Focusing on workforce diversity ratios at companies is a terrible idea. Better to focus on process.

TL;DR – Many advocates of ‘more diversity’ in the workplace and in high-paying jobs like technology, are vague, misleading, and misguided in their calls to focus on the demographic ‘representation’ of a given workforce as evidence of bias. They ignore statistical ratios of qualified workers (and underestimate how tricky and complex it would be to estimate what the ‘bias-free’ workforce makeup for a given company “should be”, let alone the random factors that would cause actual ratios to differ.) Those who are concerned with potential bias in personnel decisions should instead focus on the processes of hiring/salary/promotion, and if they believe they see bias, they should investigate more thoroughly than simply arguing that “percentage female” or “percentage minority” are useful metrics to indicate bias.

What’s wrong with diversity ratios?

A number of companies have embraced the nebulous idea of ‘Diversity’, publishing statistics on how ‘diverse’ their workforce is, and publicizing their efforts to increase that diversity. It’s often unclear whether this is done out of genuine belief that having a more diverse workforce will be good for the company, or whether it’s a cynical attempt to foster positive public opinion for its products and employment opportunities, but I suspect it’s a combination of both.

What is also unclear, or in my opinion is often intentionally obscured, is what is meant by diversity, and why ratios of characteristics used to define diversity should be focused on (generally gender and race/ethnicity, but often sexual orientation or family income are mentioned as well.) Focusing on altering the racial, sexual, or [insert demographic variable here] makeup of a workforce is incredibly misguided, and ultimately harmful if actually pursued as a goal in itself.

Instead, companies and activists should focus on making sure that the process of finding, hiring, and promoting qualified candidates is free of bias. Ratios can be a good way to check whether processes are working well (unbiased) or not, but they should not be the goals themselves.

Defining diversity

First, we must determine what is meant by diversity. I would assume that the type of diversity beneficial to an organization would be diversity of opinion, experience, and thought process, but that’s not what most diversity conversations are about (and besides, it would be difficult to measure these things in a meaningful way, since they largely exist inside the heads of workers rather than in their skin pigment, parent’s W-2 forms, and genitals…) Diversity advocates usually look at gender & race (which I’ll combine here with ethnicity), and state that their goal is to ‘increase representation among underrepresented groups’ of people at a given company or industry. ‘Representation’ presumably means ‘% of the workforce’ and ‘underrepresented’ means ‘those who make up a minority as a % of the workforce’. In the US, this seems to mean anyone who is not a white male, or perhaps a straight white male. Outside of tech, white might be sufficient to categorize those who are ‘not diverse’, but since men are overrepresented in tech, it must also mean white men. (One sign that ‘diversity’ has simply become a euphemism for not being a white male is that candidates in the singular are now described as ‘diverse’, which makes no linguistic sense.) Strangely, Asians (which includes those from India for our purposes), are generally assumed to be increase ‘diversity’, despite the fact that they are hugely overrepresented in tech (and other high-paying jobs) in the US.

Computing diversity

One complication here is that under- and overrepresentation is only meaningful if we know what the expected or ‘unbiased’ level of representative should be. If I tell you that the workforce for a tech company in San Francisco is 5% black, does that mean that blacks are under- or overrepresented relative to other groups? Well, if San Francisco’s (SF) population is 10% black, you might say ‘yes, blacks are underrepresented compared to the general population of SF’, but if SF is 2.5% black, then 5% makes blacks way overrepresented relative to the general population.

However, why should the racial makeup of SF be the ‘correct’ level of representation? Tech companies hire from many parts of the US as well as abroad, and their workforces often don’t reflect the racial makeup of the cities they inhabit (sometimes to the annoyance of city officials and their residents who would like to see the locals hired in preference to others, or to the anti-immigrant crowd that believe people randomly born into the US should have more of a right to feed their families than people randomly born elsewhere.)

Furthermore, tech companies likely hire disproportionately from immigrants of certain countries (China & India, say) who move to SF for tech jobs, but less so for other jobs. So maybe we need to look at the hiring pool of qualified candidates both in the US and outside, and then compute the racial makeup of those candidates as a whole so that we know just how many of each group we ‘should’ have in our workforce. (Gender being 50-50 in general makes this much easier for the male-female divide.)

This already seems like a difficult enough task, but a further complication is that certain racial groups, genders, and countries may not be equally represented in having the skills required for a given job. This is easiest to see in a field where explicit credentials are required, such as nursing. Nursing in the US is very female-dominated, with only about 10% of Registered Nurses (RNs) being men. If we assume that 10% figure holds both for number of male nurses employed and number of male nurses with a RN certification who are looking for work, then we should not be surprised if a given hospital employs 90% women and 10% men as RNs. If one was to look at the 90-10 split in isolation, you can imagine unsophisticated diversity pundits exclaiming over the “discrimination” responsible for only 10% of RN jobs filled by men: “Male nurses are just as competent & well-educated as women, and yet for every male nurse, there are NINE female ones despite men making up 50% of the population. Hospitals are surely discriminating against men because it’s assumed men can’t be as caring or as conscientious as women in these jobs!” etc, etc.

More thoughtful people might start asking why men are so underrepresented as RNs. They might start professional societies for male nurses, non-profits to encourage men to acquire the education and interest in becoming a RN, or groups supporting men in the nursing profession at their hospital. (“ManlyNursing, a group for male nurses and those who support them!”) Others might misguidedly start calling for the creation of hospital ‘diversity boards’ to ‘encourage’ (read: browbeat) hospital staff to hire more men until the ratio of male nurses increases relative to female, or suggest a #deletehospitalXYZ boycott social media campaign.

I have no problem with, and in fact generally encourage, the efforts to make certain sectors of society more aware of and qualified for opportunities to improve their career position. Looking at employment sectors where certain groups are underrepresented might be a great way to decide where to focus these efforts. However, the fact remains that there’s nothing apparently discriminatory about a hospital employing 90-10 women to men if that ratio represents the talent pool available to that hospital.

The same logic goes for race, etc. Because of the fact that Hispanics and Blacks generally grow up poorer & less educated than Whites and Asians in America, and that family income & education are highly correlated with individual income and employment, we shouldn’t be surprised when we see Blacks & Hispanics underemployed and underrepresented in high-paying fields with respect to whites & Asians. This doesn’t mean that companies are discriminating (or that they’re not), and further analysis is needed to try to determine that*. None of this should dissuade us as a society from improving the lot of marginalized groups by addressing the root causes of poverty or lack of education, it should simply dissuade us from assuming there’s an ‘ideal’ ratio, or even an ‘improved’ ratio of gender/race mix to shoot for, or that imbalances in the workforce are equivalent with discrimination.

To come back to tech, 79% of Computer Science (CS) bachelor’s degrees awarded in 2016 at the top 5 institutions giving those degrees out were to men. Presumably that number was even higher in the past, so the workforce population with CS degrees is likely > 80% men to < 20% women. If CS degrees are a good proxy for “qualified tech workers”, then we’d expect to see about 80-20 men to women in tech, which is in fact what we often see.

(This split is similar for engineering as a whole: in 2015, 18.5% of engineering bachelor’s degrees went to women. In contrast, women obtained over 75% of of psychology bachelors, and graduate with every kind of degree, from associate’s to doctoral degrees, at a higher rate than men overall, and have since 2009.)

So, the real question becomes “why are women [or minorities] underrepresented in acquiring certain technical skills vs men [or whites/asians]?” Not “why aren’t tech companies hiring more women/minorities (hint: bias)?” This former question is a more complex one, and out of scope for this article, but it is the one that I believe companies and diversity advocates should get together on, rather than trying to shame companies in to hiring more of a certain group, which is a zero sum game at best.

