Archive for the ‘politics’ Category

There’s A Flaw In Your Logic, Good Sir   2 comments

Gerald P.  Jr., over at the CATO institute, offers a missive entitled: “The Gulf Spill, the Financial Crisis and Government Failure”.  My teeth ache.

From the article:

The Gulf oil spill and the global financial crisis both demonstrate the failings of big government.

Already we have a problem.  The Gulf oil spill and global financial crisis illustrate failings of government.  We don’t know for sure that they illustrate the same failing.  We also don’t know that the size of government has anything to do with the problem.  You are arguing in advance of your facts, Mr. O’Driscoll; motion to strike your comment as prejudicial to the jury.

Given that it is your opening line, I don’t expect the rest of this to go well, which is too bad, as you often do write good stuff.

The agency directly responsible for regulating the activity is the Minerals Management Service (MMS) of the Department of the Interior. Government regulation is intended to protect the public interest against bad or irresponsible behavior by private parties. In the case of offshore drilling, the federal government has assumed the role of solving a collective action problem. Potentially all Americans benefit from the drilling, but those living in coastal areas suffer disproportionate harm from mishaps. The government theoretically negotiates on their behalf and establishes rules to protect them.  Obviously, regulation failed. By all accounts, MMS operated as a rubber stamp for BP. It is a striking example of regulatory capture: Agencies tasked with protecting the public interest come to identify with the regulated industry and protect its interests against that of the public.

I agree, MMS is a striking example of regulatory capture.  I disagree with your characterization of regulatory capture.  “Agencies tasked with protecting the public interest come to identify with the regulated industry”.

“Come to identify”?

This is the sort of phrase I use to describe my dog’s behavior in the household.  He has “come to identify” me as the alpha male in the pack.  Has the Materials Management service, as an organizational entity, “come to identify” with the oil industry (i.e., arrived at this identification under its own auspices)… or has it been encouraged to identify with the oil industry (either by actions of the oil industry, or by political entities above it, or some combination thereof)?  How does an organization “come to identify”… an organization does not have a unified cognitive function.  It’s a collection of individuals.  They don’t all decide to identify with an industry independently all at the same time, do they?

The result: Government fails to protect the public. That conclusion is precisely the same for the financial services industry.

The result is not precisely the same.  It is conceptually the same.  You’re misusing “precisely” in literally the same way people misuse “literally”.

Advocates of heavy regulation promise that risky behavior by banks can be controlled and limited by regulators. There are two major reasons such efforts fail. I have already discussed the first: regulatory capture.

Okay, let’s talk for a second about regulatory capture, since I agree regulatory capture is indeedy the sort of thing that represents a real problem, and you haven’t covered it well.

Remember when I talked about audit a couple of days ago?  We are going to rely somewhat on that post here.  Go read it, if you haven’t already.  Okay, now you’re back and ready for a new bunch of genius knowledge.  When you’re talking about regulatory capture, you’re talking about some of the factors I mention at the end of the post… first:  “If we make it harder for people to do one kind of bad stuff, are they going to stop doing bad stuff altogether?  Or are they going to move to a different kind of bad stuff that’s worse?”

Regulatory capture is a case where the organizational process being audited leads the organization being audited to decide “to do a different kind of bad stuff that’s worse”, namely they suborn the audit process either directly (by bribing the auditors) or indirectly (by political maneuvering changing the rules of the audit process), for the purpose of either exempting themselves  from the audit, or for the nefarious and truly reprehensible purpose of entrenching their organization’s place in the market by raising huge barriers to entry.

How you prevent regulatory capture?  This is actually *not* a big mysterious insoluble question.  “Quis custodiet ipsos custodes?”

Let’s look at the particular case of the MMS.  It is a federal agency.  The current acting head, Bob Abbey, replaced Elizabeth (Liz) Birnbaum.  Ms. Birnbaum (who inherited the job in July 2009) seems to have been thrown under a bus, so to speak, but at the same time when you’re the head of a major regulatory agency you ought to have fixed some of the problems that were present when you took the top spot.

However, it’s not terribly counter-intuitive to imagine that stacking a regulatory agency with a bunch of pro-industry appointees for several years might take some time to undo, yes?  Particularly in today’s employment-employer market, where it’s difficult to fire people?  (Yes, even in private industry?)  Stacking was a tactic that President Bush was accused of using in so many different problem domains it’s hard to list them all.  To be fair, there are accusations of the same levied at the current Administration, like any other.  However, when the question is that of regulatory capture, it seems fairly obvious that stacking in the particular case of an oversight agency with industry insiders is a bad idea.

Perhaps (and I’m just brainstorming, just thinking outside the box, here), regulatory capture is just one symptom, here?  Perhaps the root problem is that our political system is very nearly engineered so that the party in power feels that it must embed itself in every little facet of government operations in order to further its long term goals, which are most often aligned with the good of the party, not the good of the country?

Is this less an issue with large organizations in general, than it is with large organizations that perforce must trade leadership (between diametrically opposed philosophies) every 4-12 years?

Maybe we could compensate for this problem in this particular domain, without throwing our hands up in the air and claiming that we can’t build anything bigger than a breadbox without dooming it to failure?  The CDC seems to operate fairly well.  The NSF seems to get along okay.  Maybe we ought to try having these other regulatory agencies exist without having the capability of having an Administration (of any stripe) suborn the process they’re supposed to oversee?

The second source of regulatory failure is the knowledge problem identified by Nobel Laureate Friedrich Hayek. The knowledge required by regulators is dispersed throughout the industry and broader economy. For regulation to work, that dispersed knowledge must be centralized in the regulatory agency. To successfully accomplish this requires central planning of the industry, if not the economy.

Now, this is actually germane.  For this reason, if no other:

By way of explanation, MMS Lake Charles District Manager Larry Williamson told the Acting Inspector General, “obviously, we’re all oil industry. We’re all from the same part of the country. Almost all of our inspectors have worked for oil companies out on these same platforms. They grew up in the same towns. Some of these people, they’ve been friends with all their life. They’ve been with these people since they were kids. They’ve hunted together. They fish together. They skeet shoot together … They do this all the time.”

It’s certainly the case that if you want to have experts in oil drilling, you’re probably going to be hiring experts from the oil drilling industry to provide some of the functionality of your oversight mechanism, and thus they’re going to have friendship ties to the industry (this can often work out to your advantage, by the way, since people will tell friends about fiascoes that they won’t discuss with a nameless pencil-pusher).  But it’s also not anywhere near the case that nobody can be knowledgeable about audit if they don’t work in the industry.  It takes anyone with a decent knowledge of security maybe 10 seconds to identify this sort of a problem.  “Gee, Bob has worked for BP before.  Maybe we ought to read Bob’s audit reports with a certain amount of scrutiny if Bob is auditing BP instead of Shell.  Or maybe we can have Bob audit Shell in the first place, and get Louie to audit Shell.  That seems less outright stupid, doesn’t it?”

