Sunk Costs

I was a skeptic of the deal that President Obama struck with Iran. Not only did I think that it was based on false premises but I thought that the U. S. realized precious little from the deal that it would not have obtained otherwise and that the main objective of the deal was to burnish President Obama’s list of foreign policy accomplishments, not a legitimate reason.

However, once it went into force with all of its costs to the U. S. front-loaded, those became sunk costs. Now abrogating the deal would be foolish. If the deal has any benefits for the U. S. and if those benefits can be realized, the only way they can be realized is to leave it in force.

The reason I bring this up is not simply because President Trump is considering decertifying Iran’s compliance with the treaty but because it reflects a more general problem with American politics and policies over the last decade or so. Just because the previous administration made mistakes doesn’t mean that doing the opposite isn’t just as stupid. There are such things as path dependency and time dependency. You can’t unbreak eggs and there are such things as sunk costs.

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Why Niger?

The editors of the Pittsburg Post-Gazette wonder why American soldiers are fighting and dying in Niger:

The first question is, what are hundreds of U.S. troops doing in Niger? It is a French-speaking nation for which France has traditionally played the important “godfather” role, including with military forces. Niger is a poor nation of 21 million, with few notable resources apart from the fact of its central location, landlocked, and bordering on Algeria, Benin, Burkina Faso, Chad, Mali, Nigeria and southern Libya, a largely desert area of little or no strategic importance to the United States.

The claim in the past has been that some of the various shadowy tribal militia forces operating in the region have al-Qaida or Islamic State links but the intelligence supporting that argument for U.S. forces to be in Niger is shaky at best. They can better be described as armed bandit gangs.

The second major question is why Americans learn of U.S. military involvement in Niger, in combat in fact, only when American soldiers die? No one seems to recall an American president or Congress declaring war in Niger. What we are looking at instead is one piece of an expansion of U.S. military activity in Africa to justify the existence of the U.S. Africa Command, AFRICOM.

Good questions. I have a different question. Under what authority are they there? If it’s under the Authorization for Use of Military Force of 2001, that’s quite a stretch. If it’s under the president’s authority as commander-in-chief of the military, that’s an even greater stretch. That authority isn’t carte blanche. The U. S. armed forces are not the president’s personal military. If it just grew like Topsy, that’s insubordination.

There are three conditions for a just war (just ends, just means, just authority). Protecting Nigeriens would be just; extending U. S. influence in the region wouldn’t; providing a pretext to expand the role of AFRICOM would be even less so. Unless Congress has declared war against someone in Niger, I see no way that U. S. forces are fighting there under a just authority.

These interventions have a way of taking on lives of their own. The war in Vietnam began as picking up the French end. In 1959 was had nearly 1,000 advisors there, ostensibly training the South Vietnamese military. By 1961 the U. S. military was already taking casualties. The rest, as they say, is history. For another example, consider Afghanistan.

When there is no mission, it’s all creep.

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Slowly But Slowly


Slowly but slowly the scales are falling from people’s eyes and they’re beginning to understand how the terrible and wasteful overinvestment in higher education is stunting the U. S. economy. From the same article in Atlantic as the graphic above:

A new working paper authored by the UC Berkeley economist Jesse Rothstein builds on that research, in part by zeroing in on one of those five factors: schools. The idea that school quality would be an important element for intergenerational mobility—essentially a child’s likelihood that they will one day outearn their parents—seems intuitive: Leaders regularly stress that the best way to rise up the income ladder is to go to school, where one can learn the skills they need to succeed in a competitive, global economy. “In the 21st century, the best anti-poverty program around is a world-class education,” Barack Obama declared in his 2010 State of the Union address. Improving “skills and schools” is a benchmark of Republican House Speaker Paul Ryan’s poverty-fighting agenda.

Indeed, this bipartisan education-and-poverty consensus has guided research and political efforts for decades. Broadly speaking, the idea is that if more kids graduate from high school, and achieve higher scores on standardized tests, then more young people are likely to go to college, and, in turn, land jobs that can secure them spots in the middle class.

Rothstein’s new work complicates this narrative. Using data from several national surveys, Rothstein sought to scrutinize Chetty’s team’s work—looking to further test their hypothesis that the quality of a child’s education has a significant impact on her ability to advance out of the social class into which she was born.

