Thoughts on Why Leaders Lie

I just finished reading John Mearsheimer's Why Leaders Lie: The Truth About Lying in International Politics.  It's a short easy read providing a taxonomy of the kinds of lies leaders tell and their possible consequences.  Two things struck me.

First, nothing encourages lying like war.  Since war is a matter of survival, successful prosecution of war is a moral imperative that overrules prohibitions against lying.  Plus, the government takes risks and has consequential screwups in war more often than in any other venture.  There are fewer penalties for lying in war and much more to lie about.

Second, lying has bad consequences for democracies.

• It impairs the ability of voters to act on their interests at the ballot box.  Informed choices are impossible without good information.
• It impairs the ability of government itself to function as agencies learn to distrust each other.  Everyone has to devote extra resources to verification and they won't always get it right, either missing a lie or assuming something true is false.  As with voters informed decisions requires good information.
• Lying undermines the rule of law.  When it becomes commonplace it's hard to hold anyone accountable, the excuse that "so-and-so got away with it so why shouldn't I" looms larger and larger.  Plus, frictional costs weigh down the system.  IL governor George Ryan banned the death penalty not because it was wrong but because lying was so prevalent in prosecutions that it could not be fairly applied.
• Finally, it breeds cynicism in the public and dissolves respect for democracy.  A nation with a cultural of lying is vulnerable to authoritarianism.

Putting those two ideas together you have to wonder, what happens to a democracy that embraces permanent war?

WSJ on Oregon Health Plan

The Wall Street Journal ran an op-ed this week critical of Oregon's Health Evidence Review Commission (HERC).

Some parts of it were misleading and some outright false*, but on a fundamental level the concern it expresses is correct. To the extent we turn over health insurance to government we have to live with what government gives us.

What government gives us isn't arbitrary, it's a product of a public process which because we're a democracy is ours to control. But it's for all of us to control, and what we collectively decide may not coincide with what some of us individually might prefer. That's the case with education, the law, and everything else achieved through a political process. Health care is no exception.

If that sounds scary, chew on the alternative. How effectively could we act on our preferences in the pre-ACA system?

 *Factual issues:

WSJ:  On Thursday a state board could change Oregon's Medicaid program to deny costly care to poor patients who need it most...    

 That's why HERC, for example, proposed in May that Medicaid should not cover "treatment with intent to prolong survival" for cancer patients who likely have fewer than two years left to live.

Reality:  The current guideline, adopted in 2009, restricts coverage of certain treatments for cancer patients expected to live 24 months or less.  The policy WSJ claims was proposed in May was four years old, and was preceded by even tighter restrictions.  Whatever changes HERC adopts, these kinds of coverage restrictions aren't new.

As for "costly care to poor patients who need it most," HERC is considering changing the guideline so that restrictions aren't based on expected life but instead on clinical circumstances (such as multi-system organ failure).  Such restrictions are sought precisely because those treatments are unlikely to help anyone in those circumstances.  The guideline isn't about denying care to patients who need it most, it's about avoiding care that isn't needed.  Ignoring the probability of benefit as the WSJ does is like claiming buying a lottery ticket is the same thing as getting rich.

Housing Supply vs. Prices

I've been looking for a simple chart demonstrating the connection between housing supply and prices, and how different cities have experienced different rates of growth.  Not finding one I made my own.

This calculates annualized growth in housing units based on the change between the 2000 and 2010 census, and compares that to the price change from Jan 2000 to Jan 2010 based on the S&P/Case-Shiller Index.

This shows 18 of the 20 cities in the S&P Index, excluding Cleveland and Detroit which had negative population growth.  Changes in housing supply don't explain all the variation in price, but they explain a lot of it.

How many households in Portland were earning 47% more in 2010 than they were in 2000?  That's what they'd need to have the same home-buying power over that time. 

It begs the question of what's a bigger driver of gentrification:  A housing policy that encourages construction, pushing the city down and to the right along that curve, or a policy that discourages new construction which leaves housing unchanged but ensures that only an ever wealthier class of people can afford it?

With respect to taxes, Oregonians are laying in a bed we made

Does Mr. deLespinasse really mean to suggest Portlanders didn't know what they were voting for in the Arts Tax because it was too complex?  In the form approved by voters, I could tell you what any Portland resident's tax burden would be down to the penny just by asking three yes or no questions.  Try doing that with property, income, or sales taxes.  One can claim the arts tax is regressive, one can claim it is unconstitutional, but it surely is not complicated.

