Political Economics 101: A Dialog

Attached is a slightly cleaned-up transcript of an IRC conversation I had last night during which I tried to teach political economics 101 to a well-intentioned person I know who describes himself as a “socialist” (though, from the way he reacted, perhaps not for much longer). It went better than one might have expected.

I think this transcript is interesting on at least two levels. First, it was very constructive, with lessons about how intelligent people who don’t know economics perceive the issues around it as well as a short course in public-choice theory embedded in it. But also…there’s tradition running from Plato’s Dialogues to the Renaissance of teaching philosophy through dialog. It’s interesting, I think, to see how this modulates into the key of IRC.

I am “esr”, of course, and the well-intentioned socialist is “emsenn”. Regular Armed & Dangerous commenter Daniel Franke puts in an appearance as “dfranke”. Also appearing is “Rowan”, who has serious health problems, and “citizen”, who is listening and learning.

This is only very lightly edited. I have fixed typos, removed some extraneous comments by others, reordered a few lines where responses crossed each other, and joined some adjacent IRC lines where that makes it flow better. Material added after the fact is bracketed with [], paraphrasing something said in discussion outside the span of the transcript.

emsenn: esr, why does having social programs mean having a heavy hand in the economy?

esr: Because the more of the GDP that goes through political allocation, the more you crowd out market signals. Um, do you know about the “calculation problem”?

emsenn: Nope

emsenn: I’m not knowledgeable in what I’m talking about, if you haven’t noticed. ;) I just know that here sucks, and places with more social services tend to seem better.

emsenn: I’d rather things seem nice and safe than have them be blatantly trashed. I’d rather have our infrastructure seem to be up to date, our streets seem to be in proper repair, our water seem to be drinkable.

esr: (Er, “seem” is the operative word.)

esr: OK, let me explain. Note that I am not making a political argument here; this is value-free economics.

* esr gathers his thoughts.

esr: OK. You have an economy. Some of the resource allocation is through markets. Some of it is through politics. For the moment we’re deliberately ignoring political labels.

emsenn: Mmkay.

esr: The “political” side may be called socialism or communism or just “welfare state”; it doesn’t matter.

esr: The problem is this: in the absence of market [demand] signals, you can’t put capital where it will produce the most benefit to the most people. The information you need to maximize joint utility is only elicited by market transactions.

esr: Hayek noticed in 1938 that even assuming an angelically benevolent political class, this problem is unsolvable.

emsenn: And when the government is heavily involved in economics, it reduces the number of transactions?

esr: Right, but that’s only part of it. [It's not just raw volume of transactions that's significant, but the quality of the demand information in them. Political allocation creates noise - distortion - that degrades that information.]

emsenn: I don’t get why the two are tied. How come government involvement reduces transactions (trade?)

esr: Because capital that would otherwise go into market transactions is getting diverted into political allocation.

emsenn: Gotcha.

esr: But that’s actually not the worst.

esr: The worst is that political allocation quickly gets captured by rent-seekers. So, for example, welfare programs get captured by welfare service providers.

emsenn: Lobbyists, basically?

esr: Yes, and their parasites.

Rowan As far as the social services goes, I’d really, really actually like proper single payer healthcare.

dfranke: Rowan: Health care is vastly overconsumed when consumers don’t have to pay market rate for it, and it ends up making them sicker.

esr: dfranke is correct.

Rowan: Yes. But it’s also vastly unaffordable for people who DO NEED IT.

emsenn nods at dfranke. Isn’t it something like those with health insurance of any sort spend 9x more on health care than those who don’t?

esr: The reason for the capture effect is that the rent-seekers have concentrated incentives to game the system, whereas everyone else has only diffused ones

Rowan: I have disability. I cannot generally afford the healthcare services I need, such as the referral to the pain specialist to see if we can get me proper pain management. I can’t afford the physical therapy twice a week, etc.

dfranke: Rowan: whether in a socialist system or a capitalist one, health care has to be rationed. We’re not at the post-scarcity level for it yet. Capitalism will ration it far more efficiently.

emsenn has no incentives and is still trying to game the system.

emsenn: Well, game it to actually pay attention to what it’s doing and spend money correctly

esr: Yes, but you’re at a competitive disadvantage – you will always lose out to rent-seekers who can hire lawyers and lobbyists.

emsenn: Nuh-uh. I’m friends with their lawyers and lobbyists.

esr: (Note that I’m still not making value-loaded “political” claims. I’m explaining some of the basics of what’s called “public-choice economics”.)

* emsenn nods

Rowan: I have a crap POS healthcare plan right now, and even this I can barely afford.

esr: OK, so you’ll lose out to the people who can hire *more* lawyers and lobbyists than you…

emsenn: Yes.

Rowan: Luckily for maybe the next six months, I can afford the out of pocket premiums that I have to pay for the basic things my insurance doesn’t.

Rowan: I can afford new crutches, and thirty bucks for a prescription. But really, I usually can’t.

Rowan: I don’t care if single payer isn’t the system that works best. I just want a system that is affordable and works.

esr: OK, now I can explain why publicly funded health-care is a disaster.

esr: Basically, it means there are no market signals in health care. This leads straight to accelerating malinvestment — too many CAT scanners, not enough primary-care clinics.

Rowan: Right. I can see how that works, yeah.

esr: It locks in a ruinously high rate of cost inflation. The more heavily you subsidize, the worse it gets.

emsenn: esr, what about the fact that your clients, the patients, require these things. Can’t you just take metrics based on that?

esr: Been tried. Look at the NHS in Britain, or the Veteran’s Administration hospitals in the U.S. *shudder* What you end up with is the worst of both worlds; bureacratic allocation and ruinously high costs.

* emsenn nods, fucking VA.

emsenn: (My grandma moved my grandpa out of a private hospice to a VA for some unknown reason, it was horrible)

Rowan: esr: I did say working single payer care. NOOOOOOT the current disasters.

esr: But the theory that any single-payer system can work better is a delusion. The problems are intrinsic and all ground out in the absence of market signals.

emsenn: esr, so what system would work? Please keep in mind that people tend to be stupid, selfish, and mean.

Rowan: Or hell, I’ll be happy if I can get good health insurance if I get a job, but fact is, I’m uninsurable as to most standards. Chronic conditions and a history of complications.

esr: What would work better is a totally free-market system. No subsidies. Without the subsidies, medical price levels would crash – they’re being sustained where they are by the fact that effectively no one in the system is really cost-sensitive.

Rowan: esr: I would definitely support that.

esr: All the medical-services people are, in effect, being told that subsidy programs will support their inefficiencies forever. No wonder they gold-plate everything! You would too!

esr: It’s not that anyone is stupid or evil, it’s that the incentives are all wrong.

emsenn: esr, free market health care would be cheaper? What about, say, IP rights on medication, companies charging huge amounts for helpful medicines that they own sole rights to?

esr: Well, there are several possible solutions to IP blockades. One would be to junk the patent system.

emsenn: So then what’s the incentive for companies to do expensive research if they can’t get insane profits?

esr: emsenn: What is the incentive for computer-chip manufacturers? Drugs are no more IP-intensive than that, and we manage to have a competitive market there. Actually, chip fabs cost more than researching and certifying a drug.

emsenn: Is it? Most chip types have like 2-3 producers

esr: Yes. Keep going, you’re on the right track there…

emsenn: Uhh… the track I’m on is a monopoly on the market.

esr: (Wow. I explain economics and a self-described “socialist” actually listens. This is unprecedented…)

esr: (That was a compliment, emsenn…)

emsenn: esr, I’m only socialist because from what I’ve seen it seems to be best. You’re more than welcome to change my mind. Just don’t expect it to happen in a night

emsenn: Also, omnomnom donuts.

Rowan: Want donuts.

esr: OK, good. You understand that monopolies are a serious problem.

emsenn: They’re like governments without the public accountability :(

esr: I’m not back to politics yet. That involves value commitments like (in my case) “freedom is more important than equality”.

esr: I’m willing to talk in those terms, but I don’t need to right now.

emsenn: Mmkay

citizen: This is the most mature political online discussion I have seen in a while

emsenn: So, we’ve got 2-3 producers of medicine, all in competition with each other. This is, so far, good. What prevents one from buying the others, or just over time one taking a firm lead over the others?

esr: So, the question of how we avoid market failures almost (not entirely, but close enough for right now) reduces to the question of how we avoid monopolies. You figured that out yourself.

* emsenn gives himself a gold star. Wait no, fuck gold stars, I have donuts. Again, omnomnom.

emsenn: So far we haven’t been very good at stopping monopolies – they tend to end up fucking themselves over.

esr: YES! You’ve noticed that! Good!

emsenn: Mhm. Problem is they tend to set back advancement in the field.

esr: OK, now we got to an empirical question: how is the half-life of monopolies (that is, the time after achieving monopoly status that 50% will crack) related to the amount of political allocation in the economy?

esr: And the answer is….

Rowan: Now we’re beyond Rowan’s understanding of this stuff. So Rowan is going to idle.

* emsenn drumrolls

* emsenn thinks Rowan doesn’t give himself enough credit.

esr: They’re directly correlated. That is, more political allocation -> more persistent monopolies. Freer markets -> less persistent monopolies. Here’s why…

esr: A monopoly is a rent seeeker. A very rich, powerful rent seeker. A monopoly is in the ideal position to buy the regulators!

emsenn: I get what you mean. They can – right. To help ensure ideal conditions for them.

esr: Exactly.

esr: The solution to the monopoly problem, and to market failures in general, is to reduce the amount of political allocation in the system until the monopolies have a short enough half-life to be tolerable.

emsenn: How tolerable is that half life when you’re dealing with lives, as with our health system?

dfranke: emsenn: The question isn’t so much whether it’s tolerable as whether you can do any better.

esr: Thus endeth Public Choice Economics 101.

emsenn nods at esr. Sound logic.

emsenn: And it takes into account the fact that people can be assholes.

Rowan: esr: Next time can we do it in layman’s terms? :) I understood most of that but.

emsenn: So… uh. Explain more sometime. I’m hard-put to find fault with it.

esr: I will. There’s other stuff, like Coase’s Theorem on externalities, that is just as interesting.

emsenn: Externalities?

* Rowan nods.

dfranke: emsenn: an externality is basically any effect of a transaction, be it positive or negative, that falls on people not involved in it.

emsenn: Aha.

esr: Warning, however: If you really get this stuff, to the point where you can do analysis in these terms, you will be at severe risk of turning into a libertarian.

Rowan chuckles.

emsenn: esr, I’ve got no problem with that if I agree with it. :P

esr: Coase’s theorem is especially deadly that way.

esr: (Coase’s Theorem is the Killer Joke of political economics.)

emsenn: So like if I paid you to fix my street, an externality of it would be the fact that the people on the street are shit out of luck when it comes to leaving their homes for the duration?

Rowan whimpers. Pain, and an hour until pain pill.

dfranke: emsenn: well, the canonical example is lighthouses.

emsenn: But I want my street fixed :(

dfranke: emsenn: suppose if you build a lighthouse, it creates a benefit far in excess of the cost, and all sailors agree on this.

dfranke: emsenn: but how do you get someone to pay for it?

esr knows where dfranke is going and bows in his direction.

emsenn: Hrm.

dfranke: emsenn: if you build it, then there’s no way to deprive any sailor of its benefit, whether they paid to help build it or not.

emsenn: Could you tax the ships that go that route?

dfranke: emsenn: this is among the most common rationalizations for coercive taxation.

emsenn: I picked the wrong answer didn’t I?

dfranke: emsenn: Coase’s Theorem, on which I am not an expert and esr will probably have to pick up the slack for me, demonstrates that this ends up not really being a problem; that no matter what resource allocation you start out with, there will be some series of possible transactions that people will consent to that ends up getting you where you want to go.

emsenn: Could tax the nearby town too, I guess, since they get benefit from the trade, which will pick up now that the ships are at less risk of crashing.

dfranke tags esr. Your turn.

emsenn: There’s always a way to get someone to foot the bill even if they aren’t directly benefited, you mean?

esr: Not quite. What Coase’s Theorem actually says is this: “If transaction costs are sufficiently low, all externalities will be internalized” – that is, turned into market transactions between the participants. Almost what emsenn said, but more precise.

emsenn: Hah, cool.

esr: The kicker is that some externalities are hard – pollution, for example. You have to drive transaction costs to infinitesimal or zero before they internalize.

emsenn: Htm…can you look at long term costs? Like “solar costs X more now, but over 20 years the cost is nil compared to spending on coal”.

esr: Right, that’s just net-present-value accounting; it’s easy.

esr: And now you know the real reason the Internet is important.

dfranke: esr: Huh?

dfranke: esr: Oh…reducing transaction costs?

esr: The Internet is the most potent reducer of transaction costs since the invention of money.

emsenn: Aha.

dfranke: esr: Hmm, hadn’t thought of it that way before.

dfranke: esr: But you’re self-evidently correct.

esr: So, here’s how you internalize pollution costs in a really free market…

esr: You treat pollution as a form of tortious assault for which individuals can collect damages. Mercury or dioxin in my water table sucks, man!

emsenn: esr, so… treat pollution as an expense, in a way?

esr: Now, you create a futures market in shares of class-action lawsuits.

esr: QED.

emsenn: Who will the lawsuits be against?

esr: The polluters.

emsenn: So, everyone? Or just the major polluters?

esr: This only works to the extent you can identify sources of pollution.

esr: The better your sensor technology gets, and the better your ecological modeling is, the lower the threshold of pollution you can internalize.

224 thoughts on “Political Economics 101: A Dialog

  1. Very nicely done. Unfortunately, that conversation is the exception to almost every other economic or political conversation that takes place today. And it was with someone who was admittedly both open-minded and ignorant of the basics of economics. I became a libertarian (a short jump from a freedom-loving Republican) after reading authors like Hayek, von Mises, and Friedman and was bowled over by the logic of their arguments. Most people don’t put a high value on logic, though.

  2. I’ll 2nd what hvs said. Finding an emsenn in this sort of discussion is one in a million.

  3. Eliminating drug patents, radically scaling back the license cartels’ restrictions on independent provision of service by second-tier practitioners, and eliminating legal barriers to things like cooperative delivery of service would go a long way toward solving the problem. Something like old-fashioned lodge practice, with an MD on retainer for a reasonable upper middle class salary, would mean that mutual members could have primary care for monthly premiums under $50.

