Saturday, December 10, 2011

Now THAT's A Superstore

An exercise in imperfect capital markets. A classic article.

In a system with perfect capital markets, you would be able to borrow against a highly certain future return. A slight discount for risk, perhaps, but if we are talking about a term of a week or so that should be no problem.

Well, this lady decided that she could not borrow against the future earnings to be gained from selling the meth she was going to make. She had a cash flow problem, lack of $$ to buy the meth makin's.

But this woman was an American. From Oklahoma. No barriers like imperfect capital markets were going to hold HER back.

(Gotta like how the news reporter starts out by saying she is speechless, and then jabbers for several minutes).

Point is that our lady went to Wal-Mart, stole the stuff she needed to make the meth, and started cooking it up right there in the store. Yes, she did. Really. You can read about it.

Clearly an example of market failure. P-Kroog will likely want an investigation, a commission, and a new federal agency to ensure that the poor have better access to capital markets. To be fair, the bed-wetters may have a point: THIS loan likely would have been paid back, unlike the crap loans Barney Frank and Mel Watt forced the banking system to make on housing.

Don't forget about the denominator

Perhaps encouraged by the recent drop in unemployment from 9 to 8.6, President O opined that the rate could drop to 8% by November 2012.

Given that most of the recent drop is attributable to people leaving the labor force, I guess Obama is looking for 600,000 more discouraged workers to take a hike before next November?



Mars needs women!

ooops, make that "Norway needs butter"!!

Yes, one of the richest countries in the world has "run out of" butter! Just before the holidays!

Oh, the humanity!

The soaring popularity of a fat-rich fad diet has depleted stocks of butter in Norway creating a looming Christmas culinary crisis.

Norwegians have eaten up the country’s entire stockpile of butter, partly as the result of a “low-carb” diet sweeping the Nordic nation which emphasizes a higher intake of fats.

“Sales all of a sudden just soared, 20 per cent in October then 30 per cent in November,” said Lars Galtung, the head of communications at TINE, the country’s biggest farmer-owned cooperative.

A wet summer which reduced the quality of animal feed and cut milk output by 25 million litres had already limited supplies and the shortage has led some pundits to suggest the world’s eighth-largest oil exporter offer some of its plentiful fuel supply in exchange for butter.

Butter is now selling on Norway’s top auction website, with a 250-gram piece starting at around $13, roughly four times its normal price.

Top dairy producer Denmark lies just across a narrow sea channel, but its stores of creamy butter will be kept out of the country by the high import duties of Norway, the only Nordic nation that does not belong to the European Union
.

.....and there we have it. Domestic demand surged, domestic supply faltered and IMPORTS ARE FORBIDDEN!

Norway doesn't need butter, they need FREE TRADE!

We often see stories about localized shortages of global commodities and they invariably have bizarre trade restrictions behind them.

Perhaps the poor Norwegian, tragically now unable to eat a stick of butter for Christmas brunch can console themselves by knowing that their domestic butter industry is very profitable.




Friday, December 09, 2011

Individualists Trust People, Collectivists Trust the State

Culture, Cooperation, and the General Welfare

Nick Berigan & Kyle Irwin, Social Psychology Quarterly, December 2011, Pages 341-360

Abstract: Solutions to social dilemmas require cooperation. Given that there are
commonly multiple avenues for cooperation, sometimes social dilemmas require coordination of strategies in addition to sufficient cooperation to be successful. This study examines one social dilemma where such coordination is necessary: supporting the general welfare. Using World Values Survey data from 33 nations, we compare active membership in charitable organizations versus attitudes toward government welfare programs as examples of two different types of cooperation. We argue that culture influences the form of cooperation a group adopts via the amount of trust it generates. Specifically, individualist cultures promote relatively high levels of trust, which produce first-order cooperation (here, involvement in
charitable organizations). Collectivist cultures generate relatively low trust levels, facilitating second-order cooperation (here, greater support for government welfare programs). Findings support our arguments and thus suggest that culture, mediated by trust, shapes individuals’ perceptions about creating and sustaining public goods.


