As the cliche saying goes: there are lies, damn lies, and statistics. But the creation of the statistic for a job that is “saved or created” has got to be one of the worst statistical nightmares in history and it is completely meaningless, as it is entirely unprovable. Nevermind the accounting gaffes, the jobs created in zip codes and Congressional districts that don’t exist, and the accounts of dozens of jobs being saved for a few thousand dollars (would you take credit for saving a job that paid a person a few hundred dollars a year?). And nevermind that when the White House says “jobs” they really should be saying “job-years.” (Giving someone a job for one year is much different from creating a job that continues on in perpetuity.) The problem is that the statistic relies on both job creation by the spending itself, as well as jobs created by the “spending multiplier” — jobs created when the people whose job was ’saved or created” spend their money at their local stores, thereby “saving or creating” other jobs. In theory, you can do that. But in practice it’s near impossible, especially when those multipliers have clearly changed in our economy. People get concerned about the future and those people whose jobs were “saved or created” aren’t spending as much, so they’re not multiplying as much. And how do you account for the jobs that were lost because people stopped spending their money because of the expected increase in the budget deficit, or because of the fall in the dollar? If you’re going to go through a counter-factual scenario and do it in an honest way, you have to look at how everything changes, not just the things that go in your favor.

Some accounts put the cost of each of these jobs “saved or created” at over a half million dollars. The problem with that is that it treats all money as going to jobs, when some of it is being spent on infrastructure and capital equipment, which will provide benefits long after the stimulus is over.

Bottom line: it’s impossible to know how many jobs were saved or created. And touting a number, any number, when we’ve lost 7 million jobs in the recession just doesn’t hit home with people. That’s like me getting pulled over for going 30 mph over the speed limit in a school zone with kids everywhere and telling the cop, “At least I wasn’t going 40 mph over the limit! And I’m not even drinking either!” While it might be true, it probably won’t go far in convincing the cop to let me off.

Maybe I’m just being too skeptical. Maybe it really is easy to determine exactly how many jobs were “saved or created.” Or maybe not. This story from the Politico highlights the fact that three different Obama administration officials, on the same day, gave three different numbers for the number of jobs “saved or created” as a result of the stimulus bill:

Valerie Jarrett had the most conservative count, saying “the Recovery Act saved thousands and thousands of jobs,” while David Axelrod gave the bill the most credit, saying it has “created more than – or saved more than 2 million jobs.” Press Secretary Robert Gibbs came in between them, saying the plan had “saved or created 1.5 million jobs.”

(Good catch by Axelrod.) Any number they pick can never be proven and is based on a wealth of assumptions, but even still you’d think the least they could do is get together and come up with one number. Then maybe we’d believe them.

Today in his speech about the middle class, Obama claimed that the stimulus had ”saved or created” 2 million jobs, so that’s the number he’s going with. (Wise up, Gibbs!) Then he added that “economists agree,” even “conservative economists.” I find it fascinating that his own administration can’t agree on a number, but he is going to claim that economists of all stripes agree with the one specific number he gave today. Hogwash.

[On a side note, less than three months ago, at the end of December, the administration was saying that the stimulus bill had saved or created 1 million jobs. So for the last three months, when unemployment has been the highest in this recession, at 10%, and when we lost jobs every month but November, we've "saved or created" 1 million jobs -- as many as were "saved or created" in the previous 8 months. Do you believe that? Didn't think so.]

To me, the saddest part in all of this is that the “2 million” jobs “saved or created” is used as a defense that the stimulus worked. Tell that to the 7 million people who have lost jobs. The administration used to agree that “less bad” is not success:

“The first quarter of this year, we were losing jobs at an average of 700,000 jobs per month, month after month,” he said. “In the quarter that ended this week, the loss was 250,000 jobs per month, two-thirds less.”

Still, he said, “those facts and those realities aren’t good enough for President Obama, and they aren’t good enough for me.”

“We don’t think that ‘less bad’ is good,” Biden said. “‘Less bad’ is not our measure of success. One job lost is one job too many, and it’s still too much pain.”

If less bad is not your measure of success, why is it the first thing that comes out of the mouth of anyone from your administration whenever they are asked about the economy?

Using numbers from hypothetical situations is difficult, heavily dependent on assumptions that may never be proven, but the context in which you use these numbers is everything. Consider the following two scenarios:

a) You run a hospital that has had 1,000 staph infections in the previous year, so you institute a new protocol for hand-washing and this year you only have 200 staph infections. It’s pretty clear that the program is a success. And yes, even 1 staph infection is one too many, but you’ve made improvement and you can make a decent claim that your program made things better.

b) You run a hospital that had 1,000 staph infections the previous year, so you institute a new protocol and at the end of the year had 2,500 staph infections. Suppose you came out and said, “Yeah, staph infections were up this year, but we were hit by an epidemic and it would have been much worse without the measures we took. Without our protocol we would have had 4,000 staph infections.” Would people believe you? What if other reputable doctors were saying that the protocal wouldn’t have any impact (as some economists have said about the stimulus bill) and point to the increase in staph infections as proof that the protocol didn’t work?

Both of these examples rely on counterfactuals that can never be proven. But if you’re taking credit for something that cannot be proven at a time when the thing about which you are claiming success  is going in the opposite direction, you’re probably going to have a hard time convincing people.

Footnote: This piece talks about how the task is so impossible that the administration is now not releasing employment updates because they can’t crunch the numbers. Even OMB director Peter Orszag has stopped using the phrase “saved or created” in favor of the more provable “funded by stimulus dollars” term. It’s going to make the number of jobs smaller, but at least this one is verifiable (assuming of course they can fix all the problems they have collecting the data).

The tragedy in Haiti, and our response to it, has been both devastating and encouraging. As the saying goes, in times of crisis both the best and the worst come out in people. While some heroically step up to help their neighbors, others loot and attack. Personally, I’ve had a difficult time watching the news, watching people dying in front of my eyes. Wyclef Jean was on the news talking about how he and his wife had spent all day Thursday removing dead bodies from the middle of the streets, hoping to preserve some kind of dignity to the victims. I’ve had to shut the news off, not because I’m callous but because it’s all too real and too heart-breaking.

Those that study how earthquakes affect physical structures have a saying: earthquakes don’t kill people, buildings do. The devastation in Haiti is a result of two things: lack of economic development and hurricanes. Hurricanes wreak havoc on Haiti frequently, so structures are made with very heavy roofs. Lack of economic development means that Haiti’s brick structures, including walls, are made without reinforcing steel bars (rebar). They are made with more sand and less concrete. A earthquake that would just crack an American wall will take down a Haitian one. That’s not jingoism — it’s science. Heavy roofs + weak walls + earthquakes = disaster.

The Obama administration has pledged $100 million to Haiti. This is a paltry sum — the NBC late night disaster was recently reported to cost NBC about $200 million — but it’s still $100 million too much. It is not the federal goverment’s responsibility to provide money to people in other countries. Our founders had a problem even with using federal resources to help individual states, let alone other countries. That’s the U.N.’s job.

