Coyote Blog

We all know from progressive and Democratic writers the the Community Reinvestment Act and other efforts to offer cheap home loans to people without good credit had nothing to do with the mortgage industry offering too many loans to people without good credit.

So we should not be in the least bit worried that the Obama Administration is calling for more mortgages to be given to people with weaker credit, while sub-prime auto loans are simply booming.  Because we have learned from Iceland and Greece and Cyprus that the best way to deal with a debt crisis is by encouraging consumers to take on more debt, and the best way to respond to an asset bubble is to try to re inflate the bubble.

All of this, of course, is simply crazy talk.  The people who are involved HAVE to know this won't end well, because the most recent example of this leading to disaster is only 4 years old.  Hell, the people doing this were in office when this same approach fell apart last time.  But politicians refuse to face some pain now to avoid huge pain in the future - for politicians, the discount rate on pain is infinite.

When I read this in our local paper, alarm bells immediately went off:

A friendship cemented while working together on the state’s economic development efforts has led to a new partnership linking Roy Vallee, the former Avnet Inc. chairman and chief executive officer, with private developer Don Cardon.

Great, two folks who have focused on bringing crony corporatist benefits to selected local businesses and business relocations are going into business together.  I don't know these guys, I am sure they are fine folks, but my first thought was a business that leveraged their connections with government to create private profits.

Reading further, this seems like a good guess:

The two metro Phoenix business leaders say they will collaborate on large commercial developments, including those with a special public-interest focus and those with special complexities....

Cardon spent three years at the Arizona Commerce Authority, a public-private partnership, and the predecessor Arizona Commerce Department. Aside from that, he perhaps is best-known as a driving force behind CityScape, the three-block, $1.2 billion mixed-use development in downtown Phoenix. He cites as a strength his ability to bring private and public interests together on a project.

Yep, I definitely think I am on to something:

The firm will strive to encourage a “collective vision” and “make sure projects are worthy of investment and will be successful,” Cardon said. “Everything we do will involve public value, enriching the quality of life.”

You know the type of project -- the ones where the city / state / Feds justify investing millions of taxpayer money into private projects because "they create jobs" (like those at Solyndra).  In fact, the two partners are already polishing up this mantra, which I am sure we will hear over and over:

Deals typically will exceed $100 million and will create hundreds of jobs, both in the development stage and when complete, he said. The company , however, will maintain a fairly lean staff.

“We’re not a big employer, but we’ll be a job creator,” he said.

I want to make a couple of quick points:

• Investments whose primary return is "jobs" are not investments, because jobs are a cost, not an income stream.  Investing public money to create jobs means that one is investing money now so that it incurs costs later. 
• All successful capitalist enterprises that make  a profit by definition create "public value" and "enrich the quality of life."  Otherwise no one would buy their product or service and they would fail.  In fact, only publicly-funded projects can evade this sort of accountability.  When it is said that these projects deliver "public value," what is meant is that they deliver benefits that a few self-selected people have defined as somehow interesting to the public, but which it turns out the public (when given a choice) is unwilling to pay for.  Which is how we get the local town of Glendale continuing to subsidize an ice hockey team for $25 million or so a year.

"I wish I had ended up with a Princeton man"

source

I found out more about why the WordPress Bad Behavior plugin was blocking updating of my Feedburner RSS feed -- apprently, Google got a bunch of its IP addresses blacklisted in project Honeypot, which Bad Behavior uses as one source of spam data.  Here is more:

This is caused by an architectural problem at Google, and will require Google to resolve the issue for the problem to go away permanently. The issue is that, in the case of FeedBurner, Google uses IP addresses which are shared by third parties using Google App Engine, some of which are spammers. The spammers quickly get Google’s IP address blacklisted all over the Internet, and suddenly FeedBurner stops working.

If you are impacted by this issue, you can whitelist the affected IP addresses or the FeedBurner user agent string, or disable Project Honey Pot. Be aware that doing any of these will increase the amount of spam you receive. You should also complain to Google, since this isn’t the first time this has happened, and they seem to have done absolutely nothing about it.