    I’d also like to see the few (alas) remaining community nonprofits reconfigured as *genuine* community hospitals (e.g. stakeholder cooperatives directly controlled by patients and staff). If doctors were put on salary, it would end the mutual logrolling of thirty doctors calling each other in for “consultation,” and clinic bills continuing to come in six months after you leave the hospital.

    The problem, as with so much else in our so-called “market” economy, is artificial scarcity.

  4. Just fwiw, I’ve lived for long periods of time under two systems of healthcare – the UK’s NHS for 26 years, and then the US system (various insurers, for 6 years). From my experiences, and those of friends and family, I believe I can confidently say the US system as it stands right now is just about most-pessimal. I would love access to the NHS right now, and yes I would pay the extra taxes for it – they would be less than what I pay for my health insurance right now!

    I don’t pretend to know much about economics – my PhD is in pure mathematics. But I do have a general distrust of any theorem that involves real people ;-)

    Having said that, I did find this post somewhat interesting, and I’d love to hear more on this topic. But don’t expect to win me over as easily as emsenn. I’m quite the skeptic.

  5. I cannot conclusively refute Bret’s guesstimate of the density of logic-tolerance among the global (or even American) population of leftists, but my own experience tends to indicate that, while it’s far lower than it would be in an ideal world, it is rather higher than “one in a million”. If it were truly anything like one in a million, a man with a near-defunct social life (such as myself) couldn’t credibly claim to have made friends at various times with at least six such persons, dated two of them, and subsequently married one.

    Of course, in an _ideal_ world, computing the density of logic-tolerance among American leftists would involve committing a divide-by-zero error, so perhaps discussion of ideal worlds is moot. :)

    But either way, there _are_ folks out there who’ll listen to a reasonable argument reasonably presented and perhaps be convinced. They’re far rarer than they ought to be, true, but they’re not as rare as many of us think they are.

  6. >I would love access to the NHS right now, and yes I would pay the extra taxes for it

    Systems with the VA’s or NHS’s structural features can look good when you’re young and healthy. They start to bite, hard, when you’re old and sick and the treatment you need is undersupplied or rationed.

  7. > Systems with the VA’s or NHS’s structural features can look good when you’re young and healthy. They start to bite, hard, when you’re old and sick and the treatment you need is undersupplied or rationed.

    But in that case, people living in the UK are free to supplement what they automatically get from the NHS, with their own private health insurance. Still seems like a win to me.

  8. Matt,

    Okay, perhaps I was exaggerating somewhat. But I’ve never met a self-proclaimed “socialist” who was so open to other ideas and I’ve been trying to educate such people for decades. It also took me a long time to evolve from a marxist (at 16) to a free-market kinda guy, but I had to figure it out for myself since I was surrounded by socialists.

    I’m wondering how old emsenn is?

  9. Very interesting conversation. Thank you for sharing it with us.

    I’ll think about it for a while.

  10. I’m don’t get the thing about drugs being no more IP-intensive than computer chips. Producing a generic drug seems to me to be a lot easier than producing a leading-edge processor. As you point out, building the fabs is the constraint. Who can produce a copy of an Intel chip to the same spec?

    Viagra, OTOH, no problem.

    ESR says: Um, I believe you’re agreeing with me. That was my point – ICs are harder, yet we have a competitive market for them. This an argument against drug discovery needing to be socialized, or supported by the present semi-socialized system’s bloated margins.

  11. I think that your partners in discussion were a rare group of very open minded people. I suspect the forum — NedaNet — would provide a great platform to allow such a discussion to take place. You and the participants in the forum, are part of a tribe with a shared, common, profound goal, and that tears down barriers. In fact, it does more than that. The tribal mechanisms kick in to strongly incentivize everyone to agree. There is surely a lesson here for anyone who would try to proselytize to their political philosophy. Do so in an environment where there is a shared goal, experience or community independent of the philosophy you are discussing. (Religious organizations and cults are extremely good at that sort of thing.)

    I mention this because I am interested in the broader subject of “what makes a convincing argument.” I am pretty familiar with the processes of logic, but convincing and logical are often two different animals, especially when dealing with the animals called humans. For example, those things often listed as “logical fallacies” such as “Appeal to authority”, “Ad Homeneim”, “Begging the Question” and so forth are logical fallacies because, although illogical, they are convincing. Sprinkling a few into an otherwise sound argument might not be minimalist, but does make for a more convincing argument for those less versed in logic.

    I think ESR shows a strong understanding of economics in this discussion, however, I notice that there was a constant use of pretty technical terms, such as rent-seeking, Coase’s theorem, and externalities. All very powerful and useful terms, but completely alien to most people (more’s the pity.) ESR gets away with it in this discussion (despite the confusion of the participants) because of the community benefits I mentioned above. Most people don’t like being in an discussion where they have to ask you to explain your terminology.

    I suggest to make an effective case for the need for freer economies it is beneficial to try to develop a less formal but less confusing language that speaks to economics from a more readily understandable point of view. After all, most of micro-economics is pretty much obvious common sense when explained in straightforward terms. (Supply and demand — sure the more it costs the less they wanna buy, and the more they wanna sell. Price discrimination — those evil bastards, so that it why it is cheaper to fly with a Saturday stay… and so forth.)

    For example, one of ESR’s lines was:

    esr: The worst is that political allocation quickly gets captured by rent-seekers. So, for example, welfare programs get captured by welfare service providers.

    That has a lot of technical terms in it. But we could rephrase it thus:

    The worst is that if the government gets to decide how to spend your money, and other tax payers money, then lobbyists can use their influence to get the money sent to the companies they are lobbying for. Even worse, they can get it written into law that the government has to give their clients that money, making it not just an immediate problem, but a long term commitment.

    This means largely the same, but almost anyone can understand it. Of course, it is easy for me to write this with plenty of time for reflection, rather than typing extemporaneously as ESR would have to do. ESR did a great job, and hopefully won a few converts.

    However, in a previous comment, I said that political parties serve more purposes than just winning elections, and this is one. Both parties and people of particular political persuasions can spend time finding ways to explain economic concepts, and coming up with convincing examples, that can end up in the idea-space of the human consciousness. And this will help move things more in your direction far more than most other types of political actions.

    The left are extremely good at this sort of thing, the right are getting better. Libertarians need to do a better job here, come down from our ivory towers and talk in more practical and direct terms with the uncommitted middle.

  12. >But in that case, people living in the UK are free to supplement what they automatically get from the NHS, with their own private health insurance.

    Tells you something about socialized medicine, doesn’t it, that the presence of an expensive private alternative is cited by its own advocates as what makes it better. Or even tolerable.

    Now try to imagine anyone in the U.S. saying “Private medicine is only tolerable because I could go to a VA hospital instead if I don’t like the care quality.” Hilarity would ensue.

  13. Good discussion. Two points: 1) Prescription drugs would be much less expensive if it didn’t cost hundreds of millions of dollars to get them past the FDA, and if the pharmaceutical companies weren’t constantly at risk of gigantic lawsuits. Bring costs down with tort reform and by allowing companies to sell drugs with labels that say “Not approved by the FDA! Use at your own risk!” 2) Note how the portions of health care often not covered by insurance tend to be much more affordable: optometry (even laser eye surgery), dentistry, vitamins, even cosmetic surgery. In those cases there’s something closer to a free market, so there’s competition to keep costs down. Contrast that with, say, emergency room visits: who the heck knows what it’ll cost ahead of time, or what different hospitals would charge?

  14. It was definitely something that I enjoyed participating in — even with my admittedly minimal participation.

    As said, I live with chronic health problems that unfortunately necessitate my reliance on the medical system in order to enjoy anything that remotely resembles quality of living, which otherwise becomes low, pain ridden, and immobile or with a limited range of what I get to do. I don’t want to become housebound, but to be honest, if I was removed from my parents’ health insurance plan which I am currently on, I would not qualify for the state program that we have and I cannot hold a job to get my own. What I’d love would be a working system, but that does not seem to currently actually exist.

    And no no, if emsenn was made up, it would make our lives a lot more difficult in all of this.

    Very nice to be able to read over this without having to go through my IRC scrollback, thank you ESR.

  15. In regards to the problems with health care in the USA: the problem can be summed up pretty simply.

    “47 million people in the USA do not have health insurance. This statistic is used to incorrectly imply that those 47 million do not have health care.”

    This deliberate obfuscation in the public discourse on health care in the USA illustrates the basic fallacy that we Americans want the best health care possible, and we don’t want to pay a dime for it.

    Here is my prescription for fixing health care in the USA. Please note, none of these require new government bureaucracies, they simply involve the government doing less than they are doing right now. If we did these things, health care would be much cheaper, much better, and would basically vanish from the political realm.

    1. Strongly discourage employers from providing health insurance (for example, by eliminating it as a tax deduction.)
    Convince people to buy their own health insurance when they are 21 years old, and carry it through their lifetime themselves, just like they do life insurance. This will eliminate most of the complaints about health insurance, portability, existing conditions and on and on. It is fair to the insurance company too, because they get to pay when it is cheap for the young, and expensive for the old.

    2. Incentivize people to pay for out of pocket medical expenses.
    By giving them tax breaks to save and pay.

    3. Eliminate the patent system and revoke all existing patents
    The price of drugs would go through the floor. Furthermore, a recent GAO study found that drug patents DISCOURAGE innovation in the drug industry, not encourage it. This is a no brainer (aside from the who lobbyist thing.)

    4. Make the FDA advisory only, and make as many drugs as possible OTC. Make it legal for pharmacists, nurses, and other such trained professionals to prescribe some drugs.
    Every year I get the same infection in my throat. The symptoms are the same every year, the prescription — amoxicylin — this the same every year. Why can’t I just buy it at Walmart? (FWIW, I’d prefer to legalize them all.)

    5. Eliminate import laws that prevent me from buy my drugs from Canada.
    This would slightly reduce the cost of those drugs here, and would equalize them in Canada, meaning that we would no longer be subsidizing them. It would also make an insanely backward argument go away.

    6. Reduce or eliminate medical licensing requirements
    Some medical procedures can be provided without the need for a full doctor. (FWIW, I’d eliminate all licensing requirements, and have some sort of recommendation, or stamp of approval system from professional organizations. Perhaps also control the use of the word “doctor” by fraud laws.)

    7. Apply some sort of fix to the medical tort system.
    I am not particularly in favor of a looser pays system. However, lawyers play in the role of government and laws, and so governments have a perfect right to regulate them. I’d say the best system is to simply require lawyers to charge hourly fees only, and regulate the upper limit of them. They can waive the fees if the plaintiff looses. No punitive damages, allowed. They are ridiculous anyway.

    FWIW, John McCain actually had some good ideas in last year’s Presidential campaign on this subject. A tax break to buy health insurance directly, eliminating that tax break for employer provided care, and allowing a competitive market in health insurance products across state lines. Surprisingly all constitutional, and all pretty good ideas. (Shame about all the other really dumb ones.)

  16. > Tells you something about socialized medicine, doesn’t it, that the presence of an expensive private alternative is cited by its own advocates as what makes it better. Or even tolerable.

    If it makes things any clearer, I’m in favor of people having:

    1) A safety net that will always give them enough medical care that they won’t die, no matter how little money they have, and will also take care of non-life-threatening illnesses if they are prepared to wait.

    2) The choice to pay extra to avoid waiting, for the non-life-threatening stuff.

    You appear to be saying that if I believe in the safety net, then I should be against giving people the option of paying extra. That seems an odd position to take.

  17. >It was definitely something that I enjoyed participating in — even with my admittedly minimal participation.

    Rowan, you were *important*. It’s easy and glib to theorize about health-care economics in the abstract; more difficult to avoid facing reality in the presence of someone who is chronically ill and directly being shafted by the inefficiencies and absurd price levels that stem from the system’s non-free-market elements.

  18. Two comments/questions (possibly for references/further reading).

    0. Assume all non-free-market legislation in US is abolished over the night and we wake up the next day in the perfect libertarian world. Wouldn’t the system self-destruct/evolve back to more or less the current state? In particular, most libertarian arguments I’ve seen seem to ignore the possibility of revolutions when the people are not very happy. More social oriented countries are more _convenient_ to live in, whether there’s more to that than a feeling or not.

    1. Beautiful futures market argument and perfect pollution detection machines aside, judging from your argument I’d guess it would take time for the mono/oligopoly to break down _and_ there’d be nothing to prohibit another one from forming at the same time. Translating this to the health insurance terms, it’s quite possible you’d only have a couple of companies to choose from most of the time, all happily colluding (rationally!) to deny benefits to people with preexisting conditions/with genetic benefits/whomever seems costly. As a matter of fact, once genetic tests become commonplace, there wouldn’t be any economic rationale for companies to provide benefits for someone with bad genes, would it. Would you be willing to justify such situation by a possibly more efficient distribution of resources on the large scale?

  19. The brilliance of it. That just cleared up a few things for me.

  20. > If it makes things any clearer, I’m in favor of people having:

    > 1) A safety net that will always give them enough medical care that they won’t die, no matter how little money they have, and will also take care of non-life-threatening illnesses if they are prepared to wait.

    > 2) The choice to pay extra to avoid waiting, for the non-life-threatening stuff.

    What makes you think that this doesn’t exist in the US? (Hint – it does.)

  21. > All the medical-services people are, in effect, being told that subsidy programs will support their inefficiencies forever. No wonder they gold-plate everything! You would too!

    Interesting theory, but have you ever compared doctor salaries in Europe or Canada with those in the US? Or, have you considered that health care expenditures as a percent of GDP, public or private, are lower in Canada then they are in the US? The kicker is that the state can use its monopsony power to drive down salaries and prices, and that given that these systems haven’t yet collapsed into a smouldering heap, the supply of these goods is inelastic enough for this not to cause serious shortages. Given these data, the only way you can argue that private health systems are better is to argue that the US system is half-socialized in a way so botched that it is worse than single-payer. What’s your take on it?

  22. > the supply of these goods is inelastic enough for this not to cause serious shortages

    One way we know this is that the US and nations with socialized medical systems have similar life expectancies.

  23. > What makes you think that this doesn’t exist in the US? (Hint – it does.)

    No it doesn’t. I’ve lived in the US for six years – I would have found it by now.

