Donald Trump came up with a new measure this week when he compared the wealth created by a rising stock market with the government debt. It is not clear how much the president has to do with stock valuations, but arguably his promised tax cuts may be a factor pushing the market higher.
In principle, stock prices are supposed to reflect the discounted value of future profits, so if people come to think that Trump will give corporate America more money at the expense of those who own little or no stock, it should push the market higher. This would be good news for the relatively small number of people who own large amounts of stock, but bad news for those who rely largely on wages for their income and will likely face higher taxes and/or reduced government services as a result of lower corporate tax rates.
However, even by this measure, Trump is doing poorly as the NYT pointed out. The stock markets in Japan, Germany, and France, along with many others, have risen more in the last year than the U.S. market. So it appears that Trump has been a drag on the stock market.
Also, Trump does very poorly by his metric compared with Obama. Trump blamed Obama for adding $10 trillion to the federal debt during his administration. He apparently missed the Great Recession caused by the collapse of the housing bubble which happened before Obama entered the White House. This was the major cause of the run-up in debt over the last eight years.
But if presidents get credit for an increase in stock values, then Obama’s performance vastly exceeds Trump’s. In October of 2009, the stock market was already up by more than 30 percent from where it had been on inauguration day, compared to less than 20 percent with Trump. Furthermore, the stock market more than doubled during President Obama’s tenure, creating more than $20 trillion in wealth, this hugely exceeds the government debt added in this period, so by the Trump Metric, Obama did fantastic in his terms in office.
(For the record since people, and mostly American people, own the government debt, this is also wealth. So absolutely nothing about the Trump story makes any sense.)
Donald Trump came up with a new measure this week when he compared the wealth created by a rising stock market with the government debt. It is not clear how much the president has to do with stock valuations, but arguably his promised tax cuts may be a factor pushing the market higher.
In principle, stock prices are supposed to reflect the discounted value of future profits, so if people come to think that Trump will give corporate America more money at the expense of those who own little or no stock, it should push the market higher. This would be good news for the relatively small number of people who own large amounts of stock, but bad news for those who rely largely on wages for their income and will likely face higher taxes and/or reduced government services as a result of lower corporate tax rates.
However, even by this measure, Trump is doing poorly as the NYT pointed out. The stock markets in Japan, Germany, and France, along with many others, have risen more in the last year than the U.S. market. So it appears that Trump has been a drag on the stock market.
Also, Trump does very poorly by his metric compared with Obama. Trump blamed Obama for adding $10 trillion to the federal debt during his administration. He apparently missed the Great Recession caused by the collapse of the housing bubble which happened before Obama entered the White House. This was the major cause of the run-up in debt over the last eight years.
But if presidents get credit for an increase in stock values, then Obama’s performance vastly exceeds Trump’s. In October of 2009, the stock market was already up by more than 30 percent from where it had been on inauguration day, compared to less than 20 percent with Trump. Furthermore, the stock market more than doubled during President Obama’s tenure, creating more than $20 trillion in wealth, this hugely exceeds the government debt added in this period, so by the Trump Metric, Obama did fantastic in his terms in office.
(For the record since people, and mostly American people, own the government debt, this is also wealth. So absolutely nothing about the Trump story makes any sense.)
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The same day that it ran a front page story that hyped fears of huge tariffs in the event that NAFTA is repealed, the NYT ran a column highlighting the problems of protectionism. Incredibly, the column was pushing for stronger protectionism in the form of better enforcement of copyright monopolies, without any recognition that it was pushing protectionism.
This is a great example of how elite types push protectionist policies to benefit themselves, with zero recognition that they are pushing protectionism. If anyone is confused, copyright protection is a type of protectionism, unlike the tariffs of 5–10 percent that we might see if NAFTA is repealed, copyrights raise the price of protected items by many thousand percent above their free market price.