I would be interested in Mr. Overwater's reaction. Am I misinterpreting this? Do I have the causation backwards?

Japanese Light Trucks: Not What You Think...

Japanese light trucks? You mean like a Nissan 4 cylinder? Not for those wacky, wacky sons of Nippon.
(Please click for an even more deranged image)

Nod to Jackie Blue. No, you cannot "borrow" $125k to trick up your 1997 Subaru Forester with a "Scary Clown!" theme. It wouldn't be the same, anyway.

Truly Bad Economics

Do they do it for the money?

Utpal Bhattacharya & Cassandra Marshall. Journal of Corporate Finance, forthcoming

Abstract: Using a sample of all top management who were indicted for illegal insider
trading in the United States for trades during the period 1989–2002, we explore the economic rationality of this white-collar crime. If this crime is an economically rational activity in the sense of Becker (1968), where a crime is committed if its expected benefits exceed its expected costs, “poorer” top management should be doing the most illegal insider trading. This is because the “poor” have less to lose (present value of foregone future compensation if caught is lower for them.) We find in the data, however, that indictments are concentrated in the “richer” strata after we control for firm size, industry, firm growth opportunities, executive age, the opportunity to commit illegal insider trading, and the possibility that regulators target the “richer” strata. We thus rule out the economic motive for this white-collar crime, and leave open the possibility of other
motives.


Wow. I wouldn't accept this as a paper from a sophomore undergrad. The authors assume that everyone has IDENTICAL preferences toward income/leisure trade-off, and identical preferences on risk.

Let me propose an alternative. White collar workers in these firms are heterogeneous. They have differing risk preferences, and differing valuations of leisure. Therefore, the people in the "richer" strata will be those who value money most. Further, since we only observe those who are EMPLOYED, we are selecting on those who took the very highest risks throughout their career, as a matter of preference, not of strategy. (So, if 100 people took big risks, and five won, those five are likely to constitute the "richest" strata. The other 95 are unemployed, but we don't see them).

Is it a surprise, really, that the people who value money most and who are the biggest risk-takers would be the ones who dabble in insider trading schemes? Or is it a surprise that the people who are satisfied with their income and avoid risk do NOT engage in these schemes?

This paper would make sense only if all preferences are identical and if assignment to wealth strata were random. Since assignment to wealth strata is endogenous, and correlated sharply with the characteristics that make insider trading likely, I say: "back to school!"

(Nod to Kevin Lewis, who never really leaves school)

Thursday, December 08, 2011

Billy Beane, John Paulson & the January effect

My second Grantland column with LeBron is now up. This time we made the main masthead instead of being in The Triangle! Still no mention of Rex Chapman though.

A Story of Love, Deception, and Chronic Diarrhea

Dutch Boy sends this Facebook romance story, between a scammer and a person with a lot of time on his hands.

But we benefit a lot from the account! Just amazing.

Blame the Audience

"Cinema trends ebb and flow, but one facet of Hollywood moviemaking proving remarkably consistent is gender inequality, according to a study...by USC's Annenberg School for Communication & Journalism. In a survey of the top 100-grossing movies of 2009 — including 'Transformers: Revenge of the Fallen,' 'Harry Potter and the Half-Blood Prince' and 'The Twilight Saga: New Moon' — researchers found that 32.8% of the 4,342 speaking characters were female and 67.2% were male, a percentage identical to that of the top-grossing movies of 2008...Behind the camera, the gender inequality is just as dramatic: only 3.6% of the directors and 13.5% of the writers on the top-grossing films of 2009 were female, according to the study." [LA Times]

What exactly is the phenomenon being decried here?

There are quite a few movies made with, about, and concerning women. The "problem" (if it is a problem) is that fewer people go to see those movies.

Since movie audiences are diverse, but skewed a bit toward teen-age and early 20s men, this means that 19 year old guys are less likely to want to see "Terms of Endearment" than "Transformers." If movie theaters made MORE ToEs and fewer Transformers movies, then the difference would not shrink, though revenue would go down.

My challenge: If there are profitable movies that are NOT being made because of gender bias, start your own movie company, ladies. You'll make a fortune! (I really liked "Bend it Like Beckham", btw. I would rather see that than Transformers 12, or even 1. So I'll watch your movies, ladies.)

