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Philip Greenspun's Economy Recovery Plan

73 pointsby ramsover 16 years ago

18 comments

mixmaxover 16 years ago
Public economic policy is a hard problem, and with all Respect to Philip there are a couple of points from the list of promises to business managers that are somewhat contradictory.<p>1) <i>world's lowest percentage of GDP (among developed nations) spent on government; only with a low spend will investors have faith that taxes will stay low </i> - This has the consequence of bad infrastructure, an uneducated workforce, less investment in basic sciense which lays the ground for innovation and high-tech industries, etc. A country like Sweden has a high percentage of GDP spent on government, and yet it has managed to create companies such as Saab, Ikea, Ericsson, Electrolux, Hasselblad, Hennez and Maurtitz, Mysql, Volvo, etc.<p>2) <i>corporate governance that relieves investors from worry that profits will be siphoned off by management </i> - This is one of those things that sound easy but turn out to be extremely hard. History shows that when you try to protect investors from fraud, mismanagement, etc. all you get is more red tape and, bigger government and make things harder for small companies. Sarbannes Oxley (<a href="http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act" rel="nofollow">http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act</a>) was an attempt to solve this very problem and it turned out to be a disaster.<p>3) <i>world's best school system and best educated workers </i> - America has a long way to go here. The problem is that it takes many years to get educated workers: You start in kindergarten and get educated workers 15 years later. Besides empirical studies show that a good education system requires considerable public investment, and thus a larger percentage of GDP spent on government.<p>4) <i>world's cheapest transportation system and one that is virtually free from uncertainty caused by congestion </i> - again this requires substantial public investment, and is a long term commitment. You will have to spend a good amount of GDP on infrastructure and will only reap the rewards after a decade.<p>I have to admit that this reads a bit like when you hear politicians talk about technology - it is apparent that their understanding of the domain is not very deep.
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mdasenover 16 years ago
The problem with his argument is that it rests on the American economy having a realistic chance of collapse that at least equals if not exceeds that of the Great Depression. "With 20 or 30 percent of Americans facing a realistic probability of losing their jobs" - I don't think that's realistic. We've seen worse unemployment rates in my state within the past decade. We haven't even hit the problems of the early 80s. So, it's premature to assume that we're going to see a massive collapse that sees unemployment at 25-35% as he suggests.<p>In terms of government spending, there are some areas that we should scale back, but government spending doesn't hurt economic growth <i>unless</i> it's simply spending for consumption. If it's spending for investment (such as improvements in infrastructure, education of future generations, etc.) it doesn't harm economic growth. The few trillion we're spending overseas in military jaunts will hopefully get a huge cut in the next administration.<p>Pensions need a complete overhaul. The problem is that people want pensions that are written as "you get x% of your final salary each year for the rest of your life plus health insurance". That's a nebulous liability. If you want to pay an insurance company to take on that liability, you can't afford it and governments are the only ones that won't go bankrupt paying it (since they'll just push the burden onto future generations). Towns and cities are getting hit by this bad. It is my belief that the government <i>should</i> provide for you as long as you live - BUT the government should be providing for you at a <i>very</i> low rate. Any luxuries you want are your problem. If you want to be able to pass your house to your kids, you better have saved up to cover your retirement or you can reverse mortgage the house and when you pass, the house goes to the bank. I <i>do</i> believe that government must provide for its citizens. It should <i>not</i> provide a middle-class lifestyle. It can't. It's definitionally impossible to provide everyone with a middle-class lifestyle or better.<p>Likewise, health must be re-understood. First, we love new things in America more than anywhere and as such we demand new (even if it isn't better). For example, there is no evidence that Nexium is better than Prilosec (both made by AstraZenica and Nexium being an isomer of Prilosec), but Nexium is newer and under patent and Rx and costing many times more. And so many people go for it because the cost is likely to be the same to them (via insurance). People aren't price-sensitive in medicine. I don't want people depriving themselves of treatment, but Rx allergy medicine is often near identical to what you can get OTC today. However, many go for the Rx because it's just as cheap (for them). It's wasteful! Incredibly! Similarly, new treatments are expensive and then come down in price (much the same way computer technology works). Blu-Ray players cost $1,000 a couple years ago. Now you can find them for under $300. The problem is that we won't tell someone, "sorry, that treatment is really new and we just won't cover it until it gets cheaper". The questions is: how do we enable people to