Monthly Archives: June 2012

Economics 101

Jeremiah loves to find debates where the traditional right and left are both wrong, and economics is a good place to look.  The right has “hard money” pundits like Larry Kudlow, who bash Chairman Bernanke for devaluing our cherished greenback.  We have never had a strong economy without a strong dollar, he says, confusing cause with correlation.

The paths were straight, the bridges were strong … everything bore an impress of tidiness and good management.

On the left, we have people begging the Fed for easy money to shore up the stock market (?) and create jobs.  They seem to believe that inflating asset prices will stimulate the economy.

Here again, a rising market would be an effect – not a cause – of a strong real economy.  This may be hard to grasp because the market is a leading indicator.  It can rally months ahead of a pickup in earnings, but the economy is still the driver.

The other thing wrong with this argument is that, while the Fed has a mandate to try and control unemployment, it does not have a mandate to pump up the stock market.

The dollar and the stock market will both go up when the economy recovers.  Devaluing the dollar, as Bernanke has already done, can give a boost to exports and investment – but the boost is temporary.

So, if monetary policy is out, what can the government do to stimulate the economy?  Well, the idea of “stimulus” is flawed.  Economic growth depends on savings and investment, exports, a skilled and mobile labor force, and balanced budgets.  All the government can do is keep its own house in order, and not impose undue burdens on business.

There is no magic, only – as Tolstoy put it – good management.

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Unqualified Endorsement

George Clooney is raising funds for Obama, and Ted Nugent is voting Republican – but it is KISS guitarist Paul Stanley who has the last word.  Asked by CNN, Mr. Stanley declined to make an endorsement, stating he was “stunned” that people look to celebrities for political advice.

There is nothing more embarrassing than people who have become famous in film or music, suddenly feeling they have a qualified opinion about anything other than film or music.

As a thought experiment, we suggest a season of American Idol judged by economists.  Pictured here are Ben Bernanke, Paul Krugman, and Thomas Sowell.  Not so pretty, is it?

Jeremiah has written before about bad reasons to choose a candidate, and celebrity advice has to be near the top of the list.  If all you have on November 6 is some rock star’s opinion – do America a favor and stay home.

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Publish Hospital Prices

Debate over wealth redistribution is often sidetracked by the question of morality.  Is it right for one class of people to pay extra so that another class can enjoy free health care?  That’s not the question.  The question is, will it work?

Is it right for one class of people to pay extra so that another class can enjoy free health care?

People on all sides of the debate agree that the root problem with health care is that it costs too much.  Burying this problem underneath a government program is not going to fix it.  The only mechanism for cost control is competition, and competition requires published prices.

Have you ever asked about prices in the hospital?  Why not?  It’s basically an overpriced hotel with bad service.  How much is that worth?  Oh, and a random doctor stops by for forty seconds still wearing his cleats.  That’s a thousand dollars a night?  Jeremiah would rather be in the Bellagio.  Everybody we know has a horror story about receiving a five-figure bill for a simple procedure.

Seriously, if you ask about price in the hospital, you will get a very disturbing answer – it depends on who’s paying!  They charge private insurers extra to make up for the discounts the government gets.  This may sound like a bargain for Medicaid, but it also sounds pretty shady.  Odds are the government is getting screwed, too.

Congress could easily pass a law requiring clinics and hospitals to publish their price lists.  No one would complain about that, except clinics and hospitals who profit from covert pricing.  If they complain that health pricing is “too complicated” to predict, then Congress could require them to publish non-binding reference lists of last year’s charges.

Thanks to deductibles and health-saving accounts, patients are ready to do comparison shopping.  This is something we are good at.  Force them to talk price with us, and we will chisel them down.

See also: Jeremiah’s Health Care Plan

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