Disability Is Growing Very Fast And Might Be Hard To Stop

See Fun Facts on Disability Insurance by Bryan Caplan, economics professor at George Mason University. The CPI was up only 23% from 2001-2010. The SSDI was up 125%. The CPI increased 2.35% compounded annually while SSDI increased 9.45%. It increased at 4 times the rate of inflation.

Now Caplan's post

"The new Cato Policy Analysis on Social Security Disability Insurance is full of fun facts. (footnotes omitted)

The U.S. disability rate fell 25% between 1977 and 1987, then more than doubled.  The staunchest health care skeptics should be baffled.  Unless, of course, the availability of free money makes people sick to their stomachs...



Getting on disability is pretty easy if you game the system:

Applicants who are denied benefits can appeal. Indeed, the appeals process has four levels, and at each level the individual receives another chance to convince a government official or judge to grant benefits. Thus, individuals with questionable claims of disability have up to five tries at receiving benefits and they just have to succeed once.

The process can be very cumbersome and costly. A rejected applicant can first ask the SSA for a "reconsideration" of his or her claim from a different group of SSA officials. If rejected again, the applicant can request a hearing before an ALJ. These hearings do not include a government representative to question the claim on behalf of taxpayers. Meanwhile, the SSDI applicant in the great majority of cases uses the services of lawyers working on a contingency fee basis. It is a process slanted in favor of program expansion and higher spending.

If the ALJ denies the claim, the quest for federal benefits is still not over. The SSDI applicant can request a review from the Social Security Appeals Council. If the council either denies the claim or decides against reviewing it, the applicant can then file a lawsuit in a federal district court. In 2011 over 14,000 new civil actions were filed.68 In 2010 there were 2.9 million total applications for SSDI benefits. Only 35 percent were awarded benefits. However, that figure includes applicants who were denied for technical reasons or where a final decision was still pending. The overall allowance rate based on medical decisions was 55 percent. For medical decisions made at the hearings level or higher, the allowance rate was 76 percent.

Officials have enormous discretion.  Most succumb to the natural human temptation to show pity at the taxpayers' expense:

One result of judges trying to expeditiously complete case loads is high approval rates of about 60 percent on average. In 2011, 130 ALJs awarded benefits in 85 percent or more of the cases heard. A judge in West Virginia awarded benefits in all but four of the 1,284 cases he tried in 2010.100 Overall, the Wall Street Journal found that in 2011, 1,334 judges made more awards than denials, while only 439 judges had the ratio the other way around.

An anecdote that redeems anecdotal evidence:

A single judge in Pennsylvania, for example, overruled the SSA on 2,285 benefit applications in a four-year period--applications that the SSA had declined. That single judge's actions have cost taxpayers more than $2 billion.

For practical purposes, the officially disabled can collect for life:

The SSA conducts periodic reviews to determine if a beneficiary is still disabled. The frequency of the reviews depends on how long an individual's condition is expected to last. In 2011, only 3.6 percent of workers on SSDI had their benefits terminated because of medical improvement. Almost 90 percent of people had their benefits stopped because they either died or reached retirement age. The data thus indicate that once workers get on the disability rolls, they rarely leave and go back to work.

The main thing I learned, though, was that both Carter and Reagan managed to get the disability problem under control despite populist pressures.  If you assume the decline was simply cyclical, note the straight-line rise since 1987.  Democracy makes drastic rollback unlikely, but marginal reform has happened before - and can happen again."

How people make their own luck

See How to Get Lucky by Dennis Whittle. Here it is. The idea is that high income people might hot have been high income due to luck.

"Luck has a lot to do with success.  That is both my experience and the conclusion of a lot of research, including by Daniel Kahneman, winner of the 2002 Nobel Prize, who famously said:

Success = Talent + Luck. 

Great Success = A little more Talent plus a lot more Luck.

Many successful people find this assertion annoying, since they feel that they have worked very hard to succeed.  As noted in my previous post, these people suffer from survivorship bias: they fail to notice all the other people in the world who worked equally hard but failed to succeed.  (Warren Buffet is a noted exception; he has repeatedly noted that he was in the right place at the right time.)

But the good news for those less enlightened (and lucky) than Warren Buffet is that luck can be cultivated - it's not merely a matter of chance.  Psychologist Richard Wiseman argues that luck is the outcome of human interaction with chance:

Wiseman speculated that what we call luck is actually a pattern of behaviors that coincide with a style of understanding and interacting with the events and people you encounter throughout life. Unlucky people are narrowly focused, he observed. They crave security and tend to be more anxious, and instead of wading into the sea of random chance open to what may come, they remain fixated on controlling the situation, on seeking a specific goal. As a result, they miss out on the thousands of opportunities that may float by. Lucky people tend to constantly change routines and seek out new experiences. 

This at least leaves open the possibility that we can make ourselves luckier by changing our outlooks:

Wiseman saw that the people who considered themselves lucky, and who then did actually demonstrate luck was on their side over the course of a decade, tended to place themselves into situations where anything could happen more often and thus exposed themselves to more random chance than did unlucky people. The lucky try more things, and fail more often, but when they fail they shrug it off and try something else. Occasionally, things work out.

