Cited

I've published in the state bar journal, taught many continuing legal education classes, and presented conference papers at academic conferences, but I haven't actually published a law review article. This blog did rate a citation in a 2010 article, however, at footnote 42 in a recent article on the bankruptcy gag rule: Renee Newman Knake, "Contemplating Free Speech and Congressional Efforts to Constrain Legal Advice." Thanks for the mention.

Enik Rising

Add Enik Rising to the list of blogs you regularly read on Colorado politics. Denver based author Seth Masket is "a political scientist who specializes in state politics and political parties." The content can be a bit dry and has an inside baseball flavor, but if you're into that kind of thing, that's great. The blog is three years old and I don't know how it managed to evade my active notice so far.

I was impressed, for example, by a post noting that poor and working class people who are strong supporters of Obama were greatly underrepresented in the Presidential election.

He's also published a interesting book with the University of Michigan Press (2009) called: "No Middle Ground: How Informal Party Organizations Control Nominations and Polarize Legislatures."

Colorado, where political parties have a stronger than usual influence on the nomination process in state legislatures, is surely a good case study for his research.

Erowid

One handy reference source that I rediscovered this summer was the website Erowid, which is a non-profit, donor and grant supported reference site that covers all aspects of psychoactive materials. Not all of the information provided is simply a matter of scientific fact, although it does have the available scientific facts, but the statements available are largely compilations of the insights and opinions of others, so that people interested in knowing about psychoactive drugs, be they in law enforcement, experimenting users, or policy makers, can start from the same page in terms of what basic reference sources have said about the issues.

In addition to its more slowly updated reference oriented materials, the site also has mechanisms that allow for new user generated information to be quickly generated with the caveat that it is user generated information. Thus, it performs the public service of helping to identify, for example, potential outbreaks of problems in the unregulated illegal drug markets that could pose a public health risk.

It is a good first stop for anyone wanting to gather up basic information about a variety of psychoactive materials before getting sucked into a search routine that will obscure important voices in any part of the discussion.

Will Evict Squatters, Cheap.

A bank paid "$35,000 in legal fees and bills for locksmiths, security and cleanup" to evict squatters with no prior relationship to the property who showed up one day in a $3.3 million mansion in Seattle. This calls for an open letter:

Dear Mystery Bank:

You are being robbed by your attorneys. I assure you that should you ever encounter this problem in Colorado, that I would be happy to evict squatters from your foreclosed upon mansions, and pay for locksmiths, security and cleanup out of my fee, for a fraction of the $35,000 that you paid. There is a good chance that I could even manage this result without going to court.

For that matter, I'd be happy to evict ordinary former owners of the property with a much stronger claim to the property for less than that price.

Sincerely,

Me

Malkin Is Twitter's Most Influential Conservative

Michelle Malkin, a conservative commentator and blogger based in Colorado, is the most influential conservative on twitter. (She's also been mentioned as a possible running mate for Tom Tancredo on the American Constitution Party ticket to be Colorado's next governor, a mention that she finds flattering.)

The study that reached the result determined that the ultimate research of someone's ultimately influence on twitter is poorly measured by more crude estimates such as the number of direct followers that someone has on the social network, the average number of times that their postings were retweeted, or the user's "page rank." "The Onion," two news feeds, three tweeters in the entertainment industry, and three tech blogs shared the top ten most influential list with Malkin.

The most influential people in social networks have the following characteristics:

1. A user's influence score depends on the number of people she influences as well as their passivity.
2. A user's influence score depends on how dedicated the people she influences are. Dedication is measured by the amount of attention a user pays to a given one as compared to everyone else.
3. A user's passivity score depends on the influence of those who she's exposed to but not influenced by.
4. A user's passivity score depends on how much she rejects other user's influence compared to everyone else.

Put another way, influence is a measure of how strongly a person's tweets spurs people to action that they would not otherwise take, and the extent to which they have more credibility among their followers than other people that their followers follow.

Michelle Malkin, whose characteristic writing style is inflammatory, and who has a devoted base of politically active conservative followers, is a classic example of the kind of style that is influential in social media.

As Science News aptly put the conclusion: "Going viral takes a posse, not an army."

American History, Poetry and the Bond Market

To the Pennsylvanians

Days undefiled by luxury or sloth,
Firm self-denial, manners grave and staid,
Rights equal, laws with cheerfulness obeyed,
Words that require no sanction from an oath,
And simple honesty a common growth--
This high repute, with bounteous Nature's aid,
Won confidence, now ruthlessly betrayed
At will, your power the measure of your troth!--
All who revere the memory of Penn
Grieve for the land on whose wild woods his name
Was fondly grafted with a virtuous aim,
Renounced, abandoned by degenerate Men
For state-dishonour black as ever came
To upper air from Mammon's loathsome den.

- William Wordsworth (in response to his losses on Pennsylvania state bonds when it defaulted on them).

This isn't the first financial crisis that the United States has experienced. In the 1830s, we had a similar one that even inspired the poem above by William Wordworth. This history is spelled out here.

Welcome Harlequin

The latest "follower" of this blog is "Harlequin" who blogs about being a muslim convert, among other topics. (He or she may have been here a while, I don't check the followers list all that often and have not made it visible on the front page lately.)

Islam has jumped into the national consciousness with the various wars of Israel with its neighbors (many of them wars of aggression against Israel), with the 1979 Iranian revolution, and most recently in connection to 9-11, the Iraq War and the Afghan war.

But, Islam has mostly appeared on the American radar screen from a foreign policy perspective. Unlike France, Germany, Britain, and some of other European peers, the United States has experienced only modest waves of immigration by Muslims, and outside the wave of black Muslim conversion to Islam that is most popularly associated with Malcolm X, conversion to Islam by non-immigrant Americans has mostly been a silent phenomena connected with marriages to Muslims by non-Muslims. The isolated cases of individuals converting to Islam in other contexts has mostly made headlines only after convert's fervor has entangled the individuals with militant groups as in the case of Jose Padilla, and several other individuals since then.

For the most part, American Muslims have chosen to take a low profile, a bit like that of American Germans in the 1940s and 1950s, rather than confronting their communities with the fact that they are there and should be acknowledged.

This strategy has been good for personal survival and the American heartland is full of red brick suburban Mosques serving communities interesting in living undisturbed apolitical lives and fitting in. It has costs as a strategy too. The best way to break down stereotypes and secure social acceptance and an acceptance of your humanity is by leveraging the "present company excluded" rule of civility. People who have met someone who is openly gay or openly atheist is less likely to bear an overall prejudice against them, and the same considerations apply to Muslims.

Still, the live quietly strategy has had its virtues. For all the persecution that Muslims can face in America, it beats having to worry about the market place car bombs of Iraq, the urban war zones of Lebanon, the night time genocidal raids of the Sahel, the poverty of Bangladesh, and the only marginally stable regimes of countries like Pakistan, Iran and Turkey where the prospect of military rule or an annulled election hovers around every political discussion.

The prospects that a Muslim family can work, pray, have healthy children, and live in relative peace in a community of like minded people of the same religion is better in the United States than it is much of the world.

