The Healthcare (and Student Loan) Debate, Part 2…Why is everything so expensive?

Part 1: The Healthcare Debate: Confronting Reality (End of Life Care and Costly Chronic Diseases)

In part one, I discuss end-of-life care and chronic diseases and how they are a major contributing factor for rising healthcare expenditures. I also discuss the ethical considerations of denying care to such individuals.

But America’s healthcare cost expansion isn’t just limited to the elderly and the chronically ill–it’s expensive for everything and everyone, and in this post I will try to explain why. This also applies to student loans, which like healthcare, has grown substantially in recent decades.

Scott’s ‘cost disease’ post, which went hugely viral, attempts to answer this question.

Scott asks: “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.”

The problem with this debate is it falls under the category of ‘un-answerables’:

‘Global warming…if it exists, is it man-made or not?’

‘Student/college loan/tuition crisis/bubble–what can be done?’

‘Job loss and automation–will technology destroy all jobs?’

‘Why is healthcare in America so expensive?’

‘Free trade–is it good or bad?’

‘Why is affordable housing in California so difficult?…zoning, NIMBYism, etc.’

These are issues that despite being debated to death, have no consensus or resolution. These things will never be settled. Anther problem with these issues is they are highly partisan in nature, meaning they are based on emotion and ‘tribalism’ more so than empirical evidence. But I’ll try anyway. For this post, going to ignore public elementary and secondary school cost increases and just focus on college tuition.

Costs for both tuition and healthcare have surged relative to inflation and other services:

Not only has tuition surged, so too has federal student loan borrowing, suggesting a link between the two:

The student loan and tuition crisis is discussed in more detail in the post We’re Making Life Too Hard for Millennials:

The first problem is credentialism; second, students going to college who are not smart enough or mature enough graduate, taking on debt and then dropping out; third, federal student aid driving-up tuition costs; fourth, students majoring in subjects that pay poorly instead of STEM. As I explain in an earlier article Countering Flawed Arguments of the Anti-College Movement:

Also, to further answer Scott’s question, the issue is, hardly anyone pays out of pocket for anything anymore, both for healthcare and education. There are so many programs to avoid or defer paying: medicaid, medicare, free emergency room treatment, generous student loan grants and financial aid for everyone of almost all income brackets, and student loan forgiveness. As discussed in the earlier post Affordable Housing, Healthcare, & Tuition: Putting Things in Perspective, when adjusted for aid, public care, assistance, scholarships, loans, and various deferments, the burden of these costs on consumers is not as bad. When you make a service effectively free, demand for it will go up, increasing the total amount spent.

The full sticker price is seldom paid. According to the article, only 1/3rd of private university student pay the full sticker price, and the most attractive students get the best aid packages. Tuition is only growing at 2-4% a year, which is anywhere from 0-2% greater than the CPI inflation, after adjusting for a myriad of subsidies, grants, and other financial aid.

Furthermore, it’s very hard to collect on defaults. Costs may be rising at a rate greater than inflation also because people are requesting more total education and more total healthcare…instead of going to the hospital for life-threatening stuff, they go because of a stomach ache or a small cut, as well as more spending for elective procedures (nose realignment and stuff like that). Colleges and high schools have more elective programs , bigger campuses, more computers, more courses, more staff, etc. than in the past. Some colleges have AI and robotics labs. A college campus today has vastly more amenities than a campus generations ago…why are people surprised that it should cost more too?

American’s expectations for healthcare and education quality are high: We demand schools with lots of teachers, athletics, and other programs; colleges with lots of programs, stupid/pointless classes, and amenities; and for hospitals to treat everything and everyone, regardless of cost or ability to pay; and we want quick access to latest treatments and diagnostic machines. Other factors also boost costs, such as America’s use of private and two-person hospital rooms:

For example, in the middle of the last century, the U.S. decided that private or at most two-person rooms were best, because they made it easier to control infection and to let patients rest. For decades, we built hospitals to this standard; when my mother was in the hospital for a complicated appendectomy, there weren’t even any semi-private rooms on the surgical ward.

Private rooms drive up costs in a lot of ways: They take up more space, you have to duplicate equipment, and because the nurses can’t see the patients, you need more monitors and/or staff circulating to make sure no one has stopped breathing. Basic hospital rooms in many other countries look spartan and overcrowded compared with what most Americans are used to, because they have more people and fewer beeping machines.

Shorter waiting times and private rooms decreases the risk of complications and infection, boosting survival rates.

But a major factor for high healthcare costs in America is how American drug companies subsidize treatments at a lower price for foreign countries:

The price of a medical miracle varies by country. Imatinib — also known as Gleevec — was hailed as a miracle cure to treat chronic myeloid leukemia, a rare type of cancer, upon the drug’s approval in 2001. In the U.S., a year of treatment cost $92,000 in 2013. Everywhere else in the world, including in developed countries, it cost far less. Germany’s price tag was $54,000. In the U.K., it was $33,500 for annual care.

In Europe, drug prices are set by governments, not by pharmaceutical companies the way they are in the U.S. On average, the difference between the price of one drug in the U.S. and the same drug in France, Germany, Italy, Spain and the U.K. was 50 percent, an analysis by the consulting firm McKinsey has found.

“U.S. consumers are in fact subsidizing other countries’ public health systems, at least with respect to drug pricing,” Jacob Sherkow, an associate professor at New York Law School, said.

If France had to develop their own drugs and medical devices at a cost less than in America, they would probably fail.

As explained in part one, costly diseases are also major factor. It costs $200k-$1,00,000 to treat leukemia..and the average household has negative net worth…even the uninsured get the same treatment…obviously, the typical patient is not paying that, so it gets added (along with other cancers and costly diseases) to per-capita medical costs.

Medical care has become vastly more advanced too: some cancers can now be cured and survival prolonged for many others…treatments for so many diseases have gotten better than generations ago. Imagine if we could extrapolate the chart of medical costs to the medieval times…yes it would have been cheaper but also competently useless (actually iatrogenic) in terms of quality of care (as anesthesia did not exist and they believed in things like ‘humors)’. Yes, healthcare in Botswana is very cheap, but good luck getting your rare malignancy with special chromosomal markers treated there. Does this answer the question? Probably not by a long shot, but just a perspective. IMHO, when you adjust the costs in terms of out-of-pocket costs vs. sticker costs, quality of care, and innovation, perhaps it’s not so bad.

A common argument is that healthcare in all developed nations is the same, but Americans are simply paying more. However, the evidence suggests American healthcare is superior in many respects.

Survival rate for various cancer patients in America is higher than other developed countries:

From Universal Healthcare Not So Great:

Fact No. 1: Americans have better survival rates than Europeans for common cancers.[1] Breast cancer mortality is 52 percent higher in Germany than in the United States, and 88 percent higher in the United Kingdom. Prostate cancer mortality is 604 percent higher in the U.K. and 457 percent higher in Norway. The mortality rate for colorectal cancer among British men and women is about 40 percent higher.

America also leads the world in cancer screenings:

And access to various medical procedures and diagnostic tests:

But prices are high in America relative to other countries, hence the rise of ‘medical tourism’, although there are risks associated with seeking healthcare abroad.

Government-level bureaucracy and waste, as well as inflated medical device and drug costs and billing by unscrupulous companies probably also plays a role although it seems intellectually lazy to to blame everything on that.

Scot also mentions that doctors are unhappy with their jobs:

Why Doctors Are Sick Of Their Profession – “American physicians are increasingly unhappy with their once-vaunted profession, and that malaise is bad for their patients”. The Daily Beast: How Being A Doctor Became The Most Miserable Profession – “Being a doctor has become a miserable and humiliating undertaking. Indeed, many doctors feel that America has declared war on physicians”. Forbes: Why Are Doctors So Unhappy? – “Doctors have become like everyone else: insecure, discontent and scared about the future.” Vox: Only Six Percent Of Doctors Are Happy With Their Jobs. Al Jazeera America: Here’s Why Nine Out Of Ten Doctors Wouldn’t Recommend Medicine As A Profession. Read these articles and they all say the same thing that all the doctors I know say – medicine used to be a well-respected, enjoyable profession where you could give patients good care and feel self-actualized. Now it kind of sucks.

