Tokyo Electric Power Company (Tepco) reported that emergency diesel generators started as expected at the Fukushima Daiichi nuclear power plant, but then stopped after one hour, leaving units 1, 2 and 3 with no power for important cooling functions. This led the company to notify the government of an 'emergency' situation, which allows local authorities to take additional precautionary measures. An evacuation has been ordered of over 1000 people living within three kilometres, while engineers worked to restore power.

Almost nine hours later, an announcement from the Ministry of Economy, Trade and Industry said that three of four mobile power supplies had arrived at Fukushima Daiichi and cables were being set up to supply emergency power. Other power modules were in transit by air.

However, pressure inside the containment of Unit 1 at Fukushima Daichi had been steadily increasing over the time that emergency core cooling systems have not been active. Tepco reported at 2am that pressure had increased beyond reference levels but was within engineered limits.

The company then announced a decision to reduce the pressure within containment "for those units that cannot confirm certain level of water injection" by the safety systems. "We will endeavor to restore the units and continue monitoring the environment of the site periphery."

This has to be the origin of Clinton's ridiculous statement about the Air Force flying water into Japan; I could understand the Japanese wanting to borrow a mobile power cell or two, but the water thing is idiotic and of course is credulously being repeated in the media.

The anti-nuke crowd is distorting this just as quickly as they can get their hands unwrung. As far as I can tell, Fukushima Daiichi had a double failure, went to battery backup, and is taking steps to bring in alternate power, which is of course what the battery backup is for in the first place. This is clearly a serious accident, but everything seems to be working as designed, as far as I can tell.

UPDATE 9:48 CST: Guess I haven't called this one very well so far:

Meanwhile at adjacent Fukushima Daini, where four reactors have been shut down safely since the earthquake hit, Tepco has notified government of another emergency status.

Unit 1's reactor core isolation cooling system had been operating normally, and this was later supplemented by a separate make-up water condensate system. However, the latter was lost at 5.32am local time when its suppression chamber reached 100ºC. This led Tepco to notify government of another technical emergency situation.

Tepco has announced it will soon begin controlled releases to ease pressure in the containments of units 1, 2 3 and 4 at Fukushima Daini.

A three kilometre evacuation is in progress, with residents in a zone out to ten kilometres given notice of potential expansion.

In addition, the Daiichi site is leaking radiation from something other than its controlled release. No way to tell if this is resulting from core damage or some minor problem.

Now, Let's Play "Get the Metric Defined Right"

2011-01-22T17:23:00.003-05:00

Per the previous post, I'm still lost in parameter space trying to get the metric right on marginal utility for end-of-life health care.

First, it varies depending on how old you are. If you're ninety-five, a small amount of money is unlikely to prolong your life much. If you're twenty-three, a small amount of money may give you decades of extra life.

Second, as you move further out on the age axis, there is some point at which an infinite amount of money doesn't by you any more life. We might refer to this as the "your time is going to come" principle. So, on average, if you were to create a graph with the abscissa as "current age" and the ordinate as "cost per extra expected year of life", that graph has a vertical asymptote at some fairly advanced age.

Third, the shape of this graph has varied over time. Most important for our discussion, in days of yore, the graph bounced around at some fairly low value, rose a little bit as you got older, and then suddenly shot up sharply along the vertical axis as you reached your allotted three score and ten (or whatever it really was). Today, however, two things are happening:

The vertical asymptote is moving further out.
The rate of approach to that asymptote is shallower. In other words, you can actually extend your natural lifespan with some degree of medical intervention

Now, from that it's pretty easy to deduce that for any age 'a' and instantaneous medical expenditures as a function of your age:

infinity
sum(Medical expenditure(t))
t=a

is going to get bigger and bigger, the shallower and shallower that medical expenditure curve gets. But that's not the worst part.

The worst part (from a Medicare solvency standpoint--it's friggin' wonderful from the individual's standpoint) is that that vertical asymptote may be getting ready actually to tilt to the right. That pretty much means that if you want to live forever, a dollar value can be attached to what that will cost. It's likely a pretty high value, but it might no longer be infinite.

I wish somebody could produce this graph, and then animate it over time. I'll bet it would focus our conversation on health care considerably.

This Stuff Always Sounds So Much Better When Someone Other Than I Says It

2011-01-22T17:09:00.004-05:00

From a Mike Stopa op-ed piece in the Boston Globe:

The death panel notion persists, however, because it denotes, in a pithy way, the economic realities of scarcity inherent in nationalizing a rapidly developing, high-technology industry on which people’s lives depend in a rather immediate way. G.K. Chesterton once wrote that vulgar notions (and jokes) invariably contain a “subtle and spiritual idea.’’ The subtle and spiritual idea behind “death panels’’ is that life-prolonging medical technology is an expensive, limited commodity and if the market doesn’t determine who gets it, someone else will.

But, as I've harped upon before, it's worse than that. The marginal cost for an extra year of life for the elderly is declining, not increasing. That's actually bad news from a cost-containment standpoint, though. Back when an infinite amount of money got you no extra life, it was pretty simple. Now that mere hundreds of thousands of dollars can buy you a couple of extra years, it's a slam-dunk to want the extra time--as long as somebody else (like Medicare) is paying for it.

The amount of money spent per Medicare recipient has to be capped somehow, or the system will simply collapse. You can do that by denying certain treatments (the "death panel" approach), or you can do it by capping lifetime or per-year benefits.

Guess which one will promote more medical innovation?

Back to Stopa:

To the extent that ObamaCare ultimately succeeds in imposing uniformity on basic health care, it will likely lead to the creation of secondary markets for providing insurance against various health eventualities and access to “heroic’’ procedures to extend life. Water runs downhill and it’s a good thing that it does. First, we need to have people buy the expensive medicines and experimental technologies. Europe has discovered this as its regulated system of medicine has driven its pharmaceutical industry farther and farther behind that of the United States. Capping costs kills innovation.

But, in addition, Palin is right. Death panels are an inevitable consequence of socialized medicine. The law of scarcity demands them.

A mature discussion of health care must recognize basic economics so that we can think ahead on how to satisfy the demands of those who are not satisfied with base-level care.

Maturity--what a concept.

Brief update: I just noticed that I've allowed the words "Palin is right" to enter my blog, even if they were in a quotation. I'm not sure what to do about this.

Can the Financial System Be Made to Operate in the Public Interest?

2010-12-15T10:17:00.003-05:00

Tyler Cowan thinks probably not:

A key lesson to take from all of this is that simply railing against income inequality doesn’t get us very far. We have to find a way to prevent or limit major banks from repeatedly going short on volatility at social expense. No one has figured out how to do that yet.

It remains to be seen whether the new financial regulation bill signed into law this past summer will help. The bill does have positive features. First, it forces banks to put up more of their own capital, and thus shareholders will have more skin in the game, inducing them to curtail their risky investments. Second, it also limits the trading activities of banks, although to a currently undetermined extent (many key decisions were kicked into the hands of future regulators). Third, the new “resolution authority” allows financial regulators to impose selective losses, for instance, to punish bondholders if they wish.

We’ll see if these reforms constrain excess risk-taking in the long run. There are reasons for skepticism. Most of all, the required capital cushions simply aren’t that high, so a big enough bet against unexpected outcomes still will yield more financial upside than downside. Furthermore, high capital reserve requirements insulate bank managers from the pressures of both shareholders and bondholders. That could encourage risk-taking and make the underlying problem worse. Autonomous managers often push for risk-taking rather than constrain it.

What about controlling bank risk-taking directly with tight government oversight? That is not practical. There are more ways for banks to take risks than even knowledgeable regulators can possibly control; it just isn’t that easy to oversee a balance sheet with hundreds of billions of dollars on it, especially when short-term positions are wound down before quarterly inspections. It’s also not clear how well regulators can identify risky assets. Some of the worst excesses of the financial crisis were grounded in mortgage-backed assets—a very traditional function of banks—not exotic derivatives trading strategies. Virtually any asset position can be used to bet long odds, one way or another. It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law.

It’s a familiar story, repeated many times in the past. If one recalls the Basel I capital agreements for banks, the view was that we would make banks safer by inducing them to hold a lot of AAA-rated mortgage-backed assets. How well did that work out? So, with no disrespect to the regulators or the sponsors of the recent bill, it is hardly clear that enhanced regulation will solve the basic problem.

For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem. The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.

Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.

That’s an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making—collectively—some pretty big mistakes.

How about a world with no bailouts? Why don’t we simply eliminate the safety net for clueless or unlucky risk-takers so that losses equal gains overall? That’s a good idea in principle, but it is hard to put into practice. Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions. Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression. The political consequences would not have been pretty. Bank bailouts may sound quite interventionist, and indeed they are, but in relative terms they probably were the most libertarian policy we had on tap. It meant big one-time expenses, but, for the most part, it kept government out of the real economy (the General Motors bailout aside).

The other important idea from this piece is that Cowan equates rising income inequality solely from the abuses of the financial sector. He argues that, if you remove this, inequality has changed very little for 98% of the US population.

He also cites "threshold earners", people who work only to make a specific amount of money and then devote the rest of their time to pursuits that improve their quality of life, as another factor that's making inequality appear worse than it actually is.

If Cowan is right, we're likely to be subject to financial crisis after financial crisis, until we finally learn how to prevent people from gaming the system. The problem is that the people gaming the system are smarter than the people trying to engineer a solution, so they have a built-in advantage that's likely to last decades until the legal and regulatory frameworks have walled-off all the low-hanging fruit.

The big problem here is that the technology is still accelerating the information flows upon which the financial beast feeds, which means that the crises are likely to be sharper, less anticipated, and closer together.

An important piece, very clear, and ultimately pretty depressing.

A Financial Product I'd Like to See: Career Insurance

2010-12-10T13:17:00.003-05:00

As I was restating my argument for targeted, flexible adult education for the umpteenth time here, it occurred to me that the insurance industry may be overlooking an interesting product.

First, I still assert that the average high-skill worker in the US will have to be retrained for a new career at least a few times in his life, because technology and its attendant productivity increases are likely to destroy the market for his old job. That means that, a couple times in everybody's life, they're going to be stuck with the triple-whammy of having to live off their savings and unemployment insurance at exactly the same time that they'll need to be shelling out money for additional education, which in turn will prevent them from picking up even a part-time stopgap job.

This sounds to me like an insurable event. So why wouldn't the prudent worker take out "career insurance"? For a few bucks a month, you ought to be able to buy a policy that will pay for your educational expenses and support your household should you lose your job because it's become obsolete. I guess you'd have to be fairly clever in how you defined an "obsolete job", but this hardly seems like an insurmountable problem to me.

Taxing Only the Extremely Rich

2010-12-08T00:27:00.006-05:00

Yesterday I suggested that something like the Schumer compromise might be the way to go for the GOP on the tax cuts. Today, of course, it was announced that a deal was reached where nothing changes for two more years in exchange for a pretty big Christmas tree of other spending, but we can always hope that the Democrats feel like committing political suicide and don't pass it.

But it got me to wondering: How much revenue do you lose if you create a top marginal rate well above the $250K limit that Obama had proposed? To answer this, it's time to hit the IRS data, from which I produced this breakdown of total declared adjusted gross income for 2007:

(Note that I used 2007 as a more representative year than 2008 because 2008 was really, really bad.)

A few things of note here:

The mode--the category with the highest total declared AGI--is the $100K-$200K category.
If you were to set the top rate bracket to start at $200K, you'd get 33% of all revenue subject to whatever you set the top marginal rate to. Presumably, you'd get a little less than that at $250K.
If you were to move the top bracket up to $1M, you'd get about half of that--16% of all revenue, and there's only a little difference between that and $1.5M, where you'd get 14% of all revenue.

Seems to me that the sweet spot might be at $1.5M. Is that enough money to avoid an impact on small businessmen? I don't know, but I suspect that it is. Remember, the operative theory here is that small businessmen who make more than they need to run their households won't lean out their businesses in the face of a higher tax rate. In other words, there's an "I don't give a crap" threshold.

I didn't do the analysis on how much of this is dividend income. I still maintain that that sort of passive income could be taxed with few consequences.

The Democrats would have been much better off trading a top bracket above $1.5M, taxed at, say, 41%, for a permanent extension for everybody else. Let's see what becomes of the deal.

In Which Julian Assange Demonstrates That He's Not Against Secrecy, Only Secrets Not Controlled by Him

2010-12-05T15:29:00.004-05:00

Apparently Wikileaks's Julian Assange has an "insurance file" containing lots of secrets that he hasn't released, but which he threatens to release if he's shut down.

I have to say that I'm supportive of the idea that government should be as transparent as possible, in which case the recent state department and Afghanistan dumps are fair game--as long as Assange didn't pay for or coerce Bradley Manning for the information, he's not guilty of espionage, and he ought to have the same rights as any other (highly irresponsible) journalist. (Manning, of course, is guilty of treason and/or espionage, if news reports are correct.)

As for Assange's philosophy of damaging government apparatus by making it more and more paranoid about leaks, well, that's not exactly the right idea, is it? But in general, transparency is a public good, and exposing things that the government wants secret is often not a bad thing.

So, what is Assange's first considered action when he comes under pressure? He's going to threaten his foes with "secret information". Mind you it's not stuff that a government has managed to keep secret, it's stuff that he's keeping secret.

So much for transparency. He's clueless at best and more likely just a garden-variety hypocrite.

On Tax Increases and Their Impact on Small Business

2010-12-05T10:46:00.006-05:00

The big argument on increasing taxes back to Clinton-era levels is that it will stifle the economy, and the big argument on the mechanism by which it will stifle the economy is that it will prevent small businesses from hiring. I'm sympathetic to both of those arguments, but only up to a point. Let's do a little analysis:

First, let's look at the Obama plan, where we keep the Bush tax cuts in place for everybody making less than $250K a year, and we revert to the Clinton-era schedule for everybody above that.

The first argument made in favor of this idea was that the vast majority of small businesses made under $250K in the first place. I can't compute that number from the data I have (more on this in a moment), but I'm willing to guess that the vast majority of taxpayers who filed a Schedule C, E, or F had incomes under $250K. But note that that includes workers who get paid $8 an hour as contract labor and have to report their 1099's on Schedule C.

So that's not really the question you ask when you're trying to figure out small business impact to the economy. Instead, you want to ask, "what percentage of adjusted gross income came from small businesses whose owners made more than $250K per year? You can find the answer to that question by massaging the data found here. (Excel, but you can look at in Google docs. Also, note that I'm using 2007 data, because 2008 was so disastrous as to be an outlier. The same computations are easy to do for 2008.)

To classify income as "small business income," I'm going to assume that the income (and loss) came from one of the following sources:

Business or profession (I think this is Schedule C)
Net short-term gain/loss from sale of capital assets (Schedule D)
Net short-term gain/loss from partnerships or S-corporations (Schedule D)
Net long-term gain/loss from sale of capital assets (Schedule D)
Net long-term gain/loss from partnerships or S-corporations (Schedule D)
Rent gain/loss (Schedule E, because landlords are running small businesses)
Partnership or S-Corporation income/loss (Schedule E)
Farm income (Schedule F, I think, because farmers are running businesses, too).

(BTW, this is just an awesome data set--it pretty much tells you everything about how individuals make money in the US.)

When I crunched the numbers, two important stats come out:

36% of all income for filers with AGIs greater than $200K comes from small business-related activities. (The IRS doesn't have a category break at $250K)
13% of all US revenue comes from small business-related activities owned by filers who make more than $200K.

13% of the total economy would therefore be affected by letting the Bush tax cuts expire for those with incomes over $250K. (Well, a little bit less, given that the IRS data granularity is for $200K to $500K, but it'll be pretty close.) But the really startling number is the 36% of all revenue for those with greater than $200K. More than $3 out of every $10 made by these people comes from their businesses.

What does this mean? First, note that for income to show up from an S-Corporation or partnership in the individual's AGI, it's got to be profit from that business, not just revenue. It's already been offset by the cost of doing business: buying materials, paying rent on your real estate, cost of utilities, state and local taxes, and, most importantly, the cost of salaries for the business's employees.

So let's now put ourselves in the position of a small biz owner; let's call him Joe. Joe's doing quite well; he's married, he's got a business that returns $185K in profit every year, and he pays himself a $150K salary (i.e., he's his own employee as well as the owner), for an AGI of $340K. Based on 2010 standard deductions and rates, he takes home exactly $250K a year.

Now we'll assume that Joe and his wife have a particular lifestyle, and they want to maintain that lifestyle next year. In other words, Joe will manage his business so that his take-home pays is also $250K a year. With the expiration of the Obama tax cuts, his top marginal rate will go from 33% this year to 38.5% next year, so $90K of his income will be taxed 5.5% more, so he's paying an extra $4950 in taxes. So, he has to pay himself an extra $8182 so that, after the 39.5% taxes on that $8182, he takes home the extra $4950 he needs to maintain his lifestyle.

Joe's got fewer than 10 employees, so he doesn't have to worry about all that Obamacare crap. But, if Joe is paying his employees $12 an hour and they're full-time, 40-hour-a-week employees, each of their salaries is $24,960. Joe has to pay 7.65% in Social Security and Medicare taxes, for an extra $1909, so each employee costs him $26,869. Let's call it $27K.

So the Obama version of the tax increase costs Joe the equivalent of 30% of an employee.

Now, let's say that Joe knows that adding one additional $27K employee will bring in an extra $40K in revenue. (This is a pretty low productivity ratio, but small businesses with low-skill workers are like that. I'm therefore assuming that a big chunk of the productivity of Joe's business comes from Joe himself. Again, I suspect that this is the case, but I haven't done the research.) So Joe gets $13,000 for each new employee that he hires. Even after having to pull another $8200 from the business, the extra employee would make him money--but just barely. And that employee probably can't bring in that money without Joe increasing his capital expenditures. Maybe he needs to buy the employee a desk and a computer. Or maybe he needs to buy another truck for the employee to use to make service calls. When you factor that in, the extra employee is probably a wash at best, and possibly puts him slightly in the red. Bottom line: Joe's not expanding this year.

On the other hand, let's look at another example: let's call him Warren. Warren also runs what would be classified as a small business, but Warren brings in $2M take-home pay. Let's say he pays himself $200K and brings in $2,865,000 in profit. But Warren didn't get to be that rich by being a complete spendthrift; his expenses to support his lifestyle are probably considerably less than $2M. Warren can expand his business simply by saving a little less. Given that Warren is pretty successful, he's probably pretty confident that any expansion of his business is as good or better an investment as dumping his extra money into a mutual fund.

So Warren is unlikely to be bothered much on financial grounds for the tax increase. He may have lots of other things that he's concerned about (Obamacare being high on his list), but you can tax Warren more and he probably won't change his business plans very much.

So there is probably a compromise something like the Schumer compromise, where we jack the highest brackets back to 39.5%, or even 40% or 41%, but move that bracket up to $1M or 1.5M, or even $2M. Figuring out where the break point should be placed is a calculation based on where you think the "truly rich" income begins, with the criterion being those business owners that don't have to maintain their lifestyle at the expense of their business. Using this criterion, it's obviously possible that you bring a trivial amount of new revenue, but my guess is that if the Obama plan at a $250K breakpoint gets 60% of the revenue that going back to the Clinton-era brackets and rates would bring in, then moving it to $1.5M would get you 40%.

The Republicans ought to take a deal like this. Alternatively, they could take a deal where the rates stay where they are today for another year and then go with a Schumeresque compromise written into permanent law with no sunsets. The GOP probably has the votes to ram the whole thing through, but they're going to be on politically shaky ground when the deficit continues to explode. A compromise like this lets them have their cake--growth virtually unfettered by tax-impose deadweight losses--and eat it too, with a substantial deficit reduction.

(BTW, I'm going to claim partial "told ya so" points on how the GOP would play hardball on this issue, based on this post.)

CORRECTION: There was a 36% bracket between $161K and $288K in the Clinton era, so my computation of the extra tax should be $4000, not $4950, which would mean that Joe would have to pull $6611 out of the business, not $8200. I don't think this hurts the overall argument very much.

Best Quantum Mechanics Nerd Joke Ever

2010-12-04T12:13:00.003-05:00

From xkcd, H/T Cosmic Variance:

Where Do New Drugs Come From?

2010-11-06T18:44:00.002-04:00

Some interesting data on where FDA-approved drugs from 1998-2007 originated, and who brought them to market:

First, the raw numbers. In the 1997-2005 period, the 252 drugs break down as follows. Note that some drugs have been split up, with partial credit being assigned to more than one category. Overall, we have:

58% from pharmaceutical companies.
18% from biotech companies..
16% from universities, transferred to biotech.
8% from universities, transferred to pharma.

That sounds about right to me. And finally, I have some hard numbers to point to when I next run into someone who tries to tell me that all drugs are found with NIH grants, and that drug companies hardly do any research. (I know that this sounds like the most ridiculous strawman, but believe me, there are people - who regard themselves as intelligent and informed - who believe this passionately, in nearly those exact words).

Having run into some of those people myself, this is interesting data. But the rest of the analysis does show that university-originated drugs were more innovative and addressed more unserved markets than pharma-originated drugs.

O'Reilly, Kilmeade, Williams, and the Muslimness of Terrorism

2010-10-21T15:57:00.006-04:00

The recent brouhaha, and Brian Kilmeade's statement that "All Muslims aren't terrorists but all terrorists are Muslim," prompted me to do a little number crunching:

I went to the START Global Terrorism Database and pulled all attacks between 2000 and 2008 with 51 or more casualties. (You can't export enough records if you include the small attacks.) I then tagged any attack with a known perpetrator that was clearly Islamic (i.e. I knew off the top of my head that the group was Islamic or it had "Islam", "Mujahadeen", "Mohammed", etc.) or, for unknown perps, that occurred in a country that was nearly uniformly Muslim.

Results:
Number of attacks with greater than 50 casualties: 424
Number of Islamic attacks: 342
Percentage Islamic attacks: 81%

Total casualities in attacks with >50 casualties: 49,842
Total casualties in Islamic attacks: 42,029
Percentage casualties from Islamic attacks: 84%

So Kilmeade was (obviously) incorrect. But you have to admit that Muslims being responsible for 84% of the casualties (or more--I didn't include unknown Indian attacks, many of which will be Muslim-originated) is kind of a large percentage.

On Dirty Jobs

2010-10-03T11:16:00.005-04:00

Just wanted to save this, because it kinda rocked me back on my heels:

"Follow your passion--what could be wrong with that? Probably the worst advice I ever got." (11:20 into the clip)

Huh.

