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Despite the republicans’ grudge, universal healthcare must be mandatory. Without it, the market will collapse, resulting in prohibitively expense premium.

The logic can be explained by adverse selection under information asymmetry. An oversimplified reasoning is follows. People differ in their pre-conditions, which are their private information. Insurance firms, however, do not know people’s pre-conditions. So the premium is priced for the average condition, in the sense that the premium equals the coverage times the risk (the probability of being sick). But then those whose health condition is above the average (hence lower risk) is better off not to buy the insurance, because the premium is more than their benefit (coverage times the risk). Hence adverse selection occurs. After their withdrawal, only those riskier people still want to buy the insurance. But then the premium (price) must increase to the new level of benefit (coverage times higher risk), to reflect the risk profile of the remaining pool. Then adverse selection occurs again. The same line of argument shows that more people will opt out.

Without mandate, this degradation process will continue until only the most risky people remain to buy the insurance, at highest price. Certainly, this is not governments intended: to reduce the price, the healthcare must have broad base, to ensure that healthy ones subsidize unhealthy ones.

Here is an interesting sidenote. Despite being a conservative, the chief justice Roberts seems to understand this economic logic well. So he casted the deciding vote for Obama care. Interestingly, his does not tread the political ground; rather, he interpret the mandate as a tax, which saves him a lot of political headache.

2015-07-24 13.41.11


I thought you always wanted the sexy one

“The argument over style versus substance makes Sen. Clinton a little like the car dealer trying to persuade a buyer that the solid but somewhat staid sedan she offers is a better bet than the sexy but potentially unreliable sports car available down the street.” – Gerald F. Seib, Will Obama Deliver the Beef? in today’s WSJ.

Plus, this one is sexy yet reliable. How can you possibly pass? :) Check out the position papers on http://www.barackobama.com/.

A Simple Thing

As you said, simple, little things change one’s opinions and feelings of other people. Will your opinion change after you read this? What’s the old Chinese saying? You don’t do things that you don’t want other people to do to you to other people. Politicians are dirty, but some are more decent and graceful than others.

Hillary’s Smear Campaign
Michael Zeldin. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 31, 2008. pg. A.17

Beginning with the South Carolina debate, and continuing as an applause line in many stump speeches thereafter, Hillary Clinton has accused Barack Obama of representing an inner-city slum lord while practicing law in Chicago. Of all people, Sen. Clinton should know better.

During the Whitewater investigation, Independent Counsel Kenneth Starr investigated the legal work performed by Mrs. Clinton, then a partner in the Rose law firm, on behalf of Jim McDougal and his bank, Madison Guaranty. Mr. Starr believed that Mrs. Clinton helped orchestrate the fraudulent land deal known as Castle Grande. He subpoenaed her billing records, hauled her before a grand jury, and relentlessly pursued her.

In her defense, Mrs. Clinton and her attorneys asserted that her involvement in the matter was de minimus. As one of independent counsels who preceded Mr. Starr, I was interviewed repeatedly on the subject. I wholeheartedly defended Mrs. Clinton.

I believed that the evidence revealed that Mrs. Clinton, who spent a total of only 60 hours of work on the case over a 15-month period, was not substantially involved in the matter and did nothing improper in her work on behalf of Madison Guaranty. In the end, no charges were brought against Mrs. Clinton because there was insufficient evidence to prove that she knowingly assisted anyone in the perpetration of a fraud.

Yet, when an opportunity presented itself in the debate, Mrs. Clinton, without so much as a blink of an eye or the slightest blush, denounced Sen. Obama for representing “Tony Rezko in his slum landlord business in inner-city Chicago.” Her accusation invites scrutiny. Not so much for the truth of the accusation (the facts are quite straightforward and completely benign) but as a window into Mrs. Clinton’s character and as a lens with which to see whether a Clinton presidency will be a vehicle for change.

The facts are well documented: Upon graduation from Harvard Law School in 1991, Mr. Obama, the first African-American president of the Harvard Law review, could have named his job at any law firm or corporate legal department in America. Instead, he selected a boutique civil rights law firm, Miner Barnhill & Galland, where he represented community organizers, discrimination victims and black voters trying to force a redrawing of city ward boundaries.

During his tenure at Miner Barnhill, the firm accepted the representation of the Woodlawn Preservation and Investment Corp., a nonprofit group that redeveloped a run-down property on Chicago’s South Side. Mr. Rezko, not the client of the firm, was assisting Woodland with City housing redevelopment projects. As a junior associate, Mr. Obama was asked by his supervising attorney, William Miceli, to do about five hours of basic due diligence and document review. That began and ended his involvement in the case.

No one who has ever practiced law, let alone Mrs. Clinton, could argue, with a clear conscience, that these five hours on behalf of a church group that partnered with a man who at a later point in time would be alleged to be a scoundrel equated to knowingly representing a Chicago slumlord. Yet she could not resist leveling the accusation.

I suggest that this provides a window into Mrs. Clinton’s character because notwithstanding the enormous suffering she had to endure when accused of wrongful conduct in her representation of Madison Guaranty — a representation that appears to have been no more than a routine business transaction — she is willing to behave no differently than did her Whitewater accusers if she can gain politically. She appears to have learned no lessons from the Starr investigation.

Mrs. Clinton’s willingness to ignore the truth for short-term political advantage is exactly what breeds the partisanship that’s paralyzed Washington for too many years, and the cynicism felt by so many Americans, especially the young. Getting ahead by any means possible is the strategy. Once elected, the candidate falsely believes that he or she will be able to set things right and govern differently. All that was said in the campaign is rationalized — it will be forgiven and forgotten as part of the hyperbole of the election process.

Sadly, it just isn’t so. No one forgets and no one forgives in Washington. (Ask John Kerry if he has gotten over the Swift boat smear campaign.) How you get elected defines who you will be once in power. Mrs. Clinton has shown us with this one simple, baseless accusation why it will be hard for her candidacy to represent a change. She appears too comfortable with the politics of personal destruction if she can gain a political advantage.