You can't make this up.  Ray Lane, the very nicely politically-connected investor whose connections to Obama are often credited with Fisker scoring millions of taxpayer money, made a video several years ago praising Obama as a great new model of venture-capitalist-in-chief.

I can't believe any intelligent human being would think that the right role for the President is to be a venture capitalist with taxpayer money, or that even if this were so that Obama would be the right person with the right skills to do it well, but I suppose trying to score hundreds of millions in taxpayer money changes your perspective.

But the funny part is the example he uses - he thinks the best evidence of Obama being a swell investor is ... Solyndra.  Obviously filmed before Solyndra failed  (and the US government allowed all the remaining assets to go to another set of Obama cronies), this video is hilarious.

Even in all-electric mode, the Fisker Karma gets worse mileage than an SUV  (only a deeply flawed EPA MPGe rating, purposely designed to over-state electric car efficiency, hides this fact).

What a surprise -- apparently forced to make their case to private investors now rather than just DOE bureaucrats whose main criteria is "did this company support President Obama in the last election", Fisker is having trouble raising money and may declare bankruptcy.

Matt Yglesias and I certainly do read history differently.  He writes recently in a Salon article:

The basic economic foundations of industrial capitalism as we've known them for the past 150 years or so have an activist state at their core. Building political institutions capable of doing these things properly is really difficult, and one of the main things that separates more prosperous places from less prosperous ones is that the more prosperous places have done a better job of building said institutions. There's also the minor matter of creating effective and non-corrupt law enforcement and judicial agencies that can protect people's property rights and enforce contracts.

The point is, it takes an awful lot of politics to get an advanced capitalist economy up and running and generating wealth. A lot of active political decisions need to be made to grow that pie. So why would you want to do all that? Presumably because pie is delicious. But if you build a bunch of political institutions with the intention of creating large quantities of pie, it's obviously important that people actually get their hands on some pie. In other words, you go through the trouble of creating advanced industrial capitalism because that's a good way to create a lot of goods and services. But the creation of goods and services would be pointless unless it served the larger cause of human welfare. Collecting taxes and giving stuff to people is every bit as much a part of advancing that cause as creating the set of institutions that allows for the wealth-creation in the first place.

...uh, just because

via Zero Hedge

 Update:  Whenever I argue with people about this, I find out that we share different assumptions.  Those who seem to support the bailouts assume that given some breathing space, the reckoning in Europe can be avoided.  I assumed the reckoning is unavoidable, and will come either soon or at best in the next cyclical downturn.  And it will be far worse in, say, 2015 than it would have been in 2010.  Every time we delay the reckoning, we make it far worse.

And then there are politicians.  I don't think they honestly know or care if the reckoning is unavoidable. They only care if it does not happen this minute.  For politicians, the discount rate on pain is infinite.  Future pain is thus always better than current pain.

Frequent readers will know that last year, I declared that the end of full-time employment in the American service industry (due to Obamacare) would be the biggest economic story of 2013.  The mainstream media either has not yet noticed or cannot be bothered with a story that does not put Obama in the best possible light, but the story is starting to get out none-the-less.

Expect a lot more of this.  The service industry generally does not operate 8 hours a day, 5 days a week anyway, so its labor needs do not match traditional full-time shifts.  Those of us who run service companies already have to piece together multiple employees and shifts to cover our operating hours.  In this environment, there is no reason one can't stitch together employees making 29 hours a week (that don't have to be given expensive health care policies) nearly as easily as one can stitch together 40 hours a week employees.   In fact, it can be easier -- a store that needs to cover 10AM to 9PM can cover with two 5.5 hour a day employees.   If they work 5 days a week, that is 27.5 hours a week, safely part-time.  Three people working such hours with staggered days off can cover the store's hours for 7 days.

Based on the numbers above, a store might prefer to only have <30 hour shifts, but may provide full-time 40 hours work because good employees expect it and other employers are offering it.  But if everyone in the service business stops offering full-time work, there will be no reason not to go to such a plan, and thousands of dollars per employee to do so.