Enforced ratio are clearly discriminatory

Another reason to oppose the simplistic idea of trying to enforce an ideal or better diversity ratio is that this practice in itself is discriminatory because companies would necessarily have to take someone’s race or gender into account when making hiring decisions, which is illegal and precisely the practice that diversity advocates claim they are trying to eliminate. Cynically, one could argue that many diversity advocates are not actually anti-bias in hiring processes, but rather anti-white male, and though they seem unaware of this, anti-Asian, and pro-black/Hispanic/female. Arguing that companies should hire a candidate from an ‘underrepresented’ group that they’ve deemed less qualified than a candidate from an ‘overrepresented’ group is anti-meritocratic, discriminatory, and generally outlawed by Federal law.

Diversity advocates might counter by stating that they’re merely ‘correcting’ for some underlying bias that has actually suppressed more qualified minority/female candidates from getting certain jobs. This gets into ‘hard to prove’ territory that needs much more careful analysis than is usually given. I think these advocates are at least overestimating the amount of the underrepresentation that is the result of biased hiring/promotion in favor of white (or Asian) men, and are overlooking the root causes like educational attainment, incarceration rates, and the factors that lead to these proximate causes (poverty, single parenthood, etc.)

One round-about benefit of pressuring companies to hire less-qualified candidates might be that companies would respond by trying to improve the talent level of these groups, and also that those candidates would gain the resources to improve the future talents of their offspring (at the expense of the more qualified candidate’s offspring…) The latter ‘benefit’ is of dubious value to society, but the former could be good, and can be seen when tech companies partner with non-profits like Code like a Girl. (Whether it’s the best use of resources to coerce a company to spend its resources in this way when it might not have otherwise is up for debate.)

Even if advocates were correct in their assumption of wide-spread bias against certain groups in corporate hiring decisions, the correction would be to remove the bias, not enforce discriminatory ratios that will never be tuned enough to ensure that the most qualified people are hired for a given job in a given place within a given company. One simple, non-intrusive example of how to do this is to remove names, which often give away gender & sometimes race/ethnicity, from resumes before they’re given to recruiters & hiring managers. Another might be to put more weight into phone screens + resume qualifications vs in-person interviews. (This one would be a tougher sell. Despite criticisms, interviewers, including myself, like to talk to someone face-to-face and put a lot of weight on those encounters when hiring.) Using a panel discussion format for hiring decisions made up of diverse interviewers is probably also a good practice to reduce bias (and more importantly, really helps to make better hiring decisions, in my experiences at two large tech firms.)

If you are for more equal diversity, you are against Asians in tech

Interestingly, while much has been made of ‘white male privilege’ in America, I’ve heard little talk of ‘Asian male privilege’ in tech, despite the fact that Asians are hugely overrepresented in tech. (Which I attribute to their education, skills, and ambition, not to heavy bias in their favor!) Uber recently released its diversity stats, so let’s use them as a hopefully-representative example. In 2018, Uber’s tech jobs were filled by 46% white people and 45% asian (with the remaining 9% about equal parts black, hispanic, and ‘multiracial’.)

 In 2015, about 63% of the US population was non-Hispanic white, 5% Asian, 13% black, and 17% hispanic. Compared to the US as a whole, blacks & Hispanics in Uber’s US workforce are way underrepresented (about 20-25% of their US-population representation), whites are also somewhat underrepresented (about 73% of their US representation), and Asians are way overrepresented by about 900%!

One might argue that Uber is an SF-headquartered company, and the Bay Area has a larger-than-average Asian population. The Bay Area is 42% non-hispanic white, 23% Asian, 24% Hispanic, and 7% African American. Compared to the Bay Area instead of the US, whites look roughly equally represented at Uber, Hispanics look even more underrepresented (13%), and Asians much less overrepresented (but still 200% of the local average), and blacks a bit less underrepresented (about 35%.)

Either way, it seems that Asians are vastly overrepresented, whites about equally, and blacks & Hispanics way underrepresented. Strangely, even such upstanding (but left-leaning) news sources as the Washington Post want to cling so badly to the idea that Uber has poor diversity that it falsely claims that “Uber employs a relative dearth of women and racial minorities, particularly in technical roles” [emphasis mine]. Uber’s US numbers for 2018 show us plainly that whites make up 49% of Uber’s total (tech + non-tech) workforce, even though non-Hispanic whites make up 63% of the total US population. The Post goes on to admit that “Uber employees identifying as Asian make up 30.9 percent of the ride-hailing company’s U.S. workforce and hold 47.9 percent of technical roles”, but the author is incapable of seeing how this single fact invalidates its initial conclusion.

Corporations already have a vested interest in unbiased hiring

Profit-loving owners/shareholders of large companies want to hire the best talent regardless of demographics. It is in their economic self-interest to do so, and any company that doesn’t will lose out somewhat on the talent battle to a more unbiased company.

Of course, this theoretical idea doesn’t prove anything about how companies and individuals at those companies actually hire. Just because a company loses out from not hiring the best across all demographics doesn’t mean that its agents (employees in charge of hiring) are doing what they should be. Individuals, and even private owners, have other motivations besides maximizing company value, and might indeed be acting on their own prejudices. That said, it should suggest that the default systematic behavior of most large private companies, especially corporations since they are typically owned by diverse shareholder groups, will be to make relatively unbiased hiring, salary, and promotional decisions.

Individual bias

While individual bias may play a role in seeing less women or minorities in tech, this needs to be studied explicitly. In one randomized simulation on hiring an academic, for example, significant bias was found… in favor of hiring women.


Ratios (or worse, quotas) of diversity should not be the goal of diversity programs. Instead, maintaining unbiased personnel processes to cast the widest net possible for talent should be the goal. One might start with a ratio and look at how it compares to the talent pool from which a company can choose from to get clues about bias, but that should lead to a study of whether bias is actually occurring, and the ratio itself should not be confused for the goal, or as a way to measure bias in hiring.

Diversity advocates should focus more on the much harder problem of addressing the (non-discriminatory) causes of workforce underrepresentation such as poverty and educational attainment, both of which aren’t neatly segmented into race and gender categories. Fair employment and well-being should be a constructive discussion about improving the lot of all humans, not one of zero sum social politics where each group’s default assumption is that the ‘others’ are trying to keep them down or hold them back.


Preemptory clarifications

Since this is a controversial subject, here a few clarifications of what I’m trying to say above:

  • I’m talking here specifically about personnel decisions including hiring, firing, promotions, and compensation. I’m NOT talking about workplace environments, or other forms of ‘discrimination’ like hostile work environments for women or minorities. Undoubtedly these would lead to lower-than-expected ratios of the negatively-impacted demographic group in those environments. That kind of discrimination is potentially separate from what I’m talking about (although surely biased hiring might be correlated with an unfriendly environment towards the group experiencing the bias.)
  • Hiring bias is likely not the primary driver of most gender/racial disparity among jobs in the US. Instead, educational attainment, family income, physique, cultural values (male deaths in the military), and prior workforce ratios (some of which may have occurred due to past discrimination or demographic-influenced choices, like female teachers and nurses, say) are probably responsible for more of the variation we see in employment. This is NOT to say that there is NO bias in hiring decisions as a whole, and especially not in individual hiring decisions.
  • I’ve steered clear of the debate over why women get paid slightly less than men (about 95 cents to a man’s $1 after controlling for various factors) and are less represented, along with minorities, among management ranks. (Arguing that the cause is anything other than sexism is a good way to lose a career.) Frankly, I find most arguments made by both sides of the female wage gap unconvincing. These arguments seem more like narrative fallacies to me than carefully constructed causal explanations based on clear evidence. It has been argued that some of the unexplained difference between male & female salaries and positions is due everything from biology, sexism, to women prioritizing their family lives over their careers (which again might be due to social expectations that are the result of bias/traditional values, etc.) I can see how those arguments might be true, but I can see equally how they might be entirely fictitious ‘common sense’ which will evaporate in a few decades as women continue to become more equal players in the workforce (and as men in turn take a more equal role in child-rearing and domestic duties.) In general, many arguments that have ‘explained’ why women (or minorities) historically have done, or not done, this or that have turned out to be self-serving falsehoods by the, typically, white men who’ve espoused them. (See Stephen J. Gould’s The Mismeasure of Man for a good overview of the faulty biology and anthropology that produced erroneous conclusions as a result of racial bias.)
  • From looking at education & income statistics, as well as my personal experience, I think women are going to be just fine career-wise, and that America should focus more on the impoverished, which contain a disproportionate amount of black, Hispanic, and Native Americans.  This confidence with regard to female career prospects is not meant to take away from other challenges women face such as sexual violence and unwanted advances from men. These social problems (still) haven’t received enough mitigation in society, especially outside the US.