Books, software, recorded music, movies, and other video material that could be transferred at near zero cost in the absence of copyright protection instead become hugely costly. All the models that economists use (and journalists imperfectly internalize) that show the waste caused by tariffs raising prices above the free market price apply to copyright (and patent) protection as well, except the sums involved are several orders of magnitude larger in the case of copyright protection.
Of course copyright monopolies do serve an important purpose, they provide an incentive to do creative work. However there are other more modern and efficient mechanisms that can be used. For example, I outline a tax credit system modeled on the charitable contribution tax deduction in chapter 5 of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (it’s free). (Seattle is doing something comparable now by giving voters vouchers for campaign contributions.)
Unfortunately, instead of considering alternatives to copyright monopolies, our elites are prepared to use ever more intrusive laws and tools for enforcement. And then they ridicule the less-educated workers who suffer from the upward redistribution caused by patent and copyright protection for not having the skills needed to succeed in the modern economy.
The same day that it ran a front page story that hyped fears of huge tariffs in the event that NAFTA is repealed, the NYT ran a column highlighting the problems of protectionism. Incredibly, the column was pushing for stronger protectionism in the form of better enforcement of copyright monopolies, without any recognition that it was pushing protectionism.
This is a great example of how elite types push protectionist policies to benefit themselves, with zero recognition that they are pushing protectionism. If anyone is confused, copyright protection is a type of protectionism, unlike the tariffs of 5–10 percent that we might see if NAFTA is repealed, copyrights raise the price of protected items by many thousand percent above their free market price.
Books, software, recorded music, movies, and other video material that could be transferred at near zero cost in the absence of copyright protection instead become hugely costly. All the models that economists use (and journalists imperfectly internalize) that show the waste caused by tariffs raising prices above the free market price apply to copyright (and patent) protection as well, except the sums involved are several orders of magnitude larger in the case of copyright protection.
Of course copyright monopolies do serve an important purpose, they provide an incentive to do creative work. However there are other more modern and efficient mechanisms that can be used. For example, I outline a tax credit system modeled on the charitable contribution tax deduction in chapter 5 of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer (it’s free). (Seattle is doing something comparable now by giving voters vouchers for campaign contributions.)
Unfortunately, instead of considering alternatives to copyright monopolies, our elites are prepared to use ever more intrusive laws and tools for enforcement. And then they ridicule the less-educated workers who suffer from the upward redistribution caused by patent and copyright protection for not having the skills needed to succeed in the modern economy.
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For many years before and after the Affordable Care Act went into effect, many policy-types argued that its success or failure would depend on whether the “young invincibles” would sign up for health care insurance. The argument was that the system needed premiums from young people with few medical expenses in order to balance out the cost of providing care to less healthy people.
The problem with this story is that it is not just young people who have low medical expenses: most older people (pre-Medicare age) also have relatively low health care expenses. In fact, the older healthy people help the finances of the system more since the premiums for the 55 to 64 age bracket average three times the premiums of the youngest age bracket. If we have a healthy young person and a healthy old person, both of whom cost the system nothing, we are much better off if we can get three times the premium from the older person.
The Kaiser Family Foundation did a nice analysis of this issue a few years back showing that even extreme skewing of enrollment by age made relatively little difference to the finances of the system. On the other hand, skewing by health makes an enormous difference.
Vox had a nice piece on the issue of the skewing of the patient pool in the context of President Trump’s executive order allowing insurers to offer bare-bones plans that would only be attractive to healthy people. The piece pointed out that Tennessee already has a plan along the lines authorized by Trump and that it has pulled 23,000 people out of the exchanges. It points out that insurance premiums on the Tennessee exchange are among the highest in the country, presumably because more healthy people have been removed from the pool.
However, in making this case, it tells readers:
“Those 23,000 people buying the skimpier health plan are presumably younger and healthier.”
While it is very likely that the people buying into the bare-bones plan offered in Tennessee are healthier than the population as a whole, there is no reason to assume they are younger. In fact, the older pre-Medicare age group may actually save more money from this plan than younger people.