But so too are lawyers. Maybe the problem is not that being a doctor causes depression, but the people who are drawn to these highly-competitive fields (such as law and medicine) are more susceptible to being depressed and ‘burning out’.

A common question is why can’t America have a single-payer healthcare system? The problem is, taxes would have to go up:

Americans are not interested in paying significantly higher income taxes to have ‘government-provided’ healthcare. National health insurance, or single payer, is a dream for many Americans, but if they actually comprehended what it will cost them, and the rest of the taxpayers, they may pause and reconsider.

For example, Britain has a relatively well-regarded universal healthcare system that every citizen pays for through national income tax. The tax rate for income tax and National Health Insurance in the United Kingdom (England) in 2015-16 for all citizens earning between zero and £31,785, considered basic-rate (flat rate) taxpayers, is a whopping 20 percent of their entire income. It is a full 15 percent more than America’s middle class tax rate and would entail a 20 percent tax hike for 45 percent of Americans who pay nothing now.

If a British citizen earns just one pence over that “basic threshold,” their income tax rate jumps to 40 percent up to £150,000. For income over that number the rate is 45 percent; all to cover the National Health plan administered solely by the government with a form of rationing

It gets much more complicated when you compare the US healthcare system with every other country, to try to figure out why, for example, Singapore spends so little of its GDP on healthcare. Singapore has much more favorable demographics than western nations, which could account for its lower healthcare spending relative to GDP:

To get a more definitive answer means having to compare demographics, R&D costs, drug costs, the types of diseases people get, quality of care, hospital quality, public vs. private expenditures, copay and out of pocket expenses, etc., for every country, to determine if America’s healthcare system is unduly overpriced. Due to the magnitude if this undertaking–and even if one were to prove that adjusted for the aforementioned factors, Americans do not pay too much–convincing people of this fact would be nearly impossible anyway due to politics and other partisan factors. Scott’s post covers education and healthcare, but just healthcare alone is daunting enough. This is one of those issues that seems impossible to ever resolve and is something we will just have to learn to live with.

The Healthcare Debate: Confronting Reality (End of Life Care and Costly Chronic Diseases)

Two weeks ago, I began writing the draft to this post, based on an Ann Coulter interview from February 3rd. And then on February 9th, Scott published his ‘cost disease’ article addressing rising healthcare costs. It just goes to show how we’re all thinking about the same stuff even though our inspirations come from different sources.

An excerpt from a radio show with Ann Coulter, Ann Coulter’s Report Card for President Trump’s First Two Weeks: ‘I Give Him an A+++’:

“That’s all it is, Alex. We just want the free market applied to health insurance, and forget about boring us with your sob-story cases. Okay, some of them are genuine sob stories; I don’t mean to be unkind about that, but it’s a tiny, tiny, tiny minority of people who just happen to have kids or they themselves are born with some horrible condition. Just let me buy it on the free market the same way I buy shoes, and books, and milk, and, by the way, car insurance, renters’ insurance, homeowners’ insurance,” Coulter exclaimed.

“The Soviets declared everything a fundamental human right, and you couldn’t get bread,” she said in response to the argument that citizens have a “right” to “free” health care. “Apparently describing something as a fundamental human right is the fastest way to make sure there is none of it, and it’s very expensive. Sell it on the free market, and you’ll have plenty of it, lots of choices, and everything you want.”

“I also love something what Trump got attacked for in the debates, which I also describe in In Trump We Trust: he said there are three categories. There are 319 million people in the country in the category you were just describing: ‘Please just let us buy this product,’ which is now illegal in America, to purchase. That’s the letter I got. My insurance, made illegal,” she said.

“Anyway, that’s 319 million. Then there are a few million who are incompetent, lazy, they won’t have health insurance. Okay, as Trump said in the debates, we’ll take care of them on a different system. Maybe it’s Medicaid for all of them. Maybe they’re poor, they’re young, they’re millennials. Whatever it is, we’re not going to let people die in the street – a sentence that both Ted Cruz and Rand Paul attacked Trump for. Of course, we’re going to let people die in the street, but you don’t have to wreck Ann’s health care to take care of them,” Coulter asserted.

“And then the third category, which is the tiniest category of all, are people who just got a band hand in life. We’re happy to help someone who was born with some genetic condition. That’s separate. We’ll pay for them. We could give them all $10 million, and it would be cheaper than the current Obamacare,” she said.

The above passage highlights the fundamental problem with the healthcare debate – both for the ‘left’ and, regrettably, the ‘right’, too. As is often the case, the same liberals who hold Darwin sacrosanct, Darwinism doesn’t apply to healthcare, where every life is sacred and worth saving at any cost. The same goes for welfare spending, in which billions of dollars every year are transferred from the ‘fit’ to pay for the ‘unfit’, whose survival depends on this assistance.

But doesn’t the left’s support of ‘choice’ and euthanasia contradict this? Not necessarily, because for the left, ‘choice’ is about lifestyle and ‘female empowerment’, not utilitarianism or pragmatism. As soon as soon as you frame the abortion or euthanasia debate in terms of practical, quantifiable matters such as healthcare spending, welfare and entitlement spending, crime, or heaven forbid, race, the left suddenly becomes pro-life.

For example, in 2015 UK presenter Katie Hopkins (the Brits to their credit at least invented HBD) was attacked by the left for pointing out the obvious but politically incorrect observation that dementia patients, who have no hope of survival (because dementia is incurable and tends to affect the elderly), are using public healthcare services that could otherwise go to patients with better prognostic factors. The mass stupidity in 2014-2015 that was the ALS ice bucket challenge was also backed by the left. In 2001, it was mainly the ‘left’ who attacked Levitt and Donohue for positing a link between abortion and crime reduction.

A diagnosis of Dementia, duchenne muscular dystrophy, or ALS, as awful and tragic as those diseases are, is Darwin’s way of saying ‘it’s time to go’ or ‘you’re not fit, sorry’. Granted, there are some on the left who support euthanasia from a utilitarian and pragmatic perspective, as a way to reduce both suffering and healthcare costs, but they seem to be the minority. Just as the ‘left’ extols Darwin in theory (and also as way of opposing Christianity, it seems) but opposes Darwinism in practice, some on the ‘right’ also seem to cling to fanciful beliefs about healthcare, and to an extent, abortion, as Ann Coulter’s reply demonstrates.

The ‘right’ champions free market solutions to healthcare, and in my own criticism of Obamacare I tend to agree a free market approach is better than a ‘statist’ one, but many on the right don’t want to accept that free market solutions may not yield outcomes that are socially, aesthetically, or morally desirable (also known as the ‘ick’ factor). ‘Free market’ just becomes a giant magical rug to sweep all problems under. There is nothing that can’t be solved with the magical wand of the ‘free market’, and the outcome is always one that is pleasing.

From a transcript: “it’s a tiny, tiny, tiny minority of people who just happen to have kids or they themselves are born with some horrible condition.”

But this tiny minority consumes a lot of resources…that’s the problem…and it’s not so tiny in many instances. For example, Ann ignores end-of-life care, which consumes 25% of Medicare spending. One out of every four Medicare dollars, more than $125 billion, is spent on services for the 5% of beneficiaries in their last year of life.

The cost of keeping the terminally ill alive

Last year, Medicare paid $55 billion just for doctor and hospital bills during the last two months of patients’ lives.

And it has been estimated that 20 to 30 percent of these medical expenses may have had no meaningful impact. Most of the bills are paid for by the federal government with few or no questions asked. This statistic is from a 60 Minutes story on “The Cost of Dying” and is one reason our healthcare system is in trouble.