So luck is part persistence, but the speed at which we experiment is also key:

The people who labeled themselves as generally unlucky took about two minutes to complete the task. The people who considered themselves as generally lucky took an average of a few seconds. Wiseman had placed a block of text printed in giant, bold letters on the second page of the newspaper that read, “Stop counting. There are 43 photographs in this newspaper.” Deeper inside, he placed a second block of text just as big that read, “Stop counting, tell the experimenter you have seen this and win $250.” The people who believed they were unlucky usually missed both. 

And finally, part of the challenge is a willingness to abandon hypotheses and assumptions when they don't pan out:

What you can’t see, and what they can’t see, is that the successful tend to make it more probable that unlikely events will happen to them while trying to steer themselves into the positive side of randomness. They stick with it, remaining open to better opportunities that may require abandoning their current paths, and that’s something you can start doing right now without reading a single self-help proverb, maxim, or aphorism. 

[The quoted passages are from David McRaney.]"

Effects of the Minimum Wage on Employment Dynamics

Click here to read this paper by Jonathan Meer and Jeremy West of Texas A & M University. Abstract:

"The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment. For both theoretical and econometric reasons, we argue that the effect of the minimum wage should be more apparent in new employment growth than in employment levels. In addition, we conduct a simulation showing that the common practice of including state-specific time trends will attenuate the measured effects of the minimum wage on employment if the true effect is in fact on the rate of job growth. Using a long state-year panel on the population of private- sector employers in the United States, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments."

Climate change could be real but do less harm than climate policy

See Global lukewarming need not be catastrophic by Matt Ridley. Excerpts:

"Yet read between the lines of yesterday’s report from the Intergovernmental Panel on Climate Change (IPCC) and you see that even its authors are tiptoeing towards the moderate middle. They now admit there has been at least a 15-year standstill in temperatures, which they did not predict and cannot explain, something sceptics were denounced for claiming only two years ago. They concede, through gritted teeth, that over three decades, warming has been much slower than predicted. They have lowered their estimate of “transient” climate sensitivity, which tells you roughly how much the temperature will rise towards the end of this century, to 1-2.5C, up to a half of which has already happened.

They concede that sea level is rising at about one foot a century and showing no sign of acceleration. They admit there has been no measurable change in the frequency or severity of droughts, floods and storms. They are no longer predicting millions of climate refugees in the near future. They have had to give up on malaria getting worse, Antarctic ice caps collapsing, or a big methane burp from the Arctic (Lord Stern, who still talks about refugees, methane and ice caps, has obviously not got the memo). Talk of tipping points is gone.

They have come to some of this rather late in the day. Had they been prepared to listen to lukewarmers and sceptics such as Steve McIntyre, Ross McKitrick, Pat Michaels, Judith Curry and others, then they would not have had to scramble around at the last minute for ad-hoc explanations. These issues have been discussed ad nauseam by lukewarmers."

"We’ve warmed the world and will probably warm it some more. Carbon dioxide alone can’t cause catastrophe. For that you need threefold amplification by extra water vapour — which is not happening."

"Of course, the IPCC’s conversion to lukewarming is not the way it will be spun, lest it derail the gravy train that keeps so many activists in well-paid jobs, scientists in amply funded labs and renewable investors in subsidised profits. After all, Dr Rajendra Pachauri, chairman of the IPCC, confidently asserted in 2009 that “when the IPCC’s fifth assessment comes out in 2013 or 2014, there will be a major revival of interest in action that has to be taken.” He said this before the people who would write the report had been selected, before any meetings had happened and before the research on which it was based had even been published."

"if the climate resumes warming at the rate the IPCC expects, it may do more good than harm for at least 70 years: longer growing seasons, fewer droughts, fewer excess winter deaths (which greatly exceed summer deaths even in warm countries) and a general greening of the planet."

"Satellites show that in the period 1982-2011, 31 per cent of Earth’s vegetated area became more green, 3 per cent more brown. The main reason: carbon dioxide.

Leave the last word to Professor Judith Curry, of the School of Earth and Atmospheric Sciences at the Georgia Institute of Technology, who used to be alarmed and no longer is. Her message to the IPCC this week was: “Once you sort out the uncertainty in climate sensitivity estimates and fix your climate models, let us know .. .. . And let us know if you come up with any solutions to this ‘problem’ that aren’t worse than the potential problem itself.”"

Exercise may be ‘as effective’ as drugs for treating common diseases

Click here to read this article by Loren Grush of FoxNews. Maybe if people exercised more we would need less government in terms of paying for drugs. Excerpts:

"In a study published in the British Medical Journal, researchers from the London School of Economics, Harvard Medical School and Stanford University School of Medicine were interested in comparing the benefits of both exercise and drugs from past clinical trials, to see how they measured up in terms of extending a person’s mortality.