So let’s leave the age issue out of the discussion, it just generates needless confusion. To keep costs down an insurance pool needs healthy people, it doesn’t matter how old they are.
For many years before and after the Affordable Care Act went into effect, many policy-types argued that its success or failure would depend on whether the “young invincibles” would sign up for health care insurance. The argument was that the system needed premiums from young people with few medical expenses in order to balance out the cost of providing care to less healthy people.
The problem with this story is that it is not just young people who have low medical expenses: most older people (pre-Medicare age) also have relatively low health care expenses. In fact, the older healthy people help the finances of the system more since the premiums for the 55 to 64 age bracket average three times the premiums of the youngest age bracket. If we have a healthy young person and a healthy old person, both of whom cost the system nothing, we are much better off if we can get three times the premium from the older person.
The Kaiser Family Foundation did a nice analysis of this issue a few years back showing that even extreme skewing of enrollment by age made relatively little difference to the finances of the system. On the other hand, skewing by health makes an enormous difference.
Vox had a nice piece on the issue of the skewing of the patient pool in the context of President Trump’s executive order allowing insurers to offer bare-bones plans that would only be attractive to healthy people. The piece pointed out that Tennessee already has a plan along the lines authorized by Trump and that it has pulled 23,000 people out of the exchanges. It points out that insurance premiums on the Tennessee exchange are among the highest in the country, presumably because more healthy people have been removed from the pool.
However, in making this case, it tells readers:
“Those 23,000 people buying the skimpier health plan are presumably younger and healthier.”
While it is very likely that the people buying into the bare-bones plan offered in Tennessee are healthier than the population as a whole, there is no reason to assume they are younger. In fact, the older pre-Medicare age group may actually save more money from this plan than younger people.
So let’s leave the age issue out of the discussion, it just generates needless confusion. To keep costs down an insurance pool needs healthy people, it doesn’t matter how old they are.
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Eduardo Porter had an interesting column on how smaller cities are less resilient to economic shocks than larger ones. As a result, they have been losing jobs and people, while larger cities have been gaining them. While the piece makes many interesting points it is misleading in describing this pattern as a natural outcome from technology:
“As technology continues to make inroads into the economy — transforming industries from energy and retail to health care and transportation — it bodes ill for the future of such areas.”
The distribution of the benefits from technology is determined to a very large extent by policies on patent, copyrights, and other forms of intellectual property. Bill Gates, the richest person in the world, would probably still be working for a living if not for the copyright and patent monopolies he holds on Windows, Word, and other types of software.
While these monopolies serve a purpose — they provide an incentive to innovate and produce creative work — they are policies, not facts of nature. It is wrong to treat them as being simply given and unchangeable. We have made these forms of protection longer and stronger over the last four decades, which redistributes more money from the bulk of the population to the people in a position to benefit from these forms of protectionism.
We could decide going forward that the benefits from strengthening these protections, insofar as they exist, do not outweigh the costs in terms of greater inequality. We could also look to more modern and efficient mechanisms for supporting innovation and creative work.
In any case, it is simply wrong to imply that it is technology that has benefited large cities at the expense of the rest of the country. It was conscious policy. This basic fact needs to be acknowledged in any serious discussion of the topic.
Eduardo Porter had an interesting column on how smaller cities are less resilient to economic shocks than larger ones. As a result, they have been losing jobs and people, while larger cities have been gaining them. While the piece makes many interesting points it is misleading in describing this pattern as a natural outcome from technology:
“As technology continues to make inroads into the economy — transforming industries from energy and retail to health care and transportation — it bodes ill for the future of such areas.”
The distribution of the benefits from technology is determined to a very large extent by policies on patent, copyrights, and other forms of intellectual property. Bill Gates, the richest person in the world, would probably still be working for a living if not for the copyright and patent monopolies he holds on Windows, Word, and other types of software.
While these monopolies serve a purpose — they provide an incentive to innovate and produce creative work — they are policies, not facts of nature. It is wrong to treat them as being simply given and unchangeable. We have made these forms of protection longer and stronger over the last four decades, which redistributes more money from the bulk of the population to the people in a position to benefit from these forms of protectionism.