Rothstein, however, found little evidence to support that premise. Instead, he found that differences in local labor markets—for example, how similar industries can vary across different communities—and marriage patterns, such as higher concentrations of single-parent households, seemed to make much more of a difference than school quality. He concludes that factors like higher minimum wages, the presence and strength of labor unions, and clear career pathways within local industries are likely to play more important roles in facilitating a poor child’s ability to rise up the economic ladder when they reach adulthood.*

IMO belief in the role of minimum wages or labor unions is cargo cult thinking. The significance of a strong manufacturing sector and culture isn’t. Here’s the sad truth about higher education:

  • Historically, the purposes of higher education were pre-managerial and pre-professional education and networking with others on similar tracks.
  • It still is.
  • We don’t produce enough managerial or professional jobs for everyone getting college educations to take those jobs.
  • Many of those pursuing higher education are not suitable for reasons of ability, temperament, or preference to be managers of professionals.
  • Many will end up taking jobs that will never generate incomes high enough to pay off their educational loans.
  • Fraternities, sororities, and other similar social organizations in colleges aren’t peripheral to the function of higher education. They’re central to it.
  • Consequently, higher education is a waste of time and money for many of those pursuing it.
  • Post-graduate education doesn’t make the U. S. more competitive with other countries. It’s a treadmill of which the primary beneficiaries are institutions of higher learning.

There is more at stake in this policy than validating the prejudices and choices of people who’ve been successful pursuing professional degrees. Concentrating the thrust of policy on higher education draws focus from where it should be: primary and secondary education, training in the skilled trades and the requirements of modern manufacturing, and hosts of other things none of which require higher education.

We need to stop subsidizing the choice of pursuing degrees in media and encourage learning how to weld.

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Nothing

We still know next to nothing about the mass murder in Las Vegas. Was Stephen Paddock actually the perpetrator? His background and history certainly don’t suggest it. Was he actually a “soldier of ISIS” as DAESH has repeatedly claimed? That seems even more incredible.

Were there other shooters? Was he part of a conspiracy?

IMO it’s still far too early to draw any conclusions. We need to know more.

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The King’s Speech

At the Wall Street Journal former Spanish foreign minister Ana Palacio writes about King Felipe’s speech and the Catalonian referendum:

The other constant in international coverage has been calls for “dialogue” or “mediation” between Spain and Catalonia. This is simply wrongheaded. “Dialogue” in general terms does not mean anything. It is pointless given that Catalan secessionist authorities refuse to live up to or even recognize their responsibilities under the law. “Mediation” connotes a bilateral relationship that does not exist. Catalonia is part of Spain. This is an internal issue that must be addressed by all of Spain.

So far the Spanish government has held back from invoking its constitutional authority to suspend home rule in Catalonia. But as the king said on Tuesday, “the legitimate powers of the state have the responsibility to guarantee constitutional order and the normal functioning of institutions.”

What’s really needed is introspection. As the king rightly noted, “Catalan society is fractured.” Spain needs to respond to what has happened, and to its causes. This will almost certainly involve a discussion about the future of the Spanish Constitution.

Catalonia has been part of Spain for the last millennium. To the best of my ability to determine it has no history apart from Spanish history. To my eye it appears to be a linguistic community rather than a country.

And I repeat the questions I posed before the referendum: what is the unit of measure of sovereignty? The nation? The county? The city? The block? The house? The individual?

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More Pablum from the Post

Similarly, the editors of the Washington Post want to go farther than outlawing conversions from semi-automatic to automatic:

When House Minority Leader Nancy Pelosi (D-Calif.) was asked if the bill banning bump stocks might be a slippery slope toward other gun restrictions, she answered, “I certainly hope so.” To which we say, amen.

They also talk obliquely about banning “assault weapons”, presumably aware that there is no coherent definition of what constitutes an “assault weapon”. Show some spine and initiative. If there are specific weapons or characteristics of weapons they believe should be made illegal, spell them out. Delineate them. That would enable me to evaluate the prudence, effectiveness, and enforceability of the law so I could decide whether to agree with them or disagree.

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What Are “Real” Gun Control Laws?

