Quotulatiousness

October 21, 2013

The US debt iceberg

Filed under: Economics, Government, USA — Tags: , , — Nicholas @ 09:53

Jon Gabriel has put together a clear, understandable way to show the relationship between the US government’s revenue, deficit and debt numbers:

When Washington raised the debt ceiling this week, the Beltway media breathlessly reported that the fiscal crisis had ended. Lawyers danced in hallways, bureaucrats twerked on the Metro, congressional aides kissed strangers in the streets — the Tea Party has been defeated! It was like VJ day for wonks.

As our political class exchanged high fives and reporters praised a return to “sanity,” I wondered how these odd creatures defined insanity.

America’s fiscal crisis is not that our debt ceiling was too low, the fiscal crisis is that our debt is too high. When I mentioned this to left-leaning folks, they seemed indifferent. “Obama lowered the deficit.” “I think Bush spent more.“ “It’s Reagan’s fault!”

So I made this infographic:

US debt iceberg

Since most graphs look like this, I focused on just three big numbers: Deficit, revenue and debt.

The analogy is imperfect, but imagine the green is your salary, the yellow is the amount you’re spending over your salary, and the red is your Visa statement. Then imagine your spouse runs into the room and shouts, “great news honey, our fiscal crisis is over. We just got approved for a new MasterCard!” Your first call would be to a marriage counselor or a shrink.

H/T to Nick Gillespie:

What is it that Hemingway always used to say? That thing’s not loaded? Or something about how the “dignity of movement of an ice-berg is due to only one-eighth of it being above water.” Yeah, well, the horrors of federal finances is pretty undignified just looking at the amount of spending versus revenue we do and then it gets really sloppy when you look at the huge amount of debt below the waterline.

The nudge notion rebranded as a “human-centred” approach

Filed under: Books, Government, Media — Tags: , — Nicholas @ 09:26

In sp!ked, James Heartfield discusses a new book by David Chandler:

In his new book, Freedom vs Necessity in International Relations, David Chandler, professor of international relations at the University of Westminster, offers a masterful summation of the latest trends in policy internationally and domestically. The book lays bare the claims of governments to put people and their decision-making at the centre of policy. What Chandler shows to great effect is that the latest claims of policymakers and theorists to a human-centred approach result in something like its opposite. In a wide range of cases — from the United Nations’ Human Development Report to the Cabinet Office’s prioritisation of the ‘choice environment’ — Chandler explains how ‘human-centred’ policy is, in fact, very far from human-centred. The real aim is for people to align their behaviour and choices to the outcomes chosen by those in power, rather than deciding such outcomes for themselves. ‘Human-centred’ policy turns out to have as much to do with people deciding for themselves as the Ministry of Peace had to do with Peace, or the Ministry of Plenty to do with Plenty in Orwell’s novel.

Chandler draws attention to the irony of a worldview that imagines a much greater role for human action ending up making the case for greater restraints on freedom. As he explains, one of the marked prejudices of our times is that people have a far greater impact on the external world — for example, with the question of pollution — where mankind’s industrial output is held to threaten the very existence of life on the planet. Similarly, he observes, we have an exaggerated view of the way that our own health is shaped by the choices that we make. Political loyalties, too, are now widely seen as a great destructive force, limiting more positive outcomes.

[…]

But as Chandler explains, Sen’s own approach, enshrined in the UN Development Report, is less respectful of people’s own choices than you might expect. According to Sen ‘the outcome one wants is a reasoned assessment’ but ‘the underlying question’ is ‘whether the person has had an adequate opportunity to reason about what she really wants’. Building capacity turns out to mean building capacity to make the right choices — in other words, the choices that development economists think are the right choices. ‘Reducing risk-taking among youth requires that they have the information and the capacity to make and act on decisions’, explains the World Bank’s Development Report.

You’ll be free to make choices, as long as you’re careful to only make the approved choices. A very restrictive kind of “freedom” indeed.

Update: Also in sp!ked, Sean Collins talks about the introduction of so-called “libertarian paternalism” aka the nudge:

When Nudge: Improving Decisions About Health, Wealth and Happiness was published in 2008, it seemed like it might be a fad bestseller, like Freakonomics or one of those Malcolm Gladwell books.

Nudge authors Richard Thaler and Cass Sunstein, both American academics, proposed that government and employers should more consciously direct people to make ‘better’ choices in health, personal finance and other areas, in order to improve their lives. They gave the example of a cafeteria that lays out food in a way that encourages people to select carrot sticks over French fries or dessert. The authors label their approach ‘libertarian paternalism’: ‘paternalism’ because they want to steer people in a certain direction, and ‘libertarian’ because they would still offer people an array of choices (if you really want the chocolate mousse, you can reach under the counter at the back).

Although a new idea at the time, nudge was hardly a Big Idea. And yet governments around the world picked it up and ran with it, giving the concept more substance and longevity than might have been expected. As Sunstein has noted, the findings from his and others’ behavioural research have informed US regulations concerning ‘retirement savings, fuel economy, energy efficiency, environmental protection, healthcare, and obesity’. Sunstein himself implemented many of these measures in his role of Regulatory Czar in the Obama administration (described in his recently published book, Simpler: The Future of Government). In the UK, prime minister David Cameron set up a Behavioural Insights Team, also known as the ‘nudge unit’, in 2010. This has led to a variety of new policies and schemes directed at anything from obesity and teenage pregnancy to organ donations and the environment.

Nate Silver on Chinese economic data

Filed under: China, Economics — Tags: — Nicholas @ 08:37

The Wall Street Journal‘s China Real Time Report has an interview with celebrity statistician Nate Silver:

Can you apply good data analysis to poor data, for example, in China?