And, while I am a secular humanist, I don't deny that religions exist and benefit their adherents. Malcolm X built his movement on the importance of self-reliance, discipline and clean living. He was militant, but honestly, his Islam influenced values probably had more in common with those of a typical modern Republican who is terrified of Islam and wants to go to war with it, than any other prominent African-American political leader in the last century. Personal freedom is great for those who manage to enjoy its indulgences without screwing up. But, restricting one's own personal freedom with religious mandates can greatly enhance the lives of those who otherwise might have carried away by temptations that lead to self-destruction.

At its best, the attitude of harsh punishment in this life for acts that harm others associated with Islamic law is supposed to scare people straight and make them respect the well being of others, not lead to many instances of such punishment being imposed. Historically, Islam burst onto the world scene and expanded rapidly because it embraced the intellectual contributions of a diverse array of subject peoples, not by improving rigidity. Also critical to Islam's early success was its ability to think about problems at a community level rather than an individual level and to mobilize communities to address their problems rather than simply letting them slide for want of anyone who could mobilize collective action. The core Islamic religious requirement that one make charitable contributions was one of the early examples, of many, that proved that mandatory financial contribution to the common good allows for positive development of communities.

This isn't to say that Islam, or any other religion, deserves a free pass. Generally positive ideas can be applied in stupid ways. For example, Islamic courts in Saudi Arabia are currently looking into ways to intentionally paralyze a man by damaging his spinal cord as retribution for the harm he did to another man in a knife fight. The aphorism that "an eye for eye leaves the whole world blind" comes quickly to mind in this situation. While I do not reject, as many human rights advocates do, the notion that corporal punishment can be a preferable alternative to the American approach of extended incarceration in some circumstances, it is desirable only when it can reduce the extent to which lives and potential are wasted; it makes no sense when it leads only to more terribly wasted lives and costs society more rather than less.

At any rate, this blog is a forum where I welcome the contributions of insights of those who can be half way rational and civil (and don't fill it with irrelevant spam), and I hope to offer my perspective to, and receive the insights from, readers like Harlequin. Please make liberal use of my tagging and the search function in the blog to find posts that are of interest to you (although some older archived posts are not tagged and aren't located by the search function either and can only be located with manual review of old post titles in the archive in the left sidebar).

There Ought To Be An Ability To Spend Index

Ability to spend is a product of liquid assets on hand, plus available line of credit balances, plus availability of purchase related purchase money credit. This should be an important economic indicator. One can't buy goods and services if you don't have an ability to spend an amount equal to the purchase price.

But, I haven't seen an indicator like this used. Indeed, some of the important economic indicators that are used, like household debt and savings rates, actually confound this issue. Household debt is an aggregate measure that doesn't tell you how much unused credit people have available. Savings as a macroeconomic measure confounds paying down debt and putting money in a savings account as if they were the same thing.

I presume that this isn't used much because it is hard to measure, but it would capture important impacts on business cycles in the economy, such as the shock that the American economy suffered when many credit card companies reduced unused credit card balance limits, that might be invisible by other measures. It would also distinguish between periods when a large share of net worth is illiquid, and periods when it is available to be spent.

Like the money supply, this probably should have a broad defintion (any ability to spend) and a narrow one (ability to spend less foreseen commitments that draw upon the ability to spend). But, it would still seem to me to be an enterprise worth undertaking that would provide useful economic insight.

Non-Abelian Geometry

The book Eifelheim, by Michael Flynn, is on the whole a pretty lousy book. It is simply to hard a slog for too little reward and has a hard time keeping two plot arcs separated by several hundred years both flowing smoothly (this probably explains why you can get a used hard copy edition of it on Amazon for 34 cents). But, it did have one little snippet early on that was worthwhile, a very intuitive description on non-abelian geometry, in which the distance from point A to point B is not the same as the distance from point B to point A.

In the abstract, this is hard concept to understand. But, examples help. It you think of distance as the time it takes to get from one point to another, then there are lots of examples. Distance is shorter going downstream than upstream. One way streets can make it faster to go to a destination than to return from there. The distance up the mountain is longer than the trip down.

It turns out that non-abelian geometry is a feature of almost all fundamental theories of quantum gravity that can be reconciled with reality, so it turns out to be quite important in practice. But, I've never seen anybody explain the concept in a way that make as much sense as it did when Flynn described it in this book.

There are probably other gems in there as well, but I'm not sure that I have the patience to slug through the book to read them.

Tropes

The only trope I remember learning about in high school English was Christ figure symbolism, something that was apparently present in all serious fiction. In college, we seemed to spend large amounts of time pondering the identity of the author and determining that there was no such thing as truth.

The Internet, however, has proven to be much more fertile ground for analyzing popular culture with all of the behind the scenes sensibilities of a DVD extra clip, and the analysis of movies in contemporary music at Wikipedia are almost as scholarly as academic journal articles.

If someone had broken down all the cliches, literary conventions, and assumptions that go into writing for television, movies, graphic novels and genre fiction back then, and traced it to its classical sources with a healthy dose of sardonic wit, the way that the TV Tropes wiki does, I might have actually learned something there other than how many pages my friend's .22 caliber bullet could make it through David Copperfield from a distance of thirty yards.

For example, who knew that there are thirteen distinct kinds of love triangles? The wiki cites numerous examples of all thirteen types, and that's before even considering such exotic combinations as the Love Dodecahedron, the Imaginary Love Triangle (for all of those complex number fans out there), the Sibling Triangle, the Two Person Love Triangle (a surprisingly common and ancient trope, which has the convenient feature of being easy to resolve without hard feelings), and the various resolutions of these situations such as the Tenchi Solution (marry everybody!), a solution toyed with (but ultimately rejected) in the TV series Pushing Daisies to resolve a Love Triangle in that magical production. So much for the aphorism that all romances have the same plot. Maybe trashy romance novels and mathematical group theory do have something in common after all.

Honestly, one of the the really fascinating things about the Internet is how much life it has given through discussion boards and the like to popular culture criticism and analysis at a level far more sophisticated than you might expect. Despite the fact that millions of Americans are or were English majors, and there are tens of thousands of English professors out there, book sales for literary criticism are pathetic, and professional discussion of works of fiction that are any more involved than newspaper book reviews are hard to find. This is a pity, because there is a lot that can be said about good literature, whether it is a product of high culture, low culture, or something in between (the twilight zone found only on Showtime, HBO and in art house theaters). But, when the economic barriers to distributing that kind of analysis breaks down, the floodgates open, and there are apparently lots of people who understand this stuff with a mix of sincerity and intense meta-analysis I never knew existed.

Denver Goes Back To School

Across Denver, kids are going back to school today.

Last night, last minute stragglers filled stores making last minute school supply runs, raiding the mostly empty back to school sale bins. (Hey, I only had about two items left on my list, we weren't that bad.)

Today, young people with clothes are a little too new laden with backpacks the size of dorm room refrigerators loitered outside middle schools across the city doing their level best to look like delinquents.

My son rushed outside to see what the world looks like before dawn in the morning. It has been months since he's seen it and he forgot what it looked like. Apparently, it looked just like it does during the daytime but darker with more sprinklers running. On the plus side, the newspaper was brought in before it got wet.

The extra load of first day school supplies earned by daughter a drive to her new middle school, and after dropping her off, a rainbow appeared over Denver. I'm not a superstitious man, but I figure that can't be a bad omen.

