after the fall of Saigon

April 24th, 2015

Next week marks the 40th anniversary of the fall of Saigon, the day the Viet Cong took over the capital of the US-backed government of South Vietnam. FT columnist Gary Silverman recalls the political division that the Vietnam War caused in the US, and reminds us that Americans have since ignored the Vietnamese, who suffered “a civil war that took the lives of hundreds of thousands — or maybe even millions — of people”.

On one side [40 years ago] were the Americans who were willing to sacrifice their own sons to protect the Vietnamese from the communists. In all, more than 3m members of the US armed forces were sent to Southeast Asia on that mission. More than 58,000 Americans died. Thousands upon thousands more came home wounded — in body or in spirit, or both.

On the other side were Americans who felt there were better ways of showing affection for people than showering them with napalm. Some of them grew so unhappy that they rebelled against their own leaders, pledging allegiance to Ho Chi Minh’s government in Hanoi and its allies in the south, the National Liberation Front, also known as the Viet Cong. ….

[After the fall of Saigon,] Americans of all political stripes found reasons to ignore the Vietnamese. As the brutality of the communist government grew more evident, opponents of the war switched their focus to causes in other places where the oppressed were more appealing. The hawks, meanwhile, found new enemies all over the world, from Grenada to the Middle East, and eventually dedicated themselves to the war on terror.

All the while, Americans have never stopped squabbling about our role in Southeast Asia, if only because the what-ifs of the situation remain unanswerable, and the rifts in US society created by the war have never healed. But a funny thing has happened to the Vietnamese in the process. They slowly, but surely, have faded from the US view.

Gary Silverman, “The US has forgotten about the Vietnamese“, Financial Times, 24 April 2015 (metered paywall).


April 24th, 2015

Long ago, during the presidency of George W. Bush, American satirist Stephen Colbert coined the term ‘truthiness’. In an FT column this week, British economist John Kay looks back on the evolution of truthiness, and the role it plays in political debate on both sides of the Atlantic.

We are all subject to confirmation bias — a tendency to find, or interpret, facts to support opinions we already hold. But truthiness takes us further. Mr Colbert has described it as truth that “comes from the gut”. There is a profound egoism about truthiness: these are beliefs we hold not because they look true to me, but because they look true to me. A statement is truthy if it is held valid independently of any evidence. Truthiness is the belief that comes when conviction is prized over information. ….

In his fine book Enlightenment 2.0, philosopher Joseph Heath notes an effusion from former (and prospective) presidential candidate Rick Santorum. The Republican described how in the Netherlands elderly patients are “euthanised involuntarily” and its fearful residents seek medical treatment abroad. Mr Heath observes that Mr Santorum “seemed not to realise that the Netherlands was a real place, where people might hear what he said, and hope to set the record straight”. But Mr Santorum was unmoved; a spokesperson explained to a Dutch reporter, without retraction or apology, that the former senator “says what’s in his heart”.

John Kay, “How beliefs became truths for the political establishment“, Financial Times, 22 April 2015 (ungated link).

Readers of this blog might recall that the TdJ “economics as faith” series — for example, here — provides examples of ‘truthy’ thinking by economists. By ‘faith’, I was referring to any strong conviction, not necessarily religious faith. Perhaps “economics as truthiness” would be a better title for the series. Some of the examples, however, are tautologies, so true by definition.

the high cost of healthcare

April 20th, 2015

Soaring healthcare costs affect government (and personal) budgets around the world. Reform is needed. A Swedish reader of the Financial Times suggests that, on this subject, countries could – and should – learn from others. I agree.

By limiting itself to being national, the healthcare policy debate of most countries not only constrains itself overly much by giving exaggerated weight to national historical circumstances and purely traditional patterns, but also severs itself in a contra-productive way from the creative input from other countries.

What is needed is a continuous international debate of healthcare policy in an arena where academia, practical experience and politics (not one or the other) from many countries can meet, seriously compare different models and challenge each other’s assumptions in order to learn from one another.

Gustaf Almenberg, “Healthcare debates are too narrowly focused“, letter to the editor, Financial Times, 20 April 2015 (metered paywall).

Mr Almenberg (born 1945) is a business consultant, artist and psychotherapist who resides in Dalby, Sweden.


markets for healthcare

April 20th, 2015

Economists generally favour free markets, and abhor government (or private) monopolies. Why? Because free choice allows consumers to discriminate among suppliers, voluntarily paying higher prices for better quality, and paying a lower price (or refusing to purchase) inferior goods and services.

