Putting aside Judicial nominations and steroids
 

Address the many ways in which markets fail.

Putting aside Judicial nominations and steroids
 

Are you against any government involvment at all in health care?

P.S. I am meeting Pete McCloskey at 5:00 at the Ferry Building (to discuss the demise of Tom Delay). You want to hit the town after my meeting? Maybe go to the Green Rock where Sharon Stone is the bartender?

Putting aside Judicial nominations and steroids
 

Those Bay Bridge cost overruns are being generated by the private sector.

Where's Hank?
 

It's especially absurd that our President, who was in the oil business, should be suggesting that there's something to creation science. It's like he's unfamiliar with the science underlying geology.

Come to think of it, he never made much money in the oil business, did he?

Where's Hank?
 

Yikes. This is scary:

Over a third of the 1 000 or so Americans quizzed on the issue – in phone interviews by the Gallup Organisation between 7-10 November – seem to believe so. Darwin himself might be surprised to find that today, 145 years after he published his book, only 35% of Americans believe his “scientific theories are well supported by evidence”. Meanwhile, the same number are willing to agree that his theories are “not well supported by evidence”, and 29% “don’t know enough to say”.

Most Americans are not scientists and have probably had little exposure to biology or evolutionary theory since school or college, the polling organisation reports. But it then muses over why the “don’t know enough to say” percentage was not higher? The answer to this begins to appear in the responses to the next question on the origin and development of human beings.

Genesis versus Darwin
The poll shows that 45% of the US population believes human beings did not evolve, but were instead created by God in their current form about 10 000 years ago, as stated in the Bible. Just over half agreed with the alternatives which are more compatible with Darwin’s thesis; that humans developed over millions of years either with or without God’s guidance in the process

http://europa.eu.int/comm/research/h...12_21_en.html.

Where's Hank?
 

Lord help us all.

Where's Hank?
 

I like that you posted the article w/o being humbled by this part.....

• Most Americans are not scientists and have probably had little exposure to biology or evolutionary theory since school or college, the polling organisation reports. But it then muses over why the “don’t know enough to say” percentage was not higher?

the lack of shame and the abilty to post nonsense is a sign that the old SS I loved still exists. maybe Adder will weight in later!

Republicans vs. the free market
 

Rich Lowry has a good piece on NRO about how Bush's energy bill is a lobbyist's dream but ignores how markets work. For example, re drilling in the Alaska wilderness:

• Then, there’s the Alaska National Wildlife Refuge (ANWR). Allowing drilling there is the most controversial part of Bush’s energy plan. Overheated environmentalists claim it will despoil pristine wilderness. Actually, ANWR is a vast, desolate bog. But put that aside. ChevronTexaco, ExxonMobil, BP and ConocoPhillips all have backed off their support for drilling.
  
  Let it never be said the administration is slavishly beholden to Big Oil. The proceedings of Vice President Dick Cheney’s notorious energy task force might have gone something like this. Cheney: “We want to drill in ANWR.” Cigar-chomping oil executive: “Mr. Vice President, there might not be as much oil there as first thought, and when you consider the costs of drilling through permafrost and the long distances involved, it probably makes no economic sense.” Cheney: “Well, tough.”
  
  The main backers of drilling are the state of Alaska, which will get oil royalties; unions, which will get jobs; and conservatives for whom sticking it to hyperventilating enviros is a matter of principle. But oil companies aren’t in the mix. “If the government gave them the leases for free they wouldn’t take them,” an administration official recently told the New York Times.

A desolate bog can be pristine wilderness, but otherwise he's right on.

Where's Hank?
 

I was going to look for the Cite, but it is just too depressing. Everytime I read those insane polls I just want to cut my wrists.

Putting aside Judicial nominations and steroids
 

The railroads. And even the Erie canal. But what government employee built the interstates? They were built by private contractors with federal money.

And what you're getting at, more generally, is identifying a market failure that gov't action could cure. No one has an incentive to create a comprehensive network of roads, so they didn't. But plenty of private toll roads have been (and continue to be) built, without government intervention. So all you're really saying is that the government did its job in solving a market failure. Not that government does a better job than the market where there is no market failure.