I'm a middle aged software engineer. Back when I started out, I was just a computer programmer. These days, I almost exclusively draw boxes on whiteboards and evangelize ideas and products to folks inside my company. I'm pretty good at it, and I make an excellent living doing it, and I like it a lot.

I can't say I like it more than just the simple art of writing a bunch of code and making it work. My job is so abstract that I can't even really describe it to ordinary, non-technical folks, and when I do, they often don't believe that you can get paid for doing that. A lot of the time, I can't believe it either. Part of the price of success is becoming more abstract, more political, more removed from the simply joy of doing your job at its most basic level. That price may be worth paying, but we ought to be aware that we're paying it.

I've been incredibly lucky to be able to do something that I used to love, and still like pretty well. My kids aren't so fortunate. They were encouraged to "follow their passions" and the result is that they've spent a lot of time doing things that were ultimately unrewarding. My son finally went to trade school and got certified as an HVAC technician 18 months ago. A few months ago, I asked him how he liked his job. He replied, "Nobody wants to grow up to be an HVAC tech when they're a kid." And yet, he has more security than my two girls, who are still following their passions, and who aren't very happy with the result.

Watch the video; seems to me that it cuts through a lot of nonsense that somehow we've started to assume was true.

In Which, From Our Position Just in Front of the Fan, We Observe a Cluster of Moist Brown Objects on a Ballistic Trajectory Toward Us

2010-08-05T09:52:00.004-04:00

I've always been OK with regulation for location neutrality on the internet while opposing application neutrality because it can stifle protocol innovation. Now it appears as if some of the Big Boys may be about to force the issue:

Google and Verizon, two leading players in Internet service and content, are nearing an agreement that could allow Verizon to speed some online content to Internet users more quickly if the content’s creators are willing to pay for the privilege.

The charges could be paid by companies, like YouTube, owned by Google, for example, to Verizon, one of the nation’s leading Internet service providers, to ensure that its content received priority as it made its way to consumers. The agreement could eventually lead to higher charges for Internet users.

Now, it's possible that the NYT is simply casting this in the most negative light possible but, if true, I can't think of a better way of chumming the water for the net neutrality sharks to begin a full-on feeding frenzy. It's abysmally stupid.

Note that there is a serious engineering issue here. When we use DSCP to mark packets, there's a bit of a gentlemen's agreement that we use the proper code point for a particular application. If you suddenly start using different markings for the same application, you're now essentially practicing location discrimination. You can do some amount of verification that applications are being nice via policy, but it gets tricky.

I'm not entirely opposed to the idea of paying for quality of service. Indeed, paying for QoS to enable certain types of applications (for video over IP or gaming or teleoperation, for example) is almost essential. But you want that tariffing to be directed at the content consumer, not the provider. Otherwise, you get to the point where large, rich content providers can choke out the smaller guys. (Note that conversational communications is a special case, in that both ends of the stream are both consumers and providers.)

Could this all be solved by simply enforcing neutrality on all TCP traffic? This would obviously provide an (undesirable) incentive for content providers to move to UDP-based protocols, as BitTorrent has already done. It would be easier in theory to enforce clean classifications of applications with UDP and to prevent abuses of policy, but you still have the problem of what to do with encrypted traffic. Maybe you only deal with encrypted traffic best-effort, and rely on protocols like sRTP for conversational traffic that needs to be kept private.

Damn, we're on the slippery slope. I'm not sure I want to think too much about the composition of the mud.

UPDATE 14:54 EDT:

Well, this is a little better:

"People get confused about Net neutrality," Schmidt said. "I want to make sure that everybody understands what we mean about it. What we mean is that if you have one data type, like video, you don't discriminate against one person's video in favor of another. It's OK to discriminate across different types...There is general agreement with Verizon and Google on this issue. The issues of wireless versus wireline get very messy...and that's really an FCC issue not a Google issue."

This jibes reasonably well with my position, but I'm hard-pressed to figure out how you distinguish one kind of TCP traffic from another. It's still a bit of an unforced error.

A Bucket of Cold Water to the Face

2010-07-17T16:10:00.003-04:00

I have never been a fan of the "culture war" meme. Yes, there's a real phenomenon behind it, and yes, the effects are deleterious. But it never seemed to get to the heart of what's wrong.

Angelo Codevilla has re-cast the issue as a class war, not between the haves and have-nots, but rather between the rulers and the ruled. And he has done it so comprehensively that it really brought me up short.

There is much to disagree with in this essay. It hangs ten over the precipice of know-nothingism, and yet it doesn't quite teeter over the edge. Codevilla's description is of a ruling class that has been uniformly raised, uniformly educated, and uniformly taught to manipulate the levers of power. He gives them their due as an entrenched institution in American life, and he correctly points out that reducing their power requires engaging them with their own tactics, which may have the effect of making them even more powerful.

I was struck by the similarities between Codevilla's description of the ruling class and the characteristics of agricultural monocultures. Both are immensely productive as long as the conditions for which they were engineered continue to prevail. But even small environmental changes can be devastating if the monoculture hasn't been engineered to adapt to the right things. The political and economic environment has certainly changed. We'll see whether our rulers have what it takes to adapt.

All-in-all, and despite its flaws, this is a sweeping a condemnation of ever more centralized government, and an excellent appeal for a more (small "l") libertarian society.

Smart Liberals Have More Fun

2010-04-08T18:37:00.003-04:00

Apropos of hardly anything, this post advances the theory that veteran journalists tend to rely too much on what they think they know about a new development on an issue with which they're conversant, instead of asking questions. One of the commenters suggested that this is an explanation for the dreaded "liberal bias in the media", and I rose to the bait. But it got me to thinking.

There is, of course, a fairly well-entrenched narrative about liberals being smarter than conservatives. As somebody who's moderately conservative and who likes to think of himself as pretty smart, this meme always causes me to hunch my shoulders a little bit and feel defensive. Part of that defensiveness stems from a sneaking suspicion that the narrative is probably right. God knows that there are plenty of knee-jerk, reactionary, know-nothings on the far right of the conservative spectrum. These are not people with whom I identify, although I share more of their political impulses than I do with, say, the far left.

Needless to say, I'd love to rationalize my position here. And I believe that I have found a way:

A while back I wrote about the seductiveness of policy interventions. When you understand an issue, the temptation to engineer a solution to the problems surrounding an issue becomes almost overwhelming. Indeed, it's almost irresistible to fiddle with an idea in your head, playing what-if games, seeing if you can come up with something that appears to be bullet-proof. It's fun!

On the other hand, you hopefully remember that the odds of successfully intervening in a complex system and actually making things better are pretty remote. If you're a smart conservative, you try to keep this thought close at hand whenever you start playing with policy ideas.

But that is ultimately a boring, not-very-fun idea. A true idea, an important idea, always a good policy idea, but not very fun. At the end of the day, most people would rather be Pooh than Eeyore.

So imagine now that you are a smart person who's interested in politics and policy. (Hopefully, you are a smart person and don't have to imagine very hard.) Probably the reason that you are interested in P&P is because you think it's fun to think about. So: are you going to have more fun as an interventionist liberal or a grumpy old Hayekian conservative? The answer is, hopefully, obvious.

This seems to be a perfectly good explanation for why there are more smart liberals than there are smart conservatives. Smart liberals get to play with hundreds of issues and propose all sorts of innovative solutions for their problems. Smart conservatives pretty much get to apply the following three ideas to every policy problem:

Complex, non-linear systems can't be engineered.

There are limits to what you can know, even if you could engineer a complex system.

Human nature isn't perfectable, and most policy interventions for most issues require nearly-perfect humans to successfully manage them.

No fun. Most people like to have fun, especially smart people. Smart people tend to be liberals, because liberals have more fun.

Yet Another Obsidian Wings Comment Thread

2010-04-08T18:35:00.001-04:00

Got myself involved with these guys on the topic of corporate foreign tax havens and why American multi-nationals pay so little in US taxes sometimes. Nice pool of commenters over at this site.

Need Cogent Political Analysis? Check Out a Dating Site!

2010-04-06T15:16:00.005-04:00

The dating site OKCupid apparently has a blog dedicated to mining the survey questions of its (almost 180,000) members, called OKTrends. (Who knew?) From this comes possibly the most cogent piece of analysis on the relationship between demography and political strategy I've ever seen. I could summarize, but it's just easier to go read it. Fascinating.

UPDATE 4/8/10: I should probably H/T Will Wilkinson for this, and note that he thinks that a big chunk of the results from this study are a result of cohort selection: Older people grew up in a different time and had their politics informed by different forces. It's true that people's politics change as they age, but maybe not as much as would be assumed by this analysis.

On the other hand, the baby boomers, whose politics were formed in the quite liberal '60s, are now the ones with the (measured) authoritarian biases now. Is it reasonable to assume that the Obamakids will be as liberal in forty years as they were during the 2008 elections?

Good News/Bad News

2010-04-06T13:46:00.003-04:00

The good news is that the DC Circuit Appeals Court has tossed out the FCC's cease and desist order to Comcast in re. Net Neutrality and L'affaire BitTorrent, on the grounds that the FCC doesn't have any statutory authority to regulate in this area.

The bad news, of course, is that this means that Congress will likely attempt to provide the FCC with the statutory authority to do so. However much I distrust the FCC to make consistently rational decisions dealing with delicate engineering aspects of the internet, I distrust those idiots in Congress even more.

Nuclear Rocketry, Anyone?

2010-03-23T12:20:00.002-04:00

One of the deal-breakers with fission-based rocketry was the need to cool the reactor with the propellant fluid, which, first, made the whole scheme subject to the fundamental Carnot limitations of heat engines and, second, put huge stresses on the reactor itself, since it has to withstand the vibration generated by the working fluid flowing through it.

This approach is an attempt to build a "dusty plasma" reactor, where the fission products themselves can either become the reaction mass for the rocket, or can be decelerated in an electric field to directly generate electricity for some kind of ion propulsion. Using the fission products as reaction mass could yield a specific impulse of about 1,000,000 seconds (that's about a factor of 100 better than the best ion engines, BTW).

On the downside, this rocket works by emitting nuclear waste at 3-4% of the speed of light. This qualifies it as the second-dirtiest rocket ever envisioned. (Don't forget Project Orion!)

Making History the Wrong Way

2010-03-21T11:47:00.002-04:00

By almost all accounts, the health care bill will be law by tonight. Whether the reconciliation fixes are enacted is then almost inconsequential. This will, indeed, be an historic event.

There is much to like in this bill, but on balance its negatives substantially outweigh its positives. In the end, I would have preferred that it not pass for the following reasons:

It transfers a huge amount of wealth from the poorest Americans--the young--to the richest Americans--the old. If the bill had done community rating by age bracket, I'd have been OK with the mandatory coverage provisions. As it is, we'll be taking money from people who need to be productive, people who have small children, and giving it to the unproductive.

It is the mother of all unfunded mandates to the states, via the increased Medicaid burdens.

It assumes that insurance is the problem, rather than health care. I fear that the ultimate result of that will be to make the non-exchange insurance markets increasingly unaffordable, forcing more employers to dump their employees into the exchange markets.

By pushing more people into the exchange markets and more people into Medicaid, we have set the table for government-mandated price controls. This always ends with shortages.

We have added yet another huge and substantially underfunded entitlement (cf. fantasy Medicare cuts, the doc fix, etc.) that further increases the size and power of government, and further degrades the fiscal stability of the United States. (Maybe this is good news; the sooner the inevitable crisis occurs, the more likely it is that the US will make the reforms necessary to ensure long-term stability, and the less likely it is that its power will be diminished.)

It increases the insulation of the individual from exposure to the real cost of his or her health care, rather than increasing that exposure to the point where real market forces can go to work.

I am enthusiastic about the need for guaranteed enrollment. I can accept that the only cost-effective way to produce guaranteed enrollment is to have an individual mandate. I can even grudgingly admit that a system with some (age-adjusted) community rating is a fairer system than one where each individual forced to pay for his own simple actuarial risk. If those were the only things in this bill, I would wholeheartedly support it.

But that is just the tip of the iceberg on this bill. It is so sweeping, so complex, so ultimately incoherent, that it just isn't worth it.

Is There Anything Left to Conserve of Western Civilization?

2010-03-12T18:27:00.004-05:00

Stephen Davies says not, because we're not living in Western Civilization. He says a lot of other things, too. A completely fascinating lecture.

Reconciliation Hardball

2010-03-04T12:29:00.003-05:00

I was wondering how long it would take the Republicans to trot out this strategy against the reconciliation approach:

The White House may renege on passing fixes to the Senate's healthcare bill once the House has passed it, Sen. Judd Gregg (R-N.H.) claimed Thursday.

Gregg, the ranking member of the Senate Budget Committee, suggested that President Barack Obama may back off making changes to the Senate bill through the reconciliation process, which the White House and the Senate have said they would use to make changes to the Senate bill in order to placate House members.

"They're using reconciliation to pass the great big bill," Gregg said during an appearance on CNBC. "Once they pass the great big bill, I wouldn't be surprised if the White House didn't care if reconciliation passed. I mean, why would they?"

But they can be even more insidious than this--as well they should be.

I'm assuming that the Democratic strategy will be to negotiate the reconciliation bill up front, before putting the original bill to a vote in the House. But, per Hennessey's excellent post on mechanics, the original bill has to be passed before considering the reconciliation bill or the CBO won't score it as budget-negative or -neutral, which makes the major portions of the reconciliation vulnerable to being objected to on a point of order.

But here's where things will get dicey for the Democrats: Any clause in the reconciliation bill is still challengeable on points of order if it violates the Byrd rule, i.e., if it doesn't pertain solely to the budget. Now, the Dems have the whip-hand here, even if the Parliamentarian recommends against them, because the President of the Senate (aka the VP) has the ultimate power to rule on points of order. But things are going to look really, really, really bad if Biden overrides the Parliamentarian's advice over and over and over.

So here's the poison that the Republicans can whisper into the ears of wavering House Democrats: "Sure, you can pre-negotiate everything with the Senate. But even if you trust the Senate Democrats to submit and not amend what's negotiated, we Republicans will guarantee that we'll turn whatever you've negotiated into swiss cheese through point-of-order objections, to the point that it will be crystal-clear to your constituents that, not only did you flagrantly ignore their wishes by passing the original bill in the first place, but that you are a patsy of the first order for believing that it could be fixed through reconciliation. Hey--the campaign ad writes itself. All we have to do is insert your name and run it in your market. Have fun, boys!"

Fun With Reconciliation

2010-03-01T11:51:00.003-05:00

It's probably time that we all stopped waving our arms over "reconciliation" and delved into the arcana of Senate rules. These posts from Keith Hennessey are a good primer, as are these two on the mechanics of modifying the current bill through reconciliation.

The good news: It's not a slam-dunk. If Obama & Co. are serious about this, they're going to spend some time on it, and the American electorate is going to be all-too-well informed about exactly what's being rammed down their throats.

Government by the People

2010-02-24T10:40:00.003-05:00

Sometimes the people are really stupid. Sometimes conventional wisdom, deeply ingrained prejudice, and sheer laziness cause the majority of the US electorate to want policies that are not in their best interest. This seems to be the underpinnings of the current revival of the health care act, and the intention to ram it through via reconciliation.

Now, one of the reasons that representative democracy works a little better than direct democracy is that elected representatives get to exercise a little judgment to smooth out the knee-jerk passions of their constituents. They can drag their feet on an issue long enough for cooler heads to prevail. In very rare cases, they can flout the wishes of their constituents and still keep their jobs.

But ObamaCare (or whatever derogatory term we're using today) doesn't seem to be disliked due to the passions of the moment. A bit more than a month ago, the favor/oppose line on the act was 41/51. Today, it's 42/52. It's been pretty stable since last October.

Can you pick apart poll results to find something that Americans actually want done? Yes. Is there some possibility that electoral inertia will allow legislators and the President to enact this turkey and get away with it? Sure. But let's be real clear here: If this bill gets passed, it is indisputable that it will be against the wishes of the electorate. Maybe they're wrong. But if I were a congressman or senator, I'm not sure I'd want to count on it.

As You Get Older, It's Hard to Have a Movement That You Really Appreciate

2010-01-25T11:38:00.004-05:00

I wish that I could say that this little screed was merely one of a long line of smug, self-satisfied, vaguely holy attacks on the conservative movement, but I'm afraid that it's about 85% correct:

Dear Conservative Movement...

First, you’re obsessed with yourself. You try everything in the culture—The Incredibles, Wal-Mart, Crocs—and you ask: Is it conservative? This makes us look like creep socialists from the 1930s, debating endlessly about whether something is sufficiently proletariat. Weren’t we supposed to defend truth, beauty, and goodness (like St. Thomas Aquinas?) You ask us to measure Bill Watterson, Bill Cosby and Bill Clinton by one measure: conservative/not conservative.

You go so far as to encourage people to fabricate their entire identity from the Republican platform. Look at S.E. Cupp. She used to be a person! Now, under your influence, she is one of the lamer Rush Limbaugh monologues from the Clinton era. She’s a copy of a copy of Xerox of a rejected P.J. O’Rourke riff. How can you live with yourself, conservative movement?

You may not know this. But all the smartest people on the Right are basically ashamed to be associated with you. Your “success” in building a set of near-permanent institutions, think-tanks, and magazines to promote your ideals in an uncontaminated environment leaves us with two choices:

1) Sell out to the movement. That is, we may occupy ourselves by explaining that whatever the GOP is promoting—whether it be torture, pre-emptive war, Mutually Assured Destruction, or supply-side economics—is an enduring Western value. If John Boehner is doing it, we're supposed to figure out why Edmund Burke would support it.

Or:

2) Sell out the movement. That is, pitch our articles to liberal audiences. Trash the movement (like I’m doing), and trade our actual conservative convictions for the ephemeral respect of our peers.

If one of us tries to walk a fine line between these two, we’ll be accused of either disloyalty by the hacks or of hackery by the principled and aloof. One way merits a secure gig in the movement's intellectual ghetto. The other may win a few of us a higher status but a more insecure job at a respected outlet.

This situation makes actual arguments difficult, since everyone assumes we are simply enacting long-term branding strategies, rather than stating our views honestly. You’ve made it impossible for us to have a conversation.

Well, I'm not trying to pitch my articles to anybody, but, being a person of conservative impulses and hiding myself under the moniker, "The Radical Moderate" ought to tell you something. One of the reasons I started writing this blog was to try to reconcile the "good" conservative impulses with effective politics while jettisoning all the other excess baggage.

So, maybe it's time to start from first principles, for about the eightieth time. Here's what needs to be conserved:

Right now, Government does not have the knowledge, technology, or competence to centrally manage complex systems like the economy and culture, so it shouldn't try to do so right now.

Even if Government did have the knowledge, technology, or competence to centrally manage complex systems like the economy and culture, the managers would be corrupted, so it shouldn't try to do so ever.

Fortunately, complex systems are self-organizing, mod a few pathological conditions, and therefore need little management. NB: This does not mean that the few identified pathologies shouldn't be legislated against, but it does mean that you'd better be awfully careful about identifying them.

People tend to do fewer really stupid things if you don't protect them from the consequences of their own actions.

People tend to be happier and less anxious if you don't assault their way of life just because you disagree with it.

Sometimes you need to kill Really Bad People. Sometimes you need to destroy Really Bad Governments. The preemptive form of the Golden Rule (do unto others before they do unto you) needs to be applied extremely judiciously.

Other than that, the regular form of the Golden Rule works pretty well.

Have I missed anything important?

More On Health Savings Accounts

2010-01-24T16:56:00.006-05:00

I'm still infatuated with the idea of establishing a Health Savings Account for every person or family in the the US. Here's a little more meat on the bones:

First, an HSA is a way of setting aside funds exclusively to be used for purchasing medical care or insurance. Every independent person in the country would get one, but spouses could share one. Children and other dependents share one with a parent or guardian, unless they're wards of the state, which would set up and manage one for each ward.

Money in an HSA is sticky: It can accumulate over the lifetime of the account holder. It can be invested, and any investment gains go back into the HSA tax-free. (Limitations on the kinds of investments seem like a reasonable restriction.) But you can never get the money out for anything but health care and, if you have no dependents or a surviving spouse, any remaining money goes back to the government when you die. (No doubt there are all sorts of fancy things that need to be done to divide the proceeds between the feds and the states--left as an exercise for the reader.) By sending the excess back, we avoid the temptation to use the HSA as a way to park tax-free assets for one's heirs.

A big problem with such an HSA is the possibility of fraudulently using the account to pay for non-medical stuff. To avoid this, HSAs would be managed by an HSA clearinghouse. The clearinghouse is responsible for ensuring that all payments go to qualified medical providers or insurers. I suspect that this qualification process would involve applying to the government for certification that your goods and services were qualified, and the clearinghouse validating some kind of a qualification number.

The way that employer-based insurance is administered changes, but in a way guaranteed to minimize the impact to employees that would just as soon leave well enough alone. Rather than paying tax-deductible premiums on behalf of the employee, the employer dumps the (still tax-deductible) money into the employee's HSA. If the employee wants to use the employer's group plan, it goes right back out to pay the premiums. However, employees can also opt to buy some kind of third-party insurance. (Enabling legislation to create non-employer "super-group" plans would be handy here, but isn't essential.)

Here's a picture of the relationship between sources of HSA funds and legitimate forms of transfer or payments:

Note a couple of things: Parents or guardians can transfer a part of their HSA to their children to set them up as they become independent. Also note that clearinghouses get paid some regulated sum for their services managing and disbursing funds.

So why is this scheme useful? On the face of it, it does almost nothing. In fact, in arguably introduces a certain amount of inefficiency in the system. Instead of individuals paying out-of-pocket expenses directly, they have to get the clearinghouse to do it. This inefficiency can be mitigated through appropriate automation. I'd think that a credit-card like system, similar to those used by some FSA plans, would work nicely.

But in the long run, such an HSA forces every individual to be completely responsible for all health care expenditures. The clearinghouse can tell you at any point exactly what you're getting in contributions and what you're paying to insurance and/or out-of-pocket. The system is completely transparent. Only when transparency is achieved will individuals be responsible for their payments. Indeed, you can even put Medicaid and other forms of public assistance into the HSA, so even low-income people understand the costs associated with their care.

Note that this is not incredibly far off of the Wyden-Bennett plan, although the clearinghouse, only with the consent of the consumer, becomes the payer, rather than the government.

