The response covers a lot ground, reflects his considerable knowledge of health insurance. It also veers of topic at time I think. Shut-up Bruce and let the man talk:
Daily Archives: 03/24/2011
Click here to read an important article signed by a bipartisan group of ten former chairmen and chairwomen of the Council of Economic Advisers. I have never before had such a large and distinguished group of coauthors.
CEA Chairs on the Budget Deficit
Thu, 24 Mar 2011 08:46:00 GMT
Former FTC colleague Todd Zywicki doesn’t think so:
The Obama administration’s economic policy, therefore, returns us to the thinking of the 1950s and ’60s — to an economy in which big business, big labor, and big government are tied together in a relationship of mutual succor and support.
The auto bailouts exemplify this new reality. Sold as a means of revitalizing the economy, they are in fact a means of transforming the relationship between the state and the market in a way that empowers large players at the cost of economic growth. The overall effect of such state capitalism is a kind of controlled stasis, in which the preservation of old jobs takes priority over the creation of new ones. Managed decline, rather than dynamic growth, is the defining feature of the Obama economy.
Were the auto bailouts a good idea?
Tue, 22 Mar 2011 20:22:00 GMT
Be sure to read the update. An oil price shock will cause a one time increase in the price level, but not a sustained rate of change.
Caroline Baum goes after the confused thinking on oil prices and inflation:
It must be the noxious fumes or the stratospheric prices because crude oil crossing the $100 threshold makes normally thoughtful individuals funny in the head.
The early symptoms of high oil price syndrome, or HOPS, can easily be masked or confused with a more generalized form of lazy economic thinking.
For example, those afflicted with HOPS start making assertions that higher oil prices are inflationary, as if relative price changes can morph into an economy-wide rise in prices without help from the central bank.
One implication of this is that the Fed should not tighten monetary policy since the higher oil prices are just a relative price change. The Fed should also not loosen monetary policy to ease the pain of such relative price shocks. As Baum notes, that is what the Fed did in the 1970s and look what it got us. The Fed should only respond to aggregate demand shocks. This piece dovetails nicely with Mark Thoma’s post where he considers whether the Fed should respond to commodity prices in general.
Update: I should have been more clear: a relative price shock can lead to a higher price level, but not higher trend inflation. There might be a one-time increase in the inflation rate, but not a permanent one from such shocks. The post title has been adjusted accordingly.
Higher Oil Prices Do Not Equal Higher Trend Inflation
email@example.com (David Beckworth)
Fri, 11 Mar 2011 15:29:00 GMT
A dominant class of economic theories is built on the assumption that prices respond only sluggishly to new economic conditions. It’s an interesting challenge to try to reconcile that premise with what we see in the data.
A number of research papers have now tried to describe the actual high-frequency dynamics of the prices of individual grocery items as reflected in scanner data. One of my favorites is a new paper by Yale professor Judith Chevalier and University of Chicago professor Anil Kashyap. Here’s a diagram from their paper of what one sees, for example, in the weekly price of an 18-ounce jar of Peter Pan Creamy Peanut Butter at a supermarket in northwest Chicago.
Figure 1. Source: Chevalier and Kashyap (2010).
That doesn’t look to me like a price that’s frozen regardless of economic conditions. Instead, one can count on periodic deep price discounts. The timing and magnitude of these is a bit hard to predict, and there’s the curious feature that, after a brief sale, the price usually goes back to exactly where it was before the sale. A paper by Eichenbaum, Jaimovich, and Rebelo suggests that perhaps the "regular" price is the object that responds sluggishly to economic conditions. It’s worth noting that in the Peter Pan graph above, the product was only on sale about one week out of five over this period. However, Chevalier and Kashyap find that these sales account for almost 40% of the ounces sold. For other products, the importance of sales is even more dramatic. For example, 12-ounce cans of Minute Maid frozen orange juice are on sale in 30% of the weeks, but those weeks account for 70% of the ounces sold.
And, even though Peter Pan might not be on sale at any given time you show up at the grocery store, its competitor Jif might be.
Figure 2. Source: Chevalier and Kashyap (2010).
I found Figure 3 below particularly interesting. The red, short-dashed line is the regular, non-sale price for Peter Pan that one would infer from Figure 1 above. The blue, long-dashed line is the regular price for Jif from Figure 2, and the green, short-dashed line is the regular price for a third brand. The solid black line is the average price consumers actually paid for peanut butter. Its dynamic behavior looks nothing like any of the three regular prices.
Figure 3. Source: Chevalier and Kashyap (2010).
So if we wanted to talk about "the" price of peanut butter, what price would we use? The diagram below gives 4 possible answers. The blue, long-dashed line is an average of the regular prices for the three brands. The red, short-dashed line is the average price you’d pay if you bought a fixed "basket" of the three brands each week, corresponding conceptually to what the consumer price index is trying to measure. Again, neither of these look much like the average price consumers actually paid for peanut butter (the solid green line).
Figure 4. Source: Chevalier and Kashyap (2010).
