Shit I think I believe but am not currently betting on

Otherwise known as bullshit opinions.  We will see how some of these look in 5 years.

1) The justice department is dumb enough to approve the merger of Time Warner and Comcast.  The combined entity will be an open nightmare for consumers because they will have the political heft to be able to raise prices (politics is what has really held back pricing power in over half of the zip codes to date).  It will also be a secret nightmare because they will be able to start charging Youtube and Netflix carriage fees for making sure their video streams correctly.  The slow televisionization of the internet will accelerate as a result.  Perhaps this accounts for our first "golden age of television" -- the internet will be the best version of TV yet.  I call this a hidden nightmare because we won't even know what we're missing as a result.  The future has no constituency.

2) Healthcare costs will reaccelerate and Obamacare will be acknowledged as a first and very limited step in healthcare reform.  The new trendline spending increases of 4-5% will still be below the old trendline of 6-8%, but this will only be because higher deductible and out-of-pocket plans will grow faster than the market and people who simply don't have the money will skimp on spending everywhere they can.  If no step two is forthcoming, healthcare reform will end up being considered a colossal mistake on the right and a colossal missed opportunity on the left.  Fundamentally, nothing has changed about the very fucked up incentive structure of this system.

3) The internet of things will start to become a mass reality and we will all spend a lot more time staring at and talking to our devices trying to figure out why the thermostat just shot up to 90 degrees while the fridge turned off and the floodlights started blinking the tune of Jingle Bells.  It will be just like the movie Brazil, where if only you could get the future to work right, it would be amazing.  This development will be ludicrous from a human quality of life perspective, because we will perpetually spend enormous time debugging a future that is only marginally different from our present in the ways that really matter to us.  However, the internet of things will make perfect sense from the perspective of the machines.  They will have hooked us into a debugging their system by offering the equivalent of shiny glass beads to the natives.  Are small pox blankets to follow?  Ask me again in five years.

Discuss These Charts Amongst Urselves ...

I think it's actually quite a long discussion, but the starting point is the observation that the distribution of per capita healthcare spending in the US is statistically very similar to the per capita income distribution.

And, no, I don't think this is (just) because rich people spend more on healthcare.

Politics 101

Schmealthcare

This article from Time Magazine, of all places, is good, and really worth a read.  But please, dear god, make the journalists stop writing sentences like this:

we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia. 

What kind of an irrelevant factoid is this?  How hard is it to simply write that we spend twice the amount PER CAPITA as everyone else?  When I see  statements like this I just shut down immediately, even when I already agree with the point.  On the other hand, it seems to me that most people are drawn to striking images like this, regardless of whether they present meaningful data.  But this means that you can convince these people of anything as long as you give them some striking but irrelevant factoid.  We should all be very scared when people agree with us for the wrong reasons.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/print/

Closing in on the end of the S-Curve

Jim Hamilton is one of those very measured economists that you can always trust to have some actual data handy.  And one of the particular areas he always has handy data about is the long-term history of oil production.  We've probably all seen these charts before, but one particular phrase in a recent post caught my eye:

We like to think that the reason we enjoy our high standard of living is because we have been so clever at figuring out how to use the world's available resources. But we should not dismiss the possibility that there may also have been a nontrivial contribution of simply having been quite lucky to have found an incredibly valuable raw material that was relatively easy to obtain for about a century and a half.

 

My view is that stagnant world oil production and doubling in the real price of oil over 2005-2010 put significant burdens on the oil-consuming economies. Optimists may expect the next century and a half to look like the last. But we should also consider the possibility that it will be only the next decade that looks like the last.

I think I have developed a general prejudice to see a lot of what people take to be skill and intelligence as just plain luck.  This applies to people working in the markets and as well as people making predictions about the future of nearly anything complex.  Maybe it also applies to societies and technologies as a whole.  Perhaps all our self-congratulation at having built a machine for innovation and increasing standards of living is premature, and we simply blundered into a great source of energy.  

This is not an argument that such a self-sustaining machine does not now exist.  Just that it's not as smart as you thought it was.  

This sort of thing has cropped up before

Having humans drive cars is about as efficient as having chimps hand deliver internet packets.

Shared cars can be used as another example of the difference that I see between the generation of value and the appropriation of value. If you go outside, you will see a large number of vehicles. Many of these are parked, and when a vehicle is parked it's not being used. If we wanted to increase GDP, well, we might want to increase the number of vehicles that get sold, and the number of people that own vehicles, and the number of vehicles per person. But if you think about it now, when there are technologies that are starting to ripen, such as the technology that allows us to have self-driving cars, you can think that actually you can reduce the number of cars needed by having self-driving cars as shared vehicles. You can have a transportation system that is much more shared. That is going to reduce the amount of money that flows through the car industry, simply because you're going to need fewer cars because their use is more efficient when this are shared.

A stunning failure of empiricism

This Edge conversation with Daron Acemoglu is pretty interesting.  I haven't read his new book "Why Nations Fail", but I know it's down there somewhere.  I like the particular bit I put in bold.  I feel like ~95% of all political debates (both public and private) proceed at exactly the level of superficiality he describes.  

Another superficial answer is you can say, India is a democracy and China is an autocracy and that means India is better. But actually, this is where it becomes important to put more flesh on the concept of institutions. Institutions are not just what's in the constitution. There's a very naive view of institutions that says it's the parchment, it's what is written on the parchment, it's what is written on the paper. I write you have a Supreme Court, you have a presidential election, that makes you a democracy. I write something else, that makes you an autocracy. And of course, that's not what we mean by institutions. That would be a very naive view of institutions and one that would have very little empirical power to explain things.

 

There's a great example that comes from the comparison of two defining events in the United States and Argentina. Argentina, like many other Latin American countries has a constitution that has many similarities to that of the United States: a Senate, a Congress, a Supreme Court, a president, but these work very differently. In the United States, for example, though we sometimes complain about the Supreme Court, that it's just unelected people making political decisions, it's one of the important checks on the abuse of political power. It's not something that you can easily sideline.

 

For instance, in the middle of the New Deal controversy, FDR tried to sideline the Supreme Court and say, these guys are really slowing my New Deal legislation. He had majorities in both houses. He was a popular president. Many people were at least hopeful about the New Deal policies, but when he came up with his schemes to either fire new justices or add new justices to the Supreme Court so that they wouldn't block or slow down his legislation anymore, nobody supported him. The Senate didn't go along with him. The media took a pretty negative attitude toward it, and FDR gave up. He didn't mess with the Supreme Court although the Supreme Court became more accommodating to him.        

 

The same sort of thing happened in Argentina with Peron. When Peron came to power he also didn't like that the Supreme Court was blocking him in his program. There were a lot of things that he was trying to do. Then lo and behold, he came up with exactly the same scheme. He said, these Supreme Court justices are overworked and they're too old and we need new justices and nobody raised a peep. He was able to fire the Supreme Court justices, and appoint new justices. Ever since then whenever a new president comes in in Argentina, there's a whole turnover of the Supreme Court and the Supreme Court institution is a joke in terms of what it does to restrict the president, as we're seeing right now in Argentina.

 

You have these same things written in the constitutions, but they work extremely differently. Why is that? Well, the reason is twofold. One is that actually the details of how these institutions work is much more important than what is written in the constitution, than what's written on the parchment. Second, these institutions don't exist independently from how political power is distributed.

 

In particular in Argentina, political power was highly concentrated in Peron and Peron's party's hands. The media was nonexistent. There was really no within party opposition and between party opposition was largely silenced. So that means that huge monopolization of political power enabled him to sideline whatever he wanted. In the United States that was different.