Comment to Paul Krugman blog post "Taxing Job Creators"

A comment I submitted to this blog post by Paul Krugman:

You say that this paper argues that the top earners should be taxed at a rate that maximizes the amount of revenue collected from them. And this is because this money collected from them is better used for other societal purposes (government services, welfare, entitlements, etc.) that the poor and middle class rely on. I.e. the money gives much more value to society as a whole than the marginal extra value it would give to the rich guy if he kept it. That's fine, but to me this seems to be taking a too narrow view and suffers from a kind of local maxima problem. Don't you really want to be maximizing, in the aggregate, the total revenue you collect from everyone; i.e. set tax rates and deductions/credits so as to maximize the total revenue collected. Don't just set rates, etc. so as to maximize what you collect from a small subpopulation (the very rich), but rather set rates, etc. to maximize total revenue collected from everyone.

Taking this view one might be able to argue that it is actually better to tax the rich at a lower rate. For example, with the extra money that they would get to keep with lower rates, the rich might invest this money in new businesses which would hire a lot of people that otherwise would not have been hired --- and these people would then be paying taxes on their earnings and spending their money on goods and services in the community, which demand would further increase demand and revenue, etc. So it is possible that the revenue lost by taxing the rich at lower rates could be more than made up by the economic effects of how the rich end up deploying this money that they get to keep (and otherwise would have had to give up). I'm not saying this is definitely true, but just showing a plausible argument. And maybe optimizing total revenue in this way would still effectively tax the rich at a 70% rate, but it seems you're solving the wrong problem when you just consider tax rates on the rich; you should consider the whole revenue picture.

Are we condemned to repeat the past even if we remember it in massive detail?

Comment to this blog post by Paul Krugman:

Could be a very interesting case study in how it is possible for terrible history to repeat itself even in the face of detailed analysis and understanding of past similar terrible events. After the great depression most would have said "that was awful, we'll never repeat the mistakes that led to that and hampered our getting out of it!" But here we are doing it again! Why? Why? Why? Santanyana said "Those who cannot remember the past are condemned to repeat it". Well heck, we remember the past in great detail, tons of books are written about it, but we're still being condemned to repeat it!!

Ketamine as anti-depressant.

A major thrust of anti-depressant research revolves around ketamine:

http://psychcentral.com/news/2010/08/31/the-mechan...

i.e., trying to find easier to administer related molecules that also don't have all the recreational drug-like pschotic effects.

US holding down health care costs better than Canada?

Comments made to this Ezra Klein post:

Seems maybe the Canadians aren't actually so good at controlling health care costs:

"The fact is wait time “strategies” and discussions of public accountability become irrelevant when the public coffers are empty. We can talk about improved efficiency through electronic health records or curbing physician prescribing habits all we want. But provincial governments will continue to face unsustainable growth in health care costs because policy-makers continue to deny the fact that we cannot continue to pay for health care through public means alone. This reality has recently been echoed by numerous organizations, including the Fraser Institute, TD Economics, the C.D. Howe Institute, the OECD and the IMF.

Some more statistics: Over the past 10 years and averaged across the provinces, government health expenditures grew at an annual average rate of 7.5 per cent. Over the same period, total provincial revenues increased at an annual average rate of 5.7 per cent, while the economy grew by 5.2 per cent. Project these growth trends into the future and it’s clear that most provinces will soon be facing a financial crisis. By 2017, six out of 10 provinces are expected to spend 50 per cent of total available revenues on health care. And some provinces are almost already there, such as Ontario and Quebec, where half of provincial revenues will be swallowed up by health care costs by the end of this year."

Full article here: http://www.thespec.com/opinion/columns/article/542450--health-council-of-canada-short-sighted-on-health-care-reform

justin84

Over the past 10 years (1999-2009 actually), U.S. health expenditures grew 6.8 percent per year, while the economy grew 4.2 percent per year.

https://www.cms.gov/NationalHealthExpendData/02_Na...

http://www.bea.gov/national/nipaweb/TableView.asp?...

So assuming the data justin84 links to and the source data from that article I posted is correct, the US has actually done better at controlling health care costs than Canada over the last decade?

What about the fact that most of their provinces are/will soon be spending half their total revenue on health care costs? If true this seems pretty extreme and unsustainable.

But isn't cost increase containment the whole point, the thing that's gonna kill us if we don't do it? Canada is an extreme single payer system (doctors can't opt out of it, there can be no competing private system of doctors, hospitals, insurance, etc.) The government IS the health care market and yet with its dominant negotiation power as the only player in town they still are not successfully holding down health care cost increases (i.e. to rate of GDP growth or less). So using Canada as an example of how you can hold costs down effectively by going to single player (as many argue) won't work.

Comment on 'Where Are Biotech’s Billionaires?'