Transparency begets responsibility, and responsibility begets cost control. This is a big procedural change to how health care is administered in the US, but the actual cost to implement it is relatively modest.

Eat Your Heart Out, Jules Verne

2010-01-22T11:35:00.004-05:00

A cannon for shooting supplies into space:

John Hunter wants to shoot stuff into space with a 3,600-foot gun. And he’s dead serious—he’s done the math. Making deliveries to an orbital outpost on a rocket costs $5,000 per pound, but using a space gun would cost just $250 per pound.

Building colossal guns has been Hunter’s pet project since 1992, when, while a physicist at Lawrence Livermore National Laboratory, he first fired a 425-foot gun he built to test-launch hypersonic engines. Its methane-driven piston compressed hydrogen gas, which then expanded up the barrel to shoot a projectile. Mechanical firing can fail, however, so when Hunter’s company, Quicklaunch, released its plans last fall, it swapped the piston for a combustor that burns natural gas. Heat the hydrogen in a confined space and it should build up enough pressure to send a half-ton payload into the sky at 13,000 mph.

Hunter wants to operate the gun, the “Quicklauncher,” in the ocean near the equator, where the Earth’s fast rotation will help slingshot objects into space. A floating cannon—dipping 1,600 feet below sea level and steadied by a ballast system—would let operators swivel it for different orbits. Next month, Hunter will test a functional, 10-foot prototype in a water tank.

You certainly couldn't launch people this way--they'd turn into goo at the kinds of jerk and acceleration needed--but it'd work great for consumables. I don't know if you could launch modules with complex machinery and electronics through such a system, but air, water, food, and propellants are going to make up the bulk of any large-scale suborbital or interplanetary presence, and a massive reduction in launch costs might just be the enabling technology that we need.

It's Not Too Late for the GOP to Snatch Defeat From the Jaws of Victory

2010-01-20T11:22:00.007-05:00

[Meant to post this two days ago but got sidetracked. It's actually posted on 1/22, not 1/20, since Blogger uses creation dates, not post dates.]

Much scrambling is occurring now that Brown has defeated Coakley for the MA Senate seat. Not too surprisingly, the amount of crowing coming from the Republicans is only slightly less noisy than the lamentation and back-biting from the Democrats. The emerging convention wisdom is that the health care bill in its current form is, if not dead, at least severely crippled.

But there is still an excellent chance for the GOP to screw the pooch.

As of today, the current average of health care favor/oppose polls is 41/51. There will be a temptation for the GOP to interpret this statistic as indication that Americans don't want health care reform. This is incorrect, of course. There are two things that Americans do want:

Practical health care reform, rather than the Frankenstein's Monster that emerged from Congress.

Free health care reform.

The first is completely reasonable. The second is impossible. So, as the Democratic leadership invites moderate Republicans into the discussion--for real, this time--Republican success will have to be measured in threading the needle between these contradictory goals.

The good news: there's probably no need to placate the lunatic fringe right. (NB: The lunatic fringe right comprises somewhere north of 66% of the GOP caucus.) But the remaining moderates need to be careful. If they slap a band-aid on the current bill without insisting on gutting the thousands of pages of incomprehensible regulations, they will lose an incredible opportunity to demonstrate that decent legislation can be crafted, as long as the party (still) in power doesn't treat the minority the same way that the GOP treated the Democrats when their roles were reversed. On the other hand, they can't dig in their heels so much that the whole thing collapses or, if it does, that three or four simple bills can't be had in the wake of the collapse.

This won't be easy. Everybody loves guaranteed issue, but passing that in isolation from some kind of mandate, and some kind of community rating, would be considerably worse than doing nothing. (Causing average health care policy costs to increase overnight by 20-25% probably isn't going to make the electorate very happy...) In the end, there are fewer things that can be removed from the bill than conservatives would like, if the bill is to enact any sort of reform at all. But here are some suggestions:

Change community rating so that the young are no longer subsidizing the old.

Remove about 95% of the endless new regulations.

Replace the exchanges with a interstate licensing. Note that this requires the Feds to get into the business of specifying minimum coverage criteria and jamming them down the throats of all of the state insurance commissions. However, this can be much less intrusive than the exchanges were going to be.

Make the taxation for this transparent. I'd be happy with a surcharge on Medicare payroll taxes, as long as the proceeds were being accounted for separate from Medicare. You could make this somewhat progressive by making the surcharge kick in only after the first $35,000 in income, but this really needs to be pretty flat, for the same reasons that social security taxes ostensibly are flat: they are earmarked for insurance purposes for all workers, rather than just being general fund taxation. (Yes, I am aware of the disconnect between theory and reality here, but what's good for the goose is good for the gander.)

Seems like the current discussion on guaranteed issue is revolving around the elimination of pre-existing conditions, rather than guaranteed issue. I can't tell if the news coverage is distinguishing between the two; if you deny some applicants issue for any reason, but then cover the pre-existing conditions of the ones to whom you issue policies, that's pretty weak beer, albeit inexpensive beer.

Seems like the mandate simply won't fly. The only way around this that I can see is to get very serious about HSAs, automatically attaching one to every household, whether they use it or not, and providing some incentive for contribution at the low end. Maybe the government matches the first $750 for people with incomes under 3x federal poverty. I won't pretend to have worked out the arithmetic on this, but genuine health care reform relies on all citizens paying for their own services. If you can't coerce a mandate, maybe you can incent one instead.

As always, if I Ran the Circus, I'd immediately force employers to dump what they spend on an employee's health insurance into their HSA, tax-free, then provide an opt-out group plan for them to spend the money on. This would be a wash, but it would then allow the employee the choice to opt out and choose some other plan on the open market. This has not a prayer of occurring, but it would be a genuine step forward in terms of cost control at a relatively low implementation cost.

The price of admission for any sort of GOP support is tort reform, which certainly won't hurt, and can probably be had in some watered-down form.

Ultimately, the best thing about Brown's election is that it halts the stampede towards getting any bill, even a crappy one. Since Obama will want to change the subject for a while to mitigate his 11/2010 congressional losses, maybe something genuinely decent can be crafted. But the GOP ignores the issue at their own peril.

How to Make Old People Die Faster

2010-01-14T18:28:00.005-05:00

Let's look at the ingredients in the current noxious health reform brew:

Most of the alleged savings will come in the form of Medicare payment reductions.

Doctors are already refusing to see Medicare patients because they can't make any money off of them, so we should expect it to become much harder for elderly patients to get in to see a doctor in a timely fashion. (Say it again, folks: "Price controls cause shortages, price control cause shortages...")

When you're old and you don't see the doctor promptly, you tend to die.

So, Medicare may really suck in the not-too-distant future. Those of us who can afford to do so may want to get a supplemental insurance policy, if for no other reason than we'd like to be able to get an appointment with a doctor with a good enough reputation to make money.

But here's where it gets interesting: As I understand it (and somebody please correct me if I'm wrong), the private supplemental insurance policies that work with Medicare don't reimburse the doctor at a higher rate; they merely cover the subscriber's out-of-pocket. What you'd really like is a policy that would convince a doctor that he can make a living wage by seeing you.

I don't think that exists, and, given the regulatory climate that will accompany this legislation, long after the Democrats have shot their wad, it's unlikely that such a policy will exist in the future. Therefore, the only options that anybody but the extremely rich elderly will have will be to get shortage-riddled care.

I'm going to be 53 next month. This topic is starting to be somewhat more than academic to me.

A Bit of Lies, Damn Lies, and Statistics

2010-01-14T18:12:00.009-05:00

Via Instapundit, we are directed here, where we find the following graph:

Kinda scary, but note that it shows percent change from the most recent employment peak. Since employment was incredibly high prior to the Recent Unpleasantness, the reversion to the mean--and then beyond it, looks worse than it is.

The whole thing prompted a trip to the BLS web site to get raw non-farm employment numbers, from which, via the wonders of a bit of Excel hacking, I got a 3-month-smoothed rate of change on employment. Here it is:

So, this one's bad, but comparable to the stuff that happened in '74 and many of the recessions in the 50's. Interesting chart--does anybody see things getting more orderly, and the cycles (mostly) damping out over time? I wonder if this is better economic management, or whether it's a result of the structural changes from a manufacturing economy to a service/information economy.

Progress

2010-01-08T01:44:00.005-05:00

January 7, 1610:

January 7, 2010:

I want to live forever, because I want to see what happens next.

Deterring a Nuclear Iran

2010-01-06T12:30:00.001-05:00

Just wanted to leave this link to a thread I on which posted a bunch of stuff--some of it pretty stupid--concerning whether deterring Iran was possible and, if so, what the policy would look like.

WhaFuh?

2009-12-22T13:47:00.005-05:00

The only thing I can infer from this is that Harry Reid has a deep, deep need to be be punished:

Senator Jim DeMint (R-S.C.) pointed out some rather astounding language in the Senate health care bill during floor remarks tonight. First, he noted that there are a number of changes to Senate rules in the bill--and it's supposed to take a 2/3 vote to change the rules. And then he pointed out that the Reid bill declares on page 1020 that the Independent Medicare Advisory Board cannot be repealed by future Congresses:

there's one provision that i found particularly troubling and it's under section c, titled "limitations on changes to this subsection."

and i quote -- "it shall not be in order in the senate or the house of representatives to consider any bill, resolution, amendment, or conference report that would repeal or otherwise change this subsection."

this is not legislation. it's not law. this is a rule change. it's a pretty big deal. we will be passing a new law and at the same time creating a senate rule that makes it out of order to amend or even repeal the law.

i'm not even sure that it's constitutional, but if it is, it most certainly is a senate rule. i don't see why the majority party wouldn't put this in every bill. if you like your law, you most certainly would want it to have force for future senates.

i mean, we want to bind future congresses. this goes to the fundamental purpose of senate rules: to prevent a tyrannical majority from trampling the rights of the minority or of future co congresses.

So, what now? Doesn't the Senate need to get the parlementarian into the picture to decide whether the bill now needs a 2/3 vote or, barring that, an amendment striking the offending language? Doesn't that mean that Santa will not be hurrying down the chimney (still the only dirty Christmas song I've heard...) with the bill on Christmas Eve?

Health Care From First Principles

2009-12-18T10:49:00.005-05:00

David Brooks seems to have the fairest summary of the pros and cons of the current bill.

I hate to subject you all (all three of you!) to yet another formulation of the Radically Moderate Health Care Plan but, since I mostly write this for myself, here goes:

There are three main things that need to be done:

Implement guaranteed issue, community rating (segregated by age), and mandatory subscription.

Unbundle insurance offerings so that insurance, payment clearinghouse, collective bargaining, and ombudsman/patient advocate functions are separately acquirable. Eliminate Medicare as anything more than a subsidy. Eliminate employer-sponsored group insurance.

Make Health Savings Accounts the mechanism through which all government subsidy and tax advantages flow. Allow employers to send pre-tax dollars to HSAs.

I've kinda drunk the Kool-Aid on the guaranteed issue / mandatory enrollment / community rating cluster of features. Since we're going to provide some form of medical care to all comers, all comers need to participate, but you've got to spread the load relatively fairly via community rating.

I'm not a big fan, however, of the idea that the young get to subsidize the old. We all feel sorry for grandpa because he's frail and not all there. We feel especially sorry for grandpa if he happens to be living on cat food in a third-floor walk-up tenement. But the fact is that the vast majority of wealth in the US is held by people over the age of 50. That seems like a nice dividing line: I support community rating into two age categories: under and over 50. There is simply no moral justification for the young to subsidize the old, especially when the young are trying to raise families and be a productive part of the economy.

Now, all of the above seem to be essential for our public morality and basic fairness, but none of this does diddly squat to bend the cost curve, as they say. But this is actually a very simple problem. You ready? Here's the magic ingredient:

You have to be responsible for your own health care, and that of your dependent family.

That's it. That's the whole secret. But there are many consequences of this statement:

You pay the bills. You buy the insurance. You pay the out-of-pocket. You decide on the mix 0f insurance and out-of-pocket expenses that seems right for you.

You pay all the bills. No more of this business of your insurer acting as your payments transfer system. If you'd like to subscribe to a medical payer service, feel free to spend the money, but it's not part of your insurance any more.

Nobody takes care of you by default. Your employer stops being your de facto health care provider. So does the government. You pick your own risk pool and you live with it. If you want somebody acting as your health ombudsman or patient advocate, hire somebody.

You decide how you want health care delivered. Do you like your personal doctor? Terrific, but understand that you'll pay a premium when he has to hand you off to a specialist. Like an HMO model? Cool, but understand that your access to advanced care probably isn't part of the package. But that's OK--you can pay for the advanced care whenever you want it, or, alternatively, your insurance will kick in.

You get to pick whatever form of collective bargaining seems right for you. Health care networks need to reduce costs by attracting you as a customer, not because you happen to have been slimed into some network by your insurance carrier.

For most Americans, health care needs to be much more of an aggravation. You need to worry about it. You should be able to find private services that make your life easier, but you need to worry about whether they're delivering value for their cost, and you need to worry about whether they're actually taking care of your health.

To restate the above: Federal law needs to dismantle the vertically integrated insurance system. It must be illegal to bundle the following functions together:

Insurance
Payments transfer systems
Collective bargaining
Ombudsman/patient advocacy functions

In addition, we have to get rid of employer self-insurance and, for that matter, any form of employer-provided group insurance. If we allow this to persist, we so distort the guaranteed issue and community rating systems that they'll collapse.

Next, we need a mechanism through which you interact with the government about health care. Yes, there's still a role for government: it has to provide incentives for spending on health care, and it has to subsidize people who simply can't afford a basic standard of care. The strategy for this involves segregating dollars earmarked for health care from the rest of a person's income in a health savings account. Here are the rules:

Money in an HSA can only be spent on health care. You can build whatever kind of a bureaucracy you want to enforce this. My favorite form is that everybody gets an HSA debit card, and only accredited insurers, health care providers, and health service providers (ombudsmen, health networks, HSA financial managers, etc.) can enroll in the clearinghouse for the debit cards.

Money that goes into an HSA is tax-free, up to some fairly large amount. Employers can contribute pre-tax dollars into an employee's HSA. The individual can contribute post-tax dollars as well. Investment income earned by an HSA is also tax-free.

If your are in need of a subsidy to meet basic health care needs, the government deposits that subsidy into your HSA, for you to use as you see fit on your health care.

Money in the HSA rolls over indefinitely, but it goes back to the government on your death. The idea is to encourage lifelong savings for health, but to avoid the HSA turning into a tax shelter.

Finally, we all have to remember that every doctor's office visit, hospital stay, health care procedure, drug, medical device--every cotton ball--has to be paid for. There is no free lunch. The trick is to make all of those costs completely transparent. All the hidden costs of caring for uninsured patients need to come out of the inflated prices that doctors and hospitals use to hide them today. All the public sector costs need to be accounted for as taxes, not hidden deep in the system and transferred to the consumer as costs.

This current bill is a massive con job. It is designed to obfuscate, not reform. I agree that something radical needs to be done. But it can't be done if the overall objective is paternalism, rather than forcing individuals to take responsbility for themselves.

Political Science

2009-12-14T15:51:00.003-05:00

Another Climategate post, indirectly. I keep wondering what it is about the current AGW narrative that bothers me so much. I bristle at bald statements that "the science is settled", but not so much at the arrogance of the statement as the fact that there's something qualitatively fishy about it. I don't have any problem with statements like, "the science surrounding the theory of evolution is settled." So what's the difference?

For some reason, this Ezra Klein post on excess deaths from lack of health insurance triggered a possible answer. In it, we are informed:

By now, you're probably used to hearing about the $900 billion health-care bill. But what about the 150,000-life health-care bill?
Oddly, that label hasn't made its way into the conversation. But it is, if anything, a conservative estimate. The Institute of Medicine developed a detailed methodology for projecting the lives lost due to lack of insurance. The original paper estimated that 18,000 lives were lost in 2000, and the Urban Institute updated that analysis with data for 2006, yielding an estimate of 22,000 lives. As for 150,000, well, that's almost certainly too low. That's just the 2006 number across 10 years, which is the time frame we generally use for health care, with a third of the lives saved lopped off, as we're not going to cover all of the uninsured. But since the population of the uninsured grows every year, and so does the death toll, it would surely be higher. So call it the 150,000-plus-life health-care plan.

Now, I'm sure that the folks at the Institute of Medicine think they are doing science, and I'm pretty sure that they're right. But they're not really doing clean, falsifiable, Popperesque science, are they? They're building a model. The model produced some conclusions, but the conclusions are ultimately not falsifiable. It is impossible to tell whether 18,000 lives were lost in 2000 from lack of insurance, because it's impossible to build a model where 18,000 lives weren't lost because everybody had insurance.

With climate research, we also have models, but the models are even more sketchy. Instead, we have lots and lots of measurements with very little predictive theory to accompany them. We have thermometric data from the last 150 years, and we have whole bunches of proxy data from the last couple of thousand years, which may or may not correlate with actual temperatures. Once again, this may be wonderful work, but it's not exactly falsifiable, is it? Nobody's going to construct a time machine any time soon so that we can go back and measure the temperature and turn the various proxy hypotheses into hard theories. This is all correlation, not theory.

Mind you, I'm not saying that we should stop trying to produce good translations between proxy data and inferred temperature. Rather, we should just be aware of the limitations of doing so.

I have the same problems with epidemiological studies. Designing studies, sampling them, and observing statistical correlations is very important and contributes enormously to clinical knowledge. But it doesn't really tell you why a statistical correlation exists. That can only be done with a set of falsifiable hypotheses. When you base policy on statistical correlations instead of biological theory, you're probably doing better than you would with superstition, but you're running a pretty big risk that the causation you infer from the correlation might be wrong.

So a lot of this class of science is running a bit open-loop. We should always be skeptical of observation without explanation.

Which brings us back to Climategate or, more accurately, to the set of statements that can be made about the world climate, based either on the data available, or on the current set of climate theories:

Thermometric observation shows that the global climate has warmed over the past 150 years. (Very likely true.)
Measured increases in global climate are strongly correlated with CO2 emissions. (True.)
Human activity, which can be proven to cause the increased CO2 emissions, is causing the global climate to warm. (Based on a simple deduction from 1 and 2, very likely true.)
Current warming is unprecedented. (False if the theories on the correlation of proxy data with actual global temperature are incorrect. Since those theories can't currently be falsified, this can't be presumed to be true. Indeed, the whole issue behind the "hide the decline" scandal is that the decline may in fact falsify some of the proxy theories.)
Without aggressive reduction in CO2 emissions, global warming will accelerate to cause significant environmental and economic damage. (Predicted only by model. Can't yet be falsified.)
Aggressive reduction in CO2 emissions will slow the rate of global warming. (Can't yet be falsified.)

So here's where things start to get nasty: In the absence of adequately tested theories, which, while not yet falsified, are yet to be subject to any tests capable of falsifying them, climate scientists and their fellow-traveler policymakers are merely pounding the table. The consensus is, indeed, that these models are correct, but the consensus is operating without the benefit of the full, closed-loop testing cycle that we usually feel is important for scientific theory to be robust. This takes things partially out of the realm of science and deeper into the realm of politics.

Let's make sure that we distinguish between the two.

All Dirty Laundry Shall Be Washed

2009-12-12T10:50:00.004-05:00

One of the things that I really like about the health care bill is that the debate has been so wide-ranging, so vicious, and so generally desperate on both sides that almost all the issues are getting surfaced and debated in the general public (or at least the general blogosphere, which we will use as our proxy tree-ring data for the part of the general public that sorta pays attention).

Witness the current foofooraw over an amendment to allow reimportation of drugs from Canada, which violates the as-yet-unexplored deal between the White House and the pharma lobby. We heard about this deal last April or May in vague, impressionistic strokes; now we're gonna get to see the paint smears where the artist scratched his ass.

The Democratic strategy on this bill has been that, as long as you can do it quickly, you can make it as big and obscure and convoluted as you want. The Republicans have done an excellent job of making sure that it's being done in slow motion, so many of its inherent flaws are being exposed to the scrutiny of the unwashed masses. Mind you, the GOP isn't doing this out of civic duty--it merely wants to kill the bill. But it has unintentionally produced a much better public debate than otherwise would have been possible.

As for drug reimportation, let's look at the dynamics. First, all pharma companies know, in exquisite detail, the following pieces of data:

The cost of bringing a drug to market, given that the cost of all of the other failed drugs has to be amortized as well.
The global market for the drug.
The country-by-country breakdown on how that market is distributed.
The pricing policies of each of those countries, ranging single-payer-negotiated pricing in the single-payer systems to the unregulated prices of the US.

Now they can figure out how to juggle the prices to make the gross profit that they need so they can report the net margins to the financial markets that will keep them liquid enough to stay in business.

If the US reimports drugs from Canada, then the price in the US begins to approach the price in Canada. Once that happens, the drug company has to raise the price in Canada, which has one of two outcomes: either Canada refuses to pay, which degrades the quality of the Canadian health system (assuming the drug is actually valuable, of course), or it agrees to pay, which causes the price to rise in Canada, which in turn causes it to rise in the US. Either way, the real loser is the Canadian health system, since it becomes weaker either politically or financially.

So reimportation doesn't really hurt the drug companies (which is good, since now they can continue to develop as many drugs as they did in the past) and it weakens centrally managed health systems.

A win-win.

The Nobel Prize for American Exceptionalism

2009-12-11T16:37:00.004-05:00

I am far less of a Barack Obama fan now than I was when I voted for him--and he was merely the lesser of two evils even then. Still, Obama's most endearing trait, to me, is that he makes mistakes, recognizes them, learns from them, and seeks to correct them.

The Obama Administration's foreign policy has, for most of this year, been marked by an attempt to portray America as just another country. Obama hoped that, through a little humility, he could jump-start a set of diplomatic initiatives that would ultimately be beneficial for the US.

It hasn't worked. It has made our negotiating position markedly weaker. It has made us an object of contempt by some of the worst leaders in the world.