Our government has the ability to help in many ways and marshall many assets that the private sector simply cannot: coast guard ships and helicopters, for example. But giving money is not their job. It is the responsibility of every citizen across this great country to give what they can. Most of the funds to help the people of Haiti will come from charity — private citizens and firms, as it used to be done. As it was done after the great fire in Chicago. As it was done after the 1906 earthquake in San Francisco. But when you set the precedent that after every natural disaster the federal government will provide not just emergency disaster relief but long-term financial relief, it’s hard to draw the line.

Watching football this weekend, I was impressed at the speed with which we have set up campaigns to help the Haitian people. I am also impressed by our ability to use technology for this – text the word “Haiti” to 90999 and a charitable donation of $10 will be made to the Red Cross and you can pay for it on your next mobile phone bill. Amazing. I’m confident that the Red Cross will raise more for Haiti than was raised for tsunami relief a few years ago, but I wonder how much will be a result of the devastation itself or the proximity of Haiti to the US, and how much will be because it’s just so much easier for people to donate this time around.

I encourage you to do what I’m going to do and cut back on some spending this next week or two and make a little donation to the Red Cross. You can bring lunch to school instead of buying it, or buy regular coffee instead of a fancy mocha. A lot of us have already started doing those things because of the recession, but there are still other ways we can all save money if we need to.

We are the greatest, most generous country on the planet. People in other countries call us empirialistic, hegemonic, warmongering, rude Americans…and then tragedy strikes and they desperately plead for us to help them. Let us not let those pleas go unheard. Let’s show that the American people and the American government are not the same thing. Let’s show that we do not need the government to provide everything for us, and that private charities can do a much better job of raising funds and delivering help to people who need it than some bureaucrat in Washington ever could.

A colleague of mine has a different quote in his e-mail signature every few months. His current one is from Thomas Sowell:

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

I couldn’t help but think of that quote when I watched yesterday’s episode of 60 Minutes. California Governor Arnold Schwarzenegger was talking about the state’s water shortages. Partially because of drought and partially because of environmental restrictions because of the Delta Smelt, California’s farmers are having to leave large swaths of their land barren. Almond trees that took 20 years to grow are being mulched because there simply is not enough water to go around.

Schwarzenegger seems to think that the way to fix the problem is to borrow $11 billion  to renovate dams (to increase water storage capacity) and many more billions to build a new canal to route water around the delta, saving the Delta Smelt. Nevermind that the new canal would be a larger project than the Panama Canal. In Schwarzenegger’s words: “I love cranes.” I can just picture the governor now playing with Tonka trucks in his sandbox. 60 Minutes correspondent Leslie Stahl asked the governor about the trade-offs that need to be made here between water for drinking and water for farming.

Leslie Stahl: There are people who say the southern part of the state is thirsty. They say that some of these farms should just go out of business, that they take too much water and people need that water.

Gov. Schwarzenegger: Yes, you know, of course, I, I, I totally understand that. But I look at the whole picture again. I tell you, I want it all! I love our farms!

Leslie Stahl: Yes, but is that realistic?

Gov. Schwarzenegger: Yes, it is realistic. Anything is realistic! It doesn’t mean that because it’s a desert that we cannot go and bring water in here and start growing things. All we have to do is deliver water and then we can grow anything we want!

Leslie Stahl: So much for the idea that the state is entering an age of scarcity.

The tone in Stahl’s voice as she delivers that last line is dripping with sarcasm. Good for her pointing out the obvious.

I guess it’s perfectly reasonable for a man whose career was made starring in movies with computerized special effects can think that anything is possible. As Avatar has now shown, anything is possible in movies these days. I mean, if  they can make us believe that the bus in Speed could actually jump a 100-foot gap in a freeway (Mythbusters test: not even close) and convince us that Maggie Gyllenhaal is anywhere close to attractive enough to substitute for Katie Holmes in The Dark Knight without us noticing, then what can’t those guys at Industrial Light and Magic do? Maybe Schwarzenegger has been around Hollywood so much that he can’t distinguish reality from CG fantasy.

I would like to think that Schwarzenegger’s proximity to Hollywood is the cause of his behavior. But, sadly, almost all politicians do this very thing. Pointing out that we cannot do everything for everyone without borrowing from someone else or sacrificing something is considered anti-American, unpatriotic nay-saying. We’re the greatest country in the world and we can do everything! USA! USA!

Since we can’t handle the truth, politicians don’t tell it to us straight. Because we don’t want to make sacrifices, the government gives us their only solution: spending more money. Nevermind where that money comes from or the long-term costs of borrowing money or the effect on jobs from raising taxes. Why, I’m sure we’ll just get the rich people to pay for it anyway. God forbid we try letting the market work, allowing the tighter supplies of food and water to cause consumers to conserve resources more so that there is more water to go around to its most valued use. Just give the government more money and they’ll fix all your problems.

Listening to Schwarzenegger talk and the enthusiasm with which he wants to borrow and spend so much money, you would never know the state is almost $50 billion in debt with a $21 billion annual budget deficit and the worst credit rating of any state in the nation. And you would also never know he has a degree in Business and International Economics from the University of Wisconsin–Superior.

It looks like Sowell was right.

P.S. Whether Schwarzenegger realizes it or not, there is always a sacrifice. The cost of the previous over-spending is the MC Hammer-like credit rating the state now has and the higher interest payments that result from it; as well as the lost tax revenues from people who have fled the state because it has the highest sales and income tax rates of any state in the nation. You can’t avoid the first rule of economics no matter how hard you try.

P.P.S. (For Benjamin’s comment): One’s cute, the other…not so much.

I’ve talked about student evaluations before on this blog. I take them very personally, probably too much for my own good. If someone doesn’t like the class, I want to know why — but usually it’s just a vague response that doesn’t tell me how I could improve. I could have 99 people say they loved the class and 1 person say they hated it and I’m going to focus on the 1 person who hated it and wonder what I could have done differently to reach that person. (I actually had one student this semester say that while they didn’t really like me as a person, they thought I was a great teacher — I’m glad that student could separate the two.) I hope that desire to reach everyone makes me a better teacher, trying to appeal to as many people as I can, but the fact is we can’t appeal to everyone. For every person who says “you should use Powerpoint” there are two people who say they love the fact that I don’t use Powerpoint. It’s the classic public goods problem: there is only one level of the public good and people have different preferences, so many people will be unhappy with what is provided. Some want more, some want less, and many people are not happy — the Senate Health Care Bill is a great example. Republicans think it goes too far towards government control, some Democrats don’t think it goes far enough, and the crucial 60 votes hangs by the narrowest of margins.

I bring this up because I just got a new rating on my Ratemyprofessors.com page. It’s for my Econ 201 class and it’s not good:

I can see why some people might like him but if you get on his bad side your done for in the class. And like others said he is pretty full of himself.

(As Ross from Friends would say: “Y-O-U-’-R-E means “you are.” Y-O-U-R means “your.”)

I’m not going to argue the personality criticism because there’s no point. If you don’t like the way I come across, I can’t help that. If you take my statement of facts and theory with assertion as arrogance, that’s your problem. The person I make fun of the most in my classes is myself, yet somehow I’m arrogant.

