Group Bias in the Distribution of Health Care in the United States

As I suggested in an earlier blog entry governmentally subsidized health care in the United States is already being rationed. I think it is distributed based on an indefensible group bias; that is, politicians control access to subsidized health insurance based on arbitrary group association. Let's take a closer look at that.

Since the twentieth century, politicians have granted subsidized access to specific groups. In the 1940s, the first “group” to gain that access was comprised of individual white, male workers that worked for large unionized corporations. Later, politicians expanded access by including other groups including: the elderly, the poor, veterans, Native Americans, employees of government, and children. As a result of this irrational group-based allocation system, we now have a “maze” of health care tax-supported programs that provide various levels of health care coverage to most Americans. The current problem is that we now have a growing number of individuals that need access to health care but do not fall into any of these arbitrary groupings. Therefore, in order to gain access these “outsiders” have had to manufacture their own “group,” and lobby government for equal recognition. This new group is comprised of everyone that is not employed by a corporation that offers private health insurance, not elderly, not poor, not a veteran, not Native American, not employed by government, and/or not children.

Now any rational person that is against health care reform within its current framework must argue that these outsiders are not entitled to health coverage, even though these other groups already enjoy subsidized health insurance. Of course, no politician is going to take subsidized health care away from workers, the poor, elderly, soldiers, or children. But many politicians are opposed to adding “outsiders.” Interestingly the rest of us rarely demand that those politicians justify the inclusion of one group and the exclusion of another. Why?

Academic Dishonesty in Higher Education

Walter Williams is my favorite syndicated columnist. I look forward to reading his column every Sunday in the Cincinnati Enquirer. One of his favorite targets is the sorry state of higher education in the United States. His most recent rant, titled, Academic Dishonesty, shines a bright light on grade inflation at elite colleges and universities and how those very expensive institutions manipulate statistics to maintain their high rankings. Rather than rehash my hero’s arguments I thought I’d add a few caveats. As a professor at a small private liberal arts college, I can offer a slightly different perspective.

Like it or not, students at small private colleges compete with the graduates of these “highly ranked” programs; for jobs and for admission into graduate programs. But how can we compete with those institutions when they give all of their students A’s and B’s? Realistically, can we give our students a lot of B’s and C’s? Moreover, if you are a junior faculty member that hopes to earn tenure at a small college that emphasizes “good teaching,” how can you earn stellar student evaluations if you give out mostly B’s and C’s? Or better yet, if you are a Program Chair or an Academic Dean responsible for granting promotion and tenure, would you promote “easy-grading” professors with high student evaluations or “hard-grading” professors with lower evaluations; especially, knowing that low GPAs will not get your best students into high-paying jobs or graduate school?

So although it is tempting to attribute to the decline of higher education in the United States to simple dishonesty, it is actually much more complicated. At least part of the problem can be attributed to publically funded universities that spend millions of dollars in tax money on attractive new buildings and expensive athletic programs. And of course, those institutions must then take in more students to help pay the bills. Without expensive remedial programs, many of these new students flunk out the first year. One inexpensive way to make up for feeble remedial programs (and poor secondary education) is to lower academic standards. In other words, grade inflation is an effective solution to sagging retention numbers.

In my view, the only way to fix this mess is to accept the fact that higher education is an industry. This requires a major shift in governmental policy away from subsiding inefficient state institutions (and driving small public institutions out of business) and toward a less intrusive role consisting in promoting fair competition between private institutions. Realistically, will that ever happen? Well Walter, what am I going to do? Am I going to start giving out a lot of C’s and D’s in order to rescue academic honesty in higher education. If you said no, go to the head of the class.

The Non-Debate over Health Care Reform: Or, Why the Status Quo Will Prevail

Historically, health care in the United states has always been highly decentralized and forged on the basis of political action committees and paid lobbyists that represent specific groups: Medicare (the elderly), Medicaid (the poor, ) Children's Health Insurance Program (children), Veterans Health Administration (veterans), the Indian Health Service (native Americans), and Federal Employees Health Benefits Program (federal employees). Others are covered by employment-based private health insurance. All of these programs are tax-supported to various degrees. And all of them are either running deficits, infested with fraud, inefficiency, or a combination of all three. Despite shortcomings, these programs are also highly coveted by their respective constituencies, and therefore no one in Congress can reasonably propose replacing this patchwork with a single system. In other words, the health care reform movement in the United States is not about creating one single system, but rather adding other programs to that patchwork. The powerless constituencies that are currently left out this patchwork include: employees whose employers do not offer health insurance, patients with pre-existing medical conditions, employees that are under-insured (but don’t know it yet), and an undetermined number of young, healthy employees that choose to forego purchasing health insurance. Whatever happens under the guise of health care reform, I can promise you that none of the current programs will be eliminated. In other words, whatever it is that’s taking place in Washington under the guise of “Health Care Reform,” it is really about maintaining the status quo. At this point, there is no reason to debate the question of whether a centralized system is preferable to a decentralized one. That’s because no one in congress is really pushing for a centralized system. What's the problem? It's the way we go about forging public policy in the United States. Can we really afford to continue to allow Congress unlimited access to tax dollars and dole out political favors to powerful groups represented by well-paid lobbyists?

