Friday, February 20, 2004

Inflation via Medicaid

Alex Tabarrok explains, briefly but lucidly, how Medicaid drives up prescription prices for everyone – and why the severity of the problem grows as Medicaid’s share of the market increases. I suspect the argument could be generalized to cover other markets in which government is a large-scale buyer.


Thursday, February 19, 2004

More on Publicly Funded Expression

Jack Balkin has responded to my post below. I won’t try to reply to all of his arguments, in part because Sasha Volokh and Juan Non-Volokh have already replied to some of them. But I do want to make a couple of points.

First, Jack overstates my position, thereby creating a strawman. He says, among other things:

But Glen overstates his case when he assumes that use of subsidies and provision of public goods is always suspicious and tyrannical in the same way that the use of criminal fines and penalities is suspicious and tyrannical. I think there is a big difference between throwing a person in jail for being a communist and deciding to create a public library so that children and adults can have books to read. There is a big difference between preventing all demonstrations on the town green and requiring that all schools that receive public funding teach reading and mathematics. There is a big difference between the local sheriff giving parade permits only to Democrats but not to Republicans and the local university deciding that it will offer courses on microbiology but not astrology. Glen has run together a wide variety of different activities under the simple rubric of government tyranny. [emphasis added]
I never said that public funding of viewpoints is just as deplorable as the penalties and fines for the expression of particular views. It is not. I agree with all of the comparisons Jack makes (e.g., that it’s better to fund a public library than to jail a communist). But saying program A is preferable to the clearly awful program B does not imply the desirability of program A.

Second, in focusing on my final comment about the danger of having government try to distinguish good from bad ideas, Jack misses the primary argument of my post: that ideas create both positive and negative externalities. For that reason, his economic justification for public funding of the “ideas infrastructure” doesn’t stand up, because it rests on the implicit assumption that the positive externalities outweigh the negative ones at the margin. Jack focuses on the benefits of the public subsidy, without much consideration of the costs. I’ll point out just two examples of how state subsidy for particular forms of expression creates problems: (a) The Office of National Drug Control Policy spends lots of money funding anti-drug commercials that muddy the policy waters with bogus claims (e.g., by suggesting that drug users are funding terrorists) and gin up greater support for the immoral and destructive war on drugs. (b) Science funding that excludes politically unpopular areas of research, such as cloning and fetal stem cells, diverts resources and research programs away from those areas and into other areas likely to produce smaller benefits (such as adult stem cells).

Third, this is not just a First Amendment issue. I don’t claim that the First Amendment invalidates all forms of government-supported expression (hence, there is no constitutional requirement to “blow up” the Washington Monument). Some forms of government action are constitutional but still unjustified or undesirable, and that is my position on most, though perhaps not all, forms of public subsidy for expression.


Wednesday, February 18, 2004

Market Failure in the Marketplace of Ideas

In a response to David Bernstein, Jack Balkin defends public universities on economic grounds: he claims that free expression creates positive externalities, and therefore private markets will underproduce opportunities for it:

For me, freedom of speech involves important infrastructural elements in technology and institutions that undergird and enrich the system of free expression, produce an educated citizenry and give them the tools and the practical opportunity to participate in the growth and development of culture. … Put in economic terms, the infrastructure of free expression is a public good that markets will underinvest in.
Juan Non-Volokh takes apart the economic argument, pointing out that (a) the existence of positive externalities at most justifies subsidized universities, not government-run universities; (b) the prospect of government failure often outweighs market failure; and (c) government provision tends to crowd out private provision of public goods.

I wish to add one more response. As I’ve argued before (and I think Ronald Coase made the same point), ideas produce both positive and negative externalities. There is no discipline of profit-and-loss to assure the weeding out of the bad ideas and the retention of the good ones. As a result, the economic theory of market failure offers as much support for taxing and restricting expression as for subsidizing and promoting it. It is strange indeed that liberals who have nothing but contempt for product markets voice such confident support for the marketplace of ideas, even though the latter are subject to potential failures that are arguably much greater.

