No free lunches, or free colleges
It’s silly to poll Americans on economic policy questions. They do not understand enough economics to give an intelligent answer. But people keep doing so. A recent poll found that 62% of Americans favored making college free for everyone, and nearly 90% were in favor of making college free for students from lower income families, including a sizable number of Republicans:
Once an idealistic pipe dream of the far left, free higher education is now largely supported by a majority of Americans. Sixty-two percent say they support debt-free university tuition, according to a July survey of 1,000 American adults conducted by Princeton Survey Research Associates International for consumer financial company Bankrate Inc. Among those who are opposed to the initiative, 26 percent said they would support making college debt free for students coming from families that earn less than $50,000 annually. Another 5 percent are willing allow it for those whose families earn less than $85,000 a year.
This seems like a loony idea on both efficiency and equity grounds. Imagine the tuition increases that will occur after college is made free. I should not have retired from teaching. (Or perhaps the government will “regulate” college spending, what a wonderful idea!!)
The following helps to explain why Americans find the idea so attractive:
But when it comes to putting their money where their mouth is, Americans are more reluctant. Among those surveyed, 48 percent [said?] they would not be willing to pay more in federal taxes to fund free college.
I wonder if the near-zero interest rates make people even more prone to think in free lunch terms. Over at Econlog I have a post discussing Trump’s proposed tax cuts, which would balloon the budget deficit. Who will benefit from these tax cuts? People who vacation here:
I would benefit enormously if Trump’s plan were enacted. My taxes would be cut sharply, and so I would join lots of other affluent boomers in being able to stay at 4-star hotels when I visit Bali during my retirement, instead of the lousy 3-star hotels I currently stay at.
So us top ten percenters will enjoy more consumption. But will it come at anyone’s expense? Let’s think in terms of the GDP equation:
Y = C + I + G
Trump plans to increase G, so it’s not coming out of that category. He also plans to cut taxes for working class American, so it’s not coming out of the consumption of the bottom 90%. I suppose you could argue that it will boost GDP, but I doubt it. The Fed would offset any demand-side effects, and Trump’s program looked at in its entirety is anti-supply-side, especially regarding foreign trade and investment.
So that leaves crowding out of investment. Less investment, and less future GDP growth. And it makes no difference whether interest rates are 1% or 10%.
Right now Trump polls extremely well among the old. Perhaps they know that Trump plans to shovel lots of money their way, and leave a poorer country for their children and grandchildren.
Selfish b******s.
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2. August 2016 at 06:55
Why would tuition increase? If we’re actually going with the form of “free college” that most proposals for it entail – namely, free college at a public university or community college – then the funding model is just completely different. You fund it out of general tax appropriations, or a special tax just for that.
2. August 2016 at 07:21
What makes free college any different from free missles, free spying on our own citizens or anything else the federal government spends money on? Your snarky “Or perhaps the government will “regulate” college spending, what a wonderful idea!!” isn’t helpful and is dismissive. How would this be significantly different from Medicare — a system that is significantly more efficient than similar private systems?
Are you worried about inflation? Hasn’t the Fed been trying to get some inflation going for quite a while now. Perhaps this is just the ticket.
2. August 2016 at 07:40
Brett, I thought these were proposals for the Federal government to pay for education. If I’m wrong, then you are correct on that point (although it’s still a bad idea on equity and efficiency grounds).
Andrew. You said:
“What makes free college any different from free missiles, free spying on our own citizens or anything else the federal government spends money on?”
That’s not really an argument, unless you think this is one too:
“What makes free spa treatments any different from free missiles, free spying on our own citizens or anything else the federal government spends money on?”
Normally you need an affirmative argument. As I said, free college is bad on both equity and efficiency grounds. Equity grounds because college grads earn way above average, and efficiency grounds because it leads to over-provision of education. I thought that was obvious.
You said:
“Hasn’t the Fed been trying to get some inflation going for quite a while now.”
Nope, they raised rates in December to prevent inflation from rising.
American health care is an utter disaster, both the government sector, and the massively regulated private sector. Let’s not use that as a model, unless you want education to gobble up 18% of GDP.
2. August 2016 at 08:03
I’m fine with free spa treatments. Why not? Are you making some argument based on moral grounds that people shouldn’t have spa treatments? Are spa treatments better/worse than NSA spying or college? The argument is simply that the government can spend money on whatever it chooses to purchase. Personally, I’d be much happier with the government handing out coupons for spa treatments than I am with their spending on the NSA.
Over-provisioning of college? What IS that? Are we over-provisioned on high school? That some benefit more than others from ANY government spending has never been a reason not to spend.
