A Contender for Economic Idiot

I think Kevin Drum would make a fine nominee for Tim Worstall's Economic Idiot Award. Kevin's latest post looks at health care and decides that we need the French system. But is the French system all that much better?

Now the French system does seem pretty good. This story makes you think the French have managed to do it right. However, my wife recently had a fairly serious medical issue and her treatment was if anything even better, at least in terms of things getting done. She got the x-rays, cast, and so forth much faster. Of course, that might be due to differences in rural vs. suburban settings. Also, this article says that France has the number one health care system in the world.

However, there is one interesting fact in that article. France spends a lot on its health care system, 10.4% of GDP in 2002. So it isn't cheap, one of the main arguments put forward by people such as Kevin that it would be cheaper does not necessarily follow. Granted, the U.S. does spend more, 14.9% of GDP in 2002, but it is not correct to assume that if we switch to the French system we will spend 10.4% of GDP. There are differences between the populations that could result in either the same level of spending, more spending or less spending here in the U.S. I don't know which of the three will result and neither does Kevin.

But that isn't the end of the stupidity.

Somebody has to pay for it, but apparently in KevinWorld nobody is on the hook for the cost...or it is some unstated group. The reality is that the costs would be paid for by the U.S. citizens in the end. If the tax is levied on corporations it will eventually be born by people (the shareholders and Jasminelive customers), if it is levied on individuals it will be paid by some sort of tax. I don't know who else the cost could be levied on...maybe Kevin thinks we'll invade France and make them pay.

Also, there are large out of pocket payments in France. According to the link that has France as the number one health care system there is this bit of information.

Suppose you have a prescription drug bill of $150 and get 35% reimbursment; you would still be spending $79.5. And what is that part about paying the full cost of a routine doctor's visit?!?!?! The horror!

Kevin is right that the current system is seriously messed up, but it isn't clear that we can have the French system. For one thing it would mean trusting those dimwits in Washington D.C. to set up the system just like the French system and then let them have control of it for the indefinite future. Granted this criticism applies to any and all reform proposals, but I think it also provides a good reason to stay away from the complex proposals.

Some Thoughts on Gay Marriage

Generally my view of gay marriage is that I don't care who wants to marry whom (Hey Dave, is it 'who' or 'whom' there or doen't it matter?). However, Megan McArdle has written a long post that puts forward some interesting arguments that at the very least have given me pause to think about the issue more closely. I don't know if what she has written means that gay marriage is a good thing, a bad thing or is neutral, but it sure has some interesting ideas.

One thing that struck me was the comment about evolutionary-like processes in jasmin live community.

Also, her argument that simply referencing one's own experience is insufficient when looking at this issue is very good. One thing that annoyed during one of President Clinton's townhall meetings was his flippant comment about the cost of his universal health care proposal. A businessman got up and asked how he was expected to stay in business with the added costs to staying in business the proposal would impose. Clinton blithely asked why the guy could "...raise the price of his pizza's by a buck?" Clinton then went on to state that he'd still buy pizzas that were priced $1 higher. It was very annoying in that it ignored basic economics. Costs cannot be passed on entirely to consumers save in special cases. Raising the costs for firms would invariably drive some firms out of the market. The same problem applies here. Simply because I don't see how gay marriage would bother me doesn't mean it wouldn't have an effect on others, and maybe even a large effect.

At the very least Megan is right that this issue probably needs a great deal more thought on this. She is also right that many conservatives/libertarians want liberals to slow down and think about interfering in the economy, so why is not slow down and think about interfering in social institutions. Anyhow I suggest reading all of Megan's post.

A Permanent Oil Shock?

The IMF is predicting that the current oil prices are going to be here to stay. I am usually suspicious of these kinds of doom and gloom forecasts as they tend to make an implicit assumption that there is no response these high prices. The basis for this forecast is that the IMF is predicting a sharp rise in demand and a plateau in production from non-OPEC countries.

The problem I have with these types of forecasts is that they seem to imply no demand side response. Granted, there aren't many subsitutes for gasoline, but there are ways to reduce consumption and still travel approximately the same distances. Further, as prices increase people are more interested in purchasing fuel efficient cars and other items that rely on oil. Hence research into subsitutes and more efficient means of using oil also become more attrative.

Errr...What?

I read stuff like this from Kevin Drum and it just makes me scratch my head and wonder what the heck he smokes before posting on things like taxes and economic growth. I guess my big question is does Kevin Drum understand the concept of consistency?

See taxes have no impact on growth, but to find out why GDP has been trending down over time look to...taxes. On top of it, Kevin is displeased with the payroll tax which is rather regressive. But isn't this the tax rate that is likely to increase to save Social Security?