The editors of the New York Times call for “real” gun control laws:

After the slaughter in Las Vegas, Republican leaders in Washington tried to stifle the public’s demands for action with the same technique they’ve deployed after mass shootings in the past: offering up pious exhortations not to “politicize” a tragedy by debating gun controls that might, you know, prevent such mass killings from happening again.

without ever delineating what “real” gun control laws would be. Do they want a full repeal of the Second Amendment? Do they want a modification of the Second Amendment to prohibit private ownership of firearms, presumably accompanied by compulsory buybacks?

It may be that my view of law is drastically different from that of the editors. I believe in laws that are narrowly tailored to accomplish achievable goals and enforceable rather than in laws that provide law enforcement and prosecutors the discretion to indict just about anybody for just about anything. I think that making “bump stocks” and other after-market adaptations that turn semi-automatic weapons into fully automatic weapons illegal would be sensible. It’s unclear to me what measures would prevent “mass killings from happening again”.

The people of the United States already have a vast number of firearms, it is not a tiny island, and experience tells us that prohibition laws, whether against alcohol, gambling, prostitution, or drugs, while they may reduce the incidence of the behaviors they’re attempting to affect, do not prevent them. There are already laws on the books making it illegal for convicted felons to own firearms; they do not prevent them from doing so.

Of the three largest mass murders in American history only one, the recent Las Vegas shootings, used firearms. Shall we also prohibit air travel and fertilizer?

Note that I am not advocating doing nothing. I am advocating limiting what you call for to what’s effective, what you are willing to enforce, and what you are able to enact.

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Markets Have Supply and Demand

At the Wall Street Journal Scott Atlas proposes some measures that might decrease the cost of healthcare:

Republicans have now failed twice to repeal and replace ObamaCare. But their whole focus has been wrong. The debate centered, like ObamaCare, on the number of people with health insurance. A more direct path to broadening access would be to reduce the cost of care. This means creating market conditions long proven to bring down prices while improving quality—empowering consumers to seek value, increasing the supply of care, and stimulating competition.

First, equip consumers to consider prices. Critics always claim this is unrealistic: Are you supposed to shop around from the back of the ambulance? But emergency care represents only 6% of health expenditures. For privately insured adults under 65, almost 60% of spending is on elective outpatient care. Likewise, nearly 60% of Medicaid money goes to outpatient care. For the top 1% of spenders—a group responsible for more than a quarter of all health expenditures—a full 45% is outpatient. Giving consumers an incentive to consider price when seeking such care would make a huge difference.

ObamaCare moved in the opposite direction, shielding consumers from having to care about prices. Its broad coverage requirements and misguided subsidies encouraged bloated insurance policies, furthering the misguided idea that the purpose of coverage is to minimize out-of-pocket costs. When the insurer picks up nearly the entire tab, patients have little reason to consider costs, and doctors don’t need to compete on price.

Effective reform would put patients in charge of their own spending, while giving them a way to gain from paying less. The first step is to broaden the availability of high-deductible insurance plans with fewer mandated coverage requirements. ObamaCare went in the wrong direction. Its regulations—including required “essential benefits”—raised prices on these plans and limited their availability.

My analysis of data from the Employer Health Benefits Annual Survey shows that premiums on high-deductible policies rose between two and five times as fast as other types of coverage. It would also help to repeal ObamaCare’s 3-to-1 age rating, the rule that insurers can charge the oldest customers only three times what they charge the youngest ones. This alone raised premiums for young people by 19% to 35% in 2014, according to an estimate for America’s Health Insurance Plans.

A second tool for motivating patients to consider price is large, liberalized health savings accounts. These tax-sheltered accounts are generally used to pay for the noncatastrophic expenses that form the bulk of medical care. Better than tax deductions, HSAs introduce something unique—an incentive to save.

When people have savings to protect in HSAs, the cost of care drops without harmful effects on health. A study two years ago that analyzed data from 2003-07 showed that the spending of patients with HSAs and high-deductible plans decreased by 15% a year. If even half of Americans with employer-sponsored insurance enrolled in this kind of coverage, U.S. health expenditures would fall by an estimated $57 billion a year, according to a 2012 study in Health Affairs.