Agree healthcare isn’t competitive, but that doesn’t change the fact that Medicare is substantially more efficient than the current alternatives. It’s a very weak argument that the problem is the government spending (rather than private spending) when both seem beholden to a market that isn’t. But from the standpoint of GDP, why is spending on healthcare a bad thing? If Americans want to spend their money going to the doctor, that’s a choice and isn’t necessarily a problem unless it prevents some from getting necessary treatment. When you say “gobbles up 18% of GDP” I could say “contributes 18% to our GDP.” Is spending on healthcare worse than spending on video games or cell phones or cars or…?
2. August 2016 at 08:14
I am old and I don’t support Trump. I live in the crazed liberal state of Nevada, where if people get a B average in HS, they go to college for free.
Liberal as can be, that Nevada. Lol.
Scott thinks that if you educate the masses, it will prove inefficient. But having a bunch of educated people thinking up new ideas and products would be a good investment in, well, the GDP!!!
By the way, the Fed liquidates, and did so in the Great Depression and Great Recession. And yet, Scott is against that very liquidation. That means that on this issue, Scott opposes the libertarians who say destroying the economy will restore it. I don’t see it restored so much for main street. But Bernanke did destroy it in 2008.
2. August 2016 at 08:29
Why not? College used to be free not that long ago. That’s what state schools were for. Not anymore. I don’t agree with the Sanders idea of just throwing money at the problem but the idea that colleges can’t be free seems off. They could be. Or maybe not and we can’t get the genie back in the bottle but for what reason?
2. August 2016 at 08:30
Federal subsidies for higher education exceed the total tuition paid to all public colleges and universities. Substitute “free” education at a public college or university for the myriad federal subsidies that currently exist and the government spends less. How could Sumner be opposed to less government spending?
2. August 2016 at 09:17
“Perhaps they know that Trump plans to shovel lots of money their way, and leave a poorer country for their children and grandchildren.”
-There are more things in life than taxes, Sumner. The entire Democratic Party wants Black supremacy and Mexican imperialism. They’ll make this country a lot poorer than anything Trump could manage to do with the tax code. Are there any Black-majority countries richer than the United States? Any Mestizo-majority countries? The question should answer itself, for obvious reasons.
And what don’t you like about staying at larger hotels? It’s all good.
Free college is only a slightly worse idea than free public schools. And it’s not the founder of Trump University who’s advocating for it.
2. August 2016 at 09:36
Scott, thoughts on Johnson’s interview with the LA Times?
He advocates for catastrophic injury & illness insurance and a free-market approach to everything else, a progressive consumption tax, entitlement reform, & balanced budget.
http://www.latimes.com/opinion/editorials/la-ed-gary-johnson-libertarian-transcript-20160729-snap-story.html
2. August 2016 at 09:36
False. As of May I’m now a registered Democrat, and I don’t want that. In fact I’m opposed to any racial supremacists, including orange supremacists. I also think we should have immigration restrictions (like we do) and be smart about how we enforce the law. Building a wall is not necessary. My company actually develops technology for monitoring the border, which is effective and much cheaper and more practical than a wall.
2. August 2016 at 09:55
Well said, Tom. But I am an independent. I won’t vote for Gary Johnson, because entitlements are things people are entitled to because they paid into the system.
Libertarians are mad that you are being taxed to pay for their mothers’ social security. That is how sick libertarians, real libertarians, really are. Sick.
They believe the invisible hand self interest is a god. They know nothing.
2. August 2016 at 09:57
Scott,
This is by far your best anti-Trump effort. Well done.
2. August 2016 at 09:57
My company actually develops technology for monitoring the border, which is effective and much cheaper and more practical than a wall.
You finally laid your cards on the table. It’s hard to imagine a more striking example of partiality and conflict of interest. Like Scott said: Selfish, selfish, selfish. You are simply trying to sell fish, very rotten fish.
2. August 2016 at 10:09
Tom Brown, I did not hear a hint of that when I was watching the DNC. The agenda of the DNC is clear: amnesty, abortion, and no immigration enforcement whatsoever.
2. August 2016 at 10:24
False. As of May I’m now a registered Democrat, and I don’t want that. In fact I’m opposed to any racial supremacists,
Yeah, but you’re just a shnit on the internet. Attitudes toward racial patronage programs now define in-groups and out-groups among the people Glenn Reynolds calls ‘the administrative class’: that collection of lawyers, civil servants, faculty, and educational apparatchicks which make these allocative decisions. It does not mean ‘black supremacy’. It does mean that ever more rococo and opaque methods will be used to allocate benefits. The children of the professional-managerial class will navigate them passably, though they will benefit some and injure others within that class (who benefits? Oh, people who interview well and leverage connections. What can and does happen is that institutions are damaged by the imposition of dysfunctional schemes for recruitment and promotion. This has its most severe impact on people ill-adapted to higher education (which is a crucial component to sorting the labor market nowadays). See, for example, the controversies over civil service examinations for municipal fire departments. Madame Justice Sonia Lardbutt Sotomayer was guilty of judicial chicanery in one such case.