OK, the Twitter problem was fixed by shifting from gd.is (which Twitter has apparently blocked) to Goo.gl for URL shortening.  For reasons I still don't fully understand, the Bad Behavior plugin was blocking the RSS feed to Feedburner.  My guess is that this may be something to do with an interaction with Incapsula.  I like Incapsula as a service, but they are constantly shifting their servers around so the .htaccess file and the proxy server list in Bad Behavior have to be constantly changed.

I was just informed, and have confirmed, that somehow my RSS feed stopped syndicating about 2 weeks ago.  And then, on an entirely other date, the new Twitter feed stopped, but Facebook still works.

I think I have diagnosed the Twitter problem, which we will confirm with this post, that Twitter flagged and blocked the default URL shortening service my plugin uses for malware.   It is either that or Coyoteblog has been blocked.  Crossing my fingers I will see this on Twitter in about 5 seconds.

I am a bit late to the game in addressing Krugman's comments several days ago when he said:

But the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.

This was in response to the implosion of Cyprus banks, which was exacerbated (but not necessarily caused) by the banks being a home for a lot of international hot money - deposits so large they actually dwarfed the country's GDP.

I generally rely on Bastiat's definition of the role of the economist, which I will quote from Wikipedia (being too lazy on this Friday morning to find a better source):

One of Bastiat's most important contributions to the field of economics was his admonition to the effect that good economic decisions can be made only by taking into account the "full picture." That is, economic truths should be arrived at by observing not only the immediate consequences â€“ that is, benefits or liabilities â€“ of an economic decision, but also by examining the long-term second and third consequences. Additionally, one must examine the decision's effect not only on a single group of people (say candlemakers) or a single industry (say candlemaking), but on all people and all industries in the society as a whole. As Bastiat famously put it, an economist must take into account both "What is Seen and What is Not Seen."

By this definition, Krugman has become the world's leading anti-economist.  Rather than reject the immediate and obvious (in favor of the larger picture and the unseen), he panders to it.  He increasingly spends his time giving intellectual justification to the political predilection for addressing symptoms rather than root causes.  He has become the patron saint of the candle-makers petition.

I am not naive to the fact that there are pools of international hot money that seem to be some of the dumbest money out there.  Over the last few years it has piled into one market or another, creating local asset bubbles as it goes.

But to suggest that international capital flows need to be greatly curtailed merely to slow down this dumb money, without even considering the costs, is tantamount to economic malpractice.

You want to know what much of the world outside of Western Europe and the US would look like without free capital flows?  It would look like Africa.  In fact, for the younger folks out there, when I grew up, countries like China and India and Taiwan and Vietnam and Thailand looked just like Africa.  They were poor and economically backwards.  Capital flows from developed nations seeking new markets and lower cost labor has changed all of that.  Over the last decade, more people have escaped grinding subsistence poverty in these nations than at any other time in history.

So we have the seen:  A million people in Cyprus face years of economic turmoil

And the unseen:  A billion people exiting poverty

By pandering to those who want to expand politicians' power based on a trivial understanding of the seen and a blindness to the unseen, Krugman has failed the most important role of an economist.