But what really irks me is the claim that I would give people anything other than the grade they deserve. (Quick question: does using the word “irks” make me arrogant?) That is an attack on my integrity as a professor and I thought I had to say something somewhere to defend myself. (Good thing I have this blog!) This student got a bad grade and assumes that it’s because I don’t like him/her. To be honest, I can’t think of one student in that class who was on my “bad side.” I have no idea who could have written this because I actually really enjoyed that class — the students in it asked great questions and we had good interactions. To be honest, the only students that I don’t like in any class are the ones who don’t come to class, don’t do assignments, and show me through their lack of effort that they don’t really care about the class. But even then, they don’t get on my bad side — they get on my indifferent side.

All of my grading in that class is blind. I grade all the in-class exercises without looking at names. All the exams are graded blind: I flip over the cover page and grade all the question #1’s, then I move on and grade all the #2’s, etc. I have no idea who anybody is until after I’m done and I’m adding up the scores on the individual questions. All the online work is up to the students — I have no control over that. If anyone gets a bad grade in that class, it is because they did not do the work or did not learn the material, plain and simple. Blaming it on getting on my bad side is a weak excuse.

Part of me wishes I didn’t care so much. My colleagues with more experience tell me that you can’t worry about students like this — you can’t please everyone anyway so you should just shrug off the criticism. I guess I’m not cynical enough to think that way yet. (Maybe once I get tenure — just kidding!) I hope there’s a way to become less sensitive to the criticism while still retaining the desire to do my best to reach every student, but I’m not sure there is.

Okay, it’s been a long semester and I have two weeks to get a bunch of online videos done to prepare for the next semester. Enjoy the rest of your break if you have one.

I was reading this article today on CNN.com about today’s meeting between President Obama and the CEOs of a dozen major banks. His displeasure with the banking community was shown in yesterday’s interview on 60 Minutes, when he said that he did not come to Washington to help out “fatcat” bankers. I’m sure that’s just the kind of thing these guys want to hear before their meeting. (Note to Obama: if you are going to ask someone for a favor on Monday, try not to publicly insult them on Sunday.)

The article brings up several great points. The federal government bailed out many of these banks through the TARP program when they suddenly found themselves with housing assets that weren’t worth nearly as much as they thought they were worth a year before. So to remain solvent, they borrowed the cash from the government. The government did not put many strings on what the banks could do with the money — and some of them responded by buying up other banks. The federal government even forced its way into a few banks, telling their CEOs that if they did not take some of the money they would be audited.

[If you wonder why I'm skeptical of federal government power, this is a prime example. What lessons do we learn from TARP? If you give people money without conditions, they'll take it and do things they think are most appropriate. If you put conditions on the money, they may not want to take it. Only the federal government thinks that their goal should be to design a way to force banks to take money with conditions on it so that they then have control over them and can make private companies do the government's bidding. Hmm...I wonder if that will happen with health care.]

I remember when President Bush and Congress were trying to justify passing TARP. They knew that a Wall Street bailout would be unpopular, so they told us that the world would basically collapse if we did not pass it, and they also told us to look on the bright side: if this works like other bailouts (Chrysler, for example), we’ll get all the money back with interest and John Q. Taxpayer could even make some money on the deal. Cha-ching! I mean, how can you not pass such an obvious money-maker for the people, right?

As it turns out, that seems to be exactly what’s happening. The banks have already paid back $71b of the $205b that was loaned out, plus another $7b in dividends. That’s supposed to be good news, right? Now taxpayers aren’t on the hook for these toxic assets any more. But it doesn’t seem like that’s what the people in charge of our financial institutions want. Obama and Geithner are not happy about this. They don’t want the banks to pay the money back because, once they do, the government no longer has any control over them. Although that may change if Congress passes the House’s Banking Reform Act — then they can decide that any private insitutition they deem too dangerous to fail can be taken over by the government. Yay for government! But until it passes (and it will, since any bill increasing Congressional power seems to pass pretty easily), Obama has very little power today to force these bankers to do anything. He wants them to start making more loans to small businesses, but the banks don’t want to loan the money. We know credit is tight these days, but has anybody stopped to ask why banks are not making these loans? After all, if loans were profitable, banks would make them and earn profits on them. So why aren’t banks making small business loans? Because these loans right now are not a great risk for the banks. (Remember when banks were the bad guys for taking on too much risk? It seems so long ago…) Back in February, the Small Business Administration’s (SBA) default rate on its loans soared to 12%. If it were your money on the line, would you make a loan if there were a 12% chance that you would lose the principle and get absolutely nothing in return? Didn’t think so. The last time we tried to get banks to make loans to people who had a high risk of default, it was called the Community Reinvestment Act and it helped lead to the subprime mortgage crisis that caused the current recession (or is it former recession? I’m not sure – if you ask Christina Romer and Larry Summers, whose offices are adjacent to each other in the West Wing, they’ll give you two completely different answers.)

(Update: This article explains that a study of business bankruptcies found that 50% of them were current with their lenders when they suddenly declared bankruptcy — the lenders never saw it coming. Yet another reason why lenders might be reluctant to loan to small businesses in today’s economic climate.)

As proof that the banks are not lending enough, you can look at statistics showing that the amount of lending has fallen. But we also know that individuals have become more conservative with their finances and do not want to borrow as much. The current saving rate is the highest it’s been in decades — a great sign that people are finally being financially responsible after so much excessive consumption. Obama says credit supply has fallen; bankers say credit demand has fallen. And as all my students in principles of microeconomics should know: if all you know is that the quantity of a good is down, you cannot determine whether demand or supply fell (or both) without knowing what happened to the price. Unfortunately, price data is difficult to come by. I spent a good deal of time searching for small business loan interest rates this morning and could find no historical data — let me know if you find any. For now, let’s just say that both are possible explanations. But even if supply has fallen, there is a perfectly rational explanation for it: small business loans in today’s climate are extremely risky.

Sure, it’s easy to put the blame on the “fatcat” bankers — everyone in Washington loves to do that. Politicians would have you believe that large salaries and bonuses for CEOs and bankers is the source of all problems, but they’re insignificant in the relation to the entire economy. All a bunch of sound and fury signifying nothing. But let’s deal with the facts. If I discovered that a company I owned stock in were loaning money out and getting none of it back 12% of the time, I would sell my stock in that company.

If you want banks to make more loans to small businesses, you need to bring some certainty back into the economy. Small businesses don’t know what will happen with cap and trade regulation and they don’t know how much a worker will cost them if health care reform passes — so they’re sitting on their hands while unemployment passes 10%. There are plenty of good workers out there to be hired, and firms would love to hire them, but without knowing the long-term cost of those workers, it’s not worth the risk. If you want the unemployment rate to fall, reduce small business income taxes and capital gains taxes, make it clear how much health care will cost or abandon the effort, and reduce business regulations. Then you’ll see small businesses succeed and banks extending more credit.

Or you can just blame the bankers.

