Belief in Efficiency & Competitiveness

Belief in Efficiency & Competitiveness

In the United States we celebrate private enterprise. At the same time, we often downplay public institutions and ignore their contributions to the world we inhabit. We focus almost exclusively on the developments of private corporations and the developments and innovations of businesses. We are critical and wary of anything that can be presented as inefficient or likely to make private companies less competitive. However, this mindset sometimes means that we become too focused on short-term performance and fail to see larger systems and structures that unite private enterprise with the rest of society.
In his book The Homeless Christopher Jencks writes, “almost everyone … believes that efficiency (often called “competitiveness”) must come first, and that social stability will somehow follow.” The general mindset in the United States is that we need to have a fast paced, innovative, and efficient private sector for our country to flourish. Without first ensuring that the state is set for businesses and private enterprises to operate at maximal efficiency, our democracy and our country cannot successfully exist. America, this argument holds, is entirely dependent on business profits, and anything that gets in the way of competitive and efficient business is a threat to the country.
I am not an economist, and I don’t understand labor markets very well. However, I think that Jencks is correct when he states that we accept a level of sacrifice of the lowest socioeconomic status individuals in the United States in exchange for a meritocracy that generally works pretty well for most of us. I generally think we are hyper-focused on ideas of deservingness and on our own self-interest. We conflate our own self-interest with the self-interest of society at large, arguing that our economic purchases and chasing our own individual materialistic goals is what is going to keep our economy running, innovating, and leading the world.
The argument that Jencks is making in the quote above is that pure business efficiency and competitiveness is not enough for a stable society. Sacrificing those who don’t have the skills to make it in an efficient business world creates instability and fractures within our society – instabilities and fractures that an efficient business mindset cannot address. For Jencks, and for me, human connections and social cohesion are at least as important as efficiency and competition in business. The focus on short-term returns, a frequent critique of American corporations today, certainly cannot help social cohesion or improved long-term human connections and senses of community.
I think that writers like Tyler Cowen are correct in arguing that economic growth (which delivers improved quality of life) are important, but I’m not sure businesses are always focused on improving life satisfaction. Businesses are often focused on short term rent capture, which harms society. I think there are ways to drive innovations without creating an underclass that is crushed along the way and we need to find those ways. I think we need to remember how important the role of government can be in developing technologies and encouraging innovation. The development of the internet is a great example of the important, but easily overlooked role that the government can play in technological development, and Katz and Nowak show in The New Localism, how local governments and quasi-public/private institutions and partnerships can be a new model for driving economic growth and development. The key is recognizing that pursuing business efficiency at the cost of the lives of those on the lowest rung of society is not supportable and won’t lead to good social outcomes in the long run.
How We Use Resources