The problem is that this claim is based on a shaky premise: the movie industry is not greedy or craven enough to make the movies that audiences really, really want. (Here is a really terrible discussion of the "science" of movie-going prediction).

Just go rent "Thelma and Louise" again, and rail against the patriarchy. And wait for the day when the general public is FORCED to like what you think they should like. Then we will have paradise.

(Nod to Kevin Lewis)

Air Traffic Control: SNAFU

Wednesday, December 07, 2011

America's Next Tarp Model

What I just love about Jon Stewart is that he perfectly projects the non-partisan, "They did WHAT?" amazement that so many of us feel about the government's economics programs. ANYTHING could be said at this point, and we would believe it. We might break a pencil, but we'd believe it.


UPDATE: As much as Jon is having here, it is useful to point out that the actual amount, by any reasonable accounting standards, was far less. And one can't really say it was "secret," as much fun as that is to say. The painfully earnest (but scrupulously correct) Jay Hamilton explains why these two things are true.

Pups and Downs

Bet this makes you cry.

Certainly made me cry.

Beagles released from lab, first time they have ever stepped out of their cage, walked on grass, seen the sun.

(Update: Commenter makes a good point. So let's elaborate. I could put up a video about how beautiful deer are, or how noble pigs are. But I would still quite happily kill them and eat their lip-smacking delicious flesh. This video is sweet because it shows some very gentle little dogs getting out of cages where they have lived. But we should credit the research being done, of which these dogs are a critical part. You can't let the dogs run around, because they would be exposed to all sorts of outside influences, contagions, and substances that would render the treatment vs control inference invalid. It might be possible to hold the dogs in slightly better conditions, but that would be a LOT more expensive, at a time when it is not clear we are going to fund research AT ALL. So let's all say "awww..." at the sweet beagles. But let's thank the researchers for their valuable work. These dogs were not "rescued." They were retired, after useful service, just as if they were police dogs or sniffer dogs.)

Big Corporations in Overdrive: Regulation NEVER Helps Consumers

Proof # 456,987,321 that regulation never helps consumers.

Because it is actually not SUPPOSED to help consumers. It is supposed to help corporations.

NASHVILLE, Tenn.-- In June 2010 the Nashville Metropolitan City Council passed legislation raising the city's minimum fee for limo and sedan rentals, bumping it from $25 to $45. Drivers were prohibited by law from charging less. Other new regulations forbid limo companies from using leased vehicles, require cars to be dispatched only from the place of business, compel companies to wait 15 minutes before picking up a client, and ban parking in front of hotels and bars to wait for customers. More laws that take effect in January 2012 would also require companies to replace all sedans and SUVs over seven-years-old, and all limos 10-years-old and older. Vehicles older than five years cannot enter into service.

Passed under the guise of consumer protection, the net effect is to give large, existing car companies (also known as livery services) a huge advantage over smaller companies, and to effectively prevent any new companies from entering the market. Prior to the new laws, Tennesseans could purchase transportation from downtown Nashville to the airport in a limo or sedan for the same price as an average taxi ride. Nashville residents and visitors will now pay almost double for the same service.

Nashville folks in need of an affordable ride, and drivers looking to earn an independent living in a sagging economy, join a long line of people caught on the wrong end of a nationwide effort by big car services to squeeze extra profit by regulating competitors out of business. It's a case of regulations actually costing jobs and driving up costs, just as Republicans charge they always do. But this time, the regulations are being pushed by the GOP's so-called "job creators," the new name given to big business.


Two interesting things:

1. HuffPo admits "it's a case of regulations actually costing jobs and driving up costs..." Note the scare quotes implicitly surrounding "actually." Regulations really DO always cost jobs and drive up costs. There is no "actually" needed in that sentence. But HuffPo can't help itself; as a corporation herself (proving corporations are NOT human), Arriana may need her a slice of that good ol' regulation herself sometime. So there is that ridiculous, sarcastic "actually." Goofballs. (UPDATE: Radley B says the author is his intern. So perhaps I'm overreacting to the "actually." Mea culpa.)