But the local knowledge of specific circumstances of time and place cannot be aggregated in one mind or agency. We know that is impossible, and that impossibility was the reason for the collapse of the Soviet Empire and the transformation of the Chinese economy.

(sigh) No, Mr. O’Driscoll, we know no such thing.  Your statement is flatly ridiculous.  By this line of reasoning, any sort of aggregation of knowledge is useless, and any attempt at structure is equivalent to a totalitarian, planned economy.  You don’t have any sense of measure or trade-off, here.

Yes, it is true, as you aggregate knowledge you have a tendency to lose detail.  This is a problem with abstraction layers and information hiding, something that people have known about in the Computer Science field… forever, relatively speaking.  At least, in technology terms.  It’s relatively new in organizational science, but people are starting to take note.

An organizational structure is a lot like a computer program.  As the structure gets more complex, the areas in which large functions of the organization interact with other large functions need to be normalized, or you can’t get any work done.  Typically, when you do this, you’re going to lose some efficiencies in return for the others that you gain.  It’s a classic example of the trade-offs of top-down vs. bottom-up structure.  However, something the small-government people have failed to recognize is that if you don’t do this, your structure likely cannot scale.  You can’t build the Great Pyramid of Cheops with one guy.  You can’t even build it with a million guys if they don’t coordinate somehow… and if they’re coordinated, there are going to be times when a bunch of them are sitting around, doing nothing, waiting for somebody else to get something else done.

Getting groups of people to align along a particular goal predates history as a human societal problem.  There are some areas I agree with libertarians, it’s probably better to just leave well enough alone.  Some problems don’t require a Great Pyramid solution, so don’t build one.  I’m pretty sure that any industry capable of ruining the global economy or the environment for a geographical region larger than many ancient civilizations probably requires some sort of audit.  Yes, granted, it’s going to be tricky to audit such a beast.  The alternative is to forbid such things to exist, or to ride the crazy boom-bust cycle on a greater frequency than we currently do so.  I find neither particularly attractive.

Regulatory practice represents islands of central planning in otherwise decentralized market economies. If we add back in the problem of regulatory capture, then we get industries coddled and protected by government. When business and politics become intertwined we move from market economies to crony capitalism.

Yes, that’s true.  When we remove regulatory oversight, though, we get a whole new set of problems.  Please don’t pretend that they don’t exist.  You’re comparing regulatory oversight and its drawbacks to itself, instead of the lack thereof.

What is the missed lesson from all this? When President George W. Bush had his Katrina moment, the federal government’s bumbling response was blamed on him, on the Republicans, and on conservatives. Now it is President Obama’s turn. His administration’s faltering response to the disaster in the Gulf is attributed to his personal failings, staff ineptitude, communication failures, etc.

George W. Bush put a demonstrably unqualified person with no training in exception scenarios in charge of the governmental body responsible solely for responding to crisis events.  Obama put a demonstrably unsuitable person with some experience but no industry ties in charge of a governmental body riddled with industry insiders which was responsible for auditing that industry.  One major difference: there was some reason to believe that Ms. Birnbaum would be able to approach the problem of regulatory capture as she was not an insider.  She failed, yes, that’s on her and the Administration.  However, it’s clearly not the same problem as Mr. Brown’s inept handling of FEMA.  In Mr. Brown’s case, there was no reason to suppose that he might be successful.  In Ms. Birnbaum’s case, there was reason to believe she might not be successful, but also reason to believe she may be, and until it had been tested, you couldn’t know for certain.

A big-government conservative administration failed in crisis, as has a big-government liberal administration. The regulatory state did not prevent excessive risk taking whether in financial services, nor perhaps in offshore oil drilling. Government response to crises once they occur is slow and inept.

Funny, while the CATO institute fairly often criticized the Bush Administration (particularly in the areas of spending and civil liberties, it should be noted for fairness), they also supported quite a number of the Bush Administration’s policy decisions, often for “small-government” approaches.  I don’t think the privatization of Social Security supported by CATO would have been a very good idea, considering the market performance of the last 5 years.  That aside…

The “regulatory state” did not prevent excessive risk taking in financial services, because the… wait, what is the “regulatory state” circa 2008 when it comes to finance?  According to your article:

In his book on the financial crisis, “Jimmy Stewart is Dead”, Boston University Professor Laurence Kotlikoff counts over 115 regulatory agencies for financial services.

115 regulatory agencies didn’t do a good job of regulating a dozen super-sized financial institutions?  Could this be due to lots of individual regulatory bodies being out of date?  At least, partially?  After all, they had come into being to audit many small financial entities who were legally prohibited from merging from 1933 until 1999, a period of sixty-three years, not to deal with 12 entities, right?  Hypothetically, could you see an alignment problem here?

It’s not quite kosher to blame these organizations for failing to regulate an industry that looked quite different after the repeal of Glass-Steagall, when they were built to audit organizations of a type that no longer existed, don’t you think?  This is like blaming the guy in charge of watching the security cameras at a local bank branch for not noticing embezzlement at another bank branch entirely.  Of a different institution.  That isn’t even a bank.

The reason for the oil spill isn’t quite so complicated.  A bunch of demonstrably corrupt people weren’t doing a pretty simple job.

All this is not because either Republicans or Democrats are in power, but because big government doesn’t work. It can’t deliver on its promises. Big government overpromises and underdelivers. In reaching to do more, big government accomplishes less. That is not an ideological statement, but an empirical observation.

It may be an empirical observation, but it’s hardly a body of data.  I can think of more than a few examples, just off the top of my head, of “big government” delivering precisely what was promised, in some cases before time or under budget, or both.  If arguing by anecdote is an acceptable method of debate at the CATO institute, I can play!

In the case of financial services, virtually all the proposed regulatory reform offers more of the same.

Yes, that’s true.  And you artfully dodge mentioning that many of the people who support “big” government have made precisely this observation, and have complained rather loudly about it.  Like this guy here.  Not to mention the proponents of small government who have complained that it doesn’t give the government enough authority to break up large institutions.

Einstein famously defined insanity as the belief that, if we repeatedly do the same thing, we will eventually get a different result.

Yeah, uh, the source of that quotation is in some dispute.

University of Chicago law professor Richard Epstein has observed that we need simple rules for a complex world. The complexity of rules is self-defeating, because that complexity requires more knowledge than can be acquired. Brazil has a simple rule for directors of failed banks: They are personally liable.

Now, here’s the first bit of this piece that actually has value.  It’s true that sometimes (actually, often) you can devise simple solutions for complex problems.  Simple rules for financial oversight are probably a damn fine idea, but if you’re talking about making directors of any corporation liable, you’re talking about getting rid of the idea of limited liability corporations altogether, right?

