"Universal Basic Income"

Yesterday a brother sent me a link to A Plan in Case Robots Take the Jobs: Give Everyone a Paycheck - The New York Times

Their plan is known as “universal basic income,” or U.B.I., and it goes like this: As the jobs dry up because of the spread of artificial intelligence, why not just give everyone a paycheck?

Imagine the government sending each adult about $1,000 a month, about enough to cover housing, food, health care and other basic needs for many Americans. U.B.I. would be aimed at easing the dislocation caused by technological progress, but it would also be bigger than that.

My response is...well, yes and no. Bottom line: that's the right train of thought, but I don't think that it's quite the right track. We can do better.

I have favored a linear-tax scheme in the past, where by "linear" I just mean the familiar linear equation

y=m*x+b

or in this case

Tax=rate*income+base;

Say for extreme simplicity (with Congressionally-adjustable numbers) the government says: "You have a Social Security number? Okay, you have a bank account, and this one is for pre-tax money, like a 401(k). In it we deposit $100/week, your Supplemental Basic Income (small; makes no difference to a lot of people but a huge difference to others). Then we take 30% of everything you spend, i.e. everything that you move out of your pre-tax portfolio which can also include investments, savings, gifts, etc....if you deposit your paycheck into your pre-tax portfolio, that's exactly the 401(k) idea."

So, over the years, I've read Basic income arguments pro and con, starting with the ones that convinced me originally in Friedman's Capitalism and Freedom, roughly at The Libertarian Case for a Basic Income | Libertarianism.org or in Friedman's Firing Line interview at Milton Friedman - The Negative Income Tax - YouTube. I've found it pretty convincing.

Now we have a new kind of reason: geeks like me, developing the abilities of computers, are gradually making it (a) harder (at the median) and (b) less necessary (on the average) for people to earn a living in the traditional way. I've even written a bit about this recently, in the context of schools and the world that they're preparing our kids for, and I cited Pistono's Robots Will Steal Your Job, But That's OK | How to Survive the Economic Collapse and Be Happy, at HamiltonCentralOptions: SuperSchool

workers retiring this year at age 65 became high school students just about 50 years ago, in 1965. ...our total production, "real GDP", roughly tripled in that period... Manufacturing [jobs].... dropped from 25% to less than 10%, and we can expect the shrinkage to continue. The face of manufacturing is becoming the face of [robot] Baxter and his rapidly-improving successors...
Meanwhile, agriculture goes on "shrinking" in the same way: more stuff per person and much more output overall, but fewer people needed. ...

Does that mean higher unemployment? Not necessarily: it means that we produce the necessities of life with much less labor, so many more of our people will be producing goods and services, mostly services, which are not necessary for life....

And that leads into my current answer on the "Universal" or "Guaranteed" or "Supplemental" Basic Income proposal: we can do better than that. Specifically, the very information technology which pushes us towards a "yes" has a fundamental value for Great Gobs of Data; we can and should pay for that data, low pay (below minimum wage) at first but with increasing generosity as the years go by and we get richer overall. These are jobs for which anyone can qualify and make a genuine contribution to the Better World To Come.

What kind of jobs? Consider clinical trials as a model for social data collection. Everybody should be able to sign up for one of a large variety of studies, diet/exercise/social-interaction/education/long-term-low-dose-aspirin studies; these should pay people for their participation and ongoing feedback (via smartphone and associated sensors, as well as the sort of feedback that involves explicit clicks.) When an outcome is socially desirable, as in health and education, there should also be payment for achievement. In addition to these jobs, we should pay people for their perceptions, their knowledge, and even their opinions: Amazon product reviews add value to the world, Wikipedia edits add value to the world, YouTube tutorials add value to the world, this blog post probably doesn't but if there were a rating system with built-in rewards and AI protection against cheating, then the AI could find out if this blog post had added value to specific real people's worlds and it could assign rewards appropriately (both to the author and to the raters.)

And then we go off in many directions, of course...but we do so with more information, a broader base of understanding, than we would have had -- and we do so in a world where rewards come for having made a contribution to that world. Quite possibly we end up with an AI serving as the planetary village's Miss Marple, not the early-work gossip but the later version who sees all your public acts and some of what you thought was private, who can deduce a lot about your motivations (and in particular, what you gave up in order to do whatever you did and therefore what value your choice had for you). At that point we may simply drop our current insanity of "Intellectual Property" in which some of my thoughts belong to you whether I ever heard of you or not...



Or then again, maybe not.

update: An artistically inclined sister whose blog is probably more essential than this one asks via comment: "What? Art is not vitally essential?"
and that strikes me as one of the many questions that I don't want to answer for other people -- your customers in particular. My understanding is that many of them feel that life can be lived, or at least continued, without art -- and that means that art is a discretionary purchase, not "necessary for life" and therefore not recession-proof. Why Recession Isn't Good for Art -- New York Magazine

recessions mostly just yank young artists’ work off the walls. “If traditional art isn’t selling, galleries aren’t going to show emerging art.” ... In a boom, it’s cool to love art, see art, buy art. Art is taken seriously. A bust dismisses it as a luxury.

But my planetary Miss Marple would see that some people still wanted to look at, say, Raven With Shards, and you would receive credit -- spendable credit -- when they did so, even if they couldn't come up with the purchase price to own the original.

update 2, 20160610 A computationally inclined co-author suggests that I'm saying that "every human can get a job as a lab rabbit for AI", which is true in a way but

1. I think this system would be workable now, with no more AI than we've got already: as I said, "Everybody should be able to sign up for one of a large variety of studies..." and in addition I'd try to reward reviews, edits, etc.... so I'd rather say that every human can get a job as a content creator/reviewer/editor/respondent.
2. my hoped-for eventual AI wouldn't think of it that way. As I wrote more recently in A Small Note on Superintelligence Morality

   Intelligence needs to be attached to an actual person of some kind; a who not a what. This should not be called an artificial intelligence but rather an artificial person.

   .... The superintelligence need not be a biological homo sapiens, but does need to identify (correctly) as human, saying "we humans" not "you humans"; having human feelings, hopes and fears, including a feeling of membership in the human tribe. ...it is not a project of debugging a program. It's a project of raising a child, a psychologically healthy child -- yes, with parents, and preferably with siblings and so on outwards; a child who will realize that every h. sap. is one of his/her cousins.