So I have to say that I am delighted when, in Obama's Nobel Peace Prize acceptance speech, he says the following:

We must begin by acknowledging the hard truth: We will not eradicate violent conflict in our lifetimes. There will be times when nations -- acting individually or in concert -- will find the use of force not only necessary but morally justified.
I make this statement mindful of what Martin Luther King Jr. said in this same ceremony years ago: "Violence never brings permanent peace. It solves no social problem: it merely creates new and more complicated ones." As someone who stands here as a direct consequence of Dr. King's life work, I am living testimony to the moral force of non-violence. I know there's nothing weak -- nothing passive -- nothing naïve -- in the creed and lives of Gandhi and King.
But as a head of state sworn to protect and defend my nation, I cannot be guided by their examples alone. I face the world as it is, and cannot stand idle in the face of threats to the American people. For make no mistake: Evil does exist in the world. A non-violent movement could not have halted Hitler's armies. Negotiations cannot convince al Qaeda's leaders to lay down their arms. To say that force may sometimes be necessary is not a call to cynicism -- it is a recognition of history; the imperfections of man and the limits of reason.
I raise this point, I begin with this point because in many countries there is a deep ambivalence about military action today, no matter what the cause. And at times, this is joined by a reflexive suspicion of America, the world's sole military superpower.
But the world must remember that it was not simply international institutions -- not just treaties and declarations -- that brought stability to a post-World War II world. Whatever mistakes we have made, the plain fact is this: The United States of America has helped underwrite global security for more than six decades with the blood of our citizens and the strength of our arms. The service and sacrifice of our men and women in uniform has promoted peace and prosperity from Germany to Korea, and enabled democracy to take hold in places like the Balkans. We have borne this burden not because we seek to impose our will. We have done so out of enlightened self-interest -- because we seek a better future for our children and grandchildren, and we believe that their lives will be better if others' children and grandchildren can live in freedom and prosperity.

Obama is not backing down from his desire to outlaw torture, or to close Guantanamo, or to abide by international norms. Nor is he backing away from his extreme reluctance to use force and his strategy of diplomacy above all. Nor should he. However, the acknowledgment that America is the only power capable of wielding force for good purposes, and his refusal to be ashamed of it, is a major evolution in his foreign policy. Even more important, he has put Iran on notice that his diplomacy has limits, in both policy and time.

One speech does not a strategy make, but it's a start.

A New Strategy for Health Care Reform: Make Things as Bad as Possible, as Soon as Possible

2009-12-11T16:03:00.003-05:00

Harry Reid's compromise that allows Medicare buy-in at age 55 is so atrocious that I almost like it. Indeed, it opens up whole new strategic vistas for those of us who'd like to see the current plans scrapped as quickly as possible in favor of something that would actually lead to reduced costs. Let's game this out:

We get Medicare buy-in at age 55.
Millions of 55-65 year-olds opt in, because it will be less expensive than their current insurance.
Those doctors and hospitals that currently accept Medicare go further underwater because the fiat reimbursements from Medicare make up a larger portion of their patient base.
They increase prices they demand from insurers, who pass the costs along.
Insured patients scream.
Many doctors opt out of Medicare.
Patients over 55 scream because they can't find doctors that will give them an appointment any time in the next 3 months.
Many congressmen lose their jobs.
Now we can try again, maybe somewhat more seriously.

Of course, we may be dealing with the boiling frog syndrome here. You may not realize how bad things are until it's too late.

How to Keep Scientists From Becoming Politicians

2009-12-02T10:07:00.003-05:00

From Willis Eschenbach's chronicle of his FOI request to CRU, we find the following email from Ben Santer to Tom Wigley et al. buried close to the bottom of this voluminous exchange:

My personal opinion is that both FOI requests (1) and (2) are intrusive and unreasonable. Steven McIntyre provides absolutely no scientific justification or explanation for such requests. I believe that McIntyre is pursuing a calculated strategy to divert my attention and focus away from research. As the recent experiences of Mike Mann and Phil Jones have shown, this request is the thin edge of wedge. It will be followed by further requests for computer programs, additional material and explanations, etc., etc.

Quite frankly, Tom, having spent nearly 10 months of my life addressing the serious scientific flaws in the Douglass et al. IJoC paper, I am unwilling to waste more of my time fulfilling the intrusive and frivolous requests of Steven McIntyre. The supreme irony is that Mr. McIntyre has focused his attention on our IJoC paper rather than the Douglass et al. IJoC paper which we criticized. As you know, Douglass et al. relied on a seriously flawed statistical test, and reached incorrect conclusions on the basis of that flawed test.

I believe that our community should no longer tolerate the behavior of Mr. McIntyre and his cronies. McIntyre has no interest in improving our scientific understanding of the nature and causes of climate change. He has no interest in rational scientific discourse. He deals in the currency of threats and intimidation. We should be able to conduct our scientific research without constant fear of an “audit” by Steven McIntyre; without having to weigh every word we write in every email we send to our scientific colleagues.

In my opinion, Steven McIntyre is the self-appointed Joe McCarthy of climate science. I am unwilling to submit to this McCarthy-style investigation of my scientific research. As you know, I have refused to send McIntyre the “derived” model data he requests, since all of the primary model data necessary to replicate our results are freely available to him. I will continue to refuse such data requests in the future. Nor will I provide McIntyre with computer programs, email correspondence, etc. I feel very strongly about these issues. We should not be coerced by the scientific equivalent of a playground bully.

Well, yeah, there's a certain amount of whining here, but there's also an extremely good point: Do we really want a particular interest group to be able to "paper" a science project into submission? There has to be a point at which repeated FOI requests can be ajudged so intrusive, or so trivial, that the scientist has the right to ignore them and get back to work.

We're used to these kinds of tactics in the political arena, and we tolerate them as a necessary evil. However, scientists need the ability to concentrate on their research without continuously having to fight off frivolous legal actions.

Of course, the big problem here is that CRU was undeniably keeping sources, data, and reduction methodology much more opaque than was proper. They could have staved off a huge amount of FOI paperwork simply by doing a reasonable job of archiving and publishing their data. They were slobs, and then they got up on their high horse when some of their opponents accused them of being slobs.

Seems like we need some modification to the peer-review process. There's no reason in this day and age that a team can't submit a package of raw data, reductions, and code along with their paper. If the peers think that this information isn't sufficiently transparent, it should be grounds for sending the paper back to the drawing board. Of course, this doesn't solve the problem of picking a representative set of peers.

A Modest Proposal for Dr. Dean

2009-11-30T11:16:00.003-05:00

From a Fox News Sunday, November 29, 2009, interview with Howard Dean:

WALLACE: Governor Dean, you gave an interview to the liberal Web site Huffington Post this last week in which you said that Senate Democrats are in deep trouble on health care reform. And let's put it up on the screen.

You said that moderate Democrats are likely to water down the bill further and then added, "This is going to be death for Democratic campaign committees. Why would anyone donate to them if they're supporting candidates who defeat the Democratic agenda?" Governor Dean, things really that bleak?

DEAN: Well, you know, I think it's tough right now. We've got to get a decent bill with a public option in it so that we don't — aren't forced into this — what we've been forced into for the last 30 years.

Look, insurance companies take 27 percent off the top. They don't do a terribly good job. The costs have been going up at 2.5 times the rate of inflation. And the Democratic base expects, as we say, change you can believe in.

It seems that the 27% that the former governor is quoting is pretty close to the health care industry gross margin. Apparently, he thinks that that is too high.

But the actual industry net margin is closer to 6%. In other words, the investors in health care companies get about a 6% return on their investment, just slightly better than they would if they'd gone out and invested in a balanced portfolio of grocery stores.

So what's the difference between the 27% and the 6%? That's easy:

Taxes.

That's right, folks, most of of what the former Chairman of the Democratic National Committee is complaining about insurance companies making in profit goes back to federal, state, and local governments.

So, since Dr. Dean is so intent on making insurance companies more efficient, I have a modest proposal: Let's let them operate tax-free.

In 2004, HHS estimated that $558 billion was disbursed for health care from private health insurance. We could reasonably expect that making health insurance tax-free would raise net margins to, say, 8%. So, given the current 27% gross margin, this would save 19%, or $106 billion in private health insurance costs.

Of course, that's just shifting $106 billion that could go to Medicare, Medicaid, and other public health spending to the private sector. Still, Dr. Dean seems more worried about punishing evil insurance companies than he does about actual, you know, health care. So I'm sure he'll find my proposal completely reasonable.

Oh, by the way: Does anybody happen to know whether the "public option," as it's currently established, has to pay taxes? I'm guessing not. So much for a level playing field...

And Today's Word Is...

2009-11-25T09:50:00.003-05:00

kludge or kluge (klo̵̅o̅j)
noun
a piece of computer hardware or software, or a computer system, that is clumsily designed or improvised from mismatched parts
any poorly designed device or system

I've been watching the Climategate saga with a certain amount of amusement. I have to confess to a certain amount of schadenfreude on this whole thing. It's not that I don't think that anthropogenic global warming isn't real, and it's not even that I don't think that it's a cause for a certain amount of concern. But it always warms the cockles of my heart to see any group whose fundamental identity is based on being a bunch of self-righteous, holier-than-thou--worse, smarter-than-thou--scolds get their comeuppance.

But there is a real lesson in this for both scientists and non-scientists alike, and today I'd like to concentrate on the psychology of computer simulation.

From CBS's Declan McCullagh, who seems to have a much stronger tolerance for wading through the HARRY_READ_ME.txt file than I do, we learn:

In addition to e-mail messages, the roughly 3,600 leaked documents posted on sites including Wikileaks.org and EastAngliaEmails.com include computer code and a description of how an unfortunate programmer named "Harry" -- possibly the CRU's Ian "Harry" Harris -- was tasked with resuscitating and updating a key temperature database that proved to be problematic. Some excerpts from what appear to be his notes, emphasis added:
I am seriously worried that our flagship gridded data product is produced by Delaunay triangulation - apparently linear as well. As far as I can see, this renders the station counts totally meaningless. It also means that we cannot say exactly how the gridded data is arrived at from a statistical perspective - since we're using an off-the-shelf product that isn't documented sufficiently to say that. Why this wasn't coded up in Fortran I don't know - time pressures perhaps? Was too much effort expended on homogenisation, that there wasn't enough time to write a gridding procedure? Of course, it's too late for me to fix it too. Meh.

I am very sorry to report that the rest of the databases seem to be in nearly as poor a state as Australia was. There are hundreds if not thousands of pairs of dummy stations, one with no WMO and one with, usually overlapping and with the same station name and very similar coordinates. I know it could be old and new stations, but why such large overlaps if that's the case? Aarrggghhh! There truly is no end in sight... So, we can have a proper result, but only by including a load of garbage!

One thing that's unsettling is that many of the assigned WMo codes for Canadian stations do not return any hits with a web search. Usually the country's met office, or at least the Weather Underground, show up – but for these stations, nothing at all. Makes me wonder if these are long-discontinued, or were even invented somewhere other than Canada!

Knowing how long it takes to debug this suite - the experiment endeth here. The option (like all the anomdtb options) is totally undocumented so we'll never know what we lost. 22. Right, time to stop pussyfooting around the niceties of Tim's labyrinthine software suites - let's have a go at producing CRU TS 3.0! since failing to do that will be the definitive failure of the entire project.

Ulp! I am seriously close to giving up, again. The history of this is so complex that I can't get far enough into it before by head hurts and I have to stop. Each parameter has a tortuous history of manual and semi-automated interventions that I simply cannot just go back to early versions and run the update prog. I could be throwing away all kinds of corrections - to lat/lons, to WMOs (yes!), and more. So what the hell can I do about all these duplicate stations?...

As the leaked messages, and especially the HARRY_READ_ME.txt file, found their way around technical circles, two things happened: first, programmers unaffiliated with East Anglia started taking a close look at the quality of the CRU's code, and second, they began to feel sympathetic for anyone who had to spend three years (including working weekends) trying to make sense of code that appeared to be undocumented and buggy, while representing the core of CRU's climate model.

One programmer highlighted the error of relying on computer code that, if it generates an error message, continues as if nothing untoward ever occurred. Another debugged the code by pointing out why the output of a calculation that should always generate a positive number was incorrectly generating a negative one. A third concluded: "I feel for this guy. He's obviously spent years trying to get data from undocumented and completely messy sources."

Programmer-written comments inserted into CRU's Fortran code have drawn fire as well. The file briffa_sep98_d.pro says: "Apply a VERY ARTIFICAL correction for decline!!" and "APPLY ARTIFICIAL CORRECTION." Another, quantify_tsdcal.pro, says: "Low pass filtering at century and longer time scales never gets rid of the trend - so eventually I start to scale down the 120-yr low pass time series to mimic the effect of removing/adding longer time scales!"

Disclaimer: I am not a scientific modeler, nor do I play one on TV. However, I have cobbled together the odd simulation to explain various software behaviors, and I've done the occasional spreadsheet to help me understand various physical processes. In my experience, the basic methodology for producing such a model goes something like this:

Write the model.
Run it.
Stare uncomprehendingly at the results, trying to figure out why they bear no relationship to what you perceive reality to be.
Debug it and modify it.
Until it looks sorta-kinda right, go to step 2.
Once you believe it's getting close, start tweaking the various constants you defined for your model in an effort to get it in closer and closer agreement with whatever your observed data set is.
Run it.
If it doesn't agree with your data set, go to step 6.
Hopefully gain some insight into what you were modeling.
Breathe a sigh of relief that it's finally over.
(and this is the most important step of all) Forget all about how you constructed the model as quickly as possible.

My experience is that as soon as you have the model debugged, you tend to treat its results as gospel. You rely much too heavily on the model for any future inferences that you make about the system.

This is, in my experience, an essential part of the psychology of computer geeks. Computer programming is an exercise in abstraction: you break a problem down into more basic parts that you think you understand. Once you get the behavior you understand from the underlying parts, you can forget about them and concentrate on the behavior generated when you hook those parts together, and so on, until you've created the whole system. It takes a certain amount of discipline to remember that you programmed the basic parts on a day when you had just had a fight with your family, or were interrupted halfway through a key chunk of code, or were sick. They aren't necessarily correct.

I'm sure that the good folks at CRU were conscientious in verifying their models to the best of their ability. I am also sure that they were not software engineers, and our friend Harry's notes make it crystal-clear that he was dealing with a bag of poorly matched components produced by people that probably knew a lot about thermodynamics but not so much about object-oriented design (or even structured programming), to say nothing of rigorous source-code control. It's no wonder that they promptly forgot everything about their models as soon as they got them working.

Why is this important? Several reasons:

When a model isn't understandable, it isn't capable of being critiqued. Criticism is the foundation of all scientific inquiry.

In my experience, lack of elegance comes from lack of understanding of the underlying problem. You write bad code when you're blundering about. Blundering is all well and good--it's another of the unspoken foundations of scientific inquiry--but it's not so good when your results are being handed over to the UN as a basis for policy recommendations.

Bad code implies that you have no way of quantifying how sensitive your model is to its data. We know that a non-linear system like the atmosphere is incredibly sensitive to initial conditions (cf. the "butterfly effect"). My guess is that CRU not only doesn't know how noisy its measurements are, it doesn't know how much variations in those measurements affect the output.

There is absolutely no way that you can make cogent engineering recommendations on how to modify atmospheric behavior when you don't understand your model.

Let me harp on this last point a bit more. Climate science has come a long way, and it's been able to generate some results to which we all ought to pay attention. However, there is nothing like a reliable theory of the atmosphere. We can barely reproduce historical climate behavior, to say nothing of predicting future behavior with any accuracy. The big lesson from Climategate is that, while it's a great achievement to be able to tweak a model until it fits your known data sets (and I'll leave the simply despicable behavior with regard to the acquisition, maintenance, manipulation, and obfuscation of those data sets to those with a greater store of moral outrage than I), it's quite another thing to have a model that's so well understood that a set of geo-engineering principles drops out of it.

And make no mistake: What we're embarking upon is a feat of geo-engineering. When we endeavor to reduce emissions, we're basically modifying the forcing functions on the atmosphere. (It's entirely possible that there's something that we don't understand that will cause non-linear behavior to emerge when the second derivative of the historical CO2 level goes strongly negative.)

Engineering has consequences, and it's really nice to understand them with with extremely well-understood science. This is how we avoid producing the atmospheric equivalent of Galloping Gertie.

Conservation of Worry

2009-11-24T15:13:00.003-05:00

David Brooks:

Reform would make us a more decent society, but also a less vibrant one. It would ease the anxiety of millions at the cost of future growth. It would heal a wound in the social fabric while piling another expensive and untouchable promise on top of the many such promises we’ve already made. America would be a less youthful, ragged and unforgiving nation, and a more middle-aged, civilized and sedate one.

We all have to decide what we want at this moment in history, vitality or security. We can debate this or that provision, but where we come down will depend on that moral preference. Don’t get stupefied by technical details. This debate is about values.

I don't think so. Seems to me we have three choices:

We can all worry about what happens to us when we get sick. The uninsured will worry a lot, the individually insured will worry almost as much, and those of us with group insurance will worry about our companies paring stuff back until we wind up in one of the other two groups of worriers.

We can punt everything over to the government, and the we'll worry about what kinds of care they'll let us have, and we'll worry about what happens when the whole system collapses.

We can be forced to take responsibility for our own care, and we'll worry about learning enough to make informed decisions, and how to shop for cost-effective solutions, and how to adjust those solutions as we age.

I like #3 better than any of the others. Those worries are within my control. If I make mistakes, I can fix them. And, if I'm not good at making decisions in this area, no doubt somebody will find in me a nice juicy market, allowing me to trade some nominal amount of money to reduce my level of worry.

If you want to be healthy, you have to worry about your health. We're ultimately only talking about the form that that worry will take.

Yet Another Reason Why Small Government Works Better

2009-11-24T10:39:00.005-05:00

In previous posts, I've often asserted that, while social engineering (aka big government programs designed to change society in some form or another) seems like a rational undertaking, which a clever engineer ought to be able to effect, the non-linearity of the system to be engineered guarantees unintended and probably negative consequences. I still think that's right, but the recent health care kabuki in Congress has driven home another problem:

Forget about rationality. Big government programs chum the water so badly that the lobbyist sharks guarantee that any program that emerges is irrational and fatally flawed.

Let's take a look at the health care bill as it currently stands. We've got the labor unions ensuring that any reform of the employer-mediated insurance system is impossible. We've got AARP ensuring that any rational flavor of medicare reform is impossible. Hell, we've even got about fifty women's interest groups ensuring that evidence-based medicine can't be advocated, much less adopted, when it comes to breast and cervical cancer screening. Meanwhile, we have the health care providers and the insurance companies salivating over the prospect of hundreds of billions of dollars pumped into the system with absolutely no mechanism to contain cost.

Lobbying is essential. Lobbying is the only mechanism by which our representatives get even the tiniest amount of feedback on their cockamamie schemes. Without lobbyists, Congress would happily legislate pi equal to 3.0 and then be surprised when all the wheels stopped turning.

But lobbyists, by definition, want something from the government. They either want something stopped to satisfy their own interests, or they want something enacted, again, to satisfy their own interests. Successful politics results when the issue is sufficiently circumscribed that representatives can balance the interests and come up with a close-to-optimal solution.

That can't happen when the issue is so large that the lobbyists can play whack-a-mole with various parts of it and escape the scrutiny of the legislators considering the issue. That's what's going on with health care. We're no longer even attempting to engineer a single system; we're busy enacting yet another Christmas tree.

This is the fundamental reason why government programs need to be, if not small, at least circumscribed. This could of course be done with health care. The basic goal of providing guaranteed issue and the strategy of paying for it via mandates and subsidies is a completely separate issue from specifying how payments get transferred so that there's downward pressure on cost. But there is absolutely no incentive to do this. If the bill shrinks to the point where it's comprehensible by an ordinary mortal, the lobbyists lose their leverage.

Some Cogent Nuclear Criticism

2009-11-20T11:31:00.005-05:00

Michael Dittmar has an extremely detailed, four-part piece of criticism on the future of nuclear energy. He argues, in a nutshell:

The rate of new construction for the next 5-10 can't keep pace with the rate of decommissioning, so nuclear's overall contribution to the energy budget will fall, at least in the short term.
Primary U-235 production (mining and enrichment) currently only provides 66% of the fuel needed for the current reactor fleet, with the other 33% coming from secondary sources (reprocessing, enhanced extraction from tailings, and weapons conversion).
Secondary production is likely to fall off a cliff as the weapons conversion programs wind down over the next few years.
The IAEA "Red Book" numbers on available U-235 are unreliable, so the often-claimed statement that we have enough fuel for more than 100 years is questionable.
Fast U-238-to-Pu-239 breeders are still toys and have unproven economics.
Th-232-to-U-233 breeders are somewhat promising but are completely unproven technologically.
Fusion will never work.

These four articles are very dense with facts and figures, and I can't vouch for their reliability. Still, this is a fairly persuasive indictment of the ability for nuclear power to be a major contributor in the transition away from fossil fuels.

UPDATE 11/21/09: There's a thread with more discussion on this here. Also, I fixed the link to part 4.

Superconducting Interconnects For Three Grids

2009-11-17T09:36:00.003-05:00

Here's a bit on the Tres Amigas project, which proposes to interconnect the Eastern, Western, and Texas electrical grids with a limited set of superconducting DC lines so the various grids can shed or acquire power from each other. Not only is this an essential technology for dealing with intermittent resources (aka wind and solar) but it's a key test of longer-haul superconducting DC transmission technology.

The Seductiveness of Social Engineering

2009-11-13T16:31:00.004-05:00

Engineers fall into two broad categories. There are optimistic engineers, who see the possibilities in an idea and become enthusiastic about it. Then there are pessimistic engineers, who like to spot problems with an idea before attempting to develop it.

In general, you need a few of both kinds of engineers for a successful project. I tend to be a pessimistic engineer--I like to find the problems and fix 'em before we try to build something.

But being a pessimistic engineer has an odd property. If you find a problem, and you fix it, you immediately start to behave like an optimistic engineer; you start to advocate for your solution, because you can see that it's better than the original, or some other solution. In short, on most projects, pessimistic engineers eventually become optimistic.

This temperment spills over into my views on public policy. So, for example, if I can work out a probable dynamic that causes public health insurance to erode the viability of private health insurance over time, I can come up with a health care scheme that avoids that problem. (Don't do that!) And if I can see that a bill that's all about insurance reform won't do anything to control health care costs, I can immediately start working on a solution that might be able to control costs. (Beef up HSAs, allow employers to dump the cash they spend on insurance into the HSA, and give employees a broad range of choices on how they wish to design their own health care.)

But, of course, my intuitions on health care policy suck.