HSAs should be available to all Americans, including seniors on Medicare. Given that seniors use the most health care, motivating them to seek value is crucial to driving prices lower. Life expectancy from age 65 has increased by 25% since 1972, meaning Americans need to save for decades of future health care. Raising maximum HSA contributions, now $3,400 a year for an individual, to at least match the limit on individual retirement accounts of $5,500 a year, is one important step. When a person with an HSA dies, the funds should be allowed to roll over tax-free to surviving family members. HSA payments should also be permitted for the expenses of the account holder’s elderly parents.

The information that patients require to assess value must be made radically more visible. A 2014 study on magnetic resonance imaging showed that price-transparency programs reduced costs by 18.7%. The most compelling motivation for doctors and hospitals to post rates would be knowing that they are competing for price-conscious patients empowered with control of their own money.

Second, work strategically to increase the supply of medical services to stimulate competition. In large part, this means deregulation. Lawmakers should remove outmoded scope-of-practice limits on qualified nurse practitioners and physician assistants. That would enable them to staff private clinics that would provide cheaper primary care, including vaccinations, blood-pressure checks, and common prescriptions. In a 2011 review, 88% of visits to retail clinics involved simple care, which was provided 30% to 40% cheaper than at a physician’s office, while keeping patients highly satisfied.

Medical credentialing should be simplified, and the licensing boards should institute reciprocal (national) licensing for doctors to help telemedicine proliferate across state lines. Medical school graduation numbers have stagnated for almost 40 years. Some projections suggest a shortage of 124,000 doctors by 2025, with almost two-thirds being specialists. Yet medical societies artificially restrict competition by imposing protectionist residency limits that raise prices and harm consumers.

Archaic barriers to medical technology also impede competition and raise prices. Although originally intended to restrain “health care facility costs,” certificate-of-need requirements, which require health-care providers to get permission from the state to add medical technology like MRI scanners, are an example of bureaucratic overregulation. Despite unintended consequences, they are still in place in 34 states, Puerto Rico and the District of Columbia.

Third, introduce the right incentives into the tax code. Today employees aren’t taxed on the value of their health benefits—and there is no limit to that exclusion. This creates harmful, counterproductive incentives. It encourages higher demand for care and minimizes concerns about cost.

Similarly, ObamaCare’s premium subsidies and the tax credits proposed by Republicans artificially prop up high insurance premiums for bloated coverage that minimizes out-of-pocket payments. This prevents patients from caring about the bill, which reduces the incentives for doctors and hospitals to compete on price. If health-care deductions are maintained, the tax code should cap them and limit eligibility to HSA contributions and catastrophic premiums.

In other countries, governments hold down costs mainly by limiting access to care, drugs and technology. The results are long waits and worse medical outcomes, particularly for the poor and middle class, who are unable to circumvent those single-payer systems. If Republicans want to avoid going down that road, they need to educate the public on the benefits of a different approach: leveraging incentives and deregulation to reduce prices so that quality health care is affordable for all Americans.

I agree with a lot of that particularly eliminating CONs, changing scope of practice regulations, and tax changes affecting health are. I would concentrate on the income part of that equation rather than the deduction part. Employer contributions to health are insurance should be taxable as income.

However, since so much of health care spending is in fact provide-induced, I wonder how much that would really reduce costs even if implemented in toto. Something else that might be tried is lowering the reimbursement rates for Medicare. That would be dreadfully unpopular so I’m sure it would hardly be whispered about let alone implemented.

All of these things point to why I’m skeptical that any measure that’s presently on the table will actually lower the cost of health care.

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Commonsense

I don’t have a lot to say about the massacre in Las Vegas. My heart goes out to the survivors and their families as well as the families of those who were murdered.

Details are still emerging and I still don’t know enough to say much else. I have no objections to commonsense restrictions on firearms and it would seem to me that banning the sort of conversions from semi- to full automatic that this guy apparently used fall into that category as well as being a law that might actually have reduced the carnage had it been in place.

All too frequently these days proposals take a form something like this. “If you put an extreme version of such and such in place and enforce it with 100% effectiveness, it will have a minor effect on whatever it is you’re trying to do.” To my eye banning conversions to full automatic fire does not fall itnto that category.

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And What About the Mayor of San Juan?

I’m not sure which is more likely. That the mayor of San Juan, Puerto Rico will be increasingly considered an “American hero”, as claimed by Mike Lupica in the New York Daily News or that mainland Democrats will quickly start backing away from her.

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