   That's not the way we think about lab rats, or rabbits. (Although, in a sense, they are.)

The Median Hyper-Partisan

So, we still have a Republican House (a bit more so), a Democratic Senate (a bit more so), and Obama as President (a bit more so?). Things are as they have been, except that the fiscal cliff (more detail here) is closer and both sides' tendency to refuse to negotiate has been reinforced. (update: by this I meant simply that each can say "I won the election; my voters want me to go on with what I was doing.")

I'm wondering about the incentives that have created this situation, and there's an interesting theory expressed at Barack Obama's re-election: A country divided | The Economist. Basically the columnist here is saying that there are two forces involved.


1. The Median Voter Theorem -- if parties A and B want to catch the median voters, they should move towards the center. The incentives are strong, and that should bring the parties together -- and in real policy terms, it does: "Realistic arguments over policy take place on relatively narrow terrain: they are arguments over a top marginal tax rate of 35% or 39.6%, over a health-insurance system with guaranteed coverage for pre-existing conditions but with or without a mandate, and so forth." Actual radical solutions are simply not part of the discussion, even if academically preferred (e.g., forget the income tax altogether, it's a bad idea: tax consumption instead.)

The Republicans and Democrats are, in practical policy terms, much much closer to each other than either would ever consider being to someone like me. They've come together towards the median voter. Yes, but we also see

2. Media promotion of exciting stories. "...both mass-media analysts and private social-media contributors are rewarded for sharply divisive characterisations." I would generalize this: the effective politician is an entertainer, and he and his team (or she and hers) are also rewarded for generating exciting stories. The most basic story to be told is about Good v. Evil, and even while you're adjusting policies to capture the median voter, you want to be generating stories about Our Friends and Our Enemies; these work just as well on high IQs as low. The divisions here have something to do with policy, but not a great deal... I recently saw a Youtube video of someone going around asking Obama supporters for their comments on "Romney" policies such as the drone strikes, and naturally getting "That's EEEVIL" as the usual response -- but these were actually Obama policies. Interestingly, some of the respondents said they'd have to rethink their Obama support -- but I predict it won't make a lot of difference. And I'm sure it would work just as well in reverse, on Romney supporters.


Of course this means that my own obviously sensible policies have no chance of being enacted. What worries me more than that, though, is that I think the emotional manipulation by both sets of manipulators is increasingly successful. I see intelligent good people on both sides who do not want to know why intelligent good people would be on the other side. That's scary.


As the Economist says,

...Over the next four years, legislative battles are going to continue to be savage and hard-fought. Neither conservatives nor liberals are going to change their minds en masse about fundamental issues of political philosophy. The top priority is for Americans to figure out a way to keep these divisions from dividing the country into two hostile armed camps that are incapable of talking to each other.

Or then again, maybe not.

Two Hundred Trillion Dollars

There are some silly songs on Youtube about the $46,000 debt we're giving each new child at birth; the songs are supposed to make you feel guilty about what we're doing to our children, and I think they're supposed to energize you against the debt-ceiling rise and for the balanced budget amendment. Well, the debt ceiling is stupid, and the balanced budget amendment is a really bad idea, and $46,000 is a ludicrous figure; the correct figure, the figure that the average kid needs to pay (or pay interest on, or pass on with accrued interest to the next generation,) is probably well over half a million. Nobody can know exactly; it depends on future growth of expenses and revenues and population, but $46,000 is a very small fraction of the total.

In April 2010, after the health-care bill's passage, I wrote a "One Hundred Trillion Dollars" context post in which I quoted the Dallas Fed:

Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent. ... all we would have to do to fully fund our nation’s entitlement programs would be to cut discretionary spending by 97 percent....defense and national security, education, the environment ... All of them [forever]

Today I noticed on Yahoo a more up-to-date and more complete and therefore more scary view of the same concept, from BusinessWeek, in Why the Debt Crisis Is Even Worse Than You Think:

A more revealing calculation is the CBO’s measurement of what’s called the fiscal gap. That figure is conceptually cleaner than the national debt—and consequently more alarming. Boston University’s Kotlikoff has extended the agency’s analysis from 2085 out to the infinite horizon, which he says is the only method that’s invulnerable to the frame-of-reference problem. It’s an approach used by actuaries to make sure that a pension system doesn’t contain an instability that will manifest itself just past the last year studied. Years far in the future carry very little weight, converging toward zero, because they are discounted by the time value of money. Even so, Kotlikoff concluded that the fiscal gap—i.e., the net present value of all future expenses minus all future revenue—amounts to $211 trillion.

How does that work? Well, let's think about the Smith family and the Jones family, each expecting the same future expenses spread out over time. Joe Jones intends to pay as he goes; he hasn't borrowed anything. Sam Smith has borrowed enough money from a bank to fund an investment account which will pay exactly the same expenses. In fact, aside from the issue of bank profit, he had to borrow exactly the net present value of those future expenses. (He has a triple-A rating, of course. For now.) You can think of various ways that they're in different situations, but the Smith and Jones families are basically comparable: the payments on Smith's loan will not over time be appreciably different from Jones' direct expenses. So we can think of both of them as having the same financial future: if one is in trouble, they both are. And right now, the US has the same financial future as if it had made no unfunded promises but had borrowed a grand total of $211,000,000,000,000.00. So far.

Is that exact? No, of course not. Things might not be quite that bad, they could be even worse: as the article says, the calculation is quite sensitive to assumptions about future events and policy. But it's accurate enough to say that the "debt" is not what we should worry about; we should worry about the "fiscal gap".

Of course, if you worry about the debt, then it makes sense to talk about the deficit: $850 billion dollars last year. What if you're worried about the fiscal gap? Does the deficit become irrelevant? Yes, really; as Kotlikoff says:

The gap was $205 trillion last year, measured in today’s dollars. That’s an increase of $6 trillion. ... Hence, the real deficit we should be worrying about is more than six times larger than the $850 billion official deficit capturing all the attention.

