Saturday, January 19, 2019

How Skewed Is the Distribution of Medical Spending?

Following up on some topics I raised in this post.

I found this document titled The Concentration of Health Care Spending by the National Institute for Health Care Management. It gives some good figures for the distribution of actual annual health care spending. See the chart on the 3rd page. The top 1% of spenders spend ~$90,000 on average. The top 5% of spenders spend ~$40,700 on average. The top 10% of spenders spend ~$27,000 on average. The top 30% spend ~$12,000 on average. You can get cute with these numbers and infer that, for example, spenders between the 1st and 5th percentile spend about $28,000 on average. (Do a weighted-average of the 1% spending $90,000 and another 4% of individuals in the 1-5 percentile range spending $28,000 and you get the $40,700 figure.) People in the 5-10 percentile range spend on average $13,000 a year. People in the 10 to 30 percentile range, about $5,000 a year. Clearly this is a pretty skewed distribution, with the very top percentiles accounting for a large share of total spending. If someone is in the top 1% of spending year after year, health spending could easily be higher than their lifetime income.

But wait. Are people persistently in the top 1% (or top 10% or top 20%), year after year? When we talk about "the top 1% of spenders", is it the same people year after year?  Turns out the answer is "No." (Or mostly "No.") Look at the figure on page 8. It shows the probability that someone in a high-spending quantile will transfer out of that quantile within a year. If you're in the top 1% in one year, the probability is only 20% that you'll be in that quantile the next year; you have an 80% chance of moving to a lower-spending percentile. If you're in the top 5%, you have a 62% chance of moving to a lower-spending quantile. If you're in the top 10%, you still have better-than-chance odds of moving to a lower spending quantile. Clearly this demonstrates that there is some persistence in remaining in a high-spending quantile. Which is consistent with our intuition that there are unhealthy people who need ongoing, expensive care throughout their lives. If transition probabilities were completely random, people in the top 1% would only have a 1% chance of being in that group in the next year; 20% is a lot higher than 1%. But it's a lot lower than 100%.

I tried to get clever with this and come up with the transition matrix for various quantiles. I spent about an hour thinking about it and gave up. I think someone cleverer than me could come up with at least a transition matrix that is consistent with these figures; I'm thinking there is not an exact solution to that puzzle. If someone knows about a successful attempt to come up with these transition probabilities, or if someone knows what keywords to search for so I can look them up, feel free to share. Having that transition matrix would allow me to come up with expected future health care costs for various quantile ranges. (Given the transition matrix, you can multiply through to determine your odds of being in any given quantile in the next year, the year after that, the year after that, and so on. And with the average cost per quantile two paragraphs up, you can calculate their expected future costs in each year, given their current status. Use some interest rate to discount future spending, maybe add some assumptions about "absorbing states", because people eventually die, and you can come up with at least a rough-and-ready estimate for future costs. And that would tell you roughly what a health insurance policy would cost in a free market.)

I wanted to show that the expected future cost for someone in the top 1% is actually modest. Plainly it's less than "$90,000 per year, every year forever, discounted using a reasonable interest rate." Most people who transition out of the top 1% probably transition to another high-spending quantile. They may still be in, say, the top 5% or 10% in the next year. They don't transition to a perfectly random quantile, such that  they are equally likely to be at the 2nd percentile and the 99th percentile in the next year. But the odds of several very bad years in a row gets pretty small, if you simply multiply through the probabilities. Here is a darker consideration: some of those people who are in the top spending quantiles several years in a row are in the last years of their life. It's not a happy thought, but it means that there aren't that many more future years to consider, which means that future expected health costs are not quite as high as the distribution of one year's actual health cost implies. Most of the people who will be in the top 1% are probably insurable on a prospective basis, before the severity of their condition is fully realized. And anyway, a lot of this very high spending is Hail Mary medicine, enormously costly with very little chance of extending life. A sensible health insurance plan that excludes this kind of spending would be still more affordable.

I don't doubt that there are some people who are "uninsurable" in the sense that Ed Dolan means (explained in my previous post). There are probably some illnesses or injuries that are so severe and require such expensive care that even expected future health spending exceeds lifetime income. Once again, the solution to that problem is to insure health status changes rather than having insurance pay all your medical bills. The coverage trigger should be the diagnosis or the injury event, rather than the acquisition of health care years later. Your insurer at the time you were diagnosed with diabetes should eat all the future costs of health care related to treating your diabetes. If you switch insurers, that part of your future health spending should stay with the previous insurer. That way you can shop around and other health insurers don't treat you like a hot potato. (They might charge you more because your poor health is predictive of other problems not related to your diabetes, but they don't have to price or underwrite against you for spending related to your diabetes, which at that point is no longer "fortuitous." At that point, your condition a known entity.) As David Friedman once put it, the trick is to insure before the die is cast. Our stupid system insists on insuring after the dice have already come up snake-eyes.