Other thoughts:  I would offer a few other random, related thoughts on Cyprus

• Capital controls are like gun and narcotics controls:  They stop honest people and do little to deter the dishonest.  In the case of Cyprus, Krugman obviously would have wanted capital controls to avoid the enormous influx of Russian money the overwhelmed the government's effort to stabilize the banks.  But over the last several weeks, the Cyprus banks have had absolute capital controls in place - supposedly no withdrawals were allowed.  And yet when the banks reopened, it become increasingly clear that many of the Russians had gotten their money out.  Capital controls don't work as a deterrence to money that is already corrupt and being hidden.
• No matter what anyone says, the huge capital inflows into Cyprus had nothing to do with the banking collapse.  The banks had the ability to invest the money in a range of international securities, and the money was tiny compared to the size of those security pools.  So this is not like, say, a housing market where in influx of money might cause a bubble.   The only harm caused by the size of the Russian investments is that once the bank went bad, the huge size of the problem meant that the Cyprus government did not have the resources to bail out the bank and protect depositors from losses.
• Capital controls are as likely to make bubbles worse as they are to make them better.  Certainly a lot of international money piling into a small market can cause a bubble.  But do capital controls really create fewer bubbles?  One could easily argue that the Japanese asset bubble of the late 80's would have been worse if all the money were bottled up in the country. When the Japanese went around the world buying up American movie studios and landmark real estate, that was in some sense a safety valve reducing the inflationary pressure in Japan.
• Capital controls are the worst sort of government expropriation.  You hear on the news that the "haircut" taken by depositors in Cyprus might be 20% or 80% or whatever.  But in my mind it does not matter.   Because once the government put strict capital controls in place, the haircut effectively became 100%, at least for honest people that don't have the criminal ability or crony connections to beat the system.  Cyprus basically produces nothing.  Since money is only useful to the extent that it can buy or invest in something, then bottling up one's money in Cyprus basically makes it worthless.
• Capital controls are a prelude to protectionism.   First, international trade is impossible without free flow of capital.   No way Apple is going to sell ipods in Cyprus if they cannot at some point repatriate their profits.  Capital controls can also lead to export controls.  If I can't export money, I might instead buy jets, fly them out of the country, and then sell the jets.
• Let's not forget that the core of this entire problem is a government, not a private, failure.  Banks and investors treated sovereign euro-denominated debt as a risk-free investment, and banking law (e.g. Basil II) and pension law in most countries built this assumption into law.  Cyprus banks went belly-up because the Greeks, in whom they had (unwisely) invested most of their funds, can't exercise any fiscal responsibility in their government.  If European countries could exercise fiscal responsibility in their government borrowing, 80% of the banking crisis would not exist (housing bubbles and bad mortgage securities have contributed in some countries like Spain).  There is a circle here:  Politicians like to deficit spend.  They write regulations to encourage banks to preferentially invest in this government paper.  When the government debt gets iffy, and the banks face collapse, the governments have to bail them out because otherwise there is no home for their future debt.  The bailouts get paid for with more debt, which gets crammed back into increasingly over-leveraged banks.    What a mess.
• All of this creates an interesting business school problem for the future:  What happens when there are no longer risk-free investments?  Throughout finance one talks about risk free rates and all other risks and risk premiums and discussed in reference to this risk-free benchmark.  In regulation, much of banking capital regulation and pension regulation is based on there being a core of risk free, liquid investments.  But what if these do not exist any more?
• I have thought a lot about a banking model where the bank accepts deposits and provides basic services but does no lending - a pure deposit bank with absolute transparency on its balance sheet and investments.  I think about a web site depositors can check every day to see exactly where depositors money is invested and its real time values.  Only listed, liquid securities with daily mark to market.   Open source investing, as it were.  In the past, deposit insurance has basically killed this business model, but I think public confidence in deposit insurance just took a big-ass hit this week.

Postscript:  I don't want to fall into a Godwin's law trap here, but I am currently reading Eichmann in Jerusalem and it is impossible for me to ignore the role strict capital controls played in Nazi Germany's trapping and liquidation of the Jews.

PS#2:  Oops,

The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.

From the file of things that are absolutely obvious to business owners, and a total shocker to the pundit and policy class:

In its latest monthly report on economic conditions across the country, the Federal Reserve points to Obamacare as one reason the unemployment rate has remained near or above 8 percent under the current administration.

That’s what Sally Pipes, president of the Pacific Research Institute, writes in an op-ed piece for Forbes magazine.

The Fed’s so-called “beige book” noted that employers across the country have “cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff,” Pipes says, adding that as more businesses learn about Obamacare, “the more they’re coming to realize that affordable care” is the last thing it will provide.

Here is my attempt to illustrate the same thing in one chart (net monthly job creation, which Kevin Drum helpfully posts each month):

I will revise this chart later - this is actually public and private totals.  When you look at private only, the April 2010 peak goes away (that was temporary census hiring) and the chart has an even more stark inflection right there in March 2010 when Obamacare was passed.

I found this article on foreclosed homeowners vindictively trashing houses now owned by the bank to be really depressing.  An example quote:

Myra Beams, a realtor in Tamarac, Fla., said half of her foreclosed properties, regardless of the price range, have been vandalized by the former owners. "I think the former owners are angry, and for some reason, they think they're entitled to destroy properties," said Beams. "I guess they're angry at the banks for giving them the mortgage."