get the latest treatments as soon as possible without causing costs to be enormous? And there might be trade-offs that no one wants to make. We also need to become a more fit society. No matter how much efficiency we put into our healthcare system, we will pay a lot more than anyone else because we are a really unhealthy people. We need to change that. Now! I hate suggesting that a monetary incentive be in there, but that's what does it for people. No environmental or congestion plea could stop SUVs, but $4 gasoline did in a couple months. If you tried to sell one, you were getting nothing for it. Part of the issue here is what health problems are a person's fault and what aren't? We like to think of weight as a person's problem. Smoking definitely is and it's time smokers paid more in group insurance policies. Weight is hard. You definitely have some control over it, but then again, you have some control over cancer as well (from sun block to eating well and having regular screenings). I don't want to propose anything because I think it's all crap, but we need to loose the weight or stop complaining that health care costs too much.<p>As he mentioned, liability reform is important. Every time you buy anything - from an x-ray at the hospital to a DVD at Target - you're paying for liability insurance on top of the product's price. Insurance is expensive because, while one can mostly calculate out things with fun actuaries, you need to keep quite the pad in case you're under with your calculations.<p>I'd disagree that we don't want to increase spending - at least temporarily. What keeps a market economy going is stability. With instability, we hoard. In the short term, we need people to feel like there is stability so that they act normally. If that involves the government putting some money out there, so be it. A lot of the suggestions are great in the long-run, but I think the next 12-18 months are important too.<p>I'm not as anti-union as he comes off, but to an extent unions are biting the hand that feeds them. No, not the companies they work for. Rather, the market force that drives up wages: automation. Workers can only be compensated (at maximum) at their rate of production minus costs (like hiring and administration). If the production of the average worker in a union doesn't go up, neither can wages or benefits. In fact, benefits might slip if the cost of such benefits outpaces inflation. Right now, we're seeing a very anti-automation union stance. Europe and Asia are starting to use more capital per worker than the United States. Americans are great workers, but you just can't compete en-masse if you put yourself at such a huge capital disadvantage. I like unions EXCEPT for their anti-automation stance. Restricting capital kills businesses.<p>In terms of education, I think we need more informal education. How much have we all learned on this site? Wikipedia? We're seeing the opportunity to really get knowledge out there and to interact more efficiently. Heck, those online chat things that businesses employ for support are a great source of inspiration. They allow one employ to deal with several customers at once. And unlike a classroom, you don't have the issue of interrupting a lecture to ask. And that knowledge could be gone over and made into an FAQ-like structure for a topic.<p>In terms of labor markets, we're plenty deregulated. American businesses already see incredible freedom here. Minimum wages are very, very low. I'm not someone that goes around saying that the poverty line is set 3x too low (that it should be 30k for a single person rather than 10k), but I'd really rather not see wages fall at the lowest end. I'm a single person living in walking distance of the T (subway) in Cambridge and live off $15k per year for everything (except this year which saw a shiny new MacBook Pro). I'm not depriving myself of anything I want, but I don't just spend to spend. I don't regularly eat out, buy drinks at bars, spend lots on random expensive things, whatnot. Still, people need a certain level.<p>Similarly, I think affirmative action is in my best interest in the long-run. It's annoying as hell. Heck, even most African-Americans surveyed are against it. However, underclasses are bad for a society. Underclasses cause friction and havoc that take money from me. People who think a system is stacked against them try to go around it. PG commented a few days ago saying, "Markets interpret social engineering as damage and route around it." If there is one thing I want, it's that people work inside the system. Plus, it's inherently unfair that some people are the decedents of historically discriminated people and, well, I am as well, but they're people that are seen in a good light in modern America which gives me an advantage. But beyond the unfairness, giving people stuff gives them things to loose. That's good for me because the more you have to loose the less chance you're going to do something stupid to me.<p>I really want to applaud Dr Greenspun for offering his knowledge to others freely. It's wonderful.
tptacekover 16 years ago
Here's a choice quote, just so you know where he's coming from philosophically:<p>"If the product kills someone with a salary of $50,000 per year and 20 working years remaining, that is approximately $1 million in liability. [...] Punitive damages must be eliminated."<p>Somehow, I'm just having a hard time believing that the challenges we face are due to businesses not investing because they're afraid of transit union strikes, or businesses not building products because of our failure to adopt a Rand-ian strategy for valuing human life.