So, in designing health care, you have to identify a market failure that calls for a government-operated solution. The only market failure is not that, but a moral belief that everyone is entitled to "free" healthcare. That's fine, and worth voting on, but it doesn't mean that government needs to be involved in the solution any more than to move money from a rich pocket to apoor one.

Putting aside Judicial nominations and steroids
 

Identify a private enterprise given as much free reign over so much money as social security.

I'll bet that NASDAQ operates with lower admin costs.

Vanguard operates some funds with admin. costs approaching the levels that the federally run TSP does, which has a much larger base (most of the federal pension system).

Putting aside Judicial nominations and steroids
 

Health care has lots of market failure going on. It's amazingly difficult to get the incentives aligned properly. RT can explain.

Which is not to say that there aren't other issues about the healthcare to which people are entitled.

Putting aside Judicial nominations and steroids
 

Sure, but one has to identify the precise market failure and how government can solve it before justifying a true gov't health care system (as opposed to single payor, subsidies, etc.)

BTW, clean out the salacious crap from you PM box so I can send you something substantive.

Putting aside Judicial nominations and steroids
 

There are so many. Where to start? This is part of why I defer to RT. Plus, she's smarter and better informed than I am.

I cleaned out the salacious crap, and now I'm down to three PMs, two-thirds of which were from Hank. Wow!

Putting aside Judicial nominations and steroids
 

Many smart people have debated these issues. Doesn't mean Canada and England have it right.

Putting aside Judicial nominations and steroids
 

I don't think any one was saying that Canada and England is going to work here. I will specifically say that I am NOT ADVOCATING a Canada or UK model.

Things that I think are essential for all people:

• Primary care. Check ups. Annual ob-gyn trips for women. Screenings for blood and weight and cancers.
  
• Pediatric care. All vaccines, annual checkups, etc. Kids shouldn’t have to be burdened with bad health because of their parents.
  
• Catastrophic care. Richard Morrison was envisioning something like FEMA, so the regular insurance companies didn’t have to be burdened with the really expensive care that can wipe out a plan's reserves.
  
• Clinics scattered everywhere. Easily accessible, easy to access records. Places where you can go to get antibiotics for a UTI or an ear ache or flu shots. In some states, there are mini-clinics setting up in Target stores, and I think the more healthcare facilities for the small stuff, the less the system will be burdened.
  
• Outcomes research. We need to more efficiently deliver healthcare, and outcomes research can tell us what works well and what doesn't.

I think that every American should be covered by, at the least, one of those crappy college plans that give just basic coverage. More comprehensive coverage could be purchased in group plans or through buying cooperatives. Most Medicare beneficiaries purchase additional supplemental coverage, and I see no reason that the rest of us couldn’t operate under a similar, if not stripped down, system. Supplemental coverage would then address the "I don't want to lose anything" arguments. Those people are already paying for coverage in some manner. If some was subsidized by the basic and catastrophic coverage offered through a single payor, then either their salaries would increase or their premiums should go down.

If you know where else I post, you'll find an expanded version of the above.

Putting aside Judicial nominations and steroids
 

I'm just talking pragmatically, given that extrication of government from health care is about as likely as Sharon Stone blowing me tonight. To paraphrase someone - "I am wary of those who hold strong opinions; I was a history professor first."

I'm having dinner with Mom at 6:15, but should be free around 8:00. (Y'all can resume not changing each others' minds now.)

GOP: Party of Big Spenders
 

From the Cato Institute: http://www.cato.org/pub_display.php?pub_id=3750

GOP: Party of Big Spenders
 

[*sniff*]

Our young man has come so far.

Putting aside Judicial nominations and steroids
 

Managed funds, or indexed funds? Indexed funds, which is what Vanguard is famous for, are always insanely cheap to run.

I'm curious what Vanguard/Fidelity/whatever other large mutual fund industry's asset base is as compared to the TSP. TSP is no doubt the largest single retirement plan, but there are a whole lot aggregated w/Vanguard etc. Of course, I guess many of the very largest non-fed-gov't employers don't offer commercial mutual funds as the main investment options b/c the money is too big, so maybe Vanguard/Fidelity don't have as much even in the aggregate.