Sometimes, though, choice is over-rated and free markets fail. This is widely acknowledged to happen in markets for healthcare. Why? Because few consumers are able to judge the quality of healthcare services. Healthcare providers can succeed by providing superb lodging and meals while providing poor services that matter (or should matter), namely care that improves the health and longevity of patients.

Single-payer systems (public or private insurers) sometimes attempt to mimic free markets by rewarding providers who provide the ‘best’ healthcare experience, in the eyes of patients. American journalist Alexandra Robbins explains that this also fails, for much the same reason that free markets fail. Healthcare providers, she concludes, “can offer poor care and still get high patient-satisfaction ratings, and an alarming number of them do”.

When healthcare is at its best, hospitals are four-star hotels, and nurses, personal butlers at the ready—-at least, that’s how many hospitals seem to interpret a government mandate.

When Department of Health and Human Services administrators [in the US] decided to base 30 percent of hospitals’ Medicare reimbursement on patient satisfaction survey scores, they likely figured that transparency and accountability would improve healthcare. …. They probably had no idea that their methods could end up indirectly harming patients. ….

In fact, a national study revealed that patients who reported being most satisfied with their doctors actually had higher healthcare and prescription costs and were more likely to be hospitalized than patients who were not as satisfied. Worse, the most satisfied patients were significantly more likely to die in the next four years. ….

By treating patients like customers, as the nurse Amy Bozeman pointed out in a Scrubs magazine article, hospitals succumb to the ingrained cultural notion that the customer is always right. “Now we are told as nurses that our patients are customers, and that we need to provide excellent service so they will maintain loyalty to our hospitals,” Bozeman wrote. “The patient is NOT always right. They just don’t have the knowledge and training.”  Comfort is not always the same thing as healthcare.

Alexandra Robbins, “The Problem With Satisfied Patients“, The Atlantic, 17 April 2015.

Award-winning journalist Alexandra Robbins (born 1976) has published five books that focus on young adults, education, and modern college life. This article draws on her latest book, The Nurses: A Year of Secrets, Drama, and Miracles With the Heroes of the Hospital (Workman Publishing, 2015).

HT Dr Andrew Willmore (University of Ottawa).

economists’ views on UK policy issues

April 19th, 2015

UK political parties have issued manifestos in preparation for the upcoming general election. The politicians have had their say. What type of manifesto might we expect from professional economists? Tim Harford, FT ‘undercover economist’, interviewed seven top British economists and asked them what policies they would implement were they in charge of running the country. He found a surprising degree of consensus, possible only because he deliberately ignored economists known to have extreme political views.

My selection of economists was mainstream — no Marxists or libertarians — but arbitrary. There is no pretence of a representative survey here. But there were common threads, some of which may surprise.

Let’s start with the deficit which, if we are to judge by column inches alone, is the single most important economic issue facing the country. Yet with the chance to push any policy they wished, none of my economic advisers expressed any concern about it. ….

Economists have a reputation for being low-tax, free-market champions. Yet none of my panel fretted about red tape, proposed any tax cuts or mentioned free trade. Other untouched issues included the National Health Service, immigration and membership of the EU. Nobody suggested any changes to the way banks are regulated or taxed. ….

So what would the UK look like with my board of economists in charge? We’d have more borrowing and considerably more investment — in housing, in big infrastructure, in science and in green cities. Taxes seem unlikely to fall but they would be rationalised, with a focus on energy efficiency and a transparent taxation of income and housing wealth. Inequality would be in the spotlight.

The economists seem happy to leave the politicians to their usual arguments about the EU, immigration, the price of beer and the problem of tax-dodging. Noting that every party makes similar promises about funding the National Health Service, the economists have let it be.

Tim Harford, “The economists’ manifesto“, Financial Times, 18 April 2015 (metered paywall).

Tim Harford’s ‘board’ contains the following economists: Nick Stern (LSE), Jonathan Haskel (Imperial College, London), Gemma Tetlow (Institute for Fiscal Studies), Simon Wren-Lewis (Merton College, Oxford), Diane Coyle (University of Manchester), John van Reenen (LSE), Kate Barker (author of the 2004 Barker Review of Housing Supply). For details, read Mr Harford’s full column in today’s Financial Times.

sexism in US politics

April 18th, 2015

FT columnist Simon Kuper is surprised to find that few US voters care whether a woman, for the first time, might head their State (and Government).

