Archive for the 'economic theory' Category

How Obamacare Might Increase Costs

September 9, 2009

For those of you following at home, the President gave a big speech on health care reform tonight. Specifically, he argued for a plan composed of three major planks:

First, …. it will be against the law for insurance companies to deny you coverage because of a pre-existing condition. As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick. And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies – because there’s no reason we shouldn’t be catching diseases like breast cancer and colon cancer before they get worse. That makes sense, it saves money, and it saves lives.

[Second,] We will [create] a new insurance exchange – a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices. … For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.

[Third, U]nder [this] plan, individuals will be required to carry basic health insurance – just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers.

If I may sum up these points, Obama is essentially proposing to

1. Extract more value out of insurance policies, by expanding who, what, and how much is covered,
2. Improve accessibility to individual insurance policies, including a nonprofit, self-sustaining public option, and
3. Mandate that every American carry health insurance.

It’s a good plan for extending health insurance coverage to all Americans, which in itself is a worthy goal. But I am much more skeptical of its effect on health care costs. Health care reform has been billed as including powerful cost-cutting measures. But before we pour our faith into arcane budget estimates, we would do well to remember a few ways in which this plan may end up costing us more, not less, than our current (broken) system.

  • If you have insurance, you may end up getting less services for more money. This would directly contradict Obama’s promise, but it’s a reasonable possibility. Under this reform plan, insurance companies will no longer be able to save money by dropping customers or limiting their coverage. On paper, they would not be allowed to charge customers more, and would have to raid their profit margin to come up with the difference. But in practice, they will almost certainly try to get the money from customers somehow – directly through higher premiums, or indirectly through government subsidies.
  • If you don’t have insurance, you will get it (public or private, subsidized or not), and might therefore increase your utilization of health care. If people who today are being denied health care because of insurance shenanigans get the care they need, they might be healthier for it, but this care won’t come free.
  • Even if you get insurance but don’t increase your utilization of health care, you would still be paying for insurance. You might not use your new policy, but you would still be paying for it. That’s less money in your pocket, more money in the national health care expenditures column.
  • Not all of these cost increases are necessarily bad. Of course it will cost money to provide un- and underinsured Americans with lifesaving (or even just life-enhancing) health care. Of course everyone who can should pitch in to spread out the risk of ill health. If the economic times were good and (dare I dream) the federal government were running a surplus, I would gladly ignore all these factors. However, given a runaway national debt and a shaky economy, we simply cannot afford health care reform that costs more money than it saves. I have a hard time believing that Medicare and Medicaid waste and inefficiency are so great as to equal the costs of insuring the 45-some million uninsured Americans and providing improved health care for everyone.

    There are ways to improve health insurance coverage while tackling the fundamental inefficiencies of the market. I proposed one half-baked and politically unfeasible specimen a while back. In any case, if we cannot have health care reform that both expands coverage and reduces costs, then let us at least be candid about this limitation and the need for further reform. It wouldn’t have sounded as good in his speech, but President Obama would have been prudent to acknowledge that he will likely be far from the last President trying to reform a costly and inefficient health care system.

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    That’s what I get for cheerleading

    August 13, 2009

    In this post, I argued that Cash for Clunkers would stimulate overall consumer spending, not just spending on cars. Well, the first month of data is in, and two findings stick out:

  • Automotive sales went up.
  • However, retail sales as a whole declined unexpectedly.

    In light of this, I freely admit that I had been too optimistic about Cash for Clunkers. However, I would caution against writing off the program altogether – its effect may have been too small to counteract some other factor(s) which depressed retail sales; and some of its effects, particularly in buoying auto manufacturing, may not have come into play yet.

    The Times reports on the rest of July’s retail sales data:

    The Labor Department reported that retail sales fell by a seasonally adjusted 0.1 percent from June, and were 8.3 percent lower than a year ago. Economists, who had been expecting an increase of 0.7 percent, called the numbers a sobering reminder of the persistent weakness in consumer spending, which makes up 70 percent of the United States economy. …

    Consumers spent 2.4 percent more on motor vehicles and automotive parts last month compared with June as the government’s popular “cash for clunkers” car-purchase program got under way, but any money that flowed into the pockets of car dealers seemed to come at the expense of other businesses.

    Retail spending excluding sales of cars and car parts fell 0.6 percent. People spent less on furniture, electronics, appliances, books and music, implying that American consumers are still wary of the weak job market and an uncertain economic recovery.

