What's the Matter with Marin?

A recent New York Times article titled "Who Turned my Blue State Red" opens with:

It is one of the central political puzzles of our time: Parts of the country that depend on the safety-net programs supported by Democrats are increasingly voting for Republicans who favor shredding that net. 

The article (referred to hereafter as Blue State Red)  goes through an analysis of who is voting and makes two observations:

1. The really poor don't vote against their interests - instead, the lowest quintile isn't voting, period.  If they vote it's Democrat, but they don't turn out.
2. Those one or two rungs up the ladder are reacting against what they perceive as a growing dependency on the safety net.  This is the going red part.

The closing recommendations:  Democrats need to improve the economy (to reduce the need for aid) and run programs better (to reduce the resentment in item 2.)

 

It's worth paraphrasing the concluding parts of the article to get the flavor of the thinking. 

So where does this leave Democrats and anyone seeking to expand and build lasting support for safety-net programs such as Obamacare?

For starters, it means redoubling efforts to mobilize the people who benefit from the programs…

But it also means reckoning with the other half of the dynamic — finding ways to reduce the resentment that those slightly higher on the income ladder feel toward dependency in their midst. One way to do this is to make sure the programs are as tightly administered as possible…

The best way to reduce resentment, though, would be to bring about true economic growth in the areas where the use of government benefits is on the rise… If fewer people need the safety net to get by, the stigma will fade, and low-income citizens will be more likely to re-engage in their communities — not least by turning out to vote. 

What's the Matter?

Blue State Red has some parallels to the popular 2004 book What's the Matter with Kansas?  The problem posed in both is one of low-income people voting "against their interests."  In Kansas, the voters are distracted by social issues.  Blue State Red makes a different statistical argument that (a) the poorest aren't voting and (b) the next economic rungs up are resentful.

 

My problem with both of these analyses is their framework of analyzing problems in terms of homo economicus - (economic man):  the assumption that one's most important interests are economic.  This resembles the Marxist charge that some economic classes suffer from "false consciousness" - they are fooled and don't see where their "real" interests lie.  Both the bottom quintile and the next rungs up are significant beneficiaries of government programs - why won't they just understand?

 

But if people "should" vote as homo economicus, what's the matter with Marin?  Marin County - the highest income county in California - is solidly Democratic (in 2012, 74% for Obama  and 80% for Democratic Senator.)  The next two highest income counties, San Francisco and San Mateo, are just as solidly blue.  Why are these well-off people not voting for low-taxation Republicans?  If high-income people can vote for values against their purely economic interests, why don't we grant the same expectation to low income voters?  Are they supposed to be purely economically driven because they have low incomes?  This is either liberal bigotry or condescension - "those people" don't have complicated moral reasoning, or "in their situation, don't they realize that economic considerations should come first."

 

Democratic theorists can be caricatured as stuck in a materialist mindset - it's all about the goodies.  Look at the recommendations in "Blue State Red":  reduce resentment, fix the programs, get out the lowest quintile vote.  Nothing to see here, folks, move along - just need to tighten the program and fix the false consciousness.  It plays right into the mindset of Romney's 47%.

 

Instead, I think that the work of Jonathan Haidt is relevant here:  there are multiple foundations  of moral reasoning, but the relative importance attached to these categories varies strongly between liberals and conservatives.  And that in many ways liberals just don't get it.  This is summarized nicely in his 2008 TED talk.  A fundamental point of that talk is that of five foundations, liberals attach primary importance to only two:  harm/care and fairness.  Conservatives attach nearly equal importance to three others, named in-group/loyalty, authority/respect, and purity/sanctity.  Liberals tend to be leery of the latter three, as tools that have been historically used by power structures to maintain control.  But Haidt's observation is the fact that for a large number of people, generally conservative, these moral foundations are very important. 

Take these differences in moral foundations as facts on the ground.  What is someone promoting a liberal program to do?  Here are three approaches of limited utility, although they provide a good source of self-righteousness:

1. Yell louder - "YOU'RE SUFFERING FROM FALSE CONSCIOUSNESS, YOU STUPID PEASANTS.  VOTE YOUR ECONOMIC INTERESTS."
2. Work harder - more get out the vote drives, more legal challenges to keep programs alive, etc.
3. Tell the conservatives that they have the wrong value system.  Just stop clinging to their guns and religion.