By the way, I've read some posts from Ed Dolan's excellent blog, here. Go read some. I highly recommend it. I agree with a lot of his policy proposals and a lot of what he says about health policy. Implementing his solutions would vastly improve our health care system, and if I were in a position to deal, I'd be quite happy to accept these as "second best" solutions. I pounced on his Econtalk interview because he repeats a bad argument (in my opinion) that vastly overstates the "some people are uninsurable" problem.

Thursday, January 17, 2019

How Many People are Really "Uninsurable"?

In a recent Econtalk, Ed Dolan attempts to make the argument that a fully free market in health-care is not feasible. He claims that some people are completely uninsurable and cites some (very) rough figures on the distribution of health care cost on individuals. I think this is a bad argument, and for reasons I've stated several times before.
The first problem is that health care spending is very, very asymmetrically distributed, and it goes by basically a--some people call it the 80-20 rule, that 20% of people account for 80% of health care spending; and in fact the top 1% account for about 10% of health care spending. So, the result of that is that there are a lot of people for whom it is true that their health care spending needs exceed their income. In fact, exceed their entire lifetime income in a certain number of cases. Now, of course, it's also true that if your house burns down, the cost of rebuilding your house exceeds your income; and we solve that through insurance. But, health care needs are increasingly uninsurable, because in order to be insurable, a risk has to be fortuitous--it has to be due to random chance. But an increasing number of health care risks are predictable on the basis of pre-existing conditions or things that are determined, testing that's determined before you are born. So, we have this combination of catastrophic risks--which are risks that exceed your ability to pay, sometimes even on a lifetime basis, not just on current income--and we have uninsurability.
The problem with the claim that 20% of people account for 80% of the costs is that it's not grouping things the right way. I've seen this done in a very sloppy way, but as an actuary I'm used to seeing it done the correct way. The wrong way to do this is to line everybody up in order of their actual medical spending, pick out the top 20%, and calculate their share of total medical spending. The skewness of actual spending tells you nothing whatsoever about whether a risk is insurable. By this standard, fewer than 1% of homes account for 100% of fire-related homeowners insurance claims. About 1% of drivers account for 100% of bodily injury liability claims in auto insurance. Of course, all of these risks are actually quite insurable, and there are thriving insurance markets in these areas. The distribution is skewed, but not nearly as much as this presentation implies. (This Incidental Economist post by Austin Frakt has some figures, which are in the range of what Dolan says.) This greatly exaggerates how many people are truly "uninsurable."

The correct way to do this is to rank people by their expected costs, then take the top 20% (or whatever quantiles you're doing this for) and calculate their share of total medical spending. Expected cost is calculated based on some statistical model applied to a large database of historical costs, using predictors like age, gender, general health, and treatment history. For most kinds of insurance, annual premiums are determined based on these results. Doing the calculation this way, grouping by expected rather than actual costs, you don't see such extreme values. The top 1% of auto risks (measured by their expected costs, which is reflected in their policy premiums) might be responsible for, say, 5% of claims. Even these very bad risks can usually find insurance.

There are a lot of people who are predictably unhealthy: they have chronic conditions or genetic predispositions to something. But within this population, in a given year some of them will require a lot of care and others won't. Some will have a medical episode of some sort: an infection, a fall, a complication. It will result in their consuming a lot of health care in that year and possibly for a several years in a row. But the question of which person in the high-risk population actually incurs these costs is still a random guess. Contra Dolan, these costs are fortuitous (meaning random, not the colloquial meaning of "fortunate"). They are imminently insurable. If Dolan can show that health costs are as skewed as his presentation implies after doing it the right way, I might concede that there should be a government risk pool for the very highest cost (again, expected cost) individuals.

This is disappointing, because Dolan even mentions house fires and states why they are insurable. He should have had the tools to see why his "skewness" argument doesn't make sense.