Then again, on the same drive, I also saw I guy walking down the street wearing a wig that looked like a mop on his head. If he is a fashion bellwether, maybe the future isn't so bright.

I spent two of the most miserable years of my life at Stewart Junior High School (which, blessedly, has been since torn down and replaced by a tidy strip mall, proving that capitalism is more powerful than the forces of nature like the tornadoes we always assumed would some day take it down). So, I figure that whatever happens, middle school will probably not be worse for my daughter than it was for me.

In fire, aim, ready fashion, I'm going back to school today too, for a course on how to hang your own single as a lawyer, after I've already been self-employed for quite a while, both as a partner and as a sole practitioner. Maybe I'll learn something. I didn't read the outline for the course, however. So maybe its a job retraining program teaching lawyers how to retrain themselves to be roofers. We've had a lot of hail in Colorado this year. It could be a growth industry. The program is sponsored by the bar association, and to hear the wags talk, the main purpose of the bar association is to reduce the supply of lawyers, so that would make sense.

Capital Gains Taxes and Business Investment

Econometric analysis does not support the claim that capital gains tax rates have a big influence on business investment. This matters because this is the primary policy justification for this tax break to exist, and because this tax break is the single most important factor in reducing the effective tax rate paid by the wealthy.

One of the problems with the theory that reduced capital gains taxes encourage business investment is that business investment by taxpayers who benefit from reduced capital gains taxes has declined relative to GDP (from 3% of GDP in 1950 to 1% in 2008) despite falling capital gains tax rates, while business and non-profits investment by taxpayers who do not face preferential capital gains tax rates has grown and constitutes the predominant source of business investment: 94% of business investment comes from corporations and non-profits (such as pension funds and university endowments) that do not have preferential capital gain tax rates.

One of the few times when business investment increased when capital gains taxes fell can be more plausibly attributed to changes in depreciation rules that encourage capital investment: "data on the 1960's strongly implies that it was accelerated depreciation for corporate investment that caused capital spending to rise in the 1960's, not lower taxes on individuals."

This makes sense. Most business investment is in property that is expected to depreciate in value and help the firm produce ordinary income, not in property that is expected to appreciate in value over time. Business corporations in the real economy invest primarily in their own operations, not in other corporations or in speculative real estate and commodity investments. Similarly, commercial banks are in the money lending business, not the stock speculation business.

Also, keep in mind that investments in capital stock translate into funds for business investment only when there is an initial public offering of stock. Publicly held companies raise about four times as much money for business investment from bonds, whose returns are primarily taxed as ordinary interest income, as from public offerings of stock. Jenning, Marsh and Coffee, "Securities Regulation" (1992) at 11.

One can make capital gains and losses in bonds, but capital gains tax rates don't do much to encourage investment in them. This is because it is much more common for a bond to trade at significantly less than the price it was issued at, due to an increased likelihood of default, producing a capital loss, than it is for a bond to trade at more than its price at issuance.

A bond whose likelihood of default has not changed can sell for more than its face value when market interest rates fall below the nominal interest rate on the bond. But, generally, the capital gain on a bond due to falling interest rates will never be more than a fraction of a single year's interest rate, on a percentage basis, because the total payments due on a bond will never be more than its remaining principal value plus the nominal interest payments due under the bond. Generally, the portion of the return on a bond that comes from interest payments taxed as ordinary income will be much greater than the portion of the return on a bond that is taxed as a capital gain.

More intuitively, capital gains tax rates aren't very important in the bond market because bonds don't share in upside gains by the corporations that issue them. They are income investments, not growth investments.

Let repeat the key fact, because it is important:

Publicly held corporations are taxed as the same rate on ordinary income and capital gains, and the return bondholders who provide 80% of the capital that those publicly held corporations secure from the public for the purpose of making business investment is not materially affected by capital gain tax rates.

In fact, the estimate that 80% of funds used by publicly held companies for business investment comes from bond sales that indifferent to capital gains tax rates, rather than the stock market which is sensitive to capital gains tax rates, is an underestimate. It excludes loans that corporations secure from banks and other private debt offerings. But, publicly held companies that make up the bulk of our economy can't make private equity offerings.

The 80% estimate is also low because a significant source of investment capital for publicly held companies comes from reinvested profits. The qualified dividend tax rate preference has reduced, rather than increased the availability of funds for business investment from this source, because it favors the distribution rather than the retention of profits relative to the prior tax regime. Capital gains tax rate preferences, in contrast, don't influence the incentives of publicly held companies to retain earning rather than distributing them.

In the United States, external financing from sources such as stock offerings, bond issuance, and private loans account for less than than three-quarters of total financing (i.e. investment capital). Thus, initial stock offerings indirectly account for less than 5% of business investment by publicly held corporations.

In reality, then, capital gain tax rates influence, even indirectly, considerably less than 5% of all business investment by publicly corporations, and individuals who benefit from capital gains tax rates make only about 6% of direct business investment. The other 89% plus of business investment is indifferent to capital gains tax rates.

The tax breaks for capital gains, instead, primarily reward speculative gains by investors in the secondary market.

The impact that capital gains taxes have on business investment is even lower in recessions when initial public offerings are scarce, and no amount of tax rate adjustment can change the fact that falling stock prices don't produce any capital gains. Indeed, since capital losses must be set off only against capital gains (with some limited exceptions), a capital loss provides less of a tax benefit, and hence less of an economic stimulant during recessions than a net operating loss (which is ordinary income) that provides a greater tax benefit at those times because it offsets income taxed at higher ordinary income tax rates for non-corporate businesses.

Capital gains tax rates may provide some stimulative effect on investment, but this impact is greatly exaggerated. Other aspects of the tax code like depreciation rules, tax credits, ordinary income tax rates, and corporate income tax rates are much more important factors in influence amount of capital that will be made available for business investment.

About Student Loans

There has been an immense increase in student loans for students at for profit colleges which are almost more expensive than comparable program at public college, and are frequently serving the students who are less likely to succeed in the first place. Student loans for students at for profit colleges have gone from $4 billion to $26 billion in a decade, and particularly at for profit colleges, the default rates on these student loans is exceedingly high:

[O]ne in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions. . . .

For loans made to community-college students, the 15-year default rate is 31 percent. . . . While for-profits educate less than 10 percent of students, those colleges' students received close to a quarter of Pell Grant and federal-student-loan dollars in 2008, according to the College Board. And they accounted for 44 percent of defaults among borrowers who entered repayment in 2007 . . . .

Only 10 percent of community-college students took out federal Stafford loans—the most common type of federal education loan—in the 2007-8 academic year, and most borrowed less than $10,000, according to the College Board. At for-profit colleges, 88 percent of students took out Stafford loans, and nearly 20 percent of associate-degree recipients graduated with more than $30,000 in debt. Those borrowing rates reflect the higher cost of attending a for-profit college. In the 2009-10 academic year, the average for-profit institution charged $14,174 in tuition and fees, according to the College Board, and the average community college only $2,544. . . .