NON-COMPLIANCE WITH TITLE IX

This morning, an article in the Cincinnati Enquirer caught my eye: “Playing Field Still Not Level.” Basically, it exposes the fact that the state of Ohio does not enforce Title IX (1973), the legislation which mandates that public high schools offer male and female students an “equal opportunity” to participate in sports. Although I am both an avid “sports nut” and a supporter of gender equity, I am nevertheless puzzled by our disproportionate emphasis on sports in public high schools and the costs that are passed on to taxpayers; especially when most public schools are struggling to offer decent academic programs. Obviously, some sports are more expensive than others. Although I am a football fan, there is no good reason to offer this expensive sport in cash-strapped public schools (or any public school!). Without boring you with numbers I’ll merely point out that it’s very expensive to: build and maintain a football stadium, transport 75-100+ students to and from practice and games, buy equipment, pay coaches, and pay liability insurance premiums. It is the king of deficit sports. Unfortunately, football is also a “Y Chromosome sport,” and therefore any school that has a football team of, say, 150 male students, equality of opportunity would require 150 opportunities for females. This usually means that any school that takes Title IX seriously will not be able to offer other male sports such as wrestling, track and field, or lacrosse. If Ohio’s level of seriousness in respect to title IX is indicative of what’s going on elsewhere, public high school athletics is still overwhelming male dominated.

My basic argument is more subtle. I would argue that it makes more sense to offer athletic opportunities through private, non-profit voluntary associations than tax-supported schools. In fact, most communities already offer sports for pre-high school children outside of school, especially Pee-Wee Football, Little League Baseball, and AAU soccer, basketball, and track. In order to pay for these opportunities, parents pay a fee and/or raise money via bake sales, candy sales etc. Most coaches are parents that volunteer. The beauty of this arrangement is that the costs are incurred by those who receive the benefits. But today, these private endeavors are crowded out by public, tax supported high school teams. (Talk to any “select soccer coach!”) Now I can’t guarantee that football would survive privatization. It’s probably too expensive for most parents. In other words, football would not survive exposure to the free market, which is precisely why it is socialized. Think Amtrack…

One reason why I am a critic of public schools is that an inordinate amount of coercively obtained tax money is expended on sports and other extra-curricular activities. In fact, many schools that lack science laboratories, and/or air conditioning have a full array of expensive athletic teams. But then again, labs and air conditioners do not provide subsidized after-school adult supervision for mischief-prone teenagers!

Now back to title IX… If Cincinnati decided to eliminate all high school sports, parents that want their children to participate in sports would have to pay directly for these activities. Interested parents and students would have to set up these voluntary associations and volunteer to help coach, sell concessions, wash uniforms, mow lawns, etc. If the parents of female students are less-willing to get involved, that is not “discrimination.” It’s called “parenting.”

Unfortunately, the cultural drift of American society makes it difficult for high schools to cut back on extra-curricular activities, because colleges and universities now base admission and scholarships on participation in these kinds of activities. High schools that merely offer top-notch academic programs do not compete very well based on this mindset. How many student play high schools sports, cheerlead, or march in the marching band hoping to earn a college scholarship? When the stakes are that high, those voluntary coaches and band leaders are quickly replaced by paid “professionals.” And finally, many public schools are so bad that students won’t show up for school unless they can play sports, cheerlead, or play in the marching band. Well, Professor Serafini, what do you have to say about all of this? And “HAPPY BIRTHDAY!”

Tragedy of the Commons, Part 3: Over-Pollution

The second manifestation of the “tragedy of the commons” is the problem of over-pollution. When human beings either extract resources from the environment or transform resources into artifacts a certain amount residual material is left behind. That residual material deposited in the earth, air, or water can be useless, useful, harmful, or harmless. We usually call the useless, harmful, residual “pollution.” Knowledge of whether that residual material is (in fact) useful or useless, and/or harmless or harmful is contingent upon conducting costly scientific research and acting based on that research. Moreover, in many cases the natural environment is capable of reducing or eliminating the harmfulness of pollution. Knowledge of Mother Nature’s timeline for the transformation of waste can often be discovered via research, but sometimes not. The holy grail of human extraction and production is to develop techniques that minimize; or, at least expel waste at a degree and rate within Mother Nature’s ability to transform it into more useful and/or less-harmful byproducts. Call it "sustainability."

