But I am reminded that it is the young, mobile, and healthy that are taking the biggest risk with not having insurance – and increasing the told cost of health care as they find themselves in the emergency rooms. And to a certain extent, I agree. But against my libertarian tendencies, I want to argue that giving people the choice to opt in and out of insurance actually creates a moral hazard, with a solution that must ignore the individual and solved only with a macro approach.

Let’s begin by looking at what insurance is: insurance is social system that distributes the financial costs of catastrophes across a population. Individuals pay a share into a system and extreme fluctuations in small segments of the population are absorbed.

In order for this system to work, a very large portion of the population must believe that they are risk and want to buy into the scheme. The reality is, though, that the risk of a catastrophe occurring to any single individual is quite small. The chances that your house will burn down: small. Getting in a serious car accident: relatively small. Being struck by some inexplicable disease and having to be hospitalized: very small. In the developed world most people live relatively long lives – and are more often set back by slow onset conditions caused by lifestyle decisions, such as heart disease and stroke. So on an individual basis, you can’t sell insurance on a catastrophe basis, without there being some level of deception.

Moreover, individuals have a hard time accurately gauging their own risks. People rarely have adequate information about their risks to make a rational decision – and if they did, the risks would appear small. Some risks, like getting hurt in terrorist attack or a plane crash are extremely rare, yet most effective in mobilizing fear.

So we’re presented with two basic ideas: we need insurance for known fluctuations in the population, which we would all like to be protected from. But individuals have a hard time gauging their own risks, but still are asked to predict. This asymmetry of information lends itself to abuse and, I think, resembling other morally ambiguous situations, like gambling.

While specific risks to individuals are statistically rare, we know – with certainty – that small segments of the population will be afflicted with all sorts of catastrophes. Since insurance is a tool that works best everyone participates and we cannot expect individuals to ever know their own risks, it makes sense that the industry resembles a public service as apposed to a gambling business.

Yet, we are in the midst of yet another bailout by US government – again, by institutions deemed “too big to let fail.” The auto industry is asking for $25 billion, which as of now, appears could come from the $700 billion intended (and also failing) to restore liquidity in the financial markets. The financial markets are in turmoil and it would seem like a bad time to consider letting the auto industry collapse. But, we might also want to consider this a good opportunity to do what’s been needed for a long time now – and that is restructure our economy.

Before I give my reading on the situation I want to make clear that I understand that people’s livelihoods are at stake here. Even more so, our entire economy at risk. Here is some perspective:

GM’s payroll pumps $8.7 billion a year into its assembly workers’ pockets. Directly or indirectly, it supports nearly 900,000 jobs — everyone from auto-parts workers to advertising writers, car salespeople, and office-supply vendors. When GM shut down for 54 days during a 1998 labor action, it knocked a full percentage point off the U.S. economic growth rate that quarter. So what’s bad for General Motors is still, undeniably, bad for America.

That reason alone should discourage any talks of letting these companies fail. But how long can we put off restructuring this industry? If the government had not coddled these companies for the past decades we would not be in this situation today. There is no reason to believe that in future it will be easier to restructure the industry. It will be hard no matter when it happens. The reality is that the American carmakers have been zombies – clinically dead, yet still walking around – for years now. Not only that, they have been dead weight, preventing the modernization of our entire economy.

the U.S. automotive industry has been on the wrong side of almost every environmental, social and safety issue since the 1960s. The industry objected to the Clean Air Act, publicly opposed fuel economy standards, fought against seat belt and air bag legislation, dragged its feet on alternative-fuel vehicles and lobbied against almost every socially responsible initiative. Exactly why would the public want to bail out an industry that has failed in the market and been so unresponsive to the public good?