  • Can’t Get No Satisfaction

    August 1, 2009

    Mary Katharine Ham, writing for the Weekly Standard, compares the Obama administration’s Cash for Clunkers program to “the KFC grilled-chicken giveaway.” And that’s by far not the most troubling thing about her post. Rather, the low point – indeed, the wide canyon – comes when Ham criticizes Cash for Clunkers for its success. The government actually got people to buy new cars? that are more fuel efficient? The horror!

    Many Obama-supporters on Twitter* today have argued that the program is only a failure insomuch as it is a great success. You see, the Obama administration simply revealed the tremendous demand for $4,500 hand-outs fuel-efficient cars, and should be congratulated for that. The utter lack of competence, planning, or understanding of incentives is not an indication of the federal government’s unsuitability to mucking around in the private sector, but a reason to invite more mucking.

    Here’s the deal. Conservatives have long argued that in this recession, no amount of government spending will have a lasting effect until consumer spending and production rebound. This critique has all but ruled out any government program as successfully stimulating consumer spending and the private production of goods and services. For example, take this Forbes piece from last February:

    If the Bush spending plan can’t productively stimulate the economy, what government economic plan can? None. Production does not need stimulation from the government; it needs liberation from the government . What a productive, dynamic economy requires of a government is that it restrict itself to protecting property rights from force and fraud, and refrain from interfering in free production and trade.

    In a time when consumer spending is beginning to seem more like playing financial Russian Roulette than fulfilling a civic duty, this critique is implausible. If consumers are holding off on consuming, no sane producer would fail to roll back production. You can’t force demand for something by merely making it – witness the unsold inventories of retail goods that have piled up as this recession dragged on.

    But you can force consumer demand by subsidizing it. And that’s what we’re seeing with the Cash for Clunkers program. When people are paid to buy new cars, they will buy new cars. There is no way to get around this – unlike the Arizona incentive for alternative-fuel vehicles Ham mentions, which did not stipulate that owners actually use alternative fuels. Every check cut under the Cash for Clunkers program stands for a new car purchased: no exceptions. And as demand for new cars increases, the production of cars – particularly their production in the U.S. by American workers – will be bolstered by this government action. Under the paradigm of conservative economics, we are witnessing nothing short of the impossible.

    * Ham cites Twitter as a source not once, twice, or even thrice, but four times in a short post. In Twitter veritas.

    Beaten to the (HFCS-sweetened) punch

    July 15, 2009

    The Brass Tack just went right ahead and blogged New Yorker’s review of recent fat-themed books before I could get to it. I even had the article bookmarked and everything! Anyway, I guess that releases me from having to summarize the review myself:

    People have gotten fatter in the past few decades not because the nation’s willpower has suddenly been sapped by pod people, but because calorie-dense food has become much more abundant, and because humans are always easily manipulated psychologically by supersizing and the like.

    As Elizabeth Kolbert, the review’s author writes, this is a wee bit problematic:

    Type 2 diabetes, coronary disease, hypertension, various kinds of cancers—including colorectal and endometrial—gallstones, and osteoarthritis are just some of the conditions that have been linked to excess weight. (Last month, the Times reported that gout, once considered a disease of royalty, is, as the population gets fatter, making a comeback among the middle class.) It has been estimated that the extra pounds carried by Americans add ninety billion dollars a year to the country’s medical spending. No credible estimates exist for global costs, but, Delpeuch and his co-authors write, “Obesity is inescapably confirming itself as one of the biggest drains” on national health-care budgets.

    So far, we’ve heard about a variety of ways in which the obesity epidemic might be mitigated: through the tax code, through education, and even through better urban planning, to name a few. (e.g. discussions here and here.) As Brass Tack points out, these well-known initiatives may or may not be enough for the U.S., but to reduce and prevent obesity worldwide something else is needed. Here is where our takes on the situation diverge.

    As the Brass Tack writes, technology is the missing ingredient:

    The only real solution would be to make protein and vegetables competitive with grains in terms of price. If we could make in vitro meat cost-effective, one day a skinless chicken breast might be as cheap as an order of fries. (And factory-grown meat doesn’t torture animals.) We’d also need to really et aquaculture off the ground. And we’d need a new green revolution for non-starchy vegetables so they could be harvested more cheaply and watered with less. It’s going to take a whole lot more than a rooftop garden to do this.