Ann’s $10 million figure to cover rare genetic conditions is also hardly sufficient (unless it’s per patient, which would be too much). Nationally, treating ALS, DMD and MMD combined is $1.07 to $1.37 billion per year. This is a conservative figure–the actual cost is probably two to four times higher.

A minority of patients contributes to the bulk of healthcare spending:

This means adults with chronic diseases, cancer, end-of-life care, and, sadly, children with terminal conditions. Jim keeps mentioning drug addicts and vagrants, which are an easy target (because who likes drug addicts and vagrants), but this is only a fraction of the problem. Drug addiction abuse costs $75 billion annually to insurers, which is just 1/27 of the $2 trillion spent on total health care and 1/13 of the $1 trillion spent on the most costly of patients. [2]

In a free market system, defective products are either discounted or discarded, but this does not always apply to people, who are above this sorting process due to the invocation of ‘moral/ethical conscience’, which is supposed to override the free market–or–the free market is supposed to somehow, magically, cover such spending. A typical person has lifetime earnings of $1-2 million ($50k a year times 40 years). From a free market perspective, it makes sense to provide treatment for child or adult who has an entire (or most) lifetime to become economically productive. But it becomes much harder to justify care for children with rare genetic diseases, who will die before before becoming economically productive, or for the elderly who have no savings to pay for treatment and are well-past their ability to produce economic value. For clarity, we’re talking about ‘public goods’. A billionaire can afford whatever costly treatments he wants, but the question is how should public goods be rationed/allocated. ‘Rationing’ has become the third rail of policy discourse because it invokes Kafkaesque imagery of ‘death panels’, but there is no escaping the reality that all finite resources must in some way be rationed, whether it’s a free-market system or government-run system. Again, 5% of the US population accounts for 50% of healthcare spending–how does a free market approach, which is motivated by profits, handle so many unprofitable patients, in which there is no hope of recouping the often futile, palliative treatment costs?

And spending for Medicare and Medicaid is projected to be much higher both in nominal terms and relative to GDP:

To privatize healthcare means that the private sector would have to cover this spending, which likely means rates would have to go up and or healthcare would have to be denied in certain instances. It seems like wishful thinking to assume total privatization will lower costs, be profitable for insurers and providers, and provide healthcare for everyone who needs it, including costly incurable diseases and costly end-of-life care.

Any insurance program, either private or pubic, needs a lot of members to be profitable, because a minority of patients will consume the bulk of the costs. An obvious problem is it’s hard to motivate people, especially the young, to pay for heath insurance when they are healthy–people tend to want healthcare when they are sick but think they are invincible otherwise. Because there is an aversion to paying for something when it’s not immediately needed, an alternative privatization idea is to deduct healthcare costs out of the patient’s future earnings, but as mentioned above, for patients with terminal and or very costly diseases, this is unprofitable.

Even the assumption that privatization will significantly lower costs is on shaky grounds, as shown by Megan McArdle:

But we already have a public option. As mentioned, we have several. And Medicare doesn’t control costs noticeably better than the private sector does:

Medicaid controls costs significantly better. That’s because it’s a program for poor people who don’t vote much, and politicians don’t necessarily care if doctors refuse to take it. So states set reimbursement rates that are so low that you could pay more to take your kid to Panera than the government would pay for you to take him to see a general practitioner.

From 1990-2011, the difference in excess costs between ‘medicaid’ and ‘other’ (private) is just 1.7% vs. 1.5%.

Costs are rising to pay for so-called ‘futile care’. Instead of healthcare saving lives, it’s about prolonging death at great cost:

Kids With Costly Medical Issues Get Help, But Not Enough

“Katie hit a million [dollars] in her first year of life,” says Marcy Doderer, Katie’s mother. Katie used to require 24-hour nursing; now the nurse only comes at night, but it still costs almost $75,000 a year, by Marcy’s estimate. It’s a service that most private insurance doesn’t cover. It is, however, paid for by Katie’s Medicaid coverage—even though the family is well-off.

The sickest 2 million kids account for about 40 percent of Medicaid’s total spending on children. Many of these children have a combination of private insurance and Medicaid, and it can be challenging to coordinate care and coverage. Marcy Doderer, who until recently was the CEO of the children’s hospital in San Antonio, Texas, acknowledges that her job gives her family an advantage.

That’s a lot of money for a single child, when from a utilitarian standpoint the ‘greater good’ could be maximized by allocating the $1 million of medicaid assistance to multiple children who have better prognosis.

I go after the ‘left’ on this blog a lot. Now it’s the right’s turn, for foot-dragging on HBD-based solutions to healthcare (as well as crime and entitlement spending (as the ‘abortion, eugenics, welfare, and crime’ series shows [1])). The ‘sanctity of life’ can be very expensive, as the above example shows. The ‘right’, who complain about deficits and spending, need to confront this, just as the ‘left’ does, too. That’s why, despite being on the ‘right’, I agree that allowing children to be born with severe disease could be child abuse:

Such screening wouldn’t prevent all genetic disease (it would miss disease due to very rare or unknown mutations, or due to de novo mutations occurring in the child), but it would certainly have a dramatic impact on the number of children born with horrible diseases such as cystic fibrosis and Duchenne muscular dystrophy.

In earlier posts Abortion & Healthcare Policy and The Abortion Plan, I advocate incentive-based solutions, such as paying married couples who have inauspicious genetic factors to not procreate unless they have the financial means to care for a special-needs child.

Naturally there are objections to embryo screening among religious conservatives who believe that inflicting severe disease on children is the will of God – but why does the prospect raise such unease among even the secular community? I share Le Page’s puzzlement on this question, and would invite opponents to lay out any well-reasoned arguments against routine screening in the comments below.

Again, the ‘left’ has a love/hate relationship with science. But this also applies to some on the ‘right’ too. Naturally, people are squeamish at the idea of quantifying the value of human life, as explained in Abortion and Healthcare Policy:

Some people find the idea of utilitarianism, as well as thought experiments such as the trolley car, to be an affront to their moral sensibilities, since sometimes the most optimal allocation of a resource often comes at a cost to something someone else holds dear. Some are unsettled by the idea that the value of a human can be reduced to a number, but if you have insurance (health, auto, home) – that is exactly what it is, an attempt to assign a monetary value to a human life in order to price a policy, yet when the argument is framed differently (trolley car or abortion), these very people become mortified at the premise that human life does indeed have a finite value, or that some lives may be more valuable than others. ‘Pro life’ taken to its extreme would be mean no war and no death penalty – both positions many Republicans, who identify as ‘pro life’, support. So why does this contradiction exist? I suppose because they rationalize from a utilitarian standpoint that the possible loss of some innocent lives (the occasionally wrongly executed individual, soldiers dying, or collateral damage) indirectly serves a ‘greater good’ (preventing more deaths both directly and indirectly), justifying this utilitarian risk/reward trade-off.

And from Forbes, why is so much money spent on end of life care, when the evidence suggests it’s counterproductive?

It seems that no matter how much money you use during that last year/month, if the person is sick enough, the effort makes things worse. A lot of the money being spent is not only not helping, it is making that patient endure more bad experiences on a daily basis. The patient’s quality of life is being sacrificed by increasing the cost of death.

Why don’t more institutions move to palliative care quicker when they see the obvious trends in their patients? Joe Klein wrote a cover story for Time about his experience with his parents and their end-of-life experience. Anyone who has gone through a similar process can not only empathize, but will become emotional because that last year/month can be a genuinely awful experience for all concerned. So, with all this data and personal experience, why do we continue to reward a system that pushes life-at-all-costs instead of quality of life?