Also, I'm not sure about Kevin's general thesis here that it is state taxes that have been the culprit for the downward trend in economic growth. Sure, he points to some data showing that when you add up all taxes including state and local taxes you see an increasing trend in terms of share of GDP. However, the guy the New York Times article is quoting is Joel Slemrod. Slemrod is very smart and I'm sure he has looked at things like the total tax as a share of GDP.

Bad Movie! Bad, Bad Movie!

I'm talking about Sin City. Wow, was that bad. I knew I was in trouble when the opening credits included "Special Guest Director Quentin Tarantino".

It's in black and white, mostly, with the occasional blip of color here and there. It's a series of vignettes that are only marginally related with occasional overlapping characters. The vignettes are each told from one character's POV (a different character each time) via the "hearing their thoughts voice over" technique, and are not chronological. I imagine that the screenwriters dropped a pile of the comic books (the source material for this trainwreck), and no one figured out that they picked them up in the wrong order.

Each chaturbate episode includes lots of blood and gore, graphic violence, and at least one crotch shot. I'm not kidding; male genitalia are frequently kicked, bludgeoned, axed, shot or stabbed.

For a while, I thought that it was a satire on 1950's era hard-boiled detective flicks, but the v/o monologues were too stilted for even Sam Spade to utter. MEGO, so I stopped trying to figure it out.

Maybe there was some artsy-fartsy symbolism that I just wasn't getting, but I couldn't muster enough interest to analyze it. Most of the antagonists wore crosses -- I suppose that was supposed to mean something, but I really didn't care.

It might be worth renting on DVD and listening to the directors' soundtrack to see if they explain The Meaning of It All, but probably not.

Prof. Hamilton on Katrina & Oil & Gasoline Prices

Note: I posted this at Outside the Beltway earlier today, but thought some readers here might like to see it as well.

Prof. Hamilton has a very long post that looks at the impact of hurricane Katrina on gasoline, natural gas, and oil prices. First off, Prof. Hamilton was surprised at the change in oil price (about a $1),

I think this is exactly right. The problem with gasoline is two fold. First, there aren't that many refineries anymore. Building new refineries just isn't going to happen in the next 10 years is my guess without some major shift in people's thinking and some sort of major push by the Bush administration, and I don't think the latter is going to happen. The second problem are all the gasoline additive requirements (click here to see a really cool map of different blend requirements). This latter fact transforms the gasoline market from a national market to a series of local markets. Hence a single refinery going down for unplanned maintenance could cause some noticable price spikes. As I noted earlier, several refineries in the New Orleans area are likely to be out of commission for the indefinite future and that is were the big impact will come, IMO.

Another problem noted by Prof. Hamilton that I failed to consider is that the Louisiana is also a major point of entry for oil into the U.S. These too are likely to see very reduced capacity which will mean that the refineries that are currently in operation wont necessarily be getting as much oil as they could refine.

Bottom line, look for a pretty sizeable jump in gasoline prices starting pretty darned soon. Prof. Hamilton notes that September and October gasoline delivery contracts are up 13 and 11 cents respectively. I wouldn't be at all surprised if they go even higher today.

What are some of the things that can be done to mitigate these problems? Build more refineries for one. Another would be to standardized the gasoline additives so that they are uniform throughout the nation. Both of these would help reduce volatility in the gasoline markets. Do I expect any idiot politician in Washington to suggest something like this? Not really. More refineries would likely mean more competition and more competition is bad for oil industry profits. Oddly enough Bush and Cheney are on the same page as the environmentalists, but for different reasons. Similarly I don't expect much to come of any attempts to standardize gasoline additives. The first problem is that various states/areas are going to want their particular blend to be the standard. Hence there will be lots of arguing over that and whatever standard is chosen will likely create both winners and losers. Thus, this would not be a simple change in practical terms. In short, much of the current price hikes we have inflicted on ourselves. Blabbering and nonsense about foreign oil is just that, blabbering and nonsense (at least in this instance).

Oil/Gasoline Operations in LA

The link for those who have been following the issue of Katrina and energy/oil/gasoline.

The first thing to jump out at me is the good news about the LOOP (the Louisiana Offshore Oil Port). While the LOOP has been shut down since Sunday, it appears to have suffered no catastrophic damage and the big issue for getting it back in operation would be restoring electrical power. I imagine that could take awhile considering the devestation in that region.

Also of note is that gasoline near-month futures were up substantially more than crude oil prices. Crude is at $69./81, but gasoline is up over 20% at 247.5 cents per gallon (an increase of 41.1 cents per gallon). So as predicted gasoline prices have gone up substantially. It is a bit surprising that oil isn't up more, but oh well lets not look a gift horse in the mouth.