In other words, Congress and the president’s administration could agree to run a balanced budget, making this year’s official deficit zero, and the nation’s true indebtedness would still rise by $5.15 trillion!... the main reason is that we are one year closer to having to pay 78 million baby boomers roughly $40,000, on average, per year in Social Security, Medicare and Medicaid benefits. Because the fiscal gap is a discounted present value, one year makes a big difference.

If you think back to the Smith and Jones family, and imagine the fiscal gap as an implicit debt, then the $5 trillion is mainly the result of our failure to pay even the interest on the $206 trillion we owed last year -- we do have a really good interest rate as long as we keep the AAA rating, but it's not zero.

So, should we balance the budget anyway, even if it's inadequate to do so? No -- not in years with high unemployment. I'd agree with Calculated Risk: Debt Ceiling Update

A politician can say "We should have a balanced budget". It sounds good, but why aren't they challenged about operating vs. capital budgets? And about business cycle spending (obviously revenue falls during a recession - and spending increases)?

What they really want is a balanced operating budget over the business cycle. You can't put that in the Constitution. It requires effective government and constant vigilance.

But even capital vs. operating budget doesn't quite do it for me: I want the fiscal gap, over the business cycle, to remain a limited multiple of GDP. Fifteen times GDP? Okay, fifteen times GDP. (It would be nice to shrink it.) But don't let it keep growing (as a multiple of GDP) from one business-cycle peak to the next.

And with all that, should my taxes be raised? Yes, emphatically so -- my taxes should be raised as part of a plan to deal with the fiscal gap. I can and should pay more taxes than most people; that part's understood. I'm not in Kerry's league for lifetime income, not even in Obama's, but I can pay more taxes than I do -- it won't even cut my consumption until taxes get quite a lot higher. What I don't think most raise-taxes people understand is that even though a fairly substantial tax hike won't be a "hardship", won't seriously cut my consumption, it will cut my reinvestment. It has to. So it will reduce the money available to future generations of taxers; in fact a dollar of tax revenue increase now is somewhat more than a dollar of tax revenue decrease later, because you'll have spent the money before it grew. So it's crucial, when you take my money, to take it as part of a plan to deal with the fiscal gap--otherwise the gap grows and you've taken some of the resources we'll need to deal with it. (I tried to go over this in the aforelinked One Hundred Trillion Dollars post.) In any case, if you actually want to fix things, focus on consumption, not income. (I'll still pay more than average, I promise.)

And is it hopeless? Not at all. We still see, e.g. Foxconn to replace workers with 1 million robots in 3 years. We still see Sarcos Exoskeleton Bringing Iron Man Suit Closer To Reality and the beautiful Watch Festo's SmartBird Robot Soar Over TED Conference. We still see Loss of memory due to aging may be reversible and, for young and old, How Khan Academy Is Changing the Rules of Education. We may even see Could 100 Kilometer high towers usher in the next space age?

The SpaceShaft concept isn't as ambitious as the space elevator but it is much more feasible. For 130 million Euros we could design and construct a 100 kilometer tall SpaceShaft within a decade. Once we have SpaceShafts up and running, the frontier of space will finally be open to humanity.

Or then again.... maybe not.

update: Fixed silly typo which had billions instead of trillions.

Thoughts on Greece, and us

A large part of what holds Greece back, and us as well, is fairly described as rent-seeking--manipulation of public power for private profit, one way or another. In Greece, as in the Latin America of my childhood, it's much more likely to take the form of simple corruption: imagine (as I was told in Greece last week) an underpaid government official who approves environmental permits, and who provides faster service for those who provide extra money. And then he slows down the uncompensated permits sharply, to encourage the trade. It's not that he is lazy or works few hours, it's not even that there are too many such officials -- all that is often said but seems to be wrong. It's simply that his work product tends to detract from actual GDP, even as it's added at "cost" to official GDP. If he weren't doing that, Greece would be richer.

Other kinds of rent-seekers include those who profit from government-imposed monopolies, like the Athens taxi-drivers now striking, unpredictably blocking port and airport. Rent-seeking is a pretty broad category in my mind. I suppose that all countries end up with issues of regulatory capture and indeed of crony capitalism; government makes rules, and these rules will tend to promote the interests of those who have something to offer to the rule-makers, or some credible threat they can make. That interest-promotion is "rent," paid to the people who've managed to make some government power into their own property, legally or not.

I spent last week on Spetses, with various extended-family events relating to my granddaughter's baptism. It's interesting and educational to listen to Greeks and Greek-Americans talking about their fiscal crisis; I'd hoped to get some time specifically listening to Yannis Ioannides and Anna Hardman, and did, but not enough for real understanding. Yannis' basic Greece-is-not-bankrupt statement surprised me considerably (see Ioannides Says Greece Not Bankrupt, Must Change Economy: Video - Bloomberg). He thinks Greece really can pay its debts -- and he thought that even before the ’Restricted Default’ deal of this week, so I presume he thinks his case has been strengthened. He's an advocate for the austerity measures, which I suppose makes him one of the Serious People of whom Paul Krugman said this week in 1937! 1937! 1937! - NYTimes.com that

OK, so we’re going to demand harsh austerity in the debt-crisis countries; and meanwhile, we’re also going to have austerity in the non-debt-crisis countries. Plus, the ECB is raising rates. So demand will be depressed in both crisis and non-crisis economies; this will lead to a vigorous recovery through … what? The Serious People are determined to destroy all the advanced economies in the name of prudence.

I'm mostly on Krugman's side there; we're combining monetary policy from the ECB which may be reasonable for Germany but not for Greece, along with drastic contractions of an uncomfortably the-beatings-will-continue-until-morale-improves flavor. Or so it seems to me. But Yannis isn't supporting austerity to reassure bond markets as Krugman says; Yannis thinks that the "austerity" (including the deregulation of taxi medallions being protested) is part of breaking or at least limiting the rent-seeking system. Well, I'm not sure he or Anna ever said "rent-seeking" but that's my understanding of what they did say, and when I look for related material online I find things like BusinessInsider's querying a member of the `professional "elite" class' of Greece, who said

We want the Greek economy reformed. An end to the of unimaginable waste of taxpayers money,...cronyism and corruption. A much smaller and reformed public sector... A pursuit and prosecution of presently wide spread tax evasion practices. The above would immediately provide us with a considerable primary surplus, enabling us to keep repaying our debt, an obligation we wish to honour. ... Unfortunately it appears that the average Greek, does not view things the same way.

