We Need Less

Great post, just like the pledge post you link to. In academia I see lots of baptists onmedicine and school, but few on housing - where are they hiding?

Arnold,
Among the bootleggers you should include the many professors, particularly professors of economics and law, that profit from selling their "public policy" services to governments, political parties, interest groups and the media.

The affordable-housing crowd is not in academia. I think of the them as community organizers, but that is a loaded term these days. Today's Washington Post has a story that includes some of their voices, here:
link

Somehow "We need less" doesn't have much more ring than John McCain's promise that times are tough and he will stand with us. A promise of free healthcare, affordable housing and educational assistance for everyone always sounds like a better deal.

My only hope is that the economic problems we are facing today are properly explained and we can gain from the experience. Your blog on the benefits of a fixed rate 20 percent down loan is an example. Too many people think that the sub-prime mess resulted entirely from too much securitized debt and complex financial instruments and never give the underlying value of the security a second thought. My worst scenario is that school children 20 years from now will be learning how the New Deal got us out of the great depression but then greedy capitalists duped everybody with their fancy securitized debt instruments and caused the crash of 2008. We need less is the right answer, but will never make it as a slogan. What we need is more economists who understand economics.

Arnold,

Great post but lumping doctors in with the bootleggers is not consistent with what most doctors want. A few of my close family memebers are doctors and they understand that they will never need government to sunbsidize their services. At 50-80 hours a week there is plenty of work to be done and doctors make much more money from insurance and health plans that are not government sunsidized.

the winners are the bootleggers

And the people whose healthcare, education or housing is subsidised, obviously.

I suspect that "less" is precisely what many of us are going to get. Lots less.

Arnold,
Why do we need less? Let us make the mental experiment of a future where real anti-aging or anti-cancer treatments are available, but extremely expensive. What is wrong with spending say 50% of gdp on healthcare if it leads to a better, longer life? What else is there to spend it on? bigger houses, faster cars?

The problem with our health care system (which Arnold has touched on in Crisis of Abundance) is that we can not simultaneously have unfettered access, insulation from the cost of health care, and affordability. At least one of these goals must be thrown under the bus!

As I see it, we are on a collision course between severe Baumol's cost disease in health care and the income elasticity of demand for health care greater than one, i.e., it is a luxury good. If we have government pick up most of the tab then we will not get the controlling factor of price elasticity of demand.

We have a case of moral hazard and time inconsistency giving rise to a tragedy of the commons. For those familiar with Prescott's work, all this will lead to what has been characterized as America taking a European vacation. Namely, the resulting rise in tax rates will induce the most productive segment of the labor force to cut back on work or to cash in their chips altogether and drop out of the labor force if they have amassed a sufficient permanent income. We will increasingly resemble Europe and loose our economic vitality resulting in increased tensions as the growth in the pie slows.

I will not elaborate on the above unless someone shows an interest in engaging in such a discussion.

I'm sympathetic to your general idea, but you seem to use ideologically skewed examples. Less war spending is a glaring example. I'm aware health care subsidization is one of the biggest economic drains, and maybe subsidized mortgages, but how does govt. subsidization of higher education stack up against war spending? I'd like to see this point made with less ideologically cherry picked examples, if that's what's going on here.

I disagree.

Who are you to say that I am wrong to spend my money on that which I choose? If your post had been about overspending on video games or restaurants, you would have quickly seen the problem with your claim.

The two examples you give (overspending in education and health care) only seem to be overspending because these sectors of our economy have been greatly socialized. Why are you judging spending in these sectors differently from your usual rational and SUBJECTIVE economic way of thinking?

And the solution would not be for some government entity to reduce our spending in these areas. In British Columbia, a previous government was convinced by a smart UBC professor to "rationalize" health care spending, and we are still suffering.

You can't claim that we are overspending. All you can claim is that information has been taken from the consumer so that he can't make rational choices and that it is time that we returned responsiblity for spending decisions back to the consumers.