Why, you ask? It's really very simple: Everybody's intuitions on health care suck, as do everybody's econometric models and other analyses. See, there's this little thing we learn about when we're geeks, called non-linear differential equations, which govern the dynamics of most problems. The thing is, we can't solve non-linear diffEQs as a rule. We can simulate them, but then chaos and complexity theory show us that our models are sensitive to all kinds of things we can't measure very well, and are therefore hopelessly flawed. The system involved in almost any public policy endeavor is so complex that the best we can do is try something, monitor it closely, and see if we can tweak it when things go wrong.

Occasionally, we blunder into a policy issue where the behavior of the system is almost linear. Preventing monopolies and requiring bank reserves and things like that are solutions that operate either in simple areas of an economic system, or act to reduce excursions that are so obviously bad that we're almost certain that the disease is worse than the cure.

However, here I am, yet another pessimistic engineer, modeling stuff in my head on public policy. Being a pessimistic engineer, I can spot the soft spots in the policy and I can propose solutions.

And then I'm hooked. I become an optimistic engineer. I want to twiddle with the system to implement my proposal to fixing the previous problem. But of course I'm now in a position where I actually think that we ought to do something to modify the system, even though I intellectually know that whatever I propose is likely to have flaws that are as bad as or worse than the ones I was attempting to solve.

If I'm feeling incredibly disciplined, I'll eventually realize that the proper solution to a social engineering problem is usually to do nothing or very little. I'll also remember that, even though I probably can't engineer a policy to make things better, the emergent properties of complex systems will usually self-organize to create a better (and stranger) solution than I could possibly have imagined.

I think this makes me a conservative. It also may go a long way towards explaining why the majority of public policy geeks are liberals. Even if you're a pessimistic social engineer, the temptation to fix problems in other people's solutions is irresistible, eventually turning you into a temporary optimistic engineers. You want to see something done.

The fact that what you propose doing will almost certainly make things worse never occurs to you until much later.

The Internet and the Anti-Counterfeiting Trade Agreement

2009-11-04T10:12:00.002-05:00

From Cory Doctorow comes this fairly depressing report on the internet chapter of the current ACTA negotiations in Seoul:

The internet chapter of the Anti-Counterfeiting Trade Agreement, a secret copyright treaty whose text Obama's administration refused to disclose due to "national security" concerns, has leaked. It's bad. It says:

* That ISPs have to proactively police copyright on user-contributed material. This means that it will be impossible to run a service like Flickr or YouTube or Blogger, since hiring enough lawyers to ensure that the mountain of material uploaded every second isn't infringing will exceed any hope of profitability.

* That ISPs have to cut off the Internet access of accused copyright infringers or face liability. This means that your entire family could be denied to the internet -- and hence to civic participation, health information, education, communications, and their means of earning a living -- if one member is accused of copyright infringement, without access to a trial or counsel.

* That the whole world must adopt US-style "notice-and-takedown" rules that require ISPs to remove any material that is accused -- again, without evidence or trial -- of infringing copyright. This has proved a disaster in the US and other countries, where it provides an easy means of censoring material, just by accusing it of infringing copyright.

* Mandatory prohibitions on breaking DRM, even if doing so for a lawful purpose (e.g., to make a work available to disabled people; for archival preservation; because you own the copyrighted work that is locked up with DRM)

Since the Obama Administration is making such a big deal about network neutrality, I can't imagine that many of these provisions make it into anything remotely ratifiable, but I suppose the entertainment industry could yank Obama's chain hard enough to make him do something here.

I have no idea how to rework copyright to make it viable in the internet age. Obviously, something profound is going to have to happen. Fair use changes a lot in a hyperlinked world, and it is simply impossible to enforce copy protection long term. Content providers can derive some amount of value from convenient and reliable delivery services. (Oh, wait! No they can't--not with network neutrality in place.) And there is some market value associated with producing "free" content and getting people to through money into the hat. But I doubt sincerely that there would be enough money in it to produce a blockbuster movie.

Frankly, I'm not sure that we don't already have approximately the right system. Content providers lose a fair amount of money, but they can prop up their prices somewhat through scorched-earth enforcement actions. Their deterrent allow them to inflate their prices somewhat, while the threat of mass rebellion if they get too obstreperous prevents them from getting, well, too obstreperous.

This seems like one of those policy questions where the answer is going to self-organize from the bottom up. The less top-down government policy, the more likely that somebody will come up with the right business model.

A Hard Right to the Middle

2009-11-02T16:52:00.003-05:00

I've been watching the NY 23 House race with a certain degree of sadness. I would certainly have to agree that Scozzafava deserved the RINO label more than most Republicans do. Owens seems to be a run-of-the mill moderate Democrat. If I had to vote in that election, I wouldn't be overjoyed with either of them, but I would have wound up deciding on the issues, not on their party affiliations.

Enter Hoffmann, who appears to be pretty much a down-the-line conservative. Nothing particularly wrong with that, and he has had the luxury of only having to espouse a conservative orthodoxy without doing extreme religious pandering to get to where he is today, which appears to be somewhat ahead of Owens. So, could be worse.

But there is something very, very wrong here, and it has to do with that conservative orthodoxy. We have Ross Douthat cheering Hoffmann as an entrant:

Hoffmann has irritated liberals. Scozzafava was their kind of Republican, and by derailing her candidacy — which she suspended over the weekend after polls showed her slipping to third place — he’s turned a sleepy contest between two left-of-center politicians into an ideologically-charged election.

But both men [Hoffmann and the NJ independent candidate for governor Chris Daggett] deserve the public’s gratitude. They’ve injected real substance into their races, and they’ve given voters a much more interesting choice than they would have otherwise enjoyed.

Interesting? Of course. And Douthat is of course a newspaper columnist--interesting sells copy. But choice? And substance? No way. Hoffmann's ascendancy turns the race into a cartoon. Scozzafava and Owens were pretty close to each other, so they presumably would have to have debated real issues. But with Hoffmann, there's no need to debate any more. Hoffmann is a "conservative," so a big chunk of the electorate either loves or loathes the label and is relieved of thinking any more.

This is the problem with these bi-polar orthodoxies; they're so entrenched that debating the issues is worthless, since they've been carefully engineered to agree on nothing. When you hate everything about the other guy's position, you're never going to look for areas where compromise is possible or, even better, where you can parlay the agreements into a genuinely new policy position.

The worst thing about Hoffmann has nothing to do with him as a candidate. It's that, in a close race where two relative moderates had to convince voters that they were subtly better that each other, we're now left with the usual vacuum in the center, where the bulk of the electorate can only choose which ideology they find slightly less offensive.

Afghanistan

2009-10-30T10:33:00.004-04:00

If Iraq is the war that we probably shouldn't have started but had to win, Afghanistan is the war that we had to start but may not have to win.

Iraq is the most strategic location on the planet. It sits atop a lake of oil. Parts of that lake extend into countries less than friendly to the US. All of those countries can be influenced by the US projecting power into Iraq. Iraq's population is well-educated and dynamic, making it an ideal laboratory for experimenting with ways of liberalizing tribal autocracies. Finally, Iraq is the crossroads of the Middle East. If you control Iraq, you are the final arbiter of what nations get to project power where.

Afghanistan, as I have said before, is a pile of rocks. It's landlocked, with no natural resources. Its population is tribal and ignorant. It is a crossroads to nowhere. However, there are three strategic advantages to winning the war in Afghanistan:

It will stabilize Pakistan, a large country with nuclear weapons. Stabilization of Pakistan will be a great boon to India, which will almost certainly be the US's principal counterweight to China in South and East Asia.
It will complete the encirclement of Iran, which will act as a deterrent to whatever hegemonic ambitions that cesspool of a government might have.
Last but far from least, a victory in Afghanistan will prove that the US isn't utterly feckless. When we invade somewhere and tell the population that it will be better off because of our invasion, we'd better mean what we say.

Obama made a big deal about Afghanistan. It was as obvious then as it is now that his arguments were utterly craven, made only for political effect, so he could pander to the anti-Iraq crowd while still appearing to be sufficiently tough. Now that he has to govern, he has discovered that his rhetoric has boxed him into a corner.

So he's left with two unpalatable options. He can mumble "never mind" and hope that his credibility isn't permanently damaged. Or he can see the war through to its long, messy conclusion.

Ultimately, though, I think that strategic objective #3 above is the real reason we have to stick this out: We said we would make things better, and the rest of the world has to believe what we say. That means that Obama is going to have to swallow hard and do something contrary to every political instinct the man ever acquired.

Will he do it? David Brooks frames the issue quite well:

I’ve called around to several of the smartest military experts I know to get their views on these controversies. I called retired officers, analysts who have written books about counterinsurgency warfare, people who have spent years in Afghanistan. I tried to get them to talk about the strategic choices facing the president. To my surprise, I found them largely uninterested.
Most of them have no doubt that the president is conducting an intelligent policy review. They have no doubt that he will come up with some plausible troop level.
They are not worried about his policy choices. Their concerns are more fundamental. They are worried about his determination.
These people, who follow the war for a living, who spend their days in military circles both here and in Afghanistan, have no idea if President Obama is committed to this effort. They have no idea if he is willing to stick by his decisions, explain the war to the American people and persevere through good times and bad.
Their first concerns are about Obama the man. They know he is intellectually sophisticated. They know he is capable of processing complicated arguments and weighing nuanced evidence.
But they do not know if he possesses the trait that is more important than intellectual sophistication and, in fact, stands in tension with it. They do not know if he possesses tenacity, the ability to fixate on a simple conviction and grip it, viscerally and unflinchingly, through complexity and confusion. They do not know if he possesses the obstinacy that guided Lincoln and Churchill, and which must guide all war presidents to some degree.

We've heard a lot of discussion about push-button counter-terrorism in Afghanistan, where we stand off and drop Hellfire missiles from Predators. Some of that discussion has centered on the morality of a strategy that will kill more civilians than a counter-insurgency strategy might. That discussion misses the point. If we stand off and leave the Afghan people to the mercy of the Taliban, the number of people killed air strikes will be the least of their worries.

Why the Culture War Matters

2009-10-03T15:22:00.003-04:00

Having just completed a post on how we should remove the culture war from federal discourse, let me now turn around and explain why the culture war is important. Two words:

Indoctrination works.

That Marx fellow (Karl, not Groucho) was on to something when he realized that human beings are perfectable through relentless education and indoctrination. It works. It works really well. More importantly, it works better and better when you can rope more and more people into receiving the indoctrination. In short, it works better at the federal level than it does at the local level.

Liberals recognized this long before conservatives did. Then, after conservatives understood that it worked, they spent years refusing to use the technique at the federal level. It is, after all, the antithesis of the intellectually grounded Hayekian conservatism. But eventually, certain facts became clear.

First, the messages imparted by mass media have substantially overwhelmed any cultural messages that could be instilled by the school or church. In many weaker families, mass media even have more power than parents to shape many aspects of behavior.

Second, the pedagogy and marketing associated with pushing a behavioral change from a small group who wishes to impart the change to the population as a whole is vastly more sophisticated than it used to be. Civil rights, women's rights, gay rights, anti-smoking, domestic violence awareness--these are all examples of societal changes that were first pushed by a skilled, vocal minority to a highly resistant population. But, over time, the campaigns of that minority got traction and ultimately resulted in profound social changes.

The result of the union of pedagogical and media technology has been a profound change in the nature of social consensus itself. Bottom-up change, which used to be the only way to affect the culture, is now vastly out-muscled by top-down change.

The penny dropped on the conservatives back in the late eighties with movements like the Moral Majority. Suddenly, conservatives were using mass-media technology to push what they they thought were desirable behaviors, not just as a way of surfacing issues. Real attempts to stigmatize certain behaviors and promote other ones were now in place. This has only met with limited success. Whether that's because the conservative agenda is inherently less palatable to the public or that it's harder to preserve certain behaviors than it is to instill new ones, I can't tell.

We view these attempts as the beginnings of the culture war, but they're really just the beginning of both sides using the same methods to achieve different ends. As such, the culture war won't end until one side has successfully managed to indoctrinate the society with its agenda. That's not going to happen any time soon. This is one reason why we perceive society as being so polarized right now; when both sides use these top-down tactics simultaneously, the societal fissures are unpredictable.

Another effect of the advent of effective indoctrination technology is that it becomes much more important to silence your opposition. If you can shut off the media or institutional channels through which you opposition gains access to the public, you can kill their ideas. This is why you see conservative groups attempting to discredit liberal educational institutions and why you see organized campaigns to silence conservative dissent on campus. It's all part and parcel of closing down the opposition's access to an easily indoctrinated population.

But this begs a question: How healthy for our society is it to have this kind of top-down social change? It's obviously vastly more effective than the old-timey bottom-up change, but is its effectiveness somehow reducing our ability to respond to new social pressures? As a general rule, bottom-up, self-organizing systems are more robust than top-down systems. Are we running a risk that the wrong top-down messages will organize us in ways that are hard to change?

In the end, we will have to decide whether this kind of discourse is beneficial or not. But, just as it will be necessary to forgo some rhetorical techniques to de-escalate other forms of political stridency, it may be necessary to place limits on when and how we choose to use indoctrination. I have no idea what the right path forward is for this, but it's something were going to have to grapple with in the not-too-distant future.

Toward a Third Orthodoxy

2009-10-03T14:58:00.003-04:00

Eric Scheie asks a perfectly reasonable question:

Has conservatism changed? Is it the kind of change that "change" produced?

I don't have to go along with Obama's form of change, I don't see any reason why I should have to go along with conservatism's form of change. If I don't like left wing Alinskyism, why should I like right wing Alinskyism? If I don't like left wing ends-justify-the-means, by-any-means-necessary dishonesty, why should I like right wing ends-justify-the-means, by-any-means-necessary dishonesty? If I don't like left wing identity politics, why should I like right wing identity politics?

Yes, this is getting repetitive. Change is tedious.

I should try harder to ignore it in the hope that it goes away.

Answer: it's not going to go away.

I've recently realized something about my self-selection hypothesis. It's true that you can get lots of little orthodoxies, but the real problem is that the big orthodoxies suck the air out of the conversation until there are only two of them left. They are, of course, the populist knee-jerk right and the populist knee-jerk left.

This is a paradoxical result, because it's still true that a plurality of us are somewhere in the middle. The problem is that, because we're centrists, we don't have an orthodoxy of our own. No orthodoxy, no air time. No air time, no way to break into the debate in a meaningful way.

The good news is that we still vote, and we are ultimately the arbiters of who gets to run the country. The bad news is that we're always forced to vote for some yahoo that has properly espoused one or the other of the knee-jerk orthodoxies. This causes highly undesirable system dynamics, where the plural center is constantly over-correcting between the left-wing idiots and the right-wing ones.

The only solution to this is a third orthodoxy, but that will be hard to achieve with people who like to make up their own minds. Cockeyed optimist that I am however, I would offer up the following platform:

Smallish government, with more, not less, local control.
Rabidly secular. Not anti-religious, just willing to check our moral stances at the door.
Internationalist but not pacifist.
Willing to be diligent about promoting moderate candidates for public office.

This is a coalition that I think a lot of people could get behind. But they've got to be willing to take all that nasty culture war crap off the table. I'm not suggesting that people shouldn't care about that. I am suggesting that it's not a fit topic for national politics. If you don't like what's happening to your state, your town, your neighborhood, go find a candidate at that level who agrees with you and support him. Just keep it away from the federal level.

Net Neutrality Explained--Again! Differently!

2009-09-24T19:49:00.010-04:00

In the wake of FCC Chairman Genachowski’s speech, there’s been a lively network neutrality discussion going on over at Obsidian Wings, here, here, and (though I didn’t comment on these) here and here and here.

I’m still very concerned that the technical issues associated with network neutrality are still falling through the cracks. Since there appears to be a limit on how big a comment you can post over at OW, I thought I’d spend some time and describe some of the issues.

The net neutrality debate of course dates back quite a while. A good summary can be had by looking at the Wu and Lessig brief to the FCC from 2003. To boil this all down, and to describe what the FCC is worried about, there seem to be three major bones of contention:

That network management policies be open, so that the public can understand how traffic is being managed by any particular ISP. This is a pretty simple transparency issue.

That access to an ISP’s network be available to all content providers, so that the ISP can’t favor, for example, its own content over the content of one of its competitors, or so that small providers have equal access to big providers. Let’s call this location neutrality.

Finally, that ISPs practice application neutrality as well as location neutrality. The idea here is to guarantee that the internet is available as a public utility, with access guaranteed for any application--and protocol--that comes along.

Item #1 is just motherhood and apple pie, mod obfuscating enough information that an attacker can't exploit it. Transparency is good.

Item #2 was stimulated by perfectly reasonable public policy concerns. We don’t want the big providers to get bigger at the expense of the little guys, and we don’t want giant media conglomerates using their vertical content and media integration as a weapon against more horizontal competitors. All great.

At first blush, item #3 seems to make lots of sense. We want the internet to be available to the next clever fellow who invents the next killer app, right? He should be able to count on well-defined access the underlying network infrastructure, right? Wu and Lessig use the analogy of the power grid to make this point. An electronics manufacturer can count on the power grid to deliver 110V, 60 Hz current anywhere in the US. Why shouldn’t the internet provide the same platform for producers of network applications?

Well, there’s a problem. In fact, I can think of two problems, one pretty simple and the other definitely not-so-simple.

The first problem is that, while we think of our ISPs providing us internet service, what they mostly provide is web service. In 2007, HTTP traffic comprised 46% of all web traffic. Back in the late 90’s that number was probably closer to 85%.

But in between, a little thing called peer-to-peer (P2P) file sharing came along, with BitTorrent being the killer app.

The vast majority of ISP subscribers use the web for pretty much everything, so ISPs optimized their traffic engineering for web applications. Web access is very simple, but it’s highly asymmetric: You make a small request and you get back a large amount of data. ISPs therefore heavily biased their network traffic toward downloading data from the core network, rather than uploading data to it. I’m currently on Time Warner Roadrunner, and my download speed is 15 Mbps, but my upload speed is only 1 Mbps.

But a relatively small number of users use the internet for P2P file sharing. That application is so bandwidth-intensive that in 2007 it accounted for 37% of all traffic.

Access ISPs hate BitTorrent. BitTorrent uploads and downloads nearly symmetrically, and it uploads and downloads a lot. If you’re on a DOCSIS cable system for internet and you have a P2P aficionado in your neighborhood, there’s a pretty good chance that he’s consuming a sizable chunk of the upload bandwidth available.

ISPs attempted to solve this problem by throttling BitTorrent. All they have to do is drop the occasional packet, or even de-prioritize the traffic at the router, and BitTorrent uploads and downloads slow to a crawl. Torrent-heads responded by encrypting their BitTorrent flows, so it was harder to do packet inspection to discover which flows were true P2P traffic.

And then Comcast decided to send TCP reset messages to BitTorrent flows, causing them to abort. And, as if this weren’t guaranteed to cause unbridled rage, they then denied they were doing it. Until they got caught, of course.

BitTorrent is, of course, a fine poster child for application neutrality. If the FCC were to adopt an app neutrality policy, ISPs would no longer be able to throttle BitTorrent. They would probably have to respond by changing the download/upload bandwidth mix, which would require deploying a lot more network equipment and forcing the price of broadband up. Maybe that wouldn’t be so bad. I wouldn’t be happy about this, but it wouldn’t destroy the internet or stifle innovation or any of those things that anti-net neutrality folks get the vapors about.

But the second problem will do those things. The poster child application for this problem is voice and video over the internet (VVoIP), but the problem really applies to any communication application that needs to have real time communication flows. We’re about to go down the rabbit hole here, folks. Any of you who faint at the sight of internet acronyms should leave the room now.

So far, we’ve talked about the web and P2P apps, both of which use the internet’s Transmission Control Protocol (TCP). TCP was invented back in the late 1970’s and has been the dominant internet transport ever since. It provides an end-to-end reliable byte stream between two applications. To do so, it takes messages handed to it by an application and chops them up into Internet protocol (IP) packets, encapsulating each one with some information so that the packets can be re-assembled by the receiver application. If packets get dropped, or duplicated, or arrive out of order, the TCP information is sufficient to put everything back together or, if necessary, request that the sender re-send some of the packets.

TCP accomplishes its reliable transfer with two additional, highly important properties. One is flow control: this simply means that, if the receiver runs out of memory into which to receive the byte stream, it has a way to tell the sender to stop sending until memory becomes available. The other property is called congestion control. These two properties, or more precisely the lack of them in other transport protocols, are going to be a problem for application neutrality.

Everybody knows that the internet is built out of routers, which are pretty easy to understand at a basic level. A router receives IP packets (not messages) from one or more network interfaces, stores them into memory, then forwards them as fast is it can out some other set of network interfaces. There can be more input interfaces than output interfaces, or the inputs can be faster than the outputs. When this happens, packets build up in memory until the router runs out of space. Unlike TCP, the IP packets that the router deals with don’t have flow control, so the router can only drop them on their little pointed packet heads, and the receiver has to do decide what to do about the missing data.

When TCP packets get dropped, one of the most common behaviors is for the receiver merely to refuse to send an acknowledgment (ACK) packet back to the sender. After a while, the sender decides to re-transmit its currently unacknowledged packets. But now imagine that a router gets congested, so that a whole bunch of TCP connections lose some packets simultaneously. Odds are, all of the TCP senders will re-send data at the same time, making the router even more congested. If they keep doing this, the router undergoes what we somewhat euphemistically call “congestive collapse.” You’d probably say that the internet gets broken real bad.

To avoid this problem, TCP has a congestion avoidance algorithm called “slow start.” I’m not going to go into this in great detail (you can look it up), but it works something like this: When TCP starts sending data, it will only send one or two packets at a time without waiting for an ACK packet. If it gets and ACK and it has more stuff to send, it then doubles the number of packets it’s willing to send without an ACK, and so on, up to some fairly large number of packets that it’s willing to send. But if it loses even a single ACK, it infers that it’s encountered congestion and drops all the way back to sending one or two packets at a time, and gradually works its way back up, but only to some average value where it knows that it’s likely to start losing ACKS. As a result, TCP senders send a lot less data to congested routers until the congestion condition clears for some reason.

It’s pretty simple, and it works surprisingly well. It works so well that ISPs often implement a separate algorithm on their routers called “random early drop” (RED). RED is designed to smooth the congestion condition so that not all TCP streams drop into slow start at the same time, which is very inefficient, and is vulnerable to something called tail-drop synchronization, which, suffice it to say, is yet another way that a bunch of TCP senders can unintentionally gang up on a poor defenseless router and send it off to gibber in the corner.