Instead, the approach from Haidt would be to expand the liberal moral reasoning.  His research suggests that the right cares as much about care and fairness as the left; it's just not their only wavelength.  In this framework, conservative moral reasoning isn't wrong, bit instead more complex.  Communicate to conservatives on the other wavelengths too.   A couple of thoughts:

 

One source of the authority/respect moral foundation is traditional religion.  Stop being afraid of it.  Stephen Colbert did this brilliantly on the Late Show when he said: 

If you want to know if somebody is Christian, just ask them to complete this sentence: Jesus said ‘I was hungry,’ and you gave me something to eat, ‘I was thirsty,’ and you gave me something to drink, ‘I was a stranger,’ and you… _________”

And if they don’t say ‘welcomed me in,’ they are either a terrorist or they are running for president. 

Colbert casts the entire argument in a different frame - not some dry intellectual point about universal rights, but instead casting it as moral imperative from a great teacher.  Is this a rhetorical trick, a cheap appeal to emotion?  To Socrates, perhaps yes.  But from Haidt, maybe a lot of people don't do their moral reasoning a la Socrates.  Maybe it is a legitimate appeal to how they reach moral conclusions, using a moral authority that works for them.  And this isn't just pandering - there are some great truths from those old dead men, a recognition which is out of favor on the left.

 

In general, the left tends to have an aversion to religion.  Rightly so in some ways - but by avoiding religious language because of a bad history from many religions, the left has given up a source of powerful language.  One of great rhetorical powers of Dr. Martin Luther King was that he could draw from the justice language of the Bible.  He certainly did not stick to dry intellectual arguments of economic fairness.

 

Another moral foundation is in-group/loyalty.  When we classify everyone by economic class (or other identity) we have thrown away the power of re-defining the in-group to have larger boundaries.  Our culture has cliché language for identifying with the other - "there but for the grace of God go I."  But we also have powerful religious language.  When asked "who is my neighbor," Jesus draws the circle broadly:  he tells a parable where there the Samaritan - a member of a despised religious group - was the one to actually take care of the mugged traveler.  Elsewhere in the New Testament, Paul says in two different letters,

There is neither Jew nor Gentile, neither slave nor free, nor is there male and female, for you are all one. 

Again, this is powerful stuff that would speak to a large portion of the country.  I think that one could certainly draw on this to re-define groups and loyalty, shifting attitudes by working within a different worldview.

 

Others might create better examples than the two I give here.  But the point is this:  continuing to ask "what's wrong with group X" reflects an illiteracy in in moral reasoning.  Continuing to make the argument on the same grounds, just "better", starts to look like the insanity of repeating that which doesn't work and expecting different results.  Turning out the vote or incremental decreases in resentment are simply  staying on the same playing field.  Learning the differences in moral reasoning, and shifting to the that ground, could actually lead to changing hearts and minds.  Lasting change only comes about because you have convinced someone, not just because you have beat them in a contest.

 

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References

NY Times Article:  Who Turned My Blue State Red:  http://www.nytimes.com/2015/11/22/opinion/sunday/who-turned-my-blue-state-red.html

 

Jonathan Haidt

TED Talk on the Moral Mind: https://www.ted.com/talks/jonathan_haidt_on_the_moral_mind?language=en

transcript:  https://www.ted.com/talks/jonathan_haidt_on_the_moral_mind/transcript?language=en

http://heterodoxacademy.org/2015/11/24/the-yale-problem-begins-in-high-school/

http://righteousmind.com/coddle-u-vs-strengthen-u/

https://edge.org/conversation/moral-psychology-and-the-misunderstanding-of-religion

 

Stephen Colbert, Immigration, 2015-11-19:

https://sojo.net/articles/watch-colbert-shows-why-gop-leaders-need-welcome-stranger

 

Moral Foundation Theory:

https://en.wikipedia.org/wiki/Moral_Foundations_Theory

http://www.moralfoundations.org/

 

California Income by County:  https://en.wikipedia.org/wiki/List_of_California_locations_by_income

 

Homo Economicus:  https://en.wikipedia.org/wiki/Homo_economicus

 

Marin County Election Results, 2012:  http://www.marincounty.org/depts/rv/election-info/past-elections/page-data/tabs-collection/2012/nov-2012/final-election-results

 

What's the Matter with Kansas:  https://en.wikipedia.org/wiki/What's_the_Matter_with_Kansas

 

False Consciousness:  https://en.wikipedia.org/wiki/False_consciousness

 

Paul of Tarsus

Galations:  https://www.biblegateway.com/passage/?search=Galatians%203:28

Colosians:  https://www.biblegateway.com/passage/?search=Colossians+3%3A11&version=ESV

 

 

Be Careful What Lesson You Learn

Many of us are watching transfixed with horror at the ongoing mess in Europe.  It's the low-grade horror of a large slow-motion disaster movie.  I want to talk about the reasons for the disaster, and how it could be (or could have been) different.