How We Use Resources

One critique of housing first policies is that it would be too expensive for us to provide public housing to everyone in the nation who is currently homeless and needs affordable housing. The nation has too much debt and there are too many homeless people. Those who are homeless or on the brink of homelessness need to step up to support themselves, because we don’t have enough resources to help everyone. The way to end homelessness, this argument suggests, is not to house everyone, but for everyone to take more personal responsibility for their situation.
Matthew Desmond believes this argument if wrong (to put it nicely).
In his book Evicted Desmond writes, “housing-related tax expenditures far outpace those for housing assistance. In 2008, the year Arleen [A low income tenant he profiled] was evicted from Thirteenth Street, federal expenditures for direct housing assistance totaled less than $40.2 billion, but homeowner tax benefits exceeded $171 billion. That number, $171 billion, was equivalent to the 2008 budgets for the Department of Education, the Department of Veterans Affairs, the Department of Homeland Security, the Department of Justice, and the Department of Agriculture combined.” For some additional figures, the total for federal expenditures in 2008 was $2.983 trillion, total revenue was $2.524 trillion, and the deficit was $458.6 billion. The $40.2 billion in housing assistance was 1.3% of the federal expenditures, 1.5% of federal revenue, and 8.7% of the deficit. $171 billion in federal tax subsidies for homeowners was equivalent to 5.7% of total expenditures, 6.7% of revenues, and 37.3% of the deficit. What these numbers suggest, and what Desmond argues, is that we simply don’t prioritize housing assistance. We prioritize giving people who already own their homes a break on their taxes, at a greater financial cost to society, than what we are willing to provide to those who need homes in order to keep their lives on track.
Desmond continues, “most federal housing subsidies benefit families with six-figure incomes. If we are going to spend the bulk of our public dollars on the affluent – at least when it comes to housing – we should own up to that decision. … If poverty persists in America, it is not for lack of resources.”
Yes, our country has a large deficit. Yes, our country carries what seems like an astronomical amount of debt. But that doesn’t mean we cannot help the poor and homeless. Our willingness to accept huge tax exceptions for homeowners paying interest on mortgages demonstrates our willingness to live with the debt and deficit we have. It shows that our fiscal and budgetary concerns are not exactly authentic, and suggests they may be an excuse to avoid doing more for the homeless who are not seen as deserving of our aid and energy. Resources exist to allow us to do much more to ensure that every American has a basic home and doesn’t have to rely on charitable shelters and limited public housing assistance. We have resources, we just don’t use them wisely.
Who Wants Market Regulation?

Who Wants Market Regulation?

“Those who profit from the current situation – and those indifferent to it – will say that the housing market should be left alone to regulate itself. They don’t really mean that,” writes Matthew Desmond in his book Evicted.  In the world that Desmond investigated, the world of low-income housing, the ones who don’t think any government action needs to be taken to regulate or stabilize the market are the landlords and people able to make money from slum housing. The people exploiting market failures and extracting rents say they don’t want any changes in housing policy because they favor a free market, but what Desmond’s quote hints at is that they don’t really exist within a free-market, and they currently profit from existing government action (not just inaction) on housing policy.
The quote from Desmond reminds me of senior citizens who protest changes to Medicare with signs that say “Keep your government hands off my Medicare,” seemingly unaware that Medicare is a government run health program. The line between government and markets is not always clear to people, and what people actually want in terms of government market regulation doesn’t always line up with people’s stated political beliefs or stated beliefs about government intervention. We can have high minded opinions about the proper role of government relative to markets, and we sound better and more impressive when we do, but the bottom line is that we are all likely driven more by our own self-interest than our high minded opinions of governments and markets.
I am currently listening to Ron Chernow’s Hamilton biography on audiobook. I am struck by how our nation’s founding fathers quickly broke down into self-interested policy quarrels that were couched in high minded political rhetoric, but seemed to perfectly back the self-interest of the given founding father. Jefferson in particular seemed to be a master of this kind of deception, arguing that America should have a minimal government and reflect a populist standpoint. However, Jefferson owned slaves and had a vast agrarian plantation and his policies seemed to clearly favor his own lifestyle. His actions can be well understood when viewed through the lens of The Elephant in the Brain by Kevin Simler and Robin Hanson who suggest that most of our behavior is signaling and that we generally (and deceptively) act on self-interest more than we would ever admit.
All of this is to suggest that most people don’t really have any independent and objective views of government regulations of markets. Desmond’s quote about housing markets shows that people are driven by self-interest, that they discount regulations that favor their financial interests, and that they misrepresent government policies that make them better off. When our own self-interest, our own bottom line, and our social status are on the line, we are willing to compromise our high minded positions to adopt the view that is expedient to our own interests. This was true of Jefferson and Hamilton in the first Presidential Administration after the adoption of the Constitution, and it is true today in housing, Medicare, and other government and market areas. Landlords, real-estate agents, and others who currently profit in the housing market are in favor of government tax breaks on mortgage interest, of housing vouchers, and other policies that help ensure people can afford high rents. They view the market as being free without fully acknowledging these interventions and how they benefit from them.
TANF