Keep in mind, none of the excuses for ‘affimative action’ apply in the least to Chicano populations, which were small but well established in the southwest in 1960. The bulk of the chicano population today is derived from post-1965 immigration and there is simply no ‘past discrimination’ for which to atone. Dispensations to provide berths for blacks and chicanos are a gesture manifesting the disdain of professional class whites for ordinary whites. Nothing more, nothing less.
And, yes, it’s a project of a certain sort of professional type (like BO) to pack the meeting with Mexican immigrants to reduce the influence of working-class whites. Look at the leadership of the California Democratic Party – a mess of septuagenarian whites from affluent backgrounds. They’re not injured by Mexican immigration because they game it through building patron-client relations.
Read Bryan Caplan’s remarks on places like Switzerland (consequent to referenda disruptive to open-borders projects) if you want to see an example of the intense hostility of his type for ordinary people with ordinary tastes and affiliation. Caplan’s missing enough pieces upstairs that he cannot manage the evasions and verbal trumpery professors and lawyers with better social skills can.
2. August 2016 at 10:26
Building a wall is not necessary. My company actually develops technology for monitoring the border, which is effective and much cheaper and more practical than a wall.
Ha ha ha. Read RM Kaus on high-tech flim flam re this issue. He’s seen this flick before. Several times.
2. August 2016 at 10:30
The difficulty with the ‘free college’ crew is that they never delineate a scheme to ration berths. If you’re not rationing with the price system, with what do you propose to ration.
You can, of course, read Corey Robin huffing and puffing about how ‘underfunded’ CUNY is. Academics who opine on these issues general want MOAR money for their pet projects, all justified by ‘the view of my colleagues in the profession’.
One could, of course, ration making use of baccalaureate examinations. That would, of course, disrupt the patronage schemes favored by the administrative class, so will be ruled ‘unconstitutional’.
2. August 2016 at 10:53
Scott says… “Imagine the tuition increases that will occur after college is made free.”
you seem to think that when the government pays for something it is axiomatic that the costs will go up…
But This is not true at all. Just look at medical care. Heck, look at education.
when the government becomes the near monopoly power in charge of paying for education…it will be able to use it’s monopoly power to rig the game…to regulate. And when something like this becomes universal everyone has skin in the game…and there will be great political pressure to keep costs down…
There is a reason they say programs for the poor are poor programs…
To often classical econmics leaning economists miss the politics of this stuff completely… They see the world thorough the lens their models… and ignore the real world..
2. August 2016 at 10:57
you seem to think that when the government pays for something it is axiomatic that the costs will go up…
He’s incorporated into his discussion the assumption that institutions will function as private enterprises and set their own prices, which is roughly how it works now.
2. August 2016 at 11:13
We’re a small research and development firm, not a manufacturing firm. I personally have had nothing to do with the research on or prototyping of these systems, and I have only marginally benefited from any of our contracts with DHS (which comprises no more than 10% of our company’s business). Nice try. I have seen a number of presentations from my co-workers on the subject and have based my opinion on technical capabilities from that. As usual Deco provides no links to technical critiques on the subject, and Googling Kaus (whom I’ve never heard of) produces nothing but his comments on other blogs.
2. August 2016 at 11:20
While it’s true that the convention didn’t stress enforcement, I think it’s fair to assume that Democrats intend to more or less continue Obama’s policies. Regarding amnesty, it won’t happen with a GOP controlled house. Regarding abortion, I’d think you’d be in favor if it’s mostly non-whites getting them.
2. August 2016 at 11:31
Gary Anderson:
“…entitlements are things people are entitled to because they paid into the system.”
No. “entitlements” are things people are entitled to because they are citizens. Hence, the free-rider problem.
“Libertarians are mad that you are being taxed to pay for their mothers’ social security. That is how sick libertarians, real libertarians, really are. Sick”
Do you really think it’s that black and white? Libertarians are just sick? The fact that babies are being born $60K in debt primarily because of our entitlement programs (let alone the cost of projected future liabilities) is immaterial?
2. August 2016 at 11:42
“Regarding abortion, I’d think you’d be in favor if it’s mostly non-whites getting them.”
-No; you see, the woman whose abortion was cheered at the DNC was White. All this makes me think abortion is part of the Democratic Party’s demographic replacement agenda.
“While it’s true that the convention didn’t stress enforcement, I think it’s fair to assume that Democrats intend to more or less continue Obama’s policies.”