One of the major reasons for the disaster is the design of the European Central Bank (ECB.)  The ECB is and is not like our Federal Reserve.  An important difference is that the ECB cannot buy government debt.  This means that in times of economic crisis, the ECB cannot step in and act as a "lender of last resort", one of the historical roles of a central bank.

Why this limitation?  Because the Germans, as a condition for creating the Euro, required that the sole role of the ECB was price stability.  This is because the Germans have a visceral fear of hyperinflation.  You can understand their reasoning.  Hyperinflation in Germany in the 1920s led to an unstable political environment.  That environment helped the rise of Hitler and the Nazis.  Not wanting a repeat - let's make sure we never have hyperinflation.

But what if the Germans learned the wrong lesson?  In 1919, after the Peace of Versailles, John Maynard Keynes wrote a book called The Economic Consequences of the Peace.  Three important facts about the post-war (WW I) world are:

1. The world went back on to fixed exchange rates (the gold standard.)
2. The fixed exchange rates were  at the wrong level, causing persistent outflows from Germany
3. Huge wartime reparations were imposed on Germany, which it was in no position to repay.

So with this setting:  what was Germany to do?  The government financed itself by simply printing money, leading to the hyperinflation and the rest.  But was the hyperinflation the source "cause" of the subsequent problems, or just an intermediate symptom?  Instead of blaming hyperinflation, the lesson should be the underlying forces that led to the hyperinflation.

Consider the parallels with today.

1. The Euro-zone countries are locked into a fixed exchange rate, similar to the gold standard.
2. Some countries in the Euro-zone are not currently competitive, using the exchange rate under which they entered the Euro.  Instead of printing money, as in the 1920s, the Euro-zone countries or their banks ran up high levels of debt, which everyone else pretended (for a long time) were repayable.
3. Huge repayment plans are being imposed on some countries, which they will not be able to repay for decades, if ever.

So what is going to happen?  The austerity programs being imposed on the debtor countries are politically unsustainable.  Radical parties of the right and the left are on the rise.  The Germans think the solution is even more austerity and putting them in charge.

Without a different mindset, this won't end well.  The lesson to be drawn from the 1920s is not "avoid hyperinflation at all costs."  Instead, the lessons should be

• Avoid impossible fixed exchange rates between differing economies, and
• Don't impose impossible debt payment plans.

If you don't learn these two lessons, then as Keynes noted, there will be consequences.

References
http://en.wikipedia.org/wiki/The_Economic_Consequences_of_the_Peace
http://en.wikipedia.org/wiki/Lords_of_Finance:_The_Bankers_Who_Broke_the_World
http://www.nytimes.com/2012/06/25/opinion/krugman-the-great-abdication.html?_r=1&src=me&ref=general
http://topics.nytimes.com/top/reference/timestopics/organizations/e/european_central_bank/index.html

Oil and Other Costs

As a former energy economist with a junk-brain full of trivia facts, I fell back asleep the other morning computing the cost of oil relative to the total economy, after hearing an NPR story with some presidential candidates blathering on about oil prices.  As I returned to sleep, I noticed the result was about the same magnitude as another number.

More precise than my mental calculations, here are some statistics in Harper's Index style.

U.S. Daily oil consumption, million barrels:  18

Yearly consumption, million barrels:  6,570

Round number price of a barrel of oil:  $100

Cost of U.S. oil consumption for on year:  $657 billion

U.S. Defense Department budget, 2010:  $663 billion

The last two numbers are surprisingly similar. Of course, that is pure coincidence based on the price of oil and current consumption.  But it makes you wonder how much we could reduce the last number if we reduced the first number.

Dodged that Bullet!

My wife and I went in to the oncologist's about a week ago expecting my next treatment.  I had received the drug it as part of the clinical trials.  Now it is FDA approved, and the plan was for me to get ongoing maintenance doses.