I heard a wonderful exchange today on the radio between Judge Andrew Napolitano (a strict constitutional Libertarian) and Democratic strategist Pat Cadell.  Cadell cited a Rasmussel poll which found that 71% of people said they are angry with the federal government, and almost half said they are very angry. Yet when the same question was asked of politicians who are actually in control, only 6% of them were angry with the federal government. Apparently 71% of us see what’s going on and realize who the problem is, and the people who are the problem are completely unaware of what they are doing and how we feel about it.

Gadell made another point — I’m not sure I agree with him but I hope I do. He said that he thinks 90% of us agree on 80% of the issues. There are only 10% of us who are extreme, either left or right, and the rest of us basically think the same about most issues. It is a travesty that a nation where so many people fundamentally believe the same thing is divided so sharply along party lines. The political parties use small, divisive issues (abortion, gay marriage, illegal immigration) and buzzwords (socialism, unpatriotic, government takeover) to make it an “us vs. them” situation so they can get political contributions, further their own narrow agendas, and gain power.

Howard Dean recently said in a speech in France that the war between capitalism and socialism has already been fought and the outcome has been determined: we will have a mix of both; the only question is the extent to which we have one or the other. He elaborates on this, saying that capitalism is important because it appeals to part of human nature: the drive to be free, to be creative, and to make things. Socialism appeals to another part of human nature: to be part of a community and to support each other. (Some would argue that we don’t need the government do to that — that charities can do that — but I’ll accept his argument here.) So if we can get past this “capitalism vs. socialism” argument, get past thinking that it has to be all one or the other (when in reality it never will be), then perhaps we can start having a more logical discussion about the implications of sliding more to one side than the other.

My hope is that some day soon, we will all wake up and realize that political parties are using us to further their own ends. They have to divide us, to get us to choose a side. They want you to think that people on the other side are either a) wrong, b) stupid, or c) just plain evil. Your neighbors, your co-workers, and your friends are likely a mix of conservative and liberal, Republican and Democrat. Do you think the people you love who disagree with you are mean-spirited, evil or stupid? I hope not. Don’t play their game. Sure, you have to choose one person come election time. But don’t fall prey to the “us vs. them” mindset. It will make you bitter and angry — I have found that the more I become interested in political issues, the more upset I become. That’s why I haven’t written much on this blog about politics lately. Instead, I’m trying to focus on the common bonds we all share instead.

United we stand, divided we fall. It’s unfortunate that the two major political parties can only survive by dividing us. Don’t let them.

This Week with George Stephanopolous was really good this morning. He had on two senators and two representatives, one from each party, to discuss the Senate and House health care reforms. Senator Tom Coburn (R-OK), a practicing doctor himself, seems to make the most sense to me and he had a lot of great arguments about why this bill is not good for patients. The debate started out as the typical back and forth with Democrats saying their bills are awesome and will save health care and Republicans saying they won’t work and will just cost us a trillion dollars, neither party actually citing statistics or facts.

Then something strange happened — the facts came out. Initially, George did a horrible job as a moderator. Facts were brought up that wiped out a Democrat’s argument, the Democrat chalked it up to simply a difference of opinion, and George just left it at that. Hopefully people are smart enough to see through this kind of dishonest debate.

Here’s a great two-fer example of this. When confronted with the fact that the Congressional Budget Office (CBO) said that both bills of the bills would actually increase health insurance premiums, despite the insistence of Democrats that the whole purpose of health care reform is to decrease costs for households, Rep. Debbie Wasserman-Schultz (D-FL) said this: “Well, there are differences of opinion as to whether or not the Congressional budget analysis is correct on the increase in premiums, but the important thing here is that I hope we can all agree that we have to get rid of the profit-driven, insurance company-drive health insurance system that we have, where it’s insurance company bureaucrats, Senator Coburn, that are getting in between patients and their doctors. To suggest that this bill will put government in between patients and their doctors is really disingenuous.”

Did you catch that? Nevermind the facts. Who cares what the CBO says? It’s just an opinion anyway. Now let’s change the issue to those evil insurance companies.

When the CBO scores a Democrat bill in their favor, they tout the CBO as the “gold standard” which must be respected and believed as the gospel truth. But when the CBO says something the Democrats don’t like, they say “well, there are differences of opinion on that.” I call shenanigans.

In response to her, Sen. Coburn goes on to cite the fact  that the percentage of claims denied by government-run Medicare (6.5%) is almost twice the national insurance company average of 3.5%. In response to the Republican concern that government will ration care, the typical Democrat argument is basically that rationing is going to exist under any health care system (100% true, by the way), but rationing already exists and it’s done by those evil insurance companies. Yet Coburn cites the fact that government rations more than insurance companies. I think that’s a pretty important fact to consider. (Note: see the comments on this post for more on the other side of this issue.)

Another great example happened when Rep. Marsha Blackburn (R-TN) actually read from the bill itself. She started by discussing the controversial announcement this week by the Preventive Services Task Force saying that women should not get mammograms until age 50, replacing the current guidelines which say they should start at age 40; and instead of getting them every year, they should get them every two years. Republicans have been skeptical of this, arguing that this is exactly the kind of government rationing they have been worried about.. They argue that not just a coincidence that as the Democrats are looking to expand the government’s role in health care, the federal government is releasing guidelines telling women to not get as much preventive care. The American Cancer Society rejected these new guidelines.

(Note: The PSTF also said that self-examination does more harm than good, as it gets women thinking they might have cancer when they don’t and then we waste money looking for it. You hear that, women? After decades of saying that you should check yourself for lumps because early detection is the key to beating breast cancer, now the government is saying to stop looking for cancer — because, you know, if you find it, you’ll need to be treated for it. And we wouldn’t want that to happen when the government is going to have to pay for it. Democrats always say we have a horrible health care system, but the one thing that they cannot dispute is that our rate of cancer detection and survival is higher than every other country in the world. If we go down this route towards government-run health care, expect those rates to fall in line with the rest of the world; i.e. more people will die from cancer just at the point where cancer rates in the U.S. are falling because we are so successful at beating it. But the government will save money, so yay for that! As Dr. Bernadine Healy, former Director of the National Institutes of Health, said about the new guidelines: “This will increase the number of women dying of breast cancer. Women in their forties have a very aggressive kind of breast cancer. They tend to progress fast. And to not screen women in that age group is astounding to me and it goes against the bulk of individuals who are actually caring for patients. You may save some money, but you’re not going to save lives.”)

OK, back to the show. Blackburn read verbatim from the bill. Citing titles, sections and pages, she explained how the bill renames the Preventive Services Task Force to the Clinical Preventive Services Task Force. Then she explained how the bill assigns the CPSTF the task of rating all preventive services with a grade of A, B, C, D, or I. At this point, Stephanopolous seemed shocked (shocked!) that the representative had actually read the bill, even perhaps a little annoyed by it. But Blackburn pressed on, explaining that the bill says that only services rated A or B actually must be paid for by health insurance. And the preventive cancer treatments between ages 40 and 50, which the PSTF just announced are unnecessary, were given a rating of C. So the fact is that if women want to continue to get screenings at age 40, they will not be paid for by insurance or the government. You can still argue that we might find more breast cancer in one respect: women over 50 without health insurance will now get free mammograms under their health insurance or government option. But you can’t deny the fact that women 40-50 will either get fewer mammograms or have to pay for them out of pocket. Or can you?