TANF

“TANF has become welfare for the states rather than aid for families in need,” write Kathryn Edin and H. Luke Shaefer in their book $2.00 A Day. In the United States we don’t like the idea of giving direct aid to poor people. We want to make sure that people who receive social aid and assistance deserve the help they get, and as a result we have put restrictions, limits, and qualifications on the aid that the government provides to poor people. We also tend to prefer in-kind benefits rather than cash benefits, believing that cash benefits will be wasted and abused, and believing (whether we admit it or not) that we know what is better for poor people than they do. Providing the thing we think poor people need is our preference rather than providing poor people cash to acquire the thing.
This is how TANF (Temporary Assistance for Needy Families) came to exist in its current form. TANF is a block grant from the federal government to states. That means that the federal government provides a certain amount of money to the states for them to use in assisting the poor. Obviously, this means there is an incentive for states to put restrictions and limits on the aid they give to families so that they don’t expend all of the money from the grant. Any money not spent on needy families can be redirected to other purposes for which states may need additional funding.
Work requirements, drug screenings, complicated forms, long lines, and life-time limits reduce the total expenditures that states have with their TANF programs. Instead of focusing on what would be the most beneficial for the needy, programs utilizing such restrictions focus on what would be best for the states coffers. This is why the authors describe TANF as welfare for the state instead of aid for families.
Guaranteed Jobs

Guaranteed Jobs

About a year ago I read a series of books focused on homelessness and poverty in the Untied States. One take-away I had from the reading was that we need a federal guaranteed jobs program. A guaranteed jobs program would certainly be looked down upon, would not be well respected, would be criticized, but would make a huge difference in addressing deep poverty across the nation.
In their book $2.00 A Day, Kathryn Edin and H. Luke Shaefer explore the lives and realities of people living on an average of $2.00 a day in the United States. There are people in our country living a poverty so severe that many of us cannot imagine it exists within our country, yet the number $2.00 a day poor has increased recently and results from a complex set of factors that the authors explore.
One factor explored by the authors is a lack of quality and meaningful jobs for people at the lowest end of the socio-economic scale. Jobs for these individuals are often unreasonable in multiple ways. Schedules are often set at the last minute, with unpredictable and often unworkable hours. They are also often part-time, temporary, and likely to be cut at the slightest misstep. Better jobs may be available, but they may be further away than an individual living in poverty can reasonably and reliably commute to. Jobs, in other words, are not as easy to obtain and maintain as people higher up the socio-economic scale might imagine, and getting a foothold with a job to propel oneself is often next to impossible for individuals whose work future is hanging in the balance with every tiny misfortune.
Jobs provided by a government, jobs that are always available and make an effort to meet people where they are, simply do not exist. For the nation’s poorest, a job in government is almost impossible to find. The authors write, “a small group of low-skilled individuals find work at municipal buildings or in schools (perhaps as cafeteria workers or bus drivers), but prison inmates are sometimes used for maintenance and janitorial services in these places [specifically referring to the Mississippi Delta region].”
Our nation’s poorest compete for very few low wage public jobs. Part of their competition comes from prison labor, where inmates are paid less than minimum wage to work. I think these prison programs are a good thing, though I have never studied or considered them in depth. But it is notable that those in deep poverty have to compete against prisoners who make less than the minimum wage.
The only things stopping our country from developing a guaranteed jobs program is a lack of interest and stigma against the poorest of the poor. It is likely that we would not be able to find truly meaningful work for everyone who wanted and needed a job at all times, but we should make an effort to find something to do to employ the poorest among us in one way or another. There is no reason we cannot develop a program that would help meet people where they are and find something for them to do for which a wage can be provided. We have diminished the social safety net programs that help support the poorest among us, often with the argument that people should only receive such support if they are productive members of society, but we don’t make any efforts to help people become productive members of society. We don’t offer guaranteed jobs and we don’t do a lot to work with people who have not been employed for a long time to get them back into the swing of work. While some programs exist, generally we don’t find flexible ways to let people work and find pride in being part of society.
Instead, we marginalize people, criticize them for being failures, and push them to the side while blaming them for their failure. Companies and businesses are then unwilling to hire such people, reinforcing in their own minds that their failure is something inherent in who they are, driving a vicious cycle of failure, poverty, apathy, and despair. It is not a welfare program itself that drives this cycle, but the entire system and way in which we act toward such people. A guaranteed jobs program would not be perfect and would not solve every problem for every individual, but it would start to make a difference and offer some people a real way out of $2.00 a day poverty.
Misperceptions About AFDC