Contra his argument on pre-existing conditions, those risks are also insurable. They key to solving this problem is getting people to insure against the risk of acquiring a pre-existing condition ahead of time. If you sustain an injury that requires years of expensive treatment, that's a "pre-existing condition" if you attempt to switch health carriers. But if you injure someone with your automobile, your insurer at the time of the accident will cover the costs of that injury (up to the policy limits), even for care that happens years later. Health insurance could (and should) cover injuries the same way that auto insurance does. It's just as feasible that we could sell insurance that pays out if you are diagnosed with some kind of chronic condition (and my post lists several ways of doing this). Dolan mentions the possibility of testing for conditions prior to birth. Those conditions are insurable, too. Expecting parents can purchase a policy that will cover a child's genetic conditions, so long as they purchase it before any genetic testing is done. This could (and should) even be the default setting for a family health insurance policy, so they don't have to worry about buying it at exactly the right time (after the child is conceived but before any neonatal care is done). This way, the presence of a genetic condition is fortuitous, from the point of view of the insured and from the point of view of the insurer. All of this admittedly requires overhauling of our existing health insurance markets, but it's doable. What I'm describing is basically how other kinds of insurance work. Life insurance and chronic illness insurance policies often have long coverage terms, (very) high face-values, and affordable premiums. Covering the prospect of a pre-existing condition would be no different.

Dolan says some other things that I found off-putting. Russ Roberts mentions that people spending their own money would make wiser health spending decisions. They wouldn't blow their children's inheritance on last-ditch hail-Mary medicine. ("You wouldn't impoverish your children" he says.) Dolan stops him bluntly and somewhat rudely: "Stop right there. That's false." False? Always false? It's sometimes false? Is there a careful experiment or handy dataset? Oh, yeah, there is. Oh, and there's more. Roberts is basically right here, according to the best randomized controlled studies we have, the RAND health experiment and the Oregon Medicaid Experiment. People who have to pay more out of pocket (because they have less insurance coverage) consume less health care, and they don't experience a deterioration in health outcomes for it. Dolan is a health economist. He should know that.

Of course, I'm fixating on the negative. I'm specifically nit-picking at Dolan's errors (they are errors in my opinion, anyway). Don't let that put you off listening to the full podcast. It was a very interesting discussion.

Thursday, January 10, 2019

Does "Diminishing Marginal Utility" Justify Income Redistribution?

Of course not. But let's explore why some people think so and explain why that reasoning is wrong.

Diminishing marginal utility is the notion that the first thousand dollars of your income is way more important than the last thousand. The first $1,000 or so is enough to buy the bare necessities required for life: food, shelter from the elements, clothing. (Note that many people in the world make due on less than this. It's not pleasant, but it's doable.) The next thousand might buy you a few amenities, but mostly you'd use it to further ensure your survival: cleaner food, more secure shelter, warmer clothing, maybe some medicine and basic health care. As your income rises, eventually your survival is ensured as much as is feasible, and you start buying more amenities. Television, a computer, a smart-phone, a house with a man-cave. Get rich enough, and you go all-out: a swimming pool, a trampoline room, a yacht. Plainly the first few thousand dollars are more valuable to you than the last few thousand.

Some people argue that this has implications for income redistribution. If you have a million dollars and that guy over there is stuck on his first $10,000, obviously it makes sense to take some of the million and give it to the guy with only $10,000. The millionaire's loss is much smaller than the poor man's gain. The dollar amount of the transfer is equal to both individuals, but diminishing marginal utility makes that money more valuable to the poor man than the millionaire.

Mathematically this argument makes sense, but treating this as a pure math problem implicitly assumes that the incomes are distributed at random. If we acknowledge that the two individuals are decision-making human beings, the argument falls apart. Presumably the two individuals had different goals. The millionaire placed a high value on a prestigious career and high income. The other guy presumably valued something else and did not go full gunner on his career. Almost certainly, the millionaire works more hours than someone in the lowest income bracket. Of course I'm not claiming that the entire difference between these two people's incomes is determined by choice, but much (I'd venture most) of it is.

Let's take a closer look at leisure time. Doesn't leisure also have diminishing marginal utility? If you only had a single hour of leisure time each day, wouldn't you cherish it more than if you had eight or sixteen hours? Should we, as Landsburg puts it in the preceding link, round up assembly-line workers and make them mow the lawns of corporate vice presidents? Of course not. The VP could choose to spend some of their earnings to buy back a little leisure time for themselves. At the same time, albeit to a more limited extent, the assembly line workers could trade their leisure time for higher incomes. This could take the form of working more hours at the same job, working more diligently, working a job in the gig economy, earning an education in their off hours, and a dozen other things I'm not even thinking of.

Diminishing marginal utility does not by itself justify income redistribution. That requires additional assumptions about how income differences between individuals depend on deliberate choices versus random chance. Those additional assumptions need to be exposed to the light of day, so we can know if they are reasonable or not. (By the way, suppose we can perfectly determine how much of everyone's income is due to effort and how much is due to chance. Government policy should not necessarily "correct" the entirety of income differences that are due to chance. Sometimes people are offered the opportunity to insure against some kind of risk, and they decline. If there's a thriving market for fire insurance and people decline to insure their homes against fires, that means people don't place much value on flattening this risk. We need to know how much people value flattening the risk of "earning a low income." Maybe it's a lot, maybe it's not much. But someone who thinks seriously about these topics should want to know that.)

