There is another pharma scandal in the news over the astronomical increase in EpiPen’s price. Yet, before we begin to blame and denounce the abstraction “capitalism” for all our woes, it might be useful to recall my post on the Shkreli/Daraprim scandal and its discussion of healthcare regulations. This new case appears to be incredibly similar and the site Slate Star Codex has an excellent post contrasting the way the drug industry operates compared to the chair industry:
when was the last time that America’s chair industry hiked the price of chairs 400% and suddenly nobody in the country could afford to sit down? When was the last time that the mug industry decided to charge $300 per cup, and everyone had to drink coffee straight from the pot or face bankruptcy? When was the last time greedy shoe executives forced most Americans to go barefoot? And why do you think that is?
The answer?:
The problem with the pharmaceutical industry isn’t that they’re unregulated just like chairs and mugs. The problem with the pharmaceutical industry is that they’re part of a highly-regulated cronyist system that works completely differently from chairs and mugs.
If a chair company decided to charge $300 for their chairs, somebody else would set up a woodshop, sell their chairs for $250, and make a killing – and so on until chairs cost normal-chair-prices again.
And in his final act, he drives the point all the way home (worth quoting at length):
Imagine that the government creates the Furniture and Desk Association, an agency which declares that only IKEA is allowed to sell chairs. IKEA responds by charging $300 per chair. Other companies try to sell stools or sofas, but get bogged down for years in litigation over whether these technically count as “chairs”. When a few of them win their court cases, the FDA shoots them down anyway for vague reasons it refuses to share, or because they haven’t done studies showing that their chairs will not break, or because the studies that showed their chairs will not break didn’t include a high enough number of morbidly obese people so we can’t be sure they won’t break. Finally, Target spends tens of millions of dollars on lawyers and gets the okay to compete with IKEA, but people can only get Target chairs if they have a note signed by a professional interior designer saying that their room needs a “comfort-producing seating implement” and which absolutely definitely does not mention “chairs” anywhere, because otherwise a child who was used to sitting on IKEA chairs might sit down on a Target chair the wrong way, get confused, fall off, and break her head.
…Imagine that this whole system is going on at the same time that IKEA spends millions of dollars lobbying senators about chair-related issues, and that these same senators vote down a bill preventing IKEA from paying off other companies to stay out of the chair industry. Also, suppose that a bunch of people are dying each year of exhaustion from having to stand up all the time because chairs are too expensive unless you’ve got really good furniture insurance, which is totally a thing and which everybody is legally required to have.
And now imagine that a news site responds with an article saying the government doesn’t regulate chairs enough.
I’ve been out of town the last couple weeks, so I’ve missed the past two sessions. From the looks of it, I missed an excellent one last week. This week’s session yielded some great insights and few…well, we’ll get to that.
Marion G. Romney discussed how the “Church welfare is an approach to the law of consecration—the Lord’s perfect economic program.” He notes, “In light of these teachings [from the scriptures] it seems to me that every Church member, and particularly every priesthood bearer who wishes peace and joy here and eternal life hereafter, would give bounteously of his sustenance to the poor.” Yet, he made this important point: “The basis of God’s perfect economic program is labor.” Why? Because “[t]he dignity and self-respect of the receiver must be preserved.” This attitude toward work is something I touch on in my article for BYU Studies Quarterly:
In their book Wellbeing, Gallup researchers Tom Rath and Jim Harter point to evidence that shows, given a few years, people recover from tragic events (like the death of a spouse) to the same level of well-being prior to the tragedy. “But this was not the case for those who were unemployed for a prolonged period of time—particularly not for men. Our wellbeing actually recovers more rapidly from the death of a spouse than it does from a sustained period of unemployment.” Based on data from the General Social Survey, economist Arthur Brooks also found that one of the key elements for achieving happiness and self-fulfillment is work. This is due to its connection to what Brooks calls “earned success”: the ability to create value in our lives and in the lives of others (pg. 173).
Unfortunately, Romney attempts to use the cursing of the ground following Adam’s disobedience to make his point:
[Adam’s] was not a vindictive decree. The Lord was not retaliating against Adam. He was simply placing Adam in a situation where he would have to work to live. The ground was cursed in the manner prescribed for Adam’s sake, not to his disadvantage. Had Adam and his posterity been able to live without working, the human race would never have survived. Idleness is pernicious.
