Tuesday, December 20, 2011

Go Pats! (and something on Libertarians)


I regret dropping that introductory philosophy course in college as I surmise we are descending into a rather classical argument about where the limits of individual rights and liberty end, and inter-individual responsibilities begin. Thomas Burke v Karl Marx maybe?

The element of the libertarian ideal (if I understand it correctly) that I have the most trouble with is that the individual's actions are somehow mystically disconnected from their consequences for others. If I, for instance employ a 10 year old to clean our toilets (an idea resurrected by the current Republican front runner for the Presidency), that 10 year old's welfare, health, longevity and future prospects are all affected. And no sane person would argue that a 10 year old ever has a choice in such matters should they be unfortunate enough to be compelled to clean toilets.

Or to use a less absurd, and much more controversial example, the individual mandate to purchase health insurance at the center of Obamacare so reviled by a majority of Americans represents an incontrovertible limitation upon individual economic liberty. Yet its absence allows anyone without insurance to impose the costs of their "liberty" upon the rest of us every time they present themselves to the healthcare system demanding  treatment. That event occurs thousands of times across the country every day. No ER may refuse to treat a patient.

I can of course think of an endless series of these annoying (and self serving) examples.  But summed together they reinforce my notion that we are all in this together, whether we are willing to acknowledge it or not. Most Americans alas don't wan't to acknowlege it, as they continue to demand an ever growing array of government services. all the while refusing to pay for them.

As far as licensing (of doctors, hairdressers etc), that's a fascinating story on its own. It has been elegantly argued that licensing, by restricting competition, benefits those who hold the license as much or more than it protects the welfare of those who use the licensee's services. Your beloved sister and I are delighted to belong to highest paid profession in the land, but there is no rational reason I can think of that our salaries should be multiples of our counterparts in medicine across the  industrialized world. We are the fortunate participants in a system gamed for us. 

Sorry about your Broncos. As coach Fox pointed out, one can't be +3 against Brady and hope to prevail. Hope we see you again in Foxboro in the post season

Happy Holidays to you and yours 


Sunday, December 18, 2011

Tebow!. And the Market.


I haven't forgotten this, but things interrupted.

"Kindly help me with one idea though. I don't get this notion of economic liberty. My son Jack, now six months out of college and looking for a job, knows he must work at some point if he is to have any kind of life. He is not free of that powerful constraint. For the folks in our cardiology practice the constraints of economic life even less room for any choice. So I hope you'll be patient and try again. From where I sit this idea of liberty seems restricted to those of us who can afford it"

The liberty I referred to was mostly from a consumer's perspective, but it applies equally well to employment. Your son Gabe is free to pursue any career he would like, except in cases were we, as a society, deliberately exclude him. For instance, no one can start up a cardiology practice without certain licenses. (Whether or not that is desirable is a completely different question). That is tremendous freedom. No one is telling him what to do, which in my lexicon, is freedom. Of course, prospective employers have the same freedom. So he, like all of us, face risks that the path we pursue will not be achievable. 

You make a curious point, "he must work at some point if he is to have any kind of life. He is not free of that powerful constraint." Well, of course not. But in any society, no matter the economic organization, he is not free of that constraint. Even at Walden's Pond, Thoureau had to work for his living. Fish did not magically jump into his fire, nor fruit and vegetables drop off the tree and march to his site. The question isn't that we have to work, the question is how we are going to manage the allocation of scarce resources and how we are going to the changing needs and demands of consumers. I personally think a command and control system has a long and unfortunate record of hurting people, particularly the poor and unpowerful. 

The other question is what do we as a society do for those who need help. My answer is as simple as yours. We help them.

Your cardiology partners (?) do face significant restraints. But we all do, from the day we are born. You may argue their constraints are greater than average. And they may be, but I think that is impossible to determine in the aggregate and can only be determined specifically. But again, we all have constraints. It is unlikely I would ever be able to join the NBA, or NFL as a player. That constraint has grown over time. So I misspoke by speaking of liberty without speaking of constraints as well.

One more thing.

Pats v Broncos today. Go Tebow.!


Sunday, November 20, 2011

The Echo Chamber


Yes we certainly agree more than not, and I'll wager that if it were up to you and me we could solve the nation's fiscal crisis in a matter of hours. Then we would have to leave the country in fear of our lives. I for one would blitely slash Medicare spending in exchange for closing most tax loopholes and a return to Clinton era marginal rates (i.e Simpson Bowles)

So how to get there? How do we avoid becoming Greece in ten years-that was David Brooks prediction on the Newshour Friday night. From my perspective I find little to dispute that prediction.