    Now, her piece is titled “Obesity and economics,” and so my dissent may as well be titled “Obesity and sociology.” Because, for all the economic and technological factors that have gone into fueling the obesity epidemic, these factors have only been the “how.” The “why” of obesity stems from culture, and specifically the culture of food: what is food, when and how and with whom it should be eaten, and so forth. Basically, if people didn’t recognize fast-food french fries as food, it wouldn’t matter how cheap McDonald’s could sell french fries for, because the demand would just not be there. On a broader scale, people eat as they do because of a mix of old customs, new marketing, and timeless peer pressure – and, yes, because technological and economic developments have enabled them to eat so.

    So what’s the point of this – if you will – sociological take on obesity? Even if we remove the enabling factors – cheap corn, “supersize” portions, urban “food deserts”, total ignorance of nutrition – we will still be left with the root cause of obesity: the desire for a certain (and incidentally unhealthy) diet. And that means, so long as a caloric surplus is available, people will continue to get fat(ter). And that’s the good news; the bad news is that “food culture” is much more difficult to manipulate on a national scale than tax rates or commodity costs.

    Absorb what is useful

    June 4, 2009

    I don’t know if President Obama is big on kung fu movies, but he certainly seems to live by Bruce Lee’s dictum. In a departure from his campaign literature, Obama now says he is “receptive to Congressional proposals that would require Americans to have health insurance and oblige employers to share in the cost.” The Times has more:

    The president said he was open to proposals for “shared responsibility — making every American responsible for having health insurance coverage, and asking that employers share in the cost.” … “If we are going to make people responsible for owning health insurance, we must make health care affordable,” Mr. Obama wrote. “If we do end up with a system where people are responsible for their own insurance, we need to provide a hardship waiver to exempt Americans who cannot afford it.” …

    Mr. Obama’s letter affirmed his support for creation of a new government-sponsored health plan. “I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans,” he wrote. “This will give them a better range of choices, make the health care market more competitive and keep insurance companies honest.”

    Now, the three remaining supporters of Clinton’s 2008 Presidential campaign might be excused for foaming at the mouth a little. Then, Hillary Clinton promised an individual mandate to have health insurance, Massachusetts-style. Meanwhile, Obama’s plan called for a weak employer mandate, in which some but not all employers would be required to provide or help pay for health insurance. As of this writing, Obama seems to be moving away from this (most likely) less-effective policy and toward the individual mandate.

    There’s just one nagging little thing. Extending health insurance to more people costs money, and the prospective individual mandate lite, in which people are required to get insurance through the myriad private companies or a government plan does little to cut down these costs, either for consumers or for providers. It is trivial to show that unless insurance companies can effectively discriminate against high-risk consumers, the best insurance plan is one in which everybody is enrolled. Short of this drastic ideal, the more people are enrolled in a given plan, the cheaper that plan is per person on both the supply and demand sides, assuming enrollment is uncorrelated with risk. So a good way to equitably lower the cost of health insurance would be to enroll as many people as possible – regardless of risk – in a single plan. This would also have the benefit of cutting down on per capita administrative costs and duplicated overhead costs.

    How does Obama’s plan (or intentions) measure up to this ideal? By letting – nearly encouraging – consumers who are already insured to keep their current health insurance, it does nothing to lower costs for the policies of the insured (which greatly outnumber the uninsured). By allowing the uninsured to sign up for a government plan, it creates just another small insurer saddled with all the problems of the rest of the market. Finally, by encouraging some of the uninsured to seek health insurance on their own, it leaves them vulnerable to the steep premiums that rationally must be charged of individuals purchasing insurance solo.

    A real solution to the problems of American health insurance – bloated administrative costs, underinsurance, high prices – could lie just one radical policy away. If we take as constraints the ideas that 1. Americans will not accept the complete bulldozing of the private insurance market, and 2. there is no guarantee that a government-run program will be more efficient than a private one, there still remains a reasonable policy option that combines wider coverage with lower costs and room for market-driven innovation.