Now, I’m busting Mr. O’Driscoll’s chops here, but in many cases I agree with the principles espoused by the Cato Institute.  I do believe that there are some problem domains where a large regulatory structure is unnecessary, or is contraindicated.  I do believe that there are some problem domains where a local regulatory structure will be more effective than a larger entity. I don’t think any of these situations are as cut and dried as Democrats, Republicans, or Libertarians would like to believe, however.

And I really wish all three groups would stop re-writing the history of current events to support their belief systems.  Strictly from the standpoint of complex systems analysis, financial collapse and the oil spill are not representative of the same sort of oversight failure.  Pretending that they are is just baloney, and bad failure analysis.

Posted June 14, 2010 by padraic2112 in politics, rants, Uncategorized

Mr. D Goes All Crazy   Leave a comment

I’ve mentioned in the past that I like Karl Denninger’s blog.  Usually (particularly in the realm of economics) he has something interesting to say.

Sometimes, though, his politics trump his own powers of reason.  Case in point

There are a huge number of what some on the right call “Limousine Liberals” that preach all sorts of BS about “energy efficiency”, “global warming” or “alternative fuels.”

Sure.  There’s also a number of people on the right who say the same things, Karl.  What do “some on the right” call them?

Let’s deal with some facts.

Okay, lets!

  1. We have a lot of coal in this country.  It contains Thorium, which is a natural substance that can be used to build nuclear piles.  Said technology was developed and built more than 30 years ago – this is not “pie in the sky” technology.
  2. Each ton of coal we burn up contains 13 times as much energy as that liberated by combustion of the carbon in said Thorium.  We could thus receive the same electrical energy we gain by burning the coal through extracting the Thorium and using the nuclear energy to produce power.  With the rest of the energy, the other 12/13ths, we could then extract hydrogen from seawater (which we have lots of) and convert the remaining coal to either diesel fuel or gasoline.  To put a not-fine-point on this, we throw away more than 100 billion gallons of gasoline (after conversion losses) in thorium tailings alone.  That is damn close to all of our existing gasoline consumption – with ZERO oil being drilled.  (PS: Those are conservative estimates – mathematically, it’s 200 billion gallons!)
  3. We know how to build fast breeder reactors.  It is true that we have a limited supply of U-235, because it is a tiny proportion of the natural deposit in terms of isotopes.  However, we have a lot of U-238 and we can turn that into Pu-239 in said Breeder Reactor.  That produces both more nuclear fuel and electricity.
  4. We like our cars.  We like our Air Conditioning.  We like our electricity, peak load of which is often generated with natural gas.  We like our 3,000 square foot houses, our computers, our bigscreen TVs and other electrical and electronic knick-knacks.  All of these require energy to operate.
  5. A growing economy requires a growing energy output.  There is no escaping this fact, despite it being inconvenient.
  6. We have a lot of oil and natural gas in various forms in the United States.  That includes (but is not limited to) offshore oil and gas, shale on federal lands and more.  We don’t want to stick the straws in the ground and perform other sorts of mining (including strip-mining), but the energy is there.

Not too shabby, except you’ve hidden a broken one in there.  A growing economy does not require a growing energy output.  It requires either a growing energy output, or an increase in efficiency, or transformative technology that increases economic output while replacing older, equally energy consumptive technology.  Or some collection of the above.

Bluntly, “energy scarcity” is artificial.  We have every means within this nation – never reaching beyond our own borders – to supply every single bit of energy we need literally for the next several hundred years, and we can make as much of that energy into liquid hydrocarbons (gasoline and diesel) as we wish.

Energy supply is indeed constrained by lots of factors other than raw physics and currently existing engineering.  Defining “artificial” as “of human origin” then yes, that makes energy scarcity artificial.  It also makes energy supply artificial.  Oh, and the economy, our political system, money, most foodstuffs, etc., etc.  Again, this is slightly nitpicky, but you’ve got bits in here that are pretty blatant rhetorical devices designed to prejudice your readership, so this deserves mention.

Our refusal to be energy independent is political, not practical, thermodynamic, or driven by resource.  It is the product of lies and manipulations by those who claim “environmental awareness”, which in fact is no such thing – it is instead a demand that “someone else” eat the risks that come with the consumption of energy we demand to enjoy, instead of those risks and costs being accepted by us in the United States.

Wait, you missed a lot of context here.  You’re correct, slam dunk, I agree, our refusal to be energy independent is largely political.  In some cases, it may be the result of lies or manipulations by a bunch of people, some of whom claim “environmental awareness”.  Note, though, in some cases, it may also be the result of stupidity by a bunch of people, across the political spectrum.

You’re tacitly condemning one party, and tacitly condemning a subsection of that party, and ignoring the fact that energy independence is a bipartisan problemThree-Mile Island happened in 1979.  Domestic nuclear power basically died off between 1980 and 1990.  1980-1992, who was President?  Reagan, then Bush I.  1980-1992, who controlled which houses of Congress?  Democrats held both in 1980, then we were split (Democratic House, Republican Senate) until 1983, again until 1985, and again until 1987.  Democrats held both houses from 1987 thru 1991, into 1993 and up until 1995. From 1995, through 1999 and 2001, of course, we had all-Republican (along with a nice long stretch where we had a Republican President as well, of course).

Sure, I’ll grant you Clinton vetoed the Nuclear Waste Bill in 2000, but that actually had bipartisan support.  The NEI pushed for Yucca Mountain, in Nevada.  Funding cuts almost killed the project in 2001… who was it that was in control of Congress, then?  Brought back in 2003, who was in control of Congress then?  Now, I grant you the Obama Administration dealt the death blow to Yucca in 2009, unsupported by science, and probably only to save Harry Reid’s skinny butt – this deserves criticism.  However, several people (including some on the right) would hardly call the current Administration anti-nuclear.

But to claim that this is entirely the result of greenies with cases of critical cognitive dissonance isn’t quite fair, now is it?  Six years of an all-Republican government and the Right didn’t exactly push this through, did they?  Maybe that Texas oil man might have had something to do with that?

You’re also ignoring the environmentalists who supported or now support nuclear power, such as Patrick Moore (one of the founders of Greenpeace).  You’re ignoring those on the left who support nuclear power (hint, go here, google those names and “political contributions”.  They don’t all donate to the Right).

Now with these facts let me put forward one of my first principles – that is, one of the things that I simply will not compromise on.

We have no right to demand that other people accept pollution and degradation of their environment to further our way of life.

Right on board with you there.  Too bad you’re a global warming skeptic.

You can gripe about drilling off the coasts – all of them – and argue for shutting it down, along with arguing AGAINST strip-mining for shale and recovering oil sands and similar.  But if you do so you have an obligation to…

… If you enjoy your Air Conditioning in the summer time you may not use it…

… If you argue against coal-fired power plants you may not use electricity anywhere that it is generated using that coal…

Okay, now here is where the wheels start to come off the wagon.  Ad Hominem Tu Quoque!  (I love it when I get to call that one out).  Perfect Solution fallacy!  You can be a hypocrite, that doesn’t make your argument wrong!  You can be forced to make compromises you find disagreeable, that doesn’t make your position that the compromise ought not to be made wrong.

