I wasn’t always a fan of Paul Krugman, but that was when I still thought El Rushbo spoke only the truth. F2U Rio Linda: he doesn’t.
In any event, the New Yorker magazine just published a great profile of Krugman the person, which also sheds light on Krugman the (Nobel Prize winning) economist.
And buried in that article is quote from one of Krugman’s teachers, Evsey Domar, that really got my attention.
Why did some societies have serfs or slaves and others not? … Evsey Domar [argued] that if peasants are barely surviving there’s no point in enslaving them, because they have nothing to give you, but if good new land becomes available it makes sense to enslave them, because you can skim off the difference between their output and what it takes to keep them alive. Suddenly, a simple story made sense of a huge and baffling swath of reality …
Too Bad About Those Pre-Existing Conditions
This says to me that he who can accurately calculate the economic value of people’s activities can make lots of money, if you are in the right place at the right time.
One of the first great financial applications of these insights was insurance, which began as a way of reducing the risk of traders, as early as 5000 BC in China and 4500 BC in Babylon.
Right place, right time.
Let’s cut away to the present and look at Health Insurance.
Without arguing how we got here; we have an opaque, monopolistic market. Consumers have virtually no quality information, and in practice no choice of insurance providers.
The insurance companies have all the data, information and tools to calculate and guarantee their profitability.
Right place, right time.
Oh, and one other small plus … no accountability.
Not A Mystery 
Bob,
I wish your blog had a “thumbs up” button (like Facebook 😉
You say things so well that there is no point in adding further comment, and yet — I want to post a “hear, hear!” Perhaps I’ll have to post a link to this one in *my* Facebook.
Heather
Posted by Heather | March 2, 2010, 12:38 amHeather,
Thanks for the feedback. I never know what people think unless they post a comment, and it’s especially nice to get the positive kind.
Posted by Bob Gelber | March 2, 2010, 10:07 amBob, a couple of thoughts:
Karl would approve.
We spend more on defense than the rest of the world allowing other countries the luxury of spending huge amounts on their entitlements. Would you be in favor of large cuts in military spending to fund the new health care progam?
And last but not least I found a new candidate for “Official Pied Piper” Czar.
Its a must see: http://www.youtube.com/watch?v=iwGFalTRHDA&NR=1
Posted by Sal | March 2, 2010, 9:19 amSal,
I agree we have a huge problem with the deficit. The ONLY way this will REALLY be solved is with the adoption of VAT (national sales tax). In addition to raising huge sums of money it taxes consumption and rewards savings. Numbers show it would allow you to eliminate income taxes for over 90% of the population. But of course the problem is that our current political system will never adopt this solution, until one of the following happens:
[1] A Presidential candidate makes it the central piece of her campaign, and she wins as a result.
[2] Things get bad enough that the country agrees that we need to change the system and it happens in the ‘normal’ course of events with R’s and D’s working together.
[3] Countries that hold our debt start bailing out, helping implement [2].
[4] A huge crisis and melt-down of some sort that forces a relatively quick change in tax policy agreed to by all sides. Because there is no choice.
IMO the answer is behind Door 4. The big question is how bad the melt-down gets and whether there is anything left on the beach after the wave goes back out.
By the way, the other thing I like about VAT is that it taxes the ‘underground’ economy which accounts for something like 30% of GDP. Nobody mentions this, but it’s the elephant in the room…
Bob
Posted by Bob Gelber | March 2, 2010, 10:19 amAs to point number one, I can only assume that you are either pandering to your constituency or you are endorsing Hillary for 2012.
And no comment on my link?
Posted by Sal | March 2, 2010, 1:42 pmSal,
Hilary can’t run until Obama is done, and in spite of what Darth likes to believe Obama will be a two-term president.
I did check out the link, and have to admit that words failed me.
Bob
Posted by Bob Gelber | March 2, 2010, 1:52 pmJust so we are clear, you are saying, we should tax our way to prosperity?
Posted by Sal | March 2, 2010, 1:46 pmI’m saying that the deficit is such a big problem that ordinary tax increases, spending cuts or any other normal tool won’t get us there. VAT is a new tool with the potential to be a game-changer. I never said anything about prosperity, I’m talking about avoiding total disaster.
Posted by Bob Gelber | March 2, 2010, 2:00 pm