Election Prediction

On Tuesday Chicagoans will go to the polls to vote for the first round of mayoral and aldermanic candidates. If no mayoral candidate receives an outright majority tomorrow, the top two candidates will have a run-off in a couple of weeks.

Here’s what I think the outcome is likely to be:

Emanuel >45%
Chico 20%
Moseley Braun 15%
Del Valle <10%
Walls <5%
Van Pelt-Watkins <5%
Hawkins <1%

or, in summary, Emanuel will receive a plurality but not enough to avoid a run-off with Chico.

4 comments

Status Report

Posting is going to be a little slower than usual here for the next couple of days. I’m working from 5:00am to 8:00pm (or later) tomorrow as an election judge on the mayoral and aldermanic elections and despite how slow I expect it to be I still probably won’t be able to post.

I’m trying to clear the decks today to prepare for tomorrow which has cut into my posting today. Although I’ll be in a semi-comatose condition on Wednesday I expect to sneak in a post or too, at the very least one about how the election went and post-election reactions.

0 comments

We Need a New Healthcare System

Despite all that I’ve written about healthcare reform I think it’s been some time (more than six years!) since I actually put down in black and white what sort of healthcare system I think we should have. That’s an essential question since our present system is so enormously out of whack that a little tinkering around the edges will not accomplish what we need to do and need to do soon. This is an opinion piece so I’m not going to source it. If you want to look at some facts, I’ll give you just two references: Gerald Anderson and Uwe Reinhardt’s paper, It’s the Prices, Stupid and usgovernmentspending.com. Those two should be enough to convince you that here in the United States we’re paying enormously more for what we’re receiving in healthcare than any other country in the world and that our current path is not sustainable, not merely in the long term but just in the next few years.

In order to say anything sensible about what should be I think you need to state your objectives first so here goes. I think that a good healthcare system would enable people to get some reasonable level of healthcare, that the system should produce a good general level of public health, that providers should earn a decent wage, and that from an economic standpoint the healthcare sector should not be a drag on other sectors of the economy or abroad.

In theory and at some point in time (i.e. the 1960s) we probably could have achieved those objectives with a reasonably free market solution. Conditions were substantially different then than they are now and IMO from a structural standpoint better. A market solution would be something along the lines that have been proposed by some Republicans and libertarians recently: high deductible health savings accounts, means-based subsidies, and so on. IMO the time has long passed when such a solution would be effective in a manner consistent with good public health (if it ever would have been).

Despite my general predispositions towards market solutions I believe that the situation in healthcare is along the lines of the old joke: you can’t get there from here. If anything my views have hardened since I wrote about this six years ago. I think we need to take private insurance companies and employers out of the picture with a single payer system (or, at the very least, private insurance companies should play a very different role as they do in Germany or France), I think there should be no for-profit co-ops or health maintenance organizations, I think that specialists should be salaried employees of hospitals and that hospitals should be run by the government (federal or state) and that their salaries should be set by law, that GPs can remain private but should be paid based on a capitation, and that there should be some restrictions on what the government single payer will pay for. I also recognize that practically everybody would despise the system I’m proposing.

If you’ve got a better idea that would allow patients to get all of the healthcare they want, insurance companies, hospitals and other healthcare providers, and all other parties involved to make as much money as they want, won’t drive the states and federal government bankrupt, won’t cause us to borrow to pay its operating expenses, and will produce a decent level of public health, I’m all ears. I don’t see it.

36 comments

O tempora o mores!

In venial violation of my implied pledge not to write about the governor or legislature of Wisconsin, the Wisconsin public employees demonstrating against the governor, or the presumed counter-demonstrations we’ll see today, I do want to add that I don’t believe that I’ve heard more poppycock, flim-flam, manufactured outrage, exaggerated claims, unfounded views, or flimsy assertions about any topic whatever than I’ve heard about this one. Last night on NPR, for example, I heard E. J. Dionne claim that he thought that average people would leap to the defense of the demonstrating public employees. I could only wonder if he’d had a stroke. Contrariwise I suspect that Wisconsin’s public workers won’t get a great deal of sympathy from people without jobs, people who earn minimum wage, people without health insurance or pensions, or people who contribute materially to their own health insurance or pensions. As far as many ordinary Americans are concerned Wisconsin public employees are the rich.

I continue not to know much about Wisconsin politics or conditions and similarly plan to maintain my ignorance on the grounds that I don’t live there and that as far as I’m concerned as long as they stay within the boundaries set by the U. S. Constitution Wisconsin’s social and political arrangements are up to Wisconsinites.

There a forum at the New York Times on the subject. With one exception none of the participants appears to be better informed on the subject at hand than the average man or woman on the street in Berkeley, California. Was the 2010 Wisconsin election really “stolen by monied interests” as averred by one of the participants?