-Riiiight. Think again:
https://www.washingtonpost.com/politics/clintons-stance-on-immigration-is-a-major-break-from-obama/2016/03/10/6388a1f8-e700-11e5-a6f3-21ccdbc5f74e_story.html
“Regarding amnesty, it won’t happen with a GOP controlled house.”
-The 2013 amnesty bill was only stopped by the great David Brat’s surprise primary victory. Otherwise, it would have become law. Most of the House is composed of political opportunists who have their finger in the wind.
2. August 2016 at 12:16
and Googling Kaus (whom I’ve never heard of) produces nothing but his comments on other blogs.
Kaus is a lapsed lawyer who worked on the policy development staff during the Carter Administration. He’s been a prominent opinion journalist for 35 years. He’s mostly retired now. Immigration has been his issue for some time, and he’s one of the few immigration critics in the Democratic Party. He ran for Congress a few years back. Shorter Kaus: electronic systems have been offered multiple times as substitutes for an ‘unsophisticated wall’; it’s thimblerig. What they do install doesn’t work; and was likely never intended to.
2. August 2016 at 12:22
‘What makes free college any different from free missles, free spying on our own citizens or anything else the federal government spends money on?’
College isn’t a ‘public good’ (as defined by Paul Samuelson in 1954). College classrooms have walls and doors, so they’re excludable in consumption, as well as, more or less, rivalrous in consumption. It therefore will be more efficiently provided through private market arrangements…as would high school and grade school education.
‘….How would this be significantly different from Medicare — a system that is significantly more efficient than similar private systems?’
You’re joking, right? Or have you not bothered to Google, ‘Medicare fraud’ lately?
2. August 2016 at 12:22
All this makes me think abortion is part of the Democratic Party’s demographic replacement agenda.
Pushing ‘family planning’ was an avocation of a certain sort of Republican 50 years ago. It didn’t take over the Democratic Party until about 1976. That Republican subtype has largely disappeared re particular programmatic preferences. There not very common as a social type either. Barbara Bush is 91 years old.
The total fertility rate for American blacks is 2.1. Its about 15% higher than the caucasian and amerindian fertility rates, but still only replacement level. The hispanic tfr is much higher (3.9), but not much higher than the white fertility rate of 1957. Source country fertility rates are much lower than 3.9 and it’s a reasonable water that 2d generation fertility rates will be a great deal lower than 1st generation.
2. August 2016 at 12:25
This seems like a loony idea on both efficiency and equity grounds
This “loony” idea works in a lot of other Western countries. Maybe not great but I can’t see that those systems are necessarily worse than the current system in the US. Most Europeans would say their systems are way better. I’m not that convinced but I guess these people should at least be heard, especially when so many Americans seem to be so unhappy.
they would not be willing to pay more in federal taxes to fund free college
That is not necessarily a contradiction. Maybe these people think that in a four trillion dollar budget you could cut something else. Just a very weird idea, I know!
American health care is an utter disaster, both the government sector, and the massively regulated private sector.
Utter disaster compared to what? I don’t believe this is true. At least 50% of the real innovations I use in my daily work as a physician have been developed in the US, maybe it’s even around 80%.
Let’s not use that as a model, unless you want education to gobble up 18% of GDP.
Education and health care are very important sectors. Why should 10 or 15 or even 20% of GDP for each of those sectors be so bad? They might be the most important sectors of all including biochemistry and besides engineering maybe.
That’s the transition into services you are always talking about. As you said the jobs in the steel industry are never coming back, manufacturing is never coming back. It’s only logical that the GDP share of the two most important service sectors are going way up. What else are people supposed to do? What’s wrong with teachers and nurses instead of even more bureaucrats, bankers, jurists and economists?
2. August 2016 at 13:24
There is such a thing as technological progress, and over the past decade there’s been a tremendous amount in real-time image processing systems (a crucial component of border most surveillance systems, and one of the core business areas of our company).
2. August 2016 at 13:35
http://khn.org/morning-breakout/1b-fraud-case-shines-light-on-lucrative-medicare-black-market/
—————quote————-
In the biggest health care fraud case the Justice Department has ever brought, prosecutors charged on Friday that the owner of a network of Florida nursing facilities orchestrated an elaborate scheme to defraud Medicare and Medicaid of more than $1 billion over the last 14 years. The case, featuring allegations of bribes to Miami doctors, hush money to witnesses, and laundering of huge profits through shell companies, shone a light on a lucrative Medicare black market that has surfaced in the last decade.
————–endquote———–
Meanwhile, legitimate users of Medicare are finding it harder and harder to get their doctors to accept the amounts Medicare is willing to pay for services rendered.