That certainly sounds like the viewpoint of the Greeks with whom I spoke. And how big is the corruption problem? Well, Transparency International said

The Greeks paid an average of €1,355 ($1,830) in bribes [in 2009] for public services such as speeding up the issue of driver's licenses and construction permits, getting admitted to public hospitals or manipulating tax returns, ... Bribes paid for private sector services such as lawyers, doctors or banks were even higher...

So really, Yannis and those he supports (to the extent that I understand what's going on here) are not so much engaged in economics as in political action aimed at restructuring Greek culture. Otherwise, the bailouts fail. In The Painful Arithmetic of Greek Debt Default | e21 - Economic Policies for the 21st Century I see

How does corruption limit the capacity for tax and spending reform? Tax avoidance, which relies on bribery to avoid prosecution, is a national pastime in Greece – the envelope used in the bribe even has its own name, the “fakelaki,” confirming the age-old adage that the Greeks “have a word for it.” Bribery is so rampant in Greece that real estate developers’ method of obtaining cheap land is to burn down public land, squat on the burned parcels, and pay off public officials to permit this. Greece’s forest fires, particularly in the Peloponnese in 2007, have been a source of public outrage for years, and yet the developers continue to squat on the land with impunity. Is a society that permits that sort of lawlessness capable of tax reform?

Maybe. Maybe not. I respect Yannis, but if the average Greek doesn't believe in it to begin with, I don't see a happy ending to this story.

Corruption is by no means the only problem, and an end to rent-seeking would not necessarily make Greece fit comfortably into the Eurozone. Clearly, little Greece will never be the target of the ECB's monetary policy. Krugman, in Anatomy of a Euromess, said that

Spain’s troubles are not, despite what you may have read, the result of fiscal irresponsibility. Instead, they reflect “asymmetric shocks” within the eurozone, which were always known to be a problem, but have turned out to be an even worse problem than the euroskeptics feared.

David Beckworth took Krugman's analysis and extended it in "Optimal Currency Area" terms within Eurozone Periphery and the Euro, saying

If a region’s economy is not in sync with the currency union’s business cycle and the above listed shock absorbers ("flexible wages and prices, factor mobility, fiscal transfers, and diversified economies") are absent then it does not makes sense for a country to be a part of the currency union. Instead, the country should keep its own currency which itself will act as a shock absorber.

It's no great surprise to see that in his graphs, Greece ends up as the most ill-placed. But I believe that part of the "austerity" program is intended to increase the flexibility of the job market (by pruning job protection programs, as has been tried before) and maybe, if the austerity programs are accepted, maybe things will work out. For a while. Public Pensions and Labor Force Participation: The Case of Greece

The pension system of Greece is a representative case of the “Mediterranean welfare state”, which is characterized by extensive segmentation, very high payroll tax rates, and yet inadequate pension benefits. In order to explain this paradox we construct an economic–demographic model. We show that in the period 1980–2000, the segmentation of the system and the very low labor force participation rates of the Greek economy have resulted in very high payroll tax rates in relation to the current level of benefits. On top of these problems, the expected adverse demographic developments in the period 2005–2050 will render the pension system completely unsustainable.

Still, the near-term need is to cut the rent-seeking (including corruption) and collect the taxes and shrink the regulatory/welfare state. Maybe. And can it be done? Well, my own approach in Greece, even more than in the US would be:

automate, eliminate, simplify, outsource.

Almost all of a government's functionality should be virtual... Well, maybe I will make a separate post about that, sometime.

Meanwhile, a little more time has been bought. The Economist remarks that

the biggest risk to the euro zone is that its leaders will begin thinking that they've solved the problem. As growth figures worsen in coming months, markets will once again become antsy. Euro-zone officials had better be preparing for a way to convince them anew that they want this thing to work.

And I go back to the pattern I established last winter, of exercise and education

This morning I spent 45 minutes trying to pound a few modern Greek words and phrases into an aging memory; until a month ago, this would have required a major effort of willpower, but lately I've been doing it every day with no problem...

As I commented to my son's mother-in-law, see-gah-see-gah mah-THAY-no, which I think means "little by little I'm learning;" since her response was "bravo, Tom, ah-krih-VOS!" (precisely), maybe it does. And maybe I will eventually learn some economics too. Or then again, maybe not.

It's all about healthcare. Well, and signaling.

This afternoon I was sitting in the third row, right behind the woman who placed the winning bid -- $13,000 -- on the auction of Harry Potter's bow tie. Well, of J. Pierpont Finch's bow tie, Finch being the lead character of How to Succeed in Business Without Really Trying; Finch is played by Daniel Radcliffe, a talented young actor/singer/dancer (well, a bit weaker as a dancer, I thought, but I'm no judge) who will probably be plagued for the rest of his life by people who can't help but think of him as Harry Potter. And he and his co-star were trying to raise money for a Good Cause, namely healthcare, after the performance. (Okay, a specific healthcare cause, but I'm still fussing about healthcare in general.) So....

So I would call the winning bid rather impressive; I think most people would. Radcliffe commented that we were "well over the record", some time before the auction closed---I presume he does this with a fresh bow tie for each performance. But I couldn't help but be reminded of the cost of my own appendectomy, not quite a year ago: it was in fact a little over the bow tie's price. Consider what that audience pays for healthcare each year...the auction was a Good Thing to Do, an Exercise in Nobility, a demonstration of the Brotherhood of Man (that being the last song&dance) but as a contribution to healthcare it was a teaspoonful in a lake.

Yes, I understand that's not the point. It's not really about healthcare, even healthcare is not really about healthcare. Robin Hanson put it rather well, some time ago, in his argument that it's about Showing That You Care:

I can explain these puzzles moderately well by assuming that humans evolved deep medical habits long ago in an environment where people gained higher status by having more allies, honestly cared about those who remained allies, were unsure ... These ancient habits would induce modern humans to treat medical care as a way to show that you care. Medical care provided by our allies would reassure us of their concern, and allies would want you and other allies to see that they had pay enough to distinguish themselves from posers who didn’t care as much as they.