Now, you’re correct, greenies who drive SUVs are probably engaged in special pleading or committing the relativist fallacy.  But for the most part very few environmentalists believe that humankind ought to leave *zero* impact on the world (there are of course exceptions to this rule, we’ll grant you there are crazy environmentalists).  Most actual participating members of the Sierra Club and CalPIRS that I know/knew (the volunteers, that is) do all the stuff that you’d expect environmentalists to do.  Sure, there might be upper class liberals who drive SUVs and donate to the Sierra Club, show up at rallies and largely make themselves feel good about “being green”… but actual treehuggers recycle, cut power use, avoid consumables, bike, work close to home, don’t travel unnecessarily, etc., etc.  This reminds me of Conor’s post from the other day, to digress briefly.

You want to know what I consider being “equitable” if you really believe the crap that is spewed by people like Kunstler and Gore – as a maximum resource consumption point?  I’ll tell you:

  • One bedroom of of no more than 144sq/ft (12×12) for each cohabitating or married adult couple, plus one 10×10 bedroom for each additional single person (including children.)
  • One bathroom no more than 10×8, containing one tub/shower, one toilet, and two sinks.
  • A living room space of no more than 20×20.
  • An eat-in kitchen no larger than the living room.

This puts the “living space” for a household of 4 persons at about 1100 sqft.  That’s what I grew up in and it’s definitely “middle class” by the definitions of the 70s and early 80s.  It is also quite livable and frugal.  Now let’s continue:

  • One television, LCD (not plasma), no more than 400w.
  • Passive cooling only (e.g. basement + fan), no air conditioning.
  • Solar hot-water boosted with electric (remember, no petroleum – so no gas!) when necessary.
  • Your computer is a laptop (low-power netbook), and you own only one.
  • No incandescent lamps, no dishwasher (you have a dishwasher – it’s your hands.)
  • Your clothes are dried on a line outside.  The use of a horizontal (low-water and energy) washing machine is acceptable.
  • No person drives more than 5 miles to work and no petroleum is used to get there and back.  Yes, this means you walk, you bike, or you use a plug-in electric bicycle or golf-cart style vehicle or moped.
  • You do not use, at any time except for bona-fide emergency (e.g. an ambulance ride!) any petroleum-consuming conveyance, including diesel-powered trains, city buses (other than electric trolleys), automobiles or aircraft.  Period.

Well, now, hold on a sec, there Karl.  First of all, you described (mostly) my house.  The dishwasher, well, dishwashers use less water than washing the dishes by hand, and there’s water shortages where I hail from (perhaps unlike Florida), so there’s that trade-off.  We have wall units for air conditioning, which admittedly are not very efficient, but anybody who knows anything about the grid knows that what you’re saying here is a ridiculous metric to measure dedication to environmentalism.

Because, you see, the power grid can’t be turned off. During peak load, you’re actually (somewhat) contributing to power generation -> as you turn appliances on, you up the demand, and peaking power plants (which typically run off of natural gas) need to generate more power to compensate for this – of course, they have to generate it before you ask for it.

Running all the time, regardless, are base load power plants (typically coal and nuclear powered plants).  They have to run to keep the grid from collapsing, and generate power even if nobody is using it.  You can’t even really turn these turkeys *off*, since they take a while to get up to speed.  So, yeah, I could cut out all my energy usage period and live like a caveman.  The net impact on the power generation industry?  Almost zero.  More reading here for those who like reading more thorough analysis.

We’re going to hell in a handbasket anyway, Karl.  I can’t change that, by myself.  Neither can you, for that matter.  Unless/until we get real backing from a large majority of people, it’s just politically impossible for anybody to stop this train.  By your logic, if a vast majority decides to screw us, long term, for short term gain we’re only allowed to protest against this screwing if we don’t accept any of the short term benefits.  Oh, great!  We lose twice!  Once, because everybody is going to lose in the long run, and second, because we can’t even at least partially enjoy the trip.

Those who argue for a “western lifestyle” but demand that others, whether defined as Chinese, Nigerians, Arabs, Mexicans or anyone else “eat” the risk and pollution that comes from their profligate lifestyles, or who argue for you to live as the above while they have their cars, boats, mansions and planes, are both pigs and bigots.

This means you Mr. Gore, it means you Mr. Kunstler, and it means you …

Yeah, uh, Karl?  On absolutist terms,  that means you too.  You take steps to mitigate your impact (just like I do, and like any reasonable person ought).  Sure, Al Gore is probably something of a douchebag, but you’re basically saying we’re all jackasses unless we live like cavemen.  Which is absurd, I could live like a proto-human luddite all I want and that would not only help nobody… it would actually probably mean that nobody would take me seriously.

If you’re trying to convince governments to change their policy, you need to wear a tie and fly around in jets, that’s just the way the world *is*.

I therefore support extraction and production of each and every BTU that I desire to consume right here, inside our borders, where the risk of the production of that BTU falls on ME, as part of the collective known as The United States.

Okay, that’s actually admirable, to some degree.  At the very least, the immediate byproducts of our minerals and energy policy are going to screw up our water and air more than somebody else’s.  And I’m fully onboard and behind you in the push for nuclear power.

But let’s also be honest about the global energy market: China and India (just to name a couple) are moving up in the world.  If we stop buying oil and natural gas from countries that screw over their populace and just supply our own… those countries are still going to sell their oil, and still screw over their populace, they’re just going to sell to somebody else.  The oil market is global, we can’t exactly take our ball and go home (unless you’re talking about interdicting their ability to produce oil and gas unless they play by some sort of global regulatory agency).

The only way to solve *that* problem is to dramatically cut the world’s dependency upon oil as a energy source.  There’s lots of other uses for oil, but we don’t need nearly as much of it if we don’t burn almost all of it.

Posted June 8, 2010 by padraic2112 in politics

Audit   1 comment

There are typically four major processes that people talk about when they’re talking about security – identification, authentication, authorization, and audit.  It’s pretty typical for people to talk about the first two as if they were one thing (identification and authorization), but really, they’re not (that’s a topic for another day).

  • Identification: Who are you? – “Are you anybody?”
  • Authentication: Are you allowed to act on behalf of a principal? –  “Are you, the identified person, allowed to play here?”, or “Do we let just anybody play here?”
  • Authorization: What are you allowed to do? – “What sorts of ‘play’ do we allow ‘here’?”
  • Audit: Hey, what have we been letting people do here? –  “Are the above three working?”

I’ll talk about these more in depth someday, but today I want to focus just on audit.

