Monday, 18 April 2016

economics: open mike

Related: Bad Economics Teaching for the twenty-teens from data on Unistats, 2015 Better Economics Teaching: some off-the-cuff suggestions based on being a 1980s student The British Economic Crisis - a similar book to Robert Peston written in the 80s - Star Courses: the least satisfied, most bored and lowest paid UK graduates, written 2015 Boring Economics Teaching is interesting: how someone managed to teach economics from memories of an old textbook at the peak of the worst recession since the 1930s, and tried to cover-up for government causing the recession. Journal Articles by Professor Les Fishman - unbelievable beliefs - 1980s recession explanations I wrote - UK unemployment 1980s from the Begg 1984 textbook

Open Mike: a site for economics

A site called http://www.ecnmy.org/ has set-up to promote economics contributions from a range of people, if not face to face discussion; I haven't quite got the hang of it yet in terms of who it's aimed at and what contributions help; it looks a bit like an alternative to  a first economics textbook, rather like http://www.core-econ.org. Neither has a search function that I can find.

I wrote a general post about discussions but didn't like it the next morning and put something better in its place, which is also a new paragraph on better economics teaching post. It is an extra theory beyond the ideas of a "public good" that economics textbooks quote as justifying a compulsory tax or subscription to a service. I think it's essential to understanding state spending.

national insurance / social insurance / social security / welfare state
an introduction

Why?
Private payment plans exist for a lot of the things that the state provides - everyday health care, school fees, pensions, annuities, insurance against risks like car accidents, flood, fire, theft, and short term loss of earnings - including the famous PPI scheme.

Assuming these plans are as efficient as a state scheme, they have a problem: you can't afford them on a low-paid job. Put another way: people without these costs can under-cut you. So lower-paid people need a law to say that everybody has some kind of payment plan, otherwise next to nobody will. (That's a problem when people in a sweatshop country like Bangladesh compete with people in the UK to do factory jobs, or when those same people note the disparity of working conditions, and try econonomic migration.)

When?
Parts of Germany had a compulsory insurance system for employed people from 1868. The UK and Ireland had compulsory membership of insurance schemes from the National Insurance Act of 1911 (Imperial governments like Bangladesh in India did not follow). India got a basic hospital insurance scheme for people in formal employment from 1948. I don't know where to look-up what system exists in what country. Some of the current systems are listed on Spicker.uk

How?
Compulsory insurance does not have to be part of the tax and benefit system, but the public sector can privide the cheapest deal. It is, generally, efficient at vast uniform  activities, saving the costs of sales, accounting, and assessment that make up a big chunk of private insurance costs. The brokers' fee for motor insurance used to be about 50% in the first year for example, when my dad tried doing it. There is also a lot of saving in hospital admission costs: you just have to prove that you are sick to get admission, rather than remember your insurance details. The NHS is much cheaper than the US system of healthcare. I don't know figures for how cheap it is to another couple of universal benefits - pensions and family allowance - but I imagine it is practically free because a computer can do most of the work.

What does "welfare" mean?
Nothing. It is a slippery word. It slipped into the idea of a "welfare state" I guess  because the UK 1948 system paid staff to help the unemployed get interviews and nanny them about in a rather awkward way - quite different to the insurance-like gist of the system. The jargon at the time for unemployment benefits was National Insurance and National Assistance, the first being contributions-based and a higher rate and the second being based on low savings and income and at a lower rate. Vestiges survived in two rates of income support last time I looked. Oh there's another word which I think comes from Woodrow Wilson's "Social Security Tax" invented in the 1930s. Again it doesn't mean anything financial.

Is universal insurance good?
A picture of some meerkats. Shown because the UK is fond of meerkat-based advertising of an insurance comparison web site. Meerkats have east european accents and complain that their long entrepreneurial history is over-looked by people who find their site by mistake while seaching for cheap deal on your car insurance
Meerkats get cheap deal from national insurance

You do not have to pay for a parallel system to keep the old sick and young uninsured off the streets; the people born with learning difficulties or the people who have never earned enough to insure, or who migrate-in from some very different system, nor to run a third system again for people you think are feckless free-riders rather than unlucky.