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aaronswover 16 years ago
Wow, this article is so wildly ignorant of the basic economics.<p>Let's start at the beginning. Depressions are caused by a slight increase in people's preference to hold onto cash, which causes a downward spiral where the economy slows and then people want to hold onto cash more.<p>The first thing you try to do in this instance is increase the money supply, but we've gone as far as we can go on that -- the Fed has sent the interest rate to zero and it can't go any lower.<p>So, as Keynes said, the second thing you try to do in that scenario is let government spending pick up the slack and take advantage of the productive capacity that isn't being used on anything to get the economy moving again.<p>Greenspun claims this won't work because "a lot more globalized today and there is much more competition among countries." First, we've only recently caught up to the levels of international integration we had during the first wave of globalization, starting in 1870. Second, countries don't compete with each other. The fundamental well-being of a country is determined by simply its domestic productivity. What would we be competing for?<p>He seems to suggest that we're competing for international investment dollars. But then why do you think government investment won't work? Why is international investment this magical thing we must attract to start businesses?<p>He claims that Japan's huge fiscal stimulus proves stimulus doesn't work. But in Japan, stimulus did work -- when it was tried. As the leading scholar wrote: "the 1995 stimulus package ... did result in solid growth in 1996, demonstrating that fiscal policy does work when it is tried. As on earlier occasions in the 1990s, however, the positive response to fiscal stimulus was undercut by fiscal contraction in 1996 and 1997."<p>See <a href="http://mediamatters.org/items/200812220005" rel="nofollow">http://mediamatters.org/items/200812220005</a> for more.
tokenadultover 16 years ago
"Nobody has ever made a compelling argument for how having unionized teachers helps students. Nor has anyone ever made a compelling argument for how having tenured teachers helps student performance. Our country's best performing schools (all of them private) have non-unionized teaching staffs. We can't afford to experiment with unionized teachers anymore. The government created the right for public employees to unionize and it can remove that right very quickly if it has the political will.<p>"How good a job would you do at your company if customers were required by law to buy your product? That's the situation faced by public school management today. It would be illegal for a 14-year-old not to attend the local school, unless his or her family can scratch up a huge tuition payment for a private school. We need to set a deadline by which every American family has the choice to send children to a school other than the local one. There wouldn't be a problem with 'failing schools' anymore because parents would have withdrawn nearly all of their kids from such a school and the building would end up being taken over by a new school with new management."<p>Hear. Hear.
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Hellblazerover 16 years ago
Wondering what possible expertise Greenspun brings to this arena. Worse, this post of his is just a long list of assertions without any references, supporting material or backup. I guess we're just supposed to accept on faith that he knows what he's talking about.<p>Which is kind of how we got into this cluster F in the first place, isn't it?<p>Thinking that your experience in specialty X translates to great insights into specialty Y is a known FAIL. Greenspun needs to operate with the minimum debate rules that he'd demand from someone making equally blatant assertions about electrical engineering or web based computing.
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gaiusover 16 years ago
I would love to see Greenspun and Paul Graham battle in rhymes to settle once and for all who is the one true PG.