Two years into repayment, 11.9 percent of borrowers who attended for-profit colleges have defaulted on their federal loans, compared with 6.2 percent of those who attended public colleges and 4.1 percent who attended private colleges. . . . Three years out, for-profit colleges' default rate has nearly doubled, to 21.2 percent of borrowers, and the gap between the sectors has widened. . . . For-profits accounted for 16 percent of all the loans (other than consolidated loans) issued from 1995 to 2007, but 34 percent of the defaults. Thirty percent of loans made to students attending four-year for-profit colleges have defaulted within 15 years of entering repayment, more than twice the default rates at public and private nonprofit four-year colleges, which are 15.1 percent and 13.6 percent, respectively.

The differences are smaller at the two-year level, where 40 percent of loans made to students attending for-profits have gone into default within 15 years of entering repayment, compared with 31.3 percent of loans made to community-college students and 29.3 percent of those made to students who attended two-year nonprofit private college.

But, when student loans aren't paid, the provider of the education that the loans paid for typically deserves some of the blame. Students who successfully complete their educations and get good jobs can pay their student loans. It may make time, but the value that they received from their education makes it possible for them to pay them.

All too often though, student loan defaults involve students who have gotten a raw deal. They paid a lot for an education, but didn't end up getting the credential that gives that education value, or didn't successful start the career that they were led to believe that their education would permit them to secure. Because they incurred the student loan finances cost associated with getting an education, but didn't benefit significantly from getting it, they are strapped.

There is logic in not allowing student loans to be discharged in bankruptcy. Education can provided a lifelong benefit to a student, and unlike a car or a house, the future earning potential that it imparted can't be repossessed. The future earnings potential imparted by education also isn't lost simply because the graduate is briefly unemployed, and the theory is that student loans ought to recapture this value added. It may take ten or twenty years for a student to gradually repay this loan out of the future earning potential, but for students who actually can earn more, it is possible.

While the logic of student loans makes sense for students who actually graduate from traditional programs at public or not for profit educational institutions, it does not necessarily make sense for students who do not graduate, or who attend non-traditional programs at for profit institutions.

But, the problem with the status quo is that it doesn't take into account the situations where no significant future earning potential was imparted by education, or where the benefit is much smaller than the cost. If a college charges $40,000 for a babysitting certification program, and graduates make only $1 an hour more than child care professionals without certification, the future income imparted by the certification process will never be enough to pay for the tuition.

There is a class dimension here as well. Working class students are much more likely to attend for profit colleges, or to start college but drop out without getting any meaningful future income benefit than middle class or upper middle class students.

This isn't simply a matter of blameless higher education providers offering a service to students impartially making decisions about education as rational actors. For profit institutions of higher education have marketing programs specifically intended to skew a student's rational decision making process with false or misleading information and sales tactics.

Perhaps we should require educational institutions whose educational product's failure drives defaults on student loans bear some of the financial burden of those default.

Why not? This is what we expect originators of mortgage loans that can't be repaid to do if default rates are unreasonably high, and educational institutions are the de facto originators of student loans. The incentives involved is producing students who will not default on their student loans seem closely aligned with the incentives that educational institutions should have in any case.

A requirement to make bear some financial responsibility for student loans that go bad would also change the marketing incentives of for profit institutions of higher education. For profit higher educational institutions are always going to want to increase their market share. But, if they had financial responsibility for excess student loan defaults, the incentive would be to increase their market share of students who will leave the institution able to pay their student loans, rather than an incentive to simply maximize tuition revenues.

There is no need for an educational institution responsibility requirement to be limited to for profit educational institutions either. In fact, most public and non-profit operated educational institutions have low default rates and wouldn't have to make good on their responsibility. But, an unusually high level of student loan defaults are a sensible warning sign for any institution that it is not appropriately serving its students.

We are less worried about abusive sales tactics by public and nonprofit institutions of higher education, however, because they have different incentives. At public institutions, more students stretch limited higher education dollars thinner and satisfied graduates are necessary to secure political support in the long run; rather than worrying about making profits from students, they often operate on a "use it or lose it" instinct, so we aren't concerned about an underinvestment in providing educational services relative to other institutional costs. At private institutions, tuition is almost never sufficient to cover the full cost of educating students. Endowment funds and charitable gifts are necessary to make ends meet. So, unnecessarily increasing enrollment is financial drain that only makes sense if those students graduate and are successful and go onto give money to the institutions themselves.

This doesn't mean that students themselves don't share in the responsibility for deciding to spend too much on educations that won't benefit them very much, or for failing to complete their educations and thus failing to get the benefit from those educations. But, a student loan system that places the responsibility entirely on the shoulders of the students themselves fails to recognize that there are third parties who have a great impact on whether or not students make good choices about their educations, and who have the ability to change how education is provided in a way that would reduce default rates that have no responsibility and hence weak financial incentives to improve under the current system.

The student loan program relies on admissions offices in public and non-profit colleges to serve as de facto loan underwriters. At for profit institutions of higher education, however, this isn't happening.

Just as home ownership isn't in the best interests of everyone at every point in their lives, education, while generally a good thing and an important step on the road to achieving the American dream, isn't an unmitigated positive choice for everyone at all time at any price.

For profit education certainly makes sense if graduates, on average, are coming away with economic benefits proportionate to the cost of the education. And, the fact that a particular student fails is not an indictment of the institution if students are in general succeeding and this particular student's failure is an exception rather than the rule. But, education that costs more than comparable public or not for profit educational programs should be providing better results and should be held to higher standards, not more lenient ones. The fundamental principal of capitalism that gives it social utility as an economic system is that only firms that can add value should be permitted to survive.

One of the big arguments that has been made in favor of for profit educational institutions is that they serve students who often wouldn't have gotten an education without their marketing push. Affirmative action for all students who might not be getting a higher education without special attention is part of their business plan.

But, if those for profit educational institutions are producing students who are more likely to fail economically after the graduate and cost more than comparable public college programs, then the money that the public pays to make good on its guarantees of student loans that default from these institutions would be better spend on marketing for public colleges.

Community colleges with lower tuition lead to smaller student loans and a large share of students don't have to take out students loans at all to finance their educations, so they don't need to add as much to a student's future earning potential to make economic sense.

Also, keep in mind that at least in Colorado, community colleges are inexpensive because they have low costs per student, not because they have big subsidies. Tuition is a larger share of their revenues than any other public higher educational institution in the state. Community colleges in Colorado receive virtually no institutional support from the state general fund. They receive a little casino tax money. They receive some money in the form of higher education vouchers that are available to in state students in the same amount no matter where they go to college. But, no part of the higher education system, public or private, provides education at a lower cost, and none of the money received is diverted provide a profit to private investors.

Also, community college have no incentive to, and don't, lead students on. A very large share of all students who don't complete community college do so after a single semester of academic demands that they can't handle. Those students may be left with student loans, but a student loan from a single semester at a community college isn't huge, and the interest rate and repayment terms for a publicly subsidized student loan are generous, so even then, students may have a reasonable ability to repay it. Community college is financially a low risk proposition for the student and the governments that are providing the opportunity alike.

In contrast, a for profit college has a strong incentive to encourage students who clearly aren't likely to succeed in the educational program or the career that follows to keep trying in order to college more tuition under the current system.

If any institution is going to have a high failure rate, it should be public community colleges where the stakes are lowest, and the likelihood of default lower than it is at for profit colleges.