A female American president is a historic prospect. However, most voters seem unbothered. In a Washington Post/ABC News poll in January, two in three respondents said Hillary Clinton’s gender wouldn’t affect their vote. Of those to whom it did matter, over two-thirds said it counted in her favour. The few who openly rejected a woman president were mostly Republicans anyway.

In short, to quote the satirical magazine The Onion: “New Poll Finds 74% of Americans Would Be Comfortable Blaming Female President for Problems.” This is quite a turnround: 20 years ago, Hillary was widely considered too pushy even to be the president’s wife.

Simon Kuper, “What candidates aren’t talking about“, Financial Times Magazine, 18 April 2015 (metered paywall).

Other issues in which US and UK voters show little interest are banks, Europe, the rest of the world (except, in the US, for “the three I’s: Iran, Israel and Isis”), climate change, happiness, privacy, and sex (except, again, in the US, where the Republican base “remains antsy about gay marriage and abortion”).

Sadly, it appears that the outcome of both elections (especially the UK) will depend more on personalities than on issues. Mr Kuper suggests that it is makes sense to blame this on the electorate, since “an election is a market in which politicians offer goods they think voters want”.

Deirdre McCloskey on Thomas Piketty on Capital

April 15th, 2015

American economic historian Deirdre McCloskey has written a lengthy, critical review of French economist Thomas Piketty’s surprising best-seller, Capital in the twenty-first century. The ungated review was published in a journal of Erasmus University Rotterdam, where McCloskey was a visiting Professor of Philosophy for five years.

Thomas Piketty has written a big book, 577 pages of text, 76 pages of notes, 115 charts, tables, and graphs, that has excited the left, worldwide. “Just as we said!” the leftists cry. “The problem is Capitalism and its inevitable tendency to inequality!” First published in French in 2013, an English edition was issued by Harvard University Press in 2014 to wide acclaim by columnists such as Paul Krugman, and a top position on the New York Times best-seller list. A German edition came out in late 2014, and Piketty-—who must be exhausted by all this-—worked overtime expositing his views to large German audiences. He plays poorly on TV, because he is lacking in humor, but he soldiers on, and the book sales pile up.

It has been a long time (how does “never” work for you?) since a technical treatise on economics has had such a market. An economist can only applaud. And an economic historian can only wax ecstatic. ….

It is an honest and massively researched book. Nothing I shall say—-and I shall say some hard things, because they are true and important-—is meant to impugn Piketty’s integrity or his scientific effort. …. Hélas, I will show that Piketty is gravely mistaken in his science and in his social ethics. But so are many economists and calculators, some of them my dearest friends.

Deirdre Nansen McCloskey, “Measured, unmeasured, mismeasured, and unjustified pessimism: a review essay of Thomas Piketty’s Capital in the twenty-first century“, Erasmus Journal for Philosophy and Economics 7:2 (Autumn 2014), pp. 73-115 (open access).

Deirdre McCloskey (born Donald McCloskey, 1942) is professor of Economics, History, English, Communication, Philosophy and Classics at the University of Illinois at Chicago. She is author of numerous books; her latest (excepting two collections of republished essays) is Bourgeois Dignity: Why Economics Can’t Explain the Modern World (University of Chicago Press, 2011).

McCloskey has described herself as “Not ‘conservative’! I’m a Christian libertarian.”

Mrs Clinton and the politics of gender

April 14th, 2015

Hillary Clinton is now an official candidate for the job of President of the United States. FT Washington correspondent Edward Luce wonders if the fact she would be the first woman to hold that high office will attract enough female votes to ensure her victory on election day.

Mrs Clinton virtually ignored her gender in her 2008 campaign. The prospect of electing America’s first black president overshadowed that other big glass ceiling. Because of her familiarity, it is easy to underestimate her potential to excite women in 2016. In the US, black men received the vote more than half a century before women. Black turnout for Barack Obama was a strong factor in his 2008 landslide. Women could do the same for Mrs Clinton. The gap in turnout is already wide (63.7 per cent of US women voted in 2012, versus 59.8 per cent of men). If Mrs Clinton could extend that by a couple of points, her electoral maths would be decisive.

