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A Restructuring of Incentives

“By now it should be clear how all this relates to the “improvidence of the poor.” Unfortunately, talking about the self-defeating choices poor people so often make generates a lot of discomfort, because it is usually the first step of an argument that seeks to blame the poor for their own misfortune (followed by a “you made your bed, now lie in it” admonition). As a result, many people on the left choose to deny the phenomenon and insist that any appearance of improvidence is entirely a product of the circumstances that people find themselves in, rather than of the choices they have made. There is an element of wishful thinking in this. Wouldn’t it be nice if all the social problems that one finds among the poor were merely a product of their poverty? Then these problems would be easy to fix, just by redistributing income. But what if, as a matter of fact, poverty is a consequence of the underlying social problem? This puts significant constraints on how much can realistically be achieved through redistribution.

A better approach would be to grant the obvious fact that a lot of poverty (in wealthy countries with a robust labor market and a generous welfare state) is extremely recalcitrant, and often exacerbated by self-defeating patterns of behavior on the part of the poor, but then to deny the right-wing policy implications that are often thought to follow from this. The problem with these policies is that, under the banner of “personal responsibility,” conservatives ignore the distinction between moral hazard problems and the effects of hyperbolic discounting. While forcing people to live with the consequences of their own choices may be effective in the former case, it is unlikely to have much effect in the latter. The problem with people who discount the future too sharply is that they disregard certain incentives (those that occur too far off in the future). To propose those very same incentives as a solution to the problem amounts to little more than piling on.”

“The right-wing formula—defending freedom of choice at the front end, combined with massive punishments at the back end—thus amounts in practice to little more than kicking people after they’re down. The left-wing formula of education, social work, and other “talking cures” feels less coercive, but in practice tends simply to make people more aware of how badly they are screwing up. What people with highly exaggerated discount functions need is a restructuring of incentives, in order to facilitate more effective strategies of self-control.”

Excerpt From: Joseph Heath. “Economics Without Illusions.” iBooks. https://itun.es/us/Gsw_y.l

HKO

Discounting in economic terms is the reduction of future value due to interest rates and time value.  A dollar now is worth more than a dollar later.  In Heath’s example the behavior that sharply discounts a future benefit resulting from current behavior (saving or exercise) reduces the incentive to act for the benefit of the future.  Heath extends the concept of economic discounting to behavior.  He insinuates that our poverty programs try to utilize ineffective incentives.

 

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Racial Hypocrisy

From AEI Jonah Goldberg highlights the left’s incredible hypocrisy on race in Liberals are playing a racial shell game:

So: We live in a world where Bobby Jindal is a fake Indian, but it’s racist to say an older white woman isn’t a real one (the correct term being “Native American,” of course). Nikki Haley is a villain for “suppressing” her Indian roots, but Senator Ted Cruz is a fraud for touting his Cuban roots. (Cruz was recently grilled by Bloomberg’s Mark Halperin about how authentically Cuban he really is. At least Halperin later apologized.)

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Classical Liberalism

From  Jonah Goldberg in National Review, When We Say ‘Conservative,’ We Mean . . .

America’s founding doctrine is properly understood as classical liberalism — or until the progressives stole the label, simply “liberalism.” Until socialism burst on the scene in Europe, liberalism was universally understood as the opposite of conservatism. That’s because European conservatism sought to defend and maintain monarchy, aristocracy, and even feudalism. The American Founding, warts and all, was the apotheosis of classical liberalism, and conservatism here has always been about preserving it. That’s why Friedrich Hayek, in his fantastic — and fantastically misunderstood — essay “Why I am Not a Conservative” could say that America was the one polity where one could be a conservative and a defender of the liberal tradition.

It’s also why I have no problem with people who say that American conservatism is simply classical liberalism. As a shorthand, that’s fine by me.

Read more at: http://www.nationalreview.com/article/420055/conservatism-definition-difficult-produce

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Insurance is Not Access

Doctor Leo Spaceman

from Scott Atlas at the Wall Street Journal, Repairing the ObamaCare Wreckage

Why is private health insurance so important? Insurance without access to medical care is a sham. And that is where the country is heading. According to a 2014 Merritt Hawkinssurvey, 55% of doctors in major metropolitan areas refuse new Medicaid patients. The harsh reality awaiting low-income Americans is dwindling access to quality doctors, hospitals and health care.

Simultaneously, while the population ages into Medicare eligibility, a significant and growing proportion of doctors don’t accept Medicare patients. According to the nonpartisan Medicare Payment Advisory Commission, 29% of Medicare beneficiaries who were looking for a primary-care doctor in 2008 already had a problem finding one.

Because government reimbursement for health care is often below cost, costs are shifted back to private carriers, pushing up premiums. Nationally, the gap between private insurance payment and government underpayment has doubled since ObamaCare, according to a 2014 study by Avalere Health for the American Hospital Association. Premiums for private policies will certainly continue to rise, ultimately beyond the reach of the middle class.

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Arbitrary Wages

from Mark Perry at Carpe Diem, Why are market-based wages superior to government-mandated minimum wages? There are many reasons, here are three:

well, here is one of the three….

b. Government Wages Ignore Economic Realities and Instead Reflect Politics. I am not aware of any case of a new city minimum wage law being enacted (for example, $15 per hour in Seattle, San Francisco or LA), or a case of the federal minimum wage being increased, when the new government-mandated wage was determined based on any economic, scientific, or logical basis, or when some rigorous cost-benefit analysis was used to conclude that a $10.10 per hour or $15 per hour minimum wages generates the most benefits with the least costs. In almost every case, a minimum wage by government fiat is determined arbitrarily using the PFA method: “plucked from the air.”

For example, why a $10.10 per hour minimum wage as proposed by the Democrats and Obama with the Fair Minimum Wage Act? Well, according to Obama, one reason for a $10.10 an hour minimum wage is because he tells us that “ten-ten” is easy to remember (and that’s even in the name of bill – H.R. 1010). No economic or cost-benefit analysis, no economic logic, no economic reasoning, no empirical evidence; in other words, no systematic process of analysis that tells us that $10.10 per hour is somehow optimal or ideal, and is superior in some convincing way to a $9.10 or $11.10 per hour government-mandated minimum wage.

Why a $15 per hour minimum wage as advocated by former labor secretary Robert Reich in this video, and the new minimum wage that was recently adopted in West Coast cities like Seattle, San Francisco and Los Angeles? Again, there’s no economic analysis, economic logic or economic reasoning that supports $15 per hour, as the optimal or ideal wage for those cities, it’s another number that was apparently arbitrarily chosen politically using the PFA method, probably again because it’s another nice, round number that’s “easy to remember.”