A Nobel Laureate’s Disappointing Policy Advice

We reported previously on the research by Nobel laureate Angus Deaton and his wife Anne Case showing that the death rate has been increasing for the white working class, the only socioeconomic group for which that is true. This finding, which some have dubbed The White Death, has become perhaps the most talked-about recent finding in all of social science.

Deaton and Case are to be commended for their statistical analysis, which appears to be solid. The White Death seems to be real. The question therefore becomes: What can be done about it?

The Washington Post’s Wonkblog wanted to know, so they published a very good interview with Deaton and Case. Their most fundamental argument is that the labor market for unskilled labor has deteriorated badly, and this development has had an adverse impact on the lives of millions of people. I agree with Deaton and Case on this basic point. But Deaton’s specific policy recommendations left me very disappointed.

First, Deaton apparently believes that we need to get more people into college.

Anne and I, I think, differ a little bit on how much education is a solution for this. But it’s certainly clear there are lots of people who are not getting BAs who are capable of it. So we need to do a much better jobs [sic] of getting these into school.

Well, as someone who has spent more than 20 years in the university classroom, I can state with confidence that the problem in higher education is more nearly the exact opposite–too many, not too few, people pursuing BAs. America must have, at Deaton says, at least a few people “not getting BAs who are capable of it.” But there are vastly more people in the opposite situation; pursuing BAs who are not really capable. Higher education is already massively subsidized and over-expanded. Rather than expanding further, higher education needs to contract. More people should consider learning a trade or going to coding school.

On education, Deaton’s wife is more sensible:

Case: But it’s also the case here that there are people who don’t want a four-year BA. We’ve been around this block many times: We do need to think about how we want to train people to enter the 21st century labor force.

Deaton also wants to expand the welfare state.

Deaton: We haven’t really talked about how none of this is happening in Europe…The obvious difference is that the safety net is enormously more generous in Europe. And lot of people in their 50s who lose their jobs can go on retirement. You get a doctor’s certificate and you get paid pretty much your salary until you die.

Wait, if you’re in your 50s and you lose your job for economic reasons, then you can just talk a doctor into saying you’re disabled and collect your check for life, and Deaton thinks that’s a good thing? Am I misreading this, or did Deaton endorse disability fraud?

Deaton and Case also seem to believe that Americans are too reluctant to accept welfare.

Case: The other thing that makes it harder in America rather than Western Europe is that there really is a difference for a large swath of the population in how they feel about receiving government transfers. We’ve all been trained up on the idea that we are individuals and we take care of our families and our neighbors take care of theirs, and that’s the way we like it. It’s very hard to give somebody something when they see it as handout that they don’t want.

What Case says was true about America in the 1950s and 1960s. In those days, there was a strong conscientious aversion, as well as considerable social stigma, to accepting welfare. But I don’t think that’s true today. Half of American households receive some kind of government check, and 30 percent receive a “means tested” benefit, i.e., welfare. When I was a kid, that latter figure was only 7 percent.

Moreover, unlike Deaton and Case, I don’t believe the primary reason why working-class people are dying in America but not Europe is Europe’s somewhat more generous welfare state. Another obvious and possibly more relevant difference is that Europeans do not drink sugary Cokes in 30-ounce servings, nor do they consume Little Debbie Snack Cakes by the box. Maybe before we put millions more on the disability rolls, we should first try to get them to cut back on carbs.

There’s one other policy recommendation that I’ve been pushing. We’re spending about three trillion dollars a year on health care. And our life expectancy is going down. Whereas all these other countries are spending way less, and their life expectancy is going up. For me the implication is if we implemented single payer, we’d get rid of a lot of these costs. Not without screaming and yelling, of course, and not without goring a lot of oxen.

But the crucial thing is recognizing the extent to which these rising health care costs are responsible, at least in part, for the stagnant wages for people without a college degrees. If they’ve got an employer and they’ve got health care, their wages are getting pushed down by the employer paying for that health care. People don’t even realize this. They think it’s for free.

No doubt, the cost of health care is a huge problem, and we need reform. But single-payer is not the way to do it. Those single-payer countries that report lower costs are leaving out a lot of hidden costs. In particular, they don’t count the costs to individuals of suffering due to rationing of health care. They also don’t count the negative impact on the economy of taxes needed to fund the system.

I’m not a left-wing nut pushing for single-payer! It’s not because I like socialized medicine. It’s just because I think this is eating capitalism alive, and if we want a healthy capitalist society in America, we’ve got to get rid of this monster.

Shorter Deaton: “I’m for single-payer, but just don’t call me a left-wing nut!”

So to summarize, Deaton wants to expand higher education, make welfare more generous, and pay for nearly everybody’s health care. This amounts to a massive expansion of government. Deaton intends to help the ‘little guy,’ but as Dennis Prager likes to say, the bigger the government, the smaller the individual.

And Deaton wants all this additional spending when the federal government is already exposed to a $200 trillion fiscal gap. Where will the money come from?

As I said, Deaton’s policy advice is very disappointing.

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