Legalize Marijuana

California voters will have a chance to take another step in legalizing marijuana soon. I am, generally, no fan at all of the opportunity California's Constitution gives voters: a direct means of creating legislation or even amending the state Constitution. I fear that it is far too open to manipulation by relatively small, but well-organized "special interest" groups that don't really reflect the considered will of the majority of the people. Moreover, these propositions can be enacted into law without adequate provision for the costs of implementation. Thus, as a result of many earlier successful propositions, we witness a large part of California's dreadful current financial condition. All things considered, I'm emphatically for far less of propositions, not more.

However, while I disdain the process, generally, the potential result in this case, I believe, would be good. I believe the marijuana legalization proposition is probably a worthy exception because actual legislators, elected politicians, are unable to take action, even if they believe it to be right in this case.

Human beings have been altering their state of consciousness, by chemical means, throughout all cultures and all history. We are foolish to think that making this natural human behavior illegal will actually stop it. Less than a century ago, the US witnessed the disastrous experiment with alcohol Prohibition. What did we fail to learn by that?

Criminalization of marijuana does raise the cost, of course, and makes many people (non-users and crypto-users) feel righteous; but the downsides far outweigh that, in my view. Criminalization severely burdens our justice system, it explodes our prison population, it fosters organized crime, and it makes marijuana use just tantalizing enough for the young and rebelious to pursue it just because it's against the law.

I'm not naive and I realize that legalization may, in the short term, actually encourage some people to experiment with marijuana who otherwise would have been dissuaded. But, perhaps in a generation or two, I'm optimistic that reasonably broad social conventions will emerge that, like for alcohol today, "regulate" how most people use this particular chemical amendment. There will be times, places, occasions, and activities when marijuana use will be appropriate (for example: with or before food (who hasn't experienced the "munchies"), with friends, in enjoyable situations...a lot like wine today) and others when it will be frowned upon or even cause for legal punishment: "Drive with reefer, go to jail!"

More immediately, however, the legalization of this, like any other product, brings it within the expectations of "normal" activities. Legitimate businesses will compete, on quality and price, to supply maijuana demand. Retails outlets will exist in respectable neighborhhods; you'd be able to buy pot even at Safeway or Vons (if you've been to Amsterdam, you know what I mean). Fundamental quality issues can be regulated. Legitimate production and sales can be taxed. And, the criminals who now are the beneficiaries of marijuana's illegality will lose one of their huge revenue streams and one of their prime contexts for violence.

So, as much of an enemy of legislation by proposition as I am, I hope this particular exercise in circumventing the elected legislature is successful. Given the righteous, well-intentioned, but poorly informed "public" that legislators must respond to on this issue, we probably do need a "special interest" cadre to bring us to what I think is the right result.

As California goes, then, we can hope the rest of the country follows.

At Angkor: Jayavarman VII

 

At the Royal Palace: Phnom Penh

 

At Ho Chi Minh Mausoleum

 

Corrections/Amplifications to the Health Care Post

Sorry, my math was off in the final point in yesterday's post. Those who would be on notice that their health care is fully their own responsibility even in late old age would now be 45, not 40...still plenty of time.

Further, I should have added a point in the opening comments about why I'm not optimistic about a solution in the current political climate. My pessimism stems in part from the President's failure to exert a level of genuine leadership above the rancor of Democrats versus Republicans. Whether from his own instincts, or from some puzzling electoral calculus, President Obama's behavior is much more like chief Democratic cheerleader than as our head of state. When you think back to his election night triumph when he said that "there are no red states, there are no blue states, there are only the United States of America", you can now only sigh at the failure to live up to that promise.

Solving the Healthcare Mess

Anyone who has had even passing experience, recently, with the delivery of health care and the insurance financing arrangements that attend it comes away yearning for improvement; there must be something that can be done. The current political debate about what steps our society can take have raised the issue to fever pitch, but no convincing solution, at anything close to affordable cost, seems to be seriously on the table. I'm not optimistic that the present political environment will yield good results. What follows is my attempt to sort out some of the more important issues...if only for myself...so the conversation I have with myself and with others is not so frustratingly muddled. For ease of reference, I've identified themes as (D) Democrat, (R) Republican, or (N) Neither.

Let's start with the philosophy of where major societal solutions should come from. Acknowledging the over-generalization, one (D) approach is to rely on a wise and benevolent government to provide, or at least catalyze, the solution. The other key philosophical approach (R) is to rely on private solutions, harnessing the aggregate wisdom of millions of participants' self-interest. Philosophically, that latter approach appeals most strongly to me. We rely on private solutions (and tolerate major societal disparities) on such basic human needs as food, clothing, shelter, transportation. In our system, no-one expects the government to provide food, or housing, or an automobile comparable to what the wealthy can afford. In fact, extreme examples of consumption in these realms are usually matters of admiration, a plateau of size, quality, speed, or fashion that most are willing to strive for, without the expectation of any particular help from the government. But none of these examples are pure. Government subsidies (e.g. food-stamps or heavily subsidized public transportation) are often at work to establish a floor level above which private consumption can reach virtually unlimited heights.

Maybe a better example would be education, for there too, as in health care, society, itself, has a substantial interest in every member of that society having access to good quantity and quality. But while government, thru tax revenues, provides a comprehensive system of education at all levels, private alternatives abound and, especially at the primary and secondary levels, are generally considered superior (often very much so) to their public alternatives. If it didn't generally deliver excellence, private education's consumers would look elsewhere and it wouldn't survive. Public education, even where it delivers horrible results, manages to survive because of its governmental aegis. It is often barely tolerated only by those who can't afford to escape it. If society has an interest in broadly available, high quality health care, I'd argue that it has an even greater interest in high quality, broadly available education for its members. Education primarily benefits society through those who have their productive lives mostly ahead of them; health care is mostly spent on those who have already made the bulk of the contributions of which they are capable. So, if health care needs fixing, maybe education needs it even more; and the education "public option" (D) has not made a great case for its providing the solution to either.