The women’s vote is Mrs Clinton’s potential gold mine. But it is also her pitfall. Any sense that she is pandering to one slice of the electorate — even if it makes up more than half of it — could backfire. Many women (and men) revile Mrs Clinton as a manipulative figure who owes her career to her husband. Women lean more Democratic than Republican, but most do not vote on a candidate’s gender. Moreover, at 67, Mrs Clinton suffers from an age gap. In 2008, Mr Obama won more young women’s votes in the Democratic primaries than Mrs Clinton, although she received marginally more of the female vote overall. She cannot expect to shift the gender gap simply by declaring that her election would make history. She will need to incite women’s hopes without alienating men.

Edward Luce, “Why women are Hillary’s key“, Financial Times, 13 April 2015.

the Hitler-Stalin pact

April 13th, 2015

This is history that is helpful for understanding the current conflict between Russia and countries of Eastern Europe. Hungarian-born American historian John Lukacs (born 1924) reviews The Devils’ Alliance: Hitler’s Pact with Stalin, 1939–1941 (Basic Books, 2014), written by British historian Roger Moorhouse (born 1968). The essay is long, very personal, much more than a book review, and highly recommended. Here is a brief excerpt.

There [in Poland] the Soviet occupation was at least as brutal and murderous—if not more so—than in the parts of Poland subjugated by the Germans. The Russians deported at least one million people—including entire families, without any of their belongings—to Siberia, Kazakhstan, and the Russian far north, with very few ever seeing their homelands again. In April and May 1940, some 22,000 Polish officers were shot to death near Katyn. More than a million Polish prisoners and workers were deported to Germany for forced labor during the war.

It is telling that many of these practices began soon after the Soviets occupied eastern Poland in September 1939. Some Poles, including Jews, welcomed the Russian soldiers, thinking that they had come to relieve them from the Nazis. (Their subsequent disappointment in the Russians was such that some Jews in eastern Poland thought it better to escape to the Nazi zone, even though they knew how the Germans treated Jews.) Between 1939 and 1941 perhaps the majority of Jewish people in the world lived in Eastern Europe, most of them in eastern Poland, western Russia, Ukraine, and Byelorussia. Their final extermination by the Germans was not decided by Hitler until September 1941 and not put into effect before January 1942: but in many ways their fate had been foreshadowed by the Nazi–Soviet Pact.

John Lukacs, “Monsters Together“, New York Review of Books, 23 April 2015 (ungated).

Lukacs, who was born in Budapest to a Roman Catholic father and Jewish mother, describes himself as a reactionary. Moorhouse is a specialist in modern German history, particularly Adolf Hitler and the Third Reich.


secular stagnation?

April 13th, 2015

There has been a lot of talk lately – on blogs, and in the financial press – on whether we are suffering from “secular stagnation”. Disagreement is especially intense between two prominent American economists: Harvard professor Lawrence Summers (born 1954) and former Federal Reserve chairman Ben Bernanke (born 1953). Mr Summers argues that we have entered a period of “secular stagnation” whereas Mr Bernanke argues we have not. The debate is confusing because Professor Summers uses the term with reference to short-term economic growth, whereas most economists in the “secular stagnation” camp have long-term growth in mind.

FT columnist Alan Beattie explains.

Mr Summers uses secular stagnation to mean the difficulty of getting the economy to run at full capacity when factors such as weak investment demand have pushed down the equilibrium real interest rate — that needed to keep output at full steam. The response should be to reduce the actual real rate of interest by loosening monetary policy further or, better, to boost demand by increasing public investment.

By contrast, a variety of technology pessimists use the term to mean that the supply capacity of the economy is growing more slowly because, after inventing the internet (or maybe just before) the human race ran out of good ideas. (Slower technological progress can play a walk-on role in Mr Summers’ thesis, but his analysis is mainly about demand, not supply.) As for Mr Bernanke, he doubts secular stagnation is a big issue at all, arguing the slow recovery of the US economy can be explained by temporary headwinds including a battered financial system and weakness in the housing market. The implication is that America is recovering, aided by the Fed’s monetary stimulus, and that normal service will soon be resumed.

With the world economy depressed, how should policy makers respond? Mr Beattie is uncertain what is causing slow growth but, echoing the pleas of Mr Summers, calls for governments to respond with increased spending on infrastructure:

A substantial programme of public investment … means adding to already high sovereign debt burdens. But with long-term interest rates so low, the balance of risk and reward strongly favours more infrastructure. If secular stagnation is a false alarm, not much harm will have been done. If not, public investment may help save the world economy from a persistent and damaging blight.

Alan Beattie, “An agonising way to abolish boom and bust“, Financial Times, 11 April 2015.