The brown, dashed-dotted line in Figure 4 is another concept that Chevalier and Kashyap suggest using, which they call the "best price." This corresponds to how much you’d pay for peanut butter if you bought whichever brand was on sale, and were willing to stock up on special discounts to store it for up to 5 weeks. Although that extreme bargain-hunting price would by construction be lower than the actual price paid by almost everybody, the dynamic behavior of the best price resembles more closely than any of the other measures the dynamics of the average price paid actually paid by consumers.
Although prices of peanut butter may exhibit dramatic week-to-week variability, most people’s wages behave nothing like the prices of items in a grocery store. An older Keynesian tradition held that product prices were in fact perfectly flexible and that sluggish wage adjustment is the key economic friction.
But there’s obviously something much richer going on with price dynamics than what is assumed in virtually all the models that macroeconomists are using at the moment. I’m quite excited to see papers like these that examine what’s actually in the data rather than try to build a theoretical edifice whose foundation is nothing more than the imagination of economists.
Sun, 20 Mar 2011 14:54:25 GMT
This was a perspective on healthcare for those who don’t have such good access. I thought it really puts a human face on the issue of access.
Here’s a good review of the impact of the 2010 healthcare law. I don’t think its going to be a be all end all for American healthcare at all. I’m skeptical of the claims of singe-payer as well. But in its passage, I hope that a national discussion that will last year will produce improvement over the status quo.
The most disappointing thing about the discussion isn’t I don’t see many really comprehensive alternative to the 2010 bill that address the failings of the status quo, and yet the failings of the status quo seem evident. Check out this graphic:
The high cost of health care would be easier to understand if we clearly had the best access and the best health results. Overall we do well in treatment of some conditions, but we don’t have even close to the best life expectancy in world, and many people lack insurance if not access to healthcare.
Setting all that aside, I visited a blog of a severe critic of “Obamacare”, the term of choice of the law’s critics. He has a pretty good chronicle of the numerous criticism of the law: how it was railroaded into law, will ration care, cost to much (I think this emphasized the most), will redistribute wealth, end the development of new treatments, and provide care for conditions that people may have brought on themselves. But in all that criticism, I didn’t really get a feel for any good alternative, especially one that would improve access to care for those who don’t have it. I put this question to the blog author. I’m curious to see what answer I get.
Doesn’t this really boil down to:
Do you think the current health system is in need of a major changes?
Are you in favor of increased access to healthcare for those who don’t have it , even at the cost of higher premiums and taxes for yourself?
You pretty clearly would answer no to these questions.
I think I’d answer yes to both questions (for what its worth I have pretty good medical benefits and I pay taxes). I’m not sure the ACA is what we need, because we need a better way to control costs. I just don’t want to end up like we did after the 1993 health debate which was with basically the status quo. You and most of your citations clearly argue for no “Obamacare” to mostly people who don’t like Barack Obama for a variety of reasons, but I don’t know what you suggest instead.
Can you clarify?
There may be no way to reach anything close to a consensus, because those on different sides of the health debate basically want a different end state as the good society. They make different value judgments.
I’d like to move even if more slowly may than the current law to better access to health care for those who don’t have it, even if some of them are drug addicts, or illegal aliens, or arguably don’t “deserve” it. I don’t think healthcare is a beach house as Rush Limbaugh recently asserted.
The strongest critics of “Obamacare” seem to see health care as just another good you get if you work hard and earn it. This a value judgment that can’t be shown to be wrong or right with facts, but it bothers me that this is usually not explicitly stated. Its hard however to not draw this conclusion from the lack of policy suggestions that address the access issue for those of modest means.
Ultimately we as a society will make its value judgment about who should get access to healthcare. I hope we try to improve on the status quo and not treat health care as a beach house. Unless conservatives can actually suggest a way to improve health care access, one has to assume they think of health care as a beach house.
Though I think of myself as kind of middle right, I will confess that I voted for Obama in 2008.
Why? Mostly because I liked the fact that he had opposed the war in Iraq from the start, and at least by 2008 I thought that was the right place to have been. McCain in contrast couldn’t really seem to get much past proclaiming the surge as a great success, without acknowledging the war had been a mistake in the first place. In fact, he almost seemed to be itching for a fight with Russia over Georgia.
So, I thought sensible "no drama" Obama, whatever his other failings (like letting the congress turn the stimulus into a pork fest) wouldn’t use his commander in chief power to carelessly take us into war again.
I think Lewis Black nailed it on the Daily Show. Why don’t we just elect Donald Trump. What we need is a third world strongman. Our system just doesn’t seem to bring us sensible good candidates.
So if we’re gonna have bad presidents, let’s make them REALLY bad.
As if this Libyan fiasco wasn’t enough. This is from the Wall Street Journal.
New rules allow investigators to hold domestic-terror suspects longer than others without giving them a Miranda warning, significantly expanding exceptions to the instructions that have governed the handling of criminal suspects for more than four decades.
European Pressphoto Agency
Courtroom sketch of bombing suspect Umar Farouk Abdulmutallab.
The move is one of the Obama administration’s most significant revisions to rules governing the investigation of terror suspects in the U.S. And it potentially opens a new political tussle over national security policy, as the administration marks another step back from pre-election criticism of unorthodox counterterror methods.