The doctor comes into the examination room, and says the insurance company has refused approval - I had already received it four times during the trial, and that was their intrepretation of the lifetime limit for the drug.  He said, "I don't know what your financial situation is... but one dose of the drug is $45,000."  Ouch.  Big Ouch.  He said he was still arguing with them - this a new drug and studies are still begin done; someone had done a study that showed value in maintenance doses for those who had responded to the initial round of four doses.  I am one of the lucky ones who had responded (big time) to this drug.  So he had been in the office the previous night faxing 30 pages of research study to the insurance company.

Five days later we got word that treatment was approved, one again proving my oncologist's prowess at an important medical skill - navigating the insurance world.

So here are some thoughts.

The System (My Thoughts as a Patient)
A note to the anti-healthcare reform folks:  I sure am glad that there is not a faceless bureacracy between me and my doctor, and instead I have the caring folks at the insurance company looking after me.

Is this really the best use of the doctor's time?  I agree that medical procedures should be the ones that are proven effective; but it seems like the decision is being done retail, one physician at a time arguing with the drug company.

And faxing?  This is just one example of how the medical system has not come into the 21st century.  He should have at least been able to send a PDF with a click; or better, just send a link to the original of the study.  As part of this process, I had my first email interaction ever with the billing/scheduling people at the oncologist's office - it's always been by phone tag.  (Although the head nurse and I have been doing email for years, on prescription requests, etc.)

On Medical Statistics
This is a pretty classic example of the misleading nature (to the layman) of medical statistics.  The study reported that this drug extended the median lifetime by 2 months.  But a median is not an average.  Some people had no response; in my case, it is quite possible that it has added years.  The classic paper discussing medical statistics is by Stephen Jay Gould, The Median Isn't the Message.

The Economics (My Thoughts as an Economist)
It costs money to do drug research.  Some drugs never pan out.  Some are expensive to produce - this one is produced with monoclonal antibodies - bacteria where we have inserted a gene to make them produce the protein that is the drug, then we kill the bacteria and refine out the protein.  But I do not believe that the production cost is $45,000 per dose.  Instead, the $45K is going to be a combination of (a) the actual costs of producing the drug (b) return on the capital to build the factory to make the drug (c) return on the investment to discover this drug (d) return on all the other drug investment that didn't pan out (e) allocated costs of all those drug reps and advertising (f) whatever profit margin that someone thinks they can get because they have a monopoly on this drug, at least for the life of the patent.

The economic social optimum is reached when the price is equal to the "long-run marginal cost" of producing the drug.  Long-run marginal cost includes the production cost, plus the cost of the factory allocated over its life ((a) and (b)).  The research costs of this and failed drugs get a bit tricky.  Once the drug is discovered, these are fixed sunk costs - they don't affect the cost of producing an additional unit of the drug.  But if we don't allow companies to get back this money, they won't invest in research.  This has been recognized for a long time - European kings issued the rights to a patent for the unique right to produce a good.  It was recognized as such a fundamental function of government that it appears in the U.S. Constitution (Article 1 Section 8.8) - although even then it was recognized that the patent be for a limited time.  So we allow a return on costs of an invention - but for how much and how long?  And finally, drug companies have a lot of self-imposed costs - there are a lot of drug representative traipsing in and out of my oncologist's office, and drug company advertising is pervasive.  They can't spend that money without recovering it somewhere.

So it would be interesting to know the breakdown:  what is the fundamental cost of producing this drug, versus the research costs (and the rate of return the drug companies getting on their monopoly)  and the amount spent on marketing and advertising (over which we've already seen much journalistic ink spilled.)

Positive Tax News from IRS for Domestic Partners

I was talking with a friend a few days ago and he said he was re-doing his taxes back to 2007.  I'm kind of nerdly about tax rules, and I had not heard of this, so I assume that there may be others who have not either.

A May, 2010 IRS letter allows domestic partners in community property states to split income between the partners (who still have to file separately.)  If one partner makes significantly more than the other, this has advantages because they then fall into a lower tax rate.  He and his husband (married during the window before California Prop 8) have been domestic partners for many years, so they are allowed to restate their taxes back through 2007 (a three-year IRS window on re-filing for a refund.)
I haven't researched this, but there is apparently a time constraint of April 15th, 2011 for refiling some or all of the prior years (since my friend is rushing to get his 2007 re-done by then.)

References:
IRS Chief Counsel Advisory 201021050: http://www.irs.gov/pub/irs-wd/1021048.pdf
Private Letter Ruling 201021048: http://www.irs.gov/pub/irs-wd/1021050.pdf
A 90 minute webinar from January 2011:  http://www.ustream.tv/recorded/11982059