THE TYRANNY OF METRICS, Jerry Muller, Princeton, 220 pp.

by Edward Chancellor*

Once upon a time, there was a factory in the Soviet Union that made nails. Moscow set quotas on nail production. When the quotas involved quantity, the factory churned out many small, useless nails. When Moscow realised its error and set a quota by weight instead, the factory produced big, equally useless nails that weighed a pound each.

This much repeated tale of Soviet industrial inefficiency is an urban legend. But it contains a large grain of truth. Communism failed in large measure because central planners had inadequate knowledge of conditions on the ground and their attempts at control were generally thwarted. It would be nice to think that we have learnt from the mistakes of Stalin’s Russia. This is not the case as Jerry Muller explains in his book, “The Tyranny of Metrics.” The world remains in thrall to what Muller calls “metric mania.”

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The Rule of Law Kneels Before the Welfare State

by Mario Rizzo

The rule of law always suffers before the political exigencies of welfare state legislation. This is because, contrary to its name, the welfare state has little to do with the general welfare. It is essentially a vehicle by which some groups benefit at the expense of others. 

The latest is the sweetheart deal struck with labor unions and government workers to exempt them until 2018 from the 40% taxation of so-called Cadillac healthcare plans. Continue reading

Protecting Ourselves From Our Masters

by Mario Rizzo

I have previously blogged about healthcare “reform.” (One example is here.) Both the House and Senate bill attacked the tax-advantaged flexible spending account for healthcare expenses. Now there seems to be a move to reinstate it with a maximum of only $2,500.

I understand why the first instinct of economists is to oppose to such accounts. They enable people to put aside money from their salaries before taxes and use it to pay for deductibles, copayments and uncovered medical or dental expenses (for which most people’s insurance is terrible).

Flex Spending Accounts tend to lead to overutilization of healthcare because it changes the terms of the tradeoff between medical and other expenditures. A dollar spent on healthcare costs a person, say, $0.60 (The other $0.40 would have gone to Federal, NY State and City income taxes). A dollar spent on clothing costs him or her a dollar.

However, look at the world in which we live. Continue reading

Fast Track To The Single Payer

by Mario Rizzo  

For some time I have been interested in the dynamics of public policy – specifically, how particular policies make further policies more likely. Glen Whitman and I explored this in general terms in our paper, “The Camel’s Nose is in the Tent”  and our own Sandy Ikeda’s book, The Dynamics of Interventionism offers a different, but largely compatible, general dynamic framework  

I believe that dynamic-tendency (or slippery-slope) analysis — if carried on in a coherent theoretical framework with plausible empirical assumptions — can be a powerful supplementary critique of public policy.

The healthcare area seems especially prone to the dynamics of the slippery slope. In this post I wish to point to several factors that will ensure that the current proposals, if adopted, will not constitute a policy-equilibrium. Thus, they will likely lead to more and worse intervention by the state.  Continue reading