Putting aside Judicial nominations and steroids
 

Burton Malkiel, author of A Random Walk Down Wall Street and Professsor at the University of Chicago, as well as many other pundits of managed funds have consistently studied and verified that the average MANAGED mutual fund does NOT outproduce the S&P 500 index. William Sharpe, who won a Nobel prize in economics for his studies on securities, noted that on a net of expense basis, in the aggregate, fund and institutional managers will tend to underperform the market by an amount equal to the fees that they charge for managing the portfolio, plus associated costs. Vanguard's Bogle's study of the Wilshire 5000 Index from 1971 to 1990 tended to show exactly that- professional managers underperformed the index by an average of 1.8% per year- approximately the cost of managing the fund; 1% for management fee, 0.5% in fund transaction costs and 0.3% due to cash positions required by investor inflows and outflows. Another study by Brinson, Hood and Beebower of the quarterly returns of 91 large pension funds between 1974 to 1983 compared the returns from the asset classes they were investing in. 93.6% of the return was explained by the movements in the underlying asset classes they were investing in. They also showed that active managers, in the aggregate, underperformed the benchmarks by 1.10% a year. In other words, the active selection of stock did little to nothing to the overall return- it was where the money was invested that made the difference. Money Magazine (August, 1995), though certainly not an education tool in itself, also had a lengthy commentary regarding how passive investments (index funds) should be considered because of the lack of management expertise in consistently beating or even meeting the S&P 500 Index annual returns. A study by Barksdale and Green of 144 institutional equity portfolios over the rolling 10 year periods between January 1, 1975 and December 31, 1989 showed that portfolios that finished the first five years in the top quintile were actually the least likely to finish in the top half over the next five years. The results were entirely random. That meant that what might have beaten the market for a certain period of time had little consistency in doing so in the near future. Robert Stalla, instructor for Chartered Financial Analysts, stated in his material that "a properly diversified portfolio should be utilized first in many portfolios unless there is a compelling reason to do otherwise". Most recently, Jack Beebe, Director of Research for the Federal Reserve Board of San Francisco and a former stock and bond analyst, stated that "I learned that you cannot easily beat the market" and uses mostly index funds in his portfolio. The point with this limited commentary is that 401(k) funds, since they are limited in number, should at least offer a S&P 500 index fund as well as an Intermediate Bond index fund since these could/should be the major platforms from which an investor then moves. That is not to say that an investor MUST use them, but that they are made available. Without adhering to basic investment teachings, XXXXX Training Corporation is probably at risk in the future if the funds actually selected underperform baseline indexes- particularly when high fees are also noted.


Admittedly, this review is not to suggest that managed funds cannot or do not provide returns exceeding the S&P 500 index. A study by Lipper found that, in the extreme, with the very good and the very bad funds, there does tend to be repetitive performance under similar conditions. Therefore, from the vast universe of funds, it is possible to use a fund(s) that can consistently outproduce the market- at least for some period of time. But another study reviewed the Forbes Honor Roll over periods of 1980- 1984 and 1986- 1990. Only once did those in the honor roll outperform, in the aggregate, the S&P 500 index- and that by a very slight margin in the first five year period. Further, the group never outperformed both the index and the average equity fund during any five year periods. So, since a 401(k) plan offers normally just a few funds from one fund family, the odds of one of those funds consistently outproducing an index, on a risk adjusted basis, is relatively remote. It again reinforces the necessity of the offering of some index funds.


The above is corroborated by the returns of the funds selected. The Basic Value (mostly growth but with some income) has generally underperformed the market. The Capital Growth (mostly growth but with convertible securities and cash) and the Global Allocation Fund (both US and Foreign securities) have both consistently underperformed the index for all periods. That does not mean that an investor may not wish to use them nor that they might outperform an index. But when employees have NO CHOICE but to pick a fund(s) that has consistently underperformed the market, I believe the company is at risk for future liability in not recognizing basic investment teachings and reflecting that in the offerings.


While the B category funds (all the above) are exempt from the back end loads under a retirement plan agreement with Merrill Lynch, they still are subject to a 1.00% 12b-1 fee for eight years on the Global Allocation, Basic Value and Capital Fund, a .75% 12b-1 fee for ten years on the High Income and Investment Grade portfolios and a .50% 12b-1 fee for ten years on the Intermediate Bond portfolio. Even though most of the 12b-1 fees are reduced to "just" .25% at those times, the cumulative 12b-1 fees are comparable to a 6.25% (6.75% at the discretion of Merrill Lynch) total load. Additionally, high 12b-1 fees on bond funds simply reduce return overall since appreciation is not a usual consideration for bond funds today.