That makes sense to me as the beginning of a model, and it certainly isn't a criticism of the woman who paid so much for the bow tie. She evidently does care, and presumably cares that it's evident that she cares, and that's a good thing.

Nonetheless, if you want to use healthcare provision to show you care, I think it would be a good idea to spend some time looking for actual ways to provide actual healthcare; a few more teaspoons of water in the lake won't do it. So I'd like to go back over my proposal of a bit more than a year ago. I'd organize it a bit differently now, but I don't seem to have moved all that far.

If I were (heaven forfend) In Charge, I would crowd-source as much as possible of the decision-making by pushing it into a market, with participants being given as much data for decision-making as possible, and being simultaneously milked for as much data as possible. I want incentives for innovation, to reduce the death-rate for billions yet unborn; I also want incentives for good performance now, not for the sort of regulatory capture our current system maximizes. Specifically I would:

1. Allow unlicensed health care, wherever it's clearly labeled as such; it won't get public support but people can choose to spend their money on it. The argument against this is apparently that people will make bad choices. Yeah, some will, probably including me and you. So? I've never understood the way some people believe that they (or those they select) can make good choices for others; in fact I'm moderately cynical about licensure requirements as they are now structured, whether for medics or morticians or cosmetologists.
2. Require transparent pricing, uniform no-bargaining pricing, from all providers of licensed health care. (The services producing my appendectomy really don't do this.)
3. Require that "licensing" be independent of geography; if the best/cheapest supplier of a particular treatment is two states over or on another continent, that's fine. As I've said before, I believe that telepresence medicine can enable the specialization and trade that has made markets work in other contexts since before Adam Smith wrote about it, so I expect this as the usual case, not an exception.
4. Take away the employer-based tax exemption; health care shouldn't be an employment issue.
5. Add a universal tax-funded "insurance" policy (insulation, actually): if your expenditures for "proven procedures" from licensed health care providers exceed the overall 16% (of GDP) average, then the taxpayers contribute some. Maybe if your cost is 30% of your income, then the taxpayers kick in (30-16)/2=7%, half of the overage, and the maximum you can pay is 50% of your income whether that's $0/year or $10M/year. Is that too generous? Not enough? I dunno. The point is to combine protection from catastrophe (but not from serious pain) with making sure that market prices are set by people or groups who are actually bargaining in that market, i.e. the better-off people for whom procedure X will not be covered. I want to do that combination with some simple, less-than-perfect-but-better-than-nothing rule with which I can trust a government. (Democrats and Republicans trust government on different things; just figure you want a better-than-nothing rule with which you'd trust a politician of the party you despise.)
6. If you want "unproven procedures" and you can pay for them, that's fine too; the licensed health care providers should have a strong motive to come up with new stuff and document/publish that it works. The FDA should not be able to keep you from paying for these likely-to-fail treatments, but it should keep you from charging it to the rest of us. If procedure X has no accepted studies supporting it, then it's up to you to pay for it.
7. Whatever additional insurance/insulation you want to buy for proven or unproven procedures is just fine, and can be bought across state lines. It's your problem. You want to save your money in a special bank account? Feel free.
8. Any care that has been paid or partly paid by public funds goes into an anonymized public database, so that we learn more about which treatments have what effects on which conditions. Organizations promoting not-yet-approved treatments will be encouraged to contribute data.

And that's really it, for me. I'm even less confident of this than I was when I wrote the first version, but I still don't see anything else I like as well. I think that the market I'm describing would probably evolve rather quickly into a market in which people choose and buy packaged health plans from "insurance" agents, and web sites build up crowd-sourced ratings of those health plans; there would be quite a bit of overlap with the better parts of what we have now. I hope. And I care, and I suppose I'd like to signal that I care.

Or then again, maybe not.

update:I never actually mentioned that this post was prompted by thinking about Mark Thoma's Economist's View: Discussion Question: How Can We Reduce the Growth of Health Care Costs?

there is far too much discussion of cutting services, and not enough about how to control costs without affecting services (e.g., using the government's purchasing power to reduce the amount the government pays for drugs, reducing the cost of insurance companies fighting over who pays bills, etc.)

You see, I doubt the premise: if you use government power as I believe Thoma wants, you are increasing the incentives for regulatory capture, crony capitalism, rent-seeking... you are putting yourself on a path where you have signaled your concern but healthcare is not what you're rewarding. Of course government power needs to be used -- to collect the money for treatments which research results say are crucial and which markets say are expensive. And government power needs to be used to maintain a context for innovation (rather than squelch it, as I believe our recent trends in "intellectual property" law tend to do.) But if bargaining-on-prices-with-the-government is the multi-billion$ activity you focus on, then that's what companies will have to invest in. That's a bad bad bad bad thing. I commented here.

Well, it's Easter morning. Maybe we're all saved?

Or then again, maybe not.

Colgate v. Consolidation -- maybe. For now.

At last night's budget meeting, Superintendent Bowers had very good news to announce. As Radio Free Hamilton put it, Colgate Contributes $300,000 More to HCS

HCS is able to restore the equivalent of 3.5 teaching positions scheduled to be cut from the 2011-2012 budget thanks to a $300,000 contribution from Colgate.

The state had planned to cut $486K; a last-minute cut reduction had restored $94K of this; now we're back within $92K of last year's situation, except that various expenses have risen. But the immediate layoffs of teachers are deferred. Yay!

RFH continues

Colgate's donation, which will be followed by a similar one next year, was announced at the HCS Board of Education budget presentation Tuesday night. Superintendent Dr. Diana Bowers said Colgate is willing to make two more similar donations in the future depending on need and the outcome of a potential merger with Morrisville-Eaton Central School.

Actually I'm not sure she mentioned M-E by name, but the point was clear; Colgate's extra support is not forever, but might continue for two more years, unless the Hamilton district had become part of a larger district "funded in a different way." Colgate has an interest in supporting HCS as the kind of school it now is.

