Friday, December 21, 2007

Health Care

One of the main reasons the American health care system is messed up is the link between employer and health care. For most Americans, health care is subsidized by their employer, and as a result most people don't understand how much their care really costs. This leads to frivolous health care expenditures and a lack of responsibility among consumers...they're not paying [entirely] for it, so why should they worry about the cost? The link between ones employer and health care is basically the unintended consequence of government-imposed wage controls during the 1940s/1950s. Companies couldn't raise wages, so they began offering health care as an incentive to employees, essentially paying their employees with a currency of health care. Also, while individuals have to pay taxes on income used to purchase health care, companies don't. This ends up being a corporate tax loophole that companies can bury otherwise taxable income with.

Another problem with the current system is that certain health care expenditures shouldn't be considered "insurance." We don't have grocery insurance, because we know we need groceries. Likewise, we know we're going to need a certain amount of basic health care--there's no getting around it. Administering such basic health care through an insurance company or through the government is just unnecessary bureaucracy; it won't magically make the health care any cheaper, but it will add layers of administrative cost.

So if I were put in charge of solving health care, here's what I'd do:
  1. Break the link between a person's employer and their health care, which could be done in part by making all health care expenditures by individuals tax-deductible. This would take away the tax incentive that companies have to pay their employees with health care.
  2. I might consider making each individual purchase health care on the open market, just like how car insurance is mandated today. By making people think about how much health care really costs, they might think twice about getting the all-inclusive deluxe plan where all doctor visits and prescription visits are free (well, free at the point of purchase but paid for by high premiums). Additionally, people would be less likely to use insurance for routine doctor visits, which would likely lower administrative costs.
  3. I think these reforms would help a lot, but it wouldn't result in a utopia where everyone gets all the health care they possible need for the lowest cost possible. For example, people whose income is such that they already pay little or no federal income tax won't be affected by changing the tax code to allow health care expenditures to be tax-deductible. For these people, I would support a government-funded voucher program where each qualified person gets, say, a $2,000 per year voucher with which to purchase both health insurance and other health care services not covered by insurance (such as routine doctor visits). If they don't use all the money, at the end of the year the leftover amount gets rolled over year after year in an account they own. This would put the participants in such a program in charge of their health care decisions and provide them an incentive to make wise choices.

And after all that, for the people still left out (for whatever reason), I would support keeping Medicaid, although I'm sure it could use some reforms and hopefully would be used by far fewer people.

Monday, July 23, 2007

Onion Prophesy

This Onion article seems oddly prophetic:
Eco-littering, however, is just one of the ways the public is embracing the green idea. The growing popularity of flex-fuel cars, which can run on regular gasoline or the ethanol-hydrocarbon compound known as E85, means more people can enjoy old-fashioned Sunday joyrides and short drives to the neighborhood supermarket without fretting about wasting nonrenewable fuel. Compact fluorescent lightbulbs now save the trouble of turning off lights. And cleaner-burning fuels and sustainable energy sources such as wind and solar power are making the longtime dream of running household appliances at all hours a reality.
I already find myself thinking, "Oh, it's alright if I leave the lights on...I'm saving so much energy anyway." But if the cost (the holistic cost, which includes the price per unit of energy and the environmental effect of that energy) of energy decreases (note that the monetary cost may increase while the holistic cost decreases because the [perceived] environmental cost may decrease), people will probably consume more energy. What other incentive is there to conserve besides cost?

Tuesday, July 10, 2007


This is fairly old news, but since it's in my 'hood it shall be mentioned. Independent Natural Resources, Inc. (INRI (not a stock symbol)) has some interesting technology. From their website:
The SEADOGTM pump captures ocean-wave energy to pump large volumes of seawater, consuming no fuel or electricity and creates no polluting by-products in the process. The pump uses buoyancy to convert wave energy to mechanical energy...There are many applications for the SEADOGTM pump from power generation to aquafarming. INRITM is currently developing seawater desalination systems and hydroelectric energy generation.
I like that their outlook seems realistic. They're not saying that the SEADOG will someday produce all the world's energy; and they're approach of target desalinization as an application seems fairly unique. They seem to have had some positive test data, so expect to hear more about INRI in the future.