Here is yet another measure of just how much trouble we are in. Other than one of my tennis buddies, you are the  only even remotely conservative person I know. That is an increasing fact of life, that we are living in our communal echo chambers having our prejudices confirmed (Brooks again). And the extremes on both sides (think Eric Cantor and Nancy Pelosi) are controlling the argument.

Kindly help me with one idea though. I don't get this notion of economic liberty. My son Gabe, now six months out of college and looking for a job, knows he must work at some point if he is to have any kind of life. He is not free of that powerful constraint. For the folks in our cardiology practice the constraints of economic life even less room for any choice. So I hope you'll be patient and try again. From where I sit this idea of liberty seems restricted to those of us who can afford it


Friday, November 18, 2011

The Market Miracle


I'm always surprised when people are skeptical about "the miracle of the market." It is an amazing thing that I can, with great confidence, find pretty much anything I want, almost whenever I want. A device that allows me to communicate instantaneously with a person half-way across the state, or the world? Done. A haircut in every imaginable fashion? No problem. A quick hamburger? An expensive hamburger? A vegetarian hamburger? Right away sir. But I don't wake up in the morning and plan these things. I don't email the Department of Fulfillment about my pending needs. I don't email McDonald's that I'll be dropping by. I just do it, and it's there. To me, that's a miracle. 

The other thing that is miraculous, to me, is it is voluntary. I want to buy a car, I can buy a car. No one forces me to buy from a specific vendor nor a specific model. Someone wants to buy my investment advice, they can. Or they can decide not to. I can decline to offer my advice to someone if the price or other terms aren't acceptable. Because I think this voluntary exchange is an integral part of the liberty we enjoy as Americans, by and large, I'm against things that restrict my freedom to engage in voluntary transactions. 

I reject your straw man choice between a robust regulatory state and unfettered capitalism. Free markets, at least in my mind, do not mean unrestricted, or completely unregulated markets. There are public goods, the commons, to be protected. There are community needs that government is uniquely qualified to serve. Rules need to be set, in many cases, by government. 

I am not one to deny the government can do amazing things. In the social arena the civil rights movement is a miracle of government intrusion. The Internet is an outgrowth of the DARPA net, a government funded project to create a computer network that could survive a nuclear attack. I regard the National Park Service as a completely uneconomic, waste of resources and one I will fight vigorously to keep uneconomic and wasteful.

So it's a matter of degree, and who you trust. Me, I tend to trust markets more than governments. Markets fail and governments fail. Markets succeed and governments succeed. But generally, from my perspective, markets succeed more often and more effectively and has the advantage of maximizing my freedom of choice. 

I hope the reason I trust markets more is the evidence. When Jimmy Carter de-regulated the natural gas industry and the airline industry there were increased choices and lower prices for consumers. To me, that's a good thing. When the federal government decided to become a bigger factor in homes, secondary education and medicine, prices went up. I think that is a cause and effect. I'm sure you can point to instances where the markets failed and government succeeded, as can I. But again, from the evidence I have seen, or have chosen to see, it seems markets generally serve people better.


Thursday, November 17, 2011

For every 2 economists, there are 3 opinions


This emerging conversation of ours highlights the miracle of diversity of human opinion, at least when it comes to politics. I am alas way more skeptical about the miracle of the market than you are.  For me, regulated capitalism is the most remarkable economic system extant. But unfettered capitalism is among the worst-think mid 19th century England. So its a question of degree.  The idea of free markets is an illusion. It always depends upon who makes the rules. And I am certainly uninterested in returning to the freewheeling capitalism of the 19th century, when the difference between economic security and devastation could turn on a dime. Government can (and could) play a vital role in the basics-a quality education system, decent infrastructure, (at least a semblance of ) democracy, and a safety net for those among us who lose the race. Capitalism ensures that there will be winners and losers.  