2. On the other hand, the idea that "this time" the Republicans are on the wrong side of the issue is as naive as the "actually" was cynical. Of course the Republicans are on the wrong side of the issue. They are REPUBLICANS! Hypocrites.

Both of the state sponsored parties shake down corporations for campaign funds and support. Since the corporations aren't going to pay that, someone has to pick up the tab. Bend over, consumers! We are here to regulate you right up the gazotch.

Here's a fun game: Keith O and Arriana H talking about regulation. The object of the game...how long can you go before poking sharp sticks in both ears? I made it about 45 seconds. Perhaps YOU can do better.

(Nod to Joel R., who knows I'm right)

Fish in a (pork) barrel

Wow. the newly christened Miami Marlins have signed Heath Bell (3 years, $27 million), Jose Reyes (6 years, $106 million) and have supposedly offered Albert Pujols a 10 year, $200 million deal.

But you say, the Marlins never drew any fans in their old park and had a tiny payroll. How are they doing it?

Well they got the City of Miami to put up around $500 million for building their new park (about 80% of the total cost).

In a way, you could say they are paying these contracts with house (or should I say taxpayer) money and have around $150 million or so still left.

Hey, I heard Manny Ramirez was un-retiring....


PS: apparently even the clueless Feds at the SEC who couldn't lay a glove on Bernie Madoff for almost 20 years, think there is something fishy (yes!!!!) about the Marlins deal with Miami and are investigating.

Tuesday, December 06, 2011

Hyperbolic discounting in the NBA economy

One reason the owners have the edge on the players in the NBA labor dispute is time horizon. I argued earlier that the owners can more easily take the long view.

Another way to say that is that the owners have lower discount rates.

But the problem is even worse than I thought. In an effort to minimize salary losses from the missed games, the players have agreed/insisted to cram 66 games into the rest of the time remaining (I think they are maybe adding a week to the schedule). This will cause teams to have to play 3 days in a row, and some teams to play 5 games in 6 days! This will cause bad ball, and most likely, injuries.

That is a HIGH discount rate the players are exhibiting.

Don't get me wrong, I'm happy to have basketball back in the OKC! I'm just saying that the players' attempt to hold out for future earnings was even more doomed than I had thought.

Every picture tells a story

Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies

~Ron Paul

I'll give him the boom and bust part (though I'm not sure why it only applies to "middle & working-class folks), but I have to call bull*&^* on the steadily eroding purchasing power part.

Here's Ron's go to graph:



Looks, pretty bad, right? The "purchasing power of the dollar" has been grotesquely eroded by inflation
(the graph is an inverted graph of the price level). But what Dr. Paul fails to inform us is that we all have a HELLOVA LOT MORE dollars than we used to.

The average hourly wage in manufacturing in 1949 was $1.26!

Here is the graph Dr. Paul apparently is unaware of or at least hopes that you are unaware of:




People, inflation is a sustained rise in the general price level. That INCLUDES wages. Perhaps not month to month or quarter to quarter but over time, wages rise with the price level. In post world war two America, the standard of living of most Americans has steadily risen, not fallen.*

Now that I've worked up a full head of steam, let me go ahead and assert that there is little to no evidence that business cycles are more frequent or worst now than they were when then US was on the Gold Standard!



*Of course we can debate LeBron's Stagnation hypothesis over the most recent period, but that phenomenon is clearly unrelated to the modest inflation levels we have seen in the past decade.




I'm Too Sexy To Donate Kidneys, Too Sexy to ....

Wow. As it if isn't hard enough to find organ donors...new rules: you can't have had more than two sexual partners in the past year. (Anonyman, you should be okay, even though you are ambidextrous. Left and right hands don't count as two!). Excerpt:

“With the new guidelines, every college student in America will be high risk,” said Dr. Harry Dorn-Arias, a transplant surgeon at the University of Virginia. “Right now, it's probably a prostitute or a guy with a needle in his arm. Next time, it will be just a young guy."

