Basejumper.com - archive

awhile back there were some economic discussions, suggested reads, and the like.

I believe one viewer even promised a book review.

well, here is an interesting read. it is basically a long magazine article, so don't expect a quick read. it also is not a book!

it tries to provide a survey of US economic theory and how we arrived at the current situation. as always, I expect some will agree, some will not.

Thanks for posting this article, Wwarped.
Was there any particular part or concept
you found interesting, right, or wrong?


My Random 3 Cents
----------------------------------------

Mildly interesting to me personally but
very important since more people need
to be exposed to economic concepts...
even though the profession can not come
up with a solution to everything... duh, as
though any other discipline has either.

I mean have accountants fixed fraud?
have psychologists ended phedofillia?
have scientists fixed pollution? etc.

FYI - MICRO economics works!!

MACRO economics is complicated by way too
many variables & ever changing parameters.

a few economists challenged the
assumption of rational behavior

All macro economic theories are models
and models are based on assumptions,
some of these are sound and others are
pipe dreams.

When people are in love, or angry, or
drunk, or high, or insecure, or ignorant,
they tend to buy things in ways they
would not if they were sober & smart,
hence the assumption of rationality is
a flawed one and I argued this exact
point several times in grad school.

However, models teach patterns and once
you know the pattern then you can alter
it so learning them is still valuable but
one needs to understand their limitations.

interesting.

among some monetary theorists, there is a strong belief that if the head of the NY Federal Reserve had not died in 1928, the Great Depression may have been averted (and the subsequent problems such as WWII)

From the Wiki on Ben Strong:
"Economic historian Charles P. Kindleberger states that Strong was one of the few American policymakers interested in the troubled financial affairs of Europe in the 1920s, and that had he not died in 1928, just a year before the Great Depression, he might have been able to maintain stability in the international financial system."

the field is difficult because the system is so uncontrolled and information is so limited. it's akin to predicting global weather. i take the view that many economies behave according to phase transitions.

if you re-read previous threads, you'll see that I'm not a big fan of "standard" economic theory. I find the concept of "rational" participants laughable since any cursory review of advertising finds they appeal to emotions. any theory that rests on the foundation of "rational" actors must be inherently, fundamentally flawed.

it is shear madness to presume any such theory can adequately predict the impulsive nature of humanity. the confidence and hubris of such economists set the stage for the recent collapse. (instead of playing with numbers, many ought to re-read Homer.)

oh, and recall in the article the tale of establishing the price of a bottle of ketchup? the author compared establishing prices in this manner to the recent housing bubble. both prices were set on a relative, not absolute scale. well, how do you think boards determine CEO compensation? will that bubble burst as well?

Deficit and Debt

Who can define them without Google or Merriam-Webster?

I would bet the majority of people in congress don't know
the difference between the terms as evident from the
lengthy & emotionally heated discussions on health care.

Only marginally related, but anyone who's thinking about the current healthcare debate ought to read this article. The author appears fairly knowledgeable about economics.

your linked article was written in 2001 by Milton Friedman, who built his reputation at the University of Chicago. he was discussed in the original linked article as one of the "freshwater" economists. he died in 2006.

I have a HSA and like the concept. since your linked article is getting rather old, I'd appreciate an update. one that compares the actual effectiveness of MSAs/HSAs to the traditional approach.

a more recent, and lengthy article, on health care in the US is found here. it is written by a middle of the road democratic businessman. (it also mentions the arrogance of some doctors. many who evidently fail to wash their hands.)

Unfortunately, Friedman is not available to update his article.

Here is a 2006 book, written on roughly the same themes. It appears to concur with Friedman's analysis, in general.

Here is a more recent article, written by a businessman, on the same topic.


The fundamental truth that many people miss is that health insurance and health care are not synonymous. Providing one is neither necessary, nor sufficient, for providing the other.


Here's a cut and paste of something I wrote in another thread:

your quotation points out one of the fallacies of health insurance. it really is not. it tends to be health finance.

no one actually wants to receive an insurance claim, except for health insurance.
- Life?
- Liability?
- Auto?
- Flood?
- Fire?
- Robbery?

most people would rather not be in a position that to file a claim!

the big exception is Health Insurance. people love to use it for predictable, routine care. that is why it resembles a finance option more than insurance.