None of this even gets into the topic of taxes distorting incentives and making society as a whole poorer. This consideration makes the optimal amount of redistribution even lower than whatever the above discussion would. In my comparison above of the millionaire and the poor person, I say "The dollar amount of the transfer is equal to both individuals...". This assumption is violated if there are transaction costs. We need to know how big those transaction costs are, and more specifically how they depend on the total amount of redistribution.

Wednesday, January 9, 2019

Tyler Cowen Is "Not Even Wrong" About Decriminalization

[I originally titled this "Tyler Cowen Is Wrong About Decriminalization." This was the wrong title. "Wrong" would imply that Cowen offered an argument for his position, and that argument had some fatal flaw or easy refutation. His claim that decriminalization is the way to go is not even wrong.]

In a recent links roundup post, Tyler Cowen repeats his claim that decriminalization is superior to legalization of marijuana. He links to a story by Malcolm Gladwell and another one by Alex Berenson and, adding his own commentary, says, "Decriminalization, not legalization, is the way to go." Nothing in either piece supports his policy recommendation. ("Decriminalization" generally means no criminal sanctions or light fines for users, but continuation of prohibition on the supply side.) I've written before that I see this as a major blind spot for Cowen.

It's true that both pieces suggest that the harms from cannabis use may be understated. The legalizers may have been too zealous in denying any possible harmful effect of the drug, not wanting to give drug warriors any hooks to hang their policy on. But what's missing here is any kind of cost-benefit analysis. Is legalization a bad policy if any social problem (crime/mental illness/accidents) increases at all? Is there any accounting at all for the enjoyment that people get from consuming cannabis? Like I've said before, pleasure counts. As I've also pointed out before, Cowen and Tabarrok's own economics textbook provides an ironclad economic case against drug prohibition. (See the link for the full details of the argument.) Cowen owes his readers some explanation of why that analysis, which was important enough to include in his textbook, doesn't apply to marijuana. He might have some deep cultural or "histeresis" argument, about how the standard economic treatment is missing something important. I'd like to hear it so I'd know if it's a thoughtful argument that I might actually agree with, or if it's a collection of un-curated, pasted-together factoids assembled by a news-junkie. (Sorry, Tyler.)

Another thing that's missing here is a thorough vetting of the claims. The Berenson piece claims that violent crime has risen in the states that have legalized marijuana, since 2014. It's also risen nationwide over that period, so it's hard to claim anything about the effects of legalization without a more thorough analysis. (Yikes! I haven't noticed this before. Hope it's just a blip.) Both pieces suggest that some people are susceptible to developing psychosis from marijuana use. I think this claim needs to be parsed. I have heard elsewhere that marijuana use does interfere with the treatment regimes of some mental disorders (schizophrenia in particular), causing them to deteriorate or making treatment impossible. But I think there's a huge difference between saying that a cannabis harms a small percent of the population with pre-existing mental health problems and suggesting that it's dangerous for normal people using at moderate rates. Good on Berenson and Gladwell if they are simply pointing out that some people are more susceptible than others to the hazards of drug use. I'd like to see more of that kind of thinking. Other obvious examples of this: some people are allergic to marijuana smoke, and some AIDS patients are susceptible to fungus that might be growing on poorly cultivated marijuana. (And it sure looks like people with chronic health conditions are more susceptible to opioid overdose than normal, healthy people.) These are useful things to know. It's important to identify risk factors, but this should lead to a nuanced, targeted drug policy. Not general prohibition or "decriminalization", which is still prohibition on the supply side.

[As I was writing this post, I saw Jacob Sullum's excellent piece in Reason on the two Berenson/Malcolm pieces. Apparently some other people have considered the recent rise in violence more thoroughly, and they've found that it can't be plausibly blamed on marijuana legalization. See also this Twitter feed that Sullum links to. Or don't. Ugh. Way too much snark. Legalization advocates, stop doing this. It poisons your moral credibility. ]

Berenson also points out that the black market still exists. This is because excessive taxes have made it more expensive than it needs to be, and onerous regulations make it difficult to obtain in some places. So of course a black market is still going to exist, just as black market cigarettes and black market moonshine still exist, even though these goods are legal. We are still way better off with legal markets in these goods. The black market counterparts to these legal goods represent diversions from clean, regulated, audited industrial processes rather than filthy illegal operations. So it's a cleaner illegal market that we'd have under total prohibition. (More so for cigarettes than for moonshine, but still true of both.)