All the funds must attempt to outperform an index just to account for these fees- and have essentially been unable to do so. As regards bond funds, it is generally held that bond investment and returns are effectively limited for all portfolios of similar ilk and that the only way one fund can outproduce another is to take more risk- either through lower rated bonds or by use of derivatives. The returns on the Intermediate and Corporate bond portfolio have clearly underperformed the indexes. The High Income portfolio, as compared to Vanguard's High Income portfolio, shows a lower return for almost all periods and with higher risk. While I am certainly not advocating Vanguard as your fund choice, it would be utilized as a gauge in almost all law suits regarding the suitability of fund selection.


In conjunction with the above, it is necessary to relate how the overall fees compare to industry standards. I have included several performance reports for Vanguard since they are the industry gauge for low costs. The difference in fees is most notable on bond funds. Merrill's High Income management fee is 1.29%- Vanguard is .35%. Merrill's Intermediate portfolio fee is 1.04% while Vanguard charges .18%. There are other issues that could substantiate the higher fees- service is one- but they still must be viewed in terms of performance.

I'm just sayin....

Putting aside Judicial nominations and steroids
 

I have no idea whether hank answered your question. and i doubt you want to read to find out. I'm talking index funds. of course, that's what TSP is too--just indexed.

quick search: TSP 153B in assets.
Vanguard 500, 104B in assets. Of course, TSP is accross severalfunds.

Putting aside Judicial nominations and steroids
 

I argued exactly the same thing a couple of months ago. It was not well-received. YMMV.

Putting aside Judicial nominations and steroids
 

TSP is only one fund? Or fed employees have only indexed options?

Usually an indexed fund or two are available, but there are also other funds -- fixed income, some kind of cash equivalent, balanced, small cap, large cap, international . . .

ETA What Hank posted is too long. He needs to summarize. I kinda skimmed b/c I'm sick and I think I know all that stuff and posted my most relevant thought.

Putting aside Judicial nominations and steroids
 

If you don't have anything managed, you can't have an index, though.

Putting aside Judicial nominations and steroids
 

5 options:

Cash/gov't securities
Bond fund
S&P 500 index
Small-cap fund (wishire 4500)
International (EAFE)

They're adding some lifecycle funds soon. But I believe those aren't true funds but rather preset ratios in the existing funds that change the ratios as you/they age.

The pathetic thing about TSP is that something like 48% of assets are in cash.

ETA: oops, not as pathetic as I thought. 39%, with 42% in the 500 fund.

Putting aside Judicial nominations and steroids
 

So almost certainly less than 25% of your whatever billion is actually in an indexed fund. ETA oh fine, go on and edit away my thought. It's probably good that so much is in the index fund, eh?

Cash is probably the default -- it frequently is. Some companies are trying to use other things, but it's problematic. I personally really like the lifestyle-type funds, or when they will rebalance for you.

Putting aside Judicial nominations and steroids
 

Define a better job. Do you mean the private company would be more economically efficient in terms of managing costs by passing them along to veterans or by reducing services? Or do you mean that a private company would be moreeconomically efficient by adding an additional cost layer (the need to generate profit) without reducing services or passing costs along to someone else?

If you mean the latter, how would the private provider accomplish it? If you mean the former, what exactly makes it better?

Putting aside Judicial nominations and steroids
 

No, it's working fine. You have to remember that Club is the one who has the knee-jerk reactionh that anything done by the public sector is automatically bad and anything done by the private sector is automatically good. He manages to hold this opinion and not have his head explode by simply assuming away externalities and equating efficiency with the sole metric of reducing costs.

Putting aside Judicial nominations and steroids
 

Even with the SEC sitting behind them, I would imagine many former stockholders of Enron, Worldcom, AIG, Shell, Adelphia, Tyco, and other recent companies in the news would tend to agree that they still ain't worth much as regulators.