  24. Um, I believe you’re agreeing with me. That was my point – ICs are harder, yet we have a competitive market for them. This an argument against drug discovery needing to be socialized, or supported by the present swemi-socialized system’s bloated margins.

    The thing is that the IP – the temporary monopoly of a patent – is vital to the drug company being able to extract a profit from its discoveries, under the current business model at any rate. For processor makers, the need to build a fab is such a high barrier to entry that the patents are almost superfluous (though I realise they take out a bunch).

    Without some kind of patent system, what would the drug companies’ incentive be to bother to develop new drugs, if the latter were to be promptly and legally copied and put into production by everyone and his uncle in Guandong?

  25. >0. Assume all non-free-market legislation in US is abolished over the night and we wake up the next day in the perfect libertarian world. Wouldn’t the system self-destruct/evolve back to more or less the current state? In particular, most libertarian arguments I’ve seen seem to ignore the possibility of revolutions when the people are not very happy. More social oriented countries are more _convenient_ to live in, whether there’s more to that than a feeling or not.

    You’re close to the reason why I can’t take any libertarian argument seriously. Libertarians seem to vilify bureaucrats and lobbyists (and I agree they are a significant problem), but give a free pass to corporations. As much as bureaucrats are inept and corrupted and lobbyists are selfish and greedy, corporations are inept and corrupted and selfish and greedy. Monopolies are the obvious end of deregulation and once corporations achieve a monopoly, they essentially become their own government agency. Why would I want to trust the motives of a greedy corporation (a redundant label, yes) any more than I currently don’t trust bureaucrats or lobbyists?

    ESR says: “Monopolies are the obvious end of deregulation” shows you haven’t been paying even the slightest bit of attention to the way real economies behave and didn’t understand the original post at all. Let’s have this conversation again when you’re in contact with reality.

  26. Thanks esr, that was a very interesting read. It’s a nice coincidence that I was just reading this item at the Boston Globe yesterday, which discusses European health care systems that work a bit better than the NHS (I’m working in the UK currently, but paying insurance that will repatriate me to the Netherlands if I should be hospitalised!).

    The Dutch system is so complicated that I don’t understand any of it. Insurance companies, employers, patients, the government – everyone has a say and a stake in it somehow. Definitely there are quite a few rent-seekers there, but somehow the costs are, well, not out of control. Also, I wouldn’t be surprised if some of the regulations in it, while they seem to be fixes for market-failures, are actually fixing the side-effects of other market-regulations (like patents) – we have plenty of regulations…

    But the redeeming thing to note of course, is that it works satisfactorily.

    ESR says: Wait a few years. That’ll change.

  27. Mr. Raymond. i hear you have been threatened by iran regime recently. as it was just a comment i am curious to know if any physical or internet attacks has been actually done to nedanet. do FBI know where threats come from at last?

    thanks.

    Ulmaz

    ESR says: Off-topic for this thread: please go to Dispatches from the Iranian cyberfront

  28. >Wouldn’t the system self-destruct/evolve back to more or less the current state?

    Not if it works better. Consider an absolute monarchist making the same claim about this newfangled democracy theory c. 1750, and ask why we now find that question absurd. Technically speaking, democracy produces outcomes closer to a Pareto or Marshall optimum than monarchy. Free-market voluntarism should produce still closer ones, in fact as close as you can ever get in a human society.

    >As a matter of fact, once genetic tests become commonplace, there wouldn’t be any economic rationale for companies to provide benefits for someone with bad genes, would it.

    Sure there would; they’re customers with money, aren’t they? It would just push their premiums higher. Which is completely fair, as the additional risk is quite real. Insurance companies will always try to maximize premiums and minimize payouts; “bad genes” is no different in philosophical status than dozens of other actuarial factors they discriminate on without causing a fuss (age is an obvious one).

    The thing is that, at least in a free market, insurance vendors have to offer a service that’s a net win for customers or they won’t do business. Much of what makes them horrible to deal with now is that they’re, in effect, a closed oligopoly that owns its regulators. As a result, they can get away with price levels and terms of service that a free market wouldn’t sustain.

  29. >The kicker is that the state can use its monopsony power to drive down salaries and prices, and that given that these systems haven’t yet collapsed into a smouldering heap, the supply of these goods is inelastic enough for this not to cause serious shortages. Given these data, the only way you can argue that private health systems are better is to argue that the US system is half-socialized in a way so botched that it is worse than single-payer. What’s your take on it?

    Let’s pick these assertions apart:

    “the state can use its monopsony power to drive down salaries and prices” – yes, and it will do so until the utterly inevitable day when the regulatory apparat is captured by provider lobbies. At which point salaries and prices will rise until systemic collapse, though this process may be disguised as higher tax levels.

    “the supply of these goods is inelastic enough for this not to cause serious shortages.” – only works until the last generation of doctors who remembers not being drowned in paperwork is dead. The U.S. is already having a serious problem here, exacerbated by the fact that the AMA functions as a guild that restricts entry into the profession in order to collect rent for its members (instance of regulatory capture, which see).

    “US system is half-socialized in a way so botched that it is worse than single-payer.” Correct. It’s worse than single-payer would be on day one – but better than single-payer would be after the regulatory apparat undergoes full capture.

    Another significant point is that the European single-payer monopsonies are actually parasitic in significant ways on the U.S. system. They’re collecting the benefits (drug discovery, medical research) of our messier and less socialized system without having to pay all the costs; if they didn’t, they’d look significantly worse.

  30. > ESR says: Wait a few years. That’ll change.

    My gut feeling says you’re right.

    > Another significant point is that the European single-payer monopsonies are actually parasitic in significant ways on the U.S. system. They’re collecting the benefits (drug discovery, medical research) of our messier and less socialized system without having to pay all the costs; if they didn’t, they’d look significantly worse.

    Another very interesting thought. Thanks.
    *yungchin is ruminating…

  31. esr: You treat pollution as a form of tortious assault for which individuals can collect damages. Mercury or dioxin in my water table sucks, man!

    Intellectually, I know that libertarians tend to, when asked who will enforce any sort of rules, handwave into existence some kind of court system that bears no resemblance whatsoever to the one we actually have, but it’s still kind of surprising to see it blithely stated like this; perhaps I should expect an appeal to Sandor Arbitration at the Zoo next.

    Systems with the VA’s or NHS’s structural features can look good when you’re young and healthy. They start to bite, hard, when you’re old and sick and the treatment you need is undersupplied or rationed.

    But the current system is also rationed, based on one’s ability to pay for it, which is scaled to, but not the same as, health. (What’s affordable for a wealthy sick person may be unaffordable to a poor, mostly-well person.) How on earth is this not blazingly obvious?

    That was my point – ICs are harder, yet we have a competitive market for them. This an argument against drug discovery needing to be socialized, or supported by the present swemi-socialized system’s bloated margins.

    But a great deal of drug research is already subsidized; consider, for instance, the history of paclitaxel–public research sold to private folks.

    JessicaBoxer: Convince people to buy their own health insurance when they are 21 years old, and carry it through their lifetime themselves, just like they do life insurance. This will eliminate most of the complaints about health insurance, portability, existing conditions and on and on. It is fair to the insurance company too, because they get to pay when it is cheap for the young, and expensive for the old.

    How exactly would you do this convincing? Young, healthy people will opt out of the system, raising the average expense for everyone else, since they’re no longer subsidizing sick, old people–and why would they? This causes premiums to rise, which causes the average cost to insure a person to rise, and so on. It’s called the adverse selection death spiral, and it ends up with most folks not having insurance. How is attempting to “convince” young, healthy people to make what is, from an economic perspective, a stupid choice, a viable plan?

  32. I think part of the problem that leads to people like emsenn being one in a million is that for people like emsenn, the chances of finding someone like esr is also one in a million.

    I had an idea before reading this that I thought would be a way to strike a balance between the safety net of a (working) communism and the prospects for better goods/services that is inherent in capitalism. (I think I have an understanding of economic theory around emsenn’s.) Those of you with a better understanding, please point out errors I make. To me, it seems like communism fails because it assumes people are angels but instead the distribution gets sabotaged by greed, corruption, and idle whim and is entirely dependent on the government’s stability and proper function for people to get what they need (not even what they want, even basic needs become problems). For example, under Stalin, more people died under artificial famines than in the camps under Hitler. Also, it is limited to the speed of the bureaucracy instead of going as fast as possible. Work incentive is simply threats/violence. Under capitalism, work incentive is a better life, but for those that messed up, there is much less in the way of a safety net. In an ideal communism (yes, yes, oxymoron) there would be no homeless. We in the US can call ourselves the richest country, and while that’s true of most of our citizens, there are some with nothing. To combine the two, we need either a framework of capitalism with a communist mechanism for those who can’t get any better or a communist framework with a capitalist mechanism for those who can afford it. I suspect that many communist dictatorships were the latter, and it would need more government overhead anyway, so lets take a capitalist framework, so goods are well made and cheap (okay, maybe just cheap) but how do you support those without money? The way should be multiply redundant so something as common as a war wouldn’t leave half the country starving, and use people more resistant than average to corruption. (I have a group in mind that I don’t think are corruptible, but I’m probably too much the idealist). One way I see of doing that is by making a branch of the military that deals with supply lines. Since it would probably be labor intensive that would supply jobs for those without the education to get them. Since it would be set up to be redundant, nobody would be able to wreck an area by diverting shipments. The only other thing that needs changing is the way the military buys the stuff, because if they bought it on the open market at market prices, they’d probably be spending less on better stuff while reducing the overhead of needless pen-pushers.

  33. Another significant point is that the European single-payer monopsonies are actually parasitic in significant ways on the U.S. system. They’re collecting the benefits (drug discovery, medical research) of our messier and less socialized system without having to pay all the costs; if they didn’t, they’d look significantly worse.
    Indeed. How much would drugs cost here, and in Canada and elsewhere, if the socialized medicine of other countries weren’t getting away with paying their share of costs of drug development and testing because they mandate artificially low prices? Forcing drug prices in the US down to Canadian levels will not result in prices magically getting lower; they’ll result in the destruction of the pharmaceutical industry, because there won’t be any money to do drug research.

  34. Grendelkhan writes:
    > How is attempting to “convince” young, healthy people to make what is, from an
    > economic perspective, a stupid choice, a viable plan?

    Apparently, buying life insurance is not a stupid choice (as explained in my original comment.)

  35. Jay Maynard says:
    > Indeed. How much would drugs cost here, and in Canada and elsewhere, if
    > the socialized medicine of other countries weren’t getting away with paying
    > their share of costs of drug development and testing because they mandate
    > artificially low prices?

    Right. To be clear here what is happening with respect to the cost of drugs is pretty simple. Obviously the evil drug companies are trying to screw the poor sick people in America. Oh… sorry, that is the MSM line. In fact what is happening is very simple from an economic point of view. The marginal cost of drug production is very low. However, the upfront cost is very high. This leads to a situation ripe for price discrimination, where the drug companies can recover some of the low price demand by using international barriers and import/export laws to enforce the discrimination.

    Break down the barrier and the price evens out. That is to say, the US Import laws are propping up the Canadian Healthcare system. If, for example, Canadian law says that it will only pay producers a maximum of $1 for Nexium, then, as long as only Canadians buy it at $1, the drug companies can make a profit (because the marginal cost is say one cent.) But it means they have to recapture the capital from people in unrestricted markets. If those same people in unrestricted markets could also buy Nexium for $1 (say over the Internet to a Canadian pharmacy), then the drug company no longer can recapture the capital, and so will immediately stop selling the drug in Canada for $1. The price will be the same in the US and Canada, because the price discrimination barrier is gone. The consequence is that Nexium will now cost $10 in Canada, and the USA. Since Canadian law says that is illegal, you will simply not be able to buy Nexium in Canada. Consequently, the US drug import laws are propping up the Canadian healthcare system, making it look MUCH better than it actually is. The correct term for Canadian drug costs is “free-rider.”

    However, in fairness to the Canadians, it also has to be stated that a very large part of the capital cost involved in drug development involves the cost of convincing the FDA that it is both safe and effective (not to mention the capital risk from massive lawsuits should their be any problems with the drug later in life.) These are consequences of the American drug laws, not the Canadians, and perhaps we Americans are responsible for that anyways. (FWIW, Canadian drug regulation is also, generally speaking, a free rider on the FDA.)

  36. 1) Someone asked how old I am, I’m 19.
    2) To those saying I’m easily swayed: Yeah, I am, if I don’t know what I’m talking about and the other person has sound logic.
    3) I’m still not a libertarian, but see how it could work. Give esr a few more weeks around me, then we’ll see.
    4) Remember that medical companies wasn’t the point of the conversation, just a convenient example.
    (5) set up Tor relays if you haven’t already, they’re vital to securing and speeding up Iranian Internet at the moment.)

    –emsenn

  37. How about this then. Suppose you are a smallish country in the cold north, with not many neighbors. History shows that it is vital to have as high domestic food production capacity as possible: otherwise, you starve when a crisis comes and your neighbors don’t sell food to you anymore.

    But you are in the cold north where crops don’t grow very well compared to more southern latitudes. Thus in a time of peace and open markets, southern countries outcompete domestic producers in price. How do you keep domestic food production in existence on a scale that is enough to avoid starvation in the next crisis? For prolonged crises you can ramp up domestic production but you don’t have time for that if you rely entirely on imports. It takes a minimum of 1 year to grow your own food, if you have to start by ploughing a field. The point being, can you avoid government subsidies or how do you do it with minimal negative effects on production efficiency and market freedom?

    This scenario is not imaginary, I’m talking about my native Finland. We have large government subsidies for agriculture, both nationally and from the EU. I don’t know why France, Germany or Denmark need food production subsidies, but the above is how they have traditionally been justified in Finland.

    The subsidies are not sustaining obscene profit margins to farmers here. On the contrary, many farms are struggling. An often quoted breakdown of farming costs and profits says that market prices for agricultural produce roughly cover the direct production costs but leave no income to the farmer. In order to live off their work, a farmer’s income equals the subsidies they receive. In an indirect fashion, the government is employing the farmers to be in the farming business.

  38. > Apparently, buying life insurance is not a stupid choice (as explained in my original comment.)

    If you’re young and single it is. If you have a house, the bank has life insurance on you already. Your friends and family get your stuff. And you go in a hole in the ground.