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fizzer9over 16 years ago
His ideas about schools and education are incomplete. One reason we have teacher's unions is to help avoid good teachers being fired due to ignorant complaining noisy parents (and students). And by the way, even with unions a female student can ruin a male teacher's career with a simple "he touched me" lie.<p>Smart parents will do their best to send their kids to private schools, but the less fortunate kids will get stuck in public. If it were even easier/cheaper to send your kids to private, then there would be an even greater separation between the kids who's parents care and the kids who's parents don't give a damn (the haves and have-nots).<p>The answer isn't to make more private schools, the answer is to fix public schools. And the problem with public schools is not the teachers. The teachers are working within a system that is broken. Rather than go into the details, here's a quick example: you're a teacher. You cover the material in class. You're inventive, dynamic, clear, withit, the whole nine yards. You assign homework on the material, go over the homework, and then give a quiz (on that material). Students fail because they didn't study and don't care (and this stems from most parents not giving a shit about school as long as their kids are out of the house and having some fun in sports). You go over the quiz in class, and give a test later in the week (on the same material). The students fail because they don't care and didn't study. You have a choice: do you fail a bunch of students and bring down a shitstorm of parent complaints and administration complaints? Or do you yet again make things even easier and maybe even curve the grades so only the <i>very</i> least prepared students fail?<p>If you fail a bunch of students, administration will claim that you're a bad teacher. You'll have constant visits by "guests" (from administration) in the back of the room evaluating you. Parents will complain loudly that you're inept. Everyone will turn you into a scapegoat. If you're not tenured, you're gone.<p>Let me give you a hint: teaching is just a job, like any other job except that you're helping kids and so you try to go the extra mile if you can. But it's still just a job, and its not worth all the shit you get to make it rigorous if no one else is doing it, if you get no help from administration, and if you in fact get severely punished for it.<p>You want to fix education? Let the teachers teach, and let them <i>fail</i> students who fail. And for Pete's sake, get rid of the fucking standardized tests. They turn education into color-by-numbers.
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mhbover 16 years ago
<i>When school children start paying union dues, that 's when I'll start representing the interests of school children</i><p>Albert Shanker, AFT President
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trominosover 16 years ago
Every single piece of Philip Greenspun's writing I've ever read has seemed (to me) to be a massive collection of assertions with absolutely no logic backing up any of them.<p>Some of those assertions turn out to be correct, of course. But in terms of quality of discourse, Greenspun is roughly even with your average internet troll.<p>I guess it's ironic that this post is itself completely unfounded. But it's like 2:00 and I'm really tired and it astonishes me that this blog post could get so much support here, so I'd just like to get this ball rolling and see if any of you agree with me.
mattmaroonover 16 years ago
I'm not sure he's doing enough about entitlements. Even if taxes were lowered and the social security age pushed back a few years, we're still going to be eaten alive in 20 years, or so it appears to a lot of people.
Prrometheusover 16 years ago
This is a fluff article. Tempting fluff that causes everybody to come to the comment section and offer up their preconceived ideas. But fluff is fluff, even if it's tasty.<p>I don't see what I would gain from reading Greenspun's opinion on economic policy matters that I wouldn't get from reading Hayek, Friedman, or Keynes, or modern empirical arguments from places like Cato. What comparative advantage does Greenspun have here?
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previewover 16 years ago
"Nobody has ever made a compelling argument for how having unionized teachers helps students. Nor has anyone ever made a compelling argument for how having tenured teachers helps student performance."<p>I agree with these statements. However, there are many public school systems in the USA that are successful. Why? That is the right question to ask.<p>The education problem is much more complicated than simply giving parents and students the choice of school to attend. The "good" schools would then be overrun with perspective students, requiring a selection procedure to determine who to accept. And so, the rest of your life will be determined at earlier ages by some standardized test. The top few percent get the good education while the rest scramble to get what they can. That is not a better solution and does not fix the problem.
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vitaminjover 16 years ago
He's got some good ideas, but most are politically intractable.
jbertover 16 years ago
"eliminate government-owned housing so that these properties can be returned to the tax base and used to their full potential"<p>Would the government really make more ongoing income from taxes on rent rather than rent? That seems unlikely.
akronimover 16 years ago
I think this needs to be read under the same terms as his blog - "A posting every day; an interesting idea every three months…". Of course it's up to you to decide which this is...
hank777over 16 years ago
These are nothing but assertions of fact which are really unsubstantiated opinions. It is striking to watch people engage in this level of intellectual onanism.<p>I dont mind people making arguments that are reasoned and carefully successively built. But to just start with one opinion, pretend it is a fact, and then build another assertion on top of that is a bit much. I do not believe that you have to have a degree in economics to opine about economics, but whatever your arguments are, at least make them as arguments as opposed to "I am smart so everything I say must be true" style pronouncements.
chadmalikover 16 years ago
The word "debt" appears way too little. The word "credit" isn't even in the article. The whole mess we're in is because of borrowing from the future via a debt bubble to escape deflation after the dotcom/telecom bust of the early 2000's. I think Greenspun needs to read up a bit more on whats really happened.