This is why, when your neighbor is uploading porn via BitTorrent, you’re only muttering under your breath about how slow the network is, as opposed to calling your ISP and telling them that it’s broken. BitTorrent uses TCP and therefore obeys slow start, which keeps the router network only very close to being overloaded, instead of being actually overloaded.

Note that this also works perfectly well when you're watching video on YouTube or Hulu. In this case, the video is being sent from a server that reads it off of the disk and sends it over HTTP (which uses TCP). The receiver receives the stream of bytes that make of the video, decodes them, then renders them on your screen and speakers.

But there’s a wrinkle. Imagine that, on the first packet received by your browser, it started playing the video. As long as the video stream continued to be received at exactly the right rate, each new video frame and audio sample would arrive just in time to be rendered, and you’d see perfect video and hear perfect audio. Maybe the sender can send the video faster than the receiver can play it. That’s no problem; eventually the receiver will run out of memory to store the byte stream, and TCP flow control will kick in.

But now imagine that the sender is sending at exactly the right rate, with many packets between each ACK, and your video stream suddenly gets subjected to TCP slow start because an ACK gets lost. Suddenly, instead of sending one packet right after another, the sender has to wait until it receives an ACK for only one or two packets, which will at least cause “jitter”, or an irregularity in the spacing of the received TCP packets. If there’s enough jitter, the receiver will run dry: the next video or audio frame won’t be available when it needs to be rendered. Your video will freeze, or your audio will sound like it’s coming from the bottom of the sea, or through a fan.

Fortunately, this streaming video is stored on disk--it's not occurring in real time. So all the receiver has to do to avoid this problem most of the time is to wait a couple of seconds before playing the video out. Then, if there’s jitter, the data that’s already in the buffer will tide the player over until more data is received.

But what if there is no disk? What if the source of the video and audio is another human being? Two additional constraints now apply:

The sender can’t ever send the stream faster than real time to make up for past or future jitter, and

The receiver can’t wait to render the video or audio. If it does, the two humans can’t have a conversation. Research shows that human conversation starts to suffer (people tend to try to talk at the same time a lot) when the delay from the time that sound leaves a person’s lips to when it reaches the other person’s ears is more than about 150 milliseconds.

Now jitter becomes the dominant constraint on the quality of the real time application. If you transport the voice and video over TCP, it can induce fairly large amounts of jitter, sometimes more than a second’s worth, which translates into more than a second that the receiver has to delay.

Since TCP is largely unsuitable, the IETF, those fine folks that recommend protocols for the internet, invented something called the Real Time Protocol (RTP). RTP is quite different from TCP. It’s designed to get media from the sender to the receiver as fast as possible, with enough information added so that the receiver can decide if any data is missing, and so it can reconstruct the timing of the stream, playing it out at exactly the same rate at which it was captured by the sender. But this real-time behavior comes at a cost: RTP can't re-send dropped data, and it has neither flow control nor congestion control.

At the router level, RTP packets are just like TCP packets: They arrive, they get stored, and they get sent. And, just like TCP packets, they’ll get dropped if the router is congested.

Dropping a whole bunch of RTP packets in a row is bad. The receiver is capable of losing a packet here and there and hiding the fact from the user. But if you lose a lot of packets, at some point the user sees the video break up or the audio start to drop out, or echo, or sound like something out of a satanic ritual.

Even if the router doesn’t drop RTP packets, they still have to wait their turn to get sent. When your aforementioned neighbor has decided to download or upload porn, there may be hundreds of his TCP porn packets to each one of your voice and video packets. When the RTP packets get delayed behind other traffic, that can cause jitter. This makes the receiver have to buffer more data before it can start to play out, which translates to delay, which translates to reduced quality.

The other extreme is bad, too. Since RTP doesn't have any congestion control, if too many people fire off real time applications at the same time, the router is going to get swamped, and there's no way for it to tell RTP senders to shut up. Instead, the network has to perform some kind of admission control before the RTP application starts up. This is a kind of "mother may I?" step, where some service owned by the ISP does some accounting (very, very complicated accounting, it turns out) and decides whether your video will be the straw that breaks the camel's back.

(At this point, some of you are no doubt yelling at your screen, "There ain't no stinkin' admission control when I use Skype, man! You're crazy! Well, both of those statements may be true, but the reason that there's no admission control in the public net is that nobody is currently running very much high-def live video in the public net. These admission control schemes are used all over enterprise networks and are a key component of any modern VoIP enterprise PBX. When the public net grows enough video--or other type of real time application, the ISPs will have to do this.)

Once we have admission control, we still have to have some way to to let RTP packets be less likely to get dropped and to “jump the line” when the queue for the packets to be sent is too long. There are many ways to accomplish this, but the most popular is to mark the RTP packets with something that the router can recognize in the incoming IP packet. This marking is placed in a IP field called the “differentiated services code point” (DSCP). The best way to the think of DSCP is that it’s a priority that goes with the packet.

Routers don’t have to obey the DSCP markings on packets, but they can if they wish to provide differentiated quality of service (QoS). But there’s yet another problem here.

Imagine that I’m an ISP and I announce to all my customers and to the various content providers, “I’m going to support DSCP on my routers.” What is the likely response? It’s usually something like, “Yippee! DSCP! If I mark my packets with high-priority DSCP, my application will get better service!” You get a form of DSCP inflation, where the markings mean less and less, because there’s no marginal cost attached to using them. Pretty soon, the applications that really need differentiated QoS are crowded out by the ones that don’t really need it but decide to use it to give themselves an edge.

ISPs can solve this problem by charging for QoS, or they can find a way to enforce admission control. They may charge their customers for a premium plan, just like they charge for faster modem speeds today. Or they may charge by the amount of DSCP-marked data that gets sent or delivered.

However the ISP does it, you’ll now understand that the terms, “differentiated QoS” and “application neutrality” are not the best of friends. And yet the fact remains: real time applications will simply stop working without DSCP if the network becomes congested.

If application neutrality becomes an FCC-mandated regulation, there is simply no way to provide the real time services that are one of the major sources of innovation on the internet today. Note that VoIP works today because its bit rate is quite low, but even today you can wind up with significant delay. Live video is in its infancy and I fear that it won’t live to childhood if app neutrality is required. Beyond that, there are lots of real time applications that could grow to be significant. There’s obviously real time gaming, which is already taking off, albeit without tight real time constraints yet. How about tele-operation of industrial robots? Or surgical robots in underdeveloped regions where it’s hard to get a top-notch surgeon to visit? How about a service where somebody else drives your car for you, or merely prevents you from crashing? All of these applications, plus many more that nobody’s thought of, will be jeopardy.

So what are the consequences of forgoing mandated app neutrality? Well, the big one is that application developers have to think about how the internet works before they engineer something new. Is this really so bad? Don’t engineers do that already?

Of course they do. If they don’t, two things happen. First, their application may not work. But even if it does work, it may be a sufficiently bad citizen that ISPs hate it. (Cf. BitTorrent above.) Even worse, users that don't use it but are affected by it may hate it. Unless it’s really, really useful, it’s unlikely to gain any traction.

On the other hand, sometimes a useful application comes along that requires new features in the internet, like the real time apps I've been t talking about. Those new features aren’t free, but ISPs will implement them if there’s a business case for them. That can’t happen if application neutrality forbids the ISP from innovating features that have to be constrained to a particular class of traffic. Each new class of traffic comes with its own engineering requirements. The ISP has to be free to implement those requirements and choose a business model that makes it worthwhile.

Update 9/24/09 11:07 PM: Fixed some typos and broken links.

Update 10/7/09 5:23 PM: Yet another net neutrality thread here.

Yipeee! I've Been Discredited!

2009-09-23T12:33:00.003-04:00

I kinda geeked out on a net neutrality policy debate over on Obsidian Wings and I actually got somebody to quote this humble blog in order to discredit me. They used this post, which of course has nothing to do with network neutrality but which did contain some mildly out-of-context red meat through which I could be scorned.

I'm sure that my traffic stats (if I were measuring them) have gone up by a factor of a hundred. I'm so proud!

An Arms-Control Treaty For Political Discourse

2009-09-16T16:28:00.004-04:00

All the breast-beating about Joe Wilson at Obama's address and Serena Williams at the US Open and Kanye West at the VMAs has predictably been bemoaning how much the fabric of civility in the US has frayed. All true, but not very useful.

The fact is that incivility works. It gets your point distinguished and remembered much more than civil discourse does. The sad fact is that Joe Wilson's little outburst caused language to be inserted into the various health care bills that he couldn't have gotten in in his wildest dreams, had he not heckled the President of the United States with, "You lie!"

It occurred to me that this tsunami of incivility is a lot like a military arms race. Nations build more and better weapons for two reasons. They either hope to get a decisive advantage over their opponent, to cause the opponent to concede something, or they hope to maintain parity with an opponent, deterring him from action.

Arms races can only end in one of three ways:

One side can achieve dominance and bend the other side to its wishes.

A war finally breaks out, at great cost to both sides. Whether or not the war has a winner will vary from case to case.

Both sides can agree to de-escalate, usually through some sort of a treaty.

Seems to me that exactly the same three outcomes are possible in our political discourse. Either the right or the left might ultimately prevail, possibly in part from their ideas but more likely in large degree because they were more willing or more able to be more vicious and underhanded than their opponent. Or maybe things will continue to get worse to the point where our democracy simply stops functioning and we collapse into something a lot like real warfare. Whether either side wins such a war is secondary to the fact that the US won't be a very good place to live for a long time after such a collapse.

Or, we find a way to de-escalate. We come to some social consensus that declares that use of the worst verbal weapons, while they may produce some short-term advantage, will ultimately so damage both sides that their use simply can't be tolerated.

Negotiating such a social consensus is hard. Both sides have to agree to give up genuinely useful rhetorical tools. But arms-control treaties are hard, too, and yet they occasionally work.

I have no idea how one would begin such a negotiation. An obvious problem is that there isn't exactly a "leader of the right" and a "leader of the left" to participate in the negotiations and, even if there were, I'm not sure they could cat-herd their various constituencies into abiding by the agreement. At the very least, there'd be a huge amount of finger-pointing over various violations. But I have to say that the finger-pointing would be vastly preferable to the overflowing sewer that we have today.

This is probably an unworkable utopian idea. If anybody has any thoughts, let me know.

Read This Article

2009-09-14T15:06:00.003-04:00

This month's Atlantic runs a piece by David Goldhill entitled, somewhat misleadingly, How American Health Care Killed My Father. It has very little to do with the author's father and everything to do with providing a lucid explanation of why insurance isn't health care, why the patient isn't the customer, and how to phase in a system that returns insurance to being insurance.

Goldhill's recommendations are very similar to mine here, but he's done a much better job researching the problem than I ever could.

Why I Don't Support the Public Option

2009-09-11T10:52:00.002-04:00

Posted this as a comment over at Cosmic Variance today:

I guess before beginning this little screed that I ought to go on record as opposing the public option but supporting guaranteed enrollment (the no pre-existing conditions stuff) and I’m on the fence but leaning toward supporting mandatory coverage. All of this being conditioned on finding some reasonable way to pay for it. (Hint: that’s not “waste, fraud, and abuse.”)

If you guys really want to have a reasoned debate about the public option–or about anything else involving health insurance–it might be a good idea to remember how insurance companies make their money.

At the risk of ridiculously oversimplifying, what you (and, if you’re lucky, your employer) pay in yearly premiums is the insurance company’s actuarial estimate of how much people pretty much like you will consume in health services, plus some amount of profit. Since some people like you will have bad luck and incur huge medical bills this year, while most people like you will only consume a nominal amount of routine health care, the insurance company has a nice actuarial model that integrates across everybody’s expected costs and divides by the number of subscribers. Voila! A premium. Pretty simple, right?

Well, there are two terms that ought to be examined a bit more closely: “profit” and “people pretty much like you.”

Profit first: I pulled United Healthcare’s financials for 2008. They had a gross margin of 23% and a net margin of 4%. For comparison, let’s look at another evil industry: Exxon Mobil had a gross margin of 54% and net margin of 9%. Now, a couple of (currently) non-evil industries: Cisco had a gross margin of 65% and a net margin of 21%. Kroger (the supermarket chain) had a gross margin of 23% and a net margin of 2%. (I’d do more health insurance companies, but I’m lazy. When I did this little exercise before, they were all within shouting distance of one another.)

Health insurance is not an incredibly profitable business. In fact, it kinda sucks. To be sure, UNH’s stock (until recently) was skyrocketing. But that’s because their revenues were skyrocketing, which occurred because the underlying health services that they insure were going up so fast.

So, we now come to the the right’s principal non-hysterical objection to the public option, once you scrape away all the death panels and illegal aliens and socialized medicine buzzwords: They worry that a publicly offered insurance plan will so erode the margins of the private health care insurance companies that nobody will invest in them, which further erodes their margins, until they finally exit the business. As the supply of private insurance dries up, more and more people get driven into public insurance and you eventually wind up with only the 500 pound government gorilla in the room.

I’ve hopefully demonstrated that, just from a statement of income perspective, this is not an unreasonable fear. You could mitigate this fear with all kinds of restrictions on the charter for public insurance, but you’ll have a hard time convincing the right (and me, for that matter) that those restrictions can keep the camel’s nose from snuffling near the bottom of the tent flap.

But private health insurance ought to be able to be much more agile than the public plan, right? They ought to be more creative in structuring policies and taking advantage of specific market conditions, shouldn’t they?

Well, that’s where we come to the “people pretty much like you” part of the equation. Insurance companies compete with each other by offering lots of different plans, with different coverages, different deductibles, different copays, different lifetime caps, all at various different price points for their premiums. But notice that when we say, “people like you,” we really mean “people willing to pay the same premiums, assume the same risk, and running the same statistically proscribed chance of consuming health care as you.” In short, insurance companies create risk pools and offer good rates to pools that are unlikely to consume as many services as the risk pools that are likely to consume more services. The unflattering term for this is “cherry-picking” but it makes a huge amount of sense, both for the company and for the consumers that can be cherry-picked.

It does not make a lot of sense from a public policy standpoint, which has a different goal: Since we as a society have decided that sick people get treated, one way or another, it follows that we are de facto sharing risk across our entire society, and we might as well share it de jure as well. So, there’s moderately broad support for “guaranteed enrollment,” which is just a fancy way of saying, “no more cherry picking!”

So now we’ve removed the most powerful tool that an insurance company has to differentiate its products from others’. No more fancy actuarial cleverness allowed. Now you can only compete by packaging different services at different levels of deductibility and lifetime caps.

Oh, wait! Didn’t I just hear the prez say, “no more lifetime caps”? And “you’ll get all your preventative care covered, no matter what”? So, even more constraints, this time on the services offered.

In short, everybody wants to completely commoditize health insurance. That’s probably a good idea. But note that a commoditized plan will be a lot more expensive if you happen (as most of us are) to be in the ranks of the “cherry-picked”. I’m in moderately good health, for a middle-aged guy. Right now, I’m not sharing risk with the guy I know who’s 48, has already had a triple-bypass and two subsequent angioplasties, and still smokes and does the occasional line of cocaine. But with guaranteed enrollment and mandates on covered procedures, I will be. Think I’ll get as good a rate as I do now?

So, commoditized market, with a major player who doesn’t have to turn a profit and is guaranteed to get bailed out when they screw the pooch, because they are literally too big to fail. I’d say that the fear that private insurers will get crowded out is rational.

And all of the other fears flow from that. Health insurance companies are also the collective bargaining agents for their subscribers. (This is insane, but this post is already way too long…) As long as there are many of them, providers have choices about where they sell their services and nifty new gadgets and life-extending drugs. But with only one buyer, that buyer sets the price, and the seller either agrees to it, or he leaves the business.

If that single buyer (”single payer” is really kind of a tiny fig leaf, isn’t it?) always sets the prices just high enough to attract investment dollars to provide every service needed, there’s no problem. But, with no market to discover what that price should be, that’s highly unlikely, isn’t it? So, some services go under-invested. We now have shortages for some services. And, since we have no market to allocate those services, we have to allocate them via the explicit decisions of the (single) insurance provider. We call this “rationing” when we’re being honest, and the demagogues call it “death panels” or something equally inflammatory when they’re trying to whip people into a frenzy.

Personally, I like the idea that I can always pay for some service if it’s not covered but will save/improve my life. I like the idea of medical progress, even when some new treatment is too expensive to be covered by insurance and therefore available to only a few, because next year it will be cheaper and available to more people. But those new treatments/drugs/gadgets will only be provided when there are enough individual buyers to make a profitable market.

Finally, on a slightly different topic: You may disagree with my (incredibly lengthy) arguments above. You may honestly think that a single payer system is the only just solution to the problem. You might even be right; who knows? We should have that debate.

But you are a fool if the only debating tactic you can come up with is to question my motives, just as you are a fool if you question the motives of huge number of people that oppose the public option. I am not a shill for big pharma and the insurance companies. I just want to be very, very cautious about how we proceed here, because the chances of falling into a hole that will be impossible to climb out of are pretty high. I want to be (gasp!) conservative about how we proceed.

There are certainly people out there with less-than-pure motives. But please, for the sake of the rest of us who are simply trying to find a solution that will not only improve most people’s lives right now but continue to improve those of our children and our children’s children, assume that we’re not shills, idiots, or dupes. When you frame the debate like that (as Daniel did above, I’m sorry to say), the only weapon we have left is demagoguery, which is how things got as screwed up as they are now.

The Economics of Green Jobs

2009-09-06T13:54:00.002-04:00

Here's a question: We keep getting told how many jobs are going to be created through green technology, and how wonderful it will be for the US economically. But all of those jobs are going to get factored into our overall energy costs, right? So, if lots more people are going to be employed making green energy than all those nasty fossil fuel producers (who will surely lose their jobs, due to the fact that they are fundamentally evil), doesn't that mean that the cost of energy has to go way, way up? And if energy costs go way up, doesn't that imply that US GDP goes down, or at least flattens out a lot? And doesn't that really mean that cutting over to green energy is more-or-less a zero-sum game?

What Can You Say to a Creationist?

2009-09-04T16:58:00.004-04:00

Numerous comments about Sean Carroll's decision to sever his association with bloggingheads.tv, over their posting of a couple of diavlogs in which creationists and intelligent design proponents were invited to participate.

Here are some of Carroll's objections:

...It’s too easy to guess at what someone else is thinking, then argue against that, rather than work to understand where they are coming from. I tried to lay out my own thinking in the Grid of Disputation post. Namely: if BH.tv has something unique and special going for it, it’s the idea that it’s not just a shouting match, or mindless entertainment. It’s a place we can go to hear people with very different perspectives talk about issues about which they may strongly disagree, but with a presumption that both people are worth listening to. If the issue at hand is one with which I’m sufficiently familiar, I can judge for myself whether I think the speakers are respectable; but if it’s not, I have to go by my experience with other dialogues on the site.

What I objected to about the creationists was that they were not worthy opponents with whom I disagree; they’re just crackpots. Go to a biology conference, read a biology journal, spend time in a biology department; nobody is arguing about the possibility that an ill-specified supernatural “designer” is interfering at whim with the course of evolution. It’s not a serious idea. It may be out there in the public sphere as an idea that garners attention — but, as we all know, that holds true for all sorts of non-serious ideas. If I’m going to spend an hour of my life listening to two people have a discussion with each other, I want some confidence that they’re both serious people. Likewise, if I’m going to spend my own time and lend my own credibility to such an enterprise, I want to believe that serious discussions between respectable interlocutors are what the site is all about.

Some time back I was surprised to discover that I am a rabid anti-creationist. I had a discussion with my brother-in-law about the "teach the controversy" doctrine and wound up foaming at the mouth, more than a little bit. This seems to be one of those things where I would think that I'd be fairly tolerant of harmless error, but I really don't think that it is harmless. Creationism actively encourages kids to think unscientifically, which will turn them away from scientific or technical careers. It contributes to bad public policy (cf. stem cell research bans). And, by being so relentlessly political, it corrodes the foundations of secular government.

So I am somewhat sympathetic to Carroll's distaste at being associated with a site that has any tolerance for airing these kinds of ideas. Best not to give them any oxygen, right? By engaging them or debating them, you only legitimize their ideas, no?

The problem with this line of reasoning is that creationism is already legitimate. Take a look at this incredibly distressing poll from a few years ago. When you have roughly half of the country, in all demographics and age groups, believing that "God created man in his present form," the legitimacy cat is out of the bag and has been drinking from your toilet for some time.

Now, it is almost useless to debate creationism with creationists. You're not going to change their minds, and it's unlikely that pure reason will change the minds of the creationism-believing chunks of the viewing audience. Per Shaw, "never wrestle with a pig. You both get dirty, and the pig likes it."

If you can't debate 'em, what's a scientific body to do? The answer, I think, has a lot more to do with talking points than it does with winning debates. To discredit creationism, you need to get the media to pay attention. The media only pay attention to things that are so artfully crafted that people enjoy watching them enough to watch commercials at the same time. That's a job for PR folks, not scientists, not even debaters. But the scientists have to show up, or all the pretty words that the PR folks provide them will come to naught.

And that's the problem with the Carroll approach: it fails to appreciate that creationism is not a scientific issue but rather a political one. And debate and reason have a fairly small place in the toolkit required to affect attitudinal change on political topics.

One of the larger chunks of that toolkit is consistent, long-term, willingness to engage on the issue. That means that you have to respect the consequences of your opponents' opinions, even if you don't respect the position itself. You have to show up, over and over and over.

So Carroll's decision to take his bat and go home is an incredibly bad one. He has telegraphed an unwillingness to engage, to say nothing of leaving the impression that the issue is so trivial as to be beneath his notice. That's a big-time win for the creationists, when they can drive a rational human being off of a site that is largely a boon to other rational human beings.

As for BH.tv, here's what they can do to atone: Let's see a discussion, by two reputable evolutionary biologists, on the best way to combat creationism. Those talking points have to come from somewhere, don't they?

Health Care. Insurance.

2009-08-24T11:37:00.004-04:00

Some observations over the debate:

First, there may not be a death panel, but we are going to ration end-of-life care, and maybe even care for the simply very old. We can now extend the life of the very aged by a few years--at enormous cost. The cost of extending a life from, say eighty-five to ninety can often be achieved through the application of millions of dollars. We simply can't afford millions of dollars for every citizen in the last few years of life. Hence, most, if not all, will be denied the opportunity for such life extension.

But we can ration by government fiat or by market forces acting on the ability to pay. Government fiat is no doubt fairer. But such rationing comes at a huge price.

