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Sunday, April 23, 2017

It is all about politics

A very thoughtful piece on science and politics.


Perspective: It’s Not a War on Science

Sunday, April 9, 2017

The tyrannies of experts and the legacy of Woodrow Wilson

I am still in stunned. I, in no way anticipated a Trump victory in the Presidential race. He seemed like a clown to me, and a mean spirited one to boot. However, since I believed there was no way that he was going to be elected, I did not devote much time or attention to what he actually would pursue if he was elected. Press coverage did not especially help, in that it tended to cover polarizing and titillating elements such as Muslim bans and pussy grabbing.



Fast forward a few months and we have a Trump administration and despite wishful thinking of the Democratic Party, we likely have at least four years of this. The mid terms elections may sway the balance of power in Congress, but the executive branch is with us for the next four years. What does this mean? I am pretty sure I don't know but I suspect no one else really knows. I have been relatively quiet about Trump and his administration. I am inherently skeptical about everything political and for that reason I am skeptical of Trump while also skeptical of the anti-Trump movement, which appear to be monolithic in their opposition to him.



Beyond the outrageous and the titillation,  what are these guys all about? What are they trying to accomplish? Should I oppose everything they stand for? Recent coverage of the CPAC conference highlighted some brief video of Steve Bannon (Bannon) and he highlighted three major priorities; National Security, Economic Nationalism, and Deconstruction of the Administrative State. I will delve into national security at some later date, when I can say something intelligent, but must state emphatically that the mean-spirited xenophobia framed as a security concern is indefensible. Furthermore, I think Bannon and Trump are barking up the wrong tree in regards to economic nationalism, but I am out of sync with both political parties on this.



The issues raised on the Administrative State piqued by interest. I had not heard this term before but after I delved into this I realized I had given this much thought and in order to understand these issues, one must go back to the history of the Progressive movement and the works and impact of Woodrow Wilson in order to understand where this came from and how fundamentally this movement changed both how our government runs, and changed the role of experts in the private quasi-regulatory realm. Here lies much of the source of current political polarization. Do you place your faith in the state and administrative agencies (bigger government) or do you place more faith in markets and constitutional limitations which may limit the power of the state to do both good and mischief? Tough question but it is the question that must be addressed.


Please refer to the two videos below - one from Richard Epstein (Epstein) and one from the National Constitution Center (NCC).









Why markets do not work in health care

The reason that markets do not appear to work in healthcare is that there really few if any true markets deployed in healthcare. The question is, what are true markets and why do they tend to allocate resources so efficiently.


The realization I recently had focuses on a concept first put forth by Amos Tversky and Daniel Kahneman called loss aversion. Basically loss aversion means that people prefer avoiding losses as opposed to making gains. Any true market transaction must deal with loss aversion because market exchanges mean giving something up first in order to gain something. There is a complementary element to this called the endowment effect which means people place a higher value on what they already own.


What does this have to do with markets and specifically health care markets? For a transaction to happen in a free market, those undertaking the exchanges must view that they will be better off after the exchange occurs. That is a very high bar given these realities of loss aversion and endowment effect. Both parties need to hold a similar perception that they will both be better off after the exchange. Each will have to give up something they own and in market systems, what they give up is very clear to the parties undergoing the exchange. The initiation energy for the transaction has to overcome the loss aversion barrier, meaning that both parties need to be confident they are much better off after the exchange.


Health care markets are flawed markets at best. The major financial transactions happen on the front end before any services are even contemplated. They are in the form of deductions from salary, taxes, or premiums paid. These transactions do not pay for any specific health care service and they pay for some set of services which are poorly defined. Many if not people never see the money in the first place and really have no idea of what they have purchased.


This was constructed this way intentionally because if people were required to pay for premiums on a monthly basis they would experience loss aversion and push back on payment. Even with nominal charges for copays and deductibles, loss aversion prompts people to stint on their own care for the simple reason that they may perceive little value in what this money goes toward. The copays and deductibles are small fractions of the overall dollars washing around the system.


This is not unique to healthcare. Any long term investment generally has less than perfect buy in from the general public. People do not save for their retirements and Social Security is a form of forced savings. OK, it is not really savings and it is actuarially unsound, but the reason it was put in place is that because of the propensity of humans to not save for the future.


The use of insurance to pay for health care is another form of forced savings to pay for what most people will not or can not plan for. We could try to deploy more market based approaches to pay for health care but they are likely to fail miserably, or at least be viewed as failures, but not for the reasons you might think. They will fail because if people given adequate resources and are placed in charge of how they are spent, they will not view that investment in health care brings them sufficient value to invest the resources they control.  We do not trust markets in health care because we do not trust people to make the decisions that we view are best.