This is a good question. To put on my ‘Scott hat’ (in which I consider the other side of the argument), there is an anecdote about Robert Heinlein in which he was asked about cannibalism: if someone is dead, does it matter what we do with the body–to which Heinlein answered that we do not want to live in a society in which people have acquired a taste for human flesh. Similarly, do we want to live in a society where we euthanize, sterilize, or abort-away all our problems. This also invokes a ‘slippery slope’ argument: if we begin with those who are most inconvenient, why stop there. How about those who are only a ‘medium inconvenience’, and so on.

Going back to the idealism v. materialism post, a materialist may argue that consciousness and being are entirely physical (eliminative materialism), without spirit or a soul–hence a quantifiable, material value (economic or scientific) can be ascribed to individual life, justifying euthanasia and organ transplantation, as consciousness is inseparable from the brain, so if the brain empirically appears dead (diminished or absence of brain activity in response to stimuli), so too is consciousness and the body. This is the opposite view as espoused by dualism. An idealist, on the other hand, is not convinced, arguing that there are aspects of ‘being’ that are not physical (ontological argument). Epistemologically, an idealist may argue that there are imitations to what what we can know about consciousness or the value of human life, that can’t be measured by a machine or economic value (limitations of knowledge). In his mind, the idealist rationalizes that the patient has some form of sentience despite the empirical evidence showing otherwise.

The issue of fairness comes up–is it fair to deny life and birth to some.

A second reason is that diseases that are intractable now may become curable or treatable later, so by ‘giving up’, we not only deny hope for future patients, but technological and medical progress stagnates. The path of least resistance now may come at a greater cost later. Recent examples include childhood leukemia, thyroid cancer, and testicular caner, once fatal but now both highly curable. But given how costs are exploding, we better find more cures–fast.

However, life expectancy hasn’t budged much, excluding mortality within the first four years of life. Thomas Hobbes and John Adams lived to 90, a rarity even today (despite hundreds of billions spent every year trying to prolonging life). Ultimately, we cannot solve the healthcare crisis with wishful thinking…when a company is losing money, the usual response is to cut costs by discontinuing the divisions or services that are unprofitable. A restaurant, for example, may close stores. But the response by politicians is the opposite one, which is to continue what isn’t working.

Part 2 goes into greater detail about rising healthcare (and also education) costs.

[1] Related posts in the “abortion, eugenics, welfare, and crime” series:

Abortion and Crime – When Political Correctness and Partisan Politics Gets in the Way of Promising Research and Policy

Is partisanship holding back good policy in the abortion debate?

Could Republicans Endorse Eugenics?

[2] Jim’s approach is a purely rational, seldom citing links and data. Scott, despite being labeled a ‘rationalist’, actually much more of an empiricist, citing tons of links and data in his articles.

Rule by signaling

A meritocracy means taking the most competent and putting them in charge. Simple enough. But how does one determine competency? The problem is competence is determined ex post facto, through empirical evidence, in which case it may be too late. This means signaling is required, such as tests.

The “most common definition of meritocracy conceptualizes merit in terms of tested competency and ability, and most likely, as measured by IQ or standardized achievement tests.”[2] In government or other administration systems, meritocracy, in an administrative sense, is a system of government or other administration (such as business administration) wherein appointments and responsibilities are assigned to individuals based upon their “merits”, namely intelligence, credentials, and education, determined through evaluations or examinations.[3]

Hence meritocracy, in practice, often means rule by those who signal best, but a single word to describe this eludes me.

Materialism and Empircisim are Easy; Idealism is Hard

Empiricism vs Idealism:

Empiricism begins with the hypothesis that there is an objective reality independent of humanity and we may use inductive logic to learn about this reality through our senses. We can experiment and test the validity of our ideas. The scientific method is a method of empirical testing to prevent common fallacies and errors. Empiricism does not assume a priori knowledge. This is also called Philosophical Realism or materialism.

To recap some basic concepts, rationalists believe knowledge is acquired independently of sensory experience. Empiricists argue that knowledge is based on sensory perception. Rationalism involves ‘pure reason’ (priori knowledge); empiricism involves evidence (posteriori knowledge). Rationalism is top-down (deductive); empiricism is bottom-up (inductive).

Consider a stick in a glass of water. To the empiricist, the stick is broken because it visually appears so. However, when the empiricist dips his hand into the water, the stick is obviously not broken. To the rationalist, it’s not broken, but rather the water makes it seem so due to refraction. The rationalist defers to theory (refraction) to justify the stick not being broken, without having to dip his hand to see for himself.

But there are seldom ‘pure empiricists’ or ‘pure rationalists’–it’s usually a hybrid, in which Kant cleverly devised a philosophical device called the ‘synthetic a priori’ to reconcile this. Many empiricists don’t reject all theories of physics (such as Newton’s law of gravitation), if there is abundant experimental evidence to support them. Empiricism leads to theory, the latter which can be defined as an ‘object’ (which Kant called a noumenon), that exists outside of sense or perception. From The theory of phenomena and noumena:

For example, to explain why the wires in an electric toaster are hot, we invoke the underlying cause of an electric current in the wires; the toaster and its wires, and the heat, are phenomenal, and the electricity is noumenal. Or, in modern language, the toaster and the hot wires are empirical and the electricity is theoretical. As David Hume pointed out, there are no empirical causes, only correlations; all causes are underlying — noumenal — or theoretical. Theoretical science tries to describe the noumenal world, and thereby explain the findings of empirical science. Everything you read about molecules, atoms, electrons, quarks, the curvature of space-time, black holes, the Big Bang, etc. is about noumena.

This is related to Platonic idealism, which is different than Idealism as presented by philosophers such as George Berkeley. Platonic abstractions are not spatial, temporal, or mental; hence, they are not compatible with the latter idealism’s emphasis on mental existence. Plato’s Forms include numbers and geometrical figures, making them a theory of mathematical realism. This makes it a form of materialism, and is related to philosophical realism–the belief that the existence of reality is independent of our conceptual schemes, perceptions, linguistic practices, beliefs, etc.

Although realism and materialism are often used interchangeably, realism involves mathematics and Plato’s forms, which are things that are ‘real’ even though they are not physically so. A rationalist is a realist, because rationalists make use of abstractions (like math). The empiricist tends to reject these abstractions, and may gravitate towards materialist interpretations as being the basis of reality (such as dunking his or her hand in the water to verify that the stick isn’t broken, instead of deferring to refraction theory). But realism is like materialism, as the stick being intact is a property that exists outside of the mind, but realism is an abstract approach (use of theory) determine this knowledge (epistemology) and empiricism is sensory (literally, a hands-on approach). Hierarchically, realism is a subset of materialism. So while realism is materialistic, not all materialism is realism (empiricism and materialism, for example, being linked but the former distinct from realism).

Science involves ‘objects’ such as theories that exist independent of perception and mind. Religion is often associated with idealism in that, epistemologically, it requires faith–by ‘pure reason’ alone, establishing a ink between idealism and rationalism. Rationalism can be applied both in a religious context but also a scientific one.

Empiricism and realism are ‘easy’ because the former lends itself to ‘binary thinking’, specifically, verificationism (the doctrine that a proposition is only cognitively meaningful if it can be definitively and conclusively determined to be either true or false). Empiricism, unlike rationalism, takes the easy way out by never having to commit to a theory. If the empiricist can’t observe it through sense, he can simply reject it. But realism is also ‘easy’, in the synthetic sense, by reducing abstractions to objects that we take for grated as ‘true’. It’s easier to just accept that 1+1=2 than try to go further to understand why it’s so. For example, the statement, ‘rising life expectancy is good’. ‘Good’ is abstract and hard to define, besides it being implied (or objectified) that ‘good’ is contrasted from what is ‘bad’. ‘Life expectancy’ is also an object, as it is something that is measured scientifically and exists outside of sensory perception. Most of the media and pundits, whether it’s Bloomberg, Wall St. Journal, or The Economists, deal with things that can be categorized either ‘true’ or ‘false’ (such as ‘the economy is weak’ or ‘the economy is strong’), with evidence brought forth either opposing or supporting the initial premise. Or objects-as-issues (such as wealth inequality, economic growth), that are often reduced to a binary state of being either ‘good’ or ‘bad’.