If we ration through the ability to pay, the cost of extending life from eighty-five to ninety may be millions of dollars, but ten years from now, the cost for extending from eighty-five to ninety may only be hundreds of thousands of dollars. Meanwhile, the cost of extending from ninety to ninety-five may now be millions of dollars--instead of being simply impossible at any price. I would call this "progress" and it's usually considered a good thing.

Such progress is not a feature of a "fair" system. In the fair system, it is simply illegal to extend life from eighty-five to ninety if the cost can't be borne by society as a whole. Therefore, there is no incentive to figure out how to lower the cost, to say nothing of figuring out how to charge millions of dollars for extending life to an even more advanced age.

Next, on the "public option": I have no idea whether a public option will make insurers more efficient, or whether it will drive them out of business. And I daresay nobody else has any idea either. The dynamics of this sort of change are so non-linear, so chaotic, that anybody who says they have a predictive model for this is lying to you, if not lying to themselves. A public option may be needed, but it is the very last thing that we should try as a cost control measure.

There are plenty of things with much more tractable dynamics that we should try before anything as drastic as a public option:

Guaranteed coverage. Back in the 70's, we made red-lining poor neighborhoods for property insurance illegal. Prohibiting insurers from cherry-picking customers has a huge public benefit, in addition to forcing the insurers to look for more direct ways of containing costs. Note, however, that the direct effect of requiring all insurers to accept all customers will be an increase in the average policy premium, at least for a while.
Tort reform. Malpractice insurance accounts directly for only about .5% of total medical expenditures. However, there is very little data on how much "defensive medicine"--the ordering of excessively cautious tests and procedures to avoid liability--drives up overall medical expenditures. I'll estimate another .5% by rectal extraction. Now, assuming that tort reform could halve the total expenditures, a half percent reduction in total health care costs ain't chicken feed.
Health savings accounts. I'll hold off on this one for a bit--see below.
Interstate competition. There are hundreds of insurers throughout the US, but many fewer insurers than that available to a resident of any given state. This is because each state regulates its own health care insurance market, and the cost of compliance is quite high. I'm usually an opponent of any form of federalization, but this seems to be a situation where the feds subsuming health care regulation makes a lot of sense. More competition is always good.
Elimination of tax deductibility for employer-provided premiums. This will force employees to be more conscious of what they're consuming, and it's a reasonable fairness issue. It also will raise a lot of money for health care.
Increased subsidies for the poor. I have no problem with the goal of universal coverage. I am also willing to pay more in taxes and premiums to achieve that goal. (Note: the Obama administration doesn't quite consider me one of the those evil rich people, but I'm pretty close.)
Centralized record-keeping and IT reforms. This will probably squeeze a couple of percent out of overall expenditures and has very few privacy issues--assuming that we enact portability and pre-existing condition regulations on the insurers.
Greater autonomy for physician assistants, nurse practitioners, and other medical technicians. Oddly enough, when you de-professionalize services that don't really require a professional, the cost drops precipitously. Hmm--I wonder why the AMA doesn't support this?

But now we come to the crux of the problem. Assuming we enacted all of the reforms listed a above, we are still left with a system of what we all call "health care insurance" but which really is performing three completely separate functions:

It provides insurance for genuinely catastrophic conditions.
It provides clearinghouse and payments-transfer services between the consumer and the actual health care providers.
It acts as a set of bargaining collectives, representing consumers to health care providers and negotiating prices.

Of these, only the first is a function usually associated with insurance. This is an absolutely vital service and will obviously be a major component of any sort of reform. But let's take a look at these other two functions.

I've said this before, but it bears repeating: On average, all Americans consume some nominal amount of health care each year. We usually refer to this as "routine" health care: Well baby exams and vaccinations. Doctor consultation and medication for minor infections and injuries. Physical exams. Obstetrics. Stuff like that.

You'll find that the amount spent on these services varies significantly with income; poor people do without things that they shouldn't do without. But if you subsidized--and educated--the poor for this stuff, the amount of this yearly expense would be fairly constant: the standard deviation from the mean would be small.

In other words, all your insurance company is doing for you for this routine care is transferring your money from point A (you) to several different points B (your doctors and pharmacy), plus they're taking their cut. Consumption of these routine services are not insurable events, since the probability of their occurrence is so high. So the insurance company simply builds these costs directly into their premiums, takes your money, and shells it out, less a little for profit.

This is nuts. First, it's better for you to see these payments and understand what you're spending your money on. By my estimates, more than a third of all health care expenditures fall into this "routine" category. If you don't like the deal you're getting when your kid gets an ear infection, you're likely to go elsewhere the next time.

Second, there are plenty of other ways to pay for this than including it in your premium. The best way seems to be in Health Savings Accounts. Currently, HSAs are awkward, opt-in administrative nightmares. If you instituted a series of reforms, you could make the HSA the primary vehicle for all Americans' routine health care:

Make HSAs an opt-out system.
Make contributions to HSAs tax-free.
Give employers a big tax deduction on direct contributions to their employees' HSAs or for matching funds against their employee's contributions.
Centrally manage HSAs, so that everybody can have an HSA debit card to pay for medical care directly.
HSAs can also become a mechanism by which the poor receive sequestered subsidies for health care. It's easy for the government to dump your health care tax credit directly into your HSA or, in the event of overdraft, provide the funds as needed.

When you couple this with centralized health records initiatives and de-professionalization of routine care, you now have a powerful incentive for individuals to shop for inexpensive, high-quality care. Seems to me that this can probably shrink routine care expenditures by a solid 15%, which in turn lops 5-6% off total health care expenditures.

The second odd feature of US health insurance is its collective bargaining function. Whether you go to a "preferred provider" or are a member of an HMO, your insurance company is negotiating the prices for your health services directly with the providers, rather than putting you in the loop as well. To a large extent, this is not a bad thing. Collective bargaining is generally a good deal for the collective being represented.

But it's no job for an insurance company. First of all, there's zero consumer involvement, so there's no incentive for the consumer to look for alternative ways of receiving the service. Second, binding the negotiated deal to insurance carrier is far from optimal. Networks of patients, cooperatives, and even groups of insurers could get better economies of scale than individual insurers.

The consumer is also likely to be a more agile creator of collective bargaining arrangements than the insurer is. Consumers know what they need. If you're twenty-eight, healthy, and starting a family, you're likely to want a co-op that goes heavy on OBs and pediatricians. If you're fifty-five, you may want a co-op that emphasizes cardiologists and nutritionists. These co-ops are unlikely to appeal to an individual insurer, but both of these groups would be able to attract members from multiple different insurers and provide the economies of scale that would make them attractive sources of patients for the health care providers themselves.

Of course, there are plenty of genuinely insurable events that require catastrophic insurance. Such insurance needs to be a requirement. Such insurance would have a deductible that's high enough that the HSA payments cover the routine stuff, before the insurance kicks in to handle the nasty stuff. Whether you pay for your catastrophic insurance premiums out of your HSA, or your employer pays the premiums, or, if you're poor, the government pays the premiums to the insurer (or is the insurer) is important, but ultimately straightforward. The trick is to separate the routine care from the catastrophic care, so that you get excellent cost-containment for the easy stuff.

Finally, there's one other issue that needs to be addressed in this debate. There is an insidious, unspoken assumption that goes mostly unchallenged: It is that health care is so complex that poor, uneducated people are incapable of making decisions in their own best interest, or in the interest of their children.

Having poor, uneducated people in my immediate family, it's hard to argue that there's an issue here, at one level. But the liberal solution to this problem always turns out to be paternalistic--the government will take care of you, but in return you have to do what it says with regard to how you spend your health care dollars.

It's not that there aren't real problems to be addressed here, but most of them have simple, common-sense solutions that don't require cradle-to-grave interference by the government. Worried that somebody will spend their health care subsidy on booze and cigarettes? Make sure that HSAs can only be spent on medical care. Worried that somebody's kid winds up in the emergency room every time they get an ear infection? Require that the parents take a course on the most cost-effective treatment for a given condition before they can use their HSA funds.

Any policy that is based upon the idea that a section of the citizenry is too ignorant, helpless, and incompetent to make decisions in their own best interest is guaranteed to produce a citizenry that is too ignorant, helpless, and incompetent to make decisions in the own best interest forever. The trick to improving health care in the US is to make individuals responsible for their own well-being. Any system that doesn't start with this as its underlying premise is doomed to failure.

I'm Not Understanding Something

2009-02-17T20:13:00.002-05:00

So, we have the banks sitting on piles and piles of CDOs, because if they sell them, they'll wind up under-capitalized and begin the credit-trap death spiral. But doesn't mark-to-market accounting require them to write down their CDOs' value as soon as anybody sells enough of them to make a market?

Could it be that nobody is selling CDOs? And, if so, doesn't that start to smell a bit of collusion on the banks' part?

Change--Not!

2009-02-06T14:49:00.004-05:00

I've been scrupulously avoiding any discussion of the stimulus bill, but I can no longer contain myself.

Today, in response to still more bad (but completely expected) employment numbers, Obama said:

I am sure that at the other end of Pennsylvania Avenue, members of the Senate are reading these same numbers this morning. I hope they share my sense of urgency and draw the same, unmistakable conclusion: The situation could not be more serious. These numbers demand action. It is inexcusable and irresponsible to get bogged down in distraction and delay while millions of Americans are being put out of work. It is time for Congress to act.

This would be fine if the bill weren't a giant, steaming, Christmas-tree-shaped dog turd. Obama can have a stimulus bill any time he wants, just by including only infrastructure, temporary unemployment relief, and tax cuts. But he apparently doesn't want that. He wants to use the crisis as an opportunity to placate every constituency he owes from the campaign.

This is, of course, nothing new, nor is it particularly surprising. It certainly isn't a new kind of politics, however.

I performed a little exercise on the CBO analysis of the stimulus bill (PDF): I took all the expenditures the listed from the various titles of the bill and marked which ones looked stimulative to me and which ones looked like ornaments on the Christmas tree. My criteria where as follows: For something to be judged "stimulative" it had to either be one of the following:

A genuine infrastructure improvement (roads, bridges, public buildings, electrical grid, or broadband infrastructure).
A tax cut.
Something that sounded reasonable for helping out the unemployed.

Here's what I came up with:

In other words, there's about $250 billion that doesn't look very stimulative to me. A quarter of a trillion dollars.

Let's assume that I've been overly harsh and $100B of that actually is stimulative. That means that we can lop of $150 billion without trying very hard.

I don't care if we add more tax cuts or not. I'll grudgingly accept that we need a whopping big infrastructure spend (even though the evidence for that seems to be somewhat paltry, and this multiplier effect has obvious logical problems). But it's simply not gonna fly for Obama to try and stampede us into wasting hundreds of billions of dollars.

He should be ashamed of himself.

Delaying DTV Is Not All Sweetness and Light

2009-02-05T00:13:00.003-05:00

Want to know what's really going on with the decision to delay the mandated switchover to DTV? Take a look at this, from three weeks ago:

But the transition will also free up huge swaths of spectrum in the 700MHz band currently in use by analog broadcasters, which the Federal Communications Commission auctioned off last year. As FCC commissioner Robert McDowell noted on a panel at the Consumer Electronics Show in Las Vegas this weekend, "there are companies paying hundreds of billion of dollars to use this spectrum, and they expect the goods to be delivered."

One of those companies is Verizon, which ponied up nearly $9.4 billion for spectrum it plans to use for its 4G Long-Term Evolution wireless broadband network. In a letter to top members of the House and Senate commerce committees Monday, Verizon CEO Ivan Seidenberg urged members of Congress to resist any delay of the transition, warning that it could impede the company's plans. "Verizon Wireless intends to begin field testing and deployment of LTE this year," wrote Seidenberg. "Deployment of LTE, however, can only be done if we have access to the 700MHz frequencies. Delaying the DTV transition will delay our ability to upgrade those frequencies to 4G broadband for American consumers and have a negative impact on our nation's international competitiveness."

That viewpoint has put Verizon at odds with AT&T, which has signaled its support for a delay in order to ensure a smooth transition—and, coincidentally, is not planning to use its own winnings from the 700Mhz block for LTE.

It's not clear whether Verizon would really be able to make good on its plans to begin deploying its LTE network by the end of 2009. Most analysts believe that a relatively short postponement, on the order of three months, would have little effect on 4G deployment—provided it did not set the stage for further delays, as Verizon clearly fears it might. Such a delay might also avoid a spate of homeowners sliding off icy rooftops as they struggle to install new antennas.

But a longer, more disruptive delay might provide some breathing room for Verizon competitor Clearwire. That company is seeking to build market share for its own WiMAX network, a joint venture with Sprint, before LTE is ready for prime time. Clearwire has boasted that it remains years ahead of the competition, but while WiMAX networks in Portland and Baltimore are already up and running, scheduled expansions to other cities have been delayed until late 2009, even as Verizon has bumped up its own schedule. The company's stock has now been in free-fall for months, and several major backers recently announced they would take major write-downs on their investments in Clearwire. (The roster of large investors in Clearwire includes Obama-ally Google.) A toxic negative feedback loop in investor confidence could leave it unable to finance its promised buildouts for 2009. With any transition delay certain to push the spectrum handover into the next quarter of the fiscal year, if not further, the attendant uncertainty could also factor into investment decisions as Wall Street—and equipment makers—decide which standard to back.

I just love that new politics, don't you?

Gridlock, Please

2009-01-30T08:26:00.003-05:00

I used to think that a simple split in control between the legislative and executive branches was sufficient for good government. Now I'm wondering if it isn't better to have a split in control between the two legislative houses. The GOP is having lots of fun in opposition and, after all, isn't it the essence of conservatism to say no to almost everything? The inability to get anything but the most obviously good legislation passed seems like a real winner, especially when the Presidency is held by somebody who's competent and confident in his own leadership.

I am genuinely frightened by this stimulus bill. Hopefully it can be delayed long enough for cooler heads to prevail. Hopefully the President is one of those cooler heads.

A (Possibly Rhetorical) Question About Bonuses

2009-01-30T08:16:00.003-05:00

Wapo:

President Obama yesterday scolded Wall Street bankers who received millions of dollars in bonuses last year, calling the payouts "shameful" and chiding the executives for a lack of personal responsibility at a precarious time for the nation's economy.

Now if I were a board of directors hiring a CEO, I'd think that the bonus criteria were spelled out in great detail in the employment contract. Is this the case? And if it is the case, are we really dealing with shamefulness, or are we dealing with equal parts of stupidity and of assumptions from a bygone era (aka six months ago)?

I have to say that the amount of red meat being tossed to the Left by Obama is verging on the excessive. (If we're going to hold Obama responsible for contents of the whimsically named "stimulus package", we're way, way past excessive, but I think this is probably more a rookie cat-herding deficiency than anything else.) Maybe that's just as well. The GOP seems to be remembering how much easier (and more constructive) it is to be an opposition minority. Every time Obama pours some more gasoline on the fire, the more the Republicans find their footing (and an increasingly alarmed fundraising base).

The Audacity of Shooting Your Mouth Off

2009-01-23T01:42:00.003-05:00

Obama has seized on the energy issue--both as a matter of independence and as a climate issue--and has co-opted it. Good for him. But when you step up to such an issue, you assume the risk of being blamed when things go sideways, just as you assume the reward if real progress is made.

So Obama goes and talks about solar, wind, and ethanol very specifically in his inaugural speech but he is silent on nuclear power. Those three are certainly among the most promising technologies. But each has unsolved technological problems that prevent their deployment today.

Solar is too expensive. It can't scale easily to become a significant percentage of load for the grid, both because of an inadequate grid and because its power density sucks. And, finally, it's not suitable for base load until we find a really good way of storing the energy for when the sun isn't shining.

Wind is less expensive and scales better, but it still doesn't scale well enough to take over the needed percentage of power generation, and it suffers from the same base load problem as solar.

Ethanol can be used for base load, but it's ridiculous unless we're talking cellulosic ethanol and that's not really out of the lab yet. Furthermore, scalability is a big issue: What happens to the soil if you're using all your mulch for fuel? How do you transport gigatonnes of biomass to processing facilities?

Now, all of these energy sources are very promising. We should be investing heavily in solving the technical problems associated with them. But what if the technical problems can't be solved? We run across promising technologies like this all the time. (Think nuclear fusion...)

Meanwhile, nuclear power has no technical problems. It's got very high power density. It works with the existing electrical grid. It scales wonderfully. It's not much more expensive than fuel oil-, gas- or coal-fired electricity. It's safe (yes, really). Its waste is easy to dispose of. (There is no waste disposal problem at a technical level. There certainly is a political problem, but there's a political problem with all of this stuff: it's not as cheap as coal, gas, and fuel oil.)

But Obama is avoiding any mention of nuclear power. From his tepid position during the campaign to his thunderous silence in his early days in office, it's clear that Obama doesn't want to talk about nuclear. Maybe he wants to deploy it quietly so as not to enrage the Left, but we can't assume that yet.

Here's the bottom line. Obama has staked a big chunk of his reputation on improving the energy picture. Nuclear has better risk-to-reward characteristics than any of the energy sources that Obama thinks are politically correct. He needs to build out nuclear as a hedge against technological failure. Failure to do so comes with a steep price: If Obama could have fixed the energy problem with nuclear and all the other technologies come up dry, he deserves every bit of blame that we can heap upon him.

There are a few things that the government could do that would dramatically improve the deployability of nuclear power plants. First, the licensing process is intentionally obstructive. It could be streamlined with no detriment to safety.

The government could go a long way towards solving the NIMBY problem (Not In My Back Yard) and its more virulent ideological cousin, BANANA (Build Absolutely Nothing Anywhere, Near Anyone). Community review is all well and good but there's this thing called the common good that eventually needs to trump the delicate sensibilities of every single community everywhere. It's a sad fact that, as an industrial society, we have to have areas that are nasty and, well, industrial. A small risk attends the conduct of industry. The government can codify this risk, plan for it, and legislate when the reward so vastly outweighs the risk that we move forward.

Another major impediment to nuclear power is its insurability. Nuclear power is much safer than most other energy technologies in terms of number of accidents and ill effects caused by pollution. However, a major accident will happen all at once and affect a very large number of people. So on a per-capita, per-time-period basis, nuclear power is riskier than other technologies and therefore more difficult to insure. Government underwriting would dramatically reduce the cost of the technology with virtually no additional taxpayer exposure. (Think about it for a minute: If there's a nuclear disaster in the United States, is there any way that the government doesn't wind up footing the bill anyway?)

Finally, there are research activities that only the government can perform. Lots of nifty next-generation technologies are floating around. (My favorite is the Pebble Bed Modular Reactor, but there are plenty of others.)

Sadly, Obama doesn't seem interested in any of this kind of policy. I think it's incumbent upon us as citizens to make sure that he knows we're watching him on this. He needs to understand the risk he's running and the consequences of an ideological stand on this issue.

It's a Metaphor or Something, Right?

2009-01-22T00:44:00.002-05:00

Former French President Chirac hospitalised after mauling by his clinically depressed poodle. But wait! There's more:

The animal, named Sumo, had become increasingly violent over the past years and was prone to making 'vicious, unprovoked attacks', Chirac's wife Bernadette said...

Mrs Chirac said: 'The dog went for him for no apparent reason."

Now he knows how Bush felt in the runup to the Iraq invasion.

Some Good Advice

2009-01-21T15:41:00.001-05:00

A very fine To-Don't List for Republicans in opposition. Here's hoping that somebody's listening.

The Annotated Speech

2009-01-20T16:17:00.005-05:00

Here's Obama's inaugural speech, with my comments:

My fellow citizens: I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors.
I thank President Bush for his service to our nation as well as the generosity and cooperation he has shown throughout this transition.
Forty-four Americans have now taken the presidential oath.

So what about that oath? Not to the text, exactly. Is that a problem? Does he need to have a do-over? The text in Article II, Section 1, says, "Before he enter on the execution of his office, he shall take the following oath or affirmation:--'I do solemnly swear (or affirm) that I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.' " Roberts botched it. If Obama just says it out loud, correctly, is he empowered to conduct himself as President? What if he doesn't?

The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.
So it has been. So it must be with this generation of Americans.
That we are in the midst of crisis is now well understood. Our nation is at war against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some but also our collective failure to make hard choices and prepare the nation for a new age.

We are clearly in a pretty bad recession. But beyond that, I'm having a bit of trouble deciding just how panic-stricken we all should be. The rest of the world certainly doesn't love us, but they hardly ever do--sometimes they're more vocal about it. I think the world respects us, even though they'd like to reduce our power. No surprise there.

So the depth of the alleged crisis hinges on how bad the recession is. We should be worried. But isn't Obama doing the same thing for which Bush has been pilloried lo these last seven years? Isn't he using fear for political advantage?

Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.
Today I say to you that the challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met.

A bit of an odd tone here. He needs to say this, of course. We have lost our confidence and we badly need to recover it. But Obama almost sounds like a scold here.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.
On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics.
We remain a young nation, but in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.

I've now had 24 hours to let this sink in. Boy, what a load of self-righteous crap. One man's childishness is another's principled opposition. Or has Obama already forgotten his own stand on the Iraq war and how he justified it?

Don't get me wrong: I'm all in favor of improving the tone and conducting politics with neither vitriol nor hatred. But Obama has, in the past, shown a keen understanding that opposition is the best friend a good law or policy can have. Only through principled resistance can the inevitable weak spots in any policy be identified and shored up.

In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less.
It has not been the path for the faint-hearted, for those who prefer leisure over work, or seek only the pleasures of riches and fame.
Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated, but more often men and women obscure in their labor -- who have carried us up the long, rugged path towards prosperity and freedom.
For us, they packed up their few worldly possessions and traveled across oceans in search of a new life. For us, they toiled in sweatshops and settled the West, endured the lash of the whip and plowed the hard earth.

Would anyone care to identify those that seek only the pleasures of riches and fame?

For us, they fought and died in places Concord and Gettysburg; Normandy and Khe Sahn.

This one's really weird. There's an appeal to the Vietnam generation in here but nothing for those fighting in Iraq (twice) or Afghanistan. This is the point where I started to get very concerned. There's lots of red meat in here for sixties-era liberals, but considerably less for modern pragmatists, progressive or otherwise. Since Obama's main appeal is his pragmatism, this is disappointing at best, alarming at worst.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.
This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions -- that time has surely passed.

