January 2010

A great article by Ed Lazear, who I heard talk at the Economic Club of Phoenix, about the effect of increased spending by the government.

I totally agree with him, and this is something which is never addressed by the government. People who favor the entitlements and government programs to improve their lives don’t realize the long term consequences:

For example, were we to tax above the 18% tax-to-GDP ratio over the next 25 years, GDP per capita in 2035 would be about 50% less than if we were to tax below the 18% ratio.

That’s the difference between making $40,000 and $60,000. That’s huge. And remember that that’s only with a binary variable- if we go farther down, we will have even higher growth.

The less fortunate in our population like to think they are being exploited when the government doesn’t redistribute wealth in their direction; the fact is, they are selfishly taking advantage of future progress for their own purposes.

My column in Friday’s State Press. (ASU’s independent newspaper)

Sorry for my absense; I’ve been starting a new semester at school. But I’m back with some good news, courtesy of Scott Brown. President Obama is backing off his fervor with health care in the face of Brown’s victory, which means I have a chance of not having to pay for insurance when I finally get to work and want to save my money. I wonder how his political capital for other issues will be after this.

Eric C. Sun, et al, have a new working paper about the effects and effectiveness of investment in cancer research. NBER abstract here. Also see Stephen Dubner of Freakonomics discussing the findings here. I find a passage from Dubner particularly interesting:

Believe it or not, this flat mortality rate actually hides some good news. Over the same period, age-adjusted mortality from cardiovascular disease has plummeted, from nearly 600 people per 100,000 to well below 300. What does this mean? Many people who in previous generations would have died from heart disease are now living long enough to die from cancer instead.

This is the way health progress is made, and why encouraging investment in new technologies is so critical. Progress might only extend life a few years, but the findings of the article show that

Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9 trillion of additional social value, implying that the average life-year was worth approximately $82,000 to its recipient.

These incremental advances are worth so much to people at the end of life and there is such potential for mutually beneficial exchange that eventually this process leads to great progress. It is easy, though, to only see a small piece of progress at a time and say that changing incentives for health companies will not do much damage; that is the situation with health care reform in the US now.

In addition to all of the criticism the administration is coming under for the details of its reform ideas, the timing is also a big issue. Gary Becker, Steven Davis, and Kevin Murphy write about how the uncertainty caused by the government’s pushes for stimulus money to their pet projects and legislation to reform taxes and healthcare are slowing the recovery from the recession:

In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.

We need to be encouraging hiring and investment with a future full of growth and big profits, not high taxes and entitlements.

For those of you who don’t know, I like chess. A lot. And although I am not as good as I would like to be, someone else is making at run at Garry Kasparov as the greatest of all time. His name is Magnus Carlsen, and he is Norwegian. He also just became the youngest world number 1 in history with a ranking of 2810. (Kasparov’s highest rating was 2851) Ironically, Kasparov is coaching Carlsen at this point. I’m excited to see how this plays out.

I’ll let Dave Barry take this one.

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