    Consider this: a basic government insurance plan, with mandatory participation, and a deductible-copay system similar to but more benign than existing private policies. This plan would extend basic coverage to everyone, including perhaps most preventative procedures, some ER visits, and limited consultation with specialists, among other things. It would not aspire to provide full health coverage to its enrollees – only coverage for procedures with positive externalities or those which most often bring needless financial strain upon low-income families – and would be priced accordingly. Everything else – prolonged hospital stays, expensive treatments, frequent trips to the doctor – could then be covered by supplemental insurance, which consumers could obtain from anyone. Such a dual-layer system would provide universal, low-cost (but limited) health insurance, without completely turning the health insurance sector into an arm of the government.

    Owners, not patrons

    May 27, 2009

    The government is poised to acquire ownership of 70% of General Motors, ostensibly in a move that will smooth out GM’s restructuring. As the Times reports:

    The latest plan for the troubled automaker, which is expected to file for bankruptcy by Monday, calls for the Treasury Department to receive about 70 percent of a restructured G.M. Including the more than $20 billion that has already been spent to prop up G.M., the government will provide G.M. at least $50 billion to get the company through Chapter 11, people with direct knowledge of the situation said Tuesday. By some estimates in Detroit, tens of billions beyond that amount may be required. …

    The prospect of a G.M. effectively owned by the government raises a number of thorny questions. Countless policy decisions — on matters such as fuel economy standards, tax incentives to replace aging cars and green technology initiatives — will present conflicting interests. …

    Aides to President Obama have consistently said they would be reluctant shareholders, and they plan no operating role in the company.

    “No one is going to put U.S. government employees on the G.M. board,” one person close to the ongoing discussions said on Tuesday.

    The day-to-day running of the firm, this person said, would be left to professional managers, and the government would not be involved in decisions about closing factories, renegotiating contracts or selecting product lines.

    There is a strong cultural obligation for the Obama administration to keep their hands off of business, even businesses in which the government would own a controlling stake. Not surprisingly, even with these reassurances there have followed the inevitable wisecracks about socialism and government-run enterprise. While American tolerance for most state-run businesses may be low, it is simply bad policy to rely on “professional managers” to bring GM back from capitalist Limbo. After all, GM has been in some form of restructuring for decades under the steering of “professional managers,” and has neither fully recovered from its market losses in the 20th century, nor successfully avoided collapse in this recession. How badly have “professional managers” mishandled GM? Consider this:

    The automaking losses have put GM in the kind of financial position lately associated with dying airlines and retail chains. The company has been frantically seeking cash to meet its financial obligations. GM has sold stock and tapped credit markets to raise $5 billion in the past year alone, mostly to pay operating expenses. If the financial squeeze grows too tight, GM might even file for bankruptcy protection under Chapter 11 to force concessions in its wage, pension and benefit packages.

    Thus wrote Time in 1992. Professional managers have not saved GM in the past, and it is odd to think they will do so in the future. Rather than the government merely becoming patrons of the same managerial cadre, it should carefully consider taking that dreaded active role, and finally changing the (faulty) way GM does business.

    First, they came for the economists…

    March 16, 2009

    Jim Manzi is one among many commentators on the economic crisis who is using it as an opportunity to question the discipline of economics:

    If Mankiw’s list is the best economics can do, it sure seems like a naked emperor moment to me. Where’s the beef?

    My challenge would be simple: please list 14 useful, non-obvious predictive rules that economics provides that have survived rigorous, replicated falsification trials.

    If you were to provide this challenge to physics or biology, it would be easy to come up with 1,400. Hence, human invention of aircraft, space travel, mobile phones, antibiotics, vaccines, MRI scans, the internal combustion engine and so forth. This – not the attempt to create pressure on public officials to support the policy preferences of most economics professors – is why actual science education is so important.

    Manzi is not alone. While public sentiment and political action are pulling in the direction of Keynesian interventionism, the discipline of economics is still rolling on the track laid down by the neoclassical gang. The Times’ Patricia Cohen writes:

    Prominent economics professors say their academic discipline isn’t shifting nearly as much as some people might think. Free market theory, mathematical models and hostility to government regulation still reign in most economics departments at colleges and universities around the country. True, some new approaches have been explored in recent years, particularly by behavioral economists who argue that human psychology is a crucial element in economic decision making. But the belief that people make rational economic decisions and the market automatically adjusts to respond to them still prevails.

    The failure of economics to respond credibly and quickly to the unfolding crisis has led some, Manzi among them, to criticize the field as a whole. In comment threads such as these, Joes of all trades have emerged to put in their two utils about how economics is wrong, useless, or “not real.” Some choice quotes:

    The sole determinant of everything in economics is human behavior, meaning that economics is a farce.