Both pieces gave me plenty to think about, but they ultimately miss the mark. The notion that marijuana use increases rates of psychosis at the population level is alarmist in the extreme. There is a way of saying this that implies that the entire population is at risk, as if everyone who smoked were making a role of the same set of dice. There is a more accurate way of saying this that reveals to the reader/listener that most normal people don't have anything to worry about, but some people with pre-existing issues and impulse-control problems might experience harms from cannabis use. I don't think it's useful to talk about drugs use as if  it exposed the user to randomly distributed harm, as if randomly sampling from a probability distribution. Usually the harm requires deliberate, excessive use, which means the user has a great deal of control over whether any harm occurs. (Of course, this is less true of, say, heroin, where the user can't know the concentration. Another hazard of prohibition.)

Tuesday, January 8, 2019

Property Rights: Who Is the Crass Materialist Here?

There are people who reflexively sneer at any mention of property rights. It's usually people on the left. Either it's full-on socialists who think that property rights aren't even a thing, or its moderate leftists who are reflexively bracing for a "conservative" argument against raising taxes or against confiscatory regulations.

According to this mindset, we advocates of property rights are just crass materialists, even imbuing inanimate property with "rights." We're doing this at the expense of living people with actual rights, perhaps denying them an opportunity to fully enjoy those rights. By restricting the revenues of the government, we prevent the welfare state that assures (or "assures", if you're a skeptic of such assurances like I am) that everyone has the minimal material standard of living that would actually allow them to enjoy their other rights. And by hobbling the regulatory state, we're removing the only bulwark against corporate overlordship. (Labor regulations to protect the workers from their corporate masters, product safety regulations to protect consumers from unsafe products, regulations preventing misleading advertising, etc.). Arguing from a principled defense of property rights is a non-starter if you're trying to convince someone who doesn't already believe they're important. You tend to get something like an eye-roll,  and a "Here we go, another rich person wants to protect his 'property'." "Property rights" is just a phrase that rich babies use to prevent their toys from being taken away. It's a materialistic ideology that elevates property over flesh-and-blood people.

I actually think it's property rights deniers who are the crass materialists. One of their major grievances is that some people have more stuff than other people. They are obsessed with national statistics about the income of the upper class and the supposedly flat incomes of median households (which are only flat if you overstate inflation and don't account for increasing transfers, employee benefits, changing household demographics, and decreasing numbers of earners per household). This grievance persists even in a society like the U.S., where "the poor" have a much higher material standard of living than the middle class in most other nations (or for that matter the rich in most other nations). The argument that the redistributionists are just trying to ensure a minimal material standard of living is just not credible in this context. It is entirely about who has more stuff and why they should be resented for having that stuff.

More importantly, the poor need property rights to function, too. The underclasses tend to fair most poorly in societies that don't respect property rights. The economist Hernando de Soto argues in his various works that the inability to acquire title to property is a major hindrance to the world's poor. Establishing clearly who has the right to use, modify, sell, or buy an object, building, or parcel of land would remove a lot of confusion. There would be less conflict with clear rules of ownership. Property owners would also have an incentive to perform maintenance and make improvements on property that they actually own, especially if they can eventually sell it. (If you want a stark example of how lack of property rights leads to decaying infrastructure, listen to Casey Mulligan describe crumbling buildings in Cuba in this interview.)

Unclear property rights lead to unnecessary conflict. Take a simple example. Imagine a car in a world without any property rights. (How a car came to exist in that world is a mystery. Who would bother to build it knowing they couldn't sell it and recoup the production costs? Who would buy it knowing they couldn't keep it for their own use?) You approach the car and reach for the handle, thinking you're going to climb in and drive off. Someone else is approaching with the same intent. You notice each other, and each of you speeds up. This is bound to become an "I saw it first" versus "I touched it first" shouting match, which would likely escalate to a shoving contest. Or suppose we manage to solve that particular problem (of fights breaking out) because we institute an elaborate set of norms and rules for how to adjudicate the conflict. It's still a conflict, with unnecessary argumentation and shouting. Society's resources are wasted arguing over who gets what, constructing elaborate arguments, currying favor with judges, etc. A far more elegant solution is to have clear ownership rules so that not just anybody can lay claim to any property they set their eyes upon. Property rights are basically social norms that have been constructed to minimize conflict. I see property rights deniers as wanting to instigate all that conflict because they are offended by the distribution of material goods. "Let's fight it out so that we can take some of your stuff." This is crass materialism in the extreme. I want to tell them, "You're the ones who are imputing moral worthiness to material wealth, not us. You're the ones initiating a conflict where none is necessary."

