Fat, Drunk, and Stupid is no way to go Through Life: Unless You are a Michigan Public School Student

The governor and the state legislature are engaged in a process of encouraging Michigan students to fail.  Currently, the state has a policy that requires students who are unable to read at the second grade level by the time they finish the third grade they are required to repeat third grade.  This policy was based on the reasonable assumption that fourth graders who can't read at a least one grade level below, or worse, would be in academic trouble, and unlikely to succeed.  The law allowed for several exemptions, however, and the governor is working with various non profit organizations to make sure that as many students as possible take advantage of these exemptions, no matter how suspect these exemptions are.  Some school districts have stated that they will not hold any students back.  

Third grade is an important grade.  A student who struggles in the first and second grade can sometimes catch up in the third grade. However, if you are unable to read by the end of the third grade a student is in deep trouble, but unlike Dean Wormer of Faber College, Michigan public schools and the administration seem disinterested.

Not to be outdone, the Michigan legislature is now considering dropping the Algebra II requirement as well as the physical education and health requirement.  There is currently a exemption for the physical education requirement for students that play a sport.  The lack of physical education opportunities is an issue throughout the grade levels, it adversely impacts all students but boys are especially impacted by the lack of exercise during school.  They tend to get bored and fidgety and without a physical outlet they tend to do worse at school.  This is one of the reasons girls are outperforming boys by a wide margin.  A well designed physical education class would help students develop habits that would last a lifetime.

Apparently, the argument against Algebra II is that it is too hard and students who are not college bound don't need it.  The fallacy of this argument is that 17 and 18 year olds know what they are going to do the rest of their lives.  Many jobs are going to require higher levels of math in the future whether or not you have a college degree and math helps people think more rationally and systematically.  Again, what harm is there in having students being well educated before they graduate?

Eliminating the health requirement could have serious repercussions.  Michigan is now a state that allows recreational marijuana and without an effective educational program, drug abuse may get worse. This may already be the case with older people who were not educated on the impact of opioids.  A well designed health course should also be able to warn students about the risks and impacts of STDs without encouraging sexual activity.  

For the most part (physical education and health requirement being the exceptions), the unions and educational establishment favor these changes.  This should come as no surprise, as is the case with most large organizations, preserving the status quo and capturing economic rents is more important than providing good service. 

Book Recommendations

Since it's December and books are always a good gift.  The following are some of the books I've read over the past couple of years that are worth reading.  They are not in any particular order.
 

• Works of Love, Soeren Kierkegaard,  Kierkegaard's theological writing is much easier to read than his philosophical writing.  Nonetheless, he never uses a short word when a paragraph will do.  Longish book short:  love is not sentimental nonsense, it's hard work directed at people who may not be lovable.

• A First Rate Madness:  Uncovering the Link Between Leadership and Mental Illness, Nassir Ghaemi. Depending on how it's defined,  about 20 percent of the population has some type of mental illness.  This book looks at some of the more famous people in history who had mental illness and how it impacted history.  The chapters on Sherman, M.L. King, and Kennedy are especially interesting.  This book is a relatively quick read.

• West with the Wind,  Beryl Markham. An interesting autobiography of an early pilot, amongst the first to fly from Europe to North America (against the wind).  Markham was also a race horse trainer in Kenya during the first part of the 20th Century.  A very well written book, similar to Hemingway's writing about Africa.

•  Factfulness: Ten Reasons We’re Wrong About the World - and Why Things are Better than you Think, Hans, Ola and Anna Rosling.  Hans Rosling was a Swedish biostatistician who spent much of his career in Africa and Asia.  In this book he presents a compelling case that for the majority of humanity things are getting better and they are getting better fast.  This book is also a pretty quick read.  If you aren’t sure watch a couple of his TED talks on Youtube. https://www.youtube.com/watch?v=jbkSRLYSojo

• The Wizard and the Prophet: Two Remarkable Scientists and Their Dueling Visions to Shape Tomorrow, Charles C. Mann.  The book looks at some modern issues facing the planet through the lens of two competing ideologies, conservation and reducing resource use, outlined in the work of William Vogt; and technological innovation, outlined in the work of Norman Borlaug.  The account is even handed.  Vogt is the Prophet, and Borlaug the Wizard.