    Having life insurance when you have no dependents is a stupid use of money.
    Having health-care cost-spreading policies when you’re young and healthy is likewise.

    You want to fix anything that looks like a health-care “crisis” (which it isn’t), do this – complete transparency.

    Right now, if someone with an HMO goes to the doctor, it costs them, say $20. If they have major surgery it costs the $20. You see where I’m going with this? There is no signal to the consumer as to the actual value of the services consumed. There is no signal back to the producer as to the actual demand for the services provided. This would be like having insurance on your car that made every visit to the mechanic subject to only a $20 co-pay. You’d bring your car in for every squeak, he’d charge 50% more than anyone would be willing to pay, and premiums would rise.

    We’ve convinced ourselves that if people had to pay the true costs of health care that they would not go to the doctor, get sicker, and ultimately be a larger burden. But to the best of my knowledge there is no evidence that this is true.

    Offer something that is truly “insurance”, leave the maintenance costs up to the consumer, and the market will sort it out.

  39. esr wrote: “Not if it [perfect libertarian world] works better [than the current system]. Consider an absolute monarchist making the same claim about this newfangled democracy theory c. 1750, and ask why we now find that question absurd.

    Alas, will we still find the question absurd in another 100 years? The looters (lobbyists, etc.) seem to make democracies ever more sclerotic and poorly functioning. It seems that only when the slate is wiped clean by a catastrophic event (such as a world war) can something like a libertarian ideal take root for a little while. But once that ideal creates wealth and prosperity, the looters move back in and we end up with the same mess we’re heading for.

    It may be that an absolute hereditary monarchy could actually work better because then there is only one looter (the monarch) who would want to maximize the value of his economy for himself and his descendants. He would have no reason to allow other looters to interfere with the economy.

  40. > No it doesn’t. I’ve lived in the US for six years – I would have found it by now.

    Sure it does. Most places in the US have at least one “free clinic”. All have “county hospital”, often by that name. All emergency rooms are obligated to do live-saving stuff without checking whether the recipient can pay.

    Yes, some will send you bills but poor people ignore said bills and continue to go about their biz, including receiving more care in the future. Some will try to filter you out if they think that you have money to pay, but that’s what a safety net should do.

    Frankly, I doubt that you looked. These facilities are easy to find. They even advertise.

  41. I find ESR’s argument that “publicly funded health-care … Basically, it means there are no market signals in health care. This leads straight to accelerating malinvestment — too many CAT scanners, not enough primary-care clinics.” does not appear to align with actual observation. The US has far greater numbers of high dollar specialty equipment like MRIs then universal insurance countries like Canada, UK, or Germany for example. Which is why so many Canadians come to the US for such procedures/exams to avoid waits.

    ESR says: The U.S. has greater numbers of high-dollar specialty equipment because it has more customers. Normalize for population size and I think your “observation” will reverse.

  42. > Apparently, buying life insurance is not a stupid choice (as explained in my original comment.)

    It depends on the cost of said insurance. If too much of the cost is actually a subsidy to folks with significantly higher expected claims, it is a stupid choice. If the cost is significantly less than the expected claims, it’s a great choice, but one that depends on other people making stupid choices.

    The most that a rational person will pay for insurance is the expected claims plus a premium for the value of decreased volatility. (However, there won’t be any providers unless the premium for decreased volatility is greater than the cost of running the system.) That’s why young and healthy people pay less for life insurance than old and sick ones.

    The “mandate health insurance” folks are trying to get some folks to subsidize others. It’s actually a tax, but they realize that calling it that will wake up the rubes.

  43. Take a look at health care in Mexico – there is insurance, but very very few people have it. The doctors give you a menu of treatments and prices before the procedure begins.

    My father’s new wife has discovered that it’s cheaper for her to buy a round trip ticket to Mexico City from San Jose and pay for dental work there than it is for her to pay the copay and deductible to her California dental insurance, offered through the teacher’s union.

  44. ESR: Another significant point is that the European single-payer monopsonies are actually parasitic in significant ways on the U.S. system. They’re collecting the benefits (drug discovery, medical research) of our messier and less socialized system without having to pay all the costs; if they didn’t, they’d look significantly worse.

    There’s a much more subtle way in which they benefit from the US system; pricing data. The inability to price properly is a critical problem in centralized provision of services, but right now they can crib pricing data from the US market. What do we pay a RN? A heart surgeon? How many tablets of Xanax equals a MRI machine? Right now, it’s easy; they just bid 10% less than the market rate in the US and go from there. But once private consumers in the US cease to have market-making volumes (and whether HMOs count as private consumers is certainly a problem!, but they’re at least competitive bidders) that vanishes, and allocation of resources in single-payer healthcare systems will become radically less efficient, with the problem only getting worse over time.

    ESR says: Good point.

  45. Andy Freeman: All emergency rooms are obligated to do live-saving stuff without checking whether the recipient can pay.

    Funny enough–emergency care tends to be more expensive than preventive care, even over a long period. But because ERs are free for the poor, there’s not much of a choice for them. The solution, then, is either to open up other kinds of healthcare for free, or have poor people dying in the streets.

    The “mandate health insurance” folks are trying to get some folks to subsidize others. It’s actually a tax, but they realize that calling it that will wake up the rubes.

    That’s what insurance is–people who don’t have something catastrophic and unexpected happen to them subsidize those who do. The premium is paid in order to reduce uncertainty about the future.

  46. Jul 8, 2009 @esr: Thanks for that. That’s one of the best economics
    discussions I’ve ever seen.

    @Bill Moorier: Here’s the what you’re missing from the discussion.
    I’ll throw the pieces together for you:

    esr: So, the question of how we avoid market failures
    almost (not entirely, but close enough for right now) reduces to the
    question of how we avoid monopolies.

    This is a fair statement. It’s easy to see where monopolies fail.
    Check out ESR’s articles on this blog on Microsoft for a prime
    example.

    esr: OK, now we got to an empirical question: how is the
    half-life of monopolies (that is, the time after achieving monopoly
    status that 50% will crack) related to the amount of political
    allocation in the economy?

    As ESR points out later, it’s a direct correlation, of
    course. One can find historical examples of how accurate this is
    without too much difficulty.

    esr: All the medical-services people are, in effect,
    being told that subsidy programs will support their inefficiencies
    forever. No wonder they gold-plate everything! You would too! esr:
    It’s not that anyone is stupid or evil, it’s that the incentives are
    all wrong.

    Exactly. Ever see those “free diabetic blood sugar meter” commercials
    on television? We get them by the buttload down here in sunny Florida
    (one can easily guess why). Why can they afford to send out these
    meters for free? Because they’re gouging the hell out Medicare for
    the test strips they send you every month, that’s why! Medicare is a
    mostly single-payer system.

    Here’s how lovely single payer solutions are. The following are
    (semi-humorous) examples of algorithms showing what you would pay to
    a health care provider in the United States, in Python:

    import random

    def pad_amount(amount):
    random.seed()
    return amount+amount*random.randrange(0.10,0.25)

    def fudge_factor():
    random.seed()
    return random.randrange(2,5,1)

    def amount_in_cash(notified_provider_upfront=False):
    ”’ notified_provider_upfront is a boolean flag indicating whether you
    told the provider before services are rendered that you are paying
    in cash ”’
    a=provider_cost+provider_markup()
    if notified_provider upfront:
    return a
    else:
    return a+pad_amount(a):

    def amount_billed_to_insurance():
    return amount_in_cash()*2

    def amount_billed_to_Medicare():
    return amount_billed_to_insurance*fudge_factor()

    (They may be funny, but they’re not that far off the mark)

  47. > @Bill Moorier: Here’s the what you’re missing from the discussion. I’ll throw the pieces together for you

    That doesn’t help, sorry. I have actual direct experience of being a consumer of single-payer healthcare, and it is nothing like your “semi-humorous example”. This is where a lot of Americans have a hard time arguing with me – they always make the mistake of saying something like “oh no, single-payer healthcare would be *awful*, see it would be like this…”. And then I explain that I enjoyed single-payer healthcare for 26 years and it was nothing like whatever they just invented.

    The only direct answer I’ve seen so far is esr’s suggestion that I only prefer single-payer healthcare because I’m young(ish). That’s hard to refute directly – I guess I’ll just have to get old and see what happens ;-)

  48. Bill -

    The problem with your experience is that you are one man. The aggregate experience with single-payer is uniformly horrid.

    In other words, you got lucky.

  49. >Without some kind of patent system, what would the drug companies’ incentive be to bother to develop new drugs, if the latter were to be promptly and legally copied and put into production by everyone and his uncle in Guandong?

    Um, in what universe would the drug companies not get to practice trade secrecy about their manufacturing methods? Organic synthesis is not a trivial art; biosynthesis using tailored organisms, though increasingly common, is even less trivial.

  50. I said:
    > Apparently, buying life insurance is not a stupid choice (as explained in my original comment.)

    Brian (And others) responded:
    > If you’re young and single it is.

    You lost the context of what I was saying. This was in response to a claim, by someone else, that no-one would by health insurance when they were young, they would just wait till they were older, and so there would be no healthy young people to compensate for the higher costs for senior health care.

    My point was that there is exactly the same problem in life insurance, and there are very effective mechanisms in that market to control for this problem. Almost identical mechanisms would be just as effective with health insurance (catastrophic in particular, which is what insurance is designed for.)

    However, this just simply doesn’t work well when the whole market is gummed up by having it provided by your employer. Generally, you don’t work for the same company at 20 as you do at 60, so there is no continuity to provide the cross generational offsets. If you owned and carried your own insurance, such would be perfectly possible and practical. The preference for employer provided health insurance, is, in my opinion, the most important cause of problems in the health care industry. Eliminating that would go a long way to solving many of the problems.

    (On reflection, Medicare, SCHIP, Medicaid and its related state programs are actually probably worse, but that is another story.)

  51. >some kind of court system that bears no resemblance whatsoever to the one we actually have

    Eh? Do you mean you can’t sue for tort or assault where you live?

    >But the current system is also rationed, based on one’s ability to pay for it, which is scaled to, but not the same as, health. (What’s affordable for a wealthy sick person may be unaffordable to a poor, mostly-well person.) How on earth is this not blazingly obvious?

    It is blazingly obvious. But the difference is also obvious: in a fully socialized system, you won’t be able to get the treatment you need even if you could pay for it in a free market. If this doesn’t seem morally odious to you, I’m not sure what else I can say.

  52. The trouble here is that health care is different from other goods; the marginal utility of a life saving treatment is equal to the expected value of all my remaining happiness. So people don’t make choices about health care (at least for the important category of catastrophic care) the same way they do about other goods.

    The other big difference between health insurance and other kinds is that he odds of a person experiencing a costly health problem at some point in their life are extremely high. This isn’t like life insurance, which most people never collect!

    Purely anecdotally, I’ve lived in the US and Canada, and I’ll take Canada’s system over the US any day of the week.
    >“US system is half-socialized in a way so botched that it is worse than single-payer.” Correct. It’s worse than single-payer would be on day one – but better than single-payer would be after the regulatory apparat undergoes full capture.

    Maybe there is something different about the Canadian government, but the medical lobby is way less powerful up here than it is down there. Mostly because it is limited to health care providers; we don’t have private insurers, and the drug companies a) don’t consider us a big enough market to lobby intensively, and b) our single payer government makes them our bitches.

    In any event, doctor salaries are quite stable. Too stable in fact; we’ve got a shortage.

    Frankly, the populace watches government health care spending so closely that this kind of capture is just not likely here.

    We do struggle with centralized planning type inefficiencies, but overall, I think it’s a fair exchange.

    The view up here is that socialized health care is part of what brings us together as a nation (aside from beer and hockey). Taking care of each other in this way is a core value.

  53. >This scenario is not imaginary, I’m talking about my native Finland.

    Well, the first question to ask is: how did you live before cheap transport and refrigeration made it possible to import food in bulk? If you can’t return to that condition – which probably you can’t, it depends mainly on population growth since then – none of my answers are going to make you happy.

    Farm subsidies aren’t indefinitely sustainable even in peacetime, for any number of reasons; one of these is rent-seeking by the agricultural lobby, another is conflicts with other interest groups who control more votes. In wartime they’re even more likely to be disrupted, in which case you might all start starving after the first few months of trade shutting down. The classical answer to this problem is to build a large military and conquer somewhere else with better growing conditions. Or you could mostly just die.

    I think you’d better hope Finland stays plugged into the “Core” trade network. If it doesn’t, farm subsidies won’t save you.

  54. >The trouble here is that health care is different from other goods; the marginal utility of a life saving treatment is equal to the expected value of all my remaining happiness

    A common fallacy. This also applies to food.

  55. Bill,

    You don’t have to get old and see what happens, all you have to do is look around. I also have direct experience of being a consumer of a single-payer health care system and while I wouldn’t describe it as “awful” (my baseline being no health care) it has some very serious flaws.

    I have a close friend who can’t find a family doctor because there are very few in our area who are taking new patients. His old doctor lit out for greener pastures. I have a co-worker who’s doctor did the same. I have two other friends who have told me that their family doctors are telling them in many cases doctors don’t have the room to take on their existing patients newborns.

    And we live in a metropolitan area, it can be worse in small and remote towns. Health care is being rationed by limiting the number of each type of service a doctor can charge the system for, so even the doctors that remain are under utilized. They have the time to do more work, but since they can’t get paid for it they don’t bother. Doctors are more likely to try and become a specialist because they can make more money that way. On the surface it sounds like a good thing, but the end result is a chronic shortage of front line family doctors.

    I wouldn’t say the aggregate experience is uniformly horrid, but if you take a look at backlogs and wait times for various diagnostic procedures (months or even years in some places) “horrid” is pretty close.

    Frankly its just plain silly that you can go to the vet, pay a little cash and get your cat or dog into an MRI in short order. But you can’t do the same for yourself, your husband, your wife or your children.

    Seriously, I have a government that tells me one thing I can’t buy with my own money is better health care. (Fortunately recent Supreme Court rulings may change this in a positive direction).

    Emergency care is still pretty good since you get jumped to the front of the queue for pretty much everything, and from personal experience there is a massive disparity in quality between critical care and regular hospital care.

    But the inefficiencies in the system are obvious and the front line preventative care aspects of the system are sacrificed in order to maintain the emergency care at a reasonable level. The long term trends are not hopeful.