Our system of regulated capitalism allowed our 2 sons  to have the opportunity to do way better economically than our Bronx and Brooklyn born fathers. I see that chance for upward mobility diminishing from the American landscape-just look at the rise in the price of our alma maters since we graduated, and who goes there now. Not kids like us. Brooks wrote a glittering piece a few weeks ago about the diverse, and dangerous increase in inequality. I'm not arguing that more government is the answer, but it certainly feels as "the market" isn't the answer either. It always amuses me that my home state (Massachusetts) which is so reviled in the conservative commentariat, and has one of the most regulated business environments, has a higher quality of life by any measure (income, education, teen pregnancy divorce etc) than almost any other state in the Union 

The climate change issue, it seems to me, is just part of the larger issue of sustaining the welfare of 7 billion human beings and the welfare of the planet at the same time. Unchecked extraction has consequences. Ironically, the devastation of the recent storm highlighted  the robust and miraculous reforestation of  New England over the last century. That miracle didn't happen because of markets  

As far as listening to economists, which ones?  For you, not Krugman, or Stieglitz, or Roubini, or likely many others. For me, few from the Chicago school need apply. You can get any opinion you want out there it seems, all given with the same degree of certainty. I'll take my chances with my fellow scientists, who for all their human failings, are obsessed with seeing things the way the are, not they the way they'd liek them to be

As far as being a closet Republican, I can't do it. I am, after all, the grandson of an organizer for the the Garment Workers in the 30s. Not to mention my gay nephew, with whom I am extremely close, just married in liberal Massachusetts this summer.


Wednesday, November 16, 2011

Needed: A Free Market in Energy


I too am skeptical of government trying to pick winners and agree we desperate need a rational energy policy. But to me a rational policy is let the market decide. We do that for shoes and manage to get shoes to everyone. We do that for groceries and manage to get groceries to everyone. We let the market decide how electronics should be allocated and we do quite well by it (says he writing this on an ipad, with a wireless keyboard, linked to an iphone, connected to the Verizon network, all without the benefit of a government controlled policy). 

I don't worry too much about Russia, Saudi, Hugo (or Caesar) Chavez. Prices, technology change supply and demand all the time. For instance horizontal drilling and hydro fracking has created a 100 year supply of natural gas in the US. A similar large increase is likely, in my opinion, to happen with oil. Canadian oil sands have an estimated 143.1 thousand million barrel reserve, compared to 264.5 for Saudi Arabia and 211.2 for Venezuela. I'm the Alfred E. Neuman in the room. What, me worry? There is certainly risk of geopolitical disruptions hurting supply, but as long as we let prices clear, we'll adjust. Besides, if Saudi Arabia blew up Bill McKibben, Jim Hansen, Al Gore and Joe Romm would be delighted. 

We recently had a big debate in town about building a new Senior Center. One of the arguments put forth was a study by the architect of the proposed center that in 20 years the senior population of our community would double. The prediction assumed the current population would be static and we all would just age in place.  Besides being silly on the surface, and begging the question why aren't we preparing for a dramatic reduction in our school population, the thing that galled me was the person making the prediction was an architect, not a demographer. 

And that's how I kind of feel about the global warming/climate change debate.  Let's grant the greenhouse effect, and the 1 degree warming this century. Let's grant 100% of the warming is anthropogenic. Let's grant that there are severe second order impacts that accelerate warming/change.  After that I really don't want to listen to the scientists any more, because now we're talking about resource allocation and the costs of mitigation versus the costs of prevention. When we start talking about costs and benefits it is irrelevant to me how many scientists agree about warming, I want to listen to an economist.  (and Krugman doesn't count). Listening to a scientist discuss allocation of scarce resources is like listening to an architect make a demographic prediction. 

Gas taxes are highly regressive. I drive one mile to the train, another mile from the train (I've come a long way from walking 5 miles to school every day, uphill in both directions). I ride the highly subsidized Metro North to NYC, and park in the highly subsidized town parking lot. So I pay about $100 per year in gas for 25 or so gallons i consume every year on commuting. I'll pay about $25 for your gas tax while my blue collar older brother who I'm guessing drives at least 40 miles every day will get hit much harder. You sure you aren't a Republican. 


Tuesday, November 15, 2011

Needed: A rational energy policy


On the one hand I am deeply  skeptical of the idea of the gov't trying to pick economic winning horses. On the other, the country is desperate for a rational energy policy that gets $$$ out hands of the oil oligopoly (I am thinking Russia, Venezuela, Saudi Arabia Iran etc) and begins to address the issue of man made climate change (as a scientist inclined to trust the collective judgment of other scientists, I am afraid I am a believer). The answer favored by as diverse figures across the public spectrum as Tom Freedman and Charles Krauthammer, is a gas tax of about a buck. Fat chance of that.....