Here is a comment I made to this post by Matthew Herper on his Medicine Show blog:

I wonder how much of it is due to the notion that seems to be accepted by society that it is distasteful and evil to want to try to profit from peoples’ sickness and misery. Things like Facebook or Google, etc., nobody’s life is depending on those and they’re cool and hip, so hey, its okay that those guys are billionaires. But how dare you think of profit when I’m sitting here dying from cancer! My life is at stake here and all you’re thinking of is your greedy profit motive! How evil you pharma companies and biotechs are!! Etc. Etc. I think a lot of people tend to think that way and collectively it could be a downward pressure on profitability. Maybe the scientists starting the biotech companies also (maybe subconsciously) think this way too and it causes them to be less ruthless in the business decisions they make (e.g. well, I could hold out longer for a better offer so I could keep more of the money myself, but by selling out now at a lower profit we can get the new medicine to the people who need it quicker. Etc. Etc.)

Finally, medicine is something that you really can’t choose to not use (like you can choose to use Facebook or Google or not). If you get sick and there is a medicine for what ails you, you will do everything in your power to get it. So because of this there could be incredible societal pressure to make sure medicines are as affordable as possible (thus minimizing profit). Anyway, the other posters’ ideas around longer time horizons, etc. are also likely part of the story, just wanted to add another idea

Social Security an Empty Lockbox?

Some comments I made to a column by Charles Krauthammer:

Yes, I agree with this assessment. Technically the bonds in the social security trust fund are "backed by the full faith and credit" of the US government and so you can naively say "well, there's no safer investment than US government bonds, so the trust fund is flush and set for years to come!" But the key thing is, those government bonds will have to be paid off with real assets/revenue, and where does the US government get these real assets/revenue? From us taxpayers, of course. Social security has not been a problem so far because the yearly new intake of money from payroll taxes has more than covered the outflows (i.e. checks to seniors). But starting last year this changed, and going forward the trust fund will need to be tapped more and more to send out seniors' checks, and revenue (i.e. taxes) will need to rise to pay for it (or benefits reduced, etc.)

Its basically the same situation as if more and more of the foreign holders (China, Japan, etc.) of US treasury bonds all of a sudden start redeeming their bonds and demanding that the principal be returned; revenue would need to be increased to be able to handle these increasing redemptions. Same for social security going forward.

------

One more thing I want to emphasize. Krauthammer and others of a like mind are not saying that the bonds in the trust fund are wothless and have no value; they do have value and are a real obligation of the US government, just like all the other bonds held by foreigners. The key issue is the economic consequences to the United States from fully honoring this obligation. The money to pay for the redemption of these social security trust fund bonds will have to come from us taxpayers and could require tax increases, and that will have real economic consequences (reduced economic growth, etc.)

So yes, technically the trust fund bonds must be honored, but it is us as taxpayers who is doing the honoring. So we as a country need to decide: is it better to fully honor the debt obligations to the social security trust fund (and then have to face the negative economic consequences of that); or would it be better to lessen those obligations somewhat (raise retirement age, means test, etc.) which would require smaller or no tax increases and thus lessen or avoid negative economic consequences. They are both bad options and you'd rather not have to do either, but that is basically the choice we face. So which of these is the least worst solution for our country as a whole?

------

Actually, in thinking about this some more I wonder what the relative real economic consequences would be of the two options I wrote (i.e. fully honor social security obligations and raise taxes to fund, or lessen the obligations and don't raise taxes). Basically, it is all our (i.e. United States citizens) money here and the key decision is just how to divvy it up among ourselves. Do we give more to seniors (by social security) and take away from younger workers to pay for it; or do we give less to seniors and let younger workers keep more. So the key question is what is the optimal allocation of the money among different age groups and classes of US citizens, and the answer to this would depend on your priorities and moral persuasion. Are we trying to optimize growth of the US economy? Do we value a comfortable retirement for seniors over growth? Etc.

But then again, the size of the pie is the same and so maybe the economic consequences are the same no matter what we do. I.e. a dollar taken away from a current worker in taxes to fund social security is a dollar that the worker can't spend in the economy; but that dollar goes to a social security recipient who CAN spend it. Alternatively, a dollar kept by the current worker can be spent in the economy, but then that is a dollar NOT being spent by a social security recipient. In either case, a dollar is getting spent in the economy, the difference is just who is doing the spending. So maybe it is just a moral question. Do we value the needs of retired seniors over the needs of current workers? Probably too simplistic (e.g. current workers might be more likely to spend the dollar than seniors, etc.) but one reasonable way to think about the problem nonetheless.

------

But then again, maybe the real issue is that you ideally want all your citizens to be productive members of society, i.e. adding real economic output. It sounds cruel of course, but technically retired seniors are not productive members of society, in that they are consuming resources without giving back in productive use of their time and energies to help produce those resources (i.e. not working, which is the definition of retirement). So you ideally want a small percentage of retired people in your population, but for us this will be increasing going forward. So there will be a relatively smaller productive work force supporting a relatively larger group of retired seniors. This is just a fact and not much you can do about it (maybe raise retirement age a bit but there are physical limits to this); not sure what we can do about this.