Should we just let all the immigrants in?

My girlfriend and I recently moved from my home town of Seattle, Washington to northern California. In the Bay Area, even more so than in Seattle, immigrants of all kinds, but especially Hispanics, dominate the human landscape. I already had a pro-immigrant bias before moving here, but I’d like to share a few observations that have made me even more in favor of working out a way for as many foreigners as possible to come to the United States to live, work, and enrich their lives and our society with their contributions.

I rented a 15′ Uhaul truck with a tow dolly for my car, and with the help of my power-lifting girlfriend and a few friends, loaded all our worldly possessions into it and drove the 850 miles to our two-bedroom apartment in Palo Alto.

Not wanting to saddle my hapless love with yet another day of carrying heavy things, I drove to Home Depot the next morning to hire some help. A couple of middle-aged Hispanic guys were chatting together in the parking lot, and I asked if they new anyone who’d be willing to help unload a moving truck for $20/hour for what I estimated would be a 3 – 4 hour job. One of them asked what I was moving, and after I described the two queen beds, couch, and other assorted furniture, he said he was game, and I drove us back to the apartment.

Jose, I’ll call him, worked tirelessly with me, hauling everything up carefully, only accepting some bottled water as a benefits package, and politely declining my invitation for lunch. He said little, but worked hard and continuously, clearly having done this before, and offered wise, laconic advice on the proper way to turn a chest of drawers, or to rotate a box spring into the house. We finished in record time, about 2 hours, after which I drove him back to Home Depot and rounded up his wages to $80 as a token of his industriousness (and with admonitions of my girlfriend not to ‘exploit’ our new worker ringing in my ears. She is less enthusiastic of being a part of the job-creating class than I am.) Jose gave me the first smile of the day, thanked me, shook my hand, and went on his way.

Jose spoke English decently, and told me in our brief conversations to and from his erstwhile job site that he had lived in East Palo Alto for 10 years in a bedroom he rented for $1,000 a month; it was $500 only 4 years ago, but inflation has crept up everywhere in the Bay. Jose did mostly carpentry and other construction work, and sent money back to his family in Mexico. He indicated it was too dangerous for him to be in Mexico, but said his family was safe when I asked about them.

I have no idea whether Jose is here legally or not, and frankly I don’t really care. I needed someone to do tough, brief work with me ASAP for a reasonable price, and Jose came through in spades. This was the first time I’d ever hired a day laborer, and it worked out wonderfully.

This story illustrates what I’ve observed from varying distances hundreds of times: most immigrants to the United States work honestly, intelligently, and hard, often harder than native-borns like myself, either because they have to or because the ones who attempt to come here are more motivated and skilled than those who don’t.

The immigrants I know in America include:

  • The Hispanic yard maintenance guys shoveling dirt out of a pickup truck on Thanksgiving day while I strolled by leisurely after eating a gut-busting turkey dinner with my family.
  • My very bright and thoughtful Indian data analyst colleague who earned his Masters in the midwest, studies American politics more closely than I do, and told me about his trip with his friends to Glacier National park, describing a spot that was the “most beautiful place in the world” that he’d ever seen. He fortunately beat the odds in the H1-B visa lottery, managing to win a 3-year extension to his visa, despite only a 40% chance. I feel bad for the other 60% working just as hard and intelligently as him, and contributing just as much in economic surplus and taxes, who had to disrupt their productive lives and relationships in the US and return home through no fault of their own.
  • The Mexicans migrants in wide-brimmed hats picking strawberries in the 100 F heat with while I roadtripped in air-conditioned comfort down to Monterrey Bay to enjoy a county fair last weekend, stopping at a farm stand to buy some of the delicious, hand-picked fruit for a song.
  • Countless other other coworkers, neighbors, restaurateurs, Uber drivers, friends, and friend’s parents, all of whom came to the US seeking a better life for themselves and their families, and most of whom found it.

I also think about the would-be immigrants whom I’ve had less contact with, but whose stories are even more poignant in their rejection. I met a thin, boyish-faced man of about 40 in a rural village in the Philippines who was the youngest son of a mother who emigrated to the east coast of the US 15 years ago to work as a nurse. His dream all these years had been to join her there and live and work in America. He worked in construction and carpentry in the Philippines where wages are about $6 per day for unskilled day laborers, and stressed how he could have, and would have, done nearly any type of work in the US in order to move there. After finishing his story, he stared off wistfully for a few seconds, and then stated simply that he’d given up on his American Dream. His annual visa applications had been rejected year after year, despite his mother and her stateside friends’ entreaties on his behalf, and he had decided that fate–or more likely God; the Philippines is very Catholic–clearly did not intend for him to make the move.

My weekend to the Monterrey fair ended with a rodeo. The audience was probably 80% Hispanic. One announcer narrated in English, and the other in Spanish. Both the Mexican and American flags were presented, and both national anthems were played. The bronco riders were a mix of brown and white faces, and were cheered by all. Four white US servicemen performed a bull-dodging stunt while surrounded by rings of fire, and a European bullfighter had been flown in to leap impressively over a charging bull (three times!) It was the only US spectator event in my memory where as a white person I’ve been in the racial minority, but I felt perfectly welcome. The mariachi bands, elephant ears, tacos, 4-H exhibits, crowds of happy families, and the mix of languages all blended together for a uniquely enjoyable American experience.

That fair was a microcosm of how I view immigration to America: there are many pillars of the American system that people come here for and that are mostly enjoyed and revered by all of us. The elephant ears, corn dogs and wooden roller coasters are the rule of law, freedom of, or from, religion, and a peaceful political process. Other things that immigrants bring to America may not be for everyone (spicy salsa, or burkas, say), but as long as they don’t violate the rights of others living in American, we tolerate them peaceably, even if we view them with suspicion (deep-friend Twinkies, say.)

The real win is when immigrants bring something new and valuable to this country, as they have done for hundreds of years. Just consider food and drink alone, which I’m prone to do…:

The Germans brought beer (God bless them!), the Italians pizza and pasta, the Scottish whiskey, the Jews, in league with the Irish, corned beef and cabbage. More recently the Japanese brought sushi to our collective table, the Chinese gave us dim sum as a hangover-curing brunch alternative, and from Mexicans we obtained the taco, which is probably the most revolutionary thing to come out of Central America since Pancho Villa.

I rest my case: Viva la inmigración!

Ward’s 2016 Washington State, King County, and Seattle voter’s guide

Washington State’s November 2016 election ballot is chalk-full of important initiatives that require careful consideration.  I’ve given them that, and give you my recommendations below.  With one exception, this guide will NOT cover individual candidates, as I believe that territory is too divided along partisan lines.

