Some kind of end point

Failure to make the hard choices. Flat world. Ignorance.

Have to switch gears.

Another chance for me to be wrong...

More on the inheritance of education ... I think there is still room for parental difference making...but it is hard to tell from the limited data we have that doesn't control for the adoption age.  In any case, Mankiw's point is pretty clear from the graph- genes matter.

Mankiw misses one?

"It would be interesting to see the above graph reproduced for adopted children only. I bet that the curve would be a lot flatter."

I think so too, but maybe not too much flatter. A lot of being a good teacher for your kids works, even if you have a couple of little troublemakers. You can still figure out how to teach them- if you're smart enough.

Is it time to drop your 529 plan? Yes.

Fidelity asks if it's time to change your 529-plan portfolio. A 529 plan is the most over-managed money option out there. You are literally paying fees on fees. How about this- let me invest in something other than mutual funds. Until you do that, it is clear that this is just another free benefit for ... Fidelity.

Take an artificial sweetener pill

I just read this WSJ article that said: "Obese people spent 42% more than people of normal weight on medical costs in 2006, a difference of $1,429, the study found. Prescription drugs accounted for much of the increase." I therefore applaud and encourage everyone's efforts to keep their weight down. Maybe we need more exercise for people...

When people compare health care between countries, the costs per American always seem high. Why is that? Here are some behavioral observations, in addition to the usually cited factors and our general chubbiness.

1) Americans demand more expensive, patented, brand name medicines. Many studies have shown that placebos are equally effective, for mental disorders in particular. Generics often get the job done for a fraction of the cost- often for less than the co-pay offered by my insurance.

2) Americans go to the doctor more. We visit the doctor more frequently than people in other countries, with the exception of Japan. A lot of this is because doctors control access to medicines we want (see #1). Moving more medicine to non-prescription status (like allergy medication) and making more medicine available via a visit to a nurse practitioner would save on the number of visits.

3) Third party payers- we buy medical services with no concern for their cost, because we don't directly pay for them. People spend more time trying to save 50c in the grocery store than they do saving $200 on an MRI, which should be a commodity service. We need a market where you get some benefit by choosing a less expensive treatment. This will incentivize providers to actually compete on price, like they do for LASIK and cosmetic surgery.

Music?

Long time no post, but this track just was such a classlessic, it required action!!

Go Ke$ha.

Thanks...
http://www.muumuse.com/2009/07/keha-just-threw-up-in-my-closetand-im.html

Time

Read an annoying Scott Adams piece this morning, where he makes a simple metaphysical linguistic error.

"Given that science can't find evidence for either God or time, it takes a leap of faith to assume either one exists. Therefore, anything in our daily life that depends on either God or time is built on a foundation of faith and not science."

The simple error is three separate applications of the word "exists". It is obvious that the normal meaning is to say whether something physically exists or not. My computer exists. My yacht does not exist. Time is obviously different from a physical thing. Time is not something that exists in the same way. "Time" is a term that describes an aspect of the way the physical things that do exist change. Therefore, no leap of faith exists in believing in time, because no one ever said time "exists" in the same way as my computer.

Adams furthers the equivocation by suggesting that belief in gods is of a similar nature. However, most people suggest that gods exist in some way that is different than describing a property of the arrangement of physical things. Neither term applies, so there must be some third meaning of exists, if it were to be true.

So what? A Wittgenstein-style diagnosis of equivocal statements, which attempt to fuzzy the use of terms is quite productive in exposing most philosophical blatherings as pure nonsense.

Typical Healthcare Nonsense

http://www.cnbc.com/id/30940076

"As a freelancer, Tolliver could work from wherever she and take playground breaks with her daughters. But a $1,200 monthly healthcare bill ultimately led her to take a job where insurance only costs her $200 per month."


It does not only cost her $200 per month, her employer is including the extra $1000 in her total compensation. I pay about $1200 per month for family healthcare- and I am taxed on it as income, as the owner of an S Corporation. If there was a government healthcare system that was similarly efficient, she would be paying $1200 in taxes per month for the healthcare. There is no magic fairy dust available from rearranging who pays whom.  And, offering luxurious benefits to more people only makes this problem worse.


My five point plan for saving money now still stands:
1) Introduce malpractice liability limits to get malpractice insurance costs under control. (Fight ABA)
2) Increase the number of doctors by increasing the number of medical schools. (Fight AMA)
3) Negotiate Medicare/Medicaid drug prices with manufacturers. (Fight PhRMA)
4) Providing sliding scale premiums based on patient efforts at healthiness (smoking, exercise, diet), like life insurance does.
5) Limit over-treatment.

The Education Bubble

The education bubble is the number of people willing to borrow nearly $200,000 for a BA (or PhD) in Anthropology or whatever subject that exceeds the number of positions available that require that degree at that price. I read an article yesterday that mentioned a detective with a PhD in Anthropology. While it seems to be working for him, I just don't see it as economically efficient. If we look at the causes of this inefficiency and bubble, we see similar government incentives and payouts to those that drive up the price of houses and medical care.  

At some point, maybe soon, all of that money being borrowed to pay for college education is going to be hard to get.  If we keep expanding grants and loan programs supported by the taxpayer, the government will distort the market and prevent costs from dropping to match demand.

So how should the government spend its money? If public universities were run in a lean fashion, with a passion for getting rid of wasteful spending, without a distasteful focus on athletics and other distractions, they would provide more than adequate competition for private universities at fair prices. By focusing on subjects that are in demand in the economy, they could support the progress of humanity.  By virtue of selective admissions, they could continue to avoid the fate of bland ineffectiveness that has befallen public primary and secondary education. 

Low interest rates

It seems that a fundamental problem with our economy is the Federal Reserve driving the interest rate environment.

The current interest rate on Bank of America savings accounts is... 0.20%. I just don't get it. If I am a bank, I make fundamentally make money by loaning people money at a rate higher than what I pay other people for giving it to me (and charging a few fees). But who's going to give me their money at 0.2%?

This rate is extraordinarily low, but interest rates have been really low for years now. The fiscal policy behind this was pushed by Greenspan. We know now it had some weird side effects, like most government fiscal policy, that have basically crushed our economy.

On 60 Minutes last night they had a piece about people "losing" half of their 401k balance. This would mean they were 100% in equities, with maybe some in corporate bonds. Why were they 100% in equities? Especially when they were approaching retirement age?

Maybe it had something to do with the low interest rates. Even with a CD yielding 2%, your money is growing slower than the inflation rate. So, people poured their money into equities, creating a bubble. To make it worse, a lot of prominent companies haven't been paying dividends lately, so they weren't even getting any income from these investments. Stock price to earnings ratios still seem high when you look at all of the companies where the investors don't see any of the earnings, and have to speculate by selling the stock to take advantage of the price.

Lower interest rates drove the price of houses up. Government backed loans drove the price of houses up. Since the price of houses were so high, the government started buying risky loans from banks so that people could keep buying houses.

So, low interest rates may help companies grow, but most large companies sell bonds, they don't borrow from banks like I do. Who exactly are these low interest rates helping? Is there someone out there who just loves bubbles?