Arnold Kling  

Recommended Reading

PRINT
Child Labor vs. Child Slavery... Is Capitalism Pro-Kid?...

1. Bryan's 40 aphorisms.

2. The latest Robin Hanson aphorism.


many economically-puzzling regulations and policy inclinations tend to make everyone act like high status folks act, regardless of how appropriate that is for their situation.

I think that describes the drive for universal health insurance and universal college education. High-status people want to spend their surplus income on comprehensive health care coverage and prestige education. Other people might prefer to spend their surplus income on leisure. In my talk/dance, I used Neal Stephenson's The Diamond Age to describe this phenomenon. Stephenson's science fiction future includes "Vickies," who work hard according to Victorian values and accumulate wealth, and "thetes," who have lower status but everything they need.

3. The Maryland Journal. Most of my friends, who are Democrats, assume that since there is no Republican Party to speak of here that the state must be well run. The truth about our fiscal prospects would surprise them.

4. Speaking of fiscal prospects, John Taylor explains the budget debate.


perhaps the biggest difference is that the House Budget brings outlays as a share of GDP back close to 2007 levels as a share of GDP, thereby removing the large spending increase of the years 2008-2009-2010, while the Administration budget effectively locks in that increase.

Somehow, we could ratchet up spending by hundreds of billions at the drop of a hat. Reducing spending by less than $100 billion becomes Armageddon.

The left blogosphere assures us that domestic discretionary spending is restrained, Social Security is not a problem, Obamacare has taken care of health care "cost inflation,"* and the deficit is mostly cyclical. All of this fails to explain the basic outlook for outlays relative to GDP.

*Keep in mind, of course, that most of the increase in health care spending is not pure cost inflation. A lot of it reflects increased utilization of medical services, especially those that require high-tech equipment and specialists.


Comments and Sharing





COMMENTS (16 to date)
John Thacker writes:
Most of my friends, who are Democrats, assume that since there is no Republican Party to speak of here that the state must be well run.

Your friends didn't watch The Wire?

Eric Morey writes:

Domestic discretionary spending is restrained to the extent that it is not an eminent or significant threat to fiscal issues. It could be modestly paired back to the general benefit of the USA population.

Social Security is not a problem to the extent that it only needs modest adjustments to its funding (raise the cap and tax rate?) and its benefits (a bit of means testing?)

Obamacare has partially taken care of health care costs but it is insufficient. Many agree that ability to pay is not the ideal way to ration health care. However, the Ryan budget outlines a significant shift toward ability to pay rationing.

The deficit is mostly cyclical. Current deficit, yes. Intermediate and long term deficit, no.

Matrim writes:

Ryan's plan isn't that bad and it actually took me by surprise. The only thing I'm worried about is that if it were to be implemented, it probably would not stay in effect long over the long term due to regime change and future events. If we had stayed on Clinton's plan then debt would have been payed off by next year, but it didn't happen that way. Just goes to show how dysfunctional our political system is.

Tom writes:

"If we had stayed on Clinton's plan "

If we can count on a perpetual internet bubble...

Lori writes:

many economically-puzzling regulations and policy inclinations tend to make everyone act like high status folks act, regardless of how appropriate that is for their situation.

True, but couldn't the same be said of much of economic theory?

Chris Koresko writes:

Most of my friends, who are Democrats, assume that since there is no Republican Party to speak of here that the state must be well run.

Are you suggesting that Democrats prefer a one-party state?

Les Cargill writes:

High-tech equipment and specialization don't drive price up unless there's another system of constraints in place. Doctoring is about status - almost full stop. Interview a biologist who has to teach a lot of premeds - you'll find out...

I think the French manage this much better than we
do. There's status, but not as much money. The
French also consider modern medicine a French innovation ( and rightfully so ).

Kevin writes:

Arnold can you link to support for this?

"*Keep in mind, of course, that most of the increase in health care spending is not pure cost inflation. A lot of it reflects increased utilization of medical services, especially those that require high-tech equipment and specialists."

Yancey Ward writes:

Kevin,

Unless you think medical technology has been stagnant, then Kling's assertion is almost self-evident.

Kevin writes:

Yancey, I agree but most people I speak with reject this and I was wondering if Arnold, who has a lot more exposure to all this than I do, had readily available support. And hey, thanks for the condescension!

Arnold Kling writes:

Kevin,
See my book, Crisis of Abundance.

Kevin writes:

Excellent thank you Arnold.

blink writes:

Re: #2, why do we want to force others to behave like high-status individuals? If high-status folks are making the laws, wouldn't they prefer a separating equilibrium? The status argument appears to cut the wrong way.

Tracy W writes:

many economically-puzzling regulations and policy inclinations tend to make everyone act like high status folks act, regardless of how appropriate that is for their situation.

True, but couldn't the same be said of much of economic theory?

Lori, could you give an example of this economic theory that tends to make people act like high status folks act, regardless of how appropriate that is for their situation? I'm trying to make sense of your question. Personally I would have said that economic theory is, on the whole, either irrelevant to the question of how high status folks act (eg marginal utility, Robinson-Crusoe islands, guns-butter tradeoffs) or actively hostile (eg public choice theory, arguing against tax subsidies, restraints on trade, economics got the name "the dismal science" because of economists' arguments against slavery in the 19th century.)

rpl writes:
Many agree that ability to pay is not the ideal way to ration health care.
My experience is that most people who hold this opinion hold it as part of a larger feeling that health care should not be rationed at all. Unfortunately, that isn't a very realistic position. Assuming that's not the position you're taking, what do you think is the ideal way to ration health care?
Eric Morey writes:

I'm not going to pretend that I have all of the answers like a politician. However, it is clear that for a large number of treatments there doesn't need to be any rationing. Proper insurance would account for the fact that the older one gets the more likely one will need medical treatments. There should be no way to loose coverage simply because you are older or became ill while you were covered. There hasn't been much discussed about switching to a more performance based pay for medical services. I think a lot of the issues raised by Uwe Reinhardt are left unaddressed in proposals I've heard to reform the health care economy in the USA. That being said, I think that specific treatments need to be identified that will be rationed partially or totally on an ability to bay basis. I won't venture any specific recommendations here, as I'm wholly uninformed to make such claims.

I'm not sure I know what is ideal, but I'm confident that I can identify the Ryan voucher plan as moving away from it compared to our current situation. In short, I can't tell you how to fix it, but I can tell you what will make it worse.

See:
The Welfare Economics of Health Insurance
Student Assignment on Health Economics

Comments for this entry have been closed
Return to top