Misperceptions About AFDC

Aid to Families with Dependent Children (AFDC) was the welfare system in the United States from the 1930’s to 1997 when it was eventually replaced with a new system for welfare. In the book $2.00 A Day authors Kathryn Edin and H. Luke Shaefer write about the history and legacy of AFDC to explore how America ended up in a place where so many people in our country still live in a poverty that many don’t believe could exist in the richest nation on earth.
One of the challenges, the authors note, about welfare programs in the United States is that most people have serious misperceptions about how the programs operate and who is being served by the programs. These misperceptions are worsened by our country’s troubled racial history, and narratives about welfare beneficiaries in some instances are more influential in the design and implementation of welfare programs than real facts.
Edin and Shaefer demonstrate that this was true of Ronald Reagan who focused on AFDC and presented a racialized stereotype of welfare beneficiaries. Reagan popularized the narrative of the welfare queen which the authors describe by writing, “she was black, decked out in furs, and riving her Cadillac to the welfare office to pick up her check.” This narrative played on racial stereotypes, fears, and the dehumanization of black and poor people.
Edin and Shaefer continue, “None of these stereotypes even came close to reflecting reality, particularly in regard to race. It was true that as of the late 1960’s and beyond, a disproportionate percentage of blacks participated in AFDC. But there was never a point at which blacks accounted for a majority of recipients. The typical AFDC recipient, even in Reagan’s day, was white.”
The racialized stereotypes were used to justify changes to the welfare system, less generous benefits, and to demonstrate the idea that aid to the needy actually harms them rather than helps them. A narrative that was based more on anecdote and fear than reality shaped public opinion, perception, and policy. Misperceptions about AFDC meant that policymakers and their constituents were focused more on the narrative of welfare and less on the actual needs, systems, structures, and institutions of those living in poverty and ways to help them improve their lives.
Compelling Narratives

Compelling Narratives

“Although there is little evidence to support such a claim, welfare is widely believed to engender dependency,” write Kathryn Edin and H. Luke Shaefer in $2.00 A Day. People hate welfare and distrust welfare recipients. Part of the reason why is because compelling narratives have been developed and routinely deployed to argue that welfare creates dependence, that it weakens the person receiving aid, and creates a cycle where those who are poor lose skills and work ethic, becoming more dependent on a system of support.
“Even President Franklin D. Roosevelt claimed that welfare is a narcotic, a subtle destroyer of the human spirit,” write the authors. Rather than viewing welfare as a system that ensures everyone is able to meet their basic needs or as a system that provides a stable foundation for everyone to live a healthy life, welfare is viewed as a system that ruins the lives of those who receive it by draining their motivation to anything productive with their life. In the United States, a country founded on Protestant ideals where hard work is rewarded with divine riches, the idea of welfare runs against the concepts that have fueled capitalism and our independent spirit.
But the narratives around welfare are often little more than narratives. When it comes to government aid and social support, people are more interested in stories than statistics. A single anecdote about a greedy individual is more powerful than research on economic mobility, the long history of racism in the United States, or randomized controlled trials and natural experiments which show the benefits of social support systems. Research shows that economic mobility is not as simple as hard work and pulling oneself up by bootstraps. The long history of racism in America shows how black ghettos were the result of deliberate racist policies designed to hinder the economic and social advancement of black people. And natural experiments from Oregon regarding Medicaid lotteries show that individuals who receive Medicaid experience less stress and are more willing to engage economically when they are not worried about providing for their healthcare. “Sometimes evidence, however,” write Edin and Shaefer, “doesn’t stand a chance against a compelling narrative.”
When it comes to social support, we want to feel as though we are generous and we want to use charity to signal our wealth and success. Welfare provided through the government does not help us achieve these ends. Additionally, in our own narratives we like to tell ourselves that we are hard working, that we overcame obstacles, and that we are making worthwhile sacrifices for the good our families and communities. Providing welfare through the government to anyone who is below an economic threshold accepts that failure is not due to personal work ethic, challenging the idea that our success is purely a result of how hard we work. It acknowledges that racism has played into the economic outcomes (positive and negative) that we see today, it acknowledges that having a stable footing helps people get ahead, diminishing our personal narratives of overcoming obstacles. The narratives around our own success and the failures of others drive our views and opinions of welfare much more than the evidence of how welfare actually works and impacts the lives of those around us. This is true for the every day citizen on the street and many of the presidents and political leaders throughout our country’s history. These narratives also prevent us today from truly moving forward in a way that supports those who are the poorest among us.
Thoughts on Health Insurance Companies