To the broader point of whether we have too many taxes, levies and fees, we're laying in the bed that we made.  Property taxes are the primary means of funding local services.  The limitations enacted by measures 5 and 50 arbitrarily restrict what we can collect in property taxes, ensuring a growing inability to fund service.  Every year we face the same choice of either finding new revenue through levies or fees, or cutting things that we used to take for granted.  Will it be gym class on the chopping block this year or the police mounted unit?  Will it be a fire station or another cut to road maintenance?  When confronted with the intolerable we turn to alternative funding.  If we can't fund services we want with regular property taxes then we fund them with fees, levies, and yes regressive and possibly unconstitutional income taxes. 

Oregonians are inventive, resourceful, and empowered by democracy to act on our interests.  If a service cut is unacceptable we will find a way to pay for it.  Adding more arbitrary restrictions as Mr. deLespinasse calls for would only encourage more bizarre assessment schemes and more hoops to jump through.  It would ensure our system of funding local service got more complicated, not less.

If we want a less complicated system the solution is obvious:  Reform property taxes, and allow them to pay for the things we want them to pay for.  What purpose has been served by doing otherwise?

Is the commission form of government responsible for problems with the Arts Tax?

Do the problems with implementing the city arts tax reflect a problem with Portland's commission form of city government?  I think not.

On taking office Mayor Hales took control of all city bureaus.  In effect Portland has not had a commission form of government in that time, it's had a strong mayor system.

The problems with implementing the arts tax can't be put on the commission form of government, they belong solely to Hales.  By changing deadlines, monkeying with the definition of who was subject to the tax and generally badmouthing it he's given Portlanders every indication they should ignore the tax.  That so many have paid anyway is a testament to how popular the idea of putting art teachers in schools is.

The "kinks" in the arts tax demonstrate the weakness of a strong mayor system, wherein a city's priorities can be totally re-written by the election of a single office.  It encourages short term thinking and a focus on what one person can do in a four year term, rather than thinking about what a city should do in the long term.  And it's impossible to adequately vet candidates.  The arts tax drew more votes than did Charlie Hales, is it likely that people supported him knowing he'd undermine the tax?

Portland's problem isn't with the commission form of government, the problem is that we've abandoned it.

Pearl District and Housing

The Oregonian published a modest story highlighting the economic diversity of the Pearl District, a well known urban renewal project.  I was surprised at how many negative comments the story drew.  Apparently it tweaked some people's noses to learn that poor people can live in the Pearl.

There are a lot of reasons to like or dislike urban renewal, but let's look at the most basic consequence.  Urban renewal added housing.  Between 2000 and 2010 the two census tracts which most match the Pearl added more than 5,000 units of housing.  And it didn't add it willy-nilly, it was concentrated within an area of 0.72 square miles, most of it reclaimed from industrial and commercial use. 

Now consider what would happen without such concentrated development.  5,000 units equals 50 100-unit apartment buildings.  Given the problems the east side has shown accepting multi-unit housing, how would nimby leaders feel about 50 additional big buildings heading their way?  Or you could suppose that demand would have been met with suburban housing.  Assuming the same housing density as Beaverton that would require developing over 1,500 acres of land.

There are only so many ways of dealing with a rising population and a corresponding demand for housing.  Urban renewal has its flaws, but if you don't allow multi-family housing in existing neighborhoods and you don't want sprawl then reclaiming land from other uses (and the subsidies that go with it) is what is left. 

Market structure matters

This story shows how the exchange may succeed, but it also points to a problem.  If insurers are allowed to arbitrarily adjust their rates after filing (and after they've seen competing filed rates) there can be de facto collusion.  Insurers could initially file high and then go only as low as necessary to be competitive.  If they all play that strategy everyone files high and there's no need to go lower.  That's not what we want the exchange to do.

On the other hand it isn't plausible or desirable to say that insurers who want to lower their rates and who can bear the risk should be prevented from doing so.

I think the solution is to make such changes expensive.  If a company fudges filed rates the "error" should be widely publicized so as to create reputational damage.  Who wants to pay higher rates just because?  There should also be a financial hit, perhaps by the state contracting out for third party review at the filing company's expense.  Not only does it create a penalty to discourage such behavior, it's prudent since where there's one "error" there may be more.

And I have to add, I'm shocked... shocked that Providence had fat rates.