Robert Tulip wrote:Just firstly, can I say how much I appreciate your courteous, informed, factual, patient, polite replies (mostly).
Well, I occasionally have to grit my teeth to remain courteous and patient, so I am not shocked if sometimes I don't manage it. It is (mostly) a pleasure to engage intellectually with a well-informed, thoughtful advocate for a very different point of view.
Robert Tulip wrote:Whether the public debt of the 2010s was “called for” is exactly what is debatable. Of course those who incurred it say their decisions were necessary, but it seems equally possible that incurring this massive multi-trillion dollar debt was a big mistake, ratcheting up government role in the economy with significant harm and no good reason.
To make a case that it was not necessary and appropriate, you need very strong assumptions about reasons those unused resources would not have been taken up by a revived economy. So far, of course, no one, including the WSJ editorial page, the Financial Times or conservative academia, have made any effort to spell out such an argument (much less substantiate the assumptions). Nevertheless the right wing party continues to play the droning note of opposing deficits as long as they are in opposition to the president, and drop it like a hot potato when they get the chance to increase deficits for their priority. The pretense of justifying their logic never even made an appearance.
Robert Tulip wrote:Harry Marks wrote: The real irony is that efforts at austerity were in fact responsible for slowing the closing of the deficit and thereby increasing the overall level of debt.
That is an argument that can equally be used to support the supply-side trickle-down economics of the Laffer Curve and Trump’s tax cuts. Finding the optimal point of tax that maximises revenue involves big macroeconomic assumptions about the feedback from increased economic activity.
The difference is that the macroeconomics of the multiplier effect is strongly supported by evidence while the Laffer Curve has no evidence to support its application, or at best arguments from anecdote. The issue is not optimal tax revenue, (which is supposedly what the Laffer Curve argument is about) it is demand-side constraint in a serious recession. All evidence, including the lack of inflation from Quantitative Easing, indicates that the old Keynesian arguments applied strongly. A tax cut now has very little positive effect on the economy, but a tax cut in the Great Recession would have been helpful, which is why Obama continued the Bush tax reductions when he had the chance to let them expire.
Robert Tulip wrote:Yes, but quantifying the multiplier is imprecise. My impression is that private investment has a bigger multiplier than public spending.
There is a "Long Run" multiplier which mainly comes from adding productive capacity. This applies even when the economy has full employment, and private investment pretty much always creates this effect. The usual multiplier instead looks at demand-side stimulus, and it is essentially zero at full employment (though estimates of as much as 2.5 in the short run have been made). But in a severe recession it is probably more like 4, and not limited to short-run effects (which would be undone over a longer horizon - probably 4 to 6 years). Whether you use 2.5 or 4, the austerity moves by the Republicans added to debt in the long run: the revenue sharing with states, for example, which they cut, would have paid for themselves in added government revenue from added GDP and lower unemployment within two years.
Robert Tulip wrote:The economics of health care seems to me one of the most devilishly wicked problems to explain.
I would agree with this. I had the pleasure of discussing the issue with William Hsiao, a top health care economist at Harvard, and came away uncertain that there are any good options for providing it. The feedback loops can be very slow, and so it is very difficult to even quantify the trade-offs. Still, it is somewhat heartening that the CBO managed to get the numbers pretty close with their forecasts about Obamacare (erring on the side of conservative views, at least in the medium term).
Robert Tulip wrote:The US health funding system is broken and corrupted. It seems doctors exploit their position as a royal priesthood to extract vast sums of wealth from the populace.
Some do. Remember that much of the med school system is privately funded, so that doctors often start with fearful debt, unlike most industrialized countries.
Robert Tulip wrote:Changing that dysfunctional syndrome looks more like an exercise in cultural mythology than rational economics.
Worth thinking about, but it is plain that the Bernie Sanders/Michael Moore mythology leads toward fixes that are just as problematic as the pre-Obamacare mythology or the technocratic approach of Obamacare.
Robert Tulip wrote:Harry Marks wrote:Investment for the future requires borrowing. If the government can do that effectively, and spending during a serious recession is effective without knowing anything about what it is spent on, then it should.
I find these arguments misguided. The USA owes twenty trillion dollars, putting its debt into a risk category well above any private firm.
True, but firms don't owe most of the money to themselves, while the US people do.
Robert Tulip wrote:Much government borrowing is for consumption, not prudent investment.
Back in the heyday of serious budgeting that was the 90s, the idea of a capital budget was revived. But you can imagine the absurdities of, say, classifying social science research as capital investment. How much of our armaments budget is productive investment that generates spin-offs for private industry (this is a serious question, but not one with a usable answer)? For that matter, is a fighter plane investment, because it is long-lasting, or is it consumption, because we never use them to make anything? Not an easy question.
Robert Tulip wrote:So this alleged “investment” is not effective where it has no rate of return.
The rate of return on schooling is still pretty good. The rate of return on medical care for children is probably pretty good. Defense may be overdone, but it probably has a good implicit rate of return for the first 50 percent or so of expenditures. Social insurance is something people should be allowed to choose, even if it isn't productive investment.
Robert Tulip wrote:And the moral hazard of equating all recessionary countercyclical investment is extreme. In Australia that attitude got us a pile of useless unwanted school halls that were delivered well after the crisis that they responded to had passed, drastically increasing the national debt.