Under the new policy proposed this fall by the Centers for Disease Control and Prevention, deceased and living donors who were not monogamous in the previous 12 months would be considered at increased risk of transmitting HIV, hepatitis B and hepatitis C -- even if they had no other risk factors

CDC officials say the proposed guidelines are aimed at making the organ supply safer and preventing accidental transmission of life-threatening infections. The policies wouldn’t absolutely ban anyone from donating, especially in an exceptional or life-saving situation, but they would call for more scrutiny and testing.

The 1% Have Needs, Too!

What? We gots ta eat, too. You think this mortgage is cheap?

A Seattle woman who is receiving welfare assistance from Washington state also happens to live in a waterfront house on Lake Washington worth more than a million dollars.

Federal agents raided the home this weekend but have not released the woman or her husband's name because they have not officially been charged with a crime.

However, federal documents obtained by KING 5 News show the couple currently receives more than $1,200 a month in public housing vouchers, plus state and government disability checks and food stamps. They have been receiving the benefits since 2003.

The 2,500 square-foot home, which includes gardens and a boat dock, is valued at $1.2 million. And even though the couple has been receiving the benefits for nearly 10 years, records show that they accurately listed the address of their current home when applying for the state and federal benefits.

A federal official told KING 5 that the couple likely took advantage of a loophole, which allows low-income individuals to receive financial assistance to help them pay their rent and move away from housing projects. However, the law does not require officials to verify what type of home the benefits recipient is living in.


(Nod to Aaron L)

So Sweet

Can't help laughing and saying, "awwwwww....."

Property-is-Theft Movement All Sad: They Took Our Property!

Can't seem to get off the "stete=force" meme, sorry.

But it turns out that the "Property is Theft!" folks had a nice little set up, with books and some land. The state came and destroyed it all. Not long after having passed a "feel good" resolution supporting the movement.

Ah, frail principles, thy name is government.

The irony of having the "Property is Theft" folks be mad at the government for failing to protect their property, which they had stolen in the first place... priceless.

Monday, December 05, 2011

Fascinating Graph

As KPC pal Tim Worstall puts it, "Fascinating graph!"

He is quite right.

When The State Leaks, We All Get Force on Our Faces

Again, the state = violent force.

Not "the state uses force to keep us all safe." The state is force. Sure there is force that is not the state, but there is no part of the state that is not force.
(click for a more forceful image)

Statists have a conception that a "monopoly on the legitimate use of force" (THEIR definition of the state! Even they admit state=force) means that state will expand to fill the entire "force" part of the Venn diagram.

Problem is, the state leaks; force gets spilled everywhere. Force metastasizes outside of the original limits of force and displaces perfectly effective voluntary action. There is essentially no check on this expansion, unless voters choose voluntarism over coercion.

Which is why this HuffPo piece is so disturbing. The use of force, of sickening excessive force, is expanding rapidly. But you people all keep voting for it, and then saying, "Oh, we didn't mean THAT much force! Oh, no, no, no." And then you vote for it again.

Let's make this simple.
The state is force.
If you vote to expand the state, you are expanding force.
If you want less force, you have to want less state.

It's just physics.

Bridge to Euro

Some years ago a small rural town in Italy twinned with a similar town in Greece.

The Mayor of the Greek town visited the Italian town. When he saw the palatial mansion belonging to the Italian mayor he wondered how he could afford such a house. The Italian said; "You see that bridge over there? The EU gave us a grant to build a two-lane bridge, but by building a single lane bridge with traffic lights at either end this house could be built".

The following year the Italian visited the Greek town. He was simply amazed at the Greek Mayor's house, gold taps, marble floors, it was marvelous. When he asked how this could be afforded the Greek said; "You see that bridge over there?"

The Italian replied; "What bridge? There's no bridge." That's how it happens, folks.


Thanks to John-O for sending this!

