Kevin Drum

Customer Service Blues

| Sun Aug. 29, 2010 12:18 PM EDT

Keith Humphreys says that dealing with the DMV is one of the most common ways that Americans interact with their government, and the fact that DMV performance is generally horrible makes people hate the entire enterprise of representative democracy. "DMVs undermine our faith that the public sector can do anything right or that it even cares if it does," he writes, "and that undermines a basis for a democratic society." Even granted that Keith was having a bad day (at the DMV, in case that's not clear), Mark Kleiman has a question:

If poor DMV performance threatens democracy, does the equally unhelpful attitude and operational design I’ve encountered in dealing with cable companies, power companies, health insurance companies, credit card companies, and USAir and United Airlines threaten capitalism?

Excellent question! Here's my best guess at an answer. People complain about customer service from big, faceless corporations all the time. But when they do, they complain about a specific corporation: "Time-Warner sucks," "I hate Verizon," "I'm never flying Delta again," etc. In their minds, these are separate companies that have performed badly, but they don't necessarily reflect badly on the entire enterprise of capitalism. Besides, in many of these cases there's at least theoretically the possibility of taking your business elsewhere.

In the case of governments, people don't distinguish as well. If they have run-ins with the IRS (federal government), the DMV (state government), the zoning commission (city government), their trash pickup (county government), and the municipal water company (an independent agency), these are all "the gummint." And, of course, in all these cases there's not even a theoretical chance of dealing with anyone else. If you need a business license, the only place you can get it is the county clerk, and if their hours happen to be 9-5 on weekdays and they require you to show up in person and wait in a long line — well, that's what you have to do.

But it's still a bit of a quandary. If I had to guess, I'd say that the average joe actually gets more grief from dealing with big corporations (cell phone provider, cable company, airlines, etc.) than from all levels of government combined. Most of us, after all, don't interact with the government all that much aside from mailing them checks now and again. What's more, there are institutional reasons that explain lousy customer service in both cases — though, ironically, they're mirror images: lack of competition in the case of government (so they don't have a lot of incentive to improve) and too much competition in the case of corporations (which forces them to cut service to the bone in order to stay price competitive on their main products).

So which is worse? My mother was complaining last night about the LA Times' inability to deliver her paper correctly. "How long has this been happening?" I asked. "About fifty years." And recently it got even worse because they've installed a new payment system that's shot full of bugs, leading to missed deliveries and bad billing. But then there's my sister, who owns a condo and has spent the last several months fighting the County of Los Angeles, which recently decided to update its property records and determined that her garage (which is attached to the main building, not a separate structure) didn't belong to her anymore and auctioned it off. That was after she'd called several times and was assured it was just a mistake and not to worry about it.1 So now her association has had to hire a lawyer of its own to straighten this out.

Which is worse? My sister's problem is certainly more severe, though it will eventually get cleared up. My mother's is merely annoying, but chances are her service from the Times will stay terrible forever. Take your pick.

1Quick hint for life improvement: whenever anyone tells you something is just a mistake and "not to worry about it," start worrying. This is almost a certain sign that you should immediately panic and start burning up the telephone wires demanding a resolution in writing at the earliest possible time.

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Quote of the Day: Glenn Beck, Scholar

| Sat Aug. 28, 2010 12:07 PM EDT

From Dick Armey, PhD University of Oklahoma, former economics professor at the University of North Texas, and former Republican majority leader in the House of Representatives:

One of the things that we see as we look at Glenn Beck's work that's been fascinating to me, is we see a more true and accurate history of the United States, and we see it documented at levels of rigor that, in fact, one would expect out of Ph.D. dissertations — it is serious, scholarly work....[Liberal critics] don’t have to argue with Glenn Beck. They have to argue with his documentation and they can’t match that level of rigor.

Somebody just shoot me now.

Friday Cat Blogging - 27 August 2010

| Fri Aug. 27, 2010 2:07 PM EDT

Today we have twin cats. In fact, until I put these side by side, I didn't quite realize just how identical they were. And yes, for the nerd watchers among you, these are lids to comic book boxes. They are, apparently, much preferred as cat snoozing spots than the actual boxes themselves. And with that, I'm off to lunch. Have a good weekend, all.

The Tale of Fannie and Freddie

| Fri Aug. 27, 2010 2:02 PM EDT

Karl Smith has read the just-released Conservator’s Report on Fannie and Freddie and has a detailed post summarizing it. His conclusion:

The wave of housing price increases was kicked off by changes in private label securitization. These changes left Fannie and Freddie with a smaller market share and lower absolute level of securitizations. Fannie and Freddie attempted to adjust their basic business practices to stay competitive in bubble markets and among aggressive borrowers.

These adjustment left Fannie and Freddie exposed to a large decline in housing prices. This is exactly what happened and Fannie and Freddie reaped enormous losses because of their exposure.

Had Fannie and Freddie stuck to their traditional role of guaranteeing low value traditional loans rather than trying to stay competitive in bubble areas their losses would have been substantially less.