• Our Towns: A 10,000 - Mile Journey into the Heart of America, James and Deborah Fallows.  Jim Fallows is a writer for The Atlantic.  In this book the Fallows travel through the U.S. analyzing what might work and might not work in cities and communities that usually don’t make the headlines.  The authors also find a nation that is much more cohesive than what the national media would have you believe.  The insights of Deborah Fallows are particularly interesting because she sees things that men often overlook.  Among the cities covered are Holland Michigan and Fresno California.

• The Death of Expertise: The Campaign Against Established Knowledge and Why it Matters, Tom Nichols.  This is also a quick read.  For a number of reasons not the least of which is social media, people no longer trust experts, and are often hostile towards them.  This has accelerated the decline of civil society and the ability of the public square to solve problems.  The only shortcoming in the book, is the fact that the author does not chide experts for being the source of the problem.  A good recent example was the testimony of the law professors at the recent impeachment hearing and many opinion articles written by Paul Krugman. https://www.youtube.com/watch?v=3MBV-mKq8no

Climate Change is Real but We're Not Going to Die

"A Person is Entitled to Their Opinions but the Facts Belong to Everyone" - Don Paarlberg

I first heard about global warming in the mid 1980s in a book with the captivating title "The Future of the North American Granary."  In fact theoretical discussions of the possibility of greenhouse gases causing global warming go back until at least the 1950s if not sooner.  At that time one of the debates was whether particulate pollution would cause global cooling or if the accumulation of CO2 would raise temperatures.  The answer is that the planet is warming, and precipitation patterns are changing.  We are increasingly living in a world with fewer but stronger storms.  Also, with some exceptions it appears that the dry regions are getting drier and the wetter regions are getting wetter.

Despite what you may have heard, the world is not running out of water.  While climate change is impacting some aquifers and water basins, and the water cycle may be accelerating, the total amount of global precipitation is virtually identical from year to year.  If anything rising sea levels will lead to more precipitation.

It is almost certain that in the future sea levels will rise and will become more acidic.  This will reduce the productivity of the oceans and will pressure populations that live in coastal areas.  In other words there is a very good probability that there will be climate refugees in the future, especially from island states in the Pacific, and perhaps from countries with major river deltas such as Bangladesh.  Mosquito borne diseases will likely become more common, as the range of some species expand, and there is less winter kill off. People living in major cities in the West may need to move a few miles inland or adapt buildings that can withstand higher sea levels.  

How the West responds to these refugees will be one of the biggest issues facing developed economies in the next few decades.  One positive aspect of this fact is that the world has time to adjust and handle these refugees if it embraces the bleakness.  However, most nations individually only manage emergencies.

The Current State of Climate Change Debate

It wasn't always like this.  There are at least two examples of environmental policies that effectively addressed major problems.  The first was the Montreal Protocol, which banned chlorofluorocarbons (CFCs) and halons that were creating a hole in the ozone layer.  Since then the hole has become increasingly small.

The second is the cap and trade program that effectively reduced the generation of sulfur dioxide, the primary source of acid rain.  Since this policy was enacted, the health of forests and lakes have improved downwind of major sources of acid rain.

These two policies indicate some two important realities.  The first is that positive action is possible.  The second is that the environment and the planet is more resilient and  self-healing than environmental activists are willing to admit.

Another major concern involves agricultural productivity.  Some areas will be adversely impacted; of the major food exporters, Australia appears to be particularly adversely impacted by climate change.  In addition to warmer temperatures, Australia appears to more more susceptible to both droughts and flooding.  Fruit growing regions in the Midwest and Northeast parts of the U.S. and Canada may face additional pest pressure and the impact of warmer weather followed by frosts, which will kill premature blossoms.