5 minute voting guide


WA State

  • STRONG YES on Measure 732 – Make polluters pay their fair share for putting our collective home, Earth, in jeopardy via a proven and effective carbon tax. 732 reduces taxes on non-polluting things to boot!
  • NO on Measure 1433 – $15 minimum wage for WA state: This one requires a lesson in microeconomics that is not easy to deliver in a couple sentences: High minimum wages cause the least-skilled & most vulnerable (poorer, younger, less-educated) workers to lose jobs. This isn’t just theory, it’s already happening in Seattle due to the jump to $11 per hour. I discuss this one more below.
  • YES on Measure 1464 – Campaign finance reform with restrictions on lobbying by former politicians. Also restricts donations from potential state contractors and others with sleazy, non-democratic interests.
  • YES on Measure 1491 – Reasonable tool to try to reduce firearms access for those in imminent danger  of hurting themselves or others, complete with constitutional protections based on existing legislation for restraining orders. Don’t worry, the state can’t simply walk into your house and take your guns on a whim, I promise.
  • STRONG NO on Measure 1501 – Don’t believe the title of this bill; it’s a misleading scare entirely bankrolled by a very strong union (the SEIU) to hide its public employees from public record to keep these employees for learning about their rights. Seriously. It’s ugly. The Seattle Times explains.
  • STRONG NO on Measure 735 – Does nothing regarding Citizens United/corporate influence in politics, but has some harmful suggestions such as removing non-profits from lobbying. The Seattle Times explains.
  • YES on the Advisory votes 14 and 15 – Doesn’t do anything binding. Recommends maintaining consistent, already-passed tax policies.
  • STRONG YES on Senate Joint Resolution No. 8210 – A governance ‘good house-keeping’ bill with no one opposed to it.

King County

  • YES on both Charter Amendments 1: make Prosecuting Attorney a nonpartisan office, and 2: update the 1950’s-era Charter language to make it gender-neutral: councilmember instead of councilman, etc. Turns out women serve in government too.

STRONG recommendations are based on how clear the evidence & likely outcomes of a decision are to me. They have nothing to do with how important the measure is.

Candidate Recommendation

I STRONGLY RECOMMEND Brady Walkinshaw for US Representative in District 7. He’s for 732, speaks intelligently and correctly on a wide range of issues, is whip-smart (Fulbright scholar, Princeton alum), has made big impacts in local government around improving the lot of the mentally ill, reducing our prison population, and improving the environment. He’s also 32, and would be the youngest member of congress, and might actually know how to use the internet.

Brady worked for the Bill and Melinda Gates Foundation for several years, which is know for its rigorous, evidence-based approach to uplifting people. He also seems humble, pragmatic, and especially willing and able to work with Republicans–both candidates in this district are Democrats– to get things done. I also had the pleasure of meeting Mr. Walkinshaw at a “town hall” event, and was extremely impressed.

More thoughts on the initiatives

YES YES A THOUSAND TIMES YES on 732 – carbon tax

Carbon taxes, along with ‘cap and trade’, are the smartest kind of global climate change legislation. A similar carbon tax has been working successfully already in British Columbia. This bill is also revenue-neutral, which means no extra taxes, and no budget cuts either (or at least very small ones either way, depending on how the math works out.) Businesses will now pay for their pollution costs, but they and their consumers (read: us!) will get a break on producing and buying pollution-free goods. Those on the left that oppose this are either fools or hypocrites, or both.

NO on 1443 – $15 minimum wage in Washington state

Don’t, through good intentions, close the door on the lowest-skilled folks in society by forcing their cost above what businesses would pay. High minimum wages cause the least-skilled & most vulnerable (poorer, younger, less-educated) workers to lose jobs because they can’t get jobs at the (lower-than-new-minimum) wages that employer’s would be willing to pay them. Thus, these folks lose, and employers hire a few less workers, who are more skilled, at the higher minimum wage. Employers might also automate a little more and do other things to reduce their labor needs.

This is happening in Seattle already, as explained here.

Help the working poor instead by improving their skills (education, job-training & vocational programs), providing cost-effective services (health & child care, which might also make poor children more socially mobile), and allowing the poor to keep more of what they make (income tax reductions for the poor & things like the Earned Income Tax Credit.)

Another overly-simplistic way of looking at this is that I’d rather pay 10 people $9/hour then 9 people at $10 per hour and have the least skilled guy be unemployed.

My background and biases

I have an MBA from the University of Washington, focusing on economics & finance, and two degrees in Physics. I’ve worked as a financial advisor, data analyst, and engineer. I’ve researched each measure thoroughly, spending about 12 hours total on the entire process, and have consulted several sources*.

What I believe in

Utilitarianism: I believe every individual’s well-being is of equal intrinsic value, be it a Washington voter, a felon, or an African living halfway across the world. The goal of policy should be to promote the greatest happiness across the greatest number of people**.

Libertarian paternalism: I also believe that individuals themselves are usually the best judge of what will make them better off, and that ‘freedom’ (bounded by laws to protect others’ liberty) and markets (i..e: collective free choice) are the defaults that usually lead to the best outcomes.  That said, institutions can improve humanity’s collective lot further by shaping choices to help individuals in areas where we know humans do badly for themselves, including cases of addiction, mental illness, or more mundane mental problems like laziness or poor statistical reasoning (automatic 401k contributions are brilliant, for example.) Also, there is room for governments to engage in wealth redistribution or other measures that boost the total world’s well-being, after adding up the social costs & benefits.

I generally favor more choices for people as opposed to fewer. I also believe society should often reallocate its resources to the people who have the least in the world, being careful not to create bad incentives that decrease our prosperity net of distributive benefits. The simple fact is that the amounts given up by the well-off often does much more good when received by the worse-off. For example, $3,500 can save a life in Africa, but will barely get you a college quarter’s tuition in the United States.


*Credit for my conviction, or rather conversion, against high minimum wages goes to my microeconomics & finance Professor Edward Rice, who held a riveting lecture on Seattle’s $15 minimum wage law prior to that vote last year. He and the majority, but certainly not entirety, of economists and their studies on the subject finally convinced me that high minimum wage laws (defined as, say, > 50% of the poverty level), well-intentioned as they might be, actually hurt the working poor, and society as a whole.

**Technically, I would amend this to ‘the greatest well-being for the greatest number of sentient beings’, which would include animals that can suffer/feel pain. As Jeremy Bentham said, “the question is not, Can they reason? nor, Can they talk? but, Can they suffer?”

***A good explanation of how inefficient & costly rail, and unfortunately, other public transit systems are, can be found here, and light rail specifically here. My one criticism of this analysis is that the author doesn’t account for global climate change externalities (which he DOES incorporate others), but I suspect that would make little difference in the calculations and conclusions. All hail the carbon tax & flexible, cheaper bus system instead!

Ward’s 2012 Washington State, King County, and Seattle voter’s guide to the issues

Washington State’s November 2012 election ballot is chalk-full of important initiatives that you have a duty (that’s right) to vote intelligently on.  To help with that, I’m going to go over my recommendations below.  With one notable exception this year, this guide will NOT cover individual candidates, as I believe that territory is too fraught with political biases to be worthwhile to an unsympathetic reader.

Why should you give any credence to what I say?  Because I’ve researched each measure carefully, consulting several sources, am highly educated (two college diplomas and an MBA, with a solid background in economics, finance and even some philosophy), reasonably intelligent, and thoroughly rationale and critical.

My biases: I take it as given that each individual’s happiness is equally important (be it a Washington voter, felon, or Chinese guy), and that the goal of good policy should be to promote the greatest happiness across the greatest number of people.  (I.e.: I’m a died-in-the-wool Utilitarian after the fashion of Jeremy Bentham.)

These positions follow from the above philosophy:  I generally favor more choices for people as opposed to fewer (because people are usually made better off with more choice, except in certain cases.)  I believe society should often reallocate its resources to the people who have the least in the world (being careful not to create bad incentives that decrease our prosperity), as the amount given up by the well-off often does more good as an amount received by the worse-off.

As a simple example, Bill Gates wouldn’t miss $20 (and nor would most of us), but that same $20 can buy vaccines in Africa that could save a life.

Without further ado, here’s how you should vote (and why)!

State issues:

Ref 74 – Allow the gays to get marriedAPPROVE.  (Note that this bill preserves the right of religious organizations to refuse to perform, recognize, or accommodate any marriage ceremony, like that of a same-sex couple.)

502 – Legalize, regulate & tax marijuana – APPROVE.

Marijuana doesn’t appear to be particularly harmful.  Let’s let adults make adult decisions about what (at worst) mildly harmful substances they choose to ingest of their own free will.  Furthermore, policing marijuana has been largely a failure, and is extremely costly.  Instead, this bill will stop treating ADULT (21+) casual weed users as criminals, and turn weed use into a profitable source of state revenue for education, etc.