All Politics is Local

From my NC State colleague Steven Green:
The Politics of Parenthood: Parenthood Effects on Issue Attitudes and Candidate Evaluations in 2008
Laurel Elder & Steven Greene, American Politics Research, forthcoming
Abstract: This project employs 2008 National Election Study (NES) data to explore whether parents are different than nonparents in terms of their political attitudes and candidate evaluations. We find that parenthood does have political consequences although often not in ways suggested by conventional wisdom. Rather than finding parents to be a conservative group, our results support the idea that raising children has liberalizing effects on the attitudes of women. Fatherhood shapes attitudes less than motherhood, but these fewer effects are in a conservative direction. We argue that the distinctive politics of mothers and fathers reflects the impact of parenting as a gendered socialization experience combined with the contrasting parenthood themes articulated by the Republican and Democratic parties. Finally, despite media coverage suggesting Sarah Palin’s “Hockey Mom” image would attract parents, especially mothers, to her candidacy and the Republican ticket we find no support for this idea.

LeBron on the EU

Podcast: LeBron on the EU.

Contra the NY Times, Vector Autoregressions are NOT magic

In an interesting human interest story on the newest Econ laureates, the NY Times tosses this into the mix:

Mr. Sims developed a statistical approach called vector autoregression, or V.A.R. It enables the testing of cause and effect — whether, for example, the money supply is affecting interest rates, or vice versa. That is a crucial determination if economic models are to have any accuracy, as the Nobel committee has noted.


So many things wrong here. Lets try to unpack it.

First of all, causality requires identification. VARs do not provide any automatic or free identification. To do policy analysis with a VAR (as opposed to agnostic forecasting) one has to make the same type of untestable identifying assumptions here as one does in the older, explicitly simultaneous equation, Cowles commission approach.

The most common way of identifying a VAR (ordering the variables and performing a Cholesky decomposition) is EXACTLY the same as using exclusion restrictions to identify a system of equations. Other structural VARS do NOT remove the need for identifying assumptions. VARS are not a free lunch.

Second, if the article is referring to Granger causality, then Granger's 1969 Econometrica article predates the VAR.

Third, is causality (i.e. identification) crucial for economic models to have any accuracy? Well that depends on what you mean by accuracy. If you mean on target forecasts of specific aggregates, then no, identification is not really needed (VARS are great for agnostic forecasting of specific variables). If you mean being able to perform convincing counterfactual policy simulations, then yes, identification is vital (but the VAR doesn't give a free lunch here).

Don't get me wrong, I think Sims is *awesome* and well deserving of the Prize (Sargent too!!!), but VARS are not magic.



Rice Student Breaks Window

A student at Rice, participating in the old Rice tradition of running around "wearing" a little shaving cream, broke a window with his butt. Now he owes $15,000.

If you want to donate to help the kid's butt, or just want some background (sorry), by all means go here.

(Nod to Tommy the Promoted Brit)

Man, I Hate Republicans

So, check this out:

How is it that a Republican House that claims to be pro-jobs can't pass a regulatory reform so modest that even President Obama's jobs council endorses it? Part of the answer is that the accounting cartel fighting reform has one of its own in the Republican ranks. A GOP presidential candidate also can't be bothered to show up for a critical vote.

In September we told you about Tennessee Representative Stephen Fincher's plan to relieve small public companies from Sarbanes-Oxley's most burdensome and duplicative accounting rules. "Useless" might be a better description for these rules, after MF Global became the latest company in the Sarbox era to hide catastrophic transactions outside its balance sheet—exactly what the law was supposed to prevent.

On Tuesday night, the House Financial Services Committee had to yank the Fincher reforms from a scheduled Wednesday vote. With all committee Democrats expected to vote against reducing paperwork, the Republicans would need almost all hands to send the measure to the House floor.

But House sources say Michele Bachmann wouldn't return from the campaign trail to vote. Meanwhile, California Republican John Campbell has been leading an effort to water down or kill the Fincher reforms. Mr. Campbell is an accountant carrying water for his former industry colleagues. New Mexico Republican Steve Pearce, who styles himself an opponent of federal regulation, is also blocking reform.

Sarbox was supposed to punish accountants, but like much regulation in practice it guarantees a lucrative business to a cartel dominated by four big firms. The mandate for an external audit on top of the traditional financial audits has helped accounting fees rise as fast as the bureaucratic burden.


