Things to Read on the Morning of October 22, 2014
Must- and Shall-Reads:
- The Sudden Rise of Carbon Taxes, 2010–2030
- Economist: Skills, Tech Gap Can’t Explain Inequality
- Enhancing Financial Stability by Improving Culture in the Financial Services Industry
- The Federal Reserve Should Not End Its Quantitative Easing Program
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For Thursday… How Mainstream Economic Thinking Imperils America: “Your comments on how economics should… be constructed are very well-stated (actually making it more of a social science, and less model-juggling. However, it also would change the sort of person going into the field and change the field’s criteria for success. Not easy!). One thing… is the optimizing behavior of economic policy analysts. Fiscal policy seems off the table, so macroeconomists dive into unconventional monetary policy, which, one trusts, all know is extremely dicey. Why not more emphasis on yelling from the rooftops that the usual economic fears of expansionary fiscal policy (debt accumulation, waste)are simply off target, and less time worrying about the fine points of ‘tapering’? Your Brookings work with Larry shows the analytics of fiscal policy at this juncture very well. Criticizing the critics of expansionary fiscal policy as evil 0.01% oligarchs or mindless racist Tories might make one feel good and righteous but doesn’t get anybody anywhere; basic analysis held by what seems everybody but a few denizens of the Booth School shows the economic sense of the policy. The notion of criticizing Christie Romer as in thrall to Milton Friedman is indeed droll in the extreme. I guess to have to see the book to see what his problem is with Olivier.”
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Note That Politico Does Not Label Advertisements as Advertisements: No, BP Didn’t Ruin the Gulf: “What impact did the spill actually have on the Gulf Coast environment?… [10 paragraphs]… Geoff Morrell is senior vice president of U.S. communications and external affairs for BP.“
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Keeping it like the Kaiser: “The payer provider model has been around US healthcare for a very long time, but the Kaiser twist on it is very wierd and as far as I know, no one else does it quite like Kaiser… a fully integrated payer provider with exclusive usage…. Almost all other non-governmental payer-providers are not exclusive walled gardens that systematically seek to minimize interaction with the entire US healthcare delivery ecosystem…. So what does this difference mean?… I think the Kaiser model allows it to capture and internalize significantly higher percentage of preventive and care coordination benefits than most other integrated payer provider models and far more benefits are captured than segregated payer/provider models. It allows for a common focus and a shared focus on quality and risk minimization as aligning incentives to pay docs to not order a needless test actually makes sense in all scenarios. Other integrated payer providers that are not exclusive walled gardens have the incentive to perform high quality and efficient care on their insured members but wasteful care on patients who are insured by someone else. A Sutter doc who orders an MRI on a non-best practice basis for a Sutter member is costing the company money, but ordering that MRI for an Anthem or United Health insured patient is a a revenue gain. Most providers don’t change their patterns of practice on a patient by patient basis, that means aggregate performance on minimizing needless tests, minimizing preventable care incidents is conflicted with revenue maximization…. The revenue risk is the biggest risk that will stop non-exclusive mostly open payer providers from converting to a Kaiser walled-garden approach…. At least a few payer-providers will install significant gatekeepers and low walls for their network to keep most of their members in and other people out, but the walls won’t be high nor hard to hop over. Kaiser is weird in the American context, and I anticipate it will continue to be an unusual but highly successful implementation of a fairly unique non-governmental model.”
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Forecasting Is Risky, Especially About the Future: “I wrote about the people who warned in 2010 that quantitative easing would result in inflation, but who didn’t seem to change their beliefs very much after inflation failed to materialize…. Of all the defenses offered by the 2010 inflationistas for the constancy of their views, the most subtle and interesting is the claim that predicting an event is different than predicting the risk of an event…. It is indeed a subtle distinction. In fact, it is several subtle distinctions rolled into one. First, there is the issue of how to trust a forecaster who only forecasts risks…. Ideally, the way you would deal with this is to get the forecaster to make many repeated predictions…. Second, there is the distinction between making a prediction and updating one’s beliefs based on the outcome…. Third, there is the issue of time. What if, in 2027, there is a burst of inflation for no apparent reason? Will the people who predicted inflation as a result of QE in 2010 say ‘See? We told you that Fed balance sheet expansion had to cause inflation sooner or later!’?… Finally, there is the question of what information set someone used when issuing his or her warning. Did the signatories of the 2010 letter think only about the experience of the U.S. in the 1970s when they warned about inflation? Or had they stopped to consider the experience of Japan, whose repeated rounds of QE have never unleashed inflation of more than 1 percent? The fundamental question is this: Suppose there are people out there who are broken records when it comes to inflation. Rain or shine, come what may, they warn of inflation…. Obviously, these warnings would have zero informational content…. Is there some kind of Turing Test for macroeconomic forecasters?… Our tools for identifying unreliable forecasters are rather primitive–a combination of reputation, bluster, excuses, insults and counter-insults. It’s all a bit silly, and it generates a lot of bad feelings all around. But what else can we do?”
Should Be Aware of:
- A Blog for Teachers
- Gamergate Should Stop Lying to Itself
- How One Doctor [Stella Ameyo Adadevoh] Saved Nigeria from Ebola Catastrophe
- Gandalf Is Vaguely Concerned With Your Life Choices…
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Evidence for Policy: “To repeat, our assessment of the probability of effectiveness is only as secure as the weakest link in our chain of reasoning to arrive at that probability. We may have to ignore some issues or make heroic assumptions about them. But that should dramatically weaken our degree of confidence in our final assessment. Rigor isn’t contagious from link to link. If you want a relatively secure conclusion coming out, you’d better be careful that each premise is secure going in.”
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Bonus regulation–a terrible idea whose time has come?: “Finally, it appears that the investment banking industry (in Europe at least) has got the kind of regulation it deserves. Which is to say, capricious, wrongheaded, arrogant and systematically destructive. As someone who worked in this industry until about three months ago, all I can say is that I feel for my ex-colleagues, but that this was not a disaster which fell on the industry like a Black Swan from a blue sky–it was more like the kind of injuries that you get if you climb into the lion enclosure at the zoo, and repeatedly kick a sleeping lion up the bum to see if it will wake up…”
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Obama Is a Republican: “I wrote a piece for the New Republic soon afterward about the Obamacon phenomenon–prominent conservatives and Republicans who were openly supporting Obama. Many saw in him a classic conservative temperament: someone who avoided lofty rhetoric, an ambitious agenda, and a Utopian vision that would conflict with human nature, real-world barriers to radical reform, and the American system of government. Among the Obamacons were Ken Duberstein, Ronald Reagan’s chief of staff; Charles Fried, Reagan’s solicitor general; Ken Adelman, director of the Arms Control and Disarmament Agency for Reagan; Jeffrey Hart, longtime senior editor of National Review; Colin Powell, Reagan’s national security adviser and secretary of state for George W. Bush; and Scott McClellan, Bush’s press secretary. There were many others as well…. They were not wrong…. Obama has governed as a moderate conservative—essentially as what used to be called a liberal Republican before all such people disappeared from the GOP. He has been conservative to exactly the same degree that Richard Nixon basically governed as a moderate liberal, something no conservative would deny today…”