Let's say that instead of providing subsidies for health insurance we simply provided subsidies that people could spend as they please. We are probably right that large numbers would not spend their new found gains on health care if they were given a choice. Are those who fail to make decisions that we feel best for them short sighted of are we simply arrogant to assume that we know best?

Monday, March 20, 2017

A Prescient Address

Eisenhower's Farewell Address to the Nation

January 17, 1961 Video


Good evening, my fellow Americans: First, I should like to express my gratitude to the radio and television networks for the opportunity they have given me over the years to bring reports and messages to our nation. My special thanks go to them for the opportunity of addressing you this evening.

Three days from now, after a half century of service of our country, I shall lay down the responsibilities of office as, in traditional and solemn ceremony, the authority of the Presidency is vested in my successor.

This evening I come to you with a message of leave-taking and farewell, and to share a few final thoughts with you, my countrymen.
Like every other citizen, I wish the new President, and all who will labor with him, Godspeed. I pray that the coming years will be blessed with peace and prosperity for all. Our people expect their President and the Congress to find essential agreement on questions of great moment, the wise resolution of which will better shape the future of the nation. My own relations with Congress, which began on a remote and tenuous basis when, long ago, a member of the Senate appointed me to West Point, have since ranged to the intimate during the war and immediate post-war period, and finally to the mutually interdependent during these past eight years.

In this final relationship, the Congress and the Administration have, on most vital issues, cooperated well, to serve the nation well rather than mere partisanship, and so have assured that the business of the nation should go forward. So my official relationship with Congress ends in a feeling on my part, of gratitude that we have been able to do so much together. We now stand ten years past the midpoint of a century that has witnessed four major wars among great nations. Three of these involved our own country. Despite these holocausts America is today the strongest, the most influential and most productive nation in the world. Understandably proud of this pre-eminence, we yet realize that America's leadership and prestige depend, not merely upon our unmatched material progress, riches and military strength, but on how we use our power in the interests of world peace and human betterment.

Throughout America's adventure in free government, such basic purposes have been to keep the peace; to foster progress in human achievement, and to enhance liberty, dignity and integrity among peoples and among nations. To strive for less would be unworthy of a free and religious people.
Any failure traceable to arrogance or our lack of comprehension or readiness to sacrifice would inflict upon us a grievous hurt, both at home and abroad. Progress toward these noble goals is persistently threatened by the conflict now engulfing the world. It commands our whole attention, absorbs our very beings. We face a hostile ideology global in scope, atheistic in character, ruthless in purpose, and insidious in method. Unhappily the danger it poses promises to be of indefinite duration. To meet it successfully, there is called for, not so much the emotional and transitory sacrifices of crisis, but rather those which enable us to carry forward steadily, surely, and without complaint the burdens of a prolonged and complex struggle – with liberty the stake. Only thus shall we remain, despite every provocation, on our charted course toward permanent peace and human betterment.



Crises there will continue to be. In meeting them, whether foreign or domestic, great or small, there is a recurring temptation to feel that some spectacular and costly action could become the miraculous solution to all current difficulties. A huge increase in the newer elements of our defenses; development of unrealistic programs to cure every ill in agriculture; a dramatic expansion in basic and applied research – these and many other possibilities, each possibly promising in itself, may be suggested as the only way to the road we wish to travel.

But each proposal must be weighed in light of a broader consideration; the need to maintain balance in and among national programs – balance between the private and the public economy, balance between the cost and hoped for advantages – balance between the clearly necessary and the comfortably desirable; balance between our essential requirements as a nation and the duties imposed by the nation upon the individual; balance between the actions of the moment and the national welfare of the future. Good judgment seeks balance and progress; lack of it eventually finds imbalance and frustration.

The record of many decades stands as proof that our people and their Government have, in the main, understood these truths and have responded to them well in the face of threat and stress.
But threats, new in kind or degree, constantly arise.
Of these, I mention two only.

A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction.
Our military organization today bears little relation to that known by any of my predecessors in peacetime, or indeed by the fighting men of World War II or Korea.
Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence – economic, political, even spiritual – is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades. In this revolution, research has become central, it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.

Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.

It is the task of statesmanship to mold, to balance, and to integrate these and other forces, new and old, within the principles of our democratic system – ever aiming toward the supreme goals of our free society.

Another factor in maintaining balance involves the element of time. As we peer into society's future, we – you and I, and our government – must avoid the impulse to live only for today, plundering for, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without asking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.

Down the long lane of the history yet to be written America knows that this world of ours, ever growing smaller, must avoid becoming a community of dreadful fear and hate, and be, instead, a proud confederation of mutual trust and respect.