There are lots of different kinds of audit.  You have a computer security audit, whereby some nerd like me analyzes log files and system executables and whatnot and tries to determine if the system itself has only been used for its intended purpose by the people who are supposed to be using it.  You have fiscal audits, where guys in green eye shades analyze accounting logs and purchase orders and credit card receipts and justification forms and try to determine if the money has been used only for its intended purposes by the people who are supposed to be spending it (or collecting it, as the case may be).  You have safety audits, where guys in orange vests with clipboards analyze workspaces and insurance reports and work processes and try to determine if people are doing things that are statistically likely to produce a high number of injuries or deaths.  You have sales audits, where guys in suits look over sales records and market analysis reports and phone logs and try to determine if the guys with good teeth who talk to the customers are selling about what they ought to be expected to sell given the corporate understanding of the market and the customers.

In practice, all these things are wildly different, obviously.  Conceptually, from the standpoint of systems analysis, they’re all the same.  You’re taking some process, and you’re examining the inputs and outputs of that process, and if the end result doesn’t jibe with what you expect, you have a problem.  Either the inputs are off or measured improperly, the process is bad or is measured improperly, the outputs are off or are measured improperly, or your expectation (the way you audit) is just outright wrong.

Now, in the real world, almost everybody *hates* audit.  There’s lots of reasons for this, of course (in many cases, the Big Irk is that the auditor only looks at the first three possibilities, and it’s difficult or impossible to get the auditing organization to see that the actual problem is that they’re doing it wrong).

At the same time, in the real world, everybody *loves* audit, as long as what’s being audited is something somebody else is doing.  Politicians talk about oversight (which is a nice code word for audit), and the public eats it up.

Oversight!  That’s gotta be good, right?

Welfare scofflaws, corrupt politicians, police abusing authority, people abusing government grants, yeah!  Catch those rich bastards putting their money in the Swiss banks and tax the hell out of them!  Crawl up BP’s hind end with a flashlight and find out who’s responsible for this big oil spill!  We want accountability!  Measure teacher performance!  Who’s paying for my congressperson’s reelection campaign!?  Who’s driving, have they passed the test?  Who’s in the country, are they a citizen?  Who’s using welfare that shouldn’t be?  What government programs aren’t producing results?  What the hell are we spending all this money for in the military budget?  Oh, and hey, are our fraud reporting mechanisms actually working at all?  We need to audit our ability to audit!  Rargh!  Righteous indignation!

Somebody knocks on your door and says you’re being audited, suddenly you might not be such a fan of oversight.

Regulations!  Compliance!  Paperwork!  I gotta stand in line at the County Records Office or the DMV!  I have to write a stupid five page report justifying buying a plane ticket on Lufthansa instead of United, what a waste of my frickin’ time!  How the hell am I supposed to be getting any work done with all this bureaucratic red tape getting in my way!  Government is so inefficient!  We can’t measure teachers by performance, it doesn’t work!

Okay, take a breath.

Here’s the reality.  You can audit a process for success, or failure, or both.  Which one you *ought* to use in a particular scenario actually depends upon a wide number of factors.

  • What’s our false positive rate? – how often will our audit flag somebody as being bad, when they’re not?
  • What’s our false negative rate? – how often will our audit flag somebody as being good, when they’re bad?
  • How much does it cost for us to audit this thing, whatever it is?
  • What are the externalities involved in the audit?  Are we auditing the right process to begin with?
  • What happens if we don’t audit anything at all? – does it even matter?
  • If we don’t audit, will the negative consequences actually cost more than the audit?
  • If we do audit, can we do anything with the results, or are we already limited to doing one thing anyway (e.g., “Too big to fail”)?
  • Quis custodiet ipsos custodes?
  • If we make it harder for people to do bad stuff, does this actually prevent people from doing the bad stuff, or does it just make it more profitable for those who get away with it?
  • If that last is the case, are we actually going to have less bad stuff (in toto), or just fewer incidents of bad stuff with a lot more bad in the stuff?
  • If we make it harder for people to do one kind of bad stuff, are they going to stop doing bad stuff altogether?  Or are they going to move to a different kind of bad stuff that’s worse?

These are all questions you need to ask yourself when people start talking about “accountability” and “oversight”.

Otherwise, what you’re paying for isn’t better or more secure processes.  What you’re paying for is a false sense that you’re getting what you’re paying for, which is double-dipped stupidity.

Posted June 8, 2010 by padraic2112 in management, politics, security

Friday Backpfeifengesicht   Leave a comment

Following a trend established by a fellow blogger, I hereby dedicate Friday as the day for contributing towards the goal of exposing wretched (or sufficiently suspected to be wretched) examples of humanity to the greater blogosphere.

Steve Blair, City Councilperson for Prescott, Arizona, you win the dubious honor of being the first person so honored.

From AZCentral.com

A group of artists has been asked to lighten the faces of children depicted in a giant public mural at a Prescott school.

The project’s leader says he was ordered to lighten the skin tone after complaints about the children’s ethnicity. But the school’s principal says the request was only to fix shading and had nothing to do with political pressure.

City Councilman Steve Blair spearheaded a public campaign on his talk show at Prescott radio station KYCA-AM (1490) to remove the mural.

In a broadcast last month, according to the Daily Courier in Prescott, Blair mistakenly complained that the most prominent child in the painting is African-American, saying: “To depict the biggest picture on the building as a Black person, I would have to ask the question: Why?”

Blair could not be reached for comment Thursday. In audio archives of his radio show, Blair discusses the mural. He insists the controversy isn’t about racism but says the mural is intended to create racial controversy where none existed before.

“Personally, I think it’s pathetic,” he says. “You have changed the ambience of that building to excite some kind of diversity power struggle that doesn’t exist in Prescott, Arizona. And I’m ashamed of that.”

That’s not what you should be ashamed of.  More here, here, here, here, and (should you be so inclined) the archives of Blair’s radio show are here.  His political site is here.

Yes, I listened to some of it.  I need to go have a drink now.  Decrying how he’s not a racist and asking everyone not to pay attention to color while he’s arguing against a mural depicting a student of the school because it’s not “representative of Prescott”.

Yeah, those pesky people of color, always shovin’ their face in our faces.  So much easier if they aren’t recognized as members of the community.  Because clearly putting someone who isn’t white in the most predominant spot on a mural is all part of an insidious artistic agenda.

Unlike some people, I’m not going to tell you that you’re a horrible person because you’re racist.  I’m going to tell you that you’re a horrible person because you’re racist and you hold public office and you spout on the public airwaves.  You pollute your own office.  You talk about how a child’s face is divisive, I’ll bet he’s so glad to know that his very image splits the community in which he lives.

Posted June 4, 2010 by padraic2112 in politics, rants

This Is An Attack Ad?   1 comment

If you support the teaching of evolution in the classroom, you’re a stinkin’ liberal.

Now that you think we’ve fully entered bizzaro-world, guess what?  It gets more mind-bendingly crazy… who’s funding this ad?  The Alabama Education Association.

You know, politically speaking I find quite a bit about the Democratic party to be simply silly, but if this is what it means to be a conservative…

State GOP groups are progressively getting more nutty.