  56. >It is blazingly obvious. But the difference is also obvious: in a fully socialized system, you won’t be able to get the treatment you need even if you could pay for it in a free market. If this doesn’t seem morally odious to you, I’m not sure what else I can say.

    Most Canadians think of it on two lines:

    1. Assume there isn’t enough treatment to go around. We feel this is the moral equivalent to a sinking ship without enough lifeboats. What is the most moral method for deciding who gets on a lifeboat? It sure isn’t cash!

    2. Anyway, this notional shortage is not a terribly stark reality for most people. We do have enough of the basics covered that the notional shortage isn’t terrible. Heart patients, cancer patients and so on, I’ve never heard of anyone being denied care outright. Sometimes the care sucks because you have to wait too long, but for the big stuff, things move along at a reasonable pace, and the statistics will show that our overall health is quite good.

    For some very good insight on the Canadian Health Care system, check out this podcast:
    http://www.cbc.ca/whitecoat/index.html?copy-podcast

  57. > A common fallacy. This also applies to food.
    Not true! I have many choices w/r to food. I can survive on the cheap without much trouble, or I can hire a personal chef and eat tiger cheeks every day.

    Also, the delivery of food is a low tech affair, compared to leukemia treatment, for example. One round of cancer treatment can cost more than my lifetime food budget.

  58. I think a more egregious example of unnecessary government subsidies would be public education (especially post-secondary). The problems of public education are everywhere – a huge glut of graduates relative to the number of jobs requiring college-level skills, employers inflating their credential expectations such that a B.A. is now standard for ever more basic positions, and the idea of a “liberal education” going out the window as colleges draw masses of unmotivated, unqualified students. Not to mention that skilled trades are now screaming for people and that many students, unburdened by the actual cost of their education, are choosing degrees without regard for the demand that others have for the skills they will learn.

  59. esr: Eh? Do you mean you can’t sue for tort or assault where you live?

    No; the transaction costs of doing so are prohibitive where I live. Also where you live. Also where anybody lives.

    But the difference is also obvious: in a fully socialized system, you won’t be able to get the treatment you need even if you could pay for it in a free market. If this doesn’t seem morally odious to you, I’m not sure what else I can say.

    Somehow, having nonessential care rationed to rich folk at the same rate it’s rationed to the poor doesn’t strike me as being quite so morally odious as having the poor sicken and die in droves because care is allocated solely based on wealth. I suppose it might seem the other way ’round if you’re confusing net worth with moral value, but I thought you were making a solely economic argument.

    Additionally, I was under the impression that rich folk still got better care than poor folk in, for instance, Canada, as they could purchase supplementary health insurance and private care.

  60. > Um, in what universe would the drug companies not get to practice
    > trade secrecy about their manufacturing methods? Organic synthesis
    > is not a trivial art; biosynthesis using tailored organisms, though
    > increasingly common, is even less trivial.

    Right, and I think it is important again to say that the Government Accounting Office recently published a study indicating that drug patents DECREASED innovation in the drug industry, not increased. The GAO are hardly some anarchist organization, they are very pro patents in general, hence this is a very interesting study.

    Most people have a hard time understanding how that is possible. The answer is simple: patents prevent derivative innovation. They also allow drug companies protection from the harsh, refining, purifying realities of competitive markets. For example, in 2002 the patent on Claritin expired. If you don’t know it, Claritin is an allergy medicine. Almost immediately after the patent expired it went OTC. Schering-Plough, also, almost immediately released a new version called something like Claritin Clear. This was a new derived version which they still had a patent on, and was prescription only. (OTC drugs sell at lower prices because they are not paid for by insurance plans.)

    So the manufacturer delayed the new drug in line with the optimum revenue extraction from the patent. Here we see a clear example of the public loosing out due to a lack of innovation (or lack of releasing innovation) directly due to the patent system. Imagine if every drug company could focus on improving Claritin, without the massive licensing costs that would involve. Perhaps we could all sniff a lot less through our summer vacations.

    It is also worth noting that a very large amount of the capital cost of a drug is related to the extremely high cost of FDA approval. Assuming FDA approval was still required, then the pill pirate in China would still need their pirate pill approved for use in the USA, meaning that they would still have to pay this large component of the cost of production. (Please note that FDA approval pertains not just to the clinical trails, and demonstrations of effectiveness and safety, but also pertains to the proper manufacturing procedures of the drug too. For FDA approval, the pill pirate would have to get FDA approval on all of these.)

    BTW, please don’t read the preceding paragraph as an endorsement of the FDA. I have no doubt FDA delays have caused several orders of magnitude more deaths than any unapproved drugs ever did. Worse still, their monopoly squeezes out of existence any private, efficient bodies from determining the safety and efficacy of drugs, which would be infinitely more effective and useful.

    (Clarification — OTC means over the counter, that is to say, you can buy the drug without a prescription from a doctor.)

  61. >Additionally, I was under the impression that rich folk still got better care than poor folk in, for instance, Canada, as they could purchase supplementary health insurance and private care.

    We like to think that this isn’t the case, but it is. But the spread between rich and poor is smaller than in the US.

  62. Sean C.: Assume there isn’t enough treatment to go around. We feel this is the moral equivalent to a sinking ship without enough lifeboats. What is the most moral method for deciding who gets on a lifeboat? It sure isn’t cash!

    How “morally odious“.

  63. Sean says:
    > The trouble here is that health care is different from other goods; the
    > marginal utility of a life saving treatment is equal to the expected value
    > of all my remaining happiness.

    Sure, but not all medicine is about saving lives, some is about improving lives, so if you remove your extremely strict stipulation (“life saving”) your statement is, in general, incorrect.

    However, there are many goods where their lack of provision can result in death: food, vehicular safety, poor housing, clothing. crime control and so forth. So, in truth medicine is not much different than many goods in the marketplace. In extreme cases of deprivation they can lead to death.

    You later modify your argument by saying that medicine is different than these not because lack of it leads to death, but because it is expensive, and so it is more likely to be lacking and lead to death.

    But that assumes the conclusion. The cost of medical care can be borne in much more efficient ways than marginally funded obligations on the taxpayers. These sorts of mega costs are both hugely elevated by the very intervention you recommend, and also corresponds clearly with the very purpose of economic concepts like insurance.

    > The other big difference between health insurance and other kinds is
    > that he odds of a person experiencing a costly health problem at some
    > point in their life are extremely high. This isn’t like life insurance, which
    > most people never collect!

    Insurance costs are both distributed over the population of insured and over time. Different types of insurance balance these differently. Medical insurance is no different. Compare it to crop insurance which has a similar distribution.

    > Purely anecdotally, I’ve lived in the US and Canada, and I’ll take Canada’s system over the US any day of the week.

    Could you please send us Americans a thank you note, after all we are subsidizing your supposedly great system.

    > In any event, doctor salaries are quite stable. Too stable in fact; we’ve got a shortage.

    Let me see, price control, shortage… could there be a connection?

  64. The only way you end up with a system where there is not enough care to go around is one where care is rationed by a central cost-managing authority.

    How many charity hospitals are there in Canada? I don’t know the answer, and I’m too lazy to look it up. But in the US there are many, and a good number of them cater to children. Universal Single Payer necessarily eliminates these, because single-payer does not allow for competition. Audience capture is essential for a single payer system, because as soon as people go outside the system for care, they are getting more than their “fair share” of services.

    Fairness is probably the worst thing to strive for. I imagine, likewise, that the world would be a dreadful place if everyone got precisely what they deserved.

  65. Additionally, I was under the impression that rich folk still got better care than poor folk in, for instance, Canada, as they could purchase supplementary health insurance and private care.

    And if it isn’t blindingly obvious that this will always be the case unless you have a totalitarian system, even if it ends up on a black or gray market, then I don’t know what to tell you. Now take it to the next logical step: if the rich are spending money to get priority treatment, then those who aren’t spending money outside the system get even fewer services.

    So we keep talking about single-payer systems, be we keep assuming this single-payer systems live in a vacuum. They do not. Or, to put it more bluntly, there really is no such thing as a single-payer system, at least in anything resembling a free market.

  66. > Could you please send us Americans a thank you note, after all we are subsidizing your supposedly great system.
    To whatever extent these tertiary effects subsidize our acceptable system, thank you. In exchange, we’re happy to accept visitors looking for cheap drugs, and the occasional health care moocher. But please, before you feel indignant about this, run some numbers. We spend billions on hospitals, health care providers and so on. Can any of these cross-border subsidies add up to more than noise in this system? I don’t think so.

    >> In any event, doctor salaries are quite stable. Too stable in fact; we’ve got a shortage.

    > Let me see, price control, shortage… could there be a connection?

    You’re darn right there is. I’m not a fool. Next time my representative knocks on my door I’ll tell him that family practitioners need a raise.

    >But that assumes the conclusion. The cost of medical care can be borne in much more efficient ways than marginally funded obligations on the taxpayers. These sorts of mega costs are both hugely elevated by the very intervention you recommend, and also corresponds clearly with the very purpose of economic concepts like insurance.

    This is an unsupported assertion. Time in the OR and ICU involves many hours of labour from highly trained professionals, involving high tech equipment and exotic substances. This is going to be expensive, period.

    >However, there are many goods where their lack of provision can result in death: food, vehicular safety, poor housing, clothing. crime control and so forth. So, in truth medicine is not much different than many goods in the marketplace. In extreme cases of deprivation they can lead to death.

    The lack of air can lead also lead to death. Does that make it like food and housing? No, because it’s easier to obtain than those other two things. If sort these goods by x=(cost/utility), air is way on the left (basically free), and health care is way on the right (very expensive). This amounts to a material difference.

  67. Ah! The material difference is this. Over the course of a lifetime, just about everyone can produce enough wealth to provide for the cheap necessaries, air, food, housing, clothing, personal safety.

    This is not the case with health care. Some people will die cheaply with a massive coronary or accident, but many of us will need very expensive interventions at some point. And in some cases, those interventions will amount to more than their aggregate lifetime wealth production. In many cases it will add up to a very significant portion of a person’s lifetime disposable income.

  68. Sean says:
    > To whatever extent these tertiary effects subsidize our acceptable system,
    > thank you. In exchange, we’re happy to accept visitors looking for cheap drugs,

    This an ironic juxtaposition. When I wrote this (and, your welcome BTW), I was thinking of how we subsidized your drug prices. (I won’t repeat the extensive comment I wrote explaining this above.) The subsidies are massive and are hidden.

    > You’re darn right there is. I’m not a fool. Next time my representative knocks on
    > my door I’ll tell him that family practitioners need a raise.

    How much of a raise should he/she get? How do you determine price in a system without a supply/demand control mechanism? I am told the Soviet central planners used a Sears Roebuck catalog. How are your Central Planners going to make the determination? When you are old and need an expensive life saving medication, are you going to get it? Not if you have breast cancer under the British NHS apparently.

    > This [that government intervention greatly increases the cost of
    > medical care] is an unsupported assertion. Time in the OR and
    > ICU involves many hours of labour from highly trained professionals,
    > involving high tech equipment and exotic substances. This is going
    > to be expensive, period.

    First of all, I didn’t say free market health care would be cheap, only cheaper. I remember during last year’s presidential debates here in the USA, Senator Obama lectured John McCain, explaining that by centralizing control of health care in the government that they would reduce costs and decrease bureaucracy. I laughed so hard I shot Sprite out my nose. (Sorry for the gross image, but I wanted to fully communicate my contempt.)

    Government might be necessary, but it is always inefficient. The incentives are completely wrong. Government run health care wastes money on BS and allocates it wrongly, and it adheres to the sticky paws as it moves through the system. It seems to me nothing short of plainly obvious that government control imposes a substantial cost on health care.

    However, there is something far more important here. It used to be that computers were operated by “highly trained professionals, involving high tech equipment…” That is no longer the case because of the breathtaking power of the competitive markets. This power has been emasculated in the health care industry in most industrialized nations, and also to a great extent here in the USA. What competitive pressures exist, whatever innovation does take place, benefits not just the innovative nation, but also every other nation, (for the same reason we are subsidizing your drugs.) In a free market system who knows what sort of innovations would come about that would reduce the need for those expensive professionals or exotic machines and materials.

    Frankly, it is this last one that is the silent killer. FDA, and government regulations (and more recently groundless tort lawsuits) have put such an huge wet blanket on medical innovation it is nothing short of a silent massacre. So many lives cut short due to uninvented technologies, delayed or destroyed by the red tape, and bureaucracy in Washington. (It hardly need be said that Ottawa, London, Berlin and Paris are even worse.) However, a thousand lives not saved don’t carry the political clout of one life lost. In a competitive market, that is not the case at all. Dying people’s money is, after all, green as well.

    How sad it is that in our culture drug companies are seen as pariahs rather than what they really are: organizations that save and improve the lives of millions. Yet the very organizations that are directly or indirectly responsible for our deaths, discomforts and disease, which, in the realm of medicine, certainly includes our governments, are considered the friend who will save us from these evil medical companies. How screwed up and backward is that!

  69. >It used to be that computers were operated by “highly trained professionals, involving high tech equipment…” That is no longer the case because of the breathtaking power of the competitive markets.

    As a mental exercise, consider if back when computers were still room-filling propositions the government had guaranteed all citizens access to time on big mainframes for very little cost and paid the remainder of the cost to the computer companies, and then mandated that the only people allowed to make or have computers were the companies that they dealt with to provide that service. Do you think that computers would be as advanced as they are today?

  70. > When you are old and need an expensive life saving medication, are you going to get it? Not if you have breast cancer under the British NHS apparently.

    Obvious troll is now being a little too obvious.

  71. > Um, in what universe would the drug companies not get to practice trade secrecy about their manufacturing methods? Organic synthesis is not a trivial art; biosynthesis using tailored organisms, though increasingly common, is even less trivial.

    Do you think pharmaceuticals can be open-sourced the same way software can?

    ESR says: Doubtful. The economics – the shape of the production system – is different in fundamental ways.

  72. “Hearts and Lungs are Tinkertoys! I’m talking about the Human Brain!” – Young Frankenstein

    Ever met an average Joe who bought compute insurance? “If I should suddenly need mainframe time, the insurer will provide…”

    The wet blanket argument is very powerful, indeed. Here’s a concrete example. In Canada, we don’t have mobile MRI’s-on-a-bus like in the US. Because the government hasn’t figured out how to pay for it. In the US you just convince a capitalist and away you go. Can’t do that here.