The decisions we make right now will shape our future economy in dramatic ways. As the world economy swerves in every which way, we have to make sure that we don’t just straighten out, but also end up going in the right direction. And for that, I believe what we need is a well-managed dismembering of the auto industry. We certainly do not want a situation where the industry meets a sudden and catastrophic end. But that’s the direction we are going. Market pressures from Japan, Korea, and now, China, will only continue to squeeze the auto industry and I am not willing to bet our future economy on their resurgence.

the solutions will slip from GM’s control. At some point the laws of physics take over and, like steel-makers and airlines, GM is at the mercy of global forces. It simply cannot compete in a global economy with the enormous burden it now carries in legacy costs. It certainly cannot meet those costs for long off a shrinking sales base and negative cash flow. And distracted by those woes, it can’t begin to make the investments necessary to match the Koreans on price, the Japanese on quality, and the Europeans on performance.

So what does the future hold? Well, if we take a long-term view of the economy, it’s clear that the search for sustainable sources of energy will be key to our economic future, similar to the way transportation was an important economic struggle of the 19th and 20th centuries. The car brought mobility to the masses, but now transportation, as a problem, is for the most part solved. With planes, buses, trains, cars and boats we can reach most places of the world in a matter of hours – not months. We will continue to make improvements to transportation (coupled with telecommunications) but we need a larger economic scope if we are to lead in the new century.

As I said before, there needs to be a well managed dismembering of the industry. First, the companies need to file for Chapter 11 bankruptcy. The government can then move in and – and as was the case with the FDIC-managed dismembering of Washington Mutual and Wachovia – assets can be sold to highest bidder. The government can then invest in and encourage Toyota, Honda and Nissan to take over as much of manufacturing as they can. The government can assume responsibility for the pensions of the oldest employees and focus on retraining and job placement programs for the youngest.

We’d rather the government spend billions on retraining and job placement than on propping up perpetually weak companies that can’t fix themselves. We also don’t buy the argument that bankruptcy would be a deathblow for GM. The only folks it would be a death-blow for would be shareholders and many bondholders.

Will it be expensive? Yes. Is it necessary? Absolutely.

Retraining should focus on manufacturing and retrofitting our existing infrastructure with “green technologies.” When we reach an acceptable level of stability, we should consider taxing inefficient and wasteful sources of energy to increase market pressure and encourage innovation. This way we can solve the short-term economic problem of keeping people employed and the long term problem of promoting sustainability.

Obviously there will many more issues that need to be considered in this transition and there will be seen and unforeseen problems that will pop up. But if we don’t keep a long-term view when solving these issues, we are surely to find ourselves here again in the not too distant future – having accomplished little.

And in comments to reporters at the White House, the Treasury secretary, Henry M. Paulson Jr., said that consumers should remain confident about the soundness of the American financial system.

They say that chocolate rations have risen again.

But Google depends crucially and directly on the content created by users and more generally on the goodwill of the Internet community.

Equally, so do the many products Google creates and gives away, with no obvious path to future profit.

So, more than in the past, it makes sense for corporations to cultivate diffuse goodwill, rather than focusing solely on profit, perhaps modified by the need to buy off powerful interests.

I agree with your conclusions, but disagree with your analysis. Isn’t it more likely that the rules for making a profit have changed? It is not goodwill for the sake of goodness; it’s good – or at least the perception of goodness – that now helps yield profits.

Google creates products ‘with no obvious path to future profit’ because it understands that technology has changed the way business is done and the new methods require an embrace of creativity. But the motivations are still the same.

If you’re uncomfortable with the idea of ‘profits’ (as some people in this comment section appear to be) then nothing about the way the world is changing is encouraging. However, I think there is something else going on here. While the motivation is still profits, technology, which is so widely accessible, needs to provide something more than functionality. Functionality is easily replicated. What’s left is an aura. Something you use because you ‘believe’ in it, somehow.

That can be accomplished by branding. But also by what someone does with their money. So what a hotshot CEO does with their money is part of the ‘aura’ of goodness. This explains things like the Bill and Melinda Gates Foundation, Google Foundation and all those little foundations scattered around the Bay Area, created by a new breed instant millionaires, who promise to be ‘good.’ And actually do end up doing good things.

That changes the argument of profits, doesn’t it? If people are doing something worthwhile with the money they make, then what’s the problem? You can easily reduce anyone’s actions into selfish motivations and you would have proved almost nothing. It’s external actions that matter most. It appears that we are moving in a direction that encourages both profits and goodwill.

