Open letter to Representative Faso on health insurance

March 30, 2017

Dear Representative Faso,

A fellow constituent shared with me your letter to him on the subject of health insurance. It points to some serious misunderstandings on your part. I’ll get to the specifics of your letter, but I wanted to start with the general concept of “actuarial fairness.”

On the one hand, I don’t want to explain a concept you already know, and as someone who has dealt with public policy you may well be familiar with this one.

On the other hand, your earlier work as a lobbyist and a member of the state assembly may not have required you to learn about this particular term. And your support of the AHCA suggests you haven’t really thought through the implications of applying actuarial fairness in health insurance, so I’ll proceed with and explanation of that and then get to the particulars of your letter.

Actuarial fairness is the idea that people should be charged insurance premiums that are proportional to the costs they will probably impose on the system. If you’re selling 20-year life insurance, you have to charge more for an unhealthy 45-year-old than for a healthy 30-year-old. And you should charge slightly more for a healthy 45-year-old man than for an equally healthy 45-year-old woman. If you’re selling car insurance, you have to charge a higher premium for a 20-year-old man (some young men are excellent drivers, but the average person in that group is more reckless than others). And you have to charge more for people who have moving violations (their documented behavior shows them as individuals to be more reckless than the average driver).

In both of these forms of insurance, actuarial fairness isn’t a problem. We don’t require people to have life insurance, and it’s hard to see that there’s a social problem with people not having it, so we leave that to the market. We do require people to have car insurance if they’re going to drive, and driving is close to a necessity for many people. But it’s easy to separate out the part of someone’s high premium that’s due to who they are (charging more for a 20-year-old male) vs. the part that’s due to how they behave as an individual (a person with multiple moving violations). And that piece about “how you behave as an individual” is a large piece of the premium and useful to have in there as a deterrent to bad behavior, so we’re fine with actuarial fairness in car insurance as well.

In health insurance, however, it has very bad effects.

Which property matters

I finally picked up The half has never been told, by Edward E. Baptist, which I'd been meaning to read since it came out in 2014. The subtitle is, "Slavery and the making of American capitalism," and it's a strongly argued case that slavery was integral to the growth of the country's territory and economy.

That position is probably not a surprise to everyone, but as Baptist points out, there are ways in which we're still stuck in "the half that has ever been told" (p. xx, emphasis added), about how "American slavery was fundamentally different from the rest of the modern economy and separate from it. Stories about industrialization emphasize white immigrants and clever inventors, but they leave out cotton fields and slave labor." (p. xx)

I'm only barely into chapter 2, but the book is repeatedly thought provoking, including the economic and legal history around "the Yazoo."

Educating the future

Our college president asked my economics colleagues and me to weigh in on a LinkedIn article about big-picture economic trends and higher education.

Artificial intelligence is getting better and better at replacing humans in areas that we had viewed as out of the reach of computers. Wages since 2000 have been uncoupled from corporate profits, shrinking as a share of GDP while profits rose. And education will move from a cottage industry that's light on technology to a relatively small number of "education companies" utilizing technology to the max.

We're having a snow day (which might turn into two) so I had time to turn my hand to a response.

The article can be looked at as two parts. The first is a prognosis of what the economy will be like, and therefore what the job market will be like. The second is a discussion of the future of higher education within that context.

I think the "prognosis" part has pretty wide agreement among economists. The stagnation and decline in routine manual and routine cognitive employment are merely the next step in the Industrial Revolution. Mechanization mostly eliminated the importance of human (and animal) muscle power, moving humans over to "control" functions, whether manual (operating a machine that was powered by something other than your strength) or cognitive (including "routine" things like many office tasks 60 years ago). Now AI is reducing the importance of the human ability to control an object or to make a decision, as long as that control or decision-making can be routinized.

In the case of mechanization, there were shifts in the distribution of wealth, but there was also a huge increase in average wealth, and most people were able to move into work that required the control and decision-making abilities of the human mind, even if those applications were "routine."

With this next step of automating anything that can be routinized, it remains an open question how far the displaced workforce will be taken up into non-routine tasks, whether those are cognitive or manual.

Along the dystopian path, many of us turn out to be economically unnecessary and nothing is done about that, and so we end up with a hypertrophying of the 35-year process we've already experienced of economic stagnation for 90% of the population and rapidly increasing wealth for a small minority.

The enemy of my enemy etc.