If the government could distinguish between the good and bad ideas, then it could subsidize only the good ones. But I have little or no confidence in government’s ability to make such distinctions wisely, and the blanket subsidization of public universities assures funding of both the good and the bad. The strongest case for freedom of expression, I would argue, rests not on economic efficiency but on the inherent danger in giving a coercive government the power to decide what’s good and bad in the realm of ideas. From that perspective, David Bernstein’s position makes a great deal of sense: having public universities ipso facto puts the government in the position of having to make distinctions that it has no business making.


Tuesday, February 17, 2004

Economics of the Afterlife

Religious visions of reward-and-punishment in the afterlife fall into two basic categories. One category consists of what I will call “precipice” regimes, in which there are just two afterlife outcomes: heaven and hell. If you commit more than some threshold number of sins (possibly just one), you go to hell; otherwise you go to heaven. Many Protestant faiths seem to fall in this category. The other category consists of what I will call “gradient” regimes, in which there is a range of afterlife outcomes lying between sheer torment and pure bliss. In Mormonism (or so I am told), there are many different levels of heaven, and which one you reach depends on your behavior in this life. In Catholicism, how much you’ve sinned in this life determines the amount of time you spend in Purgatory. In Hinduism, your behavior now determines what kind of creature or class of person you’ll become upon resurrection.

Assuming that afterlife regimes are designed to deter bad (sinful) behavior, what beliefs about people’s preferences and choice mechanisms are implied by each type of regime? Let’s say you’re a deity who currently presides over a gradient regime, and you’re considering a switch to a precipice regime. Doing so will induce some individuals, who would have committed some number of sins under a gradient regime, not to commit any sins at all (if the hell-threshold is one sin) or to commit just under the threshold number of sins. That’s the upside. The downside is that individuals who have already passed the threshold will have no incentive to behave well. Since they’re already going to hell, they might as well commit all the sins they want. In addition, people sufficiently far below the threshold will have no incentive not to commit additional sins (unless there’s uncertainty about where the threshold lies). Thus, there’s a trade-off involved in the choice of regimes, and individual preferences and choice mechanisms will determine which regime is the more effective in deterring sins.

I hypothesize that precipice regimes are appropriate if you think that the utility of committing sins is relatively constant over time, whereas gradient regimes are appropriate if there will be occasional opportunities for sinning that are of such high utility that they cannot be resisted by many people regardless of punishment. The downside of a precipice regime is particularly high in the latter case, because many people will succumb to large temptations and then, figuring their souls are lost anyway, commit many more transgressions. On the other hand, if there are few super-sized temptations and many small-to-medium ones, the precipice regime might be more successful in deterring them, because people under a gradient regime will balance each additional sin against the minor reduction in afterlife status that will accompany it, and some medium-sized sins will be enjoyable enough to be worth it.

A precipice regime might also be more effective in preventing addictive sins, defined as sins with increasing marginal utility of commission: the more of the sin you’ve committed, the greater is your desire to do it again. Under a gradient regime, people who commit their first addictive sin will have an increasing inclination to do so repeatedly (unless the gradient becomes steeper and steeper as the number of sins rises). A precipice regime could not prevent the additional sinning, but it would stand a better chance of inducing people not to commit the very first sin.

Next up: mixed regimes, in which some sins are treated with a gradient and others with a precipice.


Monday, February 16, 2004

Barbecue Day

A student sent this letter to Jolene Koester, the president of my university, and for some reason I was CC’ed (along with two other people). I figure it’s an open letter, but just in case it’s not, I’m leaving out the student’s name.

I will not be attending class today. This day is a national holiday set aside to honor the presidents of the United States of America, especially George Washington and Abraham Lincoln. These men showed uncommon courage and leadership in successfully leading our country through some of the most difficult times in history. I could elaborate, but there are volumes of historical information about these and all the other US presidents.