I once heard a physicist describe the nature of time. He said something like, "Time is the universe's way of preventing everything from happening at once." The corollary here is that property rights are society's way of making sure everybody isn't using the same property at once. It is physically impossible for a single piece of property to satisfy all potential claims on it. The car in the example above cannot service more than a few people at any one time. A house in the same world could only comfortably fit a few people (even if we overlook non-physical discomfort of sharing a space with strangers). There must be rules governing the use of property, otherwise things get so overused or so bogged down with conflicting claims that they are basically worthless to society. There are some things that genuinely belong to the public and are more valuable if owned and managed communally. Fisheries, grazing lands, forests, etc. Even for these things, there must be clear rules for how they can be used, or they will inevitably be overused and ultimately their value destroyed. (For an excellent discussion of communal properties, I suggest Governing the Commons by Elinor Ostrom and Order Without Law by Robert Ellickson.) But even granting this point about communal property, it's a huge mistake to think that everything is in this category just because some things are.

Another argument for denying the existence of property rights goes something like this: "Historical injustices leading up to the present left property in the hands of people who aren't its rightful owner. Land was taken from displaced or exterminated people, property was confiscated by governments hostile to certain racial groups, and so on. So we can't really know who owns anything."  I think this is an incredibly silly argument. For one thing, it acknowledges that someone at some point rightfully owned property, and that it was wrong for some other party to come along at take it by force. The people who make this argument implicitly believe in property rights. (They even occasionally slip and explicitly acknowledge this belief.) More importantly, this critique of property rights doesn't provide any useful commentary about how we should adjudicate property disputes or tell us what should be distributed to whom. Yes, there are vast historical injustices whereby some powerful group pillaged, displaced, and perhaps exterminated a weaker group. Does that mean the ownership of my car is in dispute? Does that mean someone has to offer their home to anyone who needs shelter? No. The fact that there are hard cases doesn't mean that the easy cases don't exist. Most of what exists is in the "easy cases" category, and these easy cases can be handled by common-sense notions of ownership and property rights.

A related argument is the Barack Obama/Elizabeth Warren notion that "You didn't build that." If you're successful, your success depended on many inputs and required help from a lot of people. Your teachers, who built your human capital. The workers who built your establishment and staff it daily. The government roads and infrastructure that bring customers to your place of business and that generally allow you to transact. These were necessary inputs to whatever wealth you currently own. All of that is true enough, but it doesn't have any implications whatsoever for redistributing resources. If I pay someone to build a structure for me, they offer me a quote, which I can agree or decline to pay. If I pay, and they build the structure and I pay up. Deal complete, honor served. There is no residual claim. If I build a thriving, hopping business out of this structure, the builder's construction contract does not entitle him to a fraction of my revenues in perpetuity. The builder builds, the buyer pays, deal done. The same is true of almost every transaction in our society. It would be incredibly unhealthy for us to go around feeling like we had residual claims against other people's success, just because something we once did (even things we were compensated for according to an explicit contract) was a necessary input to their success. If you want to lay claim to the future profits of some company, buy stock in it. (You can't really buy stock in the future earnings of an individual person, except in some rare cases like top athletes or actors. Maybe you should be able to do this more easily? Maybe this would be a reasonable way to finance education?) It's best to start from clear rules of ownership. If people want to "sell shares" of their future earnings or buy shares of someone else's, they should do so explicitly. The Obama/Warren framing is a thinly veiled justification for grabbing more tax revenue. It doesn't tell us how much to tax, just that the amount should be "more." (Is there a way to start with the Obama/Warren formulation and arrive at the conclusion, "Therefore taxes should be lowered on top earners."? If not, I don't think it's useful for discussing tax rates.)

None of this tells us anything useful about what the optimal tax rates should be. One could be a rigid-minded "property rights extremist" in such a way that no taxation is ever justified. "It's mine, so you can't have it." But most people, even most libertarians, think that the government needs some revenue to fund its programs. (Even some anarchocapitalists, like yours truly, think that the government should remain a going concern for quite some time. If there is a necessary interim between our current massive government and future statelessness, that inevitably means some level of taxation for the foreseeable future.) These taxes might be seen as mild-but-justifiable abrogations of property rights. Or they may be seen as a necessary cost that overall improves property rights, because government police and courts discourage theft and settle disputes. I don't know what the optimal tax rate should be. But I do think it should be troubling if people start arguing that there are no moral constraints on tax collection and income redistribution because "property rights aren't even a thing." Most people are quite reasonably troubled when they hear this kind of talk. They are right to be troubled. And property rights deniers are wrong to dismiss these worries.