Such a confederation must be one of equals. The weakest must come to the conference table with the same confidence as do we, protected as we are by our moral, economic, and military strength. That table, though scarred by many past frustrations, cannot be abandoned for the certain agony of the battlefield.
Disarmament, with mutual honor and confidence, is a continuing imperative. Together we must learn how to compose differences, not with arms, but with intellect and decent purpose. Because this need is so sharp and apparent I confess that I lay down my official responsibilities in this field with a definite sense of disappointment. As one who has witnessed the horror and the lingering sadness of war – as one who knows that another war could utterly destroy this civilization which has been so slowly and painfully built over thousands of years – I wish I could say tonight that a lasting peace is in sight.
Happily, I can say that war has been avoided. Steady progress toward our ultimate goal has been made. But, so much remains to be done. As a private citizen, I shall never cease to do what little I can to help the world advance along that road.
So – in this my last good night to you as your President – I thank you for the many opportunities you have given me for public service in war and peace. I trust that in that service you find some things worthy; as for the rest of it, I know you will find ways to improve performance in the future. You and I – my fellow citizens – need to be strong in our faith that all nations, under God, will reach the goal of peace with justice. May we be ever unswerving in devotion to principle, confident but humble with power, diligent in pursuit of the Nations' great goals. To all the peoples of the world, I once more give expression to America's prayerful and continuing aspiration: We pray that peoples of all faiths, all races, all nations, may have their great human needs satisfied; that those now denied opportunity shall come to enjoy it to the full; that all who yearn for freedom may experience its spiritual blessings; that those who have freedom will understand, also, its heavy responsibilities; that all who are insensitive to the needs of others will learn charity; that the scourges of poverty, disease and ignorance will be made to disappear from the earth, and that, in the goodness of time, all peoples will come to live together in a peace guaranteed by the binding force of mutual respect and love. Now, on Friday noon, I am to become a private citizen. I am proud to do so. I look forward to it. Thank you, and good night.

Sunday, March 19, 2017

Tweeted to distraction

The Trump administration has submitted its 2017 budget proposal. It is steeped in controversy including steep cuts in support for the EPA, Department of Education, The CDC, and the NIH.  Everyone's ox gets gored in this budget. We can quickly get into the weeds on this, discussing the specific merits of individual line items. While I believe that the wisdom of cutting funds for specific entities such as the CDC or NIH is simply more than dubious, these micromanagement decisions draw attention away from the bigger issues; that being why we are having this discussion in the first place.

The Federal budget is a mess and the dysfunction in Washington is a direct result of the structural issues with Federal spending. The historical perspective of across the isle collaboration existed because there was sufficient discretionary spending within the Federal budget whereby deals could be struck with specific financial resources linked to keep everyone happy. That has gone away because most of the money in the federal budget is spent outside the control of Congress. The net effect of the explosion of mandatory spending is there is no real reason to collaborate and every reason to play legislative chicken when there are fewer and fewer goodies which can be allocated and shared.

The projections of future growth of mandatory spending paint a rather bleak picture if one thinks that future collaboration across the isle are any more likely than the recent past. Mandatory spending is increasingly crowding out discretionary spending. The fastest growing segments of the overall budget are mandatory spending on entitlements and interest on the debt.


We have dodged this over the past 10 years for two reasons. First, we have run huge budget deficits which have allowed for both substantial growth of mandatory spending and support of flat discretionary spending. Second,  interest rates have hovered around zero which has allowed for growth of debt without substantial growth of interest payments.

The only discussions which are happening regarding spending cuts are touching upon the margins of the discretionary spending, which is less than 1/3 of total spending. We are likely to have huge political fights over these marginal items now, which in the not so distant future will be entirely irrelevant since growth in mandatory spending will all but crowd out everything that is truly discretionary.

The party is over. Interest rates are increasing meaning the carrying cost for the debt we have accumulated will, along with growth in Medicare costs, decimate discretionary spending. If the conflicts over cutting at the margins of the Federal budget seem nasty this year, just wait until the out years when the pie gets even smaller. Adjusted for inflation, discretionary spending in 2016 is smaller than any year since perhaps 2003. We could perhaps maintain flat discretionary spending with substantial tax increases for the short term. However, this approach runs a real risk of decimating any prospect of real economic growth and besides, it is only a short term work around. We will need to address the mandatory spending piece. There is no way around this.
Unfortunately, entitlements are not politically addressable. No one wants to talk about them. Smart people become blind when the subject is raised. Smart politicians remain in office by avoiding the conversation. The press corps are populated by smart and innumerate people, at least the ones who are employed.
I for one am not interested in hearing about anyone's specific beef about any specific budget item which will be slashed without a concurrent recognition that the inability to direct financial resources to good investments is part of a larger train running down a track to nowhere. Upset about federal $'s for the EPA - what about the bigger picture? Fill in any issue with any agency; NIH, Education, Agriculture... It does not matter whether you win the fight this year if you are blind to the inevitability of mandatory spending crowding out the remainder of the Federal budget.