This doesn't take consolidation off the table, even in the short run; it does provide a substantial incentive counter-balancing the state pro-consolidation incentive, at least for now. For me as a parent whose youngest child is an 8th grader, whose grandchildren will almost certainly grow up elsewhere -- gee, I can reasonably hope that takes care of it. Probably. We'll probably muddle through for several years.

For me as a local citizen, one who wants things to go well even for current elementary school students and maybe even for those who haven't been born yet....hmm.... the upstate NY demographic prospects are still what they were. Things that can't go on forever, won't.

Is there an answer? Sure. This local school, like many similar local schools, will not go on as it is -- that's a given. But that doesn't mean that there will be no local school, just that there will be no local school based on the current model of school organization. Personally that thought doesn't bother me, because even without financial pressures I would expect the current model of schools to change. It's really not a great model; it's a 19th-century factory model, as stretched in various directions by good people trying to work inside that model.

If I were trying to get a community school model that would last for a while, I'd try to follow the people in this region and others that I talked about in Budgets, Consolidations, Charters. A charter school might work better against consolidation pressure; might be better able to adopt the sort of technology that would help it work at a smaller scale. I'd like to know what my neighbors would think about that. Of course most of the ones I know are parents of 8th-graders, or older -- maybe they'll settle for a solution that will last a few years. “Après moi, le déluge.”

Or then again, maybe not.

Budget Notes

The NY budget has actually passed, Albany Approves Budget – On Time | FrumForum

The Assembly closed its gallery because it did not have enough people to handle crowd control. One protester was arrested for reportedly hitting a legislative staffer in the head with a cymbal....
The budget restores about $230 million of the $1.5 billion reduction in education spending that Mr. Cuomo proposed. The majority of that restoration, $134 million, will go to counties north of New York City. Another $53 million will go to New York City, and $43 million will go to Long Island.
Senator John J. Flanagan, a Long Island Republican and the chairman of the Senate Education Committee, said the restorations were aimed at “achieving a regional balance” in school financing. “We took a bad situation and made it better,” he said. “It’s not perfect.”

From Syracuse, we hear Budget gives Onondaga County schools $24 million less:

Because the Legislature restored some aid, the district expects to eliminate 500 positions from its payroll instead of the 584 it would have had to trim under Cuomo’s budget proposal, Lowengard said.

How much state aid will your school district get? | syracuse.com

Under the approved cuts, the Fayetteville-Manlius School District will sustain an 11.6 percent cut in aid, the biggest drop in Onondaga County. Under the governor's proposal, the district would have lost 20 percent of its aid compared to last year. Not counting building aid, F-M will receive $12.6 million from the state, nearly $1.7 million less than last year.
The Liverpool School District will see the smallest drop in school aid, 1.5 percent, in Onondaga County. Under Cuomo's plan, the district would have lost 14.7 percent.

And Hamilton goes down to $3,218,215 in state aid, a cut of $141,124 or 4.2%.oops, see update below.

Also from Syracuse, unions make concessions to save three percent of the jobs being cut according to North Syracuse School District unions offer concessions to help budget - NewsChannel 9 WSYR

11 unions in the North Syracuse School District agreed to several concessions in an effort to ease the tax burden on their community. The union's move will enable the district to save 15 positions.
Most of the concessions they made involved their health care plan. They say the concessions will save the school district $1.2 million.

Generic info on the budget at Governor touts “historic, transformational” budget | Politics on the Hudson

The budget realigns education financing to meet New York’s fiscal reality and provide sustainable and predictable funding while reaffirming the commitment to improve educational outcomes in the classroom. Prior to this budget, education spending was projected to grow at an unaffordable rate of 13 percent for the 2011-12 school year.

Comments on the disparate impact of budget cuts on upstate schools at Our view: Make equity in education aid a priority - Utica, NY - The Observer-Dispatch, Utica, New York

The average tax levy needed to fill the gap left in budgets in Oneida-Herkimer-Madison BOCES schools, based on proposed reductions in aid for 2011-12, is 11.80 percent. In wealthier Rockland County, where the same aid reduction is a smaller percentage of the budget, the average tax levy needed to fill the gap is 3.03 percent.
That means local districts need to either raise taxes by an unacceptable amount or, much more likely, slice more meat out of their programs. As a result, area students get less than their counterparts in wealthier districts.
“Downstate is cutting specialized programs,” Mettelman said. “We’re cutting English teachers.”

Of course, that doesn't mean that everybody downstate is happy. State Budget Gives City 'Very Modest' Restorations, Says Bloomberg Administration - WNYC

The Bloomberg Administration is still looking at the city's share of the state budget, but officials say it appears as though the legislature restored only about 1/3 of the $600 million the mayor relied on his budget — which already included agency cuts and nearly 4,700 teacher layoffs.
Director of State Legislative Affairs for the city, Micah Lasher, said the city wasn't treated fairly by Albany lawmakers.
"When they cut revenue sharing for other localities, there was a 3 percent cut," he said. "For New York City, there was a 100 percent cut.

NY Budgeting: worse for everybody than for anybody else!

update: Apparently things aren't quite as they seem; how unusual. Our Superintendent comments/corrects the values cited above on ...What it means for HCS

In the new runs, they took the Jobs money out so it looks like districts are being cut far less that they are. The numbers are deceiving and look much more favorable. They show Hamilton losing -3.38% in aid (with building aid) instead of 11.03%.
The new run also increases projected expense driven aids....In reality, even with an increase in projected expense driven aids, we are now at -8.38% in aid loss, using the original values as they were depicted in February.
All in all, the good news is that we are $94,000 to the good in real figures.This will certainly help!

Consolidation Links; Cuomo Unfair to Upstate? --Mar 19

I've gotten behind on this, but the links (collected as always on delicious.com) don't link to each other so I will try to catch up; Superintendent Bowers blogged on further Albany budget cuts and Ken Bausch commented in News From Albany [comment by Ken]

While building aid and UPK are exempted,all other aids are reduced by @23% this year. Thus we are not actually receiving transportation aid at 76 cents on the dollar, rather the effective rate is only 59 cents on the dollar. Thus a dollar spent on new vehicles last year costs the district 41 cents, rather than the 24 cents we assumed during the vote on the acquisition of a new bus and fuel efficient vehicle last year.