Well, someone can always look into spending it better, but the increase in the debt comes more from fading private production than from the government spending. It is simply not the case that government needs to follow the same rules about borrowing that private households do.
Robert Tulip wrote:the USA may be headed for a military dictatorship when the numbers break, unless there is sensible effort to shift back to a sustainable fiscal position. Democratic politics corrupted by money makes sensible policy impossible.
There is a centrist caucus growing in importance. It may never amount to more than the LibDems in the UK, forever trying to stand for something by backing quixotic projects with wonky tendency to turn off the average voter. But they would do well to focus on campaign finance and internal rules before they try to undertake much substantive agenda.
The debt problem, including "entitlements" is eminently solvable. The problem of generating public spirited mythology is much more difficult.
Robert Tulip wrote: A military double the needed size will look to justify its existence through further adventures.
The public appetite for adventures is very low. Ironically, the military-industrial complex is the main source of resistance to cuts in foreign aid, since no one knows better than the generals that the actual ability to influence events overseas and to achieve greater security is much higher with money than with weapons.
Robert Tulip wrote:My current focus in this regard is on Iron Salt Aerosol, treating global warming as a fixable chemical imbalance.
I'm for it, but as a stopgap measure to delay doomsday, not as a long-term solution. I could be wrong about the long term, but the numbers I have seen don't really look so good.
Robert Tulip wrote:The underlying driver of private investment in education is skill formation, which is not just positional, and is far from zero sum.
True, and some parents and teachers can actually tell that skill formation is going on. But mostly, it is just as easy to create a lame level of skill formation and look like really impressive stuff is going on. The closest thing we have to an accurate measure, which is before-and-after testing, is very vulnerable to gaming. For example the quickest way for a school to get its numbers up is to exclude children with learning problems.
So when you look at what parents decide their spending based on, it comes down to: 1) the appearance of adequate skill formation (which admittedly is correlated with the actual level of skill formation); and 2) comparison with other schools based on readily observable but usually not substantive measures.
Robert Tulip wrote:I would like to see education funded by vouchers where private use is funded at about 70% of public use. That would cause a drift to private schooling. The cost of greater social segmentation is outweighed by the benefits of increasing the total education investment, enabling a per capita increase in public school funding, with higher teacher salaries and more personal focus on students, as well as a better teacher career path, school autonomy and better accountability, all leading to better system quality.
It might be worth the try to experiment with this, but I have no faith that it would improve accountability or overall quality. And the social segmentation is a real issue, though I agree it would be worth some difficulties along this line. Interventions subsidizing the private schooling more for those with less income could conceivably offset the segmentation.
Robert Tulip wrote:Harry Marks wrote:
Private schools on average add no more value than public schools.
My impression is that studies on this have been biased by inadequate variable control. It is true that education quality can be hard to measure, but the bottom line is that parents would not make such sacrifices for their children’s schooling costs if they were not convinced they were getting a better product.
An article in the January 2018 American Economic Review
http://pubs.aeaweb.org/doi/pdfplus/10.1257/app.20160634 [paywall]
looks at the effects of school choice. Its brief review of studies of lotteries to enter charter schools, in which students who apply are sorted randomly because only those selected by the lottery get the "treatment", finds positive or neutral effects in most studies, and some charters "increase achievement markedly", usually for "select groups". (The review piece I saw in the Atlantic on such studies concluded that the really effective schools were the product of a single principal with the ability to recruit faculty who align with that person's philosophy and energy, i.e. not transferable to a general case).
Since lotteries are a reasonably controlled experiment, it appears to contradict the conclusion I stated. However, the gains are not normally very large. Parents may think they are getting a great improvement for their child, but in practice not much happens.
Robert Tulip wrote:In Australia a big part of the willingness to pay for private schooling is parental hostility to the group-think values within the public education system.
You might be interested to know that this same article studied a case in which introducing school choice resulted in a marked decline in student achievement. This was due to selection for other factors, such as conservative religious views and racism, leading to people choosing inferior schools. In the U.S. this is almost always due to Creationist parents. Sometimes "groupthink" is just a slur on "people who think differently from me."
Robert Tulip wrote:in Australia teacher unions exercise effective political veto over measures to enhance school choice, and muddy the waters of policy debate through strident ideological campaigns.
This is usually a mix of self-interest, since private schools tend to be exploitative toward teachers and hostile to unions in addition to the draining of political will to support public school quality, with genuine concern for their students. American teachers' unions are also hostile to choice programs, and I would say until studies find a reliable benefit that we know how to achieve on a deliberate basis, this is probably appropriate policy.
Robert Tulip wrote:especially in a sector like health there is a perverse incentive to classify expenditure as investment when its real economic rate of return is low or negative, due to the intangible economic value of improved health.
Well, making young people healthier adds to measured economic output, while making old people healthier just adds to the amount of enjoyment in life. Do we really want to make policy distinctions on that basis?
Robert Tulip wrote:Transparency and accountability based on a strong public interest in evidence are the only remedies for corruption.
My next project is to act on this.
Robert Tulip wrote:Forgive me for inferring a Leninist tinge in your original comment. When a social class is perceived as superfluous many will see
shades of Robespierre.
Oh, I think confiscation (er, appropriation for the public interest) will prove quite sufficient. I just want it clear that I acknowledge past glories as well as reason for believing they are likely to continue.