Posted May 12, 2010 by padraic2112 in politics, Uncategorized

Why You Shouldn’t Like Obama’s Pick for SCOTUS   1 comment

Thankfully (since I don’t really have the time or the expertise to write this analysis), other people have done the work for me.

From Greenwald’s piece:

Beyond the disturbing risks posed by Kagan’s strange silence on most key legal questions, there are serious red flags raised by what little there is to examine in her record.  I’ve written twice before about that record — here (last paragraph) and here — and won’t repeat those points.  Among the most disturbing aspects is her testimony during her Solicitor General confirmation hearing, where she agreed wholeheartedly with Lindsey Graham about the rightness of the core Bush/Cheney Terrorism template:  namely, that the entire world is a “battlefield,” that “war” is the proper legal framework for analyzing all matters relating to Terrorism, and the Government can therefore indefinitely detain anyone captured on that “battlefield” (i.e., anywhere in the world without geographical limits) who is accused (but not proven) to be an “enemy combatant.”

Those views, along with her steadfast work as Solicitor General defending the Bush/Cheney approach to executive power, have caused even the farthest Right elements — from Bill Kristol to former Bush OLC lawyer Ed Whelan — to praise her rather lavishly.  Contrast all of that with Justice Stevens’ unbroken record of opposing Bush’s sweeping claims of executive power every chance he got, at times even more vigorously than the rest of the Court’s “liberal wing,” and the risks of a Kagan nomination are self-evident.

Scott Horton’s take is a little more nuanced, but essentially the same:

My suspicion–and it’s only a suspicion–is that Kagan is a liberal in the sense of the Kennedy and Johnson Administrations, someone who has faith in the power of the executive to shape a better and more just state. She pays lip service to the limitations on executive authority contained in the Constitution, but she’s generally in the thrall of executive power.

Stuart Taylor, Jr. at The Atlantic chimes in:

But on presidential power and terrorism, she is more of a known quantity.

Justice Stevens led the Court’s assault on the Bush Administration’s sweeping claims of presidential and congressional power to wage war against terrorism. In three big decisions in 2004, 2006, and 2008, narrow liberal majorities — with swing-voting Anthony Kennedy providing the fifth vote — for the first time asserted judicial power to review presidential detentions of alleged “enemy combatants” seized and held abroad. Stevens and his allies also invalidated the rules decreed by Bush for “military commission” trials of foreigners for alleged war crimes and severely restricted interrogations of suspected terrorists.

Kagan has had no occasion to revisit those precise issues as solicitor general. But on somewhat analogous issues — both in her 2009 confirmation testimony and in defending Obama’s continuation of some Bush policies that left-liberals reviled — she has sought to limit the reach of the 2008 decision and has firmly rejected the stance of the left.
… [however, he concludes]…

Speaking as a moderate independent, I like everything about Kagan that the left dislikes.

Additional commentary from The American Conservative:

Perhaps they are all too tired out from combating Sotomayor’s non-existent racism that they don’t have the energy to resist a nominee who appears to be a willing enabler of the worst excesses of the national security state. In reality, we all know that most Republicans have no interest in checking those excesses, and many of them have become so attached to defending such excesses that it has become part of their political identity. To the extent that most Republicans are content with or not overly concerned about Kagan, because she seems to line up with them on some of the issues on which the GOP has been appallingly bad, progressives, libertarians and small-government conservatives have reason to be worried.

And from The American Prospect:

Presumptive front-runner Elena Kagan, while an attractive candidate in some respects, has a record on civil liberties and executive power that strongly suggests she would not be a liberal in this mold either. This would be bad for the development of progressive constitutional values.

Of course, the views of the general political blogosphere are all over the place.  I’m inclined to provisionally agree with Mr. Thompson over at the League of Ordinary Gentlemen:

When Kagan is confirmed, it will be but one more step in the long and unabated pattern of Congressional acquiescence to the Executive, and abdication of its own institutional responsibilities that I identified a while back.  It would certainly be helpful if they realized at some point that their interests as Congress-lizards are not the same as the interests of their respective parties, and are definitely not the same as the interests of the Executive Branch.  We do not live in a parliamentary system, and Congress is supposed to be a coequal branch.  Unfortunately, Congress seems to think otherwise.

and from the comment thread on that post:

It would be nice if the Republicans at least tried to object on executive power grounds. They haven’t, and it doesn’t look like they’re expecting to seriously contest her nomination in general. This is most likely because they actually like her positions on executive power, much as they actually liked the Dick Cheney view of executive power. This does not excuse the Congressional Democrats, who will continue their well-established pattern of spinelessly acceding to the wishes of the Executive branch.

Since we don’t actually have a body of case law decisions to look at, we don’t know for sure that Kagan will be as staunch a supporter of the unitary executive as Mark fears.  However, given the fact that we still have The Patriot Act and we still have warrantless wiretapping, I’m disinclined to give the Administration a pass on this.

David Brooks and Andrew Sullivan both seem largely unimpressed with her conflict-avoidance (Brooks first):

She seems to be smart, impressive and honest — and in her willingness to suppress so much of her mind for the sake of her career, kind of disturbing.

Her life, so far as one can tell, is her career, and her career has been built by avoiding any tough or difficult political or moral positions, eschewing any rigorous intellectual debate in which she takes a clear stand one way or the other, pleasing every single authority figure she has encountered, and reveling in the approval of the First Class Car Acela Corridor elite.

I’m not so enamored of bashing elites, but it does seem pretty odd to me that someone who is being positioned to be a Final Arbiter of conflict in our society has so little public expression of the ability to be involved in conflict.

Posted May 11, 2010 by padraic2112 in law, politics, Uncategorized

CATO, Examining The Evidence   Leave a comment

Research paper published at CATO refutes the “Starve the Beast” philosophy of reducing government spending by cutting revenue.

The empirical evidence shows that cutting taxes *increases* spending.  Why?  Possible reasons

In the first place, cutting taxes doesn’t deprive the government of funds as long as it can tap the credit markets on a vast scale. Locking up the ice cream does no good if there’s an endless supply of burgers and fries. In the second place, cutting taxes instead of spending is seductively pleasant. It lets citizens enjoy more government services at no extra cost on April 15.

We can have our cake and eat it too!  Tip o’ the blogging hat to The Volokh Conspiracy.

Posted May 3, 2010 by padraic2112 in politics

A Note About Moral Hazard   3 comments

You hear about “moral hazard” a lot when people are talking about finance.  It’s an interesting topic, currently being (somewhat contentiously) edited on Wikipedia.

The less contentious part of the article consists of the opening paragraphs:

Moral hazard is a special case of information asymmetry, a situation in which one party in a transaction has more information than another. The party that is insulated from risk generally has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information.

Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions. For example, a person with insurance against automobile theft may be less cautious about locking his or her car, because the negative consequences of vehicle theft are (partially) the responsibility of the insurance company.