Other parts of the world should see higher productivity.  This includes the Prairies of Canada and the Northern plains of the U.S., although this region, especially the Red River Valley of the North faces considerable flooding potential.  Areas such as Ukraine and Russia also stand to generate increased crop production resulting from climate change.  As a result the net effect of climate change of crop production is difficult to determine at this point.

Environmentalists also decry animal food production as not being sustainable.  Perhaps some methods of raising animals are, but it is difficult to understand how traditional pasture based systems that have been used for thousands of years would have a major impact on the environment.

It should be noted that if climate change is a threat to life on earth there are several potential technical methods to address it.  One is through the use of geoengineering; increasing cloud cover, developing ways for the oceans to capture more carbon or to reflect more light back into the atmosphere are examples.  Genetic engineering could be used to develop crop varieties that drought resistant, heat resistant, and use fewer purchased inputs such as nitrogen fertilizer.  One of the great frustrations in dealing with climate change is that many of advocates of the dangers of climate change are opponents of methods to reduce its impacts.

Climate change is real and the faster policies and technologies are put in place to address it, the smaller the impact will be.  However, the inability of climate change deniers and climate change activists to embrace the bleakness, likely makes the future impacts worse that they would otherwise be.

The Latest World Economic Forum World Competitiveness Report is Out

The World Economic Forum (think of the UN for people who actually run the world), just put out its annual rankings of global competitiveness.  If you want to sift through 600 pages of data it can be found here http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf.  In it, the competitiveness of 141 different countries are assessed on 12 broad categories.  Unlike many similar reports, the Nordics, while performing well do not dominate the list.

Overall the U.S. ranks second after Singapore, with an overall score of  84. Implicit in these figures is the fact that the U.S. can effectively compete in international markets, and what problems the U.S. faces is largely of its own making.

Large countries such as the U.S. and China score high in market size, and the U.S. ranks first in business dynamism and innovation capability.  The U.S. also ties for first with several other countries in terms of macroeconomic stability.  Inflation and interest rates are low as is unemployment.  For the most part our labor markets are in pretty good shape. Compared to most countries our educational and job training system is reasonably competent although it is not as good as Switzerland, Germany or Finland.  A big problem that perhaps helps explain the disparity of incomes in the U.S. is the low level of workers rights where the U.S. only ranks 81st. 

Despite the positive attributes there are several areas of concern.  The U.S. only ranks 20th in the strength of its institutions, and 99th in terms of shareholder governance.  This might explain the pay levels of senior management.  It also explains why The Economist calls the U.S. a flawed democracy. A nation that is governed by Executive Order and judicial fiat has serious institutional problems that transcend whoever controls the executive branch of federal or state government. 

Policies that address issues relating to corporate governance and worker rights may be more effective than raising taxes on the affluent.  This has not been a major point of discussion in the developing Presidential campaign, and a platform that promotes class warfare has seldom been successful in the U.S.

The U.S. only ranks 55th in terms of healthy life expectancy.  While the average lifespan is approaching 80, the number of healthy years appears to be stuck at around 66 or 67.  Lifestyle probably has more to do with this than the quality and access to health care.  We eat too much, don't exercise enough, and take too many drugs. 

Reflections on Turning Sixty

As I begin by seventh decade on Earth I would like to share some of what I have learned over the years.