1240 – Public charter schools in WA state: APPROVE.  We need to explore more options in improving public education in WA state (and nationally), and allowing freer rein to nonprofit school administrators in a select group of 40 public charter schools seems like a very reasonable way to try some new things in education.

These charter schools are still publicly-funded & publicly-accountable schools (read the description of the bill before you go spouting off misleading WEA-influenced rhetoric willy nilly.)  They’re open to everyone, regardless of income (there’s no tuition, overflow applications will be handled by an impartial lottery), and they don’t ‘take money from public schools’ in the sense that they ARE public schools, run by a nonprofit org, and therefore get money from existing public school sources.  They are simply ALTERNATIVES to existing public schools.  They have to maintain the same hiring & educational standards as all other WA state schools.

Charter schools may not end up being the ‘answer’ to our less-than-stellar education system, but let’s please at least explore the possibility (and then measure & analyze the results), rather than being defeatist by opposing any new innovations in public education.  THINK OF THE CHILDREN! J

8221 & 8223: APPROVE each – Take a look at the 2012 Legislative voting: hardly anyone on either side of the political aisle opposed these bills of fiscal reasonableness, which is a good sign that we should pass them.

Advisory 1 – MAINTAINED – Recommend to the legislature to maintain the closure of a business tax deduction (aka, a tax ‘loophole’!)  I’m all for eliminating deductions favoring silly things, even when popular (I’d LOVE to see the homeowner’s mortgage interest deduction go away, but it’ll never happen.)  In economic theory, such loopholes distort incentives, and are bad for economic efficiency (unless they’re correcting/promoting for negative/positive externalities, like taxes on gasoline, which are a good thing, and should be higher!)  Plus, WA need revenue, so let’s close this and collect some.

Advisory 2 – MAINTAINED – See above rationale.  This time we’re taxing a negative externality-causing thing, petroleum, and perhaps correcting for subsidizing of negative externalities).

BTW, neither of these advisory votes matter that much since they won’t change the law by themselves!

Seattle & King County

APPROVE both Prop 1 in King County (fingerprinting levy to aid law enforcement) and Prop 1 in Seattle to rebuild the crumbling Alaskan Way seawall.

2012 Bonus recommendation – Ward’s votin’ Republican in the Governor’s Race

WA State governor:  I normally don’t post any of my partisan (Dem vs Republican) recommendations, since I want to restrict this guide to a non-partisan review of issues, vs politicians, but I’m going to break this rule for this notable reason: for the first time in my (relatively short) electoral life, I’m voting for a Republican, Rob McKenna, for WA state governor.  (The Seattle Times also recommends Mr. McKenna, along with a few other Republicans, as well as Democrats, that I will be voting for in large part due to their recommendation rationales.)

In short, McKenna seems to be more thoughtful and have more detailed, practical plans on tackling tough issues like education & health care costs in WA state than his opponent, Democrat Jay Inslee.  Inslee seems mostly full of hot, nice-guy-that-you’d-have-a-drink-with political air, spouting vague platitudes which I generally agree with in principle, but that don’t seem to have any practical implementation behind them.

While I disagree with McKenna’s backing of Eyman’s initiative to prevent the legislature from passing taxes without a 2/3s majority (because I think it will hamstring our legislature’s ability to close loopholes & properly fund voter-approved measures, and puts us on a road to major fiscal problem similar to places like California that have tried such a thing), I think McKenna is the best choice for governor of the two.  He has the strongest plan & apparent commitment to fund higher education (he wants to increase state funding from 30% to 50% of the cost of tuition), and he also seems serious about introducing measures to reduce the cost of health care at the state level (by favoring Health Savings Accounts & increased competition in state health care plans.)

You can find a comparison of McKenna & Inslee on the issues here:

And also here, which includes a video of the first gubernatorial debate:

UPDATE: Why We are Right to Rebuild Haiti or An Argument for Charity

UPDATE on 10/20/2010: Here’s a link to a good TED talk on how the vast majority (like, ~99% perhaps) of lives lost during the Haiti earthquake were due to poor building construction.  The speaker notes that what is required for better buildings isn’t more money beyond what’s already required to rebuild Haiti, but just more training for Haitian builders (at a minimal extra cost.)

I read a blog post called “If You Rebuild It, They Will Come” by a man named Paul Shirley.  In it, Mr. Shirley argues that we shouldn’t give/have given money to the Haiti relief effort due to the poor position they (he claims) put themselves in.  To me, even if the Haitian’s were entirely to blame for the damage the earthquake did to their country (I believe luck & history had a lot to do with it), such criticism is missing the point of an urgent relief effort.

Mr. Shirley’s criticism is a bit like giving a lecture to a badly injured speeding motorist, as he bleeds to death, on how he should have driven more carefully, rather than taking him to a hospital.  I’d prefer to take him to the hospital first, and give him the lecture later.  Mr. Shirley also seems to assume that the governmental and institutional failures of Haiti should be reasons to deny its citizens aid.  For starters, in no point in Haiti’s history do ordinary citizens appear to have be in a position to build up either the physical or intellectual capital necessary to privately look after their own needs beyond a subsistence living.  With regard to intellectual capital, schooling in the local Creole language did not even occur until 1922, less than 90 years ago.

(BTW: I’ve linked many of my sources, but if I state something unlinked/cited, it is from Wikipedia, the fount of all knowledge.)

Haitian civil unrest & violence

Mr. Shirley might argue that these citizens who are now victims of the quake are the very ones who caused the violence and civil unrest that’s been the source of so many problems throughout Haiti’s unstable history.  I suspect he would be wrong.  Let’s look at a parallel case in Afghanistan or Iraq.  You could blame the Taliban in Afghanistan for the poor conditions and civil rights abuses.  However, the Taliban are estimated to number in the tens of thousands in Afghanistan.  Let’s assume there are 100,000 of them.  The Afghanistan population totals about 28 million.  That means that only 0.36% of the population are Taliban, or 1 in 280.  You might counter by saying that yes, 279 out of 280 AREN’T Taliban insurgents, but since they outnumber them, why don’t they revolt and kick them out of the country if they don’t like the conditions caused by the Taliban?  I would suspect it’s the same reason I wouldn’t take up arms against the US government if it decided to become a totalitarian dictatorship tomorrow: I’d get slaughtered.  The Afghanistan people are poor, like the people in Haiti (who are even poorer.)  They lack education and military and financial strength.

Similarly in Iraq, there are roughly 100,000 – 130,000 insurgents.  If we divide 130,000 by the population of 31 million we get 0.42%, or about 1 in 240 people.  My point here is that a relatively small amount of people with guns and resources can control a much large number of people without one or the other.  Thus, blaming the typical Haitian citizen for not kicking violent organized groups out of the country is unrealistic.

Poverty and lack of financial & intellectual capital

“By most economic measures, Haiti is the poorest country in the Americas. It had a nominal GDP of 7.018 billion USD in 2009, with a GDP per capita of 790 USD, about $2 per person per day.[1]

However, of that ‘wealth’, about half of it is in the hands of Haiti’s richest 1%.  Thus, GDP per capita for 99% of the country is actually $1 per day.

“About 80% of the population were estimated to be living in poverty in 2003.[1] Most Haitians live on $2 or less per day. [72] Haiti has 50% illiteracy,[73] and over 80% of college graduates from Haiti have emigrated, mostly to the United States.[74]

So of those folks that DO get access to education (very few), 4 out of 5 leave the country for greener pastures. (And who could blame them?  Mr. Shirley certainly wouldn’t, unless they stayed behind to contribute to their home country’s economy and got crushed in the earthquake; then he’d blame them.)