I'm not opposed to for profit higher educational institutions. I was a professor in one myself. But, they need to operate with the right kind of business model.

It is entirely appropriate for them to cherry pick by providing education only to students who can either pay full price without government assistance, and students who are likely to benefit enough to repay the student loans they incur at rates at least as high as those of public and non-profit institutions. It is entirely appropriate for them to offer only programs that have concrete economic value for students rather than the full array of academic offerings that ordinary public and non-profit institutions provide.

For profit higher educational institutions aren't in the business of providing universal education or advancing human knowledge for the sake of advancing human knowledge. But, they should have a win-win relationship with their students and do business without expecting government subsidies.

The niche in the higher education market where for profit higher education really makes sense is probably a "high end" of the market niche, not a "low end" of the market niche. For profit law schools and medical schools and M.B.A. programs probably make much more sense from a business model perspective, in the absence of significant public subsidies, than the niche that they are trying to fill now. Perhaps I am deluding myself, but I think that providing master's degree educations to financial planners at the "high end" of their profession serving wealthy clients who are often in places where there are no public or non-profit programs available, as I did, is also an appropriate niche for a for profit business model in higher education.

But, there is no good reason that the government should be in the corporate welfare business. It does make economic sense to subsidize higher education, but it doesn't make sense to subsidize shareholder in private corporations devoted to making a profit.

The simplest way to end abuses in the for profit higher educational sector is to avoid the incentives they have to profit by creating externalities and government subsidies. And the simplest way to achieve that end without micromanaging their practices in an area were innovative approaches may be key to success, is to make for profit higher educational institutions financially responsible when students at their institutions default at excessive rates. In effect, for profit higher educational institutions should be providing a partial guarantee of the student loan portfolios that they generate.

These incentives will probably force many working class and minority students out of for profit institutions of higher education. To the extent that this pushes them instead into public college programs with lower default rates and lower costs, this is good. To the extent that these students drop out of the system all together, funding outreach programs by community colleges may be a far more cost effective way to achieve this end that guarantees of student loans at high cost institutions with very high default rates.

About Household Debt

Household debt is down 6.4% from its peak levels in 2008 to $11,700 billion.

Household Debt Is Lower Risk Than It Seems

Perhaps equally interesting, however, is its composition. Mortgage debt accounts for 74% of it. Another 6% is in the form of home equity loans. Another 6% is in the form of car loans. Student loans account for 4% of the total. Credit cards make up 6%. Other household debt accounts for 3%.

Thus, 86% of household debt is backed by assets that serve as collateral for the loan and has priority over all other debts in that collateral, and another 4% cannot be discharged in bankruptcy. Further, the residential mortgages and car loans that have been recently taken out aren't subject to being crammed down in bankruptcy.

Thus, only about 9% of all household debt owed by a family with a home worth more than the value of the loans on that property, and with a car worth more than the car loan on it, is subject to being discharged in bankruptcy.

Also, close to 90% of household debt is subject to pro-creditor exceptions in the bankruptcy law, rather than the general rules.

Default rates for debts of all kind are high right now. The collapse of the housing bubble in the financial crisis also left a lot of homeowners with little or no equity in their homes, so mortgages post extraordinary risks that they normally would not.

Still, a loan secured by a home or a car is almost never a total loss to a lender.

Debt and Institutions

It is also the case that household debt is overwhelmingly owed by households to large financial institutions like banks, credit unions, government lenders and finance companies. This may seem unexceptional, but it wasn't always the case.

Fifty years ago, it was common for the provision of goods and services to be tied directly to debts. A typical household owed money to a dozen different store keepers and service providers. But, the credit card has replaced a majority of household debt to retail good and service providers.

Non-financial businesses mostly operate on something close to a cash only basis, something that has not been true for most of the economic history of the United States. While households have more household debt than they have for most of U.S. history (except the last few years) by most measures, businesses that were once a massive shadow banking industry are now out of that business, providing them with a much more precise knowledge of their current assets than they had in the past. One of the reasons that businesses generally have been able to leverage more than they once did is that there balance sheets are more accurate because they aren't muddied by the uncertainties associated with large allowances for bad debt.

This also means that the deals that give rise to debts have been largely decoupled from the debts themselves. Credit card companies have much simpler stories to tell in court than merchants trying to collect their accounts did.

Household Debt and Social Class

The other point that this data suggests, and other economic data would confirm, is that household debt is overwhelmingly a middle class phenomena.

Renters who have never gone to college don't have any part of 84% of household debt, and realistically, tend to have less expensive cars if they have cars and lower credit limits on credit cards if they have them.

The mental image that comes to mind when economists report on a rise in household debt levels is often one of poor or working class people who are barely able to scape by, and a visit to a limited jurisdiction court where collection and eviction cases are brought, or a bankruptcy court, would easily leave you with that impression.

But, the economically important part of the household debt business is largely indifferent to the lives of the working class. Particularly in the wake of the demise of the subprime lending industry and the increasingly rigorous underwriting standards of default conscious banks, renters who didn't go to college live in something close to a cash economy.

Indeed, while it is clear that the last decade has been characterized by excessive levels of household debt for middle class homeowners, the working class is probably didn't and still doesn't have access to credit at interest rates that reflect the actual risk that they will not be able to repay their debts. The degree to which payday lenders and other businesses that offer financing or the equivalent for the poor have flourished at exorbitantly high interest rates prior to regulatory action suggests that there working class Americans have a huge unmet need for credit. And, the fact that the poor manage to largely pay these debts at huge interest rates (for goods and services that often cost more than comparable goods and services purchased by members of the middle class) with surprising low default levels suggest that default levels would be even lower if the interest rates weren't so great and the prices paid for goods and services were more reasonable.

But, because the dollar amounts of the credit needs of the poor and working class are modest compared to the credit needs of those who are better off, because transaction costs are higher relatively to the needed loan amounts, because default rates are somewhat higher, and because the collection process is much the same regardless of the size of the loan but brings bigger returns when loans are large, private lenders haven't been interested in lending to the poor and working class at reasonable interest rates.

Household Debt and Morality

The changing economic climate has also changed the moral dimension of debt collection actions. Increasingly, loans are designed so that collection actions are primarily necessary when the borrower suffers misfortune that is not entirely or even mostly the borrower's fault.

Cases where a lender isn't made whole by foreclosing on a house or repossessing a home, and as a result are suing the borrower, are cases where the lender and borrower have mutually made a mistake regarding what the assets financed were worth and have generally suffered an unexpected bout of deflation in that class of assets. When housing prices are stable, homeowners can usually sell their homes before losing them to foreclosure and make the lender whole. When car prices are stable, the value of a repossessed car is usually more than the amount owed on a loan. There is no need for lenders to bring collection lawsuits in court against debtors. When collection suits are brought, the economic event that caused asset prices to fall is as much to blame as anything that the borrower has failed to do.

Similarly, when student loans default, there is some sense that the problem may be the low quality education that was received, rather than being exclusively the result of moral fault on the part of the borrower.