    Economists serve a useful role in society. They help fill an oversupply of endowed chairs at prestigious universities, they give “street cred” to the usury of bankers, and they are able alchemists for the aristocracy.

    Economics is not a science. It’s not even even a pseudo-science. It’s like trying to quantify lust or rage in the form of equations. Your rants about your fellow economists are of that of a shaman accusing animists of being ignorant.

    Most economists are in the propaganda business. That includes evidoers Greenspan and Bernanke. Economists must bear blame for this crisis.

    In the words of a Chick tract, when it came to economists foreseeing or averting the economic crisis, somebody goofed. But this should not condemn the entire enterprise of economics to the scrap heap. Whatever its faults have been in recent years, economics can still claim at least these few defenses against swarming critics of the discipline as such.

    1. Social science is complex. Recall Manzi’s “challenge” to economics: Manzi congratulates “real” science – that is, the physical sciences – on producing “useful, non-obvious predictive rules.” Why, Manzi asks, can’t economics produce such rules, too? Distilling reality into predictive rules is hard, and it likely gets harder as academics lop off greater and greater slices of reality to explain. By virtue of being “purer” than the social sciences, the hard sciences have limited themselves to explaining increasingly limited portions of reality, and even here their job isn’t done yet. So the least “pure” social science has before it the grandest task: to model systems which have been studied by layer upon layer of “purer” hard sciences. Thus, if economics hasn’t come up with infallible laws yet, perhaps it is because of the inherent complexity of markets and market behavior.

    2. Social science is probabilistic. The above suggests that given enough time and effort, economics will produce infallible laws. This is not entirely reasonable. Any useful (i.e., sufficiently simple) social scientific theory will have to be probabilistic, even given perfect information about how its subject works. Thus, economic theories cannot say that A will lead to B, but only that all else being equal, A will lead to an increased likelihood of B. Contrary to Manzi’s standard for theories, any social scientific theory can therefore be falsified (in the strict sense), given enough trials – but this fails to describe either its accuracy or usefulness.

    3. Social science dramatically alters that which it studies. Social science is complex and probabilistic in large part because its effects on its subjects are so profound. People are not bacteria in a petri dish – they are consumers of social science as much as they are its subjects. Manzi asks economics to produce rules that are non-obvious and predictive. Well, obviousness is a matter of perception – what is obvious to one is questionable to another, and impossible to a third. In economics, mercantilism was an innovative theory that became obvious and was later discarded. How many of the “obvious” things Manzi knows about the market had to be codified and disseminated by economists? And as for the predictive quality of economic theories, such theories exists in a complicated feedback loop with the phenomena they study, with successful or famous theories introducing great distortions in the social reality. To wit, just because a certain economic theory has predictive power today, it may not necessarily have such power in the future, once word of the theory gets around to workers, consumers, investors, or the government.

    The badge of a Ph.D. in economics should not shield its wearers from well-deserved criticism. However, disagreement with a particular thinker or theory should not be cultivated into a rejection of economics as a discipline.

    (h/t to beeveedee)

    The bailouts next time

    March 15, 2009

    Matt Zeitlin proposes a tiered system of regulation for financial institutions, on the premise that the biggest banks should not be taking huge risks just to make the wealthy wealthier.

    So, looking forward to how we want to regulate the financial sector, a few things seem obvious.

    One, impose a simple rule on financial institutions. Either, you can be big — so big that your insolvency would threaten the collapse of the world economy — and not do anything risky or you can be small and do whatever the hell you want. Another way to thread the needle here would be to require banks like Citigroup, or anything that’s “too big too fail,” to pay into a super-FDIC, essentially to buy bailout insurance, so that if and when they need to be bailed out, it’s not a huge, sudden expense on the taxpayer. Or you simply let hedge funds do all the exotic stuff and tell banks to, well, be banks. Or, hell, you could just not let financial institutions get too big. For example, you could say that investment banks have to be partnerships and not let them become publicly traded companies (and thus get so big) or, on a smaller scale, just limit how much leverage can be used.