Radio Free Hamilton reported HCS Budget Cuts Include Positions

The cuts include the equivalent of five and a half full time positions. These include:

    * 1 full time administrative position;
    * 1 full time secondary guidance counselor;
    * 1 full time occupational therapist (these services will be purchased...);
    * 1 full time elementary school teaching position;
    * 1/2 choral music teaching position;
    * 1/2 science teaching position;
    * 1/2 custodial position.

Other cuts totalling $94,000 include:...

Of course it's all over the state; earlier this month, a Rochester-area district about a dozen times our size reported Proposed Greece school budget would eliminate 89 full-time staff positions

Greece, N.Y. — At a Greece school board meeting Tuesday night, interim superintendent John O'Rourke proposed a school budget that would slash 89 full-time staff positions from the Greece school district, reduce music education, and merge sports programs....The proposed $195 million budget would increase the tax rate 1.68 percent, bringing it to $22.92 per $1,000 assessed value. The budget calls for a reduction of elementary classroom time by 30 minutes a day, an increase in class sizes, the elimination of 4th grade music, reductions of instrumental and vocal music, and cuts to elementary art and library. The plan would also consolidate sports programs

The state-wide cuts do seem to have their main impact on rural schools, simply because the aid has been disproportionately directed to them, as argued in the Rochester area Glover: Proposed state cuts would be 'catastrophic' to rural schools:

Understanding that the state is in financial crisis and that everyone must make sacrifices, the superintendent says the proposed cuts in state aid are not fair spread out among suburban and rural districts. Small rural schools stand to lose the most. “We should all share in an equitable way,” Glover said. “Everybody has to tighten their belts, but this takes opportunities away from kids in rural schools.” Data taken from the Statewide School Finance Consortium website shows... Comparatively by county... “The poor schools are getting poorer,” as a result of the governor’s proposed budget cuts.

And smaller districts are being pushed towards consolidation, as in the Ithaca-area Trumansburg, South Seneca schools explore sharing resources:

Trumansburg Central School District officials are considering merger and resource sharing with the neighboring South Seneca Central School District. Spurred by Gov. Andrew Cuomo's public push for consolidation of smaller school districts in New York...

It's really quite a push, with some rather strong statements in which the New York governor hits school districts, defends education cut | Reuters

Claiming local school districts are playing "political games," New York's governor on Thursday defended his $1.5 billion cut to education spending. Governor Andrew Cuomo's proposed cut in state aid to schools -- the largest in history -- is aimed at closing a $10 billion budget gap for the next fiscal year. Cuomo told reporters on Thursday that his cuts average 2.7 percent per school district, and could be offset by rooting out inefficiencies, using reserve funds and lowering the salaries of superintendents.

It does seem that the governor is trying to understate the pain:Most school districts don't have deep pockets:

Andrew Cuomo continues his fiery rhetoric about school districts, claiming they have enough reserves and federal money in their coffers to weather state education cuts. Just Thursday he said districts shouldn't have to lay off teachers because of the aid cuts. But a report by the state Comptroller's Office this week shows that 100 of the state's 700 districts don't have the reserves and one-time federal "Education Jobs Fund" aid to offset the state reductions. Batavia is one of those districts.

The governor's not just making speeches. Capitol Confidential » Save NY now airs on school money

The pro-Cuomo Committee to Save New York is airing its third advertisement, targeting education waste. It quote a statistic that has made school officials bristle: New York is first in education spending but 34th in performance. That 34th ranking refers to the percentage of adults over 25 who have a high school diploma, and educators say it’s not a good measure given New York’s status as a magnet for immigrants. They point to other indicators, like the number of kids taking Advance Placement exams, which show New York doing better. It’s a clever ad. Someone is cutting up an education dollar while ticking off the stats, before Gov. Andrew Cuomo appears as the announcer says, “The governor’s plan target’s bureaucratic waste, and protects our students and teachers. Tell your lawmaker to support the governor’s plan.”

Upstate N.Y. schools anguish over aid cuts | The Ithaca Journal | theithacajournal.com

Among school districts facing the largest cuts per pupil, 97 percent are in upstate communities while 75 percent of those facing the smallest cuts are in downstate suburban communities, according to the Alliance for a Quality Education, an Albany-based union-backed advocacy group.

The cuts are necessary, because the state has run out of money. Why has the state run out of money? Well, quite a few reasons...here's one, as reported in the NYT two weeks back: State Workers and N.Y.’s Fiscal Crisis - NYTimes.com

At a time when public school students are being forced into ever more crowded classrooms, and poor families will lose state medical benefits, New York State is paying 10 times more for state employees’ pensions than it did just a decade ago. That huge increase is largely because of Albany’s outsized generosity to the state’s powerful employees’ unions in the early years of the last decade, made worse when the recession pushed down pension fund earnings, forcing the state to make up the difference. Although taxpayers are on the hook for the recession’s costs, most state employees pay only 3 percent of their salaries to their pensions, half the level of most state employees elsewhere. Their health insurance payments are about half those in the private sector...

So that's part of it. And what to do about it? I have no idea. Or rather, I have lots of ideas but of two kinds: trivial on the one hand, and politically impossible on the other. I dunno.

Mostly-Irrelevant Update: the NYT has an interesting proposal for partially fixing the long-term pension/budget problem which would have made the last couple of years more equitably disastrous, and would make the future better able to fund education: share the pain.

It is that simple: Just scrap the current indexing of pensions to the Consumer Price Index and replace it with a link to the state’s gross domestic product. We can’t accurately fund traditional pension plans until we have G.D.P.-linked bonds, or “trills,” which I described in a recent column. But it is time to start the transition, so that pensions share risks across generations.

That would be a good thing. It wouldn't fix our impending mainly-health-care financial disaster, but it would be a good thing.

Budget Balance: Healthcare

I've been looking at a fair number of blog posts like David Henderson's I Agree: Budget Cutting is Easy

Like Arnold and some of his commenters, I found it way easier than I thought it would be to cut the federal budget on the New York Times' interactive site. After I was done, the Times announced that I had solved the deficit. How did I do so? Entirely with budget cuts, with one exception. ...I did increase taxes by having the favorable tax treatment of employers' contributions to employees' health insurance phase out gradually.