Government & Corruption

I’ve established why I believe it’s ridiculous to assume that Haiti’s private sector could’ve been expected to prepare for the earthquake, which would’ve been relatively unaffordable, but what about the government?  Surely there must have been some capital stored up to build earthquake-proof houses etc for the masses?  Unfortunately, that is also not true, in part due to looting of Haiti’s coffers by corrupt officials:  “It is estimated that [a former Haitian president, his wife] and three other people took $504 million from the Haitian public treasury between 1971 and 1986.”

“Similarly millions was stolen by [former president] Aristide.[80][81][82][83][84] During the Aristide era, drug trafficking emerged as a major industry. Beaudoin Ketant, a notorious international drug trafficker and close partner of Aristide, confessed that Aristide “turned the country into a narco-country. It’s a one-man show. You either pay (Aristide) or you die”.[85] The BBC describes pyramid schemes, in which Haitians lost hundreds of millions in 2002, as the “only real economic initiative” of the Aristide years.”

Okay, so officials have been corrupt and have stolen hundreds of millions from the government over the years, but what about all the foreign aid that Haiti has received?

Foreign aid makes up approximately 30–40% of the national government’s budget. The largest donor is the US, followed by Canada and the European Union.[87] From 1990 to 2003, Haiti received more than $4 billion in aid.”

$4 billion might sound like a large amount of money, and it is, until you divide it by population.  Let’s assume the aid was spread out evenly over 13 years and that the population was, on average, 7.6 million.  That equates to $308 million per year, or $40.50 per person per year, which is about 1 month’s wages for most people in Haiti.  Could you rebuild your house on a sturdy earthquake proof foundation for $40 bucks, or even 1 month’s salary?  Or how about relocating to what might be a safer place (regardless of whether you can earn a living there)?

“In 2005 Haiti’s total external debt reached an estimated US$1.3 billion, which corresponds to a debt per capita of US$169. In September 2009, Haiti met the conditions set out by the IMF and World Bank‘s Heavily Indebted Poor Countries program to qualify for cancellation of its external debt. [94]

So until recently, the government was carrying debt equal to 18.7% of its 2008 GDP. That’s not a very strong base from which to run a deficit with large-scale public infrastructure projects.  To put it into comparison, the US’s record-high government debt is around 8% of GDP, only 43% of that of Haiti’s in % of GDP terms.

Who should rebuild Haiti?

Mr. Shirley states “I don’t know whose responsibility it is [to rebuild Haiti], either.  What I do know is that it is not the responsibility of the outside world to provide help.  [Ward’s note: which is basically saying it’s either Haiti’s responsibility or no ones.]  It’s nice if we do, but it is not a requirement, especially when people choose to influence their own existences negatively, whether by having too many children when they can’t afford them or by failing to recognize that living in a concrete bunker might not be the best way to protect one’s family, whether an earthquake happens or not.”

On the subject of family sizes in Haiti, for one thing, birth control is likely very inaccessible.  (If Mr. Shirley would then urge Haitians simply to not have sex, he would be severely overestimating the will power of all but a special class of human beings.)  Secondly, it may actually be in the economic self interest of Haitians to have large families (to say nothing of emotional self interests.)  Two thirds of Haitians support themselves by subsistence agriculture.  On a farm, more children equals free labor, so it may be rational for individual families to continue have larger families, despite their poverty.

Logically I can’t dispute whether or not better off people have a ‘requirement’ do help those much worse off.  Morally I disagree.  I believe those with way more money than they need to make them happy (the western world) has a strong moral imperative to better the conditions of those worse off.

How would you want the world to be if you were randomly placed in it?

There is a very simple thought experiment that I find helpful in defending the ideal that those with a lot should help those with a little.  Imagine that you were given a chance before birth to allocate all the resources in the world to various countries, regions, and peoples of the world.  You can do this however you want.  The catch is that afterwards, you will be randomly placed into that world population of about 6.5 billion.  Given income distribution in our world (as of the year 2000), you would have a 45% chance of living off less than $3/day (including a 23% chance of living off less than $2/day, the level that Haiti is at.)  2 out of 3 times you would be living off less than $14/day.  You would only have a 13% (1 in 8 ) chance of being relatively affluent & making at least $11,500 per year (1997 data), which is well below the poverty line for a family in the United States.  (The US median income per family is about $55,000 per year, making us extremely wealthy by worldwide standards.)

We live in a world where the richest 10% of the population owns 85% of its assets, and the poorest 50% owns 1%.  Would you choose to distribute resources as they are today, knowing that you’re most likely to live your life in incredible poverty (by US standards)?  Or would you choose to move things around a bit, giving yourself a chance to live comfortably no matter where you happen to be born?

Two times the wealth doesn’t equal two times the happiness

I would choose the latter, and I suspect many other people would as well for the following reason.  Pretend someone offers to let you flip a coin for your entire net worth.  If the coin lands heads, you double your wealth.  If it’s tails, you are utterly wiped out and have nothing: no house, no savings, no clothes/cars/iPhone etc.  Would you take the gamble?  I suspect 98% of Americans would not.  The reason?  Having twice as much wealth doesn’t bring us twice as much happiness.  The more money we make, the less valuable each dollar is to us.  Economists refer to this trait as being ‘risk averse.’  Losing what we already have hurts more than gaining an equivalent amount, so we pay for security in the form of insurance or diversified mutual funds.

Of course, in terms of the ‘where would you be born’ thought experiment, the results of birth misfortune are much more dire than simply losing your current wealth.   Not only do you have a 7/8 chance of making less than $11,500, you will likely lose your paths of opportunity to a better life: education, health, human rights, and physical security.


One issue I haven’t addressed is the proper incentive system for people, not just “ideal” wealth distribution.  If someone does something harmful to themselves, you want to discourage them from doing so again.  I’ve already explained why I believe the vast majority of impoverished Haitian’s are NOT very responsible for their fate, thus, it makes little sense to punish them by withholding aid.

Where possible to do so effectively, the US & private donors should definitely make an attempt to reform Haiti’s government and provide citizens with better opportunities to help themselves.  That being said, we can do a lot in the mean time.


In closing, I urge thinking people to avoid assigning blame to people in trouble simply because they have had the misfortune to be born in a different part of the world.  This is an easy trap to fall into because it absolves the blamer of all responsibility to help.  It is also easy to forget how incredibly privileged we are in western Europe & the United States.

Fortunately, judging from the roughly $1 billion in private donations from the American charities to Haiti, the vast majority of people are ignoring Mr. Shirley’s callous and faulty reasoning and donating however they can to help the Haiti relief effort.  If you haven’t already, I urge you to do the same.

“Of all vulgar modes of escaping from the consideration of the effect of social and moral influences on the human mind, the most vulgar is that of attributing the diversities of conduct and character to inherent natural differences.”

– John Stuart Mill

How to improve the health care system and what I learned from Michael Moore’s “Sicko”

I recently watched Michael Moore’s ‘Sicko,’ a “documentary” (and propaganda piece) on the health care system in the United States.  Moore also contrast our system with various government-run programs around the world.  While Mr. Moore’s opinions and footage are clearly biased in favor of a government-run system, I believe he does raise some valid points.  I’ll enumerate some of them below, adding my own thoughts.   Please remember that I am certainly not an expert in this area, and that these are merely my moderately-informed opinions.  Feel free to dissent, agree and argue by posting comments.

(Note to readers: I do feel a little uncomfortable posting politicized articles on this blog next to objective financial advice.  However, I do think there’s some value in asking readers of this blog to consider some of these very important issues from time to time, even if they disagree with every word I say below.  I’ve tried to keep my opinion pieces 1) separate by clearly labeling them as political, 2) as even-handed as possible, given my personal feelings and biases, and 3) without financial advice that relies on my political opinions.  Let me know in the comments if you like seeing a political article like this every once in a while, or if you think it’s inappropriate given the other content on my site.)

1) Doctors under a government-run insurance plan do not have to worry about getting paid by private insurers and can focus solely on providing health care. One could argue that a government-run plan would be more complicated than a private one.  That may be true, but I would think even one highly complicated government insurance option would be much less complicated that the combined thousands of private plans.