But something interesting is happening in the field of computer science:

Computer science has lost its mystique. There is no longer a need for a vast army of computer scientists. The applications, games and databases that students once built laboriously in final year projects are bought at bookshops and newsagents.

If the gap between public knowledge and academic curriculum isn’t large enough, the gap between academia and industry practice is a gaping hole. While academic departments concentrate on developing new computer systems in an ideal organisational environment, a lot of industry has moved away from in-house development to a focus on delivering a service.

The field that has helped create most the of technological change in the past 50 years is going through a demystification process, and the ability to ‘compute’ has become so ubiquitous that it is no longer reserved for the highly trained. So what should we expect? Well, at the other end of this spectrum, meaning economics, if we’re to believe my model, there should surge and there has been. Here is some evidence from Harvard registration:

Ec 10, the popular name for Social Analysis 10, “Principles of Economics,” packs Sanders Theatre this semester with 736 undergraduates, despite a drop-off of more than 200 students from first semester. The course still has more than two times the number of undergraduates registered for the next largest course, Historical Study B-49, “History of American Capitalism.”

With 355 undergraduates, “History of American Capitalism,” previously History 1651, is a newcomer to the top of the list. When it was last offered in Fall 2003, only 77 undergraduates enrolled in the course, and before that, 30.

Now, I expect that the field of economics will probably go through it’s own demystification process, probably very soon, brought on by technology, where economics will become an automated model that philosophers and politicians can tweak to build their ideal societies (and for you pessimists out there, this doesn’t necessarily mean utopian societies).

So what does this mean for the surge in interest in economics? Well, I expect an over-saturation of economists in the coming years, of which few will be good at, and a purge, reminiscent of computer science. But that’s the cycle of things eh?

But after all that, Maher focuses on the Americans and the “American Dream”. Maher cites a study on the difficulty of climbing the economic “ladder” in the United States. Apparently it is easier to work your way out of poverty in Europe (I’ve not found the exact study he cites, but this article seems to cover the idea: American ladder is tough to climb) than in the United States.

But the most interesting part of his rant comes when analyzes American reasoning. See, the American dream depends on a certain social economic structure put in place by government, and its citizens can climb up the structure with hard work. But now people have become so individualistic that they do recognize the structure put in place for them by government, and now look to dismantle it. For example, Republicans have been trying to eliminate the “estate tax” for years now, a tax that for the most part effects wealthy. But for some reason gets support from more than the few who will actually benefit from it.

Taxes are one of these things that people rarely seem to understand, even by those who depend most on the benefits brought in by taxes. It’s amazing because those who receive most of the benefits from high taxes, are those who vote against it. I recommend reading “What the matter to Kansas” by Thomas Frank. Frank goes into great detail and explains the situation in the “heartland” of America, where many people proudly (and ironically) proclaim that they do not require government handouts, but at the same time, apparently unaware, are vote away their livelihoods. So much for not needing government.

There must be a reason for this. The people must either extremely idealistic and vote against their own interest on a matter of principle, or they might just not be educated as to what they are really voting for. I suspect it’s the latter, especially when being mislead by it’s representatives. Taxes have become synonymous with un-American, sadly misunderstanding what the benefits of America.

Maher then made another good point about the American dream has come to mean. The American dream, today, has been mutilated beyond recognition. When my parents migrated to the United States, my siblings and I saw the hard and laborious work required to survive. Even with a college education, both my parents initially had traditional immigrant jobs, like a cab driver and factory worker. To this day I do not comprehend the math my parents pulled off to support 4 children on their income. But they drilled in all of their children the importance of education and hard work, and because of this I am still a believer in the American dream (to a certain level).

I have typical views on hard work because of my experience growing up poor, and because of my experience, I am often disturbed by most ideas of entitlement. A small glimpse into main stream culture, through the lens of reality television (although not exactly “reality”, it does give a glimpse the audience’s mindset), you’ll see “My Sweet 16″, where 16 year old girls throw temper tantrums at their fathers for not buying them expensive cars for their birthdays. Or “Cribs”, where “stars” show off their mansions, cars, and big screen televisions. What you see is a glamorization of gluttony (a deadly sin, may I remind you). We see ego often confused for drive, excess considered cool, education considered purgatory until you win the lotto, and hard work means wishing really bad that you become a Hollywood Star.