Okay, here’s the interesting bit, to me.  Fiscal conservatives often cite moral hazard as a reason against government intervention in the economy.  On the face of it, it’s certainly a plausible theory, although I’ve never seen convincing evidence that moral hazard itself is actually a pervasive cause of risk taking.  Standard disclaimer, I’m not an economist, so I can hardly claim to be well read in the literature.

However, something I’ve never heard a fiscal conservative mention is that the entire concept of a corporation is fraught with moral hazard.  There’s a reason a corporation is a distinct entity from a partnership, it enables the investors to absolve themselves of some of the liability involved with doing business.

If you’re really all a-fired convinced that moral hazard is such a horrible concept, why aren’t you for the dissolution of the corporation and the limited liability company as legal entities, and a change to partnerships or sole proprietorship businesses as the only legal business entities?

Sure, it would murder our GDP, destroy the entire mechanism of the 401k and 403b as retirement vehicles, result in a complete destruction of Wall Street (hm, that could be argued as a plus, there), put a severe damper on liquidity… all of those things are pretty bad outcomes for economic growth.  So I suppose that one can make the case that moral hazard has some place in our economy, right?  Sometimes, amortizing risk across a population increases risk taking, but innovation is a risky thing and we like and benefit from real innovation, so maybe subsidizing this can sometimes be justified?

So if that’s the case, can we at least come up with some other substantive objection to government intervention in the economy as a main talking point? Allow me to digress into non-finance related current affairs.  Indulge me, for a moment.

Taxpayers are likely going to be paying for a substantial portion of the cleanup of the Deepwater Horizon.  That’s a GAO PDF link in the middle, there. See, when the Exxon Valdez spill occurred (ostensibly to prevent oil companies from being sued into oblivion and/or remove the economic externality of an oil spill depending upon the degree of your pro- or anti-business stance), the government passed the Oil Pollution Act of 1990.  A tax was imposed on each barrel of oil, and the funds were deposited in a cleanup account.  Then liability limits were set on each type of vessel that might spring a leak, and if a spill occurred, the oil company owning the vessel only had to pay up to the limit of liability, the rest was covered by the fund.

Hm, doesn’t that create a moral hazard scenario?  We limit liability for each individual corporation, and if the amount of a spill exceeds what we have available in the cleanup fund, well, who is going to pay for that, I wonder?  Certainly not the corporation, it’s been absolved.

Hey, who was President in 1990, again?  Well, that’s not entirely fair, those pesky Democrats were in charge of Congress.  I’m sure that the Republicans fought tooth and nail to prevent such a horrid piece of government intervention in the marketplace.  I didn’t know Congress was so lopsided in 1990, only 5 Republicans in the House and none in the Senate?  Amazing.  One would have thought the numbers were more balanced!

From that GAO report:

A catastrophic spill could strain the Fund’s resources: Since the 1989 Exxon Valdez spill, which was the impetus for authorizing the Fund’s usage, no oil spill has come close to matching its costs.42 Cleanup costs for the Exxon Valdez alone totaled about $2.2 billion, according to the vessel’s owner. By comparison, the 51 major oil spills since 1990 cost, in total, between $860 million and $1.1 billion. The Fund is currently authorized to pay out a maximum of $1 billion on a single spill. Although the Fund has been successful thus far in covering costs that responsible parties did not pay, it may not be sufficient to pay such costs for a spill that has catastrophic consequences

One of the reasons that the Fund might not be sufficient to pay such costs?  From 1994 to 2005, our delightful Congressional representatives did not collect the tax that put money into the fund.  Say, who held majorities in Congress from 1994 to 2005?

If this spill, or any other spill in the near future, exceeds the ability of the fund to clean it up, would you care to make a small wager as to what will be said on Meet the Press or Face the Nation by the Republican representative the next week?  Undoubtedly something about the government being incompetent and being incapable of handling this sort of thing.

Now there is a moral hazard for you, ladies and gentlemen of the taxpaying public.  You don’t hold your elected officials responsible for the votes they cast.  You don’t stand up for your principles, and write your congressperson and tell them when they’re blatantly going back on funding the services that you asked them to create.

To be fair, I’m pounding a lot on Republicans in this post, and I do believe that the idea of moral hazard has some weight and ought to be considered.  However, it seems obvious to me that moral hazard is a rhetorical weapon used only when it is convenient, and I for one am really tired of hearing it trotted out right now…

Posted April 28, 2010 by padraic2112 in politics, rants, Uncategorized

My Version Of Health Care Reform   4 comments

I’ve talked about this before with various friends and sundry, but I’ve never blogged about it.

The problem with the Health Care debate in this country is that most of the solutions offered are almost as complex as the problem they’re trying to address, or they’re stupidly simple without simultaneously making the overall problem more simple.  This is one case where our system, which has grown and evolved over time, has become unnecessarily complex.  I was finally going to blog about it this week, and then I happened to notice something truly remarkable: Mr. Denniger already wrote itTwice.  Holy tamoly, this is *exactly* what I’ve been saying about health care for *years*.

Note: I’m not particularly certain that my/his idea will immediately correct all the problems with our health care system.  One major problem not addressed, for example, is that the doctor population in this country is hugely rewarded for choosing specialty care as their practice, when what we really need is more general practitioners.  Another is that there is going to be a rather ugly transitional period here, since all medical billing is currently completely insane.  Just two examples.

But this is one case where I do agree fundamentally with conservatives who say that massive infrastructure isn’t what’s required to solve the problem.  Certainly there are issues here, even with Karl’s framework.  It removes medical bankruptcy, which is good.  It ensures that everyone  gets lifesaving care, which is good.  It doesn’t actually solve the long term problem of the free riders, though, since people still won’t get enough insurance, they’ll still go to the emergency room, and it doesn’t really matter if your debt is assigned to the IRS to collect if you’re never going to make enough money to pay it off.

However, it resets the playing field at “not completely, utterly, and overwhelmingly complex to the point of utter insanity”.  It turns insurance companies into true “amortization of risk” companies, which is what they ought to be (note: I’m not convinced that limiting by state is the best long-term solution, but it’s an appropriate place to get started).

It won’t fix everything, but it will certainly remove layers upon layers of obfuscation.

Posted September 10, 2009 by padraic2112 in politics, Uncategorized

Health Care Debate   4 comments

Keith Hennessey wrote a two-part post regarding the current state of the health care debate.  The first post was quite good.  The main point of the post was to refocus the health care debate on the following problem:

“The value decision that underlies most of this debate flows from the question:  Who should decide whether additional medical care is worth the cost?”

From later in the post:

In both examples, one treatment is medically superior and more expensive than the other.  That’s what makes these hard decisions, and better demonstrations of the true tradeoffs, than either Governor Palin’s or President Obama’s examples.

Many chafe at being confronted with these kinds of choices.  They argue that, if we confront these choices, then we need to devote more resources to health care.