    The merit of this proposal (or similar proposals) lies in how well it matches what the general public expects of banks. Many bank customers are just looking for a place to park their checking account, and may not necessarily care if their savings account earns .05% instead of .06% interest. What people do care about is 1. not losing their money, as in the Great Depression, and 2. not seeing billions of tax dollars go to prop up tottering banks, as in the present crisis. On a macroeconomic scale, however, bans on risky investments for large banks might depress economic activity, since less money will be moving around in high-risk transactions. High economic growth is, unfortunately, correlated with high risk, and the challenge of regulating financial institutions lies in striking a good balance between fostering growth while inhibiting risk.

    I think the best part of Zeitlin’s suggestion is the “super-FDIC” for the biggest banks – the ones most likely to serve the general public rather than niches of well-educated, risk-loving investors. A super-FDIC (an FDIC on steroids?) would offer a bank and its customers increased financial security, in exchange for prohibiting the bank from using deposits in unacceptably risky ways. Mandating membership in such an institution for banks above a certain size would be a nightmare: legislating the cutoff line and policing banks who might cross it from year to year would be just two likely difficulties in that scenario. However, a better approach might consist of letting banks above a certain size voluntarily join this ULTRA FDIC, and encouraging that member banks advertise their membership to their customers. This tweak to Zeitlin’s proposal does not eliminate entirely the plan’s dampening of economic activity, but it seems to achieve the goal of risk reduction in a way that might be more agreeable to legislators, and less constraining of capital.

    (Don’t Give Me That) Old-Time Religion

    March 11, 2009

    By way of Jack Cafferty, a recent study purports to show that lack of religiosity, while still uncommon in America, is on the rise:

    More Americans are saying they have no religion — according to a wide ranging study done by Trinity College.

    The survey shows 15 percent of those polled say they have no religion; that’s up from about eight percent in 1990. Northern New England and the Pacific Northwest are the least religious regions. And the number of Americans with no religion rose in every single state.

    Organized religion seems to be playing a smaller role in many people’s lives. 30 percent of married couples say they didn’t have a religious wedding ceremony, and 27 percent say they don’t want a religious funeral.

    Nonetheless almost 70 percent of those surveyed say they believe there is a God; and another 12 percent say they believe in a higher power but not the God of traditional organized religions.

    Some suggest that the rise in evangelical Christianity is actually contributing to the rejection of religion by other Americans. The survey shows about one in three are evangelicals. The number of evangelicals is actually increasing while the number of Christians overall is declining.

    The hypothesis that evangelical Christians are crowding out others from organized religion is an interesting one, and not too common in explanations of religiosity’s decline. Typically, religious dynamics are modeled as reacting to non-religious social processes. The classic example of such a model is the argument that increased scientific knowledge depresses religiosity. Another hypothesis (discussed by Jamelle here) is that the rise of the welfare state engenders a decline in religiosity. In these and other models, religiosity is exogenously determined: the religious behavior of any given individual is held to be affected by scientific or economic trends which lie beyond the influence of that individual.

    The “evangelical crowd-out” model, if may I call it that*, is a new sort of beast. Now, endogenous models of religiosity – that is, theories in which one person’s religiosity is determined by another’s – are not entirely novel. In the economics of religion, Laurence Iannaccone and his colleagues have been advancing for over a decade models in which religiosity is explained either as the outcome of an individual’s past religiosity, or of the religiosity of that individual’s fellow believers. The evangelical crowd-out hypothesis separates itself from this distinguished line of research in its lack of an explicit rational-choice foundation.

    To be sure, there may be rational or quasi-rational reasons for other Christians to let go of their faith in response to the evangelicals’ rise. One possibility is that evangelicals’ prominence is increasing the stigma associated with being a Christian. Another possibility is that the risk of being confused for an evangelical grows as evangelicals form a larger proportion of all Christians. But this does not seem to be the argument here. The “crowd-out” non-evangelical Christians are experiencing seems to be based less in spiritual economics and more in an ethical response to evangelical Christianity. The scope, too, is greater than the one in traditional economics-of-religion models, which deal with households or single sects. Here, the religious practices of another group – one that lapsed believers may seldom interact with – are affecting these (ex-)believers’ own religiosity.

    I have been describing the argument that evangelicals are crowding out non-evangelical Christians from organized religion as a hypothesis, a model, a theory. In truth, I am either not familiar with or there does not yet exist a formal sociological theory of religion which would encompass this idea. If you know of an actual model which depicts individuals’ religiosity as a function of socially distant religious practices, I would be glad to hear about it. Otherwise, do suggest what such a model might look like. How should the social sciences generalize from the observation that evangelical Christianity is driving non-evangelicals out of the broader religion?