How much does it cost to develop a drug?

A comment I made to this 'In the pipeline' post:

I think others have noted that to get a basic idea of how much a drug costs you could just divide total R&D costs by number of new drugs achieved for that R&D spend. If you look at the figure in the recent NY Times article:

http://www.nytimes.com/2011/03/07/business/07drug.html?_r=2&ref=general&src=me&pagewanted=all

They give the total number of new drugs approved per year going back to 1995, and also the total R&D spend per year going back to 1995. Even just eyeballing these figures, about $1 billion per approved drug looks about right (actually a bit on the low side; and its getting even more and more expensive more recently, with R&D spending going up but number of new approved drugs going down significantly from the seeming "glory days" of 1995 to 2000, although biologic drugs aren't included here and could explain some of this). Maybe this is a rough calculation, but it can't be too far off could it?

Interesting, easily understood analogy on how the universe works; the universe's version of '20 questions'

I've always been curious about quantum mechanics and ideas like "the collapse of the wave function". Below is an interesting, easy to understand analogy about this. It comes from this Scientific American article.

"Wheeler once explained this concept to me by comparing a scientist to someone playing the "surprise version" of the old game 20 Questions. In this variant, the Guesser leaves the room while the rest of the group--or so the excluded person thinks--agrees on some person, place or thing. The Guesser then re-enters the room and tries to guess the group's secret with a series of questions that can only be answered with a yes or a no.

But the group has decided to play a trick on the Guesser. The first person to be queried will only think of something after the Guesser asks his question. Each subsequent person will do the same, making sure that his or her response is consistent with all previous questions. "The word wasn't in the room when I came in even though I thought it was," Wheeler noted. In the same way, physical reality exists in an indeterminate limbo before we pose our questions. "Not until you start asking a question, do you get something." We live in a "participatory universe," Wheeler suggested, which emerges from the interplay of consciousness and physical reality, the subjective and objective realms."

Comment on Robert Reich post "Harry Reid, and What Happened to the Public Option"

Here is a comment I made to this

We can go further!!!

"If, on the other hand, Medicare were allowed to negotiate lower drug prices, biotech drugs weren't granted a twelve-years monopoly, and doctors had to accept Medicare reimbursements in line with legislation enacted years ago, Americans would save billions."

Wonderful ideas, but why stop there! Why don't we get really aggressive with this! Why don't we do this. Let's just mandate that doctors must earn minimum wage, drug companies must sell all drugs for $1 for a year's supply, and absolutely no exclusivity period for new drugs. Anyone can copy drugs for free right away; it will be just like buying cheap knockoff Gucci handbags in Thailand or some other poor country!! So what that there will no longer be any incentive for anyone to develop drugs, the key thing is to ramrod price controls down the throat of the medical complex so we can control costs! And let's have the CBO score this plan --- the savings will most definitely be mind boggling and what congressman in their right mind would reject such massive savings for middle class Americans! Its a shoo in!! We can have our cake and eat it too!!!!

If only. You will get what you pay for. If you force doctors to accept the measly payments based on the legislation of years ago, you will soon no longer have doctors that will take medicare (if you still have any doctors at all that is, what with the massive bonuses on Wall Street maybe they'll all switch to being investment bankers). Modern medicine is simply very expensive and if you're not willing to pay it you will get rationing and poorer care.

Comment to column by Bob Herbert.

I made the following comment to a column by Bob Herbert:

It seems that about every other column of yours is essentially the same --- "the jobs situation is horrible. The government must do something to fix it!" I agree with you, but it seems the government is being pretty lethargic about jobs creation. So much political crap who knows if anything serious can get done to fix things. What about we the people directly doing something about creating jobs? Why do we have to be content to just wait for the government to save us? Isn't there anything proactive that we the people could collectively choose to do to try to help fix the jobs situation? I don't have the answer, but some suggestive ideas. Web sites like microplace allow one to invest $1000 as a loan for someone in some third world country to start a business. Why can't we have something like this for the USA? A kind of venture capital fund to start some kind of business to get unemployed people employed again. This doesn't have to be sexy --- basically, are there any small business opportunities that might be able to get started with some seed money and could hire the unemployed. Maybe some small community somewhere doesn't have many restaurants --- give some seed capital to start one! And maybe this fund could be used for the people themselves (not the government) to start a kind of WPA or CCC. It would be nice if we could count on government to fix our unemployment woes, but why not also try to take some initiative ourselves to try to fix the situation. Maybe you and your other columnists at the NY Times (Krugman, Brooks, etc.) could try to make something like this so. Instead of continually writing about the woes of unemployment, maybe you could actually try to do something.