    But it’s important to recognize that we’ve wound up here because health care isn’t like other economic goods, despite many similarities.

    And w/r to regulatory oversight, remember what it was in response to; Thalidomide, Mother’s Little Helper, and so on. The profit motive often drowned out the science. I get the feeling that Libertarians would say that these mistakes are collateral damage, and part of the cost of getting optimal resource allocation and innovation. I’m not happy with that response.

    And don’t give me “Over time the irresponsible companies would go bankrupt as a result of their mistakes”; they would, but there’s always another cowboy waiting in the wings, ready to take irresponsible risks.

  73. >Ever met an average Joe who bought compute insurance? “If I should suddenly need mainframe time, the insurer will provide…”

    I’m aware that it’s a faulty analogy. My point was that computers just a short while ago were extremely expensive, and now they’re relatively cheap. Government subsidy of computer time (yes, it’s an absurd idea) would have prevented that transition.

  74. >Government might be necessary, but it is always inefficient. The incentives are completely wrong. Government run health care wastes money on BS and allocates it wrongly, and it adheres to the sticky paws as it moves through the system. It seems to me nothing short of plainly obvious that government control imposes a substantial cost on health care.

    Let me fix that for you.

    “[People] might be necessary, but [they are] always inefficient. The incentives are completely wrong [in a free market]. [Insurance company] run health care wastes money on BS and allocates it wrongly… It seems to me nothing short of plainly obvious that [insurance company] control imposes a substantial cost on health care.”

    Absent regulation, what’s to stop collusion from defeating the concept of competition balancing out prices? Instead of the monarchy of a monopoly, you get the oligarchy of collusion. The rich form a power structure and rig the system because they have an incentive to cooperate, not to compete. A free market is not sustainable. It’s anarchy and it’s a vacuum waiting to be filled by the first greedy person who figures out how to game the system. The only way to ensure a free market balance is to give everyone a gun and allow them to legally shoot the first person who attempts to game the system, in order to create a widespread fear of possibly being perceived as greedy. That’s not going to happen of course.

    How would you achieve this? How would you migrate from our current system to your proposed system? A massive disaster, violent revolution, and some kind of totalitarian control seems necessary to implement that kind of change. You’re not going to convince the lobbyists and the corporate executives and the corrupted politicians and their brain-dead/-washed supporters to change voluntarily.

    Enough with economic theory and speculation, cited references and rhetoric. How are you proposing we actually and practically achieve this utopia?

  75. Daniel Weber:
    >I had an idea before reading this that I thought would be a way to strike a balance between the safety net of a (working) communism and the >prospects for better goods/services that is inherent in capitalism.[in regard to entire post following]

    I would find two main arguments with your rationale here, the first based on my understanding of free market dynamics (limited compared to many of the posters here, corrections happily accepted), and the second based on my experience with the major portion of your proposed mechanism. First, I would say that the watertight ‘safety net’ of a well-run communism destroys the very mechanism that makes the free market system work: incentive. I believe it was written in, or at least referenced, in ‘The Entrepreneurial Imperative’ by Carl J. Schramm that one of the greatest paradoxes of the success of free market systems is the looming specter of failure. Just as the wealth and comfort to be had by hard work and successful business models and a little luck gives you something to shoot for, the fear of ending up unable to provide basic care for yourself or your family provides something to put a little fire to your backside. You mentioned that the only incentives to production in a communist system is threats and violence, and I would argue that eliminating the incentive of ‘work or go hungry’ absolutely would kneecap the incentive to work absent threats/violence. Arguments about mitigating temporary misfortune/poverty and the like are different and complicated and not what I want to get into right now, but basically I’m saying that the free market system is a combination of positive and negative reinforcement, and eliminating either end of the spectrum greatly reduces the effectiveness of the other – communism, I believe, does so spectacularly poorly by eliminating both: if you work hard you don’t get rich, and if you don’t work hard, you don’t starve to death (well, hopefully, but the hard work wouldn’t have helped either).

    Whew, that got long. Secondly, you propose the military as a relatively corruption free and efficient logistics agency. I would say that the military is subject to corruption and inefficiency to the same degree as any other government agency except within a few special sectors. In terms of behavior that directly costs soldiers’ lives, there is a very strong incentive to act efficiently and correctly, but in all the other ways that the military is a large bureaucracy, absent that sharp reminder, you get fraud, waste, and abuse. As you imply, this is somewhat mitigated by a volunteer military with cultural traditions of duty and honor, but there are more than enough people more focused on a comfortable, stable job and getting what they can out of it than on such intangible concerns as duty and honor to keep the military from being as infallible as you and I would both like. Finally, a word on the concept of ‘military efficiency’. While it is humorous and tempting to call it a myth, I think the truth is more complex and more interesting. Basically, the military is tasked with moving stupendous amounts of men and materiel in sometimes ludicrously difficult conditions. What this means is that the military has to strive very hard to instill a sense of efficiency to get anything done at all. The end result is not efficient, but it mostly does what it needs to do fairly consistently. So, in other words, I wouldn’t recommend tacking on the even more stupendous task of providing for those in want or need througout the country. Let the military stay focused on its job of national security, mixing it into civil administration is bad juju of the totalitarian sort.

    JessicaBoxer
    >In a free market system who knows what sort of innovations would come about that would reduce the need for those expensive professionals or >exotic machines and materials.

    An excellent point with which I totally agree. By way of example, I have some anecdotal evidence that shows some innovation that has happened as a teaser of how much more we could hope for. These days, Joe Grunt infantry soldier is taught ‘Combat Life Saver’ techniques and provided with first aid kits including some pretty cool technology for addressing some of the most common battlefield injuries. Thanks to technologies like bandaging material with integral haemostatic agents, easy to use and safe tourniquets, nasopharyngeal airways (a rubber hose you put through someone’s nose and into his windpipe), and the simple expedient of a rugged plastic sticker and a large gauge needle, your average soldier (and here, I do mean non-specialist riflemen or other non-medical jobs) can do more to save someone suffering from massive arterial bleeding, blocked or collapsed airway, and tension-pneumothorax (collapsed lung due to puncture wounds to the chest cavity). And training to properly use these techniques and technologies takes less than a week of short work days with generous breaks.

  76. Sean says:
    > The wet blanket argument is very powerful, indeed.

    Sean, could I just point out that, although you and I disagree, I very much respect your open mindedness to hearing the other point of view. I don’t know if we will ever agree on this subject, but I hope that I can learn to become more like you in this regard.

    > And w/r to regulatory oversight, remember what it was in response to; Thalidomide, Mother’s Little Helper, and so on.

    I don’t know much about “Mother’s Little Helper”, but Thalidomide is a very important issue in this regards. However, there is a lot of misinformation out there about Thalidomide. First of all, it was a drug that was useful to help with various general symptoms, including nausea. Despite its reputation, it is actually a perfectly safe and effective drug. The problem is that it can cause defects in babies carried by pregnant women. Unfortunately, something like 10-20,000 babies were born with serious defects because of this, during the drug’s availability (about 1958 to 1961.) Thalidomide is a perfectly safe and effective drug for everyone, except for in-utero babies (to the best of my understanding.) Its anti-nausea properties, unfortunately, caused its use by lots of pregnant women, which was essentially an very unlucky coincidence.

    The FDA puffs out its chest about this, but the real truth is that Thalidomide was not approved in the US because the FDA is so inefficient, not because it is so insightful. As the saying goes, a stopped clock is right twice a day.

    A few things to note: although the toll was horrendous, the problems were very quickly detected (in about two or three years), and they were detected by practicing physicians, not government agents. Second, when the problem was discovered, doctors quickly stopped using it, again without some huge government oversight.

    Deformed babies have a lot of political caché (as well they should), however, people who died because drug availability was delayed have very little political clout. Robert Goldberg of Brandeis University and the “Center for Medicine in the public interest” claims that between 200,000 and 400,000 people could have been cured by drugs that the FDA had not approved but other major countries had (THA for Alzheimers, AZT for AIDS, beta blockers etc.)

    The visible deaths and injuries caused by failures to regulate sufficiently are much more politically connected and magnified than the far larger number of invisible deaths and injuries caused by overly aggressive regulation.

    Frankly, if you read serious libertarian writers on this subject of medical regulation, you will find they do not oppose regulation, they oppose monopolistic regulation run by government agencies. That sounds like a fantasy land, but how would it work in practice? Let me suggest one alternative (though the market would produce something better.) The American Medical Association, which is kind of like a trade union of doctors, would examine studies submitted by drug companies and determine the correct risk category for a drug.

    That way, good quality information about the risk profile of drugs could be given to the experts (doctors) and used to advice patients. It would allow discrete judgment calls, rather than binary black and white. For example, if a guy is going to die very soon he might be willing to take a drug that had a very high risk, and could be fully aware of the risk on the advice of his expert helper — the doctor. Far better than having to beg some government bureaucrat to give you permission to take a chance to live.

    Right now in the USA various drugs are flying off the market because of the risk of massive lawsuits. Some of these drugs greatly improve the quality of people’s lives, but do so at slightly increased risks of various medical conditions such as heart attack. Our regulators, not you, decide that risk is too much, and you have to suffer pain every time you bend your elbow joint. But people make these judgments all the time. Every time you eat a cheeseburger, you substitute your culinary pleasure for a slightly increased risk of heart attack. People are smart enough to make these choices.

    > The profit motive often drowned out the science.

    Honestly, I think that is unfair. Why do you attribute to the makers of Thalidomide only a profit motive? If they made no profit but pushed the drug out simply from altruistic reasons, would the babies be any less deformed? For sure, drug companies want to make a profit, but, from what I know, they are full of honest, hard working people who have dedicated their lives to providing products that cure disease, relieve distress, and prevent death. I think that is deeply honorable, even if it occasionally goes awry. I think these modern day heroes deserve to get paid well for their service to humanity.

  77. Sagodjur writes:
    >Enough with economic theory and speculation, cited references and rhetoric.
    > How are you proposing we actually and practically achieve this utopia?

    Good question.

    By speaking about how the system could be better run, to provide an alternative to the current political spin. By attempting to move the public debate from the inevitability of Canada in the USA to the possibility of something better and more effective. By putting into the public consciousness ideas, memes, examples, ways of thinking that make clear the folly of current proposals and the effectiveness of free market proposals.

    Ideas are powerful, they do change people’s mind. It is real easy to talk about health care privatization, when holding a picture of a rat infested VA hospital. In an earlier comment, I put forward seven simple ideas that would radically change the medical industry for the better. Perhaps they are not possible, but they are certainly not possible locked up in our heads, our lips zipped in silence.

    Perhaps ideas are not sufficient to turn the tide, but at least you can sleep at night saying you gave it your best shot.

    What are you doing to make the world a better place?

  78. Um, in what universe would the drug companies not get to practice trade secrecy about their manufacturing methods? Organic synthesis is not a trivial art; biosynthesis using tailored organisms, though increasingly common, is even less trivial.

    Well, unless the drug molecule is some big-ass high molecular weight item – maybe they’re doing fancy stuff with peptide-chain folding now, I dunno – I’d say the reverse engineering problem is going to be several orders of magnitude easier than anything you’d face with silicon. There are a bunch of ways to analyse the structure of molecules, it’s a pretty thoroughly commoditised technology as far as I know, and synthesis may not be ‘trivial’ but it’s generally a question of putting together a set of molecular subassemblies, there’s usually more than one way to do it and it’s fairly debatable whether it’s going to be beyond that guy in Guandong I mentioned. Same with biosynthesis, once you know the structure of the thing you’re trying to make you’re halfway there a lot of the time.

    I vaguely know one bioinformatics guy, I’ll try and pick his brains.

  79. >>Wouldn’t the system self-destruct/evolve back to more or less the current state?

    >Not if it works better.

    I think it matters much more whether the people _think_ the system works better, which is much less rational. One example – France and Sweden don’t seem to be rushing forward to dismantle their social nets. Another – US did end up in the current state starting from something much closer to the free market. And given that elections are held every 4 years and the effectiveness of one system might not be obvious in such a short term.

    >>As a matter of fact, once genetic tests become commonplace, there wouldn’t be any economic rationale for companies to provide benefits for someone with bad genes, would it.

    > Sure there would; they’re customers with money, aren’t they?

    The ones with enough money, sure. The ones not so lucky – too bad for them and their offsprings, right? What an irony this would be – a couple hundred years after hereditary privileges have been more or less dismantled over the world, they’d get a nice comeback via market forces.

    > It would just push their premiums higher. Which is completely fair, as the additional risk is quite real. Insurance companies will always try to maximize premiums and minimize payouts; “bad genes” is no different in philosophical status than dozens of other actuarial factors they discriminate on without causing a fuss (age is an obvious one).

    I disagree. Philosophical status of genes is different because you cannot choose them and because the gene-based discrimination would not be uniform throughout the population (as opposed to extra premiums for renting the car to anyone below 25).

    And fairness is a moral judgment, so easily disputable.

    > The thing is that, at least in a free market, insurance vendors have to offer a service that’s a net win for customers or they won’t do business.

    Only if you have enough information, as a customer, to make informed choices. This doesn’t seem to be easily achievable in the health insurance market.

  80. A lot of the comments seem to focus on insurance but the truth is that what he have isn’t insurance: it’s a medical prepayment scheme that greatly benefits medical providers. Jessica touched on this but it deserves emphasis: insurance is only for catastrophic circumstances, which the vast majority of medical transactions do not qualify as. Catastrophic means procedures that cost in excess of $50-100k: if you make $50k/year and break your leg and need $6k worth of treatment, that’s not catastrophic care (leaving aside construction workers or some such smaller groups, who can buy supplementary insurance for such expenditures if they can’t work for a period of time). The real problem is that most of the medical market is structured such that patients cannot shop around and decide for themselves what is worth their money. Part of it is that many patients do not want to do so and want to be shielded from all health-care decisions, but they’ve now created a system where nobody is allowed to do so. I’ve gone uninsured through the medical system for a foot injury, observing many places around the country, and seen that almost nobody had any procedures in place for out-of-pocket patients. I could have just walked out of many offices after the consultation and they would never have known, that’s how unused they are to dealing with non-third party payers. I tried to call many places beforehand to get some idea of prices, I would rarely get an answer and was outright lied to sometimes.