I would genuinely like to see a defense of the proposition that public employees unions are no different than private sector unions. I have yet to see one although I’ve seen defenses of unionism in general which seem to me to be beside the point. I have no opposition to private sector unions per se and believe they can, potentially, serve essential purposes particularly in the area of working conditions. Unfortunately, too often private sector unions have effectively conspired with incompetent and cowardly top management to drive their industries overseas.

51 comments

Point of Information: Public Employee Voting Patterns

I know that it’s something that a lot of people believe but I’ve never been able to come up with a reliable study that actually demonstrated it: is it really true that public employees vote overwhelmingly for Democrats? Or are do they just overwhelmingly live in cities and cities vote overwhelmingly for Democrats?

6 comments

Fallacies of Composition

Just because you combine things and make a chart out of the results doesn’t necessarily mean it makes any sense to do so. That was my reaction to this post at Econbrowser. Scan down to the two bar charts comparing public and private wages and compensation.

Skipping over that under the “All employees” classification (which, interestingly, shows that public and private compensation is about equal which sounds odd to me), the graphs illustrate that employees with bachelors only make slightly more in the private sector than in the public sector. However, I believe there’ are problems with this: it presumes that all bachelors degrees are worth about the same or, at least, that the particular bachelors degrees in the private sector have about the same worth as those in the public sector and it doesn’t account for differences in workloads.

Teachers with bachelors in education-only who attended state schools with relatively low academic standards and have, putting it kindly, lightweight programs who work a 10 month schedule (which accounts for the preponderance of primary education teachers) are being bundled with, for example, MIT grads with bachelors in electrical engineering. Should we be surprised or outraged that the latter earns more than the former? I don’t think so but the differences between those don’t show up in that bar graph.

Let’s take one, single occupation that’s employed in numbers in both the private and public sectors: lawyers. According to the BLS about a fifth of all lawyers are employed by local, state, and federal governments (I would contend that such a high proportion of government employees means that you can’t reasonably think of a market in legal services but that’s a topic for a different post). The median income for a lawyer is $113,240 and the income for lawyers who work fulltime for the government is significantly lower than for those fulltime in the private sector. Does this demonstrate that lawyers who work for the government are underpaid relative to their private sector counterparts?

The answer is a resounding “No”. Earnings in the practice of a law are in a bi-modal distribution. On the low end of that barbell are lawyers who make a median income of $35,000. On the high end of that barbell are lawyers who make a median income of $135,000. And then there are a rarified few who make significantly higher incomes than that, trailing off on the right hand side of the chart.

The point in all this is that the absence of a normal distribution means that it’s hooey to talk of means and medians in discussing earnings in the practice of law. I would further suggest that the “U” in that distribution represents lawyers who work for the government and that it’s as reasonable to suggest that they’re enormously overpaid as it is to suggest that they’re underpaid. I also guess that the right hand side of the distribution represents legal graduates who’ve graduated at the tops of their classes or who’ve graduated from a very, very small number of institutions.

Drawing a graph with a big bar on it that shows “Professionals” is very pretty and all but it doesn’t mean a damned thing. You’re comparing apples and oranges. It’s a fallacy of composition.

To produce something meaningful on this subject you’d need to go job by job, credential by credential and do a comparison of total compensation in the public and private sectors between things that were really comparable. The closest thing that I know to that is a recent study by the GAO of military compensation. It found that those in the military were significantly more highly compensated than their private sector counterparts, e.g. a truck driver in the military was more highly paid than a civilian truck driver.

3 comments

The Hazards of Government-Supported Research

I just had to pass this one on. From Marketing Japan via Mish Shedlock comes this report:

None of the government’s 214 biomass promotion projects — with public funding coming to Â¥6.55 trillion — over the past six years has produced effective results in the struggle against global warming, according to an official report released Tuesday.

The Internal Affairs and Communications Ministry, which evaluates public works projects, urged the agriculture and five other ministries conducting biomass projects using sewage sludge, garbage and wood, to take corrective action.

The Administrative Evaluation Bureau found in a study of biomass projects through March 2009 that the cumulative budget totaled about ¥6.55 trillion.

The six ministries taking part in such projects, however, have yet to confirm the financial results for 92, or 44 percent, of the 214 projects, with one bureau official saying: “The figures tell everything. The ministries need to produce certain results because they are using taxpayers’ money.”

The Agriculture, Forestry and Fisheries Ministry spent about ¥1.6 billion on a project to produce livestock feedstuff from unsold boxed lunches from convenience stores. The project was abandoned after its management firm collapsed, the report says.

The Environment Ministry and the Ministry of Economy, Trade and Industry were subsidizing similar projects at the same time, it said.

While the six ministries have argued that 161, or 75 percent, of the 214 projects have produced some results, the bureau concluded that none has produced results that would lead to the formation of a recycling-based society, the report says.

The emphasis is mine. $68 billion (Â¥6.55 trillion) sounds like a lot of money to me.