Somewhat similar (fewer cuts, more tax increases) we get Megan McArdle's In Which I Overbalance the Budget

allowing the Bush tax cuts to expire, eliminating or modifying major tax subsidies like the employer health insurance deduction, and cutting all manner of subsidies. I could have gone farther, but I deliberately left most military spending alone ... In fact, I generated too much in savings; we now have large surpluses in 2018 and 2030.

I was mildly surprised at how easy they found it, but as long as politically unrealistic solutions are okay I wish I could have expressed my actual preferences. Right now the Federal budget structure is roughly:

• Defense and security: ... some 20 percent of the budget, or $715 billion,... includes the cost of .. Iraq and Afghanistan...
• Social Security: Another 20 percent of the budget, or $708 billion....
• Medicare, Medicaid, and CHIP: ... 21 percent.., or $753 billion...Both Medicaid and CHIP require matching payments from the states....
• Safety net programs: About 14 percent...
• Interest on the national debt:... $209 billion, or about 6 percent...

That's 55% redistribution to old/young/sick/poor, 7% federal pensions, 6% interest, 20% defense, 3% educ, 3% highways etc., 2% research, 1% furriners, 4% other. Present projections have the budget busted mainly because of the redistributions' future growth, mainly old/sick. (That's a completely separate issue from this year's deficits, which come mainly from the recession.)

As Ezra Klein puts it in Ezra Klein - Four budget calculators, one story

they're all good, clean fun, and they all make the same basic point: It's the health-care system, stupid. In the Times' calculator, the single biggest thing you can do is add a "magic asterisk" to the health-care system. We don't know how exactly we're going to hold Medicare's spending growth to GDP+1%, but if... we get that growth rate, or something close to it, we can get the budget into balance. If we can't, well, we can't.

Nothing else matters (to the deficit) but healthcare? Well, nothing else matters nearly as much, and "healthcare reform" didn't deal with it. So how do we reform healthcare? Answer: well, you already know my answer. In today's news from England, we have A patient was recovering today after making medical history by having a world-first heart operation carried out by a robotic arm.

Patrick Flood, 63, yesterday thanked doctors at Leicester's Glenfield Hospital just minutes after the operation finished. He was due home today. Dr Andre Ng, a consultant cardiologist, used a robotic arm and sophisticated computer images of Mr Flood's heart to fix its irregular rhythm. ... Dr Ng controlled the robot arm in a room next to the theatre, using the 3D computer model as a guide.

This is telepresence robotics: it doesn't replace the doctor with a robot (not for a long time yet), but it does mean the doctor doesn't have to be there. Next room? Next county? Across the Atlantic? Anywhere. And that means that the traditional economic benefits of specialization and trade are available for medicine: the world's best surgeons for sub-sub-sub-specialization X.37.Z.13 can be based in countries A,B, and C, available 24/7 anywhere on earth, competing with the almost-as-good group in countries D,E,F... Since they don't have to handle anything but their own kind of operation, their training can be shorter, and updated more frequently, than that of a surgeon who has to handle a wide variety of problems for patients from a particular region. (You do need a local patient's representative trained as a general-purpose physician's assistant, probably.) Of course telepresence in diagnosis is just as important; here's a two-week-old press release Vator.tv - AT&T announces new health division

AT&T already boasts a health portfolio that includes AT&T’s Telehealth Solutions, which uses video and audio conferencing to allow patients in rural and under-served areas to consult a specialist who may be hundreds of miles away. AT&T partnered with the University of California in April to provide Managed Network Services for the California Telehealth network...

and yesterday, Crain's New York Business was reporting on NYers discover potential of mobile health

The idea that electronic devices could bring health care to areas with few services is attracting big donors and setting off an applications race among technology and software companies.

Yeah, maybe. Well, actually, yeah. Right now they're talking about it as a way to communicate with the doctor you already have, but I expect and hope that if your doctor doesn't start outsourcing to specialists (who are always available, and FedEx will deliver your self-test tomorrow) then you'll find yourself using an Android/iPhone app that gets you directly to better diagnostic services.

Cheaper and better healthcare. Maybe. If we don't stop this from happening via the wrong kind of healthcare reform, then we'll get there eventually. And if we had the right kind of healthcare reform, like what I've talked about before, we'd get there sooner.

Or then again, maybe not

update: Well, there's another issue which I should have mentioned again as looming large in my always-mistaken thoughts: growth. David Leonhardt notes One Way to Trim Deficit - Cultivate Growth - NYTimes.com

The Times’s online deficit puzzle... asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion.

And how to promote growth? Well, tax reform is the approach suggested by today's Economist in Inequality and executive pay: All hail the progressive consumption tax!

Mr Frank's proposal is well worth considering on pro-growth and counter-cyclical grounds. As Mr Frank writes: "If a progressive consumption tax were phased in gradually, its main effect would be to shift spending from consumption to investment, causing productivity and incomes to rise faster. Should a recession occur, a temporary cut in consumption taxes would provide a much more powerful stimulus than the traditional temporary cut in income taxes."

Yup. I've said it before. The simplest approach, for my simple mind, would be to stretch the 401K notion to include a long list of kinds of accounts (not just your bank accounts but investment portfolio including real estate that you don't live in) as "pre-tax"; your income can flow into this list without paying taxes, and then it can grow, but you can't spend it without paying taxes. And we get rid of most kinds of deductions, apart from that deferral. (I say this as one who has a whole lot of deductions, each of which can be reasonably argued for, but whose net effect is that people like me are being tax-subsidized by people with a lot less money.)

I don't personally sneer at earmark reform; I view it as a significant part of a favor-trading system that makes it profitable for companies to lobby for targeted legislation , which I suspect of hurting growth far more than the dollar amounts of the earmarks would predict. But the main growth-promotion that a government can do is...well, all I can do is quote Adam Smith:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.

Peace is an arguable issue--how much should we (or can we) pay for the Pax Americana even if it's real? Tolerable administration of justice (mostly, rule of law) is something I think we've been moving away from, and I believe Obama has moved us further, and sometimes I'm even less optimistic than other times. But easy taxes, not needing to be nearly as low as Smith would have thought because we're so much wealthier now -- easy taxes we might be able to get.