    Ultimately this hurts all of us, as a market free of real competition isn’t going to innovate as much, leading to bureaucratic stagnation. As for those who feel that we all have to pitch in to pay for the sick, I reject that. I don’t feel any responsibility to pitch into a govt system to pay millions of dollars to keep someone else alive (I’m not referring to insurance, which is actually risk-pooling, I’m referring to “social insurance” schemes). I don’t have any problem with others making that choice, as they have in Massachusetts, I’ll just never live there: that’s the beauty of our federalist system. California can experiment with socialized medicine all it wants, I’ll just live in Texas or some other state that lets me shop around for my medical care. Which is what makes the current health-care push by Obama so galling, they want to force all of us to use their failed centralized system, despite MA and other countries’ attempts already being a mess. As for what’ll push us towards a much freer system, others have alluded to the internet, that’s where it’s at. Regulatory arbitrage is much easier now, just as online gambling sites proliferate with the servers stored abroad. 99% of all medical consultations can be replaced by medical decision software; if they somehow ban it locally, it’ll just go online. There are big changes coming in the medical market, just as in all information markets upended by the new economics of the internet. First we killed music, then newspapers, then radio, then TV, then education, then medicine and law; the dominoes go down, one by one.

  81. I think that reverse-engineering will grow progressively easier, and trade secrecy *is* going to grow harder and harder to maintain in pharmaceuticals, but that’s not a bad thing; it’ll go hand-in-hand with the drop in capital investment required to devise and produce new drugs.

    As Jessica says, patents may well reduce the innovation in the pharmaceutical industry: they certainly tie up R&D in devising patentable analogues of existing drugs.

  82. Absent regulation, what’s to stop collusion from defeating the concept of competition balancing out prices? Instead of the monarchy of a monopoly, you get the oligarchy of collusion. The rich form a power structure and rig the system because they have an incentive to cooperate, not to compete. A free market is not sustainable.

    Because collusion is easier than thinking or working, any market will degrade to and stagnate at that point–unless or until someone destroys the status quo. The nice thing about a free market is that people can destroy the status quo. Look at portable CD players and their prices before and after the ipod. See also: Pay phones before and after ubiquitous cell phone coverage and competition. (If I’m following myself correctly, I seem to have implied that free markets are only free when they’re evolving and they’re only sustainable because they’re evolving and damn, where’d this chicken and this egg come from?)

    It used to be that computers were operated by “highly trained professionals, involving high tech equipment…” That is no longer the case because of the breathtaking power of the competitive markets.

    I think our current state of not having “highly trained professionals, involving high tech equipment” in PC-related industries is not caused by hardware manufacturers’ competition, but by Redmond’s effectively having monopoly.

    True competition would keep everyone “on their toes.” Instead, the net effect of said monopoly has been a steep dumbing down of the mean of the talent pool. Of course even in that industry there are exceptions but still the relatively few highly trained, intelligent, and capable ones don’t prevent the vast majority from being incompetent.

    So we have a shortage of highly trained professionals regarding computers because of a monopoly. Please, let’s not allow this to happen to health care.

  83. One of Eric’s blind spots is that he doesn’t think in terms of concealing information as a strategic or operational option. To him, information concealment has a transaction cost associated with it that makes it untenable. It is antithetical to a lot of his world views. In this, he’s like a lot of Libertarians I’ve known; many Libertarians/pseudo Objectivists/Freidmanites I’ve talked to regard falsehoods and lies in much the same way that, say, your mailman sees triple integrals and tensor calculus: Yes, they exist, and somewhere out there, there are people who gain some theoretical benefit from using them, but they are few and far between. Thus, for the most part, they’re worthy of academic inquiry.

    That transaction cost – the externality as it were – is something that other people either don’t see, or discount, from his mind set. I suspect that the reality of the situation is such that in environments where there are other frictions and transaction costs, the additional overhead of information concealment and operations pertaining to it is marginal, and the benefits exceptional.

    Corollary to this is that in environments where the transaction costs go down, the relative burden of secrecy goes up; this is a ‘Coase Theorem’ compliant formulation of “Information Wants To Be Free.”

    Where it runs into corner cases are places where the transaction costs are high enough that information concealment appears to give comparative advantage. We are currently in such a situation with financial markets and the derivatives bubble.

  84. ESR:

    > Well, the first question to ask is: how did you live before cheap transport and refrigeration made it possible to import food in bulk? If you can’t return to that condition – which probably you can’t, it depends mainly on population growth since then – none of my answers are going to make you happy.

    It’s not a question of being _able_ to grow enough food within Finland to feed everyone in Finland. Modern agriculture is efficient per land area and machines make it possible to cultivate very large fields and feed huge animal herds with little human workforce. Storage methods help offset bad years. The increase in production ability far outweighs our population growth. But foreign producers can still outcompete a Finnish farm in price, with today’s transport availability and costs.

    So yes, we could live off our own land. The problem is how to make it economically self-sustaining. Import limitations would do that, but it would hardly be a free market.

    > Farm subsidies aren’t indefinitely sustainable even in peacetime, for any number of reasons; one of these is rent-seeking by the agricultural lobby,

    Here’s a funny thing. Subsidies were traditionally tied to production (say, X dollars per ton of wheat). Recently the EU has changed this to area-based (Y dollars per acre). And Finnish farmers actually resisted the change, even though it means they get the same subsidies even if they don’t produce anything on their fields.

    I know that subsidies tend to cause problems, and that’s why I’m asking what else we could do to avoid them.

    > The classical answer to this problem is to build a large military and conquer somewhere else with better growing conditions. Or you could mostly just die. I think you’d better hope Finland stays plugged into the “Core” trade network. If it doesn’t, farm subsidies won’t save you.

    In practical terms that would mean integrating the EU tightly, so trade is less likely to get disrupted. That’s one way. However, that creates a dependency on this empire not falling down. I’d rather like availability of food not depending on the fate of a political union. I recall you yourself have advocated distributed structures as a remedy against terrorism. I think this can be generalized to “independent survivability of each region despite external disturbances”.

    In plain economic terms, eating domestic products is to choose a sure source of supply. That choice carries a price premium as production costs are higher and hence market prices of foods are higher. If enough people choose to pay this premium, we don’t have a problem. But there is no incentive for any single consumer to pay this premium, if others pay it. So voluntarily choosing costlier domestic food is not a Nash equilibrium. In fact this is a form of Prisoner’s Dilemma.

  85. “What is the incentive for computer-chip manufacturers? Drugs are no more IP-intensive than that, and we manage to have a competitive market there. Actually, chip fabs cost more than researching and certifying a drug.”

    Eric, you are way, way, way off base on this. You are comparing apples and sea urchins.

    Actual chip designs are protected by copyright. (There’s a little tiny (c) on every chip.) But there really isn’t much novel IP in a chip layout. It’s a deterministic implementation of known technique.

    There is more novel IP in the manufacturing process, which is embodied in the chip fab facility.

    And there’s one big deal: That IP is instantiated in a few enormously expensive units. The IP in a new drug is instantiated in millions or billions of very cheap units.

    The other big deal is that building silicon IP is relatively deterministic. And the processes and environment are literally orders of magnitude simpler than the biological systems that drugs work in.

    Pharma IP is developed through a mixture of random guessing and testing. Pharma companies spend lots of money screening huge numbers of miscellaneous compounds to see if one of them Does Something. Then they spend more money trying to see if the Something is useful, or if it can be made useful, if the compound does Something Else bad, if the compound can actually be introduced into the target organism, if it works as expected in vivo (animal then humans). The vast majority of this expenditure is wasted on dead ends.

    Eventually, if something goes well, the pharma company has a piece of valuable IP – a compound with useful medicinal effects. That knowledge can be copied and used cheaply, which is where generic drugs come from. If the pharma company cannot protect that IP, then it has no way to recoup the expenditures made to acquire it. Some companies are patenting process steps, but that’s of limited benefit. See Derek Lowe’s blog In The Pipeline.

    Incidentally, the U.S. has more CAT and MRI machines per capita than Canada. The Canadian system survives by using the U.S. system for emergency overflow situations. Such as this: a premature baby sent from Hamilton to Buffalo because there was no neonatal ICU space available anywhere in Ontario.

    As for the NHS: it does some good work. It was “successful” in its first 20 years or so because it was living off the capital (human and physical) of the older Free and private hospitals. Holding down costs is easy when one omits any investment in new plant. That capital is long since exhausted, and the result is this: a patient so disgusted with her filthy room that she cleaned it herself, dragging an IV trolley behind her.

  86. Yeah, esr’s way off on his MRI per capita guesses. I see that as a benefit of our system, but Eric seems to unfortunately have backed himself into a corner and claimed it as a negative. I think a point can be made that we do overinvest here and they underinvest in Canada, with our peculiar overinvestment likely caused by the govt still exerting a heavy influence by paying for 45% of medical transactions.

  87. @Fuzzy:

    Look at portable CD players and their prices before and after the ipod.

    Ah, but consumer electronics, unlike health care, is a (relatively) free market. Prices for these goods are based on whatever the market is able to bear. When iPods came out, fewer people wanted CD players (demand dropped), so the prices dropped accordingly — a sign of a healthy free market. (But also keep in mind that by the time iPods hit the scene,, portable CD players were already a mature technology, and thus the “economies of scale” effect had already long-since kicked in. Extra credit if you can say why it would have been different had portable CD players were still new.)

    Health care isn’t. We’ve got like 3 drug companies, a basically ubiquitous semi-socialized medical prepayment system (as someone else mentioned), and a medical establishment controlled by a government monopoly licensing board.

    See also: Pay phones before and after ubiquitous cell phone coverage and competition.

    What pay phones? :-P

  88. @ Morgan Greywolf
    Extra credit if you can say why it would have been different had portable CD players were still new.

    Assuming ipods and portable CD players were both new when the ipod was new, I can’t imagine most Americans not choosing the convenience, greater functionality, and style of the ipod. Had they both been new when the portable CD player was new, I imagine since fewer people owned a computer that would greatly change things.

    So I’m sure I’ve missed some things, but I’m also sure that the timing of the proliferation of computers changes that particular history. As they say, timing is everything. (Who are “they” again?)

    I’m thinking my simple answer is probably not the whole answer. What have I missed?

  89. > I’m thinking my simple answer is probably not the whole answer. What have I missed?

    The “economies of scale” effect, if I understand correctly. If both the iPod and portable CD players came out at the same time, _competing_ for the same customers, regardless of the available technology of any given time, you would have probably seen rapid innovation from both sides, much faster than actually has taken place from either product.

  90. Likely the portable CD player would have simply vanished. The prices wouldn’t have fallen because economies of scale hadn’t kicked in. One of the biggest things that causes the ‘economies of scale’ phenomenon is patents: since a company that holds a patent has a monopoly on that invention for a time (14 years with another 7 year renewal or something like that), they can set the price with regard to any invention that uses that patent. And they set it high to reap R&D costs, patent searches, and patent attorney fees. If they can’t get a decent ROI, they’ll just discontinue the product.

  91. Well, the heavy usage of MRI in the US relative to other countries could be either, or all, of several things: rationing of expensive gear in single-payer systems; defensive medicine practiced in the US due to threat of lawsuits (one thing you can be sure about any gov’t healthcare plan that passes this congress – it won’t take business from the trial lawyers!) that couldn’t be filed against e.g. the NHS; or doctors in the US doing tests, and procedures, that are of marginal utility but which they do get to bill the HMO for, and which cost them and the patient nothing…

  92. TOK wrote:
    > Suppose you are a smallish country in the cold north, with not
    > many neighbors. History shows that it is vital to have as high
    > domestic food production capacity as possible: otherwise, you
    > starve when a crisis comes and your neighbors don’t sell food
    > to you anymore.

    I think this is a pretty interesting question. Let me share a few thoughts on it.

    You say “your neighbors don’t sell you food anymore.” Why not? There are two reasons I can think of that you might not be able to import food, and they have different responses.

    Firstly, circumstances might have increased the value of food, that is to say, you need to offer a higher price to purchase the food. That allows the various mechanisms of supply and demand to balance things out. Mr. Berlin is willing to eat 10% less so that he can have the extra money that you offer. Or Mr. Copenhagen is willing to act as a middle man to get you the food you need if you pay him a nice premium to do so. So solution one is: offer more money.

    Secondly, there is a specific political action that makes it illegal to sell you food. So, lets say Germany is your main source of grain, and Ms. Merkle, develops a pathological dislike of blond haired people. She passes a law making it illegal to trade with Finns. What then? Well, you can buy your grain from Sweden, or Latvia, or Russia. It takes a pretty substantial amount of political capital to prevent you from finding any source of food (though again, it might be considerably more expensive.) Wise companies develop the necessary broad based international connections to provide multiple sources for you. Furthermore, other wise companies can provide some sort of insurance against short term failure, by holding short term stocks of food to see you through the crisis. If you have to buy it, they will charge you a lot, but at least you can eat. (This is commonly called “price gouging.”)

    But you say, that is crazy, how can we deal with these sorts of massive fluctuations in the price of food? Of course, the market has created a very effective mechanism to do so. It is called futures trading, where you can buy a ton of wheat today at today’s price plus a premium, and have it delivered next year. Thank goodness for these evil market manipulators!

    I would ask you to consider this alternative situation. What happens if you are getting all these food subsidies from the EU, and Ms. Merkle becomes the head of the EU. Now she is really pissed at all you blond haired people, and uses the full power of the EU to isolate you, kill your food subsidies and so forth. She has Denmark, Sweden and Norway in her pocket, so she blocks the Baltic, and completely isolates you. Now you are totally out of luck.

    However, you hope your domestic production will save you. However, Ms. Merkle blocks the supply of fertilizer and machine parts you need to make your farms work. Then, she blocks the supply of gasoline, so you have to push the plow by hand. Perhaps you think you need subsidies for your machine parts, fertilizer and gasoline industry as well? What about your steel manufacturing, your iron ore and chromium mining, your rope supply, your chemicals industry, your tire manufacturers, your engine manufactures, and on and on. Do you need to be able to supply everything you need from within the borders of Finland? There is a lot more goes into making food than seeds, ground and farmers. Does the EU need to subsidize all these things?