Health Insurance also acts as a tax/benefit. Individuals pay far more per capita than the per capita cost for a family. thus, individuals subsidize families for their routine costs. childbirth tends to be one of the more costly optional events. people with no desire/ability to have children still reduce the cost of those that do.

when people have to act responsibly and pay for things themselves, they tend to limit their spending.

when people think they get something for free, they see far less need to limit their spending.

when people think their is a limited supply of "free" money, they will rush in to get their share!

true choice in the US healthcare system will probably only occur when individuals pay themselves for routine care, or can change insurance plans easily. either option will permit individual choices to accumulate, permitting folks to vote with their feet, and thus influence how things develop.

without either option, health insurance is in the hands of bureaucrats.

IMHO.
(I've been wrong before.)

""If the insurance companies can convince you to buy "insurance" for foreseeable, predictable, in fact, guaranteed to happen events, they're no longer in the insurance business at all""

Well that's just what happens with a totally free and uncontrollable market. What's best for the business is not always good for your health

metron ariston (Greek): Moderation is best. (A favorite saying of the philosopher Cleobulus.)
According to this and my personal feeling neither a totally controlled economy (communism like) nor an uncontrolled one is the optimum way to go (..in the long term).

Re: [wwarped] Economics should be a mandatory class

Here's a film I think (maybe I'm mistaken) could be a part of such a class....

http://video.google.com/...790090544&hl=en#

To help differentiate the two, first think of a bathtub.

Debt - The amount of water currently in the bathtub. This is the amount of past budget deficits and surpluses that add up to the level at the present moment. On a national level, this value is represented by the current amount of outstanding Treasury Securities that are being used to pay for the accumulated deficits.

Deficit - This is the flow of water into the tub. A deficit occurs simply when spending exceeds income (tax revenue) for a period of time. Conversely, a surplus would be the flow of water out of the tub, when income (tax revenue) exceed expenditures.


- nick

Nick, good way to explain them.

My 14th grade friendly explanation was:

Deficit is when you or your government spends more
money in one year than was made or collected that year.

Debt is the total amount of money
you or your government currently owes.

Deficit spending causes Debt and Debt incurs
interest which is extra cost & so the spiral goes.

Great excerpts!!

Nobody spends somebody else’s money as wisely
or as frugally as he or she spends their own.

The revival of the company store for medicine has less to do with logic than pure chance. It is a wonderful example of how one bad government policy leads to another. During World War II, the government financed much wartime spending by printing money while, at the same time, imposing wage and price controls. The resulting repressed inflation produced shortages of many goods and services, including labor. Firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit. That benefit proved particularly attractive to workers and spread rapidly.

Initially, employers did not report the value of the fringe benefit to the Internal Revenue Service as part of their workers’ wages. It took some time before the IRS realized what was going on. When it did, it issued regulations requiring employers to include the value of medical care as part of reported employees’ wages. By this time, workers had become accustomed to the tax exemption of that particular fringe benefit and made a big fuss. Congress responded by legislating that medical care provided by employers should be tax-exempt.

 
That video was absolutely fasanateing and totaly terifying. I fall into the catagory of the blissfully ignorant.

How could this ever be corected? Could the goverment create money with value but printing money to buy newly created wealth, eg farm products, a percentage of manufactoring done for govermant contracts? We grow trees on a farm. Say the goverment bought lumber for a construction project? Or a certin percentage of a defence contract, say the building of tanks, to create a new "welth"?

Lee

I think the video meant to create misunderstanding and fear. it left many questions unanswered.

most of what I know about the monetary system comes from the video, so call me blissfully ignorant as well. I ended up drawing a far different conclusion than the video meant to leave.

think of it this way...
when the US based it's currency on the gold standard, each dollar was backed by an asset, much of which was located at Ft. Knox. it cost a lot of money simply to guard the gold, and removed the gold from creating value elsewhere.

wouldn't it have been better to have money backed by assets that were diversified? these assets could be diversified by type and physical location. wouldn't that potentially strengthen the monetary system?

so, say you want to buy a home. by taking out a loan for that property, the bank effectively "creates" money. while the video claims it is made out of thin air, isn't it actually backed by your home? instead of money being a claim check for a brick of gold, it is effectively a claim check for your home!

virtually anything that can act as collateral can now become the foundation of the currency! plus, it is NOT concentrated in one location. instead of money based on assets controlled by the people's representatives (i.e. govt.), the currency is based on assets controlled by the people themselves!

that all sounds kinda cool.