Putting aside Judicial nominations and steroids
 

The thing I don't get with Worldcom or Enron or all them is that it seems the wrong people got blamed for the losses. We should expect CEOs to be greedy, we should expect outside accountants and lawyers to bend to greed and let the CEOs wreck the companies, but those companies all had big in house accounting and legal departments- those people had a duty to the shareholders to watch and protect and prevent- anybody know if the inhouse guys are in prison?

Putting aside Judicial nominations and steroids
 

Circulate this to your clients, will you?

Putting aside Judicial nominations and steroids
 

he circulated it last week.

If you think private companies can do it cheaper, I have a Bay Bridge to sell you.
 

Club never bothered to answer my post observing that private companies generated the cost overruns on the Bay Bridge, which is too bad. Presumably he would say that the problem is that the state is the buyer, and lets the contractor get away with shit. To which I would point out that there was only one contractor with the capacity to make a bid, which probably explains why the market isn't quite working efficiently. No buyer, public or private, would have much leverage. And then there's the rise in the price of steel, which would have affected any project.

Putting aside Judicial nominations and steroids
 

If you expect the CEO to blew off his duty to the shareholders in the name of greed, why would you expect his inside lawyers to stand up to him?

If you think private companies can do it cheaper, I have a Bay Bridge to sell you.
 

You can talk all this pie-in-the-sky Ivory Tower stuff all you want, but at the end of the day, you're stuck with that piece of shit government-sponsered bridge.

Putting aside Judicial nominations and steroids
 

The health care industry is one huge case of market failure. The providers have limited incentive to hold costs down in some areas, because they know the insurers will pay the freight. Consumers are always willing to undergo tests or procedures that are margianl, because their out of pocket costs are essentially fixed. The insurance segment keeps raising rates to pay for increased delivery costs, because major employers and unions will pay the higher premiums in order to attract good labor.

Nobody really has to bear any risk except the consumers who are uninsured or underinsured, and the health care industry dumps most heavily on them becasue they are the only ones without sufficient clout to bargain.

In short, there is not a single patiicipant in the market for health care who actually deals at arm's length in a risk-reward setting.

Gotta love the name
 

"The Support Antiterrorism by Fostering Effective Technologies (SAFETY) Act was intended to spur development by limiting companies' liability against lawsuits related to antiterrorism products' use."
http://www.govexec.com/dailyfed/0505/050205gsn1.htm

Anyway. No need to get into an extended discussion of "how can weapons be safe" blah blah blah.

Putting aside Judicial nominations and steroids
 

Shame on you, Hank. Posting reruns.

The fact is, most of the in-house guys didn't see the deals that got Enron and Tyco and AIG in trouble (I'm not as familiar with the others). They were looked at wholly outside and at the highest levels in the company. Furthermore, the in-house lawyers are actually the least likely to spill. They can be fired and disbarred for revealing client confidences, and they can't sue their employers if they get fired for whistle-blowing. This was in the courts a few years back and the in-house lawyers lost.

On the other hand, the public acounting firms doing the deals had a public duty, at least with respect to their audit clients, to the shareholders and the markets. Outside counsel had an ethical duty under the Model Rules to not assist their clients in perpetrating fraud. The guys in the most trouble are the ones that should be.

Putting aside Judicial nominations and steroids
 

That's not really market failure, that's non-market/regulatory failure. That's been created by a belief that health care should not operate within a normal market. Instead, people should get health care through employers, free or at low cost, and should not bear much or any of the actual costs they impose on the system.

Yes, the health care system is fucked up for a variety of reasons, but you can't claim it's market failure when the current structure is far from any kind of "market" as we usually understand the term.

The moral question is the fundamental one--should health care be allocated in a way other than the market. If so, how do you design a regulatory regime to implement best whatever allocation you want, while also minimizing waste and unfairness. But the justification for doing that is not because the "market" failed--it's because you don't "like" the result the market would reach.* To the contrary, the US has the best health care because it has, to the greatest degree of any developed country, actually let a true market remain to a fair degree.


*contrast, e.g., a market failure like pollution--there there is not a market in the cost of pollution, and there's a collective action problem in limiting it, so one can say it's market failure that we need to cure, not merely impose a moral view of how much pollution should be permitted.