Maes Chooses Tambor Williams As Running Mate

GOP nominee for Governor Dan Maes has chosen Tambor Williams to share the ticket as his Lieutenant Governor. As Westword explains, Tambor Williams, a private sector lawyer who is a former state legislator and state cabinet member, is a low profile, smart, conservative woman.

In short, she is more qualified in almost every way to be Governor of Colorado than Dan Maes, although she has not previously had the kind of A-list name recognition that would normally be expected from candidates running for statewide office.

The decision comes on the last day that Maes is allowed to choose a running mate, and carries special weight, because Williams now becomes the obvious heir apparent to the GOP nomination if Maes can be convinced to drop out of the race for the sake of his party. If she shows competence on the statewide campaign trail, a Tambor Williams candidacy could even conceivably cause Tom Tancredo to drop out of the race, given the GOP a ghost of a chance in the general election.

Her ideological commitments are to issues that have big tent support in the Republican party without being hot buttons in the general election, like support for smaller government.

Even if campaign of Dan Maes to be Governor of Colorado crashes and burns, as everyone expects that it will if nothing radical changes in this race, Tambor Williams may be one of the few Republicans who will come out ahead in the bargain, reincarnated as a rising political star who came on board the Maes campaign out of duty, rather than being tainted as so many GOP politicians have been this cycle as part of the wacky far right, simply by association, as his earlier supporters might have been. This makes her a force to be reckoned with when the dust settles in 2012.

The "War on Islam" Movement

A large number of people in the United States, most prominently in Colorado, recently defeated Republican U.S. Senate candidate Jane Norton, and many participants in the debate over a proposal to build a Muslim community center near the World Trade Center site in New York City, see the current war on terrorism as equivalent to, or at least an element of, a larger war on Islam. Neither President Obama nor President George W. Bush before him, confused the two, but lots of people do.

One can see the attraction. Internationally, lots of morally repugnant things are done in the name of Islam. Many different terrorist groups around the world have taken up that mantle. Islam has been used to justify gross denials of women's rights around the world. There are scriptural sources in the Koran that can be marshaled to favor harsh, undemocratic, authoritarian political systems, and regimes like Saudi Arabia and Iran have done just that.

Yet, the United States is constitutionally committed to freedom of religion, and while Islam was not contemplated by the drafters of the First Amendment, there is no doubt that it protects the free exercise rights of Muslims, just as much as it does the right of Christians and Jews to practice their religions. And, the First Amendment has worked very well in the United States to serve as a guide for accommodating Islamic religious practice in a sensible way into American life without leading to ethnic strife. American communities with large Muslim populations have not seen the kinds of religious clashes between Muslim and non-Muslim populations that have been observed in places like Germany and France, for example.

Islam also looks much more monolithic from typical American perspectives than it is in practice. Turkey, for example, is an almost entirely Muslim country, but the urban elites, the Kurdish population, the mostly rural Northern Turkish population's cultural influences from pre-Muslim Central Asia, and spill over Shi'ite populations in areas near Iran, live their faiths in very different ways in practice. The Sufi influenced Islamic practice of most of Pakistan differs greatly from the way that Islam is practiced in Saudi Arabia, and these in turn both differ greatly from the way that Islam is practice by most Iranians.

While both Bangladesh and Pakistan are comprised mostly of South Asian Sunni Muslims, other cultural differences helped push them to a civil war that split the nations in my lifetime.

Even in places like the college I attended, where I had several history courses that paid special attention to Islam's role in history, and took two courses on Islam, few Americans, myself included, have much familiarity with the practice of Islam in places like Indonesia where President Obama's mother worked as an anthropologist, or in Kenya, where his father was born. But, what I have learned makes clear that it is not safe to assume that Islam as practiced there is more than superficially similar to Islam as practiced elsewhere, when it comes to the influence that religion has on daily life and political identity.

Still, avoiding an implicit War on Islam, even when explicitly it is disavowed, isn't easy from a conceptual perspective. American power remains deeply entwined in the soft power that flows from the success of its ideologies and way of life, even if it isn't fashionable to mention this any more. The West may no longer be interested in open colonialism, but it does still want to spread its ideas.

Many of the ideas that the West would like to spread to improve the state of the world seek to dismantle ways of living and ways of viewing the world that are justified through Islam, whether or not that is the only way to live an Islamic life.

In truth, a lot of these enlightenment and modern ideas in the West aren't really comfortable companions with either Christianity or Judaism either. The scriptural support for slavery in the Bible, for example, hasn't gone away, it has simply been reinterpreted for so long that most people aren't aware that it is still there. There is Judeo-Christian scriptural support for religiously motivated genocidal war. There is scriptural support for treating women and children as second class citizens or property. There is scriptural support for radical anti-capitalism. Many of the writings of Martin Luther, one of the crucial figures in the Protestant Reformation, which was in the long run an important liberalizing force in Christianity, come across as the rantings of a bigoted conservative extremist today.

Centuries of doctrine and habit and intellectual workarounds worked out by clergy week after week in pulpits in churches big and small, and by rabbis in Talmudic conversations have largely secured a truce between ancient religious writings and modern religious life, although there are still tensions, such as the cultural clash in much of the Western world over gay rights.

While it is perhaps somewhat unfair to say so, the Judeo-Christian world has found peace between modernity and faith through carefully cultivated hypocrisy, picking and choosing the important lessons to be learned from their faiths.

The point of this is not to make the blanket statement that Islam is intellectually immature. The point is to make clear that it is perilous to conclude that a religious text will always and everywhere imply a particular conclusion about how people should live their lives.

But, the challenges of encouraging other nations to adopt cultural practices that produce respect for justice, compassion and prosperity in the predominantly Christian countries, which are already daunting, are even more daunting when one tries to overcome them without directly attacking the Islamic faith that is used to justify the status quo.

Millions of people in the world see a path to a politically pluralistic, economically modern, humane society that is consistent with Islam. But, much of the vanguard of people with these ideals in the Islamic world have changed their worldview and embraced these ideals only in connection with a more secular religious outlook. When the West backs its ideals abroad, it can help but to usually end up siding with an elite, non-religious, extremely liberal faction (by local standards) in any particular foreign political ecology that we encounter.

The question of how to reconcile modernity with Islam is one that no one in the American political scene is equipped to answer or even contribute very meaningfully to, yet the resolution of this question is central to the future of American foreign policy.

The share of Muslims who will ultimately persevere in maintaining a feudal society like the on the Prophet lived in when he, according to tradition, dictated the Koran, is unlikely to be any larger than the share of Christians who like as the Amish do. But, how this huge share of the world's population will get from where we are now, to an Islam more at peace with modernity is not at all clear. The world rejected the approach of colonialism in the 1960s, but has not yet found a great comprehensive ideology to govern the diffusion of the technologies and positive aspects of Western culture without doing as much harm as good.

This ignorance would seem to argue for a minimalist, non-interventionist foreign policy, but, fear of violence dramatized in the 9-11 attacks and other terrorist incidents, dependence upon oil much of which is controlled by predominantly Muslim countries, as well as the specter of the potential use of nuclear weapons in the name of Jihad, makes a hands off approach largely unworkable politically. We have no choice but to do something.

There is room to support a secular but not anti-religious agenda that shares our ideals, but the path is narrow, however necessary it may be.