Also it is cheap deal! Specially if done by government or something similar in having one big computer, lots of existing information, and a lot of direct debits and credits to make into bank accounts according to age or some simply-checked claim.

If you consider health and education as insurance-like services, because they are used at parts of our life-cycles and not at others, then there are more good side effects. This idea overlaps with the idea of a "Merit Good" quoted in countries where they don't have national insurance but still pay a bit out of taxes for hospitals.

Mothers with access to secondary schools and health services tend to have fewer children and later in life. Parents who expect a basic pension and care in old age have less incentive to have a lot of children, which, in Bangladesh, it is common to do because you want them to look after you in old-age. So a cycle of poverty fuelling over-population tends not to happen when there is social insurance. Both China and Bangladeshi governments agree with this point of view. China has a "one child" policy and Bangladeshi government sends health advisors to go and persuade the poor to have smaller families, but neither yet has universal healthcare and pensions. I understand that the Bangladeshi system is like Victorian Britain: there are teaching hospitals with some state subsidy that keep bodies off the streets in the towns, and a referral system that tries to get fair access to them for people out of town. A good Victorian system to be proud of, but one that was improved-on decades and hundreds of years ago by better governments.

Problem: cost of means testing or admin still exists for some benefits
Costs mount-up again for means-tested benefits, for which you have to prove something like low income and affordable rent (for housing benefit) or unemployment and active seeking for work (for dole). The BBC published a guide to the cost of removing child benefit to wealthier mothers which I am not sure how to find on the net, but makes the point about means-testing being expensive in admin and universal benefits being a cheap deal.

Problem: the state thinks the money is theres and runs the scheme like a charity
Where the state nationalises the system as in the UK in 1948, it tends to regard the money as its own, paid straight out of the current account as a favour, and this idea creeps into the methods of administration and political decisions such as benefit sanctions or housing benefit cuts. When I was at college, Edwina Curry MP came to give a talk. She mentioned how hard she had worked to persuade the civil service to give up the notional "national insurnance fund" that still exisited at the time.

Problem: the state doesn't plan ahead
Private insurance and pension systems try to have an expert who guesses how long pensioners will live or how many accidents will happen. An absent-minded government can forget that and then leave MPs to say, with a straight face, that there is "a problem of an ageing population", as though they only discovered just recently that people get older. They can accept taxes or national insurance payments for years, and then decide they'd rather spend the money on The Olympics instead.

Problem: structural imbalances
Insurance can only be made compulsory in one country at a time. What if someone moves? Or thousands and thousands of prople in one direction? What if someone works cheaply in Rana Plaza in order to sell cheap goods in Rochdale, where their cousins have to pay national insurance and VAT? Governments have not been good at solving this problem, mainly because their MPs studied bad textbooks at college which don't mention social insurance. As a result we have a mixture of sweat-shop and non sweat-shop countries in the world, with most of the goods made in the sweatshops and poverty not always reducing in those countries. One brief attempt to build-in a "social clause" into tariffs, requiring something in return for low tariff access to trading blocks like the EU, was quickly shouted down by sweatshop governments. Attempts to defend trade and industry in states with social insurance, by building tariff barriers, are generally dismissed by economists as something that tabloid readers want and that government should not give-in to.

Oh I don't know lots of stuff

I'm so ignorant I don't know where experts on this subject write. Maybe under the heading "social security", or "comparative social security systems" or something of that kind. The Beveridge Report probably has something about it. My mum explained a bit. Just found an expert link:
http://www.spicker.uk/social-policy/socialsecurity.htm

My economics textbook says nothing little except under very odd headings

They are different to those taught in history or subjects like social work; they are just odd covers for a failure to engage with reality. I have just found a concept of payment related benefits slipped-in to my textbook half way through an obscure chaptor on taxation, and not indexed. It seems to contradict the points made more strongly that come-over from the US edition of the same book.
Public Goods
Income redistribution from the rich to the poor in one year [not over a life-cycle] as one reason for "Transfer Payments".
Merit Goods and Bads
Aid Trade and the badness of tariffs round welfare states.