    My own shabby attempt: ethically-motivated exit from organized religion should increase with the seriousness and pervasiveness of other believers’ misconduct, and should decrease with the social distance from the misbehaving other believers. This formulation explains why, for instance, Catholics might have left the church over the misbehavior of their priests, but not over William Bennett‘s gambling; and why Protestant exits were probably not motivated by either one. However, “ethically-motivated exit” demands a clear definition, and the proposition as a whole may be too limited in scope.

    * Emerging Christian attributes the idea to Mark Silk, but I have been unable to find his (or anyone else’s) original statement of this theory. Silk is quoted at greater length on the topic here.

    Mercantilism and intolerance, hard at work

    March 10, 2009

    Word is out that the economic stimulus may – horror of horrors – let undocumented immigrant workers fill as many as 300,000 jobs. As USA Today reports,

    Studies by two conservative think tanks estimate immigrants in the United States illegally could take 300,000 construction jobs, or 15% of the 2 million jobs that new taxpayer-financed projects are predicted to create.

    They fault Congress for failing to require that employers certify legal immigration status of workers before hiring by using a Department of Homeland Security program called E-Verify. The program allows employers to check the validity of Social Security numbers provided by new hires. It is available to employers on a voluntary basis.

    This news comes hot on the heels of Republican accusations that illegal immigrants would be eligible to receive stimulus checks. Predictably, conservatives are crying foul. Their disapproval seems to rest on two pillars: a bastardized mercantilism, and a lingering resentment of immigrants in general.

    The first conservative objection to seeing stimulus money go to (illegal) immigrants is the more surprising one. Michelle Malkin got an early start on making this argument:

    What will the illegal aliens do with their rebates? Remittances, baby, remittances.

    [quoted:]
    “This package will stimulate one thing for certain: more illegal immigration,” said [Rep. Tom] Tancredo. “It’s just the latest unfortunate example of American workers footing the bill for illegal aliens.”

    The bill would allow so-called “Resident Aliens” to receive rebate checks. The Treasury department classifies someone as a “Resident Alien” based on how much time that person has spent in the United States. No proof of legal presence, however, is required. The IRS’ explanation of the term can be found at: http://www.irs.gov/taxtopics/tc851.html

    “Worse, a large portion of this money will just be sent back to the home countries of illegal aliens,” concluded Tancredo. “So it might stimulate someone’s economy – just not ours.”

    I am genuinely surprised that mercantilism, an economic theory left for dead in the 19th century, is making a resurgence of sorts in conservatives’ critique of immigration. To be fair, there is big money in remittances, not only from migrant workers in the US but also from immigrants around the globe. The fear that (illegal) immigrants will send “American” money from their stimulus checks/wages to Mexico is not, therefore, completely illogical. What is illogical is the conclusion that Americans would never see that money again.

    Mercantilism turned out to be wrong in the first place because the amount of trade in the world economy isn’t fixed, and because trade flows turned out to be much more complex and circular than mercantilists could imagine. In the present context, a dollar sent in remittance to a household in Mexico might be used to purchase Chinese goods sold in Tucson, Arizona. Or, more realistically, it might be used in such a way that it frees up other money – in Mexico or elsewhere – to flow back into the American economy.

    Meanwhile, the internal mercantilism of sorts that has conservatives railing against immigrant workers in the first place is just as misguided. Suppose those 300,000 illegal immigrants materialized to take up “American” jobs. This does not mean that 300,000 Americans will have been put out of work. Illegal immigrants, as any workers, require the services of retailers, professionals, small businesses of every description, workers in the skilled trades, in manufacturing, in government, and so on. Employing any 300,000 people will create or sustain many jobs, including many which could accommodate Americans who are now unemployed. The number of jobs in a country, as the volume of international trade, is never a fixed amount.

    Employing undocumented workers – even sending them tax rebate checks – will eventually have some stimulative effect on the U.S. economy. Opponents of either approach would do well to move beyond claims of a permanent job shortage and a remittance pipeline draining money from America to other countries. Of course, that would probably require them to move on from the second pillar of anti-immigrant sentiment. I hope no one is surprised at the revelation that this pillar consists of simple racial intolerance.

    Yet efforts to prevent (illegal) immigrants from seeing one cent of the recovery package are not built on intolerance alone. They are built on intolerance and questionable economics.