2. August 2016 at 13:55
He’s incorporated into his discussion the assumption that institutions will function as private enterprises and set their own prices, which is roughly how it works now….
yea… but they wont function as private enterprises any more than the VA does or public utilities do…
2. August 2016 at 13:59
It would be fairly easy to make state schools tuition “free”. The Swedish government spends something like $9k-$11k per undergraduate for a high-quality, lower-frills education (no sportsball). You’d have to ax a lot of the unneeded non teaching positions, and break the arms race in facilities between the schools, but it could be done.
If you figure the F35 has cost $350 billion to-date, that would fund 35 million students, not bad. We have to get away from this idea that college is for more than 10% or 15% of the population though, and it doesn’t seem right to me that tax payers should pay for people to study non marketable subjects, leave that to the rich and upper middleclass. Free college is a good talking point for the new Republican party, could be a great way of overhauling the cancerous university system and getting a lot of layabout leftist faculty and admins fired.
2. August 2016 at 14:09
Scott says…. “And it makes no difference whether interest rates are 1% or 10%.”
yes it does… You forgot to include the effect inflation has on revenue….The real cost of the money borrowed is a function of interest rate AND inflation…
If we have a loan locked in at 1 % and we have two % inflation our revenue will be up by 2% but our liability will remain the same. So the cost to revenue ratio goes down fast…
at the same inflation rate the 10% interest rate will take far longer to “grow the economy out of”…
2. August 2016 at 14:14
@Patrick R. Sullivan
What’s your point? Insurance fraud is always possible when you deal with insurance.
What’s your suggestion? Paying medical bills out of your pocket?
2. August 2016 at 14:22
I would have thought my point obvious; you have zero evidence to support your assertion, ‘Medicare — a system that is significantly more efficient than similar private systems?’
Unless you can now provide some.
2. August 2016 at 14:27
Justin ays… “it doesn’t seem right to me that tax payers should pay for people to study non marketable subjects, leave that to the rich and upper middle-class.”
well first who’s to say what that is …”a marketable skill”…it’d get foggy fast..
second I think the reason we value teaching marketable skills it that we know they improve the quality of life for people who obtain them… im not sure there is anything that improve’s one’s quality of life better, than an education that prepares one to see the world and oneself more clearly… Liberal Arts can do that for some people… But we don’t think of liberal arts as marketable..
Some folks just aren’t that marketable..but they can still find fulfillment…
2. August 2016 at 14:29
We have to get away from this idea that college is for more than 10% or 15% of the population though,
Currently, baccalaureate degrees are awarded to about 43% of each age cohort. If I’m not mistaken, about 61% of all degrees awarded each year are in vocational subjects (which would include the vast bulk of post-baccalaureate degrees and a majority of baccalaureate degrees). Roughly 23% (we can re-check) of each cohort is receiving an occupational baccalaureate. Some of these are crap degrees (social work, teacher training, library administration). Still, how much vocational training do you wish to forego and how much do you fancy can be allocated to capable vocational secondary programs? We have community colleges now for the equivalent of secondary voTech.
2. August 2016 at 14:32
Wall ? We ain’t got no Wall. We don’t need no wall. We don’t have to build you any stinkin’ wall !
We just need more flying killer robots…
2. August 2016 at 14:33
Here’s another example of ‘my point’ (from almost two decades ago!);
http://www.cjimagazine.com/archives/cji4971.html?id=597
‘The Department of Health and Human Services’ Office of the Inspector General has stated that within recent years, the Medicare system has been under great assault by organized crime groups utilizing loopholes and the general lack of controls within the system to defraud the government. [Groups such as] Russian organized crime have reportedly defrauded the Medicare system of upwards of hundreds of millions of dollars, potentially even billions. In addition, the Genovese organized crime family has been reported as fraudulently receiving millions of dollars in Medicare funds. Organized crime groups have found that scamming the Medicare system is easier and safer than gaining money from other sources such as drugs. Due to the lack of law enforcement knowledge and expertise within the Medicare system, as well as the low priority seen by legislators in regards to Medicare fraud from a criminal justice perspective, organized crime has taken advantage of the system with relative ease. But, it is not merely the defrauding of the government of millions of dollars in funds that has attracted organized crime to take advantage of the Medicare system; rather, the Medicare system has been seen as a solution to many other problems and can be used in other illegal capacities as well. Organized crime groups have recognized that by using cash gained by drug sales, organized crime groups can set up and operate fraudulent medical clinics. These clinics are then used to launder money made from the illegal drug sales, which is combined with fraudulent Medicare checks issued to the clinic by the government. The money made from the Medicare reimbursement checks is then used to purchase additional illegal drugs. In this way, money is circulated through the organized crime groups ‘businesses’, and used to increase the amount of incoming funds.’