A friend posted on Facebook a query about why some American leftists are defending Russia these days.

When I did a Russian-language semester in Moscow in 1988, there were some interesting reactions to observe among some of my classmates (I was in a group of 25 US students, from colleges around the country, hosted at a Soviet university).

I was raised by parents who objected deeply to some of the actions of our own government (e.g., they were war-tax resisters for a couple of years during Vietnam).

At the same time, they were not fans of the Soviet system, they watched the Soviets crush the East German workers in 1953, the Hungarian revolution of 1956, and the Prague Spring of 1968, and they watched the Polish government crush its own people's democratic movement in order to prevent a much bloodier invasion by the Soviets. They knew people who had fled the Soviet bloc.

I went off to college and learned more about what our government and the Soviet government had done and were doing, and continued to be critical of our government while seeing it as preferable to the Soviet one.

Defending your narrative

I had a sense before the inauguration - before the election, really - that Donald Trump was fairly incompetent.

His businesses had gone through bankruptcy - what was it? Four times? Six? - after he somehow managed to lose money running a casino. So much for the saying that, "The house always wins."

And he had that long record of stiffing contractors who'd worked for him, claiming they'd done inadequate work for him.

There was the use of language. Someone can use non-standard English and be hella smart. Trump's language is something different. It seems to betray a simple inability to think clearly.

So when he moved into the White House, I was expecting incompetence, along with fearing anti-democratic actions.

Still, I couldn't have imagined it would look like this.

In my defense, he does represent an unprecedented level of incompetence, so there's no benchmark for what it would look like if this incredibly complex role were being filled by an individual with pretty limited mental capacities, aided by charlatans and mountebanks.

It is tempting to turn to his supporters - the ones who thought he'd be great because he was a successful businessman and we need someone who can bring the fairy dust of the private sector to the government - and say, "Do you still think he's such a good executive?"

But I suspect it would be pointless, in most cases.

Open letter to John Faso

February 1, 2017

Dear Representative Faso,

Congratulations on your victory in last November’s election. You have the privilege of serving our country at an unprecedented time. And that means that you have a chance to play a much more meaningful role than the typical freshman member of Congress.

You won your election by a sizeable margin, so there can be no question that, among the people in our district who bothered to vote, a majority preferred that you represent us in Washington, rather than Zephyr Teachout.

And similarly, of those in our district who bothered to vote, a majority clearly preferred that Donald Trump be president rather than Hillary Clinton. It’s true that, nationally, Mr. Trump lost the popular vote by a historic margin for a person who won, but it’s also true that we don’t have a national popular vote and that Mr. Trump got the votes where they mattered and was duly elected under our system, and that he was the more popular choice in our district.

The question is, what did the people of our district mean to vote for when they filled in the bubble for Donald Trump, and for you.

Scale of action

My friend Andree Zalesk linked on FB to a post by Yonatan Zunger, Trial balloon for a coup. It's not uplifting reading, but I think it is very well argued, and I recommend it.

In comments on Andree's page, someone wrote, "Bannon must go. Period." And Andree responded:

Do you have a strategy in mind? I have NO IDEA how we organize against something this complex and interior. Even some of the best activists I know are refusing to take this in.

I weighed in with some thoughts about government as the organ for collective action combined with the legitimate wielding of compulsion, and the possibility - but more the difficulty - of building alternative means of collective action.

Andree observed, "I don't see here where you're suggesting a strategy for resistance." And she was right. As I wrote to her.

In retrospect, I was answering in a limited way, "What can we do?" But I don't know what we do to resist beyond what we're doing: demonstrating, calling members of Congress, connecting with other people. In the end, if the judiciary declines to declare the executive to be in violation of the law, or the executive decides to ignore the judiciary (as it is apparently already doing), and the arms of the executive (like Customs and Border Patrol) obey the boss rather than the courts, and Congress declines to assert itself (or it asserts itself but the executive ignores Congress and the arms of the executive obey), then I don't know what you do.

Last night I remembered the term "people power" from when the Filipinos turned out in such massive numbers that Marcos fled. What scale of nonviolent action would it take to render Bannon's plans ineffective?

Andree gave me a pat on the back: "There you go: That last sentence is the real question."

OK, but if it is the real question, it's actually just the first real question. Because the one after that is, "How do you achieve that scale of action?"

It's an organizational question, and also one of messaging.