Idealism tends to reject object-based reasoning. Although idealism may have a grand theory, vision, or narrative (such as eschatology), it doesn’t rely on empirical, sensory, or object-based means of supporting it. [Materialist philosophy also has 'grand narratives', an example being Marxism, which is based on economic theory (an object), not theology.] It avoids reductionism (in terms of rejecting scientific-reduction in the forms scientism, cognitivism, positivism; but it also rejects verificationism (which is a form of reductionism. Idealists aren’t too fond of empiricism, because it tends to be binary and reductive.)–but also idealism rejects low-information discourse, which is related to binary thinking) preferring complicated, nuanced, and circuitous forms of discourse and invoking teleology. For example, for idealist, civil dissenters fit within a ‘grand theory’ of societal collapse. But aren’t dissenters empirical evidence that agrees with ‘grand theory’? Yes, but it doesn’t matter, because to the idealists the reality has already been constructed in his mind. To be fair, this is similar to how physicists rationalize string theory, because the theory can always be modified to account for any evidence that could disprove it. Or in another way, for an idealist, everything is subsumed by the theory. Teleology is a reason or explanation for something in function of its end, purpose or goal. For example, a teleological explanation of why forks have prongs is that this design helps humans eat certain foods; stabbing food to help humans eat is what forks are for. Likewise, a teleological explanation for dissenters is not that they are having a bad day, but rather because they are actors of a grand eschatological narrative. For a materialist, rather then evidence being subsumed by theory, the theory keeps being modified or is so broad as to encompass everything (which is a criticism of string theory).

As an example of ‘easiness’, an empiricist, if asked to predict something, may predict the sun will rise and fall. This is virtually certain to be a correct prediction, based on his empirical observations of the sun rising and setting. A realist would arrive at the same conclusion based on his knowledge about geophysics and astronomy, but to the idealist he too is missing the point of the question, because predictions are not supposed to be ‘obvious’ and the realist is caving into reductionism, just as the empiricist also engages in reductionism. An idealist, counter to what the objectively-determined odds say, in his mind, chooses odds are different.

Predicting economic stability is likely a correct prediction (based on empirical evidence, specifically, economic data and historical data; and ‘microeconomic foundations’–an attempt to apply the principles of science and physics to economics, to make the latter more rigorous) but conflict with an idealist whose ‘grand vision’ is of instability or eschatology. But ‘reality’ and ‘truth’ regarding the social sciences can be hard to define. Two people can bring forth evidence to arrive at opposite conclusions regarding the same issue. It depends how such evidence is interpreted and it’s context. For example, nominally, the national debt is high, but interest payments are low relative to GDP. By avoiding objects and binaries (verificatonism), the idealist may avoid having his beliefs being falsified.

Idealism is a search for Absolute Truth. It assumes there is a design and purpose to the universe and the human mind, and by discovering this purpose they can understand everything.

Idealism creates teleology. Everything has a function and purpose, and therefore everything has a final cause. This world is highly deterministic. Idealists rely almost purely on deductive logic. They create an artificial set of governing axioms. They can then use deductive logic to answer any problem within their Idealist world.

The idealist, in his mind, knows what is true and is not searching for it. Truth (ontology) for the idealist exists in the mind; for the materialist, it’s in objects. Both sides can either bring forth axioms (rationalism) or empirical evidence (empiricism), both of which are under the category of epistemology.
I also disagree here:

Empiricism takes considerably more effort to understand reality, but the ideas it produces are more consistent even if knowledge remains incomplete. Empirical reality may seem dangerous, as it disproves some moral preconceptions in religions and ideologies. Is it not better to accept reality whether it is pleasing or not?…

A real theory can be practiced in reality. Electrical theory: light bulb. Evolution: Genetic Engineering. Creationism: Nothing. Marxism: 100 million dead, but otherwise nothing.

Although empiricism has pretense of knowledge (because of spokespeople like Dennett, Dawkins, Harris and Nye, who use the ‘scientific method’ as a very convenient crutch), idealism is harder because it doesn’t involve ‘shortcuts’ (such as mathematics, sensory perception , scientific method) that materialism and empiricism employ. For a scientist, a sufficiently low ‘p-value’ can be sufficient, but the idealist isn’t placated as easily, asking, ‘but what if…’ or questioning the validity of the data itself. Idealism involves more mental gymnastics (or teleology) to make empirical reality and theory agree (such as reconciling theology with evolution, or sporadic incidents of ‘civil unrest’ as being a harbinger of impending economic and social collapse, not merely some people having a bad day).

Also, the author seems to be stumbling into the oh so tempting trap of scientific absolutism, overplaying his hand. Marxism is actually a materialistic philosophy (because economic theory is at the core of human behavior and reality, not metaphysics), not an idealistic one.

A mistake made by naivete atheists who think they are being clever is assuming that there is dichotomy where Christianity must oppose science, when such a dichotomy doesn’t necessarily exist. Many Christians understand and accept physics and evolution, and it’s possible to be both a Christian and an engineer or a biologist. Religious philosopher David Ray Griffin discusses this in his book God Exists But Gawd Does Not:

David Ray Griffin argues that progress on this issue will be impossible unless we distinguish between two radically different ideas of a divine creator, which he calls “Gawd” and “God.” Whereas there is overwhelming evidence against the existence of Gawd, there is also overwhelming evidence for the reality of God.

Atheists commonly default to this construct or strawman version of god, which the author calls ‘gawd’. An idealist may be well-versed in theory (such as evolution, quantum mechanics, and relativity) but understand that those things are merely approximations of reality, and that there will always be phenomena that cannot be explained by theory. For example, why don’t galaxies spill apart, because they are held together by ‘dark matter’, but the problem is physicists have no idea what dark matter is even though it’s thought to make up five sixths of the universe’s mass. A materialist may argue that there are no phenomena that can’t be explained by theory.

Related, Sean Carroll, in an excellent post Physicists Should Stop Saying Silly Things about Philosophy, opposes attempts to reduce philosophy to competition against science, or that how philosophy must oppose science, arguing that they can complement each other (a philosophical question being answered using physics), a view echoed by American philosopher of science Tim Maudlin, whose work on physics also incorporates philosophical elements.

Philosophy is useful for organizing ideas, beliefs, and concepts about the non-tangible, non-sensory world–things such as politics, epistemology, religion, morality, ethics, perception, consciousness, etc.–into some form of hierarchy or framework, analogous to the concept of categories in math.

Although reductionism is often frowned upon by idealists, it’s hard to avoid objects and binary thinking when trying to be persuasive. In trying to convey an opinion/perspective/declaration about something, that likely implies one opposes its opposite. There was a recent debate on Scott Aaronson’s blog, spawning significant related discussion elsewhere, but also a lot of internecine disagreement. Just saying ‘immigration is bad’ is too simple (object-based reasoning). The appeal of mathematics is once something is proven (either true or false), further discussion is no longer necessary (for that specific math concept, at least), whereas debates in the social sciences an liberal arts can be unending, as they don’t as easily yield to binary outcomes.

Trump Presidency Predictions and Significance: Economics, Immigration, Culture, and Endgame

From Social Matter: Reactionary Political Theory On Contemporary America

Our question is the following: what is the significance of Trump’s victory? What does it mean for the Modern Structure?

To answer the first question: a change in national sentiment. To answer the second, not much.

Trump’s rise definitely ties into a ‘shared narrative’ of a national frustration with the direction of the country, a distrust of elites, and opposition to the ‘status quo’ both in terms of economics and immigration.

But is Trump a legitimate threat? Maybe not so much.