Now, Christian, can you find such examples of fraud from your comparison, ‘similar private systems’?
2. August 2016 at 14:50
Everyone, When you subsidize something you create a triangle of deadweight loss. That’s EC101. If there is something wrong with the theory then write up a paper and win a Nobel Prize. But don’t ask me why we should not subsidize something.
Andrew, You said:
“I’m fine with free spa treatments. Why not?”
I’m speechless. Can someone save me some time. Something with Harberger triangles.
You said:
“Agree healthcare isn’t competitive, but that doesn’t change the fact that Medicare is substantially more efficient than the current alternatives.”
Actually, the Singapore system is many times more efficient.
TheManfromFairwinds, Thanks, I’ll take a look. But your description sounds promising.
Bill, You said:
“you seem to think that when the government pays for something it is axiomatic that the costs will go up…
But This is not true at all. Just look at medical care.”
Is this a joke? The government started paying for medical care in 1965, and the cost has gone up from 5% to 18% of GDP.
You said:
“and ignore the real world..”
You mean like health care going from 5% to 18% of GDP?
Art, You said 3.9 Hispanic fertility, but this source says 2.15:
“https://hailtoyou.wordpress.com/2015/12/21/total-fertility-rates-by-race-in-the-usa-1980-2013/”
Christian, You said:
“This “loony” idea works in a lot of other Western countries.”
Let’s see, those would be European countries that are poorer than the US because of higher taxes, have far fewer internationally recognized elite colleges, and trail the US badly in high tech. And they lose their best academics to the US because of the poor quality of their universities. Those are the countries you want us to emulate? “Please Italy, show us how how your regulate your universities.”
Bill, You said:
“yes it does… You forgot to include the effect inflation has on revenue….The real cost of the money borrowed is a function of interest rate AND inflation…”
Nice try, but you are in over your head here. Inflation makes no difference for my crowding out argument.
2. August 2016 at 15:00
Scott…( while still some how managing to ignore the success of the rest of the world after all these years) says… American health care is an utter disaster, both the government sector, and the massively regulated private sector.
yea…so why would you assume that a freer market would solve that problem ?….where in the world has that worked ? ( Singapore’s system is socialist)
we have a screwed up health care market because we refuse to face the truth that insurance markets operate best as a Monopoly..
the concept of insurance is to distribute risk over time and population… a free market won’t do that. In a free market the insurance companies will try and cheery pick the market…they will price out the expensive customers and concentrate on low risk high profit customers…
Our public system is overburdened with the high cost customers…while private insurers get the low cost customers..
Do you have a plan for to reform our health care system…beyond saying let the free market do it ?
“let the free market do it” is basically the foundation of every alternative “plan” the repubs have come up with over Obama’s presidency… NONE of them have penciled out well…they all cost us more and insure less..
2. August 2016 at 15:01
Art, You said 3.9 Hispanic fertility, but this source says 2.15:
I’m quoting the Census Bureau. Complain to them.
Is this a joke? The government started paying for medical care in 1965, and the cost has gone up from 5% to 18% of GDP.
I think the ratio of gross output in the medical sector to GDP is 0.18. If I’m not mistaken, share of value-added in the economy attributable to the medical sector is 0.12 and the ratio of gross output in that sector to gross output total is similar. I’ll recheck.
2. August 2016 at 15:16
So that’s why Sumner always speaks of the wisdom of the crowd, and the market being most right, about the economy.
It is because those very same people are unintelligent about the economy.
Ruh roh!
2. August 2016 at 15:20
Scott (while once again forgetting real world concerns and how they mess up ECON 101)…says…
“When you subsidize something you create a triangle of deadweight loss. That’s EC101. If there is something wrong with the theory then write up a paper and win a Nobel Prize. But don’t ask me why we should not subsidize something.”
The only way to avoid Dead weight loss in a health care market is to exclude some people from health care…
so yeah… any universal plan will involve some dead weight loss…But what is the cost of that in an monopoly system ? I don’t know but I think that the evidence of nations that are making it work at costs far lower per person than we do indicates that it is pretty small..
what are the costs of not having a monopoly system ?? It would seem they far out weigh the costs of a dead weight loss …
2. August 2016 at 15:27
Major conflation… How does taking polls improve the wisdom of the crowd ? (Wait for a labored mole hill of connection to be offered as a mountain)
( don’t get me wrong…IM all for polling…I want polls on more things…everything …I wish they’d give social scientists unlimited ability to poll )
2. August 2016 at 15:30
“It’s silly to poll Americans on economic policy questions. They do not understand enough economics to give an intelligent answer. But people keep doing so.”
no it’s not silly… It’s important to know what stupid things the general population believes..