Monday, July 9, 2007

LTC vs. The Rest

So for some reason, I started wondering about companies that might produce lithium-ion batteries for use in plug-in hybrid cars, and by searching for "lithium ion batteries" in Google Finance I discovered the company Lithium Technology Corporation (LTC, traded on the Pink Sheets as LTHU). A post on the Google Finance message boards by says the following:
GM has partnered with A123 systems, which is a privately owned LTHU competitor. A123 is currently in mass production, they do the batteries for dewalt power tools, same LiFePO4 chemistry. LTHU has been losing money for over a decade, it is run by old men. A123 is a newer company started up by an MIT graduate. I'm still optimistic about LTHU, seems like they could begin mass production any time.
A cursory glance at the A123 website vs. the LTC website would indicate that this comment seems to have some merit. A123 seems like a much more dynamic, entrepreneurial company, while LTC seems content with being a research-based company living on government contracts and grants. This realization dampens my enthusiasm over LTC's announcement that they have successfully retrofitted a Toyota Prius with their batteries to produce a plug-in hybrid capable of 125 miles per gallon. It seems like a more business-savvy company would be able to leverage this development into some sort of money-making (and technology sustaining) enterprise. Why not partner with some vehicle retrofitter in California to produce off-the-shelf plug-in hybrids for eco-conscious California consumers. People are clamoring for plug-in hybrids...what is LTC waiting for?

In a letter to its stockholders, LTC said this:
Over the next few months we plan a quantum leap in our production capacity to satisfy the growing demand for our products. We are still investing heavily in R& D, production machinery and in sales and marketing efforts. We believe that we should steer the company in a way that will build long-run sustainable value, especially in our core areas of competitive advantage where the future value of our company will come from.
They plan to increase production capacity dramatically, but will this plan pan out? Only time will tell, although the same letter mentions some new funding:
Recently, we closed on approximately $25 million in equity financing, which will be used to purchase manufacturing equipment in order to increase production capacity and repay some of our outstanding debt. Our recent equity financing was done with a Luxemburg asset management firm, Fidessa Asset Management S.A and its affiliate. We believe that this group has and will provide us with a strong financial backing.
Hopefully. But for now it seems that A123, which is lined up to produce the batteries in the Chevrolet Volt and Saturn Vue, as well as in hybrid buses for BAE Systems, is the industry leader. Apparently Compact Power, Inc. (CPI) is also supplying batteries for the Volt, so they're another player.

Interestingly, though, neither A123 nor CPI is mentioned by the CEO of LTC, Klaus Brandt, in this interview (search for "Klaus Brandt") on He cites Johnson Controls (and their partnership with Saft) as their primary competitor, which I suppose makes some sense given the fact that they were awarded one of two contracts with GM to work on the Saturn Vue (the other winner was Cobasys, a.k.a. A123).

Another takeaway from that interview, though, is that Brandt is the new CEO, and given his experience at Duracell and Varta, hopefully he'll move LTC in a more business/entrepreneurial direction. He seemed to express a desire for such a direction, at least.

In any case, here's a little summary of who has a contract with who:
  1. A123/Cobasys - contract for Chevrolet Volt, Saturn Vue, BAE Buses
  2. CPI - contract for Chevrolet Volt
  3. Johson Controls - contract for Saturn Vue
  4. LTC - ???
Why hasn't LTC won any contracts? Can Klaus Brandt snag a contract? There are numerous car companies, and surely someone besides GM is goibe handing out contracts for batteries, right? Maybe an upstart like Hyundai looking to upstage the big guys? Maybe some German company looking to leapfrog past normal hybrids and into the plug-in hybrid market? A123, CPI, and Johnson Controls can't win all the contracts--I would think that none of these alone have the capacity (and track record) to singlehandedly dominate the market. Surely there's enough pie for LTC to get a slice...

Disclosure: I don't own stock in any of the companies listed above, but I'm considering buying some LTC stock (LTHU on the Pink Sheets).

Saturday, March 24, 2007

Food Alarmism

Apparently, Chinese food is unhealthy. I guess that would mean that people that eat a lot of Chinese food wouldn't live as long as people who didn't eat a lot of Chinese food. So, let's look at two countries with fairly similar economic systems, one where the average person probably eats Chinese food a couple times a month (at best), and one where the average person eats Chinese food just about every day (source: CIA Factbook):

UK life expectancy
total population: 78.54 years
male: 76.09 years
female: 81.13 years (2006 est.)

Hong Kong life expectancy
total population: 81.59 years
male: 78.9 years
female: 84.5 years (2006 est.)


UPDATE: For comments, see the original blog post here.