Thoughts on Health Insurance Companies

Moving to a universal healthcare system with everything run by the Federal government might not solve all the problems in our healthcare system, and it might not really reduce all of our healthcare costs, but at least it would give us someone to hold accountable for rising costs, challenges with accessing care, and questionable quality of care. People across the United States are frustrated by healthcare providers and systems that seem to always be raising their costs and charging outrageous fees for basic medical care. Younger people today seem to find the idea of profiting on medical care to be slightly unethical, and health insurance company practices do a lot to increase people’s discontent with the current system and actors. In short, a lot of people probably just want to move to universal coverage provided by the government just to simplify the process and cut out insurance companies, especially when the average consumer can’t understand what benefit the insurance company provides.

 

These thoughts about our discontent with our current system came to mind this morning after reading the following passage that I highlighted in Dave Chase’s book The Opioid Crisis Wake-Up Call. Chase writes, “If you’re a fully insured employer and have higher-than-expected claims in one year, your insurance carrier will work to get as much back as possible in subsequent years through larger premium increases.”

 

What Chase describes is something that not everyone is directly aware of or able to explain, but it is something many of us have a vague feeling of or intuitive expectation of. Rather than existing as organizations to help us be healthy, rather than trying to solve a problem, rather than caring about our health needs, many people simply see health insurance as stealing a few bucks from them, their employers, their providers, and from people who really need medical care. Insurance companies are seen as morally unethical, powerful government lobbiers, and as bureaucratic machines that treat everyone like numbers.

 

If you are not in favor of a public health insurance program, and if you think that private insurance is the way to go, ask yourself what the industry could do better to actually provide value to patients. If you are in a health insurance company and think you do provide value to your patients, ask yourself, why don’t people see it? Perhaps we only see the games that insurance plays to limit access to care, to increase premiums every year, and to squeeze hospitals and providers, causing us to misunderstand the benefits that insurance provides. If private health insurance really wants to survive in the future, the industry needs to do better at showing its value, and minimizing its greedy tricks, otherwise, you can’t blame the public for wanting to eliminate insurance companies and have an accountable government take on universal coverage.
Black markets and Marijuana

A Thought About Black Markets

A line from John Hudak’s book Marijuana: A Short History is worth thinking about if we are someone who frequently thinks about public policy. Hudak writes, “The black market just has to deliver marijuana; the legal market must meet consumer demand.” 

 

Hudak’s line comes from an early paragraph in his book where he discusses historical trends in the strength of marijuana overtime. Marijuana strength is often measured by the amount of THC in the final product to be consumed. Dr. Mahmoud ElSohly, a researcher with the University of Mississippi, has been analyzing the THC content in seized marijuana since the 1970’s and has found that THC content has increased overtime from about 3% to 7-8%. However, marijuana that can now be purchased in dispensaries in states that have legalized marijuana often has a much higher THC content, closer to 20% or more.