We could decide going forward that the benefits from strengthening these protections, insofar as they exist, do not outweigh the costs in terms of greater inequality. We could also look to more modern and efficient mechanisms for supporting innovation and creative work.
In any case, it is simply wrong to imply that it is technology that has benefited large cities at the expense of the rest of the country. It was conscious policy. This basic fact needs to be acknowledged in any serious discussion of the topic.
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A front-page NYT piece warned that Trump may actually carry through on his threat to pull out of NAFTA. In recounting the fallout from a collapse of the agreement, the paper tells readers:
“If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.”
The tariffs reported for agricultural exports to Mexico are the pre-NAFTA level. Mexico would not necessarily raise its tariffs to these levels since it would mean large price increases to their consumers. Governments usually don’t like to impose large taxes on their citizens, especially just before an election. (Mexico has a presidential election next summer.) While it is worth pointing out the past history of tariffs on these items and that Mexico would certainly have the right to raise them to pre-NAFTA levels, the NYT’s assumption that it would raise tariffs by this amount is unwarranted.
A front-page NYT piece warned that Trump may actually carry through on his threat to pull out of NAFTA. In recounting the fallout from a collapse of the agreement, the paper tells readers:
“If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.”
The tariffs reported for agricultural exports to Mexico are the pre-NAFTA level. Mexico would not necessarily raise its tariffs to these levels since it would mean large price increases to their consumers. Governments usually don’t like to impose large taxes on their citizens, especially just before an election. (Mexico has a presidential election next summer.) While it is worth pointing out the past history of tariffs on these items and that Mexico would certainly have the right to raise them to pre-NAFTA levels, the NYT’s assumption that it would raise tariffs by this amount is unwarranted.
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In an NYT Upshot piece on innovation in health care, Aaron Carroll and Austin Frakt argue that the U.S. subsidizes other countries health care by paying higher prices for prescription drugs. This is far from obvious.
Since the U.S. grants patent monopolies and then puts no checks on prices, brand drugs do cost far more here than elsewhere, but that doesn’t mean that other countries are not paying enough to support innovation. The price of patent-protected brand drugs is on average around ten times their free market price. In Europe and Canada, prices are around half the U.S. price which means they are around five times the free market price.
This gap between the patent-protected price in other wealthy countries and the free market price should be more than enough to support the research done by the pharmaceutical industry. (They claim to spend around $50 billion a year on research directly. Even adding in what they pay to buy up other companies only gets to around $100 billion, a bit more than 20 percent of annual U.S. spending on drugs.)
European levels of spending may not be sufficient to support the marketing and profits of the U.S. industry, but that speaks more to the inefficiency of the U.S. industry, not the failure of other countries to pay for research. It is also worth noting that without the perverse incentives created by patent monopolies, the research process would almost certainly be more efficient.
There would be no incentive to spend money researching duplicative drugs simply to share in the patent rents of a breakthrough drug. This doesn’t mean that it is not desirable to have multiple drugs for a specific condition, but the priority of developing a second, third, or fourth drug for a condition where an effective treatment already exists is almost certainly lower than developing a drug for a condition for which no effective treatment exists. Ending the reliance on patent-supported research would also take away the incentive for drug companies to misrepresent the safety and effectiveness of their drugs.
In an NYT Upshot piece on innovation in health care, Aaron Carroll and Austin Frakt argue that the U.S. subsidizes other countries health care by paying higher prices for prescription drugs. This is far from obvious.
Since the U.S. grants patent monopolies and then puts no checks on prices, brand drugs do cost far more here than elsewhere, but that doesn’t mean that other countries are not paying enough to support innovation. The price of patent-protected brand drugs is on average around ten times their free market price. In Europe and Canada, prices are around half the U.S. price which means they are around five times the free market price.