The problem is that’s not what the phrase means. As the NET Bible Commentary explains, “The Hebrew phrase בַּעֲבוּרֶךָ (ba’avurekha) [“for your sake”] is more literally translated “on your account” or “because of you.”” For example, the NRSV translates it “because of you.” This is not done for Adam’s benefit, but is done because of his transgression. While I dig Romney’s point, his exegesis here is flawed. Nonetheless, it reminds of me this quote from Elder Christofferson a few years back:
By work we sustain and enrich life. It enables us to survive the disappointments and tragedies of the mortal experience. Hard-earned achievement brings a sense of self-worth. Work builds and refines character, creates beauty, and is the instrument of our service to one another and to God. A consecrated life is filled with work, sometimes repetitive, sometimes menial, sometimes unappreciated but always work that improves, orders, sustains, lifts, ministers, aspires.
Moving along, Elder Featherstone offered bishops some practical financial advise when it came to the welfare system:
Brethren, that is a great principle in welfare. Our home food bill is no more than it was six months ago or a year ago. We had to change the mix. We feel, bishops, you might well change the mix on those who are eating out of your bishops storehouse. When potatoes are $1.69 for ten pounds, let’s switch to rice. When meat is as high as it is, let’s not do as one bishop did, continue to give one family 67 pounds of beef each month. I don’t know that there are too many families here that are eating 67 pounds of beef each month. Those Saints receiving commodities through the bishops storehouse should not be receiving more than you are using in your homes. I hope this is a principle that we will remember and use very wisely…We are trying to spend the Lord’s sacred funds in the best possible way.
I don’t have much to say about this. I just thought it was an interesting topic to be addressed in General Conference. Church leadership isn’t just about abstract concepts and otherwordly concerns. It’s about the here-and-now. It’s about costs and benefits. It’s–in many cases–about economics. In other words, respond to with enlightened self-interest to the price system as any other consumer would.
N. Eldon Tanner talked about everyone’s favorite topic: obedience. “Obedience is the first law of heaven,” he says, “and it is obedience to the laws of God that I should like to talk about particularly, because these laws affect not only our happiness and well-being here upon the earth, but are essential to our eternal life.” I’ve mentionedmultipletimes the connection of the commandments to happiness and well-being and I’m always glad to see it discussed in General Conference. Some of his other comments cover familiar ground regarding self-discipline (which could be ultimately seen as the shaping of habits):
Self-discipline is the basis of our success. Man has been given a mind to think, to ponder, and to understand and decide what he wants to do and whether or not the sacrifice and discipline is worth it; and, in the Church, whether or not he can stand the ridicule and pressure of those with whom he associates. You have been called. You have been given the priesthood. You have been given the gospel. You are an example to the world. Be a good one. The measure of our success depends on our decision, our determination, discipline, and dependability.
Finally, President Lee urges the men the to take marriage more seriously. He states,
[Marriage] has lost its sanctity in the eyes of the great majority. It is at best a civil contract, but more than often an accident, or a whim, or a means of gratifying the passions; and when the sacredness of the covenant is ignored or lost sight of, then a disregard of the marriage vows under the present moral training of the masses is a mere triviality, a trifling indiscretion.
I think there is ample evidence to support President Lee’s claims. However, I’m always bummed when concerns I share are undermined by terrible advice. For example:
Teach those [married couples] who are having problems to go to the father of the ward, their bishop, for counsel. No psychiatrist in the world, no marriage counselor, can give to those who are faithful members of the Church the counsel from one any better than the bishop of the ward. Now, you bishops don’t hesitate to say, marriage is the law of God, and is ordained by him and man and wife are not without each other in the Lord, as the apostle Paul declared.
Um, no. This is why so many in the Church go to the bishop instead of a professional and never receive the counsel and tools they actually need. Thankfully, we’re seeing more and more bishops outsource these problems to professionals with the help of Church funds when necessary. A bishop can be useful, but authority and occasional inspiration doesn’t make you a therapist. We will likely do more harm than good if we encourage struggling couples to seek unlicensed and unprofessional help.