There is a lot more like that.  A couple of quick thoughts

• The sense of entitlement here is stunning.  It is these homeowners, not the bank, that failed to fulfill their end of the bargain.  Who is the guilty party here, anyway?
• These folks are lucky to live in the US -- we have the most lenient home mortgage system in the world.  Very, very few other countries in the world have no-recourse mortgages where one can walk away only with a ding on their credit record, without even a personal bankruptcy.  Almost anyplace else, they would be facing years of garnishments for whatever losses on the loan the bank had after they sold the home.
• I always thought the critique of lower income people "trashing" housing projects in the 70s and 80s had a vaguely racial tone to them, as if this were somehow a proof of African-Americans being shiftless and irresponsible.   But here we have white middle class people actively trashing their homes.  Proving once again that being an inconsiderate jerk is truly a multi-racial, multi-ethinic behavior.

...because they never pair benefits with expected costs.

Proponents of Obamacare and other aggressive government health care interventions often argue that government health insurance will be less expensive than private health insurance.  Ignoring the whole history of government provided services (which you have to do to accept this argument), it is entertaining to press them on what costs will go away.

First, they will argue "profits."  Health insurers "obviously" make a lot of profit, so doing away with that will amount to a lot of savings.  Several years ago, when Obama was actively demagoguing** the health insurance business, the profit margins of health insurers were all around 3-4% or less.  Which means in exchange for eliminating all private profit incentives towards efficiency and productivity, we get a 3% one time cost reduction.  Not very promising.

After profits, Obamacare supporters will point to administrative costs.  Their philosophy that private insurance administrative costs drive health inflation is built into Obamacare, which places a cap on non-care related costs as a percentage of premiums.  I would argue a lot of this cost is claims management and fraud detection that government programs like Medicare don't have, to their detriment, but let's leave that aside.  I think most Obamacare opponents are convinced that there are billions in marketing costs that could be eliminated.  This has always been their bete noir in pharmaceuticals, that drug companies spend too much marketing.

I have said for years that to a large extent, what outsiders call "marketing" in health insurance is actually customer service and information, in particular agents who go out to companies and help people understand and make their insurance choices.

Well, it turns out that when the shoe is on the other foot, Obamacare supporters suddenly are A-OK with massive health insurance marketing costs, even when what is being marketed is essentially a monopoly:

[California] will also spend $250 million on a two-year marketing campaign [for its health insurance exchange]. By comparison California Senator Barbara Boxer spent $28 million on her 2010 statewide reelection campaign while her challenger spent another $22 million.

The most recent installment of the $910 million in federal money was a $674 million grant. The exchange's executive director noted that was less than the $706 million he had asked for. "The feds reduced the 2014 potential payment for outreach and enrollment by about $30 million," he said. "But we think we have enough resources on hand to do the biggest outreach that I have ever seen." ...

The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members.

New York is off to a similar start. New York has received two grants totaling $340 million again just to set up an enrollment and eligibility process.

** Don't be fooled by the demagoguery.  This is standard Obama practice.  In exchange for eating sh*t from Obama in public, private companies get all kinds of crony favors in private.  Remember, health insurers got the US government to mandate that everyone in the country buy their products, and got the Feds to establish trillions in subsidies to help people do so.  This may be the greatest crony giveaway of all time, and to cover for it, like a magician distracting your eye from the sleight of hand, Obama made it appear in public as if he were health insurers' greatest enemy, rather than their sugar daddy.

Years ago I had an argument with my mother-in-law, who is a classic Massachusetts liberal  (by the way, we get along fine -- I have no tolerance for the notion that one can't be friends with someone who has a different set of politics).  The argument was very clarifying for me and centered around the notion of coercion.

I can't entirely remember what the argument was about, but I think it was over government-mandated retirement programs.  Should the government be forcing one to save, and if so, should the government do the investment of those savings (ie as they do in Social Security) even if this means substantially lower returns on investment?

The interesting part was we both used the word "arrogant."  I said it was arrogant for a few people in government to assume they could make better decisions for individuals.  She said it was arrogant for me to assume that all those individuals out there had the same training and capability that I had to be able to make good decisions for themselves.