1. If you want an attractive girlfriend play hockey for the University of Minnesota.
2. If you don't play hockey and want an attractive girlfriend move to Aarhus Denmark.
3. Danish is the sexiest accent.
4. There are few simple pleasures more rewarding than making a child or a woman laugh.
5. Death comes to us all.
6. Sheep die, cattle die, you yourself will die.  One thing never dies, the pursuit of economic rents by vested interests.
7. People who believe humans are basically good don't have a Twitter account.
8. If you are fifty years old and still talking about where you went to college be assured, your education was wasted.
9. Love is patient, kind and endures all things, it is not always tolerant, ask any parent.
10. Vegetables are not food, they are what food eats.
11.  An single Italian with a pencil and a piece of paper will design a more attractive car than a committee of Americans with the best Computer Assisted Design software.
12. Conversely, the easiest job in the world is designing the next Porsche 911.
13. Economists should be kind to environmental activists, they make the predictions of economists look incredibly accurate.
14. Cemeteries are full of irreplaceable men.  In other words you're not that special, that's okay.  
15. Dave Schweikhardt was an irreplaceable man. 
16. People don't understand the agri-food system, that doesn't stop them from having strong opinions
17. After I die and everyone who knows me dies, I will be utterly forgotten, as in point 14, that's okay too.
18.  People who review music on NPR have terrible taste.
19.  Pirate Metal is a real thing and it is awesome.
20. If you have a $500 cell phone, a subscription to HBO, and don't pay off the full balance of your credit card every month, it's not a failure of capitalism.  You are just bad with money.
21.  The Good Place taught me that rap musical about Kierkegaard is a terrible idea.
22. People in the Midwest and South take college football way too seriously.
23. The grass withers, the flower fades, but the word of the Lord endures forever.

Testing the Meatless Whopper

As part of my job I occasionally have to do something I would never choose to do.  Today I ate an Impossible Whopper to assess the difference between meat and  meat substitutes.  Meat substitutes are a major product development in the food industry and there is a lot of capital being raised by meat substitute companies.  The primary rationales for meat substitutes are that they are healthier, they are better for the environment and they prevent animal abuse. The good news from a vegetarian perspective is that it wasn't terrible; it was kind of dry and bland, but it almost tasted like meat.  In the final analysis, it was inoffensive.

However, there were still several drawbacks.  First it was a $1 more than a regular Whopper. Secondly, it wasn't particularly more healthy than a regular Whopper.  The Impossible Whopper is 630 calories compared to 660 for a regular Whopper; 34 grams of fat compared to 40 grams for a regular Whopper; 10 mg. of cholesterol compared to 90 mg. for the regular Whopper.  On the other hand the Impossible Whopper has 1,080 mg. of sodium compared to 980 mg. in a regular Whopper; and 58 grams of carbohydrates compared to 49 for a regular Whopper.

So on net the Impossible Whopper is slightly healthier - or more accurately - slightly less unhealthy than a regular Whopper.  It is not price competitive given the marginal improvement in health. 

The fact that the Impossible Whopper is about 20 to 25 percent more expensive than a regular Whopper should question whether or not a meatless patty is better for the environment than a beef patty.  It may be the case that more resources are needed to produce a plant based burger.  The efficiency of meat production systems tends to be understated.  While it is true that it takes 7 lbs. of feed to produce 1 lb. of beef, it is also true that much of this feed is in the form of grass and that pasture based systems do not stress the environment.  Another way to put it, is that in the U.S. beef replaced bison in much of the country, with little net impact on the environment.  Bison are better suited to life on the plains than cattle, but they aren't as tasty, and they are much harder to domesticate.  Intensive cattle feeding (higher grain and corn rations) do occur in the last 6 months or so of a steers life, as the animal is fattened up.  While it could be argued that there is some environmental degradation due to intensive feeding, it is pretty minimal.  Also, there is a fair amount of research being carried out on 100 percent pasture based systems.  Cattle do drink a lot but they also pee a lot which recharges aquifers, as a result the impact of livestock production on water supplies is also overstated.

In terms of animal welfare it should be noted that abused animals have a lower productivity than animals that are not abused.  Their feed conversion ratios are lower, and their vet bills tend to be higher.  Also, there is also a higher chance that the carcass will receive a lower grade. As is the case with environmental impacts, animal welfare advocates tend to overstate their case. There is very little abuse in the industry. For the most part, while cattle don't live that long, while they are around they have a pretty good life.

So go ahead and eat real meat for the time being.

 

How to Fix Social Security and Medicare

The following post does not contain any magical thinking and as such may leave you depressed.  This is your trigger warning.