Part 1. Economics & Finance The stock market keeps making new highs…if Trump is supposed to be a threat to the establishment, the market is not buying it. I think the market is correct and that most of this is just saber rattling , although we’ll see. The stock market is a good real-time barometer of the well-being and confidence of financial elites. If elites lose confidence, they will sell stocks and move to treasury bonds, corporate bonds, gold, or cash. ‘Challenging’ the elite is the first part; ‘doing’ is much harder. Elites are used to being challenged, and are also used to getting their way.

Tariffs are not that a big deal and more symbolic than anything, although could be problematic if overdone. Trump’s pledges to keep jobs in America seem seems to involve overly generous subsidies and or corporate welfare that may have unintended/perverse consequences. For example, the Cobra Effect.

Related, a major criticism of the Trump Carrier deal is creates a perverse incentive for companies threaten to outsource more jobs than originally planned, to get subsidies for jobs that they originally had no intent to move.

Trump is a businessman, and businessmen generally don’t like to lose money. Trump (to borrow from Taleb) has a lot of ‘skin in the game’ in that his own personal fortune is closely tied to the overall health of the US economy.

Motivated by self-preservation, I predict Trump will avoid sweeping economic policy that may cause harm both to his own personal wealth and the overall US economy, instead, as Scott noted, focusing on ‘symbolic gestures’ that get a lot of media coverage but on the grand scheme of things don’t move the needle much.

So overall, the finance-elite probably will come out ahead in a Trump administration, barring some sort of major recession or bear market (which may or may not be attributable to Trump).

Part 2. Immigration Regarding immigration, now this is where the ‘elites’ are sightly more scared, although I don’t think they have too much to worry about. Trump’s executive order was a setback, but the 9th Circuit struck it down, so it’s off to the Supreme Court, but the odds don’t look too good:

But given that the Supreme Court currently lacks its ninth member, there a real chance of a 4-4 split on the bench along ideological lines, which would have the effect of affirming the ruling of the 9th Circuit, inflicting a more permanent blow to the new administration.

Even if it passes, there will be too many holes, exemptions, and waivers. And as everyone has already noted, the ‘ban’ does not include the countries that are most responsible for state-sponsored Islamic terrorism, such as Saudi Arabia, Pakistan, UAE, and Egypt. Sunni Islam is the bigger threat, but Trump’s ban mostly targets Shia countries. Also, many instances of Islamic terrorism in America have been perpetrated by second generation immigrants from middle or upper-class backgrounds. From CounterJihad.com A Case Study in Conversion to Terror (UPDATED):

That a first generation of Muslim immigrants is often succeeded by a radical second generation has been documented by Foreign Policy, PBS, and by statisticians in Denmark. The first generation came to America or to Europe for reasons they felt strongly enough to make the move. They understood they were electing to move to a society that was less Islamic, and accepted the trade off. Their children, born in the West, did not experience the realities that made their parents leave the old world. They reject the laws and customs of their new society as being opposed to their Islamic identity. The Danish statistics found that second-generation Muslim immigrants are 218% more inclined to crime than their parents’ generation.

Furthermore, obviously, it doesn’t deal with Mexican immigration, which is what voters specifically had in mind when Trump was campaigning on immigration control. It’s still very early in Trump’s first term, so he has plenty of time to get to that. But given how Trump’s travel ban has been neutered (and was porous to begin with), deportations and restrictions against Mexican immigration similarly faces a major uphill battle. That’s the problem with democracy and progressivism: you can’t undo it. It’s like an escalator: either you get off or keep going up, but you cannot turn back.

So the amnesty-elites are worried, but too soon to call it a defeat for them.

Part 3. Culture wars Given the GOP’s long history of losing ground on culture issues, the prognosis is not good. Trump campaigned as an ‘immigration warrior’, not a ‘culture warrior’, and his past views on these issues is cloudy, such as being pro-choice at one point. He is also indifferent about same-sex marriage, and may or may not try to overturn Roe v. Wade. Many of the people close to Trump and part of his ‘economic circle’ aren’t big on culture issues.

Part 4. Endgame Overall, to reiterate, my expectations for Trump, especially regarding economic policy, are muted. That’s that’s at least for the next 4-8 years. Although I said earlier that progressivism is irreversible, technically things can change, although it will be a marathon, not a sprint.

There are two possibilities of ‘reset’: ‘quick and sudden’ (such as economic collapse, natural disaster, nuclear war, or other crisis) or ‘slow and steady’ (gradual change in sentiment and leadership). The former may not always be the best, if the elites do the rebuilding, which was the case in the 30′s following the Great Depression in which FDR, a major leftist, rose to power and whose reforms far outlasted his four terms. The 2008 financial crisis and 911 also saw the elites rebound to a stronger position than before.

The ‘slow and steady’ approach may be more viable. A notable example was the transformation of the Rome Empire from paganism to Christianity, which unfolded over a 100-year period, from around 300 to 400 AD. Until Constantine’s conversion and legalization of Christianity in 312, Christianity was mostly relegated to the fringes, practiced by only 10% of the Roman population, who feared persecution, in contrast to paganism which dominated. By around 400, paganism was outlawed. Such an ideological transformation can occur in America, and will also take a similarly long time. What is required is that ‘alt right’ politicians (who are more extreme than Trump and don’t care about financial self-preservation) accede and maintain control of the major branches of government long enough to have the Supreme Court replaced and restocked, eventually allowing constitutional amendments to be reversed, and possibly new ones to be added that increases the power executive branch–or-possibly does away with the existing system of government all together. Over 60-100 year timetable, this is possible, although still unlikely. The odds will go up if there are exogenous factors to speed this process

Related to this theme of collapse, check out And then what happens?

A Letter to ‘Trump Haters’

I address this letter to ‘Trump haters’, not ‘Hillary supporters’, because based on personal observations, some of Trump’s biggest detractors also hate Hillary just as much, if not more (for denying Bernie Sanders the nomination, who would have been a better candidate).

Trump’s win has elicited a visceral, almost primal, rebuke from otherwise rational, smart people that I otherwise respect and or even agree with on some certain issues.

From Scott Sumner of Money Illusion:

And Jeff Atwood of Coding Horror:

Brad Delong, who recently did an AMA on Reddit, also voiced a lot of concern over Trump, but at least was far more polite about it, setting a good example of how to criticize specific policy without resorting to ad hominem attacks against Trump and his supporters.

I agree with these anti-Trump economists on certain things–about the US dollar, deficits, the US economy, and about how Peter Schiff and other doom and gloom ‘Austrian alarmists’ tend to be wrong more often than not. By ‘agree’, what I mean is that they are closer to being ‘right’ (or less wrong) even though I may not, personally, like it. Drad Delong is closer to being correct regarding the ‘free trade debate‘ than Vox Day even though I wish Vox Day were right. Rationality and the ‘pursuit of the truth’ means we need to accept the world as it is, not how we want it to be. By better-understanding reality, one can be more fruitful in not only predicting but optimizing the present situation to his or her own advantage. It sounds trite to say, but knowledge (and understanding) really is power. So even though we lie on different points on the political spectrum, we both seek islands of truth and rationality in what is otherwise a sea of media nonsense, misinformation, and sensationalism. That’s the ‘common ground’ here, that we can both agree on.

And we can both agree that Hillary was a lousy candidate who ran an equally lousy, uninspiring campaign that was backed by corporate interests instead of the interests of voters, doing a disservice to both her party and supporters. From Vice.com Why 2016 Seemed Like the Worst Year Ever:

…Hillary Clinton campaigned on the absurd slogan that “America is great because America is good” and was so convinced of her own inevitable coronation as the khaleesi of corporate feminism that she didn’t even bother campaigning in Michigan. Half the electorate stayed home, and a few million useful idiots for a bargain-bin…

Going back to Trump, yes, 2016 sucked for a lot of people. For Sanders supporters (for obvious reason); for myself, other reasons. Many beloved celebrities died. The situation Syria deteriorated. ‘Brexit’ left a lot of people divided, almost literally. We are on this boat together, and although we disagree on specific issues or policy implementation, we can both agree the economic direction of the country for the past decade or two has gone in a direction that, for better or worse, has benefited too few.