The basic problem for the social and political management of pollution is how to provide incentives and disincentives that lead extractors and producers to conduct the research necessary to limit and or reduce pollution, and act based on this research. The “tragedy of the commons” predicts that political stewardship over the “commons,” is invariably inefficient and/or ineffective. Hence, when extractors and producers expel useless and/or harmful waste into “commons” there is little, if any incentive to conduct the research necessary to transform it, eliminate it, or act on that research. Here’s why. If it costs less to pollute than not pollute, extractors and producers will usually choose to pollute. They will invest in research to minimize pollution and/or convert it, if and only if, the cost of conducting that research, and the prospects of that research “paying off” is less than the cost of continuing to pollute with impunity. For example, it is difficult to extract minerals from the earth without polluting the adjacent air and water. If there is little cost associated with polluting the commons, mining companies will continue to pollute, and/or transfer the cost of cleaning up the mess to others (usually government). Therefore, pollution control policy is all about providing extractors and producers with incentives and disincentives that lead to acceptable levels of pollution.


There are two ways for societies to provide these incentives: one entails “more government” the other “less government.” Unfortunately, neither strategy is likely to succeed at a global level. There are two “more government” strategies that are often employed to raise the cost of polluting the commons. One way is to simply tax or fine polluters. This strategy entails that government "cap" pollution levels, monitor and enforce compliance with these caps, and either tax or fine extractors or producers that exceed those limits. This raises serious practical problems. At what level will government set those pollution limits? (Set caps too high and there will be no extraction or production.) How much will it cost for government to effectively monitor and enforce compliance with pollution limits? (It could cost more to monitor and enforce pollution laws than it would cost to clean up the mess.) At what level will the government tax or fine violators? (Set taxes or fines too low and there is no incentive to not-pollute, set it too high and black market polluters will appear.) Who pays the cost of monitoring and enforcement of pollution standards? (Taxpayers, polluters, stockholders, retailers etc.)

The second “more government” strategy is the policy now being pursued by the Obama administration, called “cap-and-trade.” The general idea is to “cap” pollution at a certain level, but then allow extractors and producers that generate pollution levels lower than the cap to “trade” or sell “pollution credits” to those extractors and producers that are unwilling or unable to meet those standards. This creates an artificial market, that in theory, provides an incentive to become a seller of pollution credits, and a disincentive to become a buyer of credits. Although, this resembles a free-market approach, it is really a contingent upon where government sets the pollution limits, how government manages the pollution credit market, and how much government spends doing all of this. Since the sellers of the credits are the primary beneficiaries of cap-and-trade, the question remains of how to pay for the army government watchdogs responsible for implementing this convoluted cap-and-trade system.

Critics of taxation, fines, and “cap and trade” argue that most serious problem with any strategy that involves setting, monitoring, and enforcing “caps” is that these standards are usually set by industry lobbyists rather than scientists, and therefore reflect political expediency and not science. Other critics argue that the cost of monitoring and enforcing the caps would require hiring an army of monitors and enforcers, which would require a massive tax increase, user fees of some kind, and/or increased borrowing from China! And, of course, all libertarians will point out that in recent years the United States government has proven to be less than reliable steward of the "public good" and an ineffective and inefficient monitor and enforcer of laws governing other undesirable forms of corporate behavior.

Libertarians therefore argue that the best “less government” strategy for the reduction of pollution would be to simply transform public property in private property, and thus eliminate "the commons." But private ownership of earth, air and water will not necessarily reduce pollution in the United States. If the short-term (or long-term) benefits of extraction outweigh the perceived costs of continuing to pollute, extractors and producers will continue to pollute. Moreover, if extractors and producers were required to pay the owners of the earth, air, and water, to clean up the mess, or purchase earth, air, or water from the owners, it would almost certainly reduce pollution levels, but where? If United States adopted this strategy, the most likely consequence would be that extractors and producers would simply move extraction and production to other countries that maintain “public property,” where government officials earn a handsome profit from graft and corruption. So when pollution is exported to nations that allow their governments to exercise stewardship over publically-owned earth, air, and water, “tragedy of the commons” predicts that pollution levels will rise in those countries. So although private ownership in the United States may reduce pollution levels in the United States, global pollution would continue to increase. In other words, global pollution will require global cooperation between nations and/or universal abandonment of "the commons,"which are both highly unlikely. Am I a libertarian or a cynic? What do you think?