The best way to think about social security and medicare is to imagine a family that is spending more than they earn and has done so for several years.  Eventually, they run out of savings and have to cut back on their spending.  Currently, it is estimated that Medicare Part A trust fund will be exhausted by 2026, and  Social Security fund will be exhausted by 2034.  This does not mean that there will be no funds available, because in some respects theses are pay as you go programs.  For example starting in 2026, if nothing else changes, Medicare Part A still pay 91 percent of costs, although this will decline to 78 percent by 2042.  

Benefits to social security recipients will begin to decline starting in 2035 if nothing is changed, but again, the initial decline will be small and accelerate over time. 

To Fix the Problem Embrace the Bleakness

The above facts are well known to policymakers, but their inability to make even marginal changes only mean that when the bills come due the pain will be even greater.  It's a bit like a toothache that you hope will get better by itself, it won't and putting off a visit to the dentist will only make it worse.  The following are prescriptions that will address this problem in ascending order of quality.  These are not earth shattering ideas, but reflect reality.

4) Cut benefits:  This is do nothing option.  The problem with this option is that Americans are poor savers and are overly dependent on social security for their retirement.  This policy will lead to a reduction in living standards for seniors and a lower quality of health care.  Also, hospitals in areas with a disproportionate number of elderly will face lower revenues, and will either cut back on services or close altogether.

3) Increase Taxes:  Currently the medicare payroll tax is 1.45 percent paid by employers and employees.  If this were raised to 1.9 percent, the problem would be solved.  Higher social security payroll taxes would also make social security financially viable.  The problem with this policy is that payroll taxes are a tax on employment.  The more people hired the greater the taxes paid by the employer.  This policy will further accelerate the substitution of labor with machinery and technology.  It could lead to higher unemployment, especially among those with a limited skill set. While other taxes could be raised to pay for these programs, the benefit of using payroll taxes is that is taxes a broad base and is used for a specific purpose.

2) Raise the ages for enrollment in Social Security and Medicare:  Contrary to popular belief, the U.S was comparatively late in offering social security.  The first country to enact a modern social security system was Germany in the late 19th Century.  Initially the age for benefits was set at 70, but was reduced to 65 during WW I.  When the U.S. enacted social security in 1935, it kept the age at 65.  It's important to note that in 1935 the average lifespan in the U.S. was 61.  In other words most Americans would not have expected to see any social security benefits.

One of the greatest success stories of the 20th Century has been the consistent rise in expected lifespans.  Today the expected lifespan is almost 79 which means that the typical person can expect to receive social security benefits for approximately 14 years.  It should also be noted that for most of us the nature of work has gotten easier.  Office jobs have replaced farm and factory work, meaning that most of us can work longer.  This should be considered good news and as a result, the age limit should be adjusted.

Time for an Update

1) Allow more immigration:  The fundamental issue facing Medicare and social security is demographic.  There are not enough workers to support the retired.  Currently there are 62 million people collecting social security, and there are only 128.6 million people working full-time with other 27.2 million working part-time.  In other words there are about 2.3 people supporting one social security beneficiary.  This number is only going to get worse over time, and will begin to get much worse after 2050.  The birthrate in 2015 was 12.4, half of what it was in 1959, and lower than during the Great Depression. Conversely, people from around the world still want to come to the U.S. These people tend to be young, and often have skills employers need.  There is even a strong demand for workers with what some consider limited skills.  Increasing immigration would pay a demographic dividend that would last decades.

There is some concern about an impending economic slowdown.  Part of this concern is due to the lack of workers.  Housing construction would be up if there was more immigration and the demand for goods and services would be higher if immigration was easier.  In fact if enough immigrants came none of the other policies outlined above would be necessary.

A Note About Medicare for All

There is a great deal of support among the democrats running for President for a single payer health care system along the lines of "Medicare for All".  Given the fact that few of these candidates have explicitly stated how they are going to pay for the current Medicare system makes Medicare for all a slogan and not a serious policy.   If you are unable to fully pay for Medicare for 60 million people, how are you going to cover 300 million?