In short, attempting to subsidize the American dream for low and moderate income families may be a fundamentally bad policy. However, it does not appear to be either the origin of the housing bubble or the source of Fannie and Freddie’s trouble.

Read the whole thing for the full story. Overall, it really does seem like the right take to me. Fannie and Freddie obviously made huge mistakes that are going to cost the taxpayers a boatload of money, but the evidence just doesn't support the idea that they helped provoke the housing bubble. They were followers, not leaders. It was Wall Street that lit the fuse, not Fannie and Freddie.

Read My Lips, Don't Look At My Record

| Fri Aug. 27, 2010 12:39 PM EDT

George Bush's former budget director, Rob Portman, who's doing well in his campaign for a U.S. Senate seat in Ohio, says voters really don't care that he was part of the administration that helped wreck the economy over the past decade:

"What the people in this plant want to know is what you are going to do for me going forward," Mr. Portman said. "That is all they care about, and frankly that's what voters care about."

"The world has moved on," he added. "Maybe the Democrats haven't."

Steve Benen is gobsmacked that Ohio's voters seem eager to support Portman "despite his background of failure" — though in fairness to Ohio's electorate, Portman has a long record as an Ohio congressman prior to his two years as an obscure official in the Bush administration, and that's probably what most voters are responding to.

More broadly, though, there's no reason to be surprised anyway. As near as I can tell, Portman is right: policywise, voters really don't care much about what you've done in the past. They only care about what you say you're going to do in the future. They care about scandals in the past, and they generally seem to give politicians credit for the past policies of their parties — so Republicans get automatic credit for being budget hawks even if they've spent freely in the past and Democrats get credit for protecting Social Security even if they've voted to cut it in the past. Beyond that, though, voters don't care much. They just vote for whoever talks the best talk.

This is a pretty handy thing for politicians.

Quote of the Day: PowerPoints in Afghanistan

| Fri Aug. 27, 2010 12:13 PM EDT

From reserve colonel Lawrence Sellin, formerly assigned as a staff officer at ISAF Joint Command in Afghanistan:

For headquarters staff, war consists largely of the endless tinkering with PowerPoint slides to conform with the idiosyncrasies of cognitively challenged generals in order to spoon-feed them information. Even one tiny flaw in a slide can halt a general's thought processes as abruptly as a computer system's blue screen of death.

It gets better. Unsurprisingly, Sellin was sacked yesterday.

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Eating Your Own Toxic Waste

| Fri Aug. 27, 2010 11:27 AM EDT

What's that? The housing bubble is starting to show its age and you're having trouble finding buyers for all the crappy CDOs you've put together? That won't do at all: if the market gets wind that no one actually wants the toxic waste lying around on your books, the show could be over. What to do?

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

....An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds. By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier. The banks often orchestrated these purchases. In the last two years of the boom, nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs.

ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows.

Not only does this hide the fact that there's low demand for your toxic waste, but it generates fees for all on both sides of the deal. It's a twofer!

The chart below shows how much of its own inventory Merrill Lynch bought at the height of the bubble. For all the gory details, just click the link and read the whole story.

(Via Felix Salmon.)

Stimulus vs. Austerity

| Fri Aug. 27, 2010 11:07 AM EDT

According to David Brooks, the returns are in: during the first half of this year the U.S. spent more on stimulus than Germany, and the German economy is doing great. Score: Austerity 1, Stimulus 0.

Needless to say, this didn't sound quite right to me. Why look only at the first half of this year? It takes a while for stimulus spending to have an effect, after all. So what about 2009? Here's the Wall Street Journal on March 12, 2009:

According to IMF figures, Germany's 2009 emergency spending is 1.5% of gross domestic product, compared with 2% for the U.S. But Germany's automatic stabilizers will narrow the gap, contributing an additional 1.7%, for a total of 3.2% of GDP. The U.S. stabilizers add 1.5% for a total of 3.5%.

Look: these numbers don't really prove anything either. The German economy is different from the American economy in several important ways, and in any case the global economy is so intertwined that stimulus in an importing country like the U.S. has knock-on effects on an exporting economy like Germany. Still, Brooks's column is the dumbest kind of cherry picking. Last year stimulus spending was nearly identical in both countries. Both countries adopted robust Keynesian policies, and if you can draw any conclusions from that at all, it's only that it apparently had a bigger effect on Germany than it did on us. That means only that they no longer need stimulus and we do. What's so hard about that?