Now the compromise: between 2009-2015 Obama did things we ‘The Right’ opposed, but we got through it. More importantly, we didn’t make our opposition too personal (and we will take back the ‘birtherism’ if you can take back the part about Trump being Hitler). And admittedly, Trump can be rough on the edges and uninhibited, but is a departure from the tradition of bland and predictable politics (during the primaries, democrats voted against Hillary for the same reasons republicans voted for Trump).

Trump, in many ways, is the ‘inverse Obama’, embodying ‘hope and change’ for his millions of voters who felt, and justly so, ignored by ‘politics as usual’. Yes, Hillary won the popular vote, but 62,979,879 Americans voted for Trump. ‘Unity’ means bringing everyone above the fold in the ‘national debate’, not just those with whom you agree with. The 2017 Berkeley riots, was, regrettably, a missed opportunity to go in this much-needed direction.

Avoid Individual Stocks

Billionaire Warren Buffett discusses the book that changed his life

The reality is, it was a lot easier in the 1950′s-1990′s to make money with stock picking (as Buffett did) than today, because in the past stocks tended to exhibit what is called ‘Serial Correlation’ (which in layman-speak means the past predicts the future. Two ‘up-days’ will likely be followed by a third, etc.), which made momentum and picking strategies more viable. Nowadays, with the exception of a handful of stocks (like Facebook, Google, and Amazon (all of which I have recommended for years here)), the vast majority of stocks are very erratic in terms of performance. It’s not uncommon for individual stocks to fall 20-50% for no reason or for missing earnings sightly, and then never recover again. This happened with Research in Motion, Sketchers, Kors, Fit Bit, GoPro, Fossil, and Under Armor…the list goes on and on.

And it bears repeating, 95% of day traders become insolvent within five years. Individual stocks pickers, swing traders, and momentum traders don’t fare much better.

In the 1950-90′s individual stocks would rise 1,000% in a 2-3 year period, and then keep the gains. But nowadays it’s very rare for any individual stock to go up more than 200% in a 2-year period, and then, as the prior examples show, the stock will inevitably get chopped to pieces for almost no good reason. This is probably because hedge funds, desperate for any meager ‘alpha’ in what has become an impenetrably efficient market and economy, are chasing the latest ‘hot stock’, only to dump it at the tip of a hat months later. These funds have no loyalty to the company or shareholders and are just chasing bandwagons. Also Buffett has the advantage of special ‘preferred stock’ that ordinary investors don’t get, which guarantees he makes a profit in virtually all possible circumstances.

The S&P 500 has risen over 200% from the depths of the crisis, from a level of 660 in 2009 when it seemed like capitalism was going to die, to 2300 today. The market has much further upside: profit margins and earnings are rising, consumer spending and exports are strong, valuations are still tame, Trump’s spending will provide a further economic tailwind, and interest rates are low. There is no reason to create needless complications by stock picking when one can simply buy the index (such as the S&P 500 or the Nasdaq 100) and make more money with less risk.

The Trump Disillusionment?

The legacy of Trump presidency may be one the greatest examples of voter ignorance or dissonance–by many pundits the ‘right’ who originally supported Trump but later realized he wasn’t who they thought he was…whoops. With Bush (1st and 2nd), it was obvious what you were getting (a big govt. conservative who supports interventionism, lax borders, and supply-side economics); same for Hillary and Bill Clinton (social welfare, big govt.), and Obama (social welfare, big govt.). But Trump is more amorphous, and many pundits projected unto him what they wanted to believe, while ignoring or overlooking Trump’s actual policy (but Trump was never a ‘policy guy’, which contributed to his appeal but also made it hard to understand what he stood for besides ‘making America great again’ and ‘securing the borders’). The narrative was like, “yeah, Bush sucks, Obama sucks, Clinton sucks, but Trump…he’s an ‘outsider’…he’s different…therefore, he must support small government and less defense spending…”

In ‘I don’t think that candidate is who you think he is’, I predicted such disillusionment, and sure enough here are some recent posts on Unz:

Mike Whitney, The Berkeley Incident:

So if the Chancellor had already gone the extra mile to protect free speech, then why did Trump decide to lower the boom on him? Was he genuinely angry with the Chancellor’s performance or did he interject himself for political reasons? In other words, how did Trump stand to benefit from getting involved in this mess?

Trump is not the libertarian many hoped he would be. He’s a big government nationalist with some socialist leanings regarding business, as well as an interventionist who supports a ‘big stick’ approach to foreign policy and more defense spending. This will drive the Ron Paul, small-government folks nuts. He’s also course, heavy handed, and not very erudite, which will annoy some of right-wing punditry intelligentsia, as well, obviously, as the left, to no end.

Other examples:

Patrick Cockburn, Trump’s Comments Towards Iran Could Deepen Conflict in the Region:

President Trump is adding further venom to the raging sectarian hatreds tearing apart Iraq and Syria by his latest ill-judged tweets. These have far greater explosive potential than his better known clashes with countries like Australia and Mexico, because in the Middle East he is dealing with matters of war and peace. In this complex region, the US will have to pay a high price for switching to a vaguely belligerent policy which pays so little regard to the real situation on the ground.

The Trump administration seems to think in tweets and slogans, so it is probably wrong to speak of a coherent change in policy.

And another Trump Presidency — First SNAFUs Already:

If it happens, the US attack on Iran will look very much like the 2006 Israel war on Hezbollah, and it will achieve the same results, only on a bigger scale. To put it simply – it will be a total disaster and it will mark the failure of the Trump presidency.

Trump is not going to attack Iran and jeopardize the war against ISIS. This just posturing and far from a foreign policy failure by Trump.

And from Fred Reeeed Many Storms Gathering: Reflections on Trump:

Trump is extremely combative, erratic, apparently a bully, and responds to resistance by doubling down. To many of us, including me, this was immensely satisfying when he told the press to bugger off, defied the Clinton-Wall Street-Beltway elites, and talked of putting the interests of America before those of big business. The campaign was fine entertainment. Because so many were sick of the elites, he is President. Fun as a candidate, but in a President?

More of his hostility seems to spring from failed developments in Mexico, the Trump Ocean Resort Baja California, in which purchasers of expensive apartments lost large down payments when the developments were not built.

LA Times:

“All told, two years of aggressive marketing yielded $32.5 million in buyer deposits, every bit of it spent by the time Trump and his partners abandoned the project in early 2009 as the global economy was reeling. Most of the buyers sued them for fraud.”

Whether the reason for the failure was incompetence or a deliberate scam depends on who you talk to.

If one actually reads the details about the dissolution of the Trump Ocean Resort, the developer ran off with the money, which Trump obviously could not have foreseen.

In 2016, Social Matter put out kinda a macabre article Mass Shootings Make Sense In A Democracy, which stuck with me.

And therein lies the problem with democracy, politics, and activism: it creates the illusion of individual control and power, when it really just answers to the ‘tyranny’ of the status quo and stability. Stability, generally, is good, but the problem is the disconnect between expectations and reality that arises from democracy. Democracy instills that individuals can make a difference, yet the disillusionment arises when politicians fall short of expectations, but disillusionment also arises when culture and economics rewards individualism as embodied by individual merit, status, and success–while a vote, in the grand schemes of things, is merely symbolic (a lot people would probably exchange their vote for, say, $1,000). The cynicism , predictability, and banality of democracy is masked by a pretense of change and individual empowerment. In the UAE or Saudi Arabia, both of which have absolute monarchies, there is no such thing as politics–but there is also no disillusionment, meaning that the gap between expectations and reality is minimal, but Arab monarchies are bad in their own unique ways, so this is for demonstrative purposes. But one can see how it’s almost cruel or even sadistic, in a way, how democracy dangles the carrot that embodies our hopes and wishes, and just when it’s within reach, pulls it away.

