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    February 2011

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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    A $23 billion payout to save thousands of educators' jobs faltered Thursday -- perhaps for good -- to election-year jitters among moderate Democrats over deficit spending and only lukewarm support from the White House.The proposal's chief advocate in the House abruptly canceled a committee meeting to put the money in a war spending bill. Its lead sponsor in the Senate gave up trying to do it, acknowledging he lacked the necessary votes. The developments jeopardized what progressives in Congress and some members of the Obama administration had described as a life raft for 100,000 to 300,000 teachers and other school personnel whose billions of dollars in stimulus salary subsidies run out this fall.

    Spent & Approved War-Spending - About $900 billion of US taxpayers' funds spent or approved for spending through Sept 2010.

    Afghan war costs now outpace Iraq's

    Bill on jobless benefits, state financial help scaled back - Under fire from rank-and-file Democrats worried about the soaring national debt, congressional leaders reached a tentative agreement Wednesday to scale back a package that would have devoted nearly $200 billion to jobless benefits and other economic provisions while postponing a scheduled pay cut for doctors who see Medicare patients. After struggling throughout the day to reach a compromise, House leaders scheduled a Thursday vote on the slimmed-down package in hopes of pushing it through both chambers before the 10-day Memorial Day recess, which is scheduled to begin Friday. Unless lawmakers act before June 1, millions of people could cease to be eligible for up to 99 weeks of jobless benefits and doctors' Medicare payments could fall by 20 percent.

    Uncertainty over Medicare pay sets doctors on edge - May 28th, 2010 (AP) — For the third time this year, Congress is scrambling to stave off a hefty pay cut to doctors treating Medicare patients — even as the Obama administration mails out a glossy brochure to reassure seniors the health care program is on solid ground.The 21.3 percent cut will take effect June 1 unless lawmakers intervene in the next few days. Recurring uncertainty over Medicare fees is making doctors take a hard look at their participation in a program considered a bedrock of middle-class retirement security.If the problem is allowed to fester, it could undermine key goals of President Barack Obama’s health care overhaul, which envisions using Medicare to test ideas for improving the quality of care for all Americans.

    here's where the priorities are:

    Senate Approves Nearly $60 Billion for Wars - The Senate on Thursday approved a nearly $60 billion measure to pay for continuing military operations in Afghanistan and Iraq as House Democrats struggled to round up votes for a major package of business tax breaks and safety-net programs for the long-term unemployed.Senators delivered a bipartisan 67-to-28 vote for the war financing bill after rejecting a series of Republican proposals on border protection as well as a plan by Senator Russ Feingold, Democrat of Wisconsin, to require President Obama to produce a timetable for withdrawing from Afghanistan. With lawmakers eager to begin a Memorial Day recess, House Democratic leaders ran into stiff resistance from rank-and-file members uneasy about supporting the approximately $143 billion tax and unemployment measure. More than $80 billion of it would be deficit spending — a hot-button issue in the midterm Congressional campaigns and an increasingly frequent line of Republican attack.

    The reason we are in the economic mess we are in is because of educated people. It was the brightest of the bright that destroyed our economy. So why is the cure for our problems to educate more people. Education in what, economics? Which school?

    What we need is more ethics and more morality. Right actions, ethics,can be taught in our schools but one wonders if it can be practiced in our society, a society where the establishment can't even bring itself to pass laws that encompass the indignation and anger of society, morality.

    Where is the motivation to study ethics if right action can't be practiced in business. Where is the reinforcement of morality by laws that say, 'This practice is dangerous to society and is forbidden."

    If the establishment can't even bring itself to be the guardian of society what good is it? If the establishment can't even bring itself to punish its own that prey on society, where does that leave the rest of us?

    We need systemic change and the will to change. Throwing more money into education won't do that.

    What we don't need is more money wasted on people who equate success with money. Not just the accumulation of personal fortunes but the accumulation of political war chests to stay in power.

    The ultimate purpose of corporations is to provide for the needs of society and be rewarded for it and not to prey on society for ever greater profits: think, health insurance companies.

    There is not much difference between the ignorant that prey on society and the educated who prey on society. And the greater amount of evil is surely done by the educated.

    I can only speculate on how social assholes are made, but surely the process should end with higher education. It doesn't. Instead, of education being a bulwark against those who would prey on society, the highly educated are easily defeated by a corporate culture of profits over all.

    I'm not against education. I'm just not ready to jump on the education-is-the-answer-to-all-our-problems bandwagon. Neither is ethics and morality, but they can't always be the odd man out.

    Emile Durkheim believed there were two reasons people obeyed the law: they became autonomous human beings who were able to see the good in the law or they feared the sanctions of the law.

    Since today's establishment can't even pass laws that embody the indignation and anger people feel toward corporations and the system, a new establishment is needed, One that is prepared to sanction their own; one that is willing to embody in the law the indignation we feel we toward the ethically and socially challenged; one that will allow our youth to come out of our universities able to distinguish a social interest from an individual interest; one that is willing to lay down the law and re-enforce it through the use of its sanctions.

    Without systematic change students will be forever short-changed in ethics and morality and as a result society will be forever short-changed.

    We need individuals who can see the good in protecting social interest by curtailing individual interest, but more importantly we need a society that has room for them. To get there we need a new establishment.


    Anyone who has read, understands and appreciates "Gaudy Night" starts off with a star in my book. Your perceptive economic and social analysis does not come as a surprise. Keep up the good work. I am sending a link to your site to my college junior granddaughter.

    Sam Taylor

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