Wasserman-Schultz, who suffered from breast cancer herself just a while back, then accused Republians of playing politics with breast cancer. She flat out denied what Blackburn had just said. Her response to the assertion that the CPSTF’s guidelines would essentially become law: ”No, they would not be.”

At this point I give Stephanopolous some credit. He actually put the language of the bill right up on the screen so we could all see that what Blackburn had said was 100% true. Wasserman-Schultz’s answer: “This task force’s recommendations are simply recommendations. They aren’t controlling, they aren’t going to be binding.” Again, shenanigans. Sure, nobody is saying that a 40-year old woman can’t get a mammogram, but she’s going to have to pay for it herself because no insurance company, especially the government option, will pay for it. I don’t know how this woman can lie to the American public with a straight face, but she did. And to his credit, Stephanopolous called her out on it.

Health care reform (a.k.a. health insurance reform, because it sounds less controversial) is a difficult thing to do, no question about it. There are going to have to be some sacrifices made no matter what we do – if you want to cut costs, you have to improve efficiency or reduce services; it’s that simple. When politicians, of either side of the aisle, exaggerate claims, dismiss facts, or flat-out lie about what is in the bill, they need to be called out. I’m glad that George Stephanopolous finally did that today, and I hope he’ll continue to do it in the future.

The Senate bill was released today and I have a few thoughts about how politicians on both sides are being dishonest about the bill.

Let’s start with the Republicans. The CBO’s estimate of the effects of the bill are that the cost for the government option health insurance plan will likely be higher than private plans. On Fox News, Carl Cameron reported that this confirmed what Republicans have been saying for months — that government-run health care will be more expensive. Really? That’s not how I remember it at all. I remember Lindsay Graham (R-SC) saying that the government option would be cheaper than private plans. And because it is cheaper, companies will ditch their private health insurance plans. Private health insurance companies won’t be able to compete and they’ll be driven from the market. the government option was supposed to destroy private health insurance. Now we discover that it won’t, and that’s somehow bad too? Republicans are trying to take both sides of this issue. If the government option is less expensive, it will ruin private industry. If it’s more expensive, it’s a sign that the government is inefficient and can’t do anything right. You can’t have it both ways, guys.

Speaking of having it both ways, let’s move on to the Democrats. In trying to keep this bill deficit-neutral, they are forced to raise about a half trillion dollars in taxes. $28 billion of this is taxes is expected to come from employers that do not provide government-approved health insurance plans for their employees, so they get fined. So what happens if these companies shape up and put their employees on the government option? The government now has to pay for the health care of these individuals, and the government does not collect the tax revenue. Seems to me the Democrats are counting on money that, if their bill is successful, they won’t get. It’s just like the SCHIP bill passed a few years ago. In order to help pay for an expansion in the State Childrens Health Insurance Program, the Democrats in Congress increased cigarette taxes. If people stop smoking (as we want them to do), the government doesn’t get its money and the kids don’t get health care. As I tell my students, next time you’re smoking, just tell yourself, “I’m doing it for the kids.”

The Democrats say the bill costs $848 billion and will reduce the deficit by $130 billion. That means they’re increasing revenues by 848+130 = $978 billion. Some of this is assuming new efficiencies in Medicare that the CBO says are questionable. And the rest of it is on taxes. The goal wasn’t to reduce the deficit by increasing taxes (especially in a recession) — it was to provide affordable health care for all. If you only need $848 billion, why not increase taxes enough so that you get $848 billion in revenue. If you ask me, this extra $130 billion is because they know those Medicare cuts won’t happen.

And last but not least is the difference in timeline between costs and revenues. The Democrats start collecting taxes next year, so the $978 billion in revenues comes over 10 years. But the benefits people get in the health care bill don’t start for 5 years. So they’re actually saying that we’ll collect money for 10 years and only pay it out for 5, and somehow this is a deficit reduction. That’s like me saying that I’m only going to pay half of my bills this year and then, at the end of the year being proud of all of the cash that I have in my checking account. It’s ridiculous. And the CBO says that in the second 10-year period of the bill (2019-2029), health care costs will TRIPLE.

And politians wonder why we’re sick of their games and want to throw them out of office. They can’t be honest about the numbers. They play a shell game with our money. And they talk out of both sides of their mouths. My suggestion for 2010: vote out every single incumbent. Maybe they’ll get the message.

I like to consider myself a relatively tech-savvy person.

When my colleagues have a question about D2L (our course management system, similar to WebCT or Blackboard), they ask me. When a colleague gets a new iPhone, he asks me how to set up his mail. When I visit my parents every year, they have a list of things I need to show them how to do (and write instructions they can refer to after I’m gone) — how do I rip a CD into iTunes and then burn a copy of it? How do I format something in Excel. How do I set up the wireless network? Usually I feel like I have a good idea of what’s going on, know what questions to ask and know where to find the answers.

Then I started working on my online courses. The goal originally was to have everything in D2L. Each week’s material (a “module”) would be a folder in the Content area and students would click on their different assignments. A Word document with an introduction to the chapter and a set of learning objectives. A link to a lecture presentation or two on video. All of these things would be housed on a media server at SCSU (since taking up space on D2L is, shall we say, frowned upon).

At first I just used PowerPoint and recorded audio. That file would be sent to the tech people on campus and they would convert it using Adobe Presenter into a flash video that students could watch in a web browser. It looked great and worked well. The problem was that it was just me reading a slide. It couldn’t do screen capture. I have colleagues at other schools that have used a software called Camtasia. It captures what’s on your screen so that when you’re talking through your presentation, students can see your cursor. You can highlight things and draw graphs on the screen in real time. And you can open up a web browser to show them an article, or where to go to get a piece of data. It looked cool. Of course, it costs money — $180 or so for educational purposes.

I then learned about Camstudio — a free version that has most of the same features. The only problem is that the flash conversion done by Camstudio has an interface that does not include FF or RW buttons on it. The whole upside to video is that students can rewind a section if they don’t understand it and watch it again.

So I learned about something called Flowplayer, which has a nicer interface — basically, you watch videos in much the same way you would watch a YouTube clip someone put on a blog. You can rewind, fast forward, go to specific points in the video using the slider bar, and expand to full screen. But then I need another software to convert the Camtasia AVI output file into FLV format. Okay, I got that. I also got a video editing program so I can clip out the beginning and ending parts of a presentation if they’re rocky, and I can split up a long video or splice together short ones. And now I don’t have to send every video (which is too big to send in e-mail of course) to the tech people to have them converted to a Flash file.

The question is then: how the heck do I get my students to watch this? I spend hours playing around with some HTML code that would enable Flowplayer but it wouldn’t work. The tech people gave me a workaround but the flash video they created did not include the ability to make the video full-screen, which will be crucial for my students to look at all the graphs.