People in the United States and the United Kingdom overestimate the quality of economic data. Even if people are above board, it is simply hard to estimate something like the American economy.

With China, you would have even more difficulty. I think the general lesson is that by looking at a broader consensus of indicators, you do well than just looking at one indicator or one sector.

It is problematic to think about “how do you measure Chinese growth”. One way [is to look at] more public facing measures — by looking, for example, at the amount of light output emanating from China.

I flew through Beijing [on the way to Hong Kong] — there was less physical brightness coming from Beijing than you would have seen from a comparable American city or European city.

A true cynic might suggest that the lights were dimmed by the pervasive air pollution in Beijing…

All those boats have been burned

Filed under: Health, Politics, USA — Tags: , , , , , — Nicholas @ 07:35

Megan McArdle on the problem with emulating the Conquistator model of operational planning and burning your boats:

There’s a legend that after Hernan Cortes and his crew landed on the shores of the New World, Cortes ordered that their boats be burned. The only way they would be able to get back to Spain would be to conquer the land, giving them the resources to build new boats. With necessity at their backs, his band of adventurers managed to conquer all of Mexico.

It’s not clear if this story is actually true, but it’s nonetheless beloved by motivational speakers. The last two weeks of political paralysis have been an excellent illustration of why you shouldn’t model your negotiation strategy on a guy who’s mostly famous for slaughtering strangers.

[…]

The state insurance exchanges aren’t working, Obamacare is in jeopardy, and Democrats are casting around for a way to blame this on Republicans. The answer they have settled on: It’s their fault because Republican governors did not set up exchanges.

Think about what they are actually saying: “We passed a law that was so incredibly fragile that it was destined to fail unless all the state governments controlled by the party that opposed this law worked hard to make the system a success.”

And why did they expect this to happen? The answer boils down to this: “After we burn the boats, everyone’s supposed to band together to fight the Aztecs!”

I’ve long criticized the health-care law for being a Rube Goldberg Policy Machine: There are dozens of pieces that all have to work perfectly. If one of them fails, the whole apparatus breaks down and the individual insurance market spirals toward death. That seemed risky to me, especially when the law was passed over fervent opposition — a fervent opposition that was smugly told that “elections have consequences,” without anyone apparently considering that future elections might have different consequences.

But in this view, the Rube Goldberg quality is actually a plus, because after all, if we do something that might break the insurance market unless Republicans enthusiastically cooperate, they’ll have to enthusiastically cooperate.

This is … what’s the technical term? Right, insane.

Start with the fact that the state exchanges — what we would have had if the Republican governors and legislatures had cooperated — aren’t all in such great shape, either. Don’t get me wrong; some of them are doing very well. But some aren’t really working at all, and in others the results are … unclear. And that’s in blue states where the governor and the legislature were hugely enthusiastic about this program and are going all out to make it work. As anyone who has ever implemented a new program (corporate or government) can tell you, one of the biggest hurdles is getting people who don’t care about your program, or who actively oppose it, to make their piece work. Even if they’re trying in good faith, they have neither your enthusiasm nor your deep grasp of the internal logic. In the best-case scenario, it’s not their No. 1 priority; when it competes for resources with stuff they really care about, it tends to get the second-string people and budget. This is one reason that promising pilot projects often fail when they’re rolled out to the larger organization—and one of the most important things that a corporate innovator has to do is to evangelize his program so that other departments get as enthusiastic as he is.

The Obama administration was not in a position to evangelize the president’s health-care program to Republican governors. If the law absolutely required that those governors be as enthusiastic about implementing a state exchange as the folks in the administration, then it was a bad law that should never have been passed, and the Democrats made a grave mistake that could destroy the nation’s insurance market.

After the boat-burning failed the first time, leaving it weeks from its debut without a working computer system, the administration seems to have decided that what was needed was simply a larger bonfire: Launch the nonworking system, because after all, once you’ve gone live, the potential catastrophe would be nearly upon us, which would somehow force those inside and outside the administration to somehow bring order out of the chaos they had created.

But Republicans should make this work! It’s the right thing to do! That is, of course, debatable. But aside from that, this is magical thinking — as magical as the Tea Partiers who responded, when I pointed out that the shutdown was costing them the support they’d need to retake the Senate and the White House and actually get some policy making done, that this was all the fault of the liberal media, which was just repeating administration talking points.

QotD: Obamacare as a special case of The Adams Rule of Slow-Moving Disasters

Filed under: Economics, Health, Quotations, USA — Tags: , , , — Nicholas @ 00:01

So who is up for some side bets on Obamacare?

I’m sympathetic to the opinion that introducing a huge, complicated, government-run program is just asking for trouble. On the other hand, the Adams Rule of Slow-Moving Disasters says everything will work out.

As a reminder, The Adams Rule of Slow-Moving Disasters says that any disaster we see coming with plenty of advance notice gets fixed. We humans have a consistent tendency to underestimate our own resourcefulness. For example, the Year 2000 bug was a dud because we saw it coming and clever people rose to the challenge. In the seventies, we thought the world would run out of oil but instead the United States is heading toward energy independence thanks to new technology.

Obamacare is a classic slow-moving disaster. Absent any future human resourcefulness, it just might be a nightmare. But my money says that clever humans will figure out how to tame the beast before it triggers the collapse of civilization.

If betting were legal, I’d bet $10,000 that in ten years the consensus of economists will be that Obamacare had a lot of problems but that overall it was neutral or helpful to the economy. I base that hypothetical bet on The Adams Rule of Slow-Moving Disasters, not on the scary first-year state of the law. And I reiterate that I know next-to-nothing about the details of Obamacare. I’m just working off of pattern recognition.

Scott Adams, “Obamacare – Side Bets”, Scott Adams Blog, 2013-10-18

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