It’s no wonder by people vote for hearts and dreams, instead of their own self-interest. There is a disconnect on what is considered successful and what is considered hard work. Maybe this is reason to allow the illegal immigrants into the country: to remind Americans of what hard work really means.

The documentary covered the rise of capitalism and globalization at the beginning of the century, then shake up after the first World War and rise of communism and fascism after the war. It then covered the “revival” of capitalism and globalization in the early 90s, after the fall of communism, through case studies of India, Bolivia, China and Poland. The documentary is presented in an exciting format where we see the tides of world change from one ideology to another.

Around the time when the documentary is discussing the failure of communism, we are introduced to Jeffrey Sachs. Sachs, an economist, shared his experience as an economic adviser for the Bolivian and Polish governments, where he helped draft plans that controlled inflation and ultimately saved lives. These stories were amazing to hear in the documentary, but when I encountered The End of Poverty by Sachs in a local book store, I had to get it.

I had an immediate connection with Sachs. Sachs provided me with an refreshing way of thinking that was both blindly idealistic and extremely pragmatic. This is been a balance I’ve been trying to strike in myself for years and I found a model in Sachs. From Wikipedia:

Since 2002, Sachs has been Director of The Earth Institute at Columbia University, and a professor in Columbia’s Department of Economics, School of International and Public Afffairs and Department of Health Policy and Management; in 2003 he became Quetelet Professor of Sustainable Development. He is also Director of the United Nations Millennium Project and Research Associate at the National Bureau of Economic Research. Previously, Sachs has been an advisor to the IMF, the World Bank, the OECD, the World Health Organization, and the United Nations Development Programme.

It was inspiring to see someone who’s ideology is to simply save lives. No complex ideas on how “things should be” or ways to build a Utopian society. Nope, it is simply save lives. Sachs specializes in “modernizing” governments by advocating for free markets, and generally focuses on encouraging the “world community” to cancel debts for struggling countries and encouraging countries to open up its borders to foreign investment.

I might share the same ideals as Sachs for what a modern governments and economy should look like, but when it about saving lives I think the solution which prevents hundreds of thousands of people from dying every day is the best solution. What I find inspiring is that Sachs has found his tool, capitalism, and he has fine tuned it to deal with different situations. The tool is not what he is advocating for, but instead he is advocating for the results.

Here here a few bookmarks I’ve saved that have more information on Sachs.

“American executives who are planning to send work abroad express concern about what they regard as an incipient erosion of scientific prowess in this country, pointing to the lagging math and science proficiency of American high school students and the reluctance of some college graduates to pursue careers in science and engineering.”

I find it quite ironic that the reason why companies are outsourcing the most skilled jobs of any society is because of lack of education. Currently, in American culture, there is a political movement which is selling the idea to people that the science we know today is flawed, and a more philosophical concept of science is required. It’s hard not to see a link between these two situations, one idea casts doubt onto science and the other is heavily dependent (the jobs) on the belief in science.

American politics, with it’s current ties with Intelligent Design movement, is failing Americans in many ways. Teaching student to accept ignorance when in doubt will never have a scientific backing, but it seems clear to me that if education loses $59M by the federal government, ignorance might become more widespread and accepting of even the most unfounded ideas.

A Washington Post article summarizes the devastating effects of these budget cuts quite nicely.

“The budget would eliminate the Perkins loan program, which provides low-interest loans to low- and middle-income college students. The budget also would end Perkins loan forgiveness for members of the armed services and Peace Corps volunteers. The budget would redirect those savings to increase spending on Pell Grants, which provide college grants to low-income students and raise the maximum award $100 to $4,150 — the first of five annual Pell increases planned by the White House.”

But I lied, this is not irony. This two prong attack on science is not a coincidence. Sadly, the extremely religious have political power, and this agenda is heavily dependent on people’s ignorance. To me it seems clear that in order to sell ignorance, education cannot be cherished, and the fact that research jobs are leaving the country is a clear sign that the extremely religious are getting their way.