Friday, December 28, 2018

The 20th Century as a Boorish Uncle

I wrote an appreciation of negative role-models here. These are people who set such a bad example that nobody close to them will be tempted to emulate them. They're an evil fun-house mirror showing you how bad it can get, like the boorish uncle who berates his wife in full view of the extended family.

I think of the 20th century as the ultimate negative role model. So many horrible things were tried. This is true also of previous centuries, but this time we had modern technology to record it and preserve this bad example for posterity's sake. Fascism. Eugenics, leading to whole-sale industrial genocide. Communism. Socialism. Hyper-inflation. So many terrible ideas were tried, and what's more they were tried to the hilt. We saw pure, undiluted examples of these phenomena. Eugenics is so horrifying because it's morally revolting to see it in actual practice, even if some pre-Nazi eugenicists had insufficient imagination to see the horror in theory. Same with communism. Even if centralized planning of an entire society had been intellectually respectable in theory, history has repudiated it.

My darkest thought is that history had to try these things to see just how bad they are. It would be easier to indulge empty ruminations if such-and-such a people didn't exist if it weren't for the horrific examples of Nazi genocide. It seems obvious now to us right-thinking folk, but I don't think it would be quite so obvious without a stark negative role-model in recent historical memory. To take another example, full-fledged communism is still respectable in some circles, but far less so than it would otherwise be. Coffee house intellectuals and college sophomores like to pontificate about how awesome society might be if someone were in control. History's repudiation of communism hasn't been quite as fully learned as the repudiation of eugenics and genocide. But the lesson is still there for the taking. Someone more knowledgeable than a coffee house intellectual can point to horrific counter-examples supplied by the 20th century. This would be a lot harder if communism hadn't been tried (and tried and tried and tried...).

I actually have a darker thought still. These lessons will fade from living memory, and we'll have to re-learn them with another round of horrific counter-examples. We'll begin to regard Hitler and Stalin as benignly as we now regard, say, Attila the Hun or Genghis Khan. Or worse, we'll start to think, "You know, we have the data an the computing power now to do central planning. And our understanding of social science is a lot more mature than it was in the 20th century. Let's give it another go." (Salvador Allende thought he could centrally plan the economy of Chile with the computing power available to him in the early 1970s, see here. I can imagine someone with better computers having the hubris to think they can naturally do better.) I don't know if we're really headed for that. I tend to believe the optimistic Stephen Pinker/Matt Ridley/Julian Simon narrative that life is getting better, cleaner, less violent, and more enlightened. But I'm not fully sure of that, and it terrifies me.

Thursday, December 27, 2018

There Isn't Enough Moral Philosophy in Public Health

I know philosophy gets a bad rap these days. Many people think it's just a bunch of useless navel-gazing. Saying there isn't enough philosophy in something practical like public health is like saying there isn't enough interpretive dance in civil engineering, or there isn't enough basket weaving in meteorology. But this is a mistake. Without some kind of philosophical grounding, it's impossible to say which decisions are correct. It's impossible to figure out how to trade off one cost versus another, and it's impossible to justify curtailing people's freedoms, as public health institutions often do.

I've criticized the term public health in multiple previous posts. As far as I can tell, the term doesn't have a coherent definition, at least not one that justifies the existence of government "public health" institutions in any serious way (the FDA, the CDC). Public Health is like a magic incantation that lets the government interfere with our decisions without actually justifying itself. It's as if the goal were to expand human lifespans at any cost, or reduce this or that morbidity rate regardless of people's actual preference for risk. In fact public health officials often explicitly use this kind of language.

If you want examples, read anything by Jacob Sullum on the FDA's misguided efforts to regulate vaping. (Here and here for example.) Sullum repeatedly points out that any restrictions placed on vaping will cause some number of adults to decline to switch from cigarettes to vaping. Vaping is almost certainly safer than smoking cigarettes (though I think there are legitimate concerns that there might be unseen long-term effects), so any missed opportunity to make the switch is bad news even from a strict public health perspective. Sullum even quotes Gottlieb, the FDA chief:

"It's implausible for me to say that there aren't kids out there who are using e-cigarettes instead of combustible tobacco and probably, if they never had this opportunity, would have used combustible tobacco." But he added that it's hard for the FDA to consider that as "a public health justification" when "our mandate is that no child should be using a tobacco product." That suggests the FDA's mission to reduce underage vaping may conflict with the public health goal of minimizing morbidity and mortality.
Even if "public health" means something narrow like "minimizing overall mortality and morbidity across the population," then the FDA is apparently bad at it. They have to follow their mandate off a cliff, without even considering other public health considerations. This doesn't even get into any of the philosophical questions about how to weigh the costs and benefits of restricting people's freedoms. Suppose people really like vaping, even though it turns out vaping removes, say, a year from the life of the average vaper. Vapers decide that the cost is tolerable. Does "public health" demand that we restrict vaping above and beyond the way people voluntarily restrict their own vaping habits? Or here's another philosophical consideration. The FDA seems so concerned with protecting children ("our mandate is that no child should be using a tobacco product") that it's willing to throw a large number of adults under the bus. (An infinite number, as Gottlieb's recitation of his mandate would seem to imply? I hope not, but I don't see what would constrain them.) But wait a minute. Is it so terrible if a "child" vapes? (Does "child" mean "anyone under 18"? Does anyone remember being this age and resenting their lack of autonomy? Does this get any weight at all in the social calculation?) Most of the health consequences of smoking, and presumably vaping, come much later when the child has become an adult and this adult has continued their bad habit for a lifetime. If smoking were acutely toxic, killing some random users instantly, there would be a much stronger case for restricting youth use. Admittedly, it's probably easier to prevent a child from ever starting the habit than it is for an adult to end their long-standing habit. But the framing of "We're protecting children" seems misguided. "We're protecting adults, who would otherwise have a harder time controlling their behavior" doesn't sound quite as compelling as "We're protecting the children." But it would be more honest.

Consider the so-called "opioid epidemic." From a public health perspective, people only see that upward-trending line showing the increase in opioid-related deaths. The only valid goal from a public health perspective is to mechanically bring that trend line back down. The CDC's initial reaction was to do something like this. They issued misguided prescribing guidelines, which completely ignored the variability in actual pain patients' responses to the medicine. These "voluntary" guidelines ended up being used as justification for law enforcement to harass doctors and patients who were prescribing/prescribed "too much." This was a foolish overreaction by the CDC to something that wasn't even a real "public health" crisis in any meaningful sense. Some patients were hurt by these restrictions, and by "hurt" I mean "cast into crippling agony." (I argue here, it was no more a "crisis" than increased driving leading to more driving deaths is a crisis.) And what is the public health benefit of these restrictions? That people who want to use opioids to get high have a harder time finding them? Is that even a benefit? Again, public health obliterates free choice with an all-trumping mandate bring the trend line down. Pleasure counts. It damn well ought to, at any rate.

In his book Good Calories, Bad Calories, Gary Taubes describes a miserably austere diet that would have a small impact on heart disease and obesity rates. You'd basically have to starve yourself for your adult lifetime in order to gain a few months of life. Some doctors and public health officials advocated for the diet anyway, apparently taking an "improve society's health metrics at all costs" perspective. This kind of "no man left behind" thinking is just indefensible.

I'm thinking of other examples that are not necessarily from our public health institutions. Here are several. Sometimes people at my jiujitsu school get injuries, and they ask their doctors how to deal with them. Sometimes they get the clueless response, "Well, quit doing the thing that's getting you injured!" (Some doctors are better than others. One of my injured colleagues found a sports doctor who had worked with the American Olympic weightlifting team, so he understood the notion of training though injuries and training to overcome injuries.) To this doctor, this hobby was all cost. If you can't understand the love of the sport, you won't understand why someone would risk injury to continue it. Russ Roberts has mentioned on Econtalk (I can't find the episode right now) a friend who likes to ride his motorcycle, but who broke his arm in an accident once. His doctor told him to stop riding or he'd stop treating him. Russ' friend, bless him, said, "What the hell do you mean? I love riding my motorcycle." To Russ' friend, cycling was an enriching hobby, and the risk was a price worth paying. I spoke to one older gentleman who was on testosterone treatment. On a high dose, he could get away with less sleep, but on a lower dose, the one that his doctor ultimately prescribed to him, he had to sleep for 11 or 12 hours a day. Suppose we get more total hours of waking life under one treatment regime, even if technically we die at a younger age. Does "public health" have anything at all to say about this trade-off? If it does, and if it conflicts with an individual's preference for "more total waking hours, but a shorter overall life", does public health trump individual choice? (I can't say that any official public health policy led to any of the above examples, but the "better health at all costs" mindset is pervasive anyway.)

I think we really need to realign the mission of our public health institutions so that they are consistent with a free society. (First step: realign them so they are actually coherent.) Doing this might require some squishy moral philosophy. All that public health data is useful, and props to the CDC for collecting it and making it publicly available. But what society ultimately does with that information is not their call.