All in all, a mixed bag of a session. But when we look at the topics–work, finances, discipline, marriage–we see that the gospel is about everyday life. Let’s not forget that.
I took the title of this talk from the first talk of this session: Elder Vaughn J. Featherstone’s “The Gospel of Jesus Christ Is the Golden Door.” The first half of the talk is primarily about the welfare program, and there were lots of interesting insights there, but then the second half had to do with work. “Brethren,” he said, “there is no substitute for work… The Lord expects us to be industrious; he expects us to be mentally and physically ambitious with all our hearts and souls.”
I like the Mormon emphasis on work, on progress, on self-sufficiency, and on freedom. To me, it is ennobling. Elder Featherstone quoted from a story by Richard Thurman near the end of his talk:
Whenever something in you says, “It’s impossible,” remember to take a careful look and see if it isn’t really God asking you to grow an inch, or a foot, or a mile, that you may come to a fuller life.
And then he made an interesting transition:
Emma Lazarus has written words which describe the great Statue of Liberty. These words have special meaning to us in the Church, for truly these same words entreating all to come to America may well apply to the Church. I will just quote the last few lines. She said:
“Give me your tired, your poor,
Your huddled masses yearning to breathe free;
The wretched refuse of your teeming shore,
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door.”
The gospel of Jesus Christ is the golden door, in the name of Jesus Christ, Amen.
This ending is vital to anyone who wants to understand Mormonism, including us Mormons. With all our emphasis on eternal progression and self-sufficiency and pragmatism and work you may start to wonder—and some have certainly criticized—where is there room for grace? Where is there room for God’s mercy and power?
The answer is simple: we believe in both. In a nutshell, that’s why I’m Mormon. Because I believe in the tradition of both. We depend—absolutely and without reservation—on the mercy and grace of God. We are, alone and unassisted, doomed. Nephi’s younger brother Jacob explained that, without the intervention of God, “our spirits must become subject to that angel who fell… and our spirits must have become like him, and we become… angels to a devil.” Alone, we all fall eventually succumb to moral empathy. Even after we are rescued from that fate, King Benjamin taught that “if ye should serve [God] with all your whole souls yet ye would be unprofitable servants.” There is no question: we cannot save ourselves.
And yet the question becomes: after we are saved through divine intervention, then what? That’s when the call for mental and spiritual ambition comes into play. It’s not a question of inventing our own rescue plan. It’s a question of what God calls on us to do with the plan that He put in place. The golden door is His. We just have to walk through it.
Economist Bryan Caplan–himself not a utilitarian–argues that a utilitarian case can be made against abortion. His four main arguments are:
“Almost everyone is glad to be alive. The unwanted infant may have a below-average quality of life, but below-average is usually excellent nonetheless.”
“There is a long waiting list – hence excess demand – to adopt healthy infants, so birth mothers need not raise their unwanted children.”
“Due to the endowment effect, unwanted children often become wanted by their birth mother once they’re born – as many would-be adoptive parents discover to their sorrow.”
“Women who just miss the legal cutoff for abortion seem to quickly recover emotionally. Pregnant women who think “A baby will ruin my life” are, on average, factually mistaken.”
Utilitarianism isn’t my favorite approach to ethics, but it can yield some fruitful insights.
Earlier this year, a new study was published in The Review of Financial Studies that “highlights the importance of middle-class and high-FICO borrowers for the mortgage crisis.” In an excellent summary by The Washington Post‘s Robert Samuelson, he summarizes the three main findings:
First, mortgage lending wasn’t aimed mainly at the poor. Earlier research studied lending by Zip codes and found sharp growth in poorer neighborhoods. Borrowers were assumed to reflect the average characteristics of residents in these neighborhoods. But the new study examined the actual borrowers and found this wasn’t true. They were much richer than average residents. In 2002, home buyers in these poor neighborhoods had average incomes of $63,000, double the neighborhoods’ average of $31,000.