“What we have is a body of research that looks at benefits of exercise alone and then a separate body of research that looks at benefits of drugs on their own,” lead researcher Huseyin Naci, a researcher at the London School of Economics and a pharmaceutical policy research fellow at the Harvard Medical School, told FoxNews.com. “There’s never been a study that compares these two together, so that’s the rationale for this research.”

Naci and his team looked at four areas of health where evidence has shown that exercise can have lifesaving benefits: secondary prevention of heart disease, stroke rehabilitation, treatment of heart failure and prevention of diabetes.

Researchers then compiled a list of the different classes of drugs people commonly take to manage these conditions, and ultimately came up with 305 randomized clinical trials to analyze.  The study involved 339,274 people, 15,000 of whom received physical intervention for their health conditions while the rest were included in drug trials.

Overall, the researchers saw no significant difference between exercise and drug intervention for the secondary prevention of heart disease and the prevention of diabetes.  And in the case of stroke patients, exercise was found to be more effective than drug treatment at extending a person’s mortality."

The inequality illusion

Click here to read this article by Aparna Mathur of AEI.Excerpts:

"we worked with the RECS data as well. This survey has questions on household use of appliances such as microwaves, dishwashers, computers, printers and other data. What we find is that the access of low-income Americans – those earning less than $20,000 in real 2009 dollars – to these devices that are part of the “good life” has increased. The percentage of low-income households with a computer rose to 47.7% from 19.8% in 2001. The percentage of low-income homes with six or more rooms (excluding bathrooms) rose to 30% from 21.9% over the same period.  Similar increases can be documented for appliances like air-conditioners, dishwashers, microwaves, cell phones and other household items.

In general, we find that people at all income levels now have access to many more material possessions than they did in the 1980s. Moreover, there has been a narrowing of the gap between high and low income classes in terms of ownership of these items. It is hard to argue against the improvement in the standard of living that has accompanied these trends.

Hence, the standard narrative that rising income inequality has somehow hurt the middle and lower income classes is not supported by data. Policies aimed at redistributing incomes from the top to the lower income classes have certainly been responsible for part of this trend. However, we would caution against using this argument for raising marginal tax rates at the top to levels seen in the 1970s. In another co-authored piece , my colleagues and I argue that the Diamond and Saez solution to inequality—a marginal tax rate of 73 percent —is based on unrealistic assumptions relating to how individuals would respond to high tax rates. Their modeling of the optimal rate assumes a “more equality is better” social welfare function and assigns no social value to the marginal dollar of consumption for the rich. Most importantly, it ignores the long-run behavioral responses and consequences of having marginal tax rates that are over 50 percent. In the article, we show that while these assumptions work well in theoretical models that are aimed at catering to an audience of professional economists, these should not be used as the basis of real world public policy formulation."

Coca-Cola Aims To Put Clean Water Stations In 3rd Worldies

Looks like a valuable contribution to the quality of life for many people. See EKOCENTER Delivers Safe Access to Water and Other Basic Necessities to Communities in Need . Excerpts:

"To help provide communities in need with access to safe drinking water and other basic necessities, The Coca-Cola Company, together with DEKA R&D, and other critical partners including development banks, NGOs and companies, launched EKOCENTER™ - a downtown in a box - with the Slingshot™ water purification system  housed within the community center. The EKOCENTER project aims to improve the holistic well-being of developing communities around the world, focusing on those within the Bottom of the Pyramid (BoP), the largest, poorest socio-economic group. Globally, this represents nearly 4 billion people who live on less than US$2 per day.

"EKOCENTER is a modularly designed kiosk with Slingshot at its core, transformed from  a 20-foot shipping container into a hub of community activity, offering  clean, safe drinking water, alongside other services, such as access to wireless communication, electricity, vaccination storage, and more tailored to address community needs. EKOCENTER^TM strives to help communities thrive— each and every community member—from the people using EKOCENTER^TM to the local entrepreneur operating it"

"By 2015, we will place between 1,500 and 2,000 units in the form of EKOCENTERs, “downtowns in a box,” or Slingshot water purification systems to deliver further services beyond clean water, in Africa, Asia, Latin America and North America. Through this commitment, we aim to deliver 500 million liters of safe drinking water, while promoting greater local development in communities that need it most."

"What is Slingshot technology? Each EKOCENTER is equipped with Slingshot technology. The Slingshot water purification system—developed in partnership with DEKA R&D—uses vapor compression distillation (VCD) technology to turn any source of dirty water—river water, ocean water and even raw sewage—into safe, clean drinking water. The technology, invented by inventor and DEKA R&D President Dean Kamen, delivers approximately 800 liters of clean water daily at the hourly electricity cost of less than a standard handheld hair dryer (1kWh).

In 2012, our Company announced a partnership with DEKA R&D at the Clinton Global Initiative to deliver stand-alone Slingshot water purification systems to schools, community centers and health clinics in rural communities in countries throughout Africa, Asia and Latin America, and as an expansion of this partnership, Slingshot will be a key component of the EKOCENTER project.

In 2013, we are deploying units in Africa and Latin America. Building on current pilot work initiated in Paraguay, Mexico and South Africa by The Coca-Cola Company and DEKA R&D, the project will expand in early 2014 to additional markets