And at the end of the day, that is essentially the two sides of the argument over government paternalism boiled down to its core.  I thought coercion was immoral, she thought letting unprepared people make sub-optimal decisions for themselves when other people know better is immoral.  As with most of my one on one arguments I have with people, I left it at that.  When I argue face to face with real people, I have long ago given up trying to change their minds and generally settle for being clear where our premises diverge.

I am reminded of all this reading Bruce McQuain's take on Sarah Conly's most recent attempt to justify coercive paternalism (the latter is not an unfair title I have saddled her with -- it's from her last book).  Reading this I had a couple of other specific thoughts

1. I am amazed how much Conly and folks like her can write this stuff without addressing the fundamental contradiction at its core -- if we are so bad making decisions for ourselves, why do we think the same human beings suddenly become good at it when they join government?  She would argue, I guess, that there are a subset of super-humans who are able to do what most of us can't, but how in a democracy do we thinking-impaired people know to vote for one of the supermen?  Or if you throw our democracy, what system has ever existed that selected for leaders who make good decisions for the peasants vs., say, selected for people who were good generals. 
2. Is there any difference between Conly's coercive paternalism and Kipling's white man's burden?  Other than the fact that the supermen and the mass of sub-optimizing schlubs are not differentiated by race?  It's fascinating to see Progressives who are traditionally energized by hatred of colonialism rejuvinating one of imperialism's core philosophical justifications.

I don't pay much attention to TV and entertainment news, but I found myself kind of fascinated by this train wreck.  

I was amazed at the stakes, how many hundreds of millions of dollars were on the line, based on small changes in the perceived likability of certain talking heads.

But I was even more amazed by how juvenile, thin-skinned, and emotionally-immature people making 10 million + salaries could be.  One woman, who had a reputation as a serious journalist (at least until she took a job on a morning show) breaks down into tears and goes into a year-long depression because she lost her job -- and was effectively given a $12 million severance, a figure well north of my lifetime cumulative income.  Jeez, who in this day and age has not lost a job, likely with no more to show for it than a box of their personal items and a security escort to the door?  Reading this thing I just wanted to keep shouting "grow the f*ck up!"

From South Bend Seven

You can't define an appropriate environment as whatever the most easily offended person wants. Jezebel thinks you can, ought and must do it that way. But I know they're wrong. You know why? Because Jezebel itself thinks it's absurd. They're totally cool with using that standard when it comes to dick jokes, but when it comes to breast feeding suddenly it's outrageous (eg one, two). Mothers can't be expected to make decisions based on the whims of whoever is most repulsed by strangers' breasts. Well guess what? That means I shouldn't be expected to conform my behavior to whoever leasts wants to overhear terrible puns about dongles.

Megan McArdle has a column I am going to excerpt at great length (sorry Ms. McArdle).  This is great article on a topic I have tried to explain many times here

After all, the insurance company has to make money.  That has to mean that the expected value of the claims they pay out is lower than the expected value of the premiums their customers pay in.  In some sense, then, the expected value of your insurance premium is negative.

But insurance does make everyone better off, because it covers very large costs that most people would have trouble paying.  Even most really good savers would have a hard time replacing the value of their house, or paying off a $250,000 judgement for an auto accident.  The expected value of those incidencts is very, very negative--more than just the value of the cash, you have to factor in the horror of being homeless or bankrupt.  When you factor in the homelessness, the bankruptcy, and so forth, the slighly negative expected financial value is more than outweighed by the positive value of being protected against personal catastrophe.  Not to mention the peace of mind one gets from not having to worry about homelessness, etc.

This is the magic of risk pooling.  But notice that it's the catastrophe which makes insurance a good deal.  You wouldn't get much value from buying "grocery insurance".  At best, you'd be paying an extra administrative fee to route your routine expenses through an insurer, rather than paying them directly.  At worst, you'll end up with bills skyrocketing as all sorts of perverse incentives appear.  After all, if the insurer is paying all your grocery claims, why not load up on filet mignon instead of ground turkey?