Tragedy of the Commons, Part 2: Over-Extraction of Resources

One manifestation of the “tragedy of the commons” is that human beings tend to over extract resources. Resource depletion can often be blamed on the fact that we often have imperfect information, as to the exact quantities of available resources at our disposal and the natural capacity for replenishment. How many salmon can be extracted before the species is no longer able to sustain itself? I wish imperfect information was the only source of unsustainable resource depletion. Unfortunately, we all over-extract in order to reap known short-term benefits at the expense of the unknown long-term costs. As evidenced by the universality of this kind of behavior, I’m afraid that human beings (individually and collectively) are naturally predisposed to unsustainable over-extraction.

In a free market, one would expect that the extraction of increasingly scarce resources would become prohibitively expensive and, therefore, extractors would be incentivized to pursue less-expensive substitutes. However, technology extends the ability of extractors to find increasingly scarce resources, while other technologies make it possible to efficiently over-extract those remaining resources. Hence, technology also plays a role in over-extraction. Governments encourage investment in these technologies by offering tax write-offs and other less visible incentives.

But then again, we might question whether the long-term extinction of any one resource is necessarily tragic. Although the over-extraction of oil would be tragic to the oil industry and its stockholders, over the long-run, it would be a godsend to the coal industry and other alternative energy industries. If those alternatives turn out to be onerously expensive, we can always alter out consumption patterns. Unfortunately, this natural process is often short-circuited by governmental tax policies, subsidies, and licensing that provide perverse incentives that lower the cost of continuing to extract increasingly scarce resources at the expense of other potentially viable substitutes. Libertarians argue that viable substitutes must be discovered via free market competition. But welfare liberals cling to the false belief that government experts possess perfect information, and therefore can choose the best substitutes. When governments choose the wrong substitutes, we invariably end up with resource shortages, higher prices, and/ or higher taxes. F.A. Hayek called this governmental tendency to over-estimate its ability to manage markets, “The Fatal Conceit.”

In the United States, the over-extraction of natural resources is also fueled by public ownership of resources, coupled with the government charging favored extractors ridiculously low license fees to extract publically-owned oil, coal, and timber. Sometimes these “sweetheart deals” can be attributed to outright corruption of public officials, but most often it’s a matter of legislators trying to protect extraction jobs in their districts by artificially lowering the cost of extraction and thereby fighting off viable competing substitutes offered by other districts. Hence, onerously expensive off-shore drilling for increasingly scarce oil is incentivized by government by lowering extraction fees, water pollution standards, and taxes etc. Despite years of tragic over-extraction, environmentalists continue to express unbridled faith in governmental stewardship over resource extraction, while in reality they are more likely to end up with “corporate welfare,” which is how governments make the “tragedy of the commons” even more tragic.

Environmental Policy and the "Tragedy of the Commons" Part I

Any libertarian-based environmental policy begins with a foundational principle called the “Tragedy of the Commons.” Let’s break it down into its basic components: “commons” and “tragedy.” In the Western world, the cultural origin of the concept of collective environmental ownership can be traced to the Biblically-based tenet that God gave the earth to mankind. Over the centuries this has been interpreted to mean that caring for the earth is our collective responsibility: call it “stewardship.” Unfortunately, the problem with collective responsibility is that we have repeatedly proven to be irresponsible stewards. That’s why when human beings assert collective dominion over the environment the consequences are inevitably tragic. Hence, the familiar libertarian mantra, “When everyone owns it, nobody owns it.”

Human beings utilize our common earthly environment in two different ways. We extract resources and expel waste. Throughout human history, environmental tragedy has resulted from our over-extraction and over-expulsion. In recent years, the over-extraction and over-pollution have become more problematic than in the past because we’ve become much more efficient extractors and polluters. The root of the problem is that, when given the option, we humans would rather reap benefits than pay costs. In the case of over-extraction and over-pollution the costs are usually transferred (shifted) to other humans, and most often to future generations. Most libertarians argue that the only way to avoid “tragedy of the commons” is to abandon collective ownership and stewardship in favor of private ownership. I’m not sure about that. Private ownership alone will not necessarily lead to non-tragic environmental policy. After all, individual owners are also prone to over-extraction and over-pollution of their own property, as they willingly risk less-certain long-term tragedy in pursuit of certain short-term benefits.

So the real problem arises when opportunistic owners over-extract and over-expel at the expense of other adjacent property owners. Therefore, other libertarians argue that private ownership must be accompanied by the empowerment of adjacent property owners to exact retribution. When my neighbor builds a dam upstream to divert water for his private fishing pond, why can’t I sue him for over-extraction? When the coal-fired utility plants along the Ohio River pollute the air over my property why can’t I sue Duke Energy Corporation for polluting my air? But it's not that simple. The two manifestations of the “tragedy of the commons” are so different that they require more detailed, separate analyses. Therefore, my next two blog entries will cover over-extraction and over-pollution, respectively.