Then yesterday I finally realized the best solution to my problem. I decided to put the online courses up as two new blogs hosted on my own personal web site. (You’ll see them as the top two links on the right side of the page.) I don’t know how anybody would do what I’m doing using the school’s resources. It’s just too complicated — too many moving parts going on and what ends up getting sacrificed is the experience for students. So instead I’ll have a blog and each post will be a module. I’ll add all the text I need, include video clips they can watch full-screen, and include links to other articles. All in all, I think it’s a great solution. I can password-protect each post and give students the password each week, and other people can’t steal my content. It also means I can give the password to colleagues from other universities who want to see what I’ve done — something I can’t do if the course is all on D2L. In the end, I found a great solution that meets all of my needs and will hopefully provide a quality educational experience to my students.

But I think it’s a little sad that the only way to have an online course set up the way I need it to be set up, so my students can learn what I need them to learn in the way that I think is most effective — and in a way that is not that technologically fancy at all — is to completely bypass the university technology system that is supposed to make everything happen for us. I honestly don’t blame the tech people — I think they’re doing the best they can. They were extremely helpful in helping me realize what exactly it was that I wanted to be able to do in the online course, providing a headset and microphone so I could make my recordings, and answering all my questions in a way that was understandable. I know they’re dealing with restrictions imposed on them by others, security issues, licensing issues, etc. I post this not to complain about the work they have done (because, frankly, without them I would have been even more lost), but to point out that right now we have a system where technology dictates pedagogy. You are told what is possible and you try to mold your course around that — and if you don’t like it, you have to find a way to work around the system. That’s not right. Pedagogy should drive technology, not the other way around

An interesting story about a middle school in North Carolina that was allowing parents to purchase extra credit for their children. As it turns out, that was a controversial thing to do. (Duh.) $20 would purchase 20 test points, 10 points each on two tests. The tests were normalized to be out of 100 points, so you were basically buying your kid a one grade bump on two tests. Here’s the part of the story that made me laugh:

Susie Shepherd, the principal, said a parent advisory council came up with the idea, and she endorsed it. She said the council was looking for a new way to raise money.

“Last year they did chocolates, and it didn’t generate anything,” Shepherd said.

Shepherd rejected the suggestion that the school is selling grades. Extra points on two tests won’t make a difference in a student’s final grade, she said.

What Ms. Shepherd is saying is two things: a) Parents should spend $20 to buy their kids extra credit so that the school can raise money, and b) it will not have any impact on their grade. I don’t know how many tests there are every semester, but a 10% increase on two tests has to have some impact on a student’s grade, doesn’t it? And if there are so many tests that it doesn’t matter, than the PAC is basically stealing the parents’ money, selling them something that is worthless. Either Ms. Shepherd thinks the parents of the children in her school are stupid or she thinks people reading the story are stupid. I’m not sure which.

I’ve flirted with some controversial things with grades in the past, and I’ve often had to ask my colleagues what they thought of it, and have backed away from a few proposals. In my Industrial Organization class at Northern Michigan University, I ran a simulation game based on Severin Borenstein’s Competitive Strategy Game. I’ve used the game, or a variation thereof, all three times I have taught I.O. in my career and the students love it. It applies principles from throughout the course, forces them to use Excel to run simulations and calculate different scenarios, and helps them visualize what they are learning. I can’t get Dr. Borenstein’s software to work any more for some reason so I use an Excel file to run the simulations and that allows me to tweak things and create new markets. It’s more work for me but the result is better and I’m much more in tune with the decisions students are making.

The game accounts for about a quarter of each student’s final grade. It’s a semester-long project with an assignment every week or two (it varies by semester). It can be a lot of work or students can half-ass it and hope to get lucky.  The first time I taught the course, I was not sure how motivated students would be. So to encourage them to really take it seriously, I stated in the syllabus that members of the team that finished in first place would each received one grade shade bump on their final grade; if they had an A-, I would bump them up to an A. But I realized something: the good students are probably going to take the game more seriously, and they’re probably going to get an A anyway. NMU did not allow me to give out A+’s, so a grade bump for these students was worthless. So I decided to give it to them as a property right — they could give it away to a friend or even sell it to another student if they wanted. I would set up an auction for them.

I loved the idea at first, and so did they. Students often consider their grades as their property, but they do not have the right to sell or trade that right. I thought I would experiment with that. But at the end of the semester, I started hearing complaints from some of the other students. They thought it was unfair that someone who did poorly all semester could buy a grade bump from another student. I mentioned that there would be an auction for the grade bumps (two of the three students in the winning group already had an A and therefore did not need theirs) and everybody had an equal opportunity to put in a sealed bid on one of them. Naturally, some complained that this meant the wealthier students would get the grade bump — the same thing complained about in the story linked above.

I did not want to cause a controversy with this, so I did not collect any money from the students who put in the highest bids, and I did not give them the grade bump. I took the two highest bids, averaged them, and gave the two students that owned the grade bumps cash from my own pocket. I thought that was the fairest thing to do — why should they suffer a loss of income because I changed the rules on them? If I remember correctly, it was only $25 or so each. Nobody bought a grade, and the students that earned the grade bump and did not need it received the cash equivalent value.

But there have been other times when I have thought of doing something similar. As it turns out, I’m not the only one considering it. In fact, Michael Baye, the author of the book I use in Managerial Economics, gave an online web conference a few months ago where he talked about something he does in his classes that could easily be construed as grade-selling. He includes class participation in his grades. He also auctions off a few shirts at the beginning of the semester and any student wearing one of the shirts when his or her name is called is automatically immune from questioning and gets 100% that day. Some students keep the shirt in their backpack and put it on before every class. These students have essentially bought a percentage of their grade. He does it so that when he asks students how much they are willing to pay for a good at the beginning of the semester, it’s not just a thought experiment; it’s something tangible, something that has real value to them. He uses the numbers he gets from this experiment to create a demand curve. He uses the numbers to run regressions, to calculate consumer surplus, the profit-maximizing price for a monopolist, and a variety of other things. It’s a running theme throughout the whole course based on an actual tangible good. But still…is he selling grades? Does the fact that he’s selling a shirt make it not so straight-forward?

I have thought of doing something similar in my Managerial Economics class in the future. I don’t grade attendance so the magic shirt idea wouldn’t work. Instead, I thought that students would bid on one of several homework passes. Each homework assignment is usually worth between 5-7% of their final grade and there are 3-4 of them. It’s not hard to get a good grade on homework assignments and most students get at least 80% on them. But if they bought one of these passes, a student would have one freebie and receive 100%. In my mind, I justify it by saying that if a student decides to just not learn the material and use the homework pass, their grade will likely suffer on the next exam, which usually takes place the following week. And I can do the same analysis on the data that Baye does — I’ve seen the Excel sheets he has created with it and he applies the data to almost every concept students learn the entire semester.  It really is a valuable teaching tool. But is it buying a grade? And if it is, is it worth any potential controversy if it has pedagogical value? If I sold magic homework shirts instead, would it be any different?

I’m interested in comments from students and educators.