But insurers try very hard never to sell insurance for less than the cost of your expected claims.  If you expect to buy $10,000 worth of groceries next year, it will not charge you less than that for a "grocery policy".  And if we all drive up the costs of grocery insurance by consuming more, the insurer can do one of two things: raise everyone's "insurance premiums" to cover a filet mignon budget, or create a list of "approved groceries" that it will cover, and start hassling anyone who tries to file an excessively expensive claim.

Sound familiar?

This is why you should always have liability insurance, but should think twice about collision damage coverage.  It's why high deductibles are a good idea--for small expenses, it's better to self insure.  And it's why "catastrophic" health plans, which only cover the sort of extremely expensive events that most people would have difficulty financing, are a much better deal than the soup-to-nuts plans that most people get through their employers.  Those plans are expensive, both because they're paying for a higher percentage of your expenses, and because they drive up utilization--which means that they drive up next year's premiums even more.  Imagine what your car insurance would cost if it covered gasoline, routine maintenance, and those little air freshener trees you hang from the rearview mirror.  Then stop asking why health insurance costs so much.

But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn't really insurance at all.

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."

She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market.  Sebelius' response is apparently that catastrophic insurance isn't really insurance at all--which is exactly backwards. Catastrophic coverage is "true insurance".  Coverage of routine, predictable services is not insurance at all; it's a spectacularly inefficient prepayment plan.

The last two lines are why I knew from the very beginning that the promise I would get to keep my health insurance was a lie.  Because I have true insurance, rather than a pre-payment plan for incidental health-related expenses, and the folks who wrote Obamacare think of insurance as pre-paid medical care (in fact, I believe they think of private insurance as a Trojan Horse for all-inclusive single payer government health care).

Here are the standings of our bracket challenge.  I have been light on blogging because I have been on the road for 2 straight weeks, which has left me both underwater with work and a bit out of sorts.

The increasing popularity of vilifying one's intellectual opponents as evil in order to avoid debating them (after all, why bother debating people who are, well, evil) will not be a new concept to readers here.

To see how the frontiers of this tactic are being pushed, one can best look at the climate debate.  I want to link a spectacular example, but let me give some background:

About a year ago, a professor of cognitive science wrote a paper (Lewandowsky 2012) that tried to correlate being a climate skeptic with holding any number of other conspiracy theories (e.g. moon landings were faked).  You can read the whole sad story, but in essence the survey used small sample sizes of people who may not actually have been skeptics (the survey was not actually advertised at any skeptic web sites) and compounded its own problems with bad math.  In fact, the study has not actually been formally published to this day.

Anyway, a lot of folks criticized the paper.  So what did the author do?  Amend the paper to fix the errors?  Defend his methodology?  No, he wrote a second paper that used the critiques of his first paper (often selectively edited by himself) as further evidence of "conspiracist ideation."  Seriously.  The fact that critiques exist of his paper proves the paper!  And then, for double extra recursion points, when the author published the paper online, he front-loaded the first five comments with friends who accused all subsequent commenters criticizing the second paper as conspiracists who are merely proving the point of the second paper.

All of it here.  (and hilariously, this -- Lewandowsky calls totally reasonable comment by mainstream climate scientist "conspiracist".)

Seriously, this is the group calling me "anti-science"!  And no matter how much of a nutter this guy is, he got tons of mainstream ink for his initial "study."   In our post-modernist world, the media uncritically laps this stuff up as real science because the results fit their narrative.

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Glenn Reynolds linked this titillating headline:

NINE PERCENT OF YALE STUDENTS SURVEYED SAY THEY’VE ACCEPTED MONEY FOR SEX

Of course, when you read the article (of course I clicked through, I have no pride),  you find that:

• The sample size is approximately 40
• The sample was from a group of people who self-selected to attend a seminar by the owner of a sex-toy business

The "3% who participated in bestiality" is actually 1 person out of 40 who have a self-selected interest in pushing sexual boundaries.  With a little larger sample size, a bit poorer math, and a bit more work goal-seeking to a desired outcome, this might almost meet the standards of climate research.

Which is all a relief to me -- after 30+ years of being a Yale hater, I was afraid I might have to admit it was a more interesting place than I thought.