Musings On Health Care Administration

Deductibles v. Co-Pays

In a "traditional" health insurance plan, you typically have to pay a certain amount of health care expenses out of pocket at the reduced rate that doctors and other health care providers charge patients with insurance, and then a percentage of that price (typically 20%, but sometimes as much as 40% and sometimes as little as 10%) of the balance, up to a maximum out of pocket cost amount. These out of pocket costs are called "deductibles" because they are tax deductible if you itemize your deductions on your tax returns and more than 7.5% of your adjusted gross income went to out of pocket medical costs.

In an HMO plan, you typically have to pay a co-pay of a fixed amount for specific services. Typically, there is one amount for a primary care physician visit, another for a specialist physician visit, yet another for an urgent care clinic visit, another for an ER visit and another for a day in a hospital up to a certain cap. There are also usually two to five classes of drugs, each with a different co-pay amount for a month's supply (and a reduced co-pay if you purchase the drugs via a mail order pharmacy). The HMO pays the balance of the the provider costs.

Once upon a time, the traditional plan also offered a great deal more freedom to patients to choose their doctors. But, this is largely a thing of the past. These days, there is typically a preferred provider list and a patient pays a substantially larger share of the cost for using one under either type of plan.

Historically, HMO co-pays have been low, on the assumption that people in these plans have fewer funds to pay for out of pocket costs. But, one of the big attraction of a plan organized around co-pays, even if the co-pays are high and offer little insurance company contribution to the cost of care other than catastrophic care, is that they simplify the maze of health care pricing.

If you have a traditional plan, there is no easy way to determine what providers will charge. As a story I heard on NPR last week noted, many providers don't even know what their offices charge for the services that they provide. Physicians, hospitals and pharmacies almost never make their charges for particular services available to the general public, and even when they do, they generally quote the price that they charge uninsured patients who don't pay cash which only a small percentage of their patients actually pay.

In contrast, with HMO style co-pay pricing, you know up front what you will pay for particular services, and those prices are simple enough that someone who is not a health care professional can understand them, that a cheat sheet can fit on a credit card sized piece of plastic, and that a quite complete summary can appear on a few photocopied pages.

Even if the co-pay for a primary care physician visit is $75 and the co-pay for a specialist physician visit under an HMO style plan is $200 (both of which are far more than the co-pays under most HMO plans), you know what to expect and the actual amount that gets paid to the physician's office is not your problem. In contrast, in a traditional type health insurance plan, you never know when an unannounced rate change for a service will affect you and usually don't know what the charge was for the services you received until after you get the bill, and there are routinely problems involved in determining the correct amount.

An HMO plan limits risks to the patient to those disclosed in advance, and leaves the insurance company with the risks that it is in the best position to control, those involving the actual charges from providers.

It seems to me that there is a place in the market for an HMO structured plan with high co-pays, a health care savings account and lower premiums that would provide incentives similar to that of the package of a health care savings account coupled to a traditional style plan with a large deductible before any coverage kicks in, but with less of the billing hassle and easier to understand financial obligations for patients. Equally important from the insurance company's perspective, by being clear, a high co-pay HMO plan would probably have even lower participation from insureds who anticipated having high provider utilization, which would tend to reduce expenses and drive down premiums more than an economically equivalent plan that lured in people who underestimate what providers actually charge for their services in a more traditionally structured plan.

Few things are as frustrating as seeing incompetence by provider billing departments (often outsourced themselves) and insurance company claim processors escalate to the point where the provider asserts a right to hold you, the patient, responsible for charges that are supposed to be covered by your dreadfully expensive health insurance policy.

The utter disaster that is medical billing and pricing uncertainty associated with health care often rivals high premium and high out of pocket costs of a health care plan. As bad as insurer Assurant seems to be in processing big claims, their latest product, which promises to replace point of service billing with a monthly statement clarified with a personal health care advocate, by promising to reduce the bureaucratic hassle associated with health care billing is attractive.

When markets work, they work because they provide economic decision-makers with information. But, if economic decision-makers, like patients using health care, don't have good information that they can understand, then market approaches don't work.

Against the AGI Cap

The 7.5% of AGI cap on deductions of out of pocket health care costs really makes no sense when one can fully deduct out of pocket health care costs without this limit, even beyond what would ordinarily be tax deductible, with low deductible health insurance policies, with flexible spending accounts, and with health savings accounts (to name at least three options). While the notion of making it unnecessary for most patients to save health care receipts and the associated administrative burdens for tax purposes may have once made sense, it would be better if it were possible to get the same tax treatment of the same out of pocket expenses without paying fees to third party intermediaries to get it.

This would be a tax simplification measure that might actually produce net economic benefit by reducing the dead weight loss induced by the current tax code to involve third party bureaucracies in routine out of pocket medical expense payments.

Is There An App For That?

It probably already exists, but if it doesn't, I'm sure that there will soon be smart phone applications to locate health care providers on preferred provider lists, customized for the phone user's particular health care plan.

Non-Preferred Providers

It would be interesting to see what the ranks of "non-preferred" health care providers who don't have contracts to provide reduced rates to insurance companies look like. In what medical specialties are they most common? Do they do medicine differently? Do they produce better medical outcomes? What kind of patients do they serve? How much do their charges differ from preferred providers?

Certainly, there are whole specialties (cosmetic surgery and abortion providers, for example) that are overwhelmingly not on preferred provider lists. My sense is that the proportion of psychiatrists on these lists is also low, while it seems that most "bread and butter" specialties like OB/GYN, pediatrics, and cardiologists, for example, are on preferred provider lists.

The prevailing assumption is that providers not on these lists charge much more, service affluent service-oriented patients, and provide services that are in some qualitative way better. But, it also isn't clear that these assumptions are really supported by the data, and I would be hard pressed to guess what proportion of physicians aren't on major insurance company preferred provider lists.

Medicaid and Medicare Provider Reimbursement

Of course, one of the other great mysteries of modern publicly funded health insurance programs is that providers can opt out of providing services to Medicaid and Medicare insured patients, and that those programs pay below market rates for services (understandable given their large market share) and pay different rates for the same services (Medicaid reimbursement rates are the lower than Medicare or private insurance or uninsured patient rates).

It doesn't make sense that two federal government sponsored health care programs should have different reimbursement rates for the same services.

The studies I have seen suggest that Medicaid reimbursement rates are below cost, that Medicare reimbursement rates are at cost, and that private health insurance patients pay a premium to make up for Medicaid reimbursement rate related losses, charity care and bad debt from uninsured patients.

It isn't that I don't see some of the reasons. If Medicare patients didn't have Medicare they would usually be paying their physicians similar amounts, and they have essentially 100% of the market share for patients over age sixty-five so a large deviation between costs and charges would be unsustainable in many kinds of practices. In contrast, Medicaid patients make up a minority of people needing most kinds of care, so physicians can stay in business without them, so they can afford to not serve these patients rather than being forced to lobby for higher costs.

The cost of increasing Medicaid reimbursement rates is immense. It is one of a handful of programs that has grown much faster than inflation, overwhelmed state budgets, and has become a larger and larger share of the federal budget. And, the visible beneficiaries of increased reimbursement rates are physicians, not the poor, who benefit invisible and indirectly from having more health care options. Still, one can't expect to get something for nothing.