Notes in progress about social policy, a subject I had previously not heard of, which covers the welfare state and ought to shove some very clear economic theory up economists' trousers, but doesn't.

5.4
Threshold graduates will be able to demonstrate:
z
well-developed descriptive skills and basic analytic skills
z
an ability to distinguish between some of the core theories, concepts and
approaches in social policy - reasons for universal benefits and contributions-based approach to benefits -  need for tariff boundaries around areas with a national
z
a basic ability to seek out, use and evaluate data derived from social surveys and
other research publications
z
a basic ability to undertake investigations of social questions, issues and problems
z
a sufficient grasp of research methods and their application to enable them tocomment on research evidence

Typical graduate
Knowledge and understanding
5.6
Typical social policy graduates will be able to demonstrate a thorough knowledge,
critical and systematic understanding of key aspects of social policy including a critical understanding of the functioning of the institutions of the UK welfare state and at least some of the other welfare systems operating in other parts of the world. They will be able to demonstrate an ability to review, consolidate, extend and apply their knowledge and understanding across a wide range of social policy issues and be able to reflect critically on ideas that are presented in teaching and in relevant literature.
Subject-specific skills
5.7
Typical graduates will be able to demonstrate:
z
well-developed descriptive and analytic skills
z
an ability to understand the core theories, concepts and approaches in
social policy and a clear ability to distinguish among them
z
an understanding, and ability to reflect upon, the underlying value base of many
policy proposals and distinguish clearly between normative and empirical arguments
z
a sufficient grasp of research methods and their application to enable them to
comment on research evidence
z
a strong familiarity with a range of research methods and an ability to reflect
critically on their use in various research studies.

economics teaching - some related posts

Related: Bad Economics Teaching for the twenty-teens from data on Unistats, 2015 Better Economics Teaching: some off-the-cuff suggestions based on being a student in the 1980s  The British Economic Crisis - a similar book to Robert Peston written in the 80s - Star Courses: the least satisfied, most bored and lowest paid UK graduates, written 2015 Bad Economics Teaching: how someone managed to teach economics from memories of an old textbook at the peak of the worst recession since the 1930s, and tried to cover-up for government causing the recession. Journal Articles by Professor Les Fishman - unbelievable beliefs - UK unemployment 1980s



This is one reason why I blog. After looking for EU-funded regional development schemes after illness in 2002-5, I found that London ones had been diverted to a campaign against local manufacturing and in favour of a membership organisation with public subsidy. It was probably linked to Millenium Development Goals and the aftermath of Make Poverty History - in fact Pants to Poverty is quite open about this as an origin. It preached that tariffs around welfare states are bad, payments by taxpayers in such states to schemes in Bangladesh or maybe steelworks in China are good, and that social insurance is not a fit topic to discuss when talking about poverty in Bangladesh. I didn't want to talk about poverty in Bangladesh; I wanted schemes like London Fashion Week and Esthetica, the room that sounds like "ethical" but isn't, to close-down and for government to save the money or spend on a scheme of business support as intended. My web page on the subject has slipped down the rankings so I will give it a link: http://veganline.com/ethical-fashion-forum.htm The page is headed "Ethical Fashion Forum: goods from badly-countries" I've added a heading to this link: "brands are over-done; ethical fashion blogs don't mention national insurance, ethical fashion companies seem a bit glib and to ignore UK manufacturing as the main priority, ethical fashion definitions are rigged by a house of lords committee and a group at London College of Fashion sponsored by Nike, ethical fashion designers are a daft idea because you have to make the stuff". So now you know.