More on Solar Subsidies


Solar is cost competitive to gas, with lots of subsidies and government mandated purchasing. From the NY Times, A Gold Rush of Subsidies in Clean Energy Search

"P.G.& E., and ultimately its electric customers, will pay NRG $150 to $180 a megawatt-hour, according to a person familiar with the project, who asked not to be identified because the price information was confidential. At the time the contract was awarded, that was about 50 percent more than the expected market cost of electricity in California from a newly built gas-powered plant, state officials said."

I'm probably too hard on Krugman. 50% higher price for solar is "near," enough given that solar is seeing price declines of 7% per year. So only 5 or so years away from being at price parity. That is as long as the massive subsidies continue.


Monday, November 14, 2011

Shale, Solar and Krugman


Somewhere in this I get the subtle feeling you don't like Krugman......

He is to the left of me for sure (most of the time), For instance I certainly never thought John Edwards for instance was anything but what he turned out to be, and Krugman loved him. Character counts, and ought to trump ideology (most of the time)

Whatever the truth of this particular controversy is, what feels most troubling is the county's inability to even have a sane, civil, thoughtful conversation about it-the historians tell us America has always been that way, and somehow we do OK. Maybe its the American people's total unwillingness to pay for what they get from government, and the politicians on both sides pandering to that unwillingness, makes me wonder whether things are actually worse this time round.


Shale Gas and Solar


Thanks, I read both. I like Brooks well enough. Krugman is a hack. His piece on solar vs gas was absurd.
He writes fracking "produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads. " Well fracking CAN produce toxic wastewater and if you dump it into drinking water it will contaminate drinking water, but to say it IS dumped in drinking water as part of the fracking process is simply dishonest, or ignorant. He claims there is reason to believe it contaminates groundwater, when actually, there is zero evidence it does that. The damage to roads? Maybe. But does he seriously think this is an intractable problem?

He claims the Solyndra failure is evidence of the success in the solar industry. Sort of. It's evidence that Solyndra's technology couldn't compete with alternative solar technology. It says nothing about the success of solar versus carbon-based technologies.

He writes there is frequent talk of a Moore's Law in solar, as solar prices are falling 7%/year, adjusted for inflation. This is laughable since Moore's Law posits a doubling in the number of transistors that can be placed on an integrated circuit every two years, which, on a compound basis is a growth rate of about 35% per year. But even with a falling panel production cost, for homes/business installation is the cost that is unlikely to fall since labor for panel installation, which has nothing to do with solar panel production, is a big part of the total cost. Relative to large solar plants in the desert,  the economics obviously differ.

Then he leaps to, "we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal," but oddly concludes with, "solar is now cost-effective."

I used to think Krugman was like John Kenneth Galbraith, an entertaining writer that was almost always wrong. Now his writing is filled with bile and half-truths. But he's still almost always wrong.


Shale Gas

Did you see David Brooks op ed? He is an enthusiastic backer. Then came Paul Krugman a few days later who was, well, Paul Krugman. I can send you both if you are interested.

At this point the politics are already so intense I wonder if there will ever be room for the science (whatever it is). 


Tuesday, November 1, 2011

Our Purpose

This blog originated as a private conversation, mostly focusing on the various political, economic and social debates of the day, and football too. So much of the current media and political discourse lacks seriousness and is unhinged from truth (You know who you are). As our conversation progressed we thought it would be useful, plus it appealed to our egos, to add our voices to those who are vigorously debating, in an honest way, the choices we face.
We will not always, or even regularly see eye-to-eye. We will argue, cajole and inform each other. Occasionally we may even get mad. We remain convinced that the best solutions may not satisfy all, but that there are answers to the difficulties we face. The more vituperation that comes our way from partisans on both sides of the isle, the more we’ll believe we are making progress.

Who We Are

Eli Butcher
I am the grandson of a tailor from Coney Island who grew up to be an academic physician at a large northeastern teaching hospital. I have substantial expertise as a clinician scientist and a longstanding interest in health care policy, but no training, in economics, formal or otherwise. I would describe my politics as socially liberal and fiscally conservative. I am also a bred-in-the-bone Boston sports fan.  
William Knabe
I am a husband, a father and a brother. My academic background is economics with a large dose of history. For close to 25 years I have worked in and around the financial services industry. The easiest tag to place on my politics is libertarian, but it would be more accurate to describe me as vigorous believer in the power of the free market to create a better life for all, with a large dollop of Catholic-infused responsibility to help those in need.