"Standing pat" = "very bad behavior." Standing pat is often the right thing to do--not always, but often. I don't revolutionary change except where it's blindingly obvious that it's needed. There are several areas where that's true (the current monetary crisis, the lack of an energy policy that makes sense, the lack of any form of civility in government) but there are plenty of areas where you can only make things worse.

Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.

Ooooo, maybe it really is the Great Depression! Or maybe just 1936.

For everywhere we look, there is work to be done.
The state of our economy calls for action: bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth.
We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.

I'm behind him on the electric grid and high-speed internet initiatives. But, are we really suffering reduced growth because of our highway system? Yeah, yeah, maintenance is important, but is that what he's saying here?

We will restore science to its rightful place and wield technology's wonders to raise health care's quality and lower its costs.

And if health care stubbornly gets more expense in spite of technology's wonders or, more likely, because of them, what then?

We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age.

Sun... check. Wind power... check. Ethanol... check? And of course, nuclear... huh. Imagine that. No nukes. What a surprise!

I'm inclined to give Obama a lot of rope in the hopes that any energy policy is better than no energy policy at all. But let's set down a marker right now, shall we? Obama is predicting both a climatic crisis from carbon-based fuels and an economic crisis as the supply of those fuels slowly declines. So it's important to try lots of things in order to generate an optimal solution to the 21st century's energy demands. But solar, wind, and ethanol all have significant technical hurdles to overcome before they can become anything like a panacea.

Nuclear, on the other hand, has no hurdles. The waste disposal problem isn't a technical problem; it's a problem of public will. We could meet all of our demand with nuclear power alone. We could drive our carbon emissions down by at least 60% (assuming that electric cars don't pan out, otherwise emissions could go even lower) with nuclear power alone.

If Obama fails to install a robust nuclear program and fails to plan for an increased nuclear role, then he is guilty of extreme energy malfeasance. He will be judged very harshly if none of the other renewable technologies takes hold strongly enough to solve the problem.

All this we can do. All this we will do.
Now, there are some who question the scale of our ambitions, who suggest that our system cannot tolerate too many big plans. Their memories are short, for they have forgotten what this country has already done, what free men and women can achieve when imagination is joined to common purpose and necessity to courage.
What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long, no longer apply.

Barry baby, we all love ya, but some of those "stale political arguments", like being cautious when adopting revolutionary change and paying for your government as you go, rather than running up truly alarming debts, are not very stale.

The question we ask today is not whether our government is too big or too small, but whether it works, whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.
Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.

Another weirdy here. Where programs don't help families or retirees or improve personal care, we'll cancel programs? What does this say about the defense department? Commercial supports? Policing programs? Hell, what does it say about energy programs?

And those of us who manage the public's knowledge will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.

If this is the clarion call to increased openness, cool. But if it is, why is it so, uh, obscure?

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched.
But this crisis has reminded us that without a watchful eye, the market can spin out of control. The nation cannot prosper long when it favors only the prosperous.
The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity; on the ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good.

Calls for regulation of markets? Well, OK. But the "ability to extend opportunity to every willing heart"? What does this mean? That the government will give you a job if you want one? Socialist claptrap.

As for our common defense, we reject as false the choice between our safety and our ideals.
Our founding fathers faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations.

Those ideals still light the world, and we will not give them up for expedience's sake.
And so, to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and we are ready to lead once more.

I think I hear Miracle Max in the distance, saying, "Goodbye, boys! Have fun stormin' the castle!" It's a nice line, but it's a cheap line. The expensive part comes when you can cut some corners to vastly improve your odds of avoiding an attack or live (or die) by your principles. Still, Obama gets to have a little naivete on his first day. Then we'll see.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with the sturdy alliances and enduring convictions.

...and internment camps and military tribunals and forced rationing and J. Edgar Hoover. Again, lovely sentiments. Let's watch the self-righteousness, OK?

They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use. Our security emanates from the justness of our cause; the force of our example; the tempering qualities of humility and restraint.
We are the keepers of this legacy, guided by these principles once more, we can meet those new threats that demand even greater effort, even greater cooperation and understanding between nations. We'll begin to responsibly leave Iraq to its people and forge a hard- earned peace in Afghanistan.

Nice tap-dance on Iraq. But just what is a "hard-earned peach in Afghanistan"? And, given that we've just said that we're not going to wield power for power's sake, what exactly is the goal? And what is the national interest?

Obama has a long history of assuming that the Pottery Barn rule of international conquest trumps all other considerations when it comes to Afghanistan. We broke it, so we have to fix it. But he forgets that we broke it because we needed to eliminate a threat. That threat no longer exists in Afghanistan. It moved next door, to Pakistan. Afghanistan is a pile of rocks. It would be lovely if democracy flowered out of the mountains and the deserts there, but it's not the main requirement. The main requirement is to deny terrorists safe haven. Obama needs to understand the priorities better.

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat and roll back the specter of a warming planet.

Sounds lovely.

We will not apologize for our way of life nor will we waver in its defense.
And for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that, "Our spirit is stronger and cannot be broken. You cannot outlast us, and we will defeat you."
For we know that our patchwork heritage is a strength, not a weakness.
We are a nation of Christians and Muslims, Jews and Hindus, and nonbelievers. We are shaped by every language and culture, drawn from every end of this Earth.
And because we have tasted the bitter swill of civil war and segregation and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.

Encouraging. There's a very small sop to the multiculturalist crowd in here, but Obama seems genuinely to understand that America's power comes from its citizens being Amercians of the unhypenated kind.

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect.
To those leaders around the globe who seek to sow conflict or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy.
To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.
To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.
And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.
As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us, just as the fallen heroes who lie in Arlington whisper through the ages.
We honor them not only because they are guardians of our liberty, but because they embody the spirit of service: a willingness to find meaning in something greater than themselves.
And yet, at this moment, a moment that will define a generation, it is precisely this spirit that must inhabit us all.
For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies.
It is the kindness to take in a stranger when the levees break; the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours.
It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.

Yup, very nice. Boilerplate.

Our challenges may be new, the instruments with which we meet them may be new, but those values upon which our success depends, honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism -- these things are old.
These things are true. They have been the quiet force of progress throughout our history.

Best lines of the whole speech, and profoundly comforting to conservatives, especially after everything that came before it.

What is demanded then is a return to these truths. What is required of us now is a new era of responsibility -- a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task.
This is the price and the promise of citizenship.
This is the source of our confidence: the knowledge that God calls on us to shape an uncertain destiny.
This is the meaning of our liberty and our creed, why men and women and children of every race and every faith can join in celebration across this magnificent mall. And why a man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.
So let us mark this day in remembrance of who we are and how far we have traveled.
In the year of America's birth, in the coldest of months, a small band of patriots huddled by nine campfires on the shores of an icy river.
The capital was abandoned. The enemy was advancing. The snow was stained with blood.
At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:
"Let it be told to the future world that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet it."
America, in the face of our common dangers, in this winter of our hardship, let us remember these timeless words; with hope and virtue, let us brave once more the icy currents, and endure what storms may come; let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.
Thank you. God bless you.
And God bless the United States of America.

Final thoughts: This is mostly red meat for the Left. It is profoundly in conflict with the image of moderation that Obama has projected through the general election and the transition. Still, if all the Left gets is a pretty speech and the rest of us get the benefit of a cool, pragmatic President, we'll be doing quite well.

I wish our new President very good luck. He'll need it. I expect to disagree with him at least half of the time. I hope that he takes that disagreement (or, rather, the collective disagreement that emerges from the conservative zeitgeist) in the spirit in which it is offered. If he can co-opt criticism and transform it into excellent policy, he'll be a great President. If he can't, he'll be Jimmy Carter.

A Few Final Bush Thoughts

2009-01-20T15:45:00.004-05:00

Well, Obama is the President. Bush is on his way back to Texas. Most breathe a sigh of relief. I'm glad it's over but I wonder what the final verdict on W. will be.

Bush's "dram of eale" was an utter lack of subtlety. He was incapable of understanding that words and attitudes matter, even when one is doing the right thing. He was incapable of persuasion, which it turn led to, well, let's be charitable and just call it high-handedness.

From this character flaw flow all of Bush's mistakes: Objectively, the Israelis and Palestinians hate each other and aren't prepared to make peace, so why bother with diplomacy? North Korea, Iraq, and Iran truly are evil, so why mince words? France, Germany, and Russia oppose our invasion of Iraq, so we will run roughshod over them--why compromise? Though the State of Louisiana failed in its duties to New Orleans, FEMA pretty much did its job--why should it take up the slack for the State's failure? The list goes on and on.

Bush couldn't understand the value of diplomacy, so he ignored it. Bush couldn't understand the necessity of compromise, so his legislative agenda was largely unsuccessful. Bush couldn't argue well, so he was remarkably intolerant of dissent.

All in all, a very bad trait for a President.

We'll see how he's remembered. He was certainly a good man, and he had a huge amount of courage. He did a fine job keeping the war off of American soil. Ironically, he may have been so successful that he'll never get credit for it: If al Qaeda turns out to be crushed, then history will judge Bush's wars as a vast overreaction. Of course, there's a distinct possiblity that, without the wars, terrorism would be genuinely ascendant.

All in all, not a superb President. Maybe not even a mediocre President. But we'll see how things look after four or eight years of Obama. I remember being awfully tired of Clinton at the time. Now, I just wish we could go back to that party.

That Pesky Multiplier Effect

2009-01-15T12:36:00.003-05:00

Conventional (or at least popular) wisdom is that each dollar of government spending contributes more than a dollar of GDP. Further popular wisdom is that spending has a better multiplier than a tax cut.

But Greg Mankiw thr0ws up several well-taken caveats:

In practice, however, the multiplier for government spending is not very large. The best evidence comes from a recent study by Valerie A. Ramey, an economist at the University of California, San Diego. Based on the United States’ historical record, Professor Ramey estimates that each dollar of government spending increases the G.D.P. by only 1.4 dollars. So, by doing the math, we find that when the G.D.P. expands, less than a third of the increase takes the form of private consumption and investment.

Mankiw goes on to poke further at the popular wisdom on tax cuts:

Textbook Keynesian theory says that tax cuts are less potent than spending increases for stimulating an economy. When the government spends a dollar, the dollar is spent. When the government gives a household a dollar back in taxes, the dollar might be saved, which does not add to aggregate demand.
The evidence, however, is hard to square with the theory. A recent study by Christina D. Romer and David H. Romer, then economists at the University of California, Berkeley, finds that a dollar of tax cuts raises the G.D.P. by about $3. According to the Romers, the multiplier for tax cuts is more than twice what Professor Ramey finds for spending increases.
Why this is so remains a puzzle. One can easily conjecture about what the textbook theory leaves out, but it will take more research to sort things out. And whether these results based on historical data apply to our current extraordinary circumstances is open to debate.

Finally, we also have an obvious question from Arnold Kling:

It is amazing what happens when you assume that you live in a linear world. You say that the multiplier for government spending is 1.57.

Really? Over what range? Think of it this way: at which level of additional government spending would the path of U.S. real GDP be the highest?

(a) $100 billion in spending above the baseline
(b) $1 trillion in spending above the baseline
(c) $100 trillion in spending above the baseline

If you use a constant multiplier of 1.57, the right answer is (c). Yet we know that this is not the right answer. At $100 trillion in additional government spending, the United States would be operating like Zimbabwe, with similar results.

So to talk about "the" multiplier, as if it were linear, has to be wrong at some level. Is the multiplier linear over the range between $100 billion of additional spending and $1 trillion of additional spending? I think that is unlikely. Between, say $400 billion and $800 billion, is the incremental multiplier still in a range between 1 and 2? I worry that it is much lower. I worry that it turns negative somewhere in that range.

Personally, I can't see how all the inflating of the economy doesn't lead to a lot of, well, inflation. It doesn't if you think that there is an offsetting amount of deflation (say, somewhere between $5 and $10 trillion), but we really have no idea, do we?

Might not be a terrible time to buy some gold.

The Death of 8.01 and 8.02

2009-01-14T10:57:00.002-05:00

MIT is doing away with its lecture=based introductory physics courses. One of my most excruciating memories from my intensely checkered career at MIT was attending 8.01 lectures in introductory mechanics in the dreaded, auditorium-like room 26-100. During the lectures on conservation of momentum, the professor set up an air track, smashed a couple of shuttles together to demonstrate his points, and then droned on with the rest of the lecture--while leaving the air track running, with the shuttles bouncing back and forth.

Now, it's impossible to get an air track completely level, and friction eventually does slow things down. So after 15 or 20 minutes, the shuttles would ever, so, sloooowly, coast to spot in the middle of the track, stop, and then, even, more, sloooowly, slide back in the other direction. There were 500 freshmen in that auditorium, all of them with the same wincing expression on their faces, watching that damned shuttle come to a stop. They all had similar expressions of relief on their faces when it started moving again.

Forget waterboarding and stress positions and prolonged isolation. Just put your enemny combatant in front of that air track and you'll have him spilling everything he knows in about two hours.

MIT is going to a high-tech, participatory approach to teaching its introductory physics courses. It'll be interesting to see how it turns out. This looks like a significant innovation in teaching technology, which is ultimately the way how we solve our education problems.

Iran's Power

2009-01-13T10:48:00.003-05:00

Conventional wisdom is that the war in Iraq and the neglect of the Israeli-Palestinian peace process have conferred new power on Iran. But I have some questions:

First, will Iraq be a puppet of Iran? There is certainly Iranian influence in Iraq that didn't exist in Saddam's day. But it seems as if the most blatantly pro-Iran militias have lost power over the past two years. Furthermore, the Iraqi government has finally managed to achieve some sort of balance between the Sunni and Shia groups, making it that much harder for Iran to achieve any workable political dominance. Do improved ties between Iraq and Iran really provide much political power to Iran?

One way that Iran benefits is that it no longer needs a standing army to defend itself from Iraq. But Iran has chosen to fund insurgent operations in Iraq, which probably cost as much if not more than garrisoning troops on the border. Furthermore, because it is conducting hostile operations in Iraq, it can't really release many border resources.

The same calculus applies to Israel. Iran has definitely accumulated power through Hezbollah and Hamas, but it's spending a hell of a lot of money and resources to do it and its neighbors are much more likely to take covert countermeasures against it. As a result of its higher profile, Israel regularly prunes back these groups' military power, forcing Iran to spend even more to resupply them. How long can they do this?

Finally, even as Iran's nuclear program continues, Iran's military adventures make that program less and less acceptable to the international community. An insular Iran with nukes might have been ignored. An aggressive, expansionist Iran can't be ignored, even by those countries that wouldn't ordinarily care much about proliferation.

In short, Iran is burning through a lot of resources for its new-found power. With the oil crash, it no longer has the windfall that allows it to be quite so profligate. Now that it's out on the limb, can it achieve its objectives before its financial position saws it off?

I'm Back (?)

2008-12-30T14:45:00.002-05:00

I seem to have taken a couple of months off. Some of this was post-election stupor, but I've also had a bit of a health issue (a bit of C6 radiculopathy, which has made it painful and/or disturbing to type very much).

Starting Monday, I'll be heading back to work. I've been on a leave of absence for nine months and it's time to do something productive.

Which leaves the future of this blog sort of up in the air. I've enjoyed doing something approaching structured, non-technical writing for the first time in years, but it does take up a certain amount of time. We'll see.

A New Way to Regulate

2008-11-14T15:30:00.001-05:00

Somebody's probably already thought of this but I hadn't, so here goes:

Today, we regulate for anti-trust by looking at market share in important industries. Today we regulate banks largely by looking at their total leverage. But, despite the media nattering on about companies that are "too big to fail," that's not really the problem. The problem is that some companies are too connected to fail. If you rip them out of the network of financial and supplier relationships, the damage done cascades through the whole network.

So why not regulate from a graph-theoretic basis? We not only want to know about leverage and market share, we want to know about how many other entities that hold debt or credit, or how many suppliers and customers, will be hurt if a given entity goes belly-up. If we had this information in a standardized reporting structure, regulators could look for excessively connected nodes or nodes whose average network distance was substantially shorter than the network diameter.

These are the companies that are most likely to cause trouble if they fail. Regulators could concentrate on these companies and, if necessary, take preemptive action to reduce the damage they could do to the rest of the network.

No idea whether this is feasible or what the unintended consequences are.

Earth, Say Hi to Fomalhaut B

2008-11-13T22:49:00.003-05:00

The first images of an extraterrestrial planet have been obtained.

The achievement, the result of years of effort on improved observational techniques and better data analysis, presages more such discoveries, the experts said, and will open the door to new investigations and discoveries of what planets are and how they came to be formed.

This is a big deal.

When you can image a planet, you can get its spectrum. One day, not too far in the future, we will obtain the spectrum of a planet and there will be free oxygen lines in it. How different will the world be when we know that there is life on another planet, circling another star? Will we feel compelled to send probes there, irrespective of the cost? Or will this just become yet another datum in the panoply of wonders that is our modern world.

The economy sucks. We're embroiled in a low-intensity world war. Our politics is about to undergo the biggest upheaval since 1981, maybe since 1932. But we can still do... this.

The Boiling Frog Theory of the American Electorate

2008-11-10T09:55:00.004-05:00

As I've said before, Obama's instincts are liberal but he's dispassionate enough always to think his positions through before acting. That makes him more centrist. But Obama still has a very liberal agenda. How will he execute on that?

Bill Kristol writes:

His selection of Rahm Emanuel as chief of staff suggests that Obama’s not going to be mindlessly leftist, and that he’s going to shape a legislative strategy that is attentive to Congressional realities while not deferring to a Congressional leadership whose interests may not be his own. Jimmy Carter and Bill Clinton were both tripped up in their first two years by their Democratic Congresses. Obama intends for Emanuel to ensure that that doesn’t happen.

Both Carter and Clinton lurched to the left, got their hands slapped for it, and were then forced slowly to moderate their positions for the rest of their terms. In short, they forgot the Boiling Frog Observation: If you toss a frog into boiling water, it will immediately hop out. However, if you toss a frog into cold water and slowly heat it, the frog will happily boil to death.

If Obama's smart--and he is--he'll recognize why this analogy is important to his success in transforming policy. If he starts with a moderate agenda, he won't create an electoral backlash in the out-year elections and he'll be re-elected handily in 2012. By then, he can make his legislative initiatives progressively more liberal without any reaction by the electorate. This is the key to maximizing the amount of damage he can do the country.

We have one hope: Obama may be smart, but Congress approximately has the I.Q. of the frog in question. Paradoxically, if we are to keep Obama's agenda as centrist as possible, it may be important that Obama fails to rein in the crazies on the left.

No Kneeling Before Zod!

2008-11-08T12:54:00.002-05:00

Sage advice from John Scalzi, who helpfully critiques the best and the worst of sci-fi movie presidents.

An Alternative Theory On McCain's Electoral Defeat

2008-11-05T22:44:00.003-05:00

Consider the following:

One day, while sitting in his A-4 on the USS Forrestal, minding his own business, a missile was accidentally fired into John McCain's aircraft from another plane sitting on the deck. Though McCain escaped with his life, resulting secondary explosions caused the largest loss of life at sea since World War II.

When McCain recovered from his Forrestal injuries, it was only a few missions later when he was shot down over Hanoi.

Because he was an admiral's son (and grandson) and refused to cooperate with the North Vietnamese, he was singled out for exceptionally harsh torture.

In 2000, McCain's first presidential campaign foundered on an exceptionally well-run and exceptionally vicious rumor campaign sabotaged his chances in South Carolina. The competence of that campaign was almost certainly the result of an accident of fate: anybody other than Carl Rove wouldn't have been nearly as effective in torpedoing McCain.

Finally, after surging ahead in the polls, McCain became the first candidate in US history to fall victim to a massive financial crisis only six weeks before the general election.

Now, consider these facts as well:

Barack Obama won his Illinois state Senate seat when a routine ballot-qualification attempt against his opponents actually succeeded, allowing him to run for the seat unopposed.

When Obama decided to run for the US Senate, his opponent fell victim to possibly the juiciest sex scandal, involving him coercing his wife, a well-known Borg at the time, into attending sex clubs with him. Again, Obama ran virtually unopposed. (I don't count Alan Keyes as opposition.)

It just so happens that Obama arrives on the national scene at just the right time to make a terrific speech at one convention, then becomes a junior Senator at just the right time to capitalize on growing national disgust for all things Republican. Having no record that could be used against him, he is able to bootstrap a successful presidential campaign.

With his numbers sharply declining and only eight weeks left in the campaign, Obama becomes the beneficiary of the same financial crisis that wreaks havoc with the McCain campaign.

I've gone on at great length about Obama's many talents and McCain's obvious deficiencies, but maybe the reason the election turned out the way it did is simpler to explain than that: McCain is the unluckiest man in the world, and Obama is the luckiest.

Why I Voted Against McCain

2008-10-29T11:48:00.002-04:00

Apparently I am now One of the Ones I've Been Waiting For.

Shit.

When you no longer believe in protest votes, the only way to vote against McCain is to vote for Obama. So I did. Mind you, it was completely irrelevant for whom I voted: I live in Texas, in a safe Republican state, in a safe Republican district (21, and Lamar Smith ran with no Democratic opponent). But it's important to go on record for my awe-inspiringly massive readership.

Here are the reasons why I just couldn't pull the trigger on McCain:

Would you really want somebody who hired those advisers to run that campaign actually running the country?

The campaign suspension during the financial brouhaha, which led to nothing except confusion and a humiliating walk-back on all of McCain's fancy rhetoric. The "fire Chris Cox" thing didn't fill me with warm fuzziness, either.

Palin: a good idea with extremely poor execution. Bush had a lot of good ideas, too...

All of McCain's policy proposals had the same basic problem as his legislative successes: they sound wonderful at a high level but are riddled with unintended consequences and various impracticalities.

The extremely wide dynamic range of both McCain's intellect and temperment. Like the little girl with the curl right in the middle of her forehead, when he was good he was very very good but when he was bad he was horrid.

The Republicans need to lose and lose big. As painful as the next four or eight years are going to be (and they're going to be awful), it is simply a requirement that the electorate informs its representatives what kind of government they simply will not accept. It does no good to have a winning philosophy of government on your side when you don't follow it, let alone understand it. Maybe we'll get smarter ones next time.

This is a head vote, not a heart vote. As I've said many times before, my first impulses are almost always conservative and it's impossible not to want to root for McCain, if only for his sheer moxie. It's an odd feeling to cast your vote one way and then be secretly rooting for the other guy, but there it is: Obama will be a less bad President than McCain.

Perhaps I'm repeating myself, but... shit.