The problem is that there is always a resource constraint.  Maybe yours is 10% or 15% higher than mine, or maybe you would redistribute funds from other people to make someone’s pie bigger.  But a bigger pie does not allow you to avoid these tradeoffs.  It just means you confront them at a different cost level.  The question of who gets to decide is unavoidable, no matter where you fall on the policy or political spectrum.

He’s right, and I encourage anybody to read that first post.

I’m really disappointed in this followup post.  I left the following comments in the thread, replicated here since the second one is lengthy.

If enough people choose not to buy the +$400 insurance, it’s no longer +$400 insurance, it’s +$500 or +$1,500 insurance; and conversely if enough people buy the $400 insurance, it’s now +$300 or +$10 insurance (profit considerations non-withstanding).  If the option is between $400 insurance and $10 insurance, statistically healthy people will choose the $10 insurance, to have $390 worth of beer money. And now, the individuals who would have been interested in the $400 insurance are left with a product that sells for $1500. They can’t afford that, so they get some other sort of insurance.

But when they finally get sick, those younger family members who have been paying $10 for their own insurance are often called upon to help pay for the $5 million dollar treatment or watch grandpa die.
Moving insurance decisions to an individual level (particularly when, *as you note*, the general population is not particularly well educated as to medical risks and statistics) means that most people will choose based upon individual risk and individual reward. However, most people in practice are impacted by group risk and group reward; decoupling these is not a simple affair.

My second comment started off perhaps a bit too pointed, but I was hugely frustrated to see a first post that framed a public policy issue in a manner that I thought was excellent, and then almost immediately went off the rails in the second post.

I feel like a guy who walked into a huge banquet hall, saw glittering crystal goblets and brilliantly polished silverware on pristine white linen, sat down on a luxuriously cushioned chair, and was served a twinkie on a cracked plastic plate.

Your previous post did an excellent job of providing a workable foundational framework for constructive discussion on health care.  This post was filled with “I think…”s and “I believe…”s and precious little to provide backing evidence for those beliefs.  You’ve constructed a faith based argument.  That would be fine if we were discussion theology, and at least a credible beginning to a philosophical discussion.  What we’re talking about here is trying to make informed decisions about public policy, and knowing what you think or believe isn’t nearly as interesting as knowing *why*.

>  Governments/insurers/employers have to set up rules that apply to everyone.  People
> are different, and sometimes those rules don’t fit your particular case.

Is this really a particularly worrisome case?  People on Medicare are generally happy with Medicare (from what I recall).  Is this an exception scenario worth serious consideration?

> People have different attitudes toward medical care.  Third parties can’t know those
> preferences or account for them in their decisions.

For the most part, this is why the bill includes the now-infamous (not really) “death panels”, so that doctors can inform patients as to health outcomes for grave illnesses, and people can express those preferences.  Beyond a matter of preference, there is the in-practice question of “preferences” diverging from the standard of care.  Certainly some people will want to refuse vaccinations, for example.  Do we allow them to do so as a matter of routine?  What about during an epidemic?  Can we state that there are times when the preferences of the individual are not germane?  When?  If not, why not?  And if we allow people to opt-out of care decisions, what happens when the consequences occur?  Do we refuse treatment to un-vaccinated children who get measles?  Do we treat head injuries to people who ride motorcycles and don’t wear helmets?  Do we provide cancer treatment to smokers?  On the other side, do we give every conceivable test to hypochondriacs?  Do we give liver transplants to people with terminal cancer?  Do we give hyperconcerned parents antibiotics for their child’s ear infection, when there is little demonstrated medical value?  Your position conveniently allows you to duck answering these questions directly, if we give more decision-making power to the individual, but the consequences to the public policy are still going to be there.

> The cost-benefit decision depends on the cost and the resources available.  Using Friday’s
> example 1, you might choose the Skele-Gro if it were $500, but reject it at a cost of $5,000.

Yes, but not all medical decisions can be made on utility theory.  Moreover, we can’t expect health care providers to have audit capability over patients’ financial records at the time of admission.  If a doctor says one treatment for my daughter’s life-threatening disease will cost $50,000 with an 90% chance of success and one will cost $250,000 with a 93% chance, how does the doctor know I have the other $200K?  Are you suggesting removing medical cost related bankruptcy?  How does the hospital recoup those costs without passing them on to the other consumers, if it turns out the patient can’t pay?

> In addition to whatever resource constraint exists, third parties have other pressures on
> their decisions, and other incentives.  A government bureaucrat has rules and laws he
> has to follow, deadlines, and time and workload pressures.  He also faces political
> pressure from Congress and medical treatment interest groups (hospitals, nursing
> homes, doctors, nurses, drug and device manufacturers, …)  These pressures make
> his cost-benefit decision on your behalf different from your own.

True, but possibly not really relevant, and correctable.  We have an existing, ongoing case study (again) in Medicare to show how often this occurs.  How bad is it?  You believe it is bad… why?  What studies lead you to believe that the workload in Medicare leads to bad outcomes, generally?

The same is true with the status quo.  In your proposed model, you’ll have individuals making partially informed medical decisions based largely upon price tag.  I’m unconvinced that the average person is going to make a cost-benefit decision that will generally be within a narrower neighborhood of “the correct” decision than medically advised bureaucrats.  Moreover, I haven’t seen any proposed model that includes some bureaucrat’s signature to proceed with a treatment.  Researchers come up with treatments.  NIH grants fund their efficacy.  Medicare decides to cover the treatment (or not) based upon that efficacy (certainly, political pressure can be applied here, I’m seriously unconvinced it’s anywhere near epidemic proportions).  Private insurers generally follow.  Practitioners execute treatments as part of their professional judgment.  If a doctor has a pattern of treatments that don’t match the general population of doctors, audits are performed.

> Government bureaucracies are slow to adapt to changes in medical practices and markets.

In comparison to what?  (I’ll go ahead and grant you “markets’; medical practices are an entirely different story).  What are you proposing as a model for creating a standard of care?  “Whatever the patient wants”?  How will you have reasonable tort reform if a patient decides that a green tea enema or crystal therapy will cure his currently operable early stage cancer and then he dies of it later?  How can a doctor reasonably defend herself from a malpractice suit if there is no standard of care?

Moreover, *people are just generally bad at risk assessment*.  This is basic security and psychology research.  People will generally underestimate the amount of insurance they need to cover medical costs, just like they underestimate how much they need for retirement (volumes of citations available upon request).  When they fail to have the insurance to cover their costs, the two possible choices are: do nothing and let them suffer the consequences, or provide treatment and absorb the cost, spreading it out among the other people who seek care.  They become free riders, or dead bodies.  How do you propose to resolve this dilemma, which seems to be an inherent weakness in your proposed model?

There’s a bunch of hard questions above.  I don’t pretend to know offhand the right answers to all of them (or even most)… but I certainly would have liked any one of them to have been mentioned.

Posted September 2, 2009 by padraic2112 in politics, rants