2) The profit motive of private insurance and health care companies (including for-profit hospitals and drug companies) is not necessarily in the best interests of patients. Moore interviews people whose job it is to find loopholes that allow insurance companies to avoid paying claims to those who become sick.  Also, there have been studies that show doctors are much more likely to prescribe particular drugs to patients when lobbied by drug salespeople regardless of whether the patient needs the drug or not:  “[r]esearch clearly shows that doctors who report relying more on promotion tend to prescribe less appropriately, prescribe more often and adopt new drugs more quickly.”

I’m not saying that the profit motive is bad in the health care industry (in fact, I think it’s often a wonderful way to align the incentives of many different people and businesses), but it has some undesirable effects.  Without the large profits that drug companies enjoy, there would be smaller incentives to pursue groundbreaking drugs that can work wonders for people ranging from cancer sufferers to those with high cholesterol.  I think many people make the faulty argument that because drugs are so cheap to manufacture, they shouldn’t be priced so high.  However, development of these drugs requires an enormous amount of research and development (R&D) expenditures, and most drugs developed never see the light of day.   Economist Gary Becker has suggested that countries that regulate the prices of drugs to low levels are able to ‘free ride’ off the American system.  What he means is that drugs that are developed in the US, where their makers can enjoy large profits, still benefit other nations that might have stifled similar drug development in their own country with price caps.

3) Moore’s ‘Sicko’ also states that we in the US suffer from poorer health as measured by infant mortality and longevity when compared to other industrialized nations. It is certainly true that we are an unhealthy nation, but others like Becker point out that this is mostly due to our terrible lifestyle, and not to the quality of our technical skill in healthcare.  Becker shows that survival rates for diseases like cancer are higher in the US, suggesting that our healthcare system is in fact very good (although very expensive.)  While it’s true that our poor health is often due to factors like overeating and smoking, I think it’s incorrect to think that our health care system can’t help fix these lifestyle factors.  When an ‘ounce of prevention is worth a pound of cure’, why should we be so focused on the quality of the cure and not prevention?

One potential benefit of a government-run health insurance option is that it would be a perfect place for an incentive system to be set up to promote healthier lifestyles.  One could penalize people who smoke or are at an unhealthy weight through higher premiums, or reward seniors who join a gym or excercise program.  This gets into dicey territory of how to determine what’s ‘bad’ and what’s ‘good’ for people.  One might point out that obese people and smokers actually costs less to treat during their lifetime because they die sooner.  Despite this, I personally feel that we as a country have a responsibility to encourage people to live healthy lives.  Libertarians would find this paternalistic, but I believe people are generally happier if they are healthier, and I would support the government taking modest measures to raise the health of its population.  Simple things like providing information (warning labels on cigarrettes, forcing restaurant chains to display calories) shouldn’t be too objectionable.  Penalties for drunk driving are another example (which should be increased; the penalties, I mean.)*  On a larger scale, we could eliminate farm subsidies for crops that make up too much of our diet, like the corn used to make corn syrup.

4) There is a general lack of information on the part of consumers. I’m a fairly sophisticated consumer when it comes to most items.  I have a mental price list for pretty much everything I buy, and am constantly weighing benefits of one product versus savings on a substitute.  Despite the fact that I pay much more attention to prices and value than most people, I am completely clueless as to what is reasonable to spend on a night in a hospital, a routine doctor’s office visit, x-rays, or a hip surgery.  Prices are not posted for all to see and compare between hospitals as they are for other products.   Insurance options are generally not set up to encourage patients to shop cost effectively.  Combine this with the many varieties of health insurance, all with pages of descriptions on what they do and don’t cover, copays, coinsurance rates, deductibles and lifetime maximums.  These factors make it very hard to know if what you’re paying for care is reasonable or outrageous.  A government insurance option or regulation that standardizes the way policies are displayed, or a rule forcing healthcare suppliers to clearly delineate their service prices in a fashion that’s easy to compare, would go a long way towards helping patients make better decisions for themselves.

5)  I also perceive a lack of competition between health care providers and insurers within localized areas. This could be partially fixed if the government would equalize the tax benefits of health care between individuals and businesses.  Currently, a business gets to deduct its health insurance premiums whereas a wage-earner with an individual plan generally cannot.  This provides a huge incentive for people to be insured through their employer, which creates problems of choice, since companies typically don’t offer many insurance options from competing providers.  Transportability, by which I mean the ability for a person to keep their insurance when switching (or losing) jobs, is also an issue when insurance is tied to employment.  Individuals do have some options to avoid paying taxes on their out-of-pocket health expenses, like Health Savings Accounts, but usually not their insurance premiums.

In addition, I would guess that businesses get to write off health benefits at the corporate tax level of 35%, whereas even if individuals could write off thier insurance premiums it would be at their federal income tax level, which would be much lower for the vast majority of people.  Because of this last issue, I would suspect it would be easiest for the government to eliminate the tax breaks that businesses get on health care, and simply let individuals deduct their personal insurance costs.**  I think that if the onus were put on individuals to buy their own health insurance, and if policy terms were more standardized, it could lead to a situation more like car insurance, where it’s very easy to compare policies and switch to get the best deals.

6) Lastly, I think the importance of personal security and risk aversion is overlooked by opponents of government health insurance. As Moore’s film shows, experiencing a traumatic health event without proper insurance (or finding out you didn’t have what you thought was proper insurance) can be catastrophic to individuals and families.  (You’ve probably heard the oft-quoted statistic that about half of the bankruptcies in the US are related to illness or health care expenses.)  People gladly pay more to avoid unsustainable losses; that’s what insurance is all about.  I think that covering the majority of the 40-50 million Americans without health insurance with at least catastrophic care, and forcing insurance companies to not drop patients when they get sick would help alleviate the hardship individuals would feel in the event of a serious illness.  Plus, catastrophic care combined with preventative visits could save money through early prevention and by lowering emergency room visits by those without insurance.


I think its important for both sides of the health care debate to realize the successes AND defects of our current system.  (For extra reading, Becker does some of this in his analysis of the Swiss health care system.)  My point here is not to illustrate that government-run insurance is better than private insurance (I think we should have both, assuming the government option can be done right.)  Rather, I want to stress the importance of improving the current system, which is not working for many Americans, notably those in the bottom income percentiles.  Standardization and flexibility in individual choice in policies can help consumers navigate the system and make better choices.   Making sure that all Americans, especially children, since they have no choice in the matter, have affordable health coverage is also important.  I believe we should take things a step further and find ways for our health care system to alter our lifestyles for the healthier.  I’m frankly dismayed that a nation as wealthy and resourceful as ours has continued to allow many of its citizens to exist in a condition so inferior to that of the rest of us.  Because I believe that the individual happiness gained from increased wealth diminishes rapidly at a certain point, it is shameful and stupid for us not to a have a more egalitarian society, especially with respect to basic services like health insurance.  It is my hope that Americans will one day view basic health care in the same way most view education or protection from violence today, as a benefit that should be extended to all, regardless of race, sexual orientation, gender, or income.

* There is an important distinction that economically-minded people like myself make when discussing government-imposed penalties and incentives.  1) Incentives designed to compensate for the damages a person or company does to bystanders.  These are known as ‘negative externalities’.  A common example is pollution which affects those who are not the cause of the problem.  2) Incentives designed to modify behavior towards some kind of (subjectively) preferable alternative, despite the fact that this behavior is only harming the individual that persists in it.  Strict Libertarians would argue that government should never step in under these situations, since that would be infringing on individual liberty.

The problem with this position is that it assumes people are always rationally doing what they want to, and that no one outside of that person has a better idea of what would make the self-inflicter better off.  This may make economic calculations easy, but it’s difficult to apply in real life.  Few people question that a child should be forced to do certain things that will make them better off in the long run, like attending school or avoiding sharp objects.  Yet once a person is an adult in the eyes of the law, this idea that others can sometimes look out for a person better than the person themself is thrown out the window by those who hold “liberty” as the ideal that trumps all others.  For example, an economist would say a drug addict shooting heroin into his veins and living in a dumpster is doing what’s ‘best’ for himself, given his desires and position.