That editorial was not from the WaPo or the HuffPo. That's the Wall Street Journal. Could the idiot Republican possibly be any more worthless? Every chance they get they vote for anti-competitive regulation increases and bailouts for their campaign contributors. They vote against millions for widows and orphans, but support billions in tax money for corporations. Man, I hate Republicans.

(If you are thinking of offering a "yeah, but Dems are bad, too!" defense....just shut up. The Dems are honest. They say they are going to take money from people who earned it and use it to buy votes. Despicable, but honest. The Republicans are LIARS on top of being thieves.)

(Nod to Kevin Lewis)

Fun Talk with Rick Martinez

Got to do an interview on many subjects with my pal Rick Martinez.

It's long, with commercials. But we had a good time. Plagiarism, North Carolina politics, and the economy.

Angus!

Angus visited, and the Mungowitz dogs were worshipful. Tanzi would not leave him be, and Hobo...well, we always say that dog put the "ho" back in Hobo.

Oh, and his talk was terrific, too!

Sunday, December 04, 2011

Heh. WRK strikes back

On being forced to volunteer, and then being interrogated on why he "wants to be around other people's children.

Nicely played, sir. Nicely played.

Basic Logic Fail

Okay, let's review.

This guy, Dr. D.M. Berwick, was appointed to head the US gov't office of Medicaid/Medicare.

He had a history of saying that we needed a health care system more like the Brit system, run by the government, and with rationing decisions made by bureaucrats. (Note: At KPC we understand health care has to be rationed. I just don't want it done by some person who got fired at the DMV).

Now, he says 30% of the US health care expenditures on Medicare/aid are pure waste, and doctors all know it.

He continues (I quote the NYTimes reporter's set-up)

If his estimate is right, Medicare and Medicaid could save $150 billion to $250 billion a year by eliminating waste, which he defines as “activities that don’t have any value.”

Dr. Berwick sounded like a professor of political science or a visitor from a foreign country when he recounted his efforts to fathom Washington’s ways.

“Government is more complex than I had realized,” he said in an understatement. “Government decisions result from the interactions of many internal stakeholders — different agencies and parts of government that, in many cases, have their own world views.”


Um.... so, I have a question. This guy was a big fan of government-run health care. He took a government job, and now he thinks 30% of the money we spend is wasted. He thinks government is "more complex" than he realized, and...well, the article continues:

Before coming here, Dr. Berwick was president of the Institute for Healthcare Improvement, a nonprofit group in Cambridge, Mass., that trains medical professionals. “I was used to moving very, very fast,” he said. “We could decide on Monday to start a program and have it in existence on Wednesday.”

As a federal official, Dr. Berwick was sometimes impatient with colleagues in the government and with the health care industry.


So, in this gentleman's OWN EXPERIENCE, private nonprofits are relatively fast and much more efficient and government sucks. Medicare/aid in particular is a disaster, as he knows from trying to fix it.

His solution: Let's expand Medicare until it's the entire health care system! He continues to love Obama-care like it's a religious pilgrimage.

Asked why Americans were still deeply divided over the new health care law, signed 20 months ago, Dr. Berwick said: “It’s a complex, complicated law. To explain it takes a while. To understand it takes an investment that I’m not sure the man or woman in the street wants to make or ought to make.”

But, Dr. Berwick said, just as Americans supported manned missions to the moon without knowing the details of rocket science, they ought to support the new law because of its ultimate destination.


A religious belief is one that you cling to in spite of all empirical evidence to the contrary. This guy saw, with his own expert eyes, the gigantic waste of time and money that is government-run, government-provided health care. He gave specifics, showed that he is actually a smart and honest guy.

And then reverts to his religious belief: worship the state, and the state will do the right thing. These little glitches....just aberrations. Eventually, he says:

“We are a nation headed for justice, for fairness and justice in access to care,” Dr. Berwick said. “We are a nation headed for much more healing and much safer care. There is a moon shot here. But somehow we have not put together that story in a way that’s compelling.”

No, doctor, there is a big difference between going to moon, and going to justice. When you get to the moon, you can come back. When you get to "justice," which you appear to be believe to be the absence of any private enterprise, you turn into Cuba. There is no coming back from that.