The US healthcare market is a long way from free. It has a major set of bizarre distortions imposed by government action, generally made at the behest of lobbyists employed by insurance companies. There are major market distortions in both the tax status of coverage (coverage tied to employment is tax advantaged) and the third party payment system (more than half of healthcare expenditures in the USA are made directly by the government).

To describe such a system as "totally free" is either a blatant attempt at misinformation, or the result of being a victim of such misinformation.

The US healthcare market is a long way from free.

Very correct!!

Competitors, aka health care providers, have
huge barriers to entry and plenty of oversight.
Same with pharmacy, x-rays, etc. There are
price supports, government payment, and
forced dis-economies of scale.

Nope, definitely NOT a free or competitive market.

It is 6:15 AM here and I need to split soon
for the DZ and make a sandwich so this
will be a quick few points.

We used to barter - trade one good for another
but carrying around chicken is a pain in the ass,
half a chicken doesn't store well, and what if you
want to something from me but I already have
plenty of chicken?

Right, so money or tokens became the tool to
use, easy to carry, easily dividable, easily stored,
hence mutual need to not a requirement for trade.

As long as the number of tokens or money is
expanded at the same rate of goods and services
in an economy then prices should remain stable.

However, credit cards and bank loans allow people
to buy stuff, so in essence they expand the supply
of trade-able tokens in the market while The Fed
is busy printing money then we have too many
tokens for the current level of stuff so prices
creep up to soak up the excess money. This is
referred to as inflation - general rise in prices.

I did not see the video so I will stop here and
post more Monday when my time is leisurely

"is either a blatant attempt"
...or the result of someone with piss poor English trying to express a far more complex opinion just in one sentence while being in a hurry

What I should have written is that profit orientated medicine is what you get when you expect it to be health orientated while functioning at least partially on a free market basis. And this part in the American health care system is the biggest of any other health system that I'm aware of.
I never thought of it as an absolutely free from the government as that in my opinion would be a disaster (read next for my reasoning) and of course I'm not that naive to think that it could have escaped from profit orientated interest (lobbyists...).
In the modern society no model can be false proof ...couse there are just so many people money orientated with low moral barriers like enron brokers (artificial electricity black outs to keep the stock price hight - in a deficit manner). And it's practically impossible to control everyone!!!

Now every system has it good and bad features.
A more private (free from government) type of medicine is more progressive and more competitive that any other. It's widely accepted that the American medical doctors have maybe the highest professional education, most brilliant medical scientists work in America, the hospitals got the best equipment and if you wont to get the best possible therapy (money not an issue) you should go to....yes correct US of America.
Bat what happens when it comes to the accessibility to that perfect health mechanism ?
If you lost your job (kind of real nowadays), if you have no money for a good health insurance, or any insurance at all, or you had a severe accident while base jumping and little or no money in the bank whats next? and how match of that brilliant medical system is going to be accessible to you?

On the other hand there is the 100% government controlled-sponsored medical system like in Canada or some Europe countries. The waiting lists are huge! You have to wait as match as 3 months for some appointments. Hospitals are far from having the best equipment, nor doctors are so well educated as in US.
Bat on the other side it does not make any difference if you have an over middle income or you are broke when it come to severe illness or accident (even being cut while shaving is considered as such) you are doctors number one priority (unless of course someone else had a more sever cut during shaving).
While doing my orthopedics tree month education in medical school we had an illegal immigrant from Africa being hit by a car while crossing the road to clean a cars front glass with minor pelvis fracture (the kind you are still going to walk without any medical help bat limping for the rest of your live). Well guess what, he still got the surgery while no insurance of course and stayed in hospital for as long as it was necessary, all that for free.
Now a story from a colleague that worked in a private hospital for a wile. There was an old man with minor stroke that presented with slight temporary stammer. After making the CT and according to guidelines the doctor prescribed aspirin as anti platelet therapy sufficient for the case and let the old men go. Well guess what that same day he had a long chit-chat with the head of the hospital for not having the old men hospitalized for a week at least.

Don't get me wrong any system and I mean every one can work absolutely fine if the people in it are highly responsible and with strict moral standards. Bat just cose that is not the case, I think its best (and its just one man's opinion) to have in the basis of the system a free for all orientation , and of course leave some space for private medicine (playing the role of the golden standard for best quality medicine and by the way serving those who cant wait and can afford it)
Well that's the basis of my previous piss poor post ... sorry for that

i like turtles.

me too