This gap between the patent-protected price in other wealthy countries and the free market price should be more than enough to support the research done by the pharmaceutical industry. (They claim to spend around $50 billion a year on research directly. Even adding in what they pay to buy up other companies only gets to around $100 billion, a bit more than 20 percent of annual U.S. spending on drugs.)
European levels of spending may not be sufficient to support the marketing and profits of the U.S. industry, but that speaks more to the inefficiency of the U.S. industry, not the failure of other countries to pay for research. It is also worth noting that without the perverse incentives created by patent monopolies, the research process would almost certainly be more efficient.
There would be no incentive to spend money researching duplicative drugs simply to share in the patent rents of a breakthrough drug. This doesn’t mean that it is not desirable to have multiple drugs for a specific condition, but the priority of developing a second, third, or fourth drug for a condition where an effective treatment already exists is almost certainly lower than developing a drug for a condition for which no effective treatment exists. Ending the reliance on patent-supported research would also take away the incentive for drug companies to misrepresent the safety and effectiveness of their drugs.
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PRI had an interview with NYT reporter Steve Erlanger on the situation in Catalonia in which he said that Spain had pretty much recovered from the recession and debt crisis. That’s not what the data say.
According to the data from the OECD, the employment rate for prime-age workers (ages 25–54) is still down by almost 5 percentage points from its pre-crisis peak. For young people (ages 15–24), it has fallen by 20.0 percentage points from 39.4 percent to 19.4 percent. In the United States, this sort of drop off in employment rates would mean that an additional 10 million people are out of work.
This deterioration in the economy may have some connection to the unhappiness of the people in Catalonia with the Spanish government.
PRI had an interview with NYT reporter Steve Erlanger on the situation in Catalonia in which he said that Spain had pretty much recovered from the recession and debt crisis. That’s not what the data say.
According to the data from the OECD, the employment rate for prime-age workers (ages 25–54) is still down by almost 5 percentage points from its pre-crisis peak. For young people (ages 15–24), it has fallen by 20.0 percentage points from 39.4 percent to 19.4 percent. In the United States, this sort of drop off in employment rates would mean that an additional 10 million people are out of work.
This deterioration in the economy may have some connection to the unhappiness of the people in Catalonia with the Spanish government.
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The NYT had an interesting article about an effort to make a number of cancer drugs available in several African countries at generic prices. This will make many treatments that are extremely expensive in the United States affordable for these countries. As the piece notes, the Indian drug manufacturer intends to sells many of the pills at 50 cents each and infusions for $10. The prices in the United States could be close to one hundred times as high, as was the case with many AIDS drugs and the hepatitis C drug Sovaldi.
This is a great story for the people who will now be able to get treatment. It also drives home the simple and obvious point: drugs are almost invariably cheap to produce. They are expensive because we give drug companies patents and other types of monopolies.
This is done to to give them an incentive to carry on research. It is an incredibly backward and wasteful way for the government to finance research. It would be great if we paid for the research upfront and allowed drugs to be sold at their free market price rather than trying to find ways to extract money from people suffering from serious illnesses, or to force them to pressure governments or their insurers to cough up the money.
The NYT had an interesting article about an effort to make a number of cancer drugs available in several African countries at generic prices. This will make many treatments that are extremely expensive in the United States affordable for these countries. As the piece notes, the Indian drug manufacturer intends to sells many of the pills at 50 cents each and infusions for $10. The prices in the United States could be close to one hundred times as high, as was the case with many AIDS drugs and the hepatitis C drug Sovaldi.
This is a great story for the people who will now be able to get treatment. It also drives home the simple and obvious point: drugs are almost invariably cheap to produce. They are expensive because we give drug companies patents and other types of monopolies.
This is done to to give them an incentive to carry on research. It is an incredibly backward and wasteful way for the government to finance research. It would be great if we paid for the research upfront and allowed drugs to be sold at their free market price rather than trying to find ways to extract money from people suffering from serious illnesses, or to force them to pressure governments or their insurers to cough up the money.
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