Second, borrowers were not saddled with progressively larger mortgage debt burdens. One way of measuring this is the debt-to-income ratio: Someone with a $100,000 mortgage and $50,000 of income has a debt-to-income ratio of 2. In 2002, the mortgage-debt-to-income ratio of the poorest borrowers was 2; in 2006, it was still 2. Ratios for wealthier borrowers also remained stable during the housing boom. The essence of the boom was not that typical debt burdens shot through the roof; it was that more and more people were borrowing.
Third, the bulk of mortgage lending and losses — measured by dollar volume — occurred among middle-class and high-income borrowers. In 2006, the wealthiest 40 percent of borrowers represented 55 percent of new loans and nearly 60 percent of delinquencies (defined as payments at least 90 days overdue) in the next three years.
Remember this the next time you hear someone blaming the financial crisis on the “irresponsible poor.”
I’m currently reading through the Oxford-published volume The Bible and the Pursuit of Happiness and the second chapter “Is There Happiness in the Torah?” discusses how family life is a major aspect of “the good life” in the pre-Israel, patriarchal narratives of Genesis. This reading combined with a browsing of older saved, but never published blog posts brought out these findings on happiness and marriage from a 2015 New York Times article:
Social scientists have long known that married people tend to be happier, but they debate whether that is because marriage causes happiness or simply because happier people are more likely to get married. The new paper, published by the National Bureau of Economic Research, controlled for pre-marriage happiness levels.
It concluded that being married makes people happier and more satisfied with their lives than those who remain single – particularly during the most stressful periods, like midlife crises.
Even as fewer people are marrying, the disadvantages of remaining single have broad implications. It’s important because marriage is increasingly a force behind inequality. Stable marriages are more common among educated, high-income people, and increasingly out of reach for those who are not. That divide appears to affect not just people’s income and family stability, but also their happiness and stress levels.
…Those whose lives are most difficult could benefit most from marriage, according to the economists who wrote the new paper, John Helliwell of the Vancouver School of Economics and Shawn Grover of the Canadian Department of Finance. “Marriage may be most important when there is that stress in life and when things are going wrong,” Mr. Grover said.
For the most part, this is true worldwide (the exceptions are Latin America, South Asia and sub-Saharan Africa). “Though some social scientists have argued that happiness levels are innate,” the article continues,
so people return to their natural level of well-being after joyful or upsetting events, the researchers found that the benefits of marriage persist.
One reason for that might be the role of friendship within marriage. Those who consider their spouse or partner to be their best friend get about twice as much life satisfaction from marriage as others, the study found.
…The benefits of marital friendship are most vivid during middle age, when people tend to experience a dip in life satisfaction, largely because career and family demands apply the most stress then. Those who are married, the new paper found, have much shallower dips – even in regions where marriage does not have an overall positive effect.
Seems like the patriarchal narratives might be on to something.
According to Richard Reeves and Dimitrios Halikias at the Brookings Institution, “the movement of less-skilled workers to higher-growth areas has not risen in recent years, a break with the historical pattern[.]” It seems that regulation is the culprit. “The number of court cases mentioning “land use” (an innovative measure of regulation used in a Hutchins Center working paper by Peter Ganong and Daniel Shoag) has risen steadily:”
“The Hutchins paper,” the authors continue, “complements earlier economic analyses, including a study published last year by Chang-Tai Hsieh and Enrico Moretti which estimates that the U.S. economy is 14 percent smaller as a result of constraints on housing development…By using local government powers to zone out lower-income families, upper middle class Americans protect the value of their homes. (Federal policy helps, of course, by regressively supporting richer home owners through mortgage interest deductions.)” Zoning acts as a kind of “opportunity hoarding,” even when it comes to elementary education:
According to Jonathan Rothwell, there is a strong link between zoning and educational disparities. Homes near good elementary schools are more expensive: about two and half times as much as those near the poorer-performing schools. But in metropolitan areas with more restrictive zoning, this gap is even wider. Loosening zoning regulations would reduce the housing cost gap and therefore narrow the school test-score gap by 4 to 7 percentiles, Rothwell finds.
Some of the most effective things are also some of the most mundane.