I’m usually one to have a strong opinion on something one way or another, once I figure out what the facts are. But after reading a story today about a proposed new law, I’m not sure whether I like it or not. I think I could be in favor of it but, well, I need more facts. Selling me on public policy changes based purely on theory is not easy to do.

The proposed law would require that when an employer tells a sick employee to stay home, they pay the employee for up to 5 days of sick leave. Currently there is no law forcing employers to offer any paid sick leave. But with H1N1 waking people up to the possibility of a pandemic, lawmakers are starting to reconsider this. The Center for Disease Control (CDC) has been advising employers to encourage their sick employees to stay home. My school did the same thing for faculty, staff and student. But faculty have paid sick leave and, worst case scenario, students get the day off. We don’t usually hear complaints from them about that.

For millions of people, especially hourly workers, staying home for the good of the firm means less money in their pockets, a difficult decision for people to make, especially in a soft economy. They don’t want to infect their co-workers, but they can hardly afford to stay home. The CDC is spinning this as a good thing for employers: if your sick employee stays home, she won’t infect her co-workers and the amount of sick time taken overall will decrease. Paying for sick leave encourages her to make a decision that is in the best interest of the firm. Overall productivity will stay high and the few days of paid sick leave the firm has to pay is small relative to the potential loss in profits from a firm-wide outbreak.

(A quick market-based analysis: if the CDC is correct, profit-maximizing firms would have been voluntarily doing this all along — especially evil corporations who only care about profits. If the CDC is correct, you don’t need to force firms to pay for sick leave. So if they’re not choosing to do this, they must have concluded that they would rather have less-than-full productivity out of a more sick work force than have some people stay home sick and have to pay them for it.)

One problem I have with the article: no mention of any statistics. The CDC seems to just assume that when an employee goes to work sick, she will infect other people and they will infect others. While that’s certainly possible in theory, there is also the other side of the argument: many employees work while sick and maintain their productivity and don’t infect anyone. It depends on individual behavior, how communicable the disease is, and how long it lasts. I’m not sure how you would gather statistics on this to do a cost-benefit analysis here, but it seems that nothing like this has been attempted. But Congress can’t afford to worry about that — they’ll pass a law anyway.

Next thing you know, we’ll be passing mandated flu shots. Actually, that would no doubt be stricken down as unconstitutional. (Actually, I’m not sure that word means anything any more.) Instead, the government will just impose fines or taxes on firms that do not offer free flu shots to their employees. And they’ll tell firms: it’s for your own good. And it might be. It very well may end up costing less for the firm to pay for all its employees’ flu shots than endure a loss of productivity as people take sick leave. But without any data or analysis behind it, I’m skeptical.

Yesterday I had the opportunity to visit Titanic: the Artifact Exhibition at the Minnesota Science Center in St. Paul. I’m not sure what I was expecting, but I left saddened and amazed at the same time.

In 1912, you had an America and Western Europe that was going through amazing technological progress. The sheer size of the ship was massive: it took over 3 million rivets to assemble the outer hull, and it burned 40 pounds of coal per second. Titanic was a symbol of the times, a ship that was presumed indestructable, offering both unsurpassed luxury for the wealthy and affordability for the working class – a third-class (“steerage”) room cost the equivalent of $650 today, far less than many from Mexico and South America pay people to get them to our country. Its three-turbine propulsion system was an engineering marvel.  Titanic was divided into a dozen or so watertight chambers so that if one or two of them were breached, the boat would still float. The iceberg took down 6 of them, if I remember correctly.

One fact stuck in my head: of all the women that were on Titanic, only three had husbands who survived the disaster. Only 20% of the men on board survived – but of men who had wives, only three men survived. (Here for more on survival rates.) That tells me that the men whose families were on the ship had one foremost priority: get their families off safely. The men whose families were not on board had no such higher motive, and did not cede room in the lifeboats for others’ women and children. As they say, tragedy often reveals both the best and worst in people.

[Quick note: the Titanic had more than enough lifeboats for all of its passengers. Most of them launched prematurely, with husbands worrying about the safety of their families, wanting to make sure the lifeboat was not so crowded that it might sink. If I remember correctly, the first third or so of all lifeboats launched were filled with less than a third of their potential passengers. There were life preservers for everyone (white vests filled with blocks of cork for bouyancy), but the water was below freezing and hypothermia set in within a half hour.]

As you make your way through the exhibit, you cross an amazing collection of personal materials. Teapots from the dining room that somehow survived in perfect condition. Personal items of passengers. A wide assortment of money. Playing cards that look remarkably similar to what we use almost a century later. This is where the exhibit hits home, and Titanic becomes not just a boat that hit an iceberg, but a collection of people. People from the highest social standing to the lowest. Some making their way back to America to resume their businesses, some headed there to start a new life, filled with hope and aspirations. These were real people, and seeing their combs, luggage, and postcards is what reminds you of that.

On a wall at the end of the exhibit is a quote by an Irish poet named Jack Foster: “We are all passengers on the Titanic.” Sound familiar? After 9/11, we were all New Yorkers. We all understood the horror of the tragedy that occurred and felt it could have happened to us. As a country, we banded together to give assistance however we could to the families who lost loved ones. The children who survived the Titanic were assisted through massive charitable giving, even putting some through college. It is sad that it takes a disaster on a scale like this to unite people, but apparently not much has changed in a century.

There are many lessons to be drawn from the Titanic. In an effort to make its planned departure date, much was rushed. The ship ended up sailing without one pair of binoculars on board, a simple detail that may have prevented the disaster. The iceberg field that the Titanic passed through was also navigated by a half dozen other ships that night and the following day, including the Carpathia that rescued its survivors. None of these ships was hit because they were able to steer around the icebergs. They had binoculars to see them, and they weren’t so big that they could not maneuver easily. Rushing through a giant venture and overlooking important details because you are trying to meet some arbitrary date can have major adverse consequences. (Are you listening, Nancy Pelosi?)

You know I’m a supporter of free markets, but there is room for some government guidelines in many industries. People have to know what the rules are in order to compete, and part of the government’s role is to define basic rules of the game. After the Titanic sank, the U.S. and other countries agreed on a variety of new changes. They restricted some radio frequencies from personal use and designated which frequencies would be used by ships, making it easier for them to communicate quickly when they are in trouble. They imposed restrictions on how far north a shipping vessel could navigate, to avoid the kind of waters Titanic found. The result of these actions: since the Titanic, no other such ship has sunk because it hit an iceberg.

If you are down in the St. Paul area, I encourage you to check out the exhibit. It’s $23 for admission to the museum and the exhibit, but it was definitely well worth the money.

I have had the iPhone application for a while and haven’t used it but I’m watching my students take their Intro to Econ midterm and thought this would be a great time to start wig a short post.

Netflix recently announced it would stream movies to it’s customers via the PS3 starting next month. Currently, Xbox360 users have the option. Sounds great but PS3 users can already stream by using the web browser built into the PS3. I use it to watch shows on Hulu (which apparently is going to start charging for their service soon, much to my disappointment. No free lunch indeed.) It is not easy to navigate or type in URLs with the controller but for something simple like watching a video, it works okay.