2. August 2016 at 15:35
without knowing that Americans believed the nonsense of Reagan’s voodoo econ it would be very hard to explain the past 30 years..
2. August 2016 at 16:17
Scott… you once said that you think Hill will be a one term president who will be much worse than Obama… Do you care to take that assertion to market…?
would you be willing to make some concrete predictions ? Is their a stat or two that you think will be way up or way down vs Obama ? a ballpark would be fine…no one could ask for more than a ballpark..
Personally I don’t see a lot of difference between the two.. and so I don’t expect big changes in the economy… But i’ll predict IF Hill can get a genuine public option (big IF) that the trend on insurances costs increases will head down again…
2. August 2016 at 16:26
If one concludes, as I think one must, that the policies of both D. Trump and H. Clinton will hurt the economy I also conclude, via the EMH, that the stock market is trading at a discount. My question is: “How is that discount being calculated?”
2. August 2016 at 16:33
Bill Ellis:
“Singapore’s system is socialist.”
I think it’s more complicated than that. The Singapore system seems to have less centralized healthcare payment.
For Singapore:
“private spending amounts to 69 percent of total health care expenditure, of which 88 percent is out-of-pocket, including costs that are covered and reimbursed by employer medical benefits.”
For the US:
“public spending accounted for 47.6 percent of total health care spending…private health insurance spending accounted for about 33 percent of total health care spending (CMS, 2014a).”
http://www.commonwealthfund.org/~/media/files/publications/fund-report/2015/jan/1802_mossialos_intl_profiles_2014_v7.pdf
2. August 2016 at 16:47
without knowing that Americans believed the nonsense of Reagan’s voodoo econ it would be very hard to explain the past 30 years..
This makes no sense whatsoever.
(FWIW, growth rates during the 1982-91 business cycle were quite satisfactory; the Bush Administration acceded to a tax increase in 1990; the ratio of federal debt to GDP continued to increase until the voters took the committees chairmanships and floor majority away from the Democratic congressional feed-the-hogs caucus..
2. August 2016 at 18:05
Scott Sumner says: “When you subsidize something you create a triangle of deadweight loss. That’s EC101. If there is something wrong with the theory then write up a paper and win a Nobel Prize. But don’t ask me why we should not subsidize something.”
You don’t need to write a paper. You just have to understand that that rule works most of the time, but not all of the time. There are exceptions to the rule. For example, subsidizing education could produce an Einstein. Or subsidizing a product could produce stronger exports. Or, by privately subsidizing his autos by paying good wages, Henry Ford succeeded.
Good thing he wasn’t an economist.
2. August 2016 at 18:18
Shill Ellis:
“How does taking polls improve the wisdom of the crowd ?”
Polls reveal the wisdom of the crowd. Sumner is rejecting the wisdom of the crowd as manifested in the poll.
Are you still smarting?
2. August 2016 at 18:20
Sumner does not want to eliminate or reduce deadweight loss.
He advocates for governments to subsidize the fiat currency monopolies/hegemonies, he advocates for the governments to subsidize “NGDP futures”, the list goes on and on.
Deadweight loss is only a bad thing when the deadweight loss is not preferable to Sumner. Screw everyone else who incurs the costs. This is the mind of a socialiat at work.
3. August 2016 at 00:35
OT – This week’s Economist, note the reliance on Sumner’s “Confidence Fairy” and how metaphysical the entire concept is. Does Scott Sumner believe he can fly, like Peter Pan? Just believe!
“Abenomics has fallen short of its targets and its overblown rhetoric. That makes it easy to dismiss as a failure. In fact, it has shown that central banks and governments do have the capacity to stir a torpid economy. And in some senses, the hype was needed. Japan’s stagnation had become a self-fulfilling prophecy; Abenomics could succeed only if enough people believed it would. This is a final lesson that Japan’s economic experiment can impart to the rest of the world. Aim high.”
3. August 2016 at 01:59
“Japan’s stagnation had become a self-fulfilling prophecy”
The ‘wrong’ policies?
“Princes of the Yen: Central Bank Truth Documentary”
https://www.youtube.com/watch?v=p5Ac7ap_MAY
3. August 2016 at 05:34
Bill, Singapore’s system is “socialist”? No wonder libertarian economists love it so much.
And yes, my prediction is that Hillary will be a one term President. What she gets through Congress will depend on how the House elections turn out.
Christian, You said:
“What’s your suggestion? Paying medical bills out of your pocket?”
Yup.
