Links to Consider, 9/28
Tyler Cowen on single-payer healthcare; Kohn vs. Sumner; Wesley Yang on pushback against gender transitioning ideology; Jay Bhattacharya and Mikko Packalen on economists' silence on COVID policy
single payer systems are working far less well than they used to, including during the pandemic but not only. Eventually the blame will shift and will be put on something like “austerity,” whereas the deeper understanding was that those systems were bound to end up understaffed and undercapitalized all along.
In my view, the equilibrium is always a two-tier health care system. In the U.S., the lower tier is Medicaid, or doing without health insurance. The upper tier is private health insurance. In countries with single-payer systems, the lower tier is what the government provides. The upper tier is going outside the system. In Canada, for instance, the upper tier is going to the U.S. for treatment.
Sumner argues should have led the Fed to begin more aggressive easing in Q3 [of 2008]. But at the end of July, Board staff was projecting 4.3% SAAR growth in NGDP for Q3 and 3.9% for Q4-2008 to Q3-2009. Private forecasters were in close agreement; the Survey of Professional forecasters in August saw NGDP growing at a 4.3% annual rate in Q3 and at 4.1% for the following four quarters, with rising interest rates. Obviously, none of this suggested an impending collapse that required immediate monetary policy attention in July and August.
Lehman failed in mid-September, and soon after this occurred various market indicators (such as TIPS spreads) clearly suggested that money was too tight, as both inflation and employment forecasts were falling well below the Fed’s implicit policy mandate. Thus even before we had the revised NGDP data, various asset market forecasts clearly suggested that we had a major demand shortfall. The Fed needs to respond to forecasts, not backward looking NGDP data.
Nonetheless, some might argue that by mid-September it was too late to do anything to avert a severe recession. I don’t believe it was too late, but it’s my third point that is the most important:
3. Level targeting. I cannot emphasize enough the need for some sort of level targeting policy regime. The Fed needs to be telling the markets that whatever happens in the short run during a banking crisis, NGDP will be about 8% above current levels two years into the future. They need to emphasize that they will do whatever it takes so that markets expect roughly 4% average NGDP growth over the next two years.
Kohn explicitly cites private forecasts for 4% NGDP growth, and Sumner says that the Fed should have relied more on other indicators.
I have never viewed market monetarism as radically different from the way the Fed operates. The Fed makes forecasts of NGDP, to which it pays close attention. It has done so since I was an economist there in the early 1980s. But forecasts are sometimes wrong.
I am probably being uncharitable to Sumner, but he comes across to me as solving the problem of imperfect forecasts by finding indicators that in hindsight would have produced better forecasts in a particular episode. I find that unsatisfying.
The dozen or so protesters who joined Billboard Chris at Boston Children’s hospital were, like the woman speaking above, virtually all lifelong Democrats who until recently shared in all the progressive enthusiasms of the Blue Tribe of which they are a part. None are “anti-trans.” But having looked at the evidence around medical transition of children, and conscious of the stripping out of gatekeeping in gender practices that pioneering gender clinicians have publicly blown the whistle on — they are not persuaded that placing their children in the pipeline to lifelong medicalization is the right choice.
I am considering writing a longer post on the topic of the pushback against progressive gender ideology. Where are things headed? Will the resistance to adolescent gender transitioning collapse, just as in the past the resistance to gay marriage collapsed? Or will the conservatives finally win one? Or will the progressives have to retreat even further, leading to sexual binaries and marriage with children becoming cool again?
Jay Bhattacharya and Mikko Packalen write,
Many in the economics profession did see that government policies of the last couple of years would result in high inflation. But most who saw it coming chose not to inform the public or raise the alarm until it was too late.
…Since the Spring of 2020, economists have had a strong incentive to censor themselves about the costs of covid measures for fear of being seen as out of step with the hastily achieved consensus that covid measures came without any significant costs to the public.
On the inflation issue, I would offer a more charitable view. First, many economists probably hesitated to warn about inflation because similar warnings about inflation in 2008-2009 proved wrong. In fact, the mainstream view came to be that the amount of fiscal stimulus in 2008-2009 was too little, not too much. In addition, economists have come to believe that monetary policy is the proper instrument for fighting inflation. There was no need to warn about inflationary fiscal policy as long as monetary policy was available as a solution. Only a few of us departed from that view.
On the cost-benefit issue, I think that this reflects the way the left views government, which is as a rational, benevolent provider of public goods. The right takes a more cynical view, which I would argue is more realistic, but the right has hardly any voices left in the top tier of academic economists.
‘single payer systems are working far less well than they used to, including during the pandemic but not only. ‘
There is only one true single payer system, the UK’s NHS and it has NEVER worked - which is why nobody else does it that way. Since all resources are scarce, where medical care is free at the point of delivery, absent a price system medical care in the UK is rationed by waiting lists. Fixed budgets encourage delayed testing and treatments to push expense into the next budget period, thus ever growing waiting lists. Government targets to reduce waiting lists, encourage gaming the system by selecting the easiest and cheapest to test/treat from the waiting list. The result is the list shortens, targets met, politicians boast, but the proportion of serious cases most needing early treatment increases. The good news is a fair proportion will die waiting, or if finances permit some will elect for private medical care. Both eventualities are a win for the NHS establishment. The NHS - described by one senior politician as a national religion - is a political football, kicked about particularly at election time, with little to do with providing medical care. The CoVid Fakedemic just high lighted how useless and self-serving it is. 6 million people on the waiting list, estimate to be about 8 million next Spring - if everybody doesn’t freeze to death this Winter thanks to the UK’s genius energy policies.
Re Sumner (on Kohn): You seem not to grasp Sumner’s point, that the market’s forecast of future NGDP—supposing that NGDP is, or is a proxy for, the most important economic magnitude—is vastly more important for the Fed’s purposes than what actual future NGDP turns out to be. The Fed’s action today is aimed at affecting the actions of market participants today and tomorrow. The Fed should be looking not at “forecasts,” but at *the market forecast*, as reflected in such things as TIPs spreads and, ideally, a futures market in NGDP. In fact, this market forecast will be more accurate (about what future NGDP will actually be) than the various private forecasts, but that is not why it is so important. What it reflects are the attitudes of market participants *now*, which determine their *present* actions; and that is the Fed's proper focus.
And I think you should be more impressed by Sumner’s further point, that a credible regime of level targeting would immensely improve the market’s confidence that future NGDP will be (nearly) on-course. The Fed’s job is to instill such confidence; anything else—such as the actual accuracy of various predictors of future NGDP--pales into insignificance.