From state and federal politician's perspectives, it is easier politically to cut reimbursement rates for providers than it is to cut the services that Medicaid provides. But, as fewer and fewer providers are accepting Medicaid patients it is becoming clear that this isn't a sustainable approach.

And, the American Association of Retired Persons (a major Medicare lobby) is much more effective in Congress and state houses than the American Association of Poor People (there is no such thing). Unions, the biggest lobbying force for people of relatively ordinary means, are still largely devoted to helping people who have decent steady jobs at least most of the time.

One of the biggest political arguments for universal or categorical approaches to the welfare state, as opposed to means tested ones is that they provide a large political base of beneficiaries and service providers for those programs that incidentally ends up providing better funded and better quality services for the poor who often can't lobby for themselves.

Physician Self-Employment

Some of the highest quality care in the country comes from physicians who are on salary, rather than being employee-owners in their practices. Mayo Clinic, for example, operates this way. These physicians actually get paid considerably less than the highest income earning physicians who are routinely self-employed.

Self-employment for physicians, and for lawyers for that matter, has been justified historically as a matter of preserving autonomy in professional judgment. In practice, health insurance programs, professional minimum standards, and drug company incentives, to name just a few, routinely limit professional judgment for physicians, but self-employment remains the norm.

This has been very good financially for physicians as a class. They have received entrepreneurial profits, in addition to ordinary labor market compensation, as a result. But, it hasn't necessarily been good for the economics of health care or the quality of care.

People don't go to medical school because they have a talent for running a small business, and medical school prepares doctors to be small business people far less than law school prepares lawyers to be small business people, even though lawyers are considerably less likely to run small businesses than doctors.

This means that most doctors spend lots of time on administrative matters that they don't have much comparative advantage in providing and frankly aren't very good at on average, leaving them less time to do what they were trained to do.

The abysmal state of medical billing, the routine long waits in doctor's offices even for pre-scheduled appointments, significant levels of dubious tax positions taken by physicians, and the failure to most physician's offices to follow basic "by the book" accepted "checklist medicine" practices that have a big impact on medical outcomes despite high levels of personal expertise, are all symptoms of the problems caused by having physicians rather than expert business administrators usually run medical offices.

Removing barriers to non-physician management of medical offices might be one way to improve the quality of health care and physician satisfaction, while reducing provider costs (of which physician compensation is the largest component). Movements to improve administration quality, such of the rise of urgent care clinics and ambulatory surgery centers, are examples of these trends.

Preventative v. Diagnostic Care

Normally, both preventative health care services, like vaccinations, and diagnostic care, like sick kid visits, are both provided by primary care physicians. But, preventative care, because it is predictable and narrow, can be provided by people who are far less expensive than diagnostic care, where the ability to spot uncommon conditions is critical. Would it be possible to further decouple the two and reduce costs?

Hickenlooper's Half Measure

On April 4, 2009, Denver Police Officer Devin Sparks attacked a man talking on a phone (to a law enforcement officer, no less), and then lied about what it did and why he did it in a police report. His partner, Corporal Randy Murr, also lied in his police report to cover up his partner's wrongdoing. Videotape makes the police officers' lies impossible to overlook.

Manager of Public Safety Ron Perea responded to the police brutality and falsified police reports prepared by Devin Sparks and Randy Murr with a slap on the wrist: three day suspended without pay. Independent Monitor Richard Rosenthal cried foul and called for the police officers to be fired.

Mayor Hickenlooper didn't have the guts to acknowledge that the police officers in question engaged in police brutality and lied in their police reports, despite the clear videotaped evidence to the contrary, and that his Manager of Public Safety inappropriately tolerated this gross misconduct.

But, the power of the press has been enough for him to try to triangulate by calling in the FBI to investigate the incident, so that he has some hope of appeasing the public who can see the truth with an investigation from an agency that may be more honest in the face of undeniable facts than Ron Perea, without incurring the symbolic cost of disagreeing with the police even when it is clear that they are lying and covering up for each other.

The truth is simple. Cops who engage in unjustified police brutality or lie in police reports need to lose their jobs and their careers. Ron Perea doesn't deserve to be the Manager of Public Safety in Denver. He was tested, and has shown that he doesn't have the moral character needed to lead Denver's police force. He needs to step down.

Somebody needs to make clear that corruption will not be tolerated in Denver's police force, that police officers who lie can't do their job of being trusted to testify truthfully in court, and that tolerating brutality and corruption hurts public safety by undermining public trust in the police. Somebody needs to recognize that the buck stops with him, and that somebody is ultimately Mayor Hickenlooper.

Perhaps that somebody will instead be an FBI officer. The Denver police force has once again shown that it is incapable of disciplining its own appropriately, despite millions of dollars it has been forced to pay in legal settlements of civil rights suits as a result.

Mayor Hickenlooper has taken a half-measure to acknowledge that this time Denver police officers were caught red handed. But, if he really wants to show the moral leadership that we need in the man who seems sure to be our next Governor, he needs to take his responsibility to lead seriously. Showing backbone in a case like this one will show the public and those who work for him in the city and in time in the state government, that the law has to be taken seriously by the people charged with carrying it out.

More Heavy Particle Decay Asymmetry

The decay asymmetries of top quarks, and of charm quarks and W particles are significantly out of line with the amount predicted by theory.

This, together with B meson asymmetries that a presumed to be associated with strange quark decay, previously blogged here at the pre-print stage, suggests that the differences between the behavior of heavy fundamental particles and their anti-matter equivalents may be more pervasive than experimental evidence has previously suggested.

The general observation appears to be that heavier fundamental particles in the Standard Model appear to generically show stronger asymmetries between matter and anti-matter than lighter fundamental particles in the Standard Model.

Since matter-antimatter asymmetries are equivalent to CP asymmetries, which are in turn equivalent to time asymmetries, the implication may be that mass has an impact not just on the rate at which time progresses, as general relativity makes clear, but also on the strength of the forward arrow of time, a phenomena not predicted by general relativity.

Spinal tap can diagnose Alzheimer's disease

A test of spinal fluid can help diagnosis whether someone is suffering from Alzheimer's disease (which causes dementia), or other conditions with similar symptoms.

[The researchers using the test] accurately detected Alzheimer's in 90 percent of patients with the disease. They were also able to detect 100 percent of people with memory impairments who would progress to Alzheimer's disease within five years. And they detected Alzheimer's proteins in 36 percent of people with normal brain function.

[They] analyzed spinal fluid from 114 adults with normal brain function, 200 who had mild cognitive impairment -- a precursor to dementia -- and 102 who had Alzheimer's. They identified one protein signature that was associated with Alzheimer's, and another that indicated healthy brain function.

When they looked to see how accurate these signatures were at spotting the disease, they found 90 percent of those with Alzheimer's had the disease pattern in their spinal fluid. The pattern was present in 72 percent of those with mild cognitive impairment and 36 percent of those who were normal.

The indicators in the healthy subjects may end up being more than coincidental. There have been indications in other research that neurological diseases including Alzheimer's disease can take decades to manifest. I wouldn't be at all surprised if most of the non-symptomatic control group members with the spinal fluid indications of Alzheimer's disease go on to develop that condition.