Art, Well the CDC says 2.15. You say the Census Bureau says 3.9, so you have a link?
http://dailycaller.com/2015/03/19/no-hispanic-surge-on-the-horizon/
Hugh, I have no idea. In general, Presidents don’t have a big effect on the stock market. A GOP victory is usually worth about 2 points, perhaps because of an expectation of lower taxes on stocks.
3. August 2016 at 09:15
Scott:
I don’t think we should have free college, in fact I think our government is already recklessly overextended, but I think the argument against free college education cannot be won purely by saying that it’s a subsidy and subsidies cause dead weight losses.
Review some of the comments here (or 99% of the commments on Krugman’s blog) to see why. There’s a grey area between what’s a subsidy and what’s an investment. Was DARPA a subsidy or an investment? Are NIH grants subsidies or investments? Are public high schools subsidies or investments? Or both?
3. August 2016 at 13:42
Like Carl I don’t really get the subsidy argument. What is the purpose of taxes again?! Every tax ends up in a subsidy. Therefore I would expect Scott to be very happy about Trump’s tax cuts. Yet in another post Scott was against tax cuts also. So which way is it? I don’t get it. Taxes yeah but please not for anything that might be actually useful?
I also don’t get the equity argument. In Germany college is free. Yet poorer people often prefer a vocational training at a good company because then they make good money from day one – and many years earlier than college students. Catching up with such a head-start is not easy, not even for college students.
3. August 2016 at 13:57
‘Like Carl I don’t really get the subsidy argument. ….
‘I also don’t get the equity argument.’
Knock me over with a feather.
4. August 2016 at 06:49
Carl, Sure, but at the margin college ed already has a negative return. I’ve taught at one of America’s better schools. When I think about the 90% of America’s colleges that are below Bentley, I wonder what’s the point?
On the other hand I think college does provide a lot of good consumption to younger people, but there’s no reason to subsidize that.
Christian, Germany’s blue color workers must be doing pretty well if college students need to be subsidized for equity reasons.
4. August 2016 at 09:16
Scott:
Makes sense. Thanks.
4. August 2016 at 10:43
“Germany’s blue color workers must be doing pretty well if college students need to be subsidized for equity reasons.”
On a comparative (other countries’ blue collar workers) basis, they are doing pretty well. But Germany’s education system probably isn’t the best to model the US system on, because it’s heavily skewed towards and dominated by the giant, efficient production machine that is the German economy. Vocational training basically is the companies getting in on the creation of future workers early on and molding them according to their needs. Also, the threshold for university is relatively high.
4. August 2016 at 14:25
@ssumner
Christian, Germany’s blue color workers must be doing pretty well if college students need to be subsidized for equity reasons.
Well they are doing pretty well. At least when they pick the right vocational training and go to a company like Bosch, Daimler, BMW or Porsche. I assume from your point of view that’s not a bug but a feature. And I think you got a point. Thank you for your answer.
@Lazy Rentier
because it’s heavily skewed towards and dominated by the giant, efficient production machine that is the German economy.
Thank you for your praise. I could not have advertised it any better myself.
4. August 2016 at 14:51
What can the white working class be offered in exchange for not burning the world down? Free college, while expensive, would be a small price to pay to stop shit like Brexit and Trump. But I’d certainly like to hear if you have any better ideas.
4. August 2016 at 20:08
Scott
FWIW Trump is much more like Mussolini than Hitler. For an excellent and funny take on Musso, go here.
http://www.bbc.co.uk/programmes/b07d7nj9
5. August 2016 at 04:19
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5. August 2016 at 12:10
Trump plans to increase G, so it’s not coming out of that category.
I do not believe Trump for a minute but he says that he will cut G. In particular by making better deals buying weapons and stuff for the military and by squeezing health-care providers to Medicare.
5. August 2016 at 14:01
[…] No Free Lunches, Or Colleges via The Money Illusion […]
5. August 2016 at 14:36
[…] No Free Lunches, Or Colleges via The Money Illusion […]
5. August 2016 at 21:18
[…] Sumner has a post on free lunches: This is something that intelligent people shouldn’t have to be constantly reminded about, […]
6. August 2016 at 06:05
Christian, Yes, I’ve always wondered why the US didn’t copy Germany’s vocational training system. I suppose those things can be hard to translate into different cultures, but it does seem to work well.
Anon256, Why would the white working class want to burn the world down? And they’d be better off if there were were subsidies to those who did not go to college, not to those that did.
The best solution for the working class is the same as the best solution for other classes, policy reforms to boost economic growth.
James, Yes, that’s pretty obvious.
Floccina, Yes, he says that he’d reduce waste (as do all candidates), but his specific proposals would sharply increase G. Just a few days ago he came out with a massive infrastructure plan, which is more than twice the size of Hillary’s.