Cheap Drugs

| Fri Aug. 27, 2010 9:15 AM EDT

Aaron Carroll writes today that we're addicted to new drugs even though older drugs are often just as good or better than the new ones. The problem is that we don't usually know this for sure since comparative studies are rare. However, a few years ago one was done for blood pressure medications:

There were so many drugs to choose from for this trial (at different costs) that the National Heart, Lung, and Blood Institute (NHLBI) primarily organized and supported a randomized, controlled trial to examine which was best. This study was enormous; it took place in 623 centers in the United States, Canada, Puerto Rico, and the U.S. Virgin Islands between 1994 and 1998, and included over 33,000 participants. Patients received one of four drugs:

  • Amlodipine, a calcium channel blocker
  • Doxazosin, an alpha-adrenergic blocker
  • Lisinopril, an angiotensin-converting enzyme inhibitor
  • Chlorthalidone, a diuretic

The last of these, the diuretic, was the oldest of the drugs, and by far the cheapest. However, at the end of the study, the results were clear. This old, cheap diuretic was significantly better at preventing at least one of the major types of cardiovascular disease when compared to the other, newer drugs. Since the diuretic was also significantly less expensive, it should be the drug of choice in initial treatment of high blood pressure. However, it usually is not.

I'm glad to hear it! My blood pressure has been slowly rising for the past few years, and last year my doctor decided I should start taking something for it. At first she recommended a beta blocker, but as we talked about it she said something that made me a little nervous (I don't remember quite what). "You know," I said, "I actually have a strong preference for the oldest, cheapest, best studied drugs around." She looked slightly surprised, but said that was perfectly reasonable and immediately prescribed a diuretic. I've been taking it ever since. (And, yes, I try to watch my sodium intake too.)

The whole post is worth reading. Sometimes new drugs are great, but I'm willing to bet that we waste upwards of a quarter to a third of the money we spend on pharmaceuticals because both doctors and patients have been brainwashed to always want the latest and greatest. But me? I like drugs that have been really well studied and are known to have infrequent and well understood interaction effects. In fact, new drugs actually make me kind of nervous. I am an insurance company's dream patient.

A Climate Change Thought Experiment

| Fri Aug. 27, 2010 5:00 AM EDT

It's unfair to call Bjørn Lomborg a climate skeptic even if he did write a book called The Skeptical Environmentalist. He believes in global warming, after all. He just thinks it's not our biggest problem right now, and in any case, we can simply adapt to it when it happens. Here he is a couple of days ago on the possibility of a large rise in sea level over the next century:

Here are the facts. A 20-foot rise in sea levels [...] would inundate about 16,000 square miles of coastline, where more than 400 million people currently live. That’s a lot of people, to be sure, but hardly all of mankind. In fact, it amounts to less than 6% of the world’s population — which is to say that 94% of the population would not be inundated. And most of those who do live in the flood areas would never even get their feet wet.

That’s because the vast majority of those 400 million people reside within cities, where they could be protected relatively easily, as in Tokyo. As a result, only about 15 million people would have to be relocated. And that is over the course of a century. In all, according to Nicholls, Tol, and Vafeidis, the total cost of managing this “catastrophe” — if politicians do not dither and pursue smart, coordinated policies — would be about $600 billion a year, or less than 1% of global GDP.

It's a beguiling premise. Only $600 billion a year! And all it depends on is politicians pursuing smart, coordinated policies.

But there's something missing from this equation: namely that the money is largely going to have to be spent in some of the poorest countries on the planet, and it's going to have to come from the richest. But will rich countries be willing to pony up even a fraction of this $600 billion a year? Or will they take a look at each catastrophe separately and take refuge in the mantra that no individual event can be blamed on global warming?

I'd guess the latter. But if Myles Allen of the University of Oxford and some of his colleagues have their way, this excuse is going to get harder and harder to make:

In 2004, Allen and his colleagues showed to a high level of confidence that human greenhouse gas emissions had at least doubled the risk of the European heatwave of 2003 occurring....Kevin Trenberth of the National Center for Atmospheric Research in Boulder, Colorado, thinks similar analyses should be done within weeks of an event. For instance, we know that high sea-surface temperatures and large amounts of moist air over the Indian Ocean helped bring about the Pakistani floods and the heatwave in Russia. It should be possible to determine how great a role human climate change played in these events, Trenberth says.

Allen's team hasn't analyzed the Pakistani floods yet, and climate deniers will point out that Pakistan has had plenty of floods in the past. But what if Allen's models show, say, that climate change doubled the chance of this month's disaster in Pakistan? Does that mean that rich countries ought to bear half the cost of dealing with it? Probably. But just last week the UN reported that "donor fatigue" was hampering aid efforts and that they had raised only a third of the $459 million needed for initial relief. If two or three disasters in a single year makes it hard to raise even a measly half billion dollars for Pakistan's worst flooding in decades, what are the odds of rich countries coming up with anything close to $600 billion each and every year for the next century?

Slim and none. Given the political realities, adaptation is certain to be a necessary part of our strategy for dealing with climate change. But political realities — not to mention physical, chemical, and ecological ones — also make it clear that adaptation alone is a chimera. Citizens of rich countries will never be willing to spend enough on their poorer neighbors to mitigate the damage of climate change even if the necessary amount is "only" one percent of global GDP. The fact remains that the likely damage from climate change is so severe, so varied, and so unpredictable that the only sensible policy is to spend money to try to prevent it in the first place. Short of a massive technical breakthrough in clean energy production, this simply isn't likely to change. The faster we reconcile ourselves to it, the better.

Front page photo: Lui Siu Wai/zumapress.com