Among 17 Republican appointees who responded to Journal inquiries, none said they supported Mr. Trump. Six said they did not support Mr. Trump and 11 declined to say either way. An additional six did not respond to repeated messages. Among the 21 Democrats who responded to the Journal, 14 said they supported Mrs. Clinton, none said they opposed her and seven declined to say either way. One Democratic appointee didn’t respond to messages.
Check out the full article to see what the economists are saying.
a growing body of evidence suggests the economic expansion since the 2007-2009 financial crisis has enriched a much larger swath of the upper middle class, and that a deeper income divide is developing between that top quarter or so of the population and everyone else.
The latest piece of evidence comes from economist Stephen Rose of the Urban Institute, who finds in new research that the upper middle class in the U.S. is larger and richer than it’s ever been. He finds the upper middle class has expanded from about 12% of the population in 1979 to a new record of nearly 30% as of 2014.
Rose defines the upper middle class “as any household earning $100,000 to $350,000 for a family of three…Smaller households can earn somewhat less to be classified as upper middle-class; larger households need to earn somewhat more.” These findings fit comfortably with a number of other studies:
Research from Sean Reardon of Stanford University and Kendra Bischoff of Cornell University, for example, found in research published in March that the number of families living in affluent neighborhoods has more than doubled, to 16% of the population in 2012 from 7% in 1980. They define these neighborhoods as those where the median income is at least 50% higher than the rest of the city.
The Pew Research Center last month found that 203 metropolitan areas have seen their middle class shrink, but in 172 of those cities, the shrinkage was in part due to the growth in wealthier families. (In 160 of the cities, the share of lower-income families grew as well.) So Pew found the middle class shrinking from both ends – not just from families falling below the middle class, but also because of families rising out.
While this news can be inspiring, there are nonetheless
way[s] upper-middle class families perpetuate their status across generations…that can sometimes be harmful to middle- or lower middle-class families…Take high housing costs or the soaring costs of higher education. The spread of $3,000-a-month apartments or a national average $32,000-a-year college tuition bill is not driven by heirs or CEOs renting dozens of apartments or sending dozens of children to college. It’s driven by millions of upper middle class families with enough income to foot those bills[.]
Past multilateral trade liberalization rounds have helped boost productivity, so these recent agreements—albeit not global—could do the same, given their broad geographic coverage, both as a percentage of total world GDP and total world trade. Policymakers, however, need to be mindful of the distributional effects of open trade and take steps to mitigate the impact on those displaced to realize the full potential of lower trade barriers on productivity and economic well-being.
As shown below in Chart 1, even in advanced economies, which have already liberalized tariffs in the past, further reductions in nontariff/regulatory barriers to trade and FDI offer scope for additional productivity gains.
The authors then cite the “wide consensus that liberalization of trade and FDI [foreign direct investment] can lead to improved resource allocation across firms and sectors, boosting productivity and output. For instance, existing evidence suggests that more-productive firms tend to gain market share at the expense of less-productive firms. But two specific effects of liberalization additionally enhance productivity:
Increased competition: Lower trade and FDI barriers on final goods can strengthen competition in the liberalized sector(s). This can help firms exploit economies of scale, improve efficiency, absorb foreign technology, and innovate.
Enhanced variety and quality of available inputs: Trade liberalization can also boost productivity by increasing the quality and variety of intermediate inputs used in final goods production.”
There are substantial gains in productivity to be had with the lowering of tariff barriers:
In summary,
Our findings provide a case for further liberalization to raise productivity and output in advanced economies. That the estimates vastly understate potential gains by overlooking the much larger economic benefits of easing non-tariff barriers makes the case all the stronger.
While compensation programs may be in order for those who suffer job loss or wage reduction due to increased trade (something the authors acknowledge and suggest), this should not distract us from the massive gains that trade liberalization brings. Those seeking to be the “Leader of the Free World” take note.
…Imagine that this whole system is going on at the same time that IKEA spends millions of dollars lobbying senators about chair-related issues, and that these same senators vote down a bill preventing IKEA from paying off other companies to stay out of the chair industry. Also, suppose that a bunch of people are dying each year of exhaustion from having to stand up all the time because chairs are too expensive unless you’ve got really good furniture insurance, which is totally a thing and which everybody is legally required to have.
Economist Bryan Caplan–himself not a utilitarian–argues that a 
