We Need More Competition in Government

Arnold Kling and Scott Sumner both advocate a return to decentralization and federalism-based policies. I particularily like this paragraph from Kling:

I would like to see more experiments and more variety. Instead of having a big national contest over what health care system, why not try single-payer in one part of the country and radical deregulation in another? Switzerland, which is about the size of Maryland, has different health care systems in each of its 20-odd cantons, which are about the size of Maryland counties. Surely it must be possible to try different health care approaches in Texas and Massachusetts.

I do not see what is unreasonable about this. One may say that this would lead to potentially devastating situations in states that took a more decentralized approach, but even if this were true, those peoples could move to a state that offered a more centralized approach if they felt that would benefit them.

Also, Sumner implies that comparing the United States to smaller, far less diverse and complex countries like Denmark and Switzerland is a mistake. I think it is safe to say that it gets exponentially more difficult to centrally plan for a country as it gets larger. Thus, the argument that the US should centrally plan health care because smaller countries do it effectively is a backwards statement. We shouldn't centrally plan precisely because these smaller, less complex nations are competent at it.


UPDATE: Here is Reason's Peter Suderman's take on Kling's post:

I'm obviously wary of socializing medical payment, even at the state or local level. But given the opportunity to see single payer compete against a genuinely deregulated market, I'm pretty sure I'd bite. And I suspect a lot of single payer supporters would too. But that sort of political competition isn't in the cards. Instead we're stuck with a broken, compromised system in which neither side gets what they want: On one hand, the government controls nearly half of all medical spending, but failures get blamed on the free market. On the other hand, those who want to sweep away the current system and socialize medical insurance get stuck with messy legislative compromises larded with handouts for special interests. You could make the Beltway centrist's case that this is a good thing—that political systems shouldn't cater to extremes. But in this instance, we've got a system that's catering to almost no one [emphasis mine -ed.] And in the meantime, we're stifling innovation and experimentation on both ends of the political spectrum.

Sumner on Health Care and Insurance

Here.

Read more about HSAs here.

Liquidity Trap/Stimulus/Wages Links

Chicago economist Casey Mulligan on the "paradox of toil", stimulus, unemployment, Krugman, and liquidity trap.

The Marginal Revolution boys offer their thoughts here and here.

Sumner here.

And here's a link to Krugman's blog, where he has a number of posts on the topic.

Question for liquidity trap proponents: can the Fed actively buy debt (as oppose to passively inflate through zero interest rates), both private and public, to further increase the money supply? If so, would this make fiscal stimulation unnecessary?

Competing Macro Views

Some would say the current state of macro is in disarray as it is having a great deal of trouble explaining the current economic situation. But I don't think disarray is so much occuring as is intense competition. Right now there are a ton of competing views trying to explain the siuation. Krugman, Kling, and Sumner seem to me to be the big three right now. Here's Kling on the current state of macro and the competing views:

I am prepared to offer pushback against the Sumner-Hetzel viewpoint. However, it really deserves the status of the "null hypothesis." In a more reasonable world, everyone would be starting from the presumption that Sumner and Hetzel are correct. Those of us arguing folk-Minskyism and telling the Recalculation Story should be the ones fighting an uphill battle to bring our ideas into the policy debates. That this is not the case, and that SC is now on the fringe, is one of the most remarkable stories of this whole macroeconomic episode.