I have no opposition to research as such and, especially, no opposition to government support of research. I have previously expressed a prejudice in favor of mass engineering projects (e.g. the space program, the Manhattan Project) as the mechanism for such research and this provides a good illustration of why that might be. Well, I guess that at least the Japanese now know 214 approaches that won’t get them where they want to go.

It probably should be pointed out that there are opportunity costs involved and investing in approaches that didn’t prove fruitful undoubtedly crowded out some approaches that might have been. Not every project gets approved because it has merit. Some are approved because somebody’s brother-in-law owns the company or the receptionist is cute.

0 comments

My Sole Comment on the Public Employee Demonstrations in Madison

I’ll bet that people who’ve referred to Madison, Wisconsin as “the Athens of the Midwest” probably didn’t mean it in this sense.

Cf. here and here.

16 comments

Sometimes the Bear Eats You (Updated)

Naked Capitalism takes note of Boeing’s ill-conceived assay at outsourcing:

…the real problem with outsourcing, if you don’t think it through, is that it can wreck your business and cost you a bundle.

Case in point: Boeing Co. and its 787 Dreamliner.

The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won’t be boarding until this fall, if then. Some of the delay stems from the plane’s advances in design, engineering and material, which made it harder to build. A two-month machinists strike in 2008 didn’t help.

But much of the blame belongs to the company’s quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing’s dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house.

The 787 has more foreign-made content — 30% — than any other Boeing plane, according to the Society of Professional Engineering Employees in Aerospace, the union representing Boeing engineers. That compares with just over 5% in the company’s workhorse 747 airliner.

Boeing’s goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits.

The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn’t fit together. Some subcontractors couldn’t meet their output quotas, creating huge production logjams when critical parts weren’t available in the necessary sequence.

Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints.

Some then farmed out their engineering to their own subcontractors, Mike Bair, the former head of the 787 program, said at a meeting of business leaders in Washington state in 2007. That further reduced Boeing’s ability to supervise design and manufacture. At least one major supplier didn’t even have an engineering department when it won its contract, according to an analysis of the 787 by the European consortium Airbus, Boeing’s top global competitor.

I wonder if there may be more to Boeing’s experiment than just a desire to trim labor costs. Transferring such a large proportion of the design and manufacturing of the plane overseas may have been a marketing strategy as much as for reasons of cost control. We’re not the only country in the world that’s sensitive about imports and local partners make overseas sales easier at the very least. Sometimes they make them possible.

Still, I’ve seen it any number of times. Very few companies, even large companies, are really prepared to manage offshore outsourced manufacturing or operations and lowballing the extraordinary management costs is a commonplace.

Additional thoughts that come to mind are:

  • The obvious impossibility of securing against technology transfer.
  • I’m becoming increasingly skeptical about how we’re calculating GDP. If you lowball the costs of imported parts (or, worse, characterize them as intra-company transfer), assemble the components here, and slap on a big mark-up, couldn’t that end up overstating GDP pretty substantially? Especially when you multiply it times however many companies are doing that?
  • Shouldn’t major defense contractors be treated somewhat differently than a company that manufactures hair extensions? There’s the whole dual-use thing. Presumably, Boeing’s plan is to sell some 787s to our military for one thing or another. I seem to recall that the military has purchased quite a number of C-19s, essentially 747-100s.
  • Another things that many companies who start off-shore outsourcing don’t seem to be aware of is that there is no robust system of international civil law. Basically, there are some bilateral agreements. If your overseas contractor screws you over or delivers faulty material, you may have very little recourse.

Update

Felix Salmon comments on this same story:

Outsourcing is a bit like taking collateral from your repo operation and investing it in subprime credit. Most of the time, you make a small amount of money — and then, occasionally and unpredictably, you lose an absolute fortune. Boeing was picking up pennies in front of a steamroller, and ended up getting crushed.

Even more interesting are the comments to his post which repeat the speculation I’ve made above: that at least part of the reason for Boeing’s off-shore outsourcing was marketing gone awry.

4 comments

Roof Tiles for Geo-Engineering

Here’s another really grand example of geo-engineering:

A California company is selling a “smog-eating” concrete tile roof that it says neutralizes the nitrogen oxides spewed by automobiles.

Boral Roofing says each year, one of its concrete tile roofs on a typical 2,000-square-foot house can break down the same amount of nitrogen oxides as a car’s engine typically produces during 10,800 miles of driving.

When sunlight hits the roof, it activates titanium dioxide, which breaks down the nitrogen oxides in the air into oxygen and nitrates, the company say. The tiles’ smog-fighting ability was proved in extensive laboratory testing and field studies conducted by a European Union consortium of academic and industry experts from 2002 to 2006.

The tile adds about $800 to the cost of the average 2,000-square-foot house.

Now if they could just get Southern Californians to drive just 10,800 miles per year… Still, it seems to me that the underlying technology may have applicability beyond roofing tiles (here in Chicago tile roofs aren’t unknown but they aren’t all that common, either).

Hat tip: Greg Mankiw

6 comments