 

My interest is not so much in the marijuana itself, although the plant and product is interesting (Note: I have asthma and can’t smoke and I have never tried any edible forms of marijuana). What is really interesting is the degree to which the black market under-served those who wanted to purchase marijuana from 1970 to today. Marijuana that could be purchased from a drug dealer or a friend was not as potent as people would have liked. If people were intent to buy marijuana, their only option was a product that we would consider inferior to the options available in states that have legalized marijuana today, a product that many likely wouldn’t chose if they’d been able to chose an alternative product.

 

The point I want to highlight is not that people were purchasing weak marijuana from the 1970’s until 2019 when Hudak’s book was published. Instead, the point I am trying to make is that the black market delivers sub-par products to people who use them. In the case I am writing about, illegal supplies of marijuana were simply less potent, not something that non-marijuana users are likely to care much about. However, if we think about other black markets, we should be more concerned about the products that people purchase illegally. Other black market products, that people cannot obtain legally and that cannot be regulated by a true market mechanism, likely come with more dangers than just being weak. Other illicit drugs can be even more dangerous and harmful when purchased on the black market. Health products, purchased on the black market where they might be cheaper than licensed and regulated products obtained legally, could also pose serious risks of harm.

 

This creates an argument for reasonably regulated markets, even of things we find deviant and would rather people be unable to purchase. We want some type of government oversight to ensure that products and services are safe, effective, and authentic, but we should be concerned about government regulation that drives a product or service into a black market. The market itself will find a way  to deliver the service or product, but it may do so in a dangerous and illicit manner. Government and regulation can be forces for good and bad within this dynamic. What is important is that we think critically of how regulation relates to markets, and consider the impact on people’s lives, including the lives of those who will still pursue a product or service once it is forced to a black market.

The Complement of Networked Governance

The last few weeks I have been writing about governance ideas presented in Bruce Katz and Jeremy Nowak’s book The New Localism. One idea I have brought up multiple times is the idea of new institutions at the local level formed from networks of public, private, and civic actors. Katz and Nowak argue that these networks are crucial for the development of plans and strategies to help cities grow, adapt, and thrive in a globalized economy. New institutions include structures and frameworks that bring together public, private, and civic leaders who have the ability to mobilize energy, capital, and people to actually get things done, rather than to just talk about doing things.

 

Katz and Nowak are clear, however, that these new network governance structures are not something they suggest as a replacement to traditional government structures and agencies. In their book they write, “In the end, however, networked governance is a complement to functioning government, not a substitution. As responsibilities shift downward in societies, capable local governments become a necessary component of problem solving and leadership.”

 

I previously wrote about the ways in which our denigration of government in some ways create a self-fulfilling prophecy, where talented and motivated people are afraid of the stigma of government work and chose to work in the private sector, leaving government with less capable and dynamic talent. A lot of rhetoric says that government is the problem and not a solution, but Katz and Nowak show that government has to be part of the solution.

 

City and local governments create the structures that can organize private and civic groups. They create the forums through which stakeholders can deliberate and discuss the problems that people in the region face. Agencies play a role in ensuring that projects and programs taken on with the support of private and civic groups follow legal precedent and sound administrative practices in an equitable manner. Without a competent public sector, the plans from governance networks would have nothing to graft onto, and could not be implemented nor developed.

 

New governance approaches through networks are efficient and effective because they bring in the people who have the expertise in a given area and invite them to be part of a larger solution than just maximizing their bottom line. They engage community members and actors in place-making, helping the region grow in a way that will in turn benefit each member of the network. The network fills the gaps in public action and strengthens the weakest parts of the public sector. Together, a competent local government combined with the nimble and expert private and civic sectors has a great advantage in the field of problem solving.