In addition to the above-mentioned leaders, this “Presidents Day” holiday has been expanded to include honor to ALL the American presidents, regardless of political persuasion. And since this fine institution receives federal funding (approved by the president), it only seems consistent that the faculty, administration and students of Cal State Northridge acknowledge this day. I do hope that this scheduling error is corrected so that next year, we all will be able to reflect on this nation without whose leaders the world would not know the meaning of freedom and democracy.
My first reaction was to snort; I figure this student is less concerned about honoring freedom and democracy than attending a backyard barbecue. But then I thought, what’s wrong with that? Lucky for me, I don’t teach on Mondays, so I’ll be attending a barbecue myself – not because I admire the presidents (I can count the ones I truly admire on one hand), but because I like barbecue. And it is pretty bizarre that CSUN takes off Cesar Chavez Day but not Presidents’ Day. Setting aside the question of which day is more worth celebrating, there’s something to be said for the coordinating function of holidays: it’s easier to organize fun activities when everyone gets the same day off work. Given that most people in this country celebrate Presidents’ Day, not Cesar Chavez Day, CSUN’s calendar is just a little bit off.


Picking Fights with Libertarians

I enjoy Mark Kleiman’s blog, despite often disagreeing with it. But Mark does have an odd penchant for picking fights with libertarians even when we agree with him. This happened a year ago, on the subject of laws that allow health insurance companies to break their contracts (see my responses here and here, both reaching into topics we do disagree on). It happened again last month, when he skewered Bush’s risible moonbase proposal (see my response here). And now it’s happened again, in a post on the FDA’s decision on the morning-after pill. “Once again,” he writes, “we can expect a deafening silence from the libertarians, whose sincerity about personal liberty I keep doing my level best not to doubt.”

Weird. It’s true that libertarians haven’t said much on this specific issue, though some have – read this and this and this. But on the other hand, libertarians generally argue that the FDA should be either emasculated or abolished entirely; here's a page articles from Cato, and an entire website run by the Independent Institute. I’m pretty sure Mark would not support eliminating the FDA, but the point is that doing so would make the morning-after pill issue moot; as long as abortion remained legal for even the first three days of pregnancy, the morning-after pill would be readily available. (As an aside, I should point out that there are many pro-life libertarians, though I’m pretty sure they are in the minority.)

I’m guessing the bigger issue is that Mark wants to know why libertarians aren’t opposing Bush. But more and more, they are. I, for one, have stated my opposition to George Bush repeatedly on this site. Radley Balko has been so critical of George Bush that he had to declare a week off from Bush-bashing – a pledge that he’s been unable to keep. Indeed, Bush-bashing is a favorite activity on most every libertarian site I visit. From Cato, here is a scathing indictment of his fiscal performance, here's another, and here's another from two years ago, before it got popular; here is an article criticizing the civil liberties record of John Ashcroft, and here is page of links on civil liberties under the Bush administration. If the question is why libertarians aren’t flocking to the Democrats, Mark should know the answer to that one: it’s because the Democrats are awful, too, on almost every front, including civil liberties. Lest we forget, Democrats voted for the civil-liberties-violating Patriot Act, Democrats voted for the political-speech-restricting Bipartisan Campaign Reform Act, Democrats voted for the nonpolitical-speech-restricting Child Online Protection Act, Democrats support hate speech laws, Democrats stand should-to-shoulder with Republican drug warriors. Even so, most libertarians I’ve spoken to are hoping a Democrat wins the next presidential election so that we can return to the glory days of gridlock.

UPDATE: In an update to his original post, Mark admits the silence has not been so deafening after all, posting a link to this post by libertarian Jacob Levy.


Sunday, February 15, 2004

Love Needs No License

I support gay marriage (at least until government gets out of the marriage business altogether), but this statement by one of California’s gay newlyweds gets it all wrong:

“Now we’re not second-class citizens; now we can have a loving relationship like every other married couple we know," [Nancy] Felixson said.
Hey, you don’t need the state’s permission to have a loving relationship. That’s already legal. What’s at issue here is not love, but equal access to state-granted privileges like married tax status and medical power of attorney.