It’s pretty obvious that turning to politics is unproductive. The solution, as outlined here and here, is to focus on ‘localism’ (the inner circle) instead of ‘globalism’.

Why conservatives always lose

From John C. Wright: The Last Crusade: Rip van Con, and related: Why conservatives always lose.

Conservatives are good at winning public office. Right now, the GOP has control of all three branches of government. The GOP controlled the executive branch for much of the 70′s-2000′s, save for Clinton and Carter. Obviously, the GOP platform is one that appeals to a lot of Americans, or at least half. In addition, the GOP has won the ‘economic wars’ and the Cold War, in that capitalism has obviously triumphed over Communism (fall of Communist Russia, and to some extent, China). Only a handful of countries (N. Korea, Cuba, Venezuela, etc.) still cling to that failed ideology. Related to Communism, despotism has also been in decline. So that’s the good news. The bad news is the GOP has completely failed the ‘culture wars’, so much so that many on the ‘right’ are throwing in the towel. Conversely, the ‘left’ has lost the economic wars but have won the culture wars. As alluded by Thomas Frank in his best-seller What’s the Matter With Kansas, this may be due to the ‘great compromise’ whereby both right-wing and left-wing elitists agree to give up ground to get half of what they want. Politics is just theatrics, like professional wresting, where the outcome is predetermined. Large democracies and republics, such as America, are good at preserving the status quo, which is good for economic and geopolitical stability, but also tends to leave a lot of people unsatisfied.

The Free Trade Debate, Part 2

Part 1, from back in 2015.

Vox Day recently put out a Periscope voicing his opposition to free trade. Given how knowledgeable he is on the issue, trying in any way to refute it seems like a daunting task, but rather than trying to prove someone is ‘right’ or ‘wrong’, a shortcut is to defer to the empirical evidence to show whether free trade is responsible for whatever deleterious effects are commonly attributed to it. The free trade debate is one of those issues that will never be resolved to anyone’s full satisfaction. Both sides can bring forth arguments, but no amount of evidence either way will decisively resolve the issue, which is one of the problems with economics, which is a social science, versus a ‘hard science’.

An argument against free trade requires showing that if free trade were eliminated, social welfare would improve. Alternatively, once could show that social welfare was better before free trade was implemented, or that free trade caused a sudden decline in social welfare. One must show free trade is directly responsible for the following consequences its detractors commonly ascribe to it:

1. Free Trade destroys jobs

2. Free trade destroys manufacturing jobs

3. Free trade leads to greater wealth inequality

4. Free trade leads to stagnant wages

Vox Day says GDP is an inaccurate measure of social welfare, and none of the above involve GDP.

Regarding #2, the most damning evidence against free trade is the waterfall-decline of manufacturing jobs between 2001-2006, largely attributable to China entering the WTO. By some estimates, 1-3 million US manufacturing jobs were sent to China.

Everyone focuses on NAFTA, which went into effect on January 1994, but manufacturing jobs didn’t decline until 2001.

However the 2001-2010 decline of manufacturing jobs need to be put into perspective, as part of an 80-year decline of manufacturing jobs relative to the total US labor force:

Furthermore, total private non-farm payrolls continue to grow despite free trade, suggesting the loss of manufacturing jobs is being replaced by growth in other sectors (such as services, healthcare, and technology):

The long-standing, multi-decade trend of job creation prevails despite free trade.

Opponents of free trade accuse participants, such as China and Japan, of ‘cheating‘ by deliberately devaluing their currencies:

The most common charges of “cheating” on free trade involve a country’s keeping its currency artificially low (so its products are cheaper, and therefore more competitive, in the U.S.), subsidizing its domestic firms so they have better margins, or even levying protective tariffs without regard for prior agreements.

If the U.S. leaves its markets open to unfairly cheap foreign products while its own goods are stymied abroad, then the job-killing concerns about free trade are all the more pressing,

“Trade deals are absolutely killing our country — the devaluations of their currencies by China and Japan and many, many other countries, and we don’t do it because we don’t play the game,” GOP front-runner Donald Trump said at a Thursday night debate, reiterating his call to employ threats of retaliatory tariffs. “And the only way we’re going to be able to do it is we’re going to have to do taxes unless they behave.”

If China is cheating, they certainly aren’t doing a very good job at it:

Foreign currencies are falling not because of cheating but due to economic weakness and uncertainty, which makes the safety of the US dollar more appealing. Many foreign countries actually want stronger currencies, because it makes their debt that is denominated in US dollars cheaper. Also, the US dollar is rising in anticipation of rising interest rates (due to strong growth and Trump’s stimulus, defense spending, and tax cuts). If Trump wanted to make free trade fairer, he could try to make the US dollar weaker by reneging on his spending initiatives.

Regarding #3, wealth inequality began to rise in the late 70′s, fifteen years before NAFTA and nearly two decades before China entering the WTO:

Regarding #4, real wages have been flat since the early 70′s, nearly two decades before NAFTA:

So it’s pretty obvious that the trend of rising wealth inequity and stagnant real-wages were in place decades before NAFTA. It’s impossible to show that eliminating free trade would reverse this. Globalization, automation, and ending of the gold standard in 1971 probably played a role though, but this is much bigger than NAFTA.

Just two weeks ago, Brad Delong wrote a huge piece in Vox.com defending free trade, NAFTA and other trade deals have not gutted American manufacturing — period.

If you can get past the usual snark that is to be expected of leftists, he has some good points:

A manufacturing job making things in a factory is no longer, in any sense, a typical job for Americans. A sector of the economy that provided three out of 10 nonfarm jobs at the start of the 1950s and one in four nonfarm jobs at the start of the 1970s now provides fewer than one in 11 nonfarm jobs today. Proportionally, the United States has shed almost two-thirds of relative manufacturing employment since 1971:

The effects of NAFTA may also be overblown:

Back in 1992, when Republican George H.W. Bush was negotiating NAFTA, Ross Perot claimed that NAFTA would lead to a “giant sucking sound” as businesses moved huge numbers of jobs from the US to Mexico. But did NAFTA drive any rise in the unemployment rate? No. The years after NAFTA’s implementation were the best as far as unemployment is concerned of any since the early 1970s.

Did NAFTA drive the fall in the manufacturing employment share? No.

Before NAFTA was signed, we were already five-sevenths of the way from July 1953 to our present state in terms of “losing” manufacturing jobs. We were three-fifths of the way from January 1971 to our present state. Even the best policies favorable to nurturing a country’s manufacturing sector would not have prevented this process of the shedding of relatively inefficient manufacturing jobs. The trend preceded NAFTA, and it would have continued with or without NAFTA.

Thus the high-end credible estimate is that NAFTA produced a shedding of 200,000 manufacturing jobs. That represents:

0.14 percentage-points of nonfarm employment

1/25 of the excess shedding of the manufacturing job share

1/112 of the total shedding of the manufacturing job share since 1971

In the context of all the forces and disruptions affecting the US economy and the US distribution of income and wealth over the past half-century, NAFTA was and is simply not a very big deal.

Dr. Delong cites 300,000 jobs lost due to the 2001 WTO deal, in contrast to 2-3 million given by other sources.

By and large, the jobs that we shed as a result of NAFTA and China-WTO were low-paying jobs that we did not really want. Because of NAFTA and China-WTO, we have been able to buy a lot of good stuff much cheaper — which means we have had more income to spend on other things and to pay people to do other, more useful things than work on low-productivity blue-collar assembly lines.

Also, this argument is largely subjective. If no one wanted the jobs, they wouldn’t have existed. Workers would have chosen other jobs. A crappy manufacturing job that pays $20/hour beats a crappy fast food job that pays $7/hour.

Overall, I think Dr. Delong’s position is the correct one, but it isn’t of much respite for those who have lost manufacturing jobs.