Apparently this will be a little better quality (the system is supposed to vary the quality of the video based on the speed of your internet connection, and will provide DVD quality if you have a fast internet connection) but the number of titles is still limited to what it is now when streaming online with a computer or the PS3 browser. No major new releases are available to be streamed. Only 1 of the 20 movies in my Netflix queue has the streaming option available.

And for at least a few months, PS3 users will have to insert a disc to enable the streaming function. (This does not count as one of the discs you can have out — it’s a freebie.) Sure, it is probably easier than the built-in web browser but it will be annoying to have to switch out discs when you want to watch a movie. Next year, Netflix plans on having the software built into a PS3 firmware update. If you have a PS3 and Netflix and want to explore the streaming option, go to Netflix, click on the streaming video, then explore the different player options — click the PS3 and you should be able to find the option to put yourself on the list to have a streaming disc shipped to you when they are available in a few weeks.

When I first heard about the option I was excited. But the more I learn about it, the more I think this is just a minor improvent over the status quo — the only real difference is better picture quality and hopefully a more navigable interface. But I guess if it were a really significant improvement, like expanding the list of streamable movies, they would start raising prices. And the last time they did that, for Blu-ray, I had to cut back my purchases.

I’ve talked about the gender pay gap before here. To summarize it as I see it, here is a quick rundown of the facts. For the same job with the same experience and qualifications, men make perhaps 5-10% more than women — that is clearly unfair. Yet the average woman working full time earns only 78% of what the average man earns working full time. How do we explain these two results? It boils down to either inequality of opportunity (men are keeping women out of high-paying professions) or a difference in choices — women choose different jobs, either because of personal choice or societal pressures. It’s hard to prove any of those causes — and it is probably a little of each of these — and it’s unclear what the solution is exactly.

This morning on Meet the Press, there was a roundtable discussion on the state of women in America. I was struck by a comment at the very end by Maria Shriver. In the context of a discussion about Hillary Clinton’s role in last year’s presidential primary, she was asked by the moderator why there are not as many women as men in politics. Her response was that women do not want their lives exposed the way politicians’ lives are these days. She finished up saying, ”It’s not that women aren’t competent, but women view success differently than men. They view power differently than men. And they often want very different lives than men.”

I am glad that Maria Shriver, a self-described feminist, can be honest enough to admit that women want different things out of life than men. I think anyone with half a brain can realize that. Yet some women’s rights groups, like the Women’s Center at my university, would lead you to believe that somehow this should not translate into different occupational decisions or different salaries.  The WC has send out information in the past saying that women working full time should earn 100% of men working full time, regardless of the occupations they choose. To them, anything less is discrimination.

Studies have shown that men take jobs that require them to travel more; they work outdoors more often in harsh temperatures; and they work riskier jobs (94% of all workplace fatalities are men).  To borrow from President Obama’s favorite phrase: “Let me be clear:” I think women should be paid the same amount of money for the same work with the same qualifications, plain and simple. One study of people at age 30 grouped people by major and, without even correcting for job or industry, found that women who majored in economics earned 99% of what men who majored in economics earned. I think that’s a pretty good statement for the economics profession.

Yet I don’t think that, for the economy as a whole, women’s average salaries should equal men’s average salaries — at least not if women are working more convenient hours, in less risky and less stressful jobs. The difference lies in whether you are comparing the same job or a different job — and if you work a different job you should not expect the same pay. For example, the research requirements for tenure at SCSU are much lower than those at Harvard and, not coincidentally, SCSU pays a much lower salary than Harvard. It would be ridiculous for me to complain that I do not get paid as much as a Harvard professor when their lives are much more stressful because their tenure requirements are more strict. I made a decision based on what I wanted out of life and I live with the consequence that others in my profession get paid more than I do for working what is clearly a more difficult and stressful job.

Some women’s rights groups want women to have equal incomes despite having different goals, making different decisions and working in different jobs — “wanting different lives,” according to Shriver. That is asking for special treatment, not equal treatment.

I’m a libertarian and my general stance is that we should try free market solutions first and then, if those don’t work, look to the government. The  main problem I have with government is that when they change the rules of the game, they change the way people behave and that creates new problems — which invariably call for more government intervention (spend more on education because we’re not getting good outcomes!) instead of less. For example, taxing high incomes but not bonuses caused Wall Street to change their whole pay structure so that now executives get huge bonuses. The government didn’t like that, so they tried forcing companies to offer stock instead of cash, so that executives have a stake in company performance. But that just increases the reward for cooking the books to make the stock overvalued. So now they have to have new accounting rules and other ways of trying to fix that problem, using “clawback” features and trying to base bonus pay on long-term stock performance instead of short-term performance. That will invariably cause another problem they’ll try to fix. It’s not that the goverment TRIES to screw things up — it’s just that they end up doing that because they fail to account for how people will respond to changes in laws that change their incentives.

Now this from the bill in the Senate Finance Committee makes me reconsider the notion that nobody in Washington understands incentives:

Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the Health and Finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent.

and

Douglas J. Short, BeniComp’s chief executive, said the incentives he uses focus on outcomes, not conditions.

“I can’t give you an incentive based on being a diabetic or not being a diabetic, but whether you’re managing your blood glucose level — I can give you an incentive based on that,” Short said.

I understand the concern that people wil pre-existing conditions have, but I also understand the perspective of health insurance companies. If insurance is supposed to be for things beyond your control (like flood insurance, for example, which is completely beyond my control as a homeowner), then insurance companies base rates on observable characteristics and statistics. If I live in a flood plain, they charge me higher rates — not because of anything I did but because the risk is higher.

And in some cases, that’s what health insurance is. I could get cancer, fall down and crack my skull open or any number of things. And the premiums I have paid will cover the cost of the treatment — I use health insurance to smooth my payments for medical care over my entire life rather than have massive expenditures every once in a while. But when I have a pre-existing condition, the risks and expected costs are higher. Granted, there may be nothing I can do about it, but forcing health insurance companies to take people with pre-existing conditions at the same rates as everyone else is forcing health insurance companies to pay for something that will make them lose money overall on that person. How is that fair to them?

Back to the story, and my main conclusion: I love this. We’ve become a society of people that mostly eat too much and exercise too little because, well, we can. I like the compromise the Finance bill makes: force insurance companies to take everyone but allow them to charge higher rates to people whose behaviors are resulting in higher costs. If you are overweight and eat fast food 5 times a week, and put yourself at higher risk for heart disease, why should your insurance company bear that risk? They shouldn’t — you should. Many companies have tried incentivizing good behaviors, like paying for part of a subscriber’s gym membership fees if the person exercises at least twice a week. That’s all well and good. But in addition to carrots, sometimes you need sticks.

As a libertarian, I believe you have the right to do whatever you want with your body and your property, as long as nobody else has to bear the costs of your actions. If we legislate a health insurance system where insurance companies are forced to take you regardless of your condition, there should still be a way of making you pay for the poor health choices you make from that point on. The Finance bill seems to recognize this.