Capitalism: the Antithesis of Social Darwinism

Okay, so the following comment in response to Julian Sanchez’s phrase “the progressive version of the intelligent design fallacy” got me all riled up, and I’ve already criticized it here.
If you want to make an evolutionary argument, you have to realize that the way evolution by random mutation works is by failure. Trial and error. Lots and lots of error. Millions of kids lives would be ruined, society would collapse, and a new society billions of years from now would have evolved the innate capacity to build properly functioning schools for their multi-tentacled offspring. Or something like that. Anyway, the point is that if you want progress you can find in the newspaper rather than in the fossil record, you need intelligence.

Julian was advocating for school choice (i.e. vouchers), so I assume that this commenter is an opponent of school choice, and probably of capitalism in general. Who knows...The point is, a lot of people commit the fallacy of associating capitalism with evolution, or more specifically, Social Darwinism.
What's the easiest (and intellectually laziest) way to attack a person advocating capitalism and free markets? Accuse him of supporting Social Darwinism. Of course, such an attack is misguided at best, and actually couldn’t be further from the truth.
In a market-based system, wealth is created through innovation. In evolution/Social Darwinism, wealth is transferred to the biggest bully. Sure, at any given instance, the competition between two businesses vying for the same thing (access to some resource or customer or money) might resemble an encounter between a snake and a mongoose, but the customer ends up winning in either case because the winner of the battle must do something (such as inventing a new product that makes life easier) to win the battle for the resource.
In fact, communism—the polar opposite of capitalism—more accurately resembles Social Darwinism; the lack of incentives for innovators results in a fixed amount of wealth being fought over instead of new wealth being created (through the innovation that capitalism so uniquely fosters). Carl Milsted sums it up nicely here:
Another notorious metaphor [to capitalism] is “Social Darwinism.” It implies a tougher fight for survival in a market system. Ironically, when traditional societies become more free market based, populations tend to explode, until parents realize that their children are likely to live long lives. As far as people are concerned, capitalism is anti-Darwinian. A good case could be made that our descendants will be stupider and less hearty because capitalism has made life too easy.
There is an evolutionary aspect to capitalism, but it applies to businesses, not the people they serve. Businesses that fail to provide good service do get weeded out by competition with better businesses. But the evolutionary process is not entirely Darwinian: businesses learn. Lamarkian evolution is the norm.
Anyway, the point is this: in a market-based school system, some schools would fail, while others would succeed. But just as the consumers win when Target matches Wal-Mart’s prices and provides a more comfortable and attractive shopping environment (while other competitors like K-mart fall by the wayside), the students and parents would win if schools were pitted against each other. Sure, some schools would be closed (i.e. go out of businesses), and (gasp!) some teachers would lose their jobs. But I want bad schools to close, and I want bad teachers to lose their jobs. After all, I’m not all that concerned about the schools and the teachers; I’m concerned about the students!

The Progressive Version of the Intelligent Design Fallacy

Julian Sanchez describes what he calls the "progressive version of the intelligent design fallacy" in this post. Here's the excerpt:
This is the progressive version of the intelligent design fallacy—the implicit belief that complex results must be consciously aimed at to be achieved...
The context that it's used in is to attack how opponents of school choice seem to operate on the presumption that central planning is required to produce a good product. I love the concept that Julian has coined, but I don’t love the term he’s given to it. I think it will lead to a lot of confusion and straw man arguments that conflate market-based systems and capitalism with evolution. For example, a commenter attacks Julian's verbiage with this comment:
If you want to make an evolutionary argument, you have to realize that the way evolution by random mutation works is by failure. Trial and error. Lots and lots of error. Millions of kids lives would be ruined, society would collapse, and a new society billions of years from now would have evolved the innate capacity to build properly functioning schools for their multi-tentacled offspring. Or something like that. Anyway, the point is that if you want progress you can find in the newspaper rather than in the fossil record, you need intelligence.