However, I doubt that few people, including the addict himself, in his more-lucid moments, truly believe such a person wouldn’t be better off if he were able to kick the habit.  Moreover, we frequently hear people saying they don’t want to do something, and yet they do it anyway.  While this makes me react cynically and irritably toward such people, I still think we as a society have a responsibility to take their words at face value and try to help them.  This might be on the ‘local’ level of a family member forcing someone into rehab, or it might be on the government level of subsidizing rehab centers or criminalizing (to a reasonable extent) the use, or at least the sale, of drugs.

** Labor unions dislike this idea because it jeopardizes the benefits they can offer people.  However, it’s important to remember that health insurance is just one part of employees overall compensation package, so less benefits would be theoretically made up in higher salaries (minus the difference in tax subsidies that the business was enjoying.)  Plus, instead of subsidizing health insurance premiums at the corporate level, government could provide additional subsidies to individuals to make up any differences.

Do average Americans benefit from lower capital gains tax rates?

The answer, according to some well-reasoned arguments voiced by‘s Kaye Thomas, is ‘not much.’  Here’s some interesting thoughts from Mr. Thomas’s article regarding taxable stock capital gains in the US.  (Bolding and italics mine):

“[I]t may be true that 100 million Americans own stock, but most stock held by middle class Americans is in IRA or 401k accounts, where the capital gains rate doesn’t apply. The tax rate matters for stock held outside these retirement accounts, and most of that stock is owned by extremely wealthy individuals. The bottom 60% of households own just 9%, while the top 10% of households own 70%. Over half of all capital gains go to households with income over $1 million. That’s roughly two-tenths of one percent of the population getting more than half the benefit of the cut in the tax rate.”


“Advocates of lower capital gains rates (and lower corporate tax rates, and other tax benefits for business) often cite the statistic that 100 million Americans own stock, implying that the middle class will receive an ample share of the benefit. Yet ownership of stock is highly concentrated in the hands of wealthy individuals, a small fraction of the population. The vast majority receive little direct benefit, or none at all. To borrow an analogy from John Kenneth Galbraith, the “100 million” argument is like justifying the cost of feeding more oats to the horses by pointing out that some will fall to the ground and be eaten by sparrows.”

Why I hate the US Postal Service

No, really.  I hate them.

No, really. I hate them.

A dollar to ‘verify my identity’?  For security purposes!?  All my financial institutions changed my address for free, and they seem pretty darn secure.  Give me a break.  Better yet, break up this tax-sucking monopoly that tries to pass for a public service outfit!

Now don’t get me wrong, there’s plenty of other things that those useless minions at my local post office do besides nickel and dime their customers under the guise of protection like 1) frown.  2) Put up friendly signs providing helpful guidance like ‘NO FREE TAPE” and 3) go on break when there’s a line of people out the freakin’ door waiting to mail packages!

Keep in mind that these same folks lost about $5.1 billion (B)  in 2007, $3 B in 2008 and anticipate a deficit of roughly $6 B in 2009.  To read more criticism and why we should allow private companies and the magic of the internet overtake the post office, read this. Go here to REMOVE YOURSELF FROM JUNK MAIL LISTS that make up over half of USPS’s business (at rate subsidized by all us taxpayers!)

If you weren’t hopping mad already, below are some more awesome tidbits from Wikipedia that make me want to jam my hand in a blender running at ‘frappe’:

– “Congress has delegated to the Postal Service the power to decide whether others may compete with it” [Pop quiz to readers: if you were a giant, ineffecient, money-burning monopoly, would you rather have competition or not? Hmmm…]

– “FedEx and United Parcel Service (UPS) directly compete with USPS express mail and package delivery services, making nationwide deliveries of urgent letters and packages. Due to the postal monopoly, they are not allowed to deliver non-urgent letters and may not use U.S. Mail boxes at residential and commercial destinations. These services also deliver packages which are larger and heavier than what the USPS will accept, and unlike the USPS assign tracking numbers to every package.”  [So, Fedex and UPS accept packages that USPS won’t, and also assign *gasp* tracking numbers to every package so you’ll know where they are (what a novel idea; good thing USPS plans to implement that by 2013…)  Now remind me why these private companies aren’t allowed to deliver regular mail to our mail boxes as well??]

– “The USPIS has the power to enforce the USPS monopoly by conducting search and seizure raids on entities they suspect of sending non-urgent mail through overnight delivery competitors. For example: according to the American Enterprise Institute, a private think tank, the USPIS raided Equifax offices in 1993 to ascertain if the mail they were sending through Federal Express was truly “extremely urgent.” It was found that the mail was not, and Equifax was fined $30,000″ [WTF!?  So a company, of it’s own free will, chooses to use FedEx instead of USPS, presumably because it’s more reliable and/or cheaper, and it’s fined!  That’s like me buying groceries at the less-expensive store Safeway within walking distance of my apartment and getting fined by the expensive QFC a mile or two up the road!]


Disturbing (but not altogether surprising) news about the financial bailout

No one seems to know where the $700 billion financial bailout went, what’s being done with it, and how much is still in the bank’s coffers to be used for who know’s what. Read about this below:

Now I can understand how normally, banks wouldn’t track dollars that came from one source versus dollars from another. However, in THIS case, the government fronted billions in taxpayer money (not private investment.) Therefore, I can’t imagine congress requiring anything less than full disclosure of how the money was going to be allocated and spent.

It appears that the rush to get money to the banks has succeeded in giving banks no incentives whatsoever to transparently disclose what’s being done with the money, or ‘where’ it’s at within each bank. If one made the assumption that these banks were all going to use this money for the best possible long-term usages for their firms, this lack of disclose might be okay. BUT, the fact that banks are in this mess due to poor financial decisions (and NOT “bad luck” due to the economic downturn, despite the fact that it exacerbated the situation), destroys that assumption.

While I do strongly believe that private firms generally perform better than government-owned ones (been to your local post office lately?), one thing that political trumpeters of the “free market” like to neglect are the conflicts of interest between firms and their management teams. Unfortunately, CEOs are often rewarded with compensation that focuses on the short term stock price (stock options and bonuses dependant on share price) rather than being aligned with the company’s long term future.

Warren Buffet, CEO of Berkshire Hathaway and arguably the greatest investor of all time, is a notable exception. His substantial net worth of many billions is almost completely investing in the company he leads. This long term ownership, combined with the fact that Buffett’s salary is a meager (for CEOs) $100,000 per year, with no fancy options deals, means that Buffett’s incentives are aligned with those of his long term shareholders.

Also, CEOs are generally paid more relative to the size of the company they control***. This creates the incentives to make fiscally irresponsible mergers just to “grow the empire.” And now, with the precedent being set of companies designated “too big to fail,” managements have even more incentives to grow the size of their firms. These incentives by themselves do not encourage firms to pursue social gains (either for consumers or shareholders) and therefore are undesireable.

Coming back to the financial bailout, it is very troubling that in an effort to quickly sustain failing companies within the financial services industry (without discussing whether that was the right thing to do or not), congress and the administration may have not addressed the threat of those firms failing in the future, throught poor use of the bailout money in the present. This lack of oversight may result in these same companies returning years later in similar predicaments. (Of course, that may have resulted anyway, even with oversight, calling into question the wisdom of the bailout, of which I’m not knowledeable enough to discuss.)

Hopefully failure of many of these companies down the road does not turn out to be the case. But, when one has no idea of what’s happening with the bailout money those firms received, how can we know one way or the other?


*** From nobel prize-winning economist Gary Becker (on the “For every 10 per cent increase in firm size, measured by the market value of assets, by sales, or by related variables, compensation increases by about 3 per cent. This “30 per cent” law held during the 1930’s, and has held for every succeeding decade, including right up to the present.”