Still, a private health care situation can't make a great case either. If it were really able to provide the solution, why hasn't the market place already done so? I think I know a number of reasons, all of which, I believe, can be managed, in time. But, still, some governmental support (direct subsidy and/or tax allowance)(D) may be necessary to "jump start" a better plan.

• Refocus attention on good health outcomes, not on transactions/procedures, regardless of their impact on actual results. Here are some actual ways to do that.
• Change our mentality about the role of health insurance. It is the problem, not the solution. Today, some tend to think of that coverage as needing to provide access to the ultimate in procedures, or treatments, or medications, regardless of cost, from the first dollar. When we insure our homes, we don't expect that coverage to apply to the replacement of burnt-out light bulbs, but some seem to behave as if health insurance should cover small things, as if by right. I happily acknowledge the benefit of this stunning example from David Goldhill's excellent article in The Atlantic, Sept, 2009. I owe much of my current thinking about how to solve our health care problems to his wise analysis. So, instead of thinking of health insurance as a "first dollar" proposition, view it as catastrophe level coverage that would provide extreme care, rarely, to keep anyone from having to exhaust their other resources to meet extreme needs. Because of the very high deductibles and very substantial "co-pays" that this would involve, this catastrophe level coverage could be very inexpensive (if other features apply...read on). To make this "core" insurance coverage especially cheap, we could mandate that everyone acquire it (D), broadening the pool of premium payers and reducing the liability risks of the insurers. This would mean including in the mandate especially the young and healthy. For those very poor for whom even this cheap coverage would be difficult to afford, we could provide some government subsidy (D).
• Since the threshholds of actual coverage would be very high in this regime, individuals would have substantial incentive to carefully evaluate the cost/benefit calculus of their healthcare use (R)...as they do in every other realm of their economic activity. That consumer consciousness would go a long way to discipline the delivery system on quality and cost, forcing providers and the insurers themselves to provide good value for money.
• To make sure people don't just ignore their health situation until extreme care becomes necessary, the mandated core insurance could cover a comprehensive physical examination at appropriate age intervals, with "discounted" costs for therapies that are identified and promptly pursued as a result of such periodic examinations.
• Expand HSA's (Health Savings Accounts) by making the deductible contribution larger and making the HSA funds eligible for payment of premiums for coverage in addition to the mandatory core. But, as a counterpoint, and as a way to make this tax-neutral, eliminate (gradually) the non-taxability of employer provided health insurance. This is an idea whose time has passed (a large industrial employer-based solution, inaugurated when wage controls precluded cash wage increases; the times, they have a changed!)
• Enable a nation-wide health insurance market (R), to provide access to very large policy-holder bases (reduces premium costs and liability risks).
• Cap malpractice awards (R). Some argue that this is a very small problem in the overall tally of costs. Even if true, I'm not sure why it's being small should permit us to not solve a problem that many believe exists. More important than the direct malpractice recovery costs, however, are the impacts on practitioners' insurance costs (passed on to health care consumers) and the mentality of practicing "defensive medicine".
• Finally, and this is the big one: gradually eliminate Medicare (N). Start by raising the eligibility age from the current 65, by 2 years, every 4 years. In 40 years, the threshhold elibility age would then be 85; then, 40 years from now, bring the program to a complete close. Anyone today older than 40 would get some, diminishing Medicare benefit. Anyone today 40 years old or younger would be on notice that they will have to fend for themselves...even in their very old age. But with decades of opportunity to accumulate reserves in HSA accounts and with their mandatory core, catastrophic insurance policies in place, everyone (younger, or older, than 40, today) will probably be in a much better place to wisely manage... and pay for... their health care needs than most other aspects of a comfortable life in old age. And, in the meantime, society as whole will have saved an enormous cost.

Removal of Stimulus should be GOOD News

After the close of US markets today, the Federal Reserve raised it's discount rate (the rate at which it lends to eligible institutions, generally commercial banks) to 75 basis points. This was the first increase in three years and is part of the already announced plan to gradually reduce the significant monetary stimulus that it has engaged in as part of the global effort to combat the recent severe credit crisis. This is important evidence of the Fed's belief that the economic recovery underway in the US is real and sustainable (though still fragile...the rate is only .75%). Taking an even medium term view (weeks or months), investment markets should rejoice in the prospect of fundamental economic growth continuing. Instead, the perverse initial response appears to be more than modestly negative. Asian markets have declined today by more than 2% and, if the same mentality prevails, one can expect the same directional movement in Europe and the Americas as the new trading day unfolds.

The immediate fear that reduced governmental stimulus (even if only a very modest reduction and only gradual) will stall the recovery seems to be trumping the notion that the withdrawal of government stimulus is precisely what must occur if the world's economy is to stand on it own feet. Of course, it is true that the Fed and its counterparts around the world could get it wrong: the withdrawal of stimulus being too early or too much. But, they could get it wrong in the other direction, as well: too little and too late, with consequent inflation and renewed asset bubble risks...the very error of recent times probably contributing to the problem of excessive leverage that we are now suffering through.

My bet would be on the monetary authorities getting it more right than wrong. Consequently, if one has long term confidence in market performance but is tempted to time market entry based on "irrational" behavior, this will probably turn out to be a good day to be buying.