Nevermind the commenter’s conflation of evolution with market-based systems (see this post for my thoughts on that fallacy). What really freaks me out about this guy’s comment is that he seems to be willing to completely ignore the obvious evidence that markets work, and more specifically that people (in their current state of evolutionary existence) function optimally in market-based systems. It won’t take millions of years of evolution for people to adjust to a market-based school system, just as it won’t take millions of years of evolution for people to adjust to a market-based food distribution system (or any other subsystem of the overall capitalist/market-based economy). NEWSFLASH! We already have those systems! A market-based school system isn’t any different!
Yes, you need intelligence, but not from a central planning perspective. You need intelligence (insofar as being able to tell the difference between a failure and a success) at the level of the consumer, or in the case of school choice, the parent. And we already have that! Would anyone ever really suggest that people are so stupid that, without millions more years of evolution, they can’t tell the difference between a success and a failure?
Anyway, to avoid the confusion that Julian’s comment cause in this commenter, as well as to avoid the conflation of evolution (i.e. Social Darwinism) with capitalism, I’d like to suggest a new term to describe this fallacy that many people assume to be true. How about simply, the “central planner fallacy?”

UPDATE: For comments, see the original blog post here.

School Choice

This post was originally a comment in response to this post on AngryBlog, but I liked it so much I'm posting it here:

Potential reasons for opposition to school-choice:
1.) Public funding of religious schools
2.) An erosion of the sense of “community” that comes with geography-based schools
3.) Fear of treating children like commodities to be shuffled around to school after school to prove a political point
Point #1 is a valid concern, but as long as there’s nothing in the allocation formula regarding religion (or the lack thereof) I think that this concern goes away.
Point #2 is not a valid concern because it relies on the false assumption that geography-based schools have the potential to foster a greater sense of community than performance-based schools.
Point #3 is valid, but as Tim points out, it can’t get any worse than it already is. We’ve been carrying out the progressive experiment with education for a long time now, and inner-city kids are the victims of “progressive dogmatism.”
The progressive system isn’t working (and in fact isn’t all that progressive). It’s time to try something else.

Liberty Mutual's "Responsibility" Site

After calling Liberty Mutual to ask about a bill, I decided to go online to pay it. The image/question on the right side of the page caught my attention. It asked, "Should the government regulate the use of trans fats in restaurants?"

My interest was piqued! "OF COURSE NOT!" I thought to myself, my rage at the recent action by the New York City city council to ban trans fats being quickly recalled. So I clicked on the image and found this site, which has a huge list of "yes/no" survey questions that have been featured in weeks past. Much to my surprise the questions actually address the concept of liberty/personal responsibility vs. government mandates rather directly.

Besides the trans fat question that's currently up, they also ask about motorcycle helmet laws, airport security, even whether people without children should have to pay "school taxes" (their words). In most cases, the survey respondents [predictably] err on the side of more government action (and less liberty). Most respondents think the government should ban trans fats, most think the government should have motorcycle helmet laws, most think the minimum driving age should be raised, etc. But the "yeses" don't usually win by very much, showing that there is a healthy amount of people that believe the government should stay out issues revolving around personal choice and responsibility.

Even better, the comments that those opposed to government action write tend to be along the lines of liberty and the government's taking of freedom. The do-gooders keep trying to bring the question back to whether helmets saves lives or whether trans fats are healthy, but the opposition doesn't fall for that straw man, instead recentering the debate to government action vs. individual liberty and personal responsibility.

Go to the site now and voice your opinion!

Thursday, January 18, 2007

Corn-Based Ethanol - Not A Panacea

This article, which is a summary of findings of a University of Minnesota study, is a good summary of why corn-based ethanol is anything but a panacea for solving energy problems. Here are the five main reasons offered:
  1. Ethanol production requires almost as much energy as it yields. This is a common argument, but the Minnesota study found that the net energy yield from corn based ethanol is 25%.
  2. It isn’t easy being “green” when growing corn. Corn is not a hassle-free crop, and to get high yields you need a lot of fertilizer. I can't imagine too much organically-grown corn is going to go into ethanol production.
  3. Corn crowds out wildlife. Basically, more corn = less wildlife. However, another potential source of ethanol--prairie grass--is essentially wildlife in the sense that it fosters an ecosystem native to the region in which it grows.
  4. Corn ethanol doesn’t cut enough greenhouse gases. It's not much better than regular old gasoline, and in some respects it's worse.
  5. We can’t grow enough corn. This goes back to the "more corn = less wildlife" idea; the energy yield of corn just isn't enough for us to "grow" our way to energy independence. Sorry, corn.
The authors of the study correctly conclude, in my opinion, that corn-based ethanol subsidies should be discontinued. I'd go a step further and say that all energy subsidies (especially those for oil!) should be discontinued, but that's a discussion for another day. In any case, let's leave the corn for food (and maybe biodegradable plastic) and start developing ethanol sources that are actually worth pursuing.