    This second scenario, the political one, I outline above is far more dangerous. It is truly something to fear. However, the more we encourage large multinational organizations like the EU and the UN, the more readily they can cooperate, the more readily power is centralized, and the more readily you are left with no alternative but to genuflect to their demands. If you only have one friend, you’d better pray that they don’t become your enemy. Better to have lots of friends.

    Every country has certain distinct advantages, just as every person has distinct advantages. Just as a person creates greater value by specializing in what they are good at, so does a country. If you are good at computer programming, better to do that than spend some time doing that, some growing food, some building a house, some making electricity and so forth. The farmer can specialize in growing food, and you can write his farm management software. The house builder builds the farmer and you a house, and for it gets food from the farmer, and from you gets a web site to advertise his services. Imagine if each had to be skilled in computer programming, house building and farming. Specialization creates immense wealth, and is the very foundation of the strength and wealth of modern societies.

    Use the financial power that gives you and your countrymen to provide for your other needs, both by developing companies with strong networks with other specialists, and providing insurance type mechanisms to provide in the darker days. Get rid of “anti-gouging” laws, and rather give a medal of thanks to the gougers, since they are so beneficial for a society. While you are at it send a thank you note to those evil, nasty futures traders, since they are angels in disguise.

  93. Eric,

    For some reason when I post a comment on here, it just doesn’t appear. I don’t know your email address to email you, so I am at a loss how to comment on there. Perhaps my loquatiousness got me banned — I was on vacation yesterday so had some time on my hands — however, in the past I have had a similar thing happen, where I post, then it doesn’t appear, and if I post again, WordPress says I am repeating myself.

    Not sure what is the best course of action here. If you want to, you can email me at my first name Jessica, followed by an underscore, followed by boxer, at that domain owned by the yahoo guys.

    Thanks for any help.

    This happens to everyone occasionally, especially on long comments. They end up in the spam queue for reasons I don’t understand, not knowing exactly how the WordPress spam filters work. Have patience; I have de-spammed your comment and will do so if this happens again.

  94. (one thing you can be sure about any gov’t healthcare plan that passes this congress – it won’t take business from the trial lawyers!)

    Indeed. Tort reform will need to be carried out alongside healthcare reform in order to make the latter effective. The easy exploitability of the plaintiff-friendly U.S. judicial system should be patched regardless of your political-economic affiliation.

  95. >Assume there isn’t enough treatment to go around. We feel this is the moral equivalent to a sinking ship without enough lifeboats. What is the most moral method for deciding who gets on a lifeboat? It sure isn’t cash!

    This is a terribly, terribly false analogy. It’s emotionally plausible but leads to dangerously poor reasoning – as it apparently has, in Canada. I think it deserves an entire blog post of its own; ‘s now queued up as a topic fir me to write about.

    >the delivery of food is a low tech affair, compared to leukemia treatment, for example. One round of cancer treatment can cost more than my lifetime food budget.

    You’re confusing effects with causes. There’s nothing intrinsic about medical care that makes it as expensive as it is; Wal-Mart is now beginning to prove this. It’s pathology in the socialized and guild-ridden production and delivery system that makes it that way. If we handled food provision in the same brain-dead way food would be unaffordable too.

  96. >No; the transaction costs of [suing for tort and assault] are prohibitive where I live. Also where you live. Also where anybody lives.

    Nonsense. My wife is a tort lawyer with a specialty in environmental litigation, so I know this is false.

    >Somehow, having nonessential care rationed to rich folk at the same rate it’s rationed to the poor doesn’t strike me as being quite so morally odious as having the poor sicken and die in droves because care is allocated solely based on wealth.

    It took me a while to understand explicitly why I think this response is so utterly wrongheaded. I’ll probably blog an essay on it sometime, but in brief I think it comes down to a difference between the way you think political allocation works and the way I think it works. Your model of health-care rationing is that it will be administered by kindly, disinterested persons with at most a marginal amount of self-seeking and corruption. Mine is that it will be administered by a nomenklatura growing ever more corrupt and out of touch with patients’ actual needs., more and more preoccupied with rent-seeking and internal turf battles.

    Thus, you think political rationing is better than people dying because they’re poor. I think it’s far, far worse. At least in a market system you’re not going to be denied treatment because a bureaucrat doesn’t like your attitude, skin color, your accent, or your politics and can creatively interpret the rules to fuck you over. Far, far better the impersonality of the market than the personality of the petty tyrant.

    You may think this is an excessively cynical view of political allocation, but I think history backs me up. Political allocation doesn’t start out this way, but it always ends up this way.

    > I suppose it might seem the other way ’round if you’re confusing net worth with moral value, but I thought you were making a solely economic argument.

    I am, although I admit to having made it easy to think otherwise in this instance. I don’t think “fairness” can really be distinguished from economic efficiency. When you try, you end up with unsustainable systems.

  97. >Well, unless the drug molecule is some big-ass high molecular weight item – maybe they’re doing fancy stuff with peptide-chain folding now, I dunno – I’d say the reverse engineering problem is going to be several orders of magnitude easier than anything you’d face with silicon.

    You’d think so, wouldn’t you? Somewhat to my own surprise I recently learned this isn’t true. It turns out that being able to synthesize a bare molecule of modafinil (a drug I’m interested in) isn’t enough. The effects depend on subtleties like the micro-granularity of the drug crystals and what kind of diffusive carrier you mix in. At this level, even knowing what key traits to duplicate isn’t easy. There is black art here.

  98. >One of Eric’s blind spots is that he doesn’t think in terms of concealing information as a strategic or operational option. To him, information concealment has a transaction cost associated with it that makes it untenable.

    You’re overgeneralizing, Ken, and positing from that a blind spot where I can see quite clearly, thank you.

    There are only very specific circumstances where I believe anything like “concealment has a transaction cost associated with it that makes it untenable”. Firstly, transaction cost is not the issue; opportunity cost is the issue. Secondly. one of the almost necessary conditions for this is that the limiting factor in the production system has to be human attention. This condition is not even true of all software, though the software cases are specific and exceptional; it is wildly untrue about most other other kinds of goods.

    You really should read my foundational papers sometime; I wrote down a fairly complete generative theory addressing this issue (among others) ten years ago. You understand economics well enough to enjoy them, and it might save you from making claims like the above that are – sorry – transparently silly.

  99. Rich Rostrom>Eric, you are way, way, way off base on this. You are comparing apples and sea urchin

    I concede all the detail differences you cite; I just don’t think they matter to the argument. They key point is that both drugs and chips a have a colossal front-loaded investment and relatively low per-unit production costs. If a free-market system can generate chips, it can generate drugs, too.

    Rich Rostrom>Incidentally, the U.S. has more CAT and MRI machines per capita than Canada.

    Of course we do! Note that I said “overinvestment relative to primary-care clinics”. Because most of the players in this U.S. system are, cost-insensitive, the incentives favor high-cost, high-margin treatment methods. I’m not even claiming that we have too many scanners for our population, I’m claiming that the system favors putting capital into scanners over other uses that would lead to better outcomes even if we ended up short of scanners as a result – like inexpensive primary-care clinics.

    Ajay>Yeah, esr’s way off on his MRI per capita guesses

    See above. Actually, I wasn’t guessing; I’ve seen your bar graphs, or ones like them, before. But, looking back, I can see how what I wrote could be interpreted as you did. I hope my reply to Rich Rostrom clears it up.

  100. You’d think so, wouldn’t you? Somewhat to my own surprise I recently learned this isn’t true. It turns out that being able to synthesize a bare molecule of modafinil (a drug I’m interested in)

    Ooo, me too. Great for programming, even if you happen to be the Worst Python Coder In (whatever the Buddhist equivalent to Christendom is).

    isn’t enough. The effects depend on subtleties like the micro-granularity of the drug crystals and what kind of diffusive carrier you mix in. At this level, even knowing what key traits to duplicate isn’t easy. There is black art here.

    Er, I read that it *might* be a case of Cephalon trying to cheekily extend the useful life of their patent by dressing it up in bogus claims. Helps that no one seems to know how the stuff works, of course. Unless you can point me to any independent tests of the various formulations against each other I’m a little inclined to lump them in with homeopathy and the Bach Fish Remedies. The only thing I can see you being able to affect by controlling particle size is speed of dissolution, and there are other ways of doing that.

    This is not to say that it isn’t fairly easy to imagine drug delivery systems combined with treatment methods that would be a little more opaque to casual inquiry than simple molecules. I can see them going for the pharmaceutical equivalent of Security Through Obscurity if we take their patents away, though.

  101. It turns out that being able to synthesize a bare molecule of modafinil (a drug I’m interested in) isn’t enough.

    @esr: I believe that modafinil can be synthesized from adrafinil. This is useful knowledge because modafinal is a Schedule IV controlled substance and its chemical precursor adrafinil is not. Note that IANAChemist, but my wife is a psychologist who happens to know more about psychoactive substances than your average psychiatrist. I’ll ask her about it when we go for our evening walk tonight.

  102. > Funny enough–emergency care tends to be more expensive than preventive care, even over a long period. But because ERs are free for the poor, there’s not much of a choice for them.

    You forget “county” and free clinics. However, the point is that the poor do have free basic healthcare in the US so any argument assuming otherwise is wrong.

    > The solution, then, is either to open up other kinds of healthcare for free, or have poor people dying in the streets.

    That doesn’t follow.

  103. > That’s what insurance is–people who don’t have something catastrophic and unexpected happen to them subsidize those who do.

    Unexpected is too strong. A certain number of accidents is expected each year for a population of teen age drivers. That number is different for middle aged married men. Heck – it’s different for teen age girl drivers than it is for teen age boys.

    The value of insurance is in reducing the variance. However, if the difference between someone’s expected costs and their insurance premium is bigger than that value, they won’t buy voluntarily.

    In other words, healthy young adults won’t voluntarily buy health insurance at the rates required for a pool that includes significant numbers of old sick people.

  104. > Some people will die cheaply with a massive coronary or accident, but many of us will need very expensive interventions at some point. And in some cases, those interventions will amount to more than their aggregate lifetime wealth production. In many cases it will add up to a very significant portion of a person’s lifetime disposable income.

    Nice horror story, but if it’s true, it says that a subsidized system will necessarily take a huge fraction of GDP, approaching or exceeding 1. Since one of the big arguments was that we’d spend less money….

    Michael Jackson had heroic measures before he died. If we do that for more people, the total cost of healthcare goes up.

    Taking money from one person to give to another, or spend on another’s behalf, does not reduce costs.

  105. BTW – There seems to be an assumption that preventative care reduces costs. It doesn’t. It increases quality of life, but it increases costs.

    http://content.healthaffairs.org/cgi/content/abstract/28/1/42 – paid link, sorry, but the conclusion “Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. Medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save.”

    See also http://www.nytimes.com/2007/08/08/business/08leonhardt.html?_r=1

  106. >BTW – There seems to be an assumption that preventative care reduces costs. It doesn’t. It increases quality of life, but it increases costs.

    This is not quite true. There are two large categories of preventative medicine that really are net cost reducers, but they’re such old news that everyone takes them for granted and nobody puts them inside that frame any more. They are (a) proper sanitation for control of infectious diseases, and (b) ensuring that people get enough of critical micronutrients like vitamins and iodine so they won’t get deficiency diseases.

    Beyond that, yes, the cost effect of “preventative medicine” is marginal and, for the degenerative diseases associated with old age, negative.

    This is an important point, because the delusion of “preventative care” as a cost saver is one of the major shuck-and-jives being used to sell fully socialized medicine.

  107. esr: [On the transaction costs of legislation] Nonsense. My wife is a tort lawyer with a specialty in environmental litigation, so I know this is false.

    Really? Individuals routinely sue large companies for assault or torts and succeed in gaining proper restitution in a sensible timeframe, and can do so without massive personal investment or risk?

    Are you actually claiming that lawyers are not expensive, and so they should be used for everything that’s currently covered by regulation?

    I think it comes down to a difference between the way you think political allocation works and the way I think it works. Your model of health-care rationing is that it will be administered by kindly, disinterested persons with at most a marginal amount of self-seeking and corruption. Mine is that it will be administered by a nomenklatura growing ever more corrupt and out of touch with patients’ actual needs., more and more preoccupied with rent-seeking and internal turf battles.

    But it already is administered that way. Faceless bureaucrats answering to the requirements of their own hierarchy (in this case, to raise profits by running patients through a mess of paperwork and denials-by-default) already do make receiving healthcare in this country more difficult for a lot of people who end up needing it. Even with this, it helps fewer people and costs more.

    You’re pointing to a hypothetical problem while pointedly ignoring the very same problem–wearing a different hat–that’s quite real and quite present.

    Thus, you think political rationing is better than people dying because they’re poor. I think it’s far, far worse. At least in a market system you’re not going to be denied treatment because a bureaucrat doesn’t like your attitude, skin color, your accent, or your politics and can creatively interpret the rules to fuck you over. Far, far better the impersonality of the market than the personality of the petty tyrant.

    You may think this is an excessively cynical view of political allocation, but I think history backs me up. Political allocation doesn’t start out this way, but it always ends up this way.

    Please, please find me some examples of well-off folks in Canada who’ve been denied treatment because “a bureaucrat” didn’t like their attitude. I can find you plenty of examples of people who’ve actually been hurt by the “impersonality of the market” which conveniently doesn’t bother you.

    I am, although I admit to having made it easy to think otherwise in this instance. I don’t think “fairness” can really be distinguished from economic efficiency. When you try, you end up with unsustainable systems.

    Oligarchies built atop a disposable underclass are “fair” to you? Well, I suppose the oligarchs think they’re fair. (They’re no more unsustainable than any other particular arrangement.)

    Andy Freeman:You forget “county” and free clinics. However, the point is that the poor do have free basic healthcare in the US so any argument assuming otherwise is wrong.

    Free clinics aren’t available everywhere, and a lot of places simply won’t see people on Medicaid because it pays so little. Even in the better cases, there’s a high barrier to entry that’s just not there for emergency medicine.

    > The solution, then, is either to open up other kinds of healthcare for free, or have poor people dying in the streets.

    That doesn’t follow.

    Could you be more specific? Again, if you provide healthcare solely in emergency cases, you’re going to have a lot more emergency cases, because the preventative care which would keep down the numbers of emergencies is not provided. If you don’t want the drag on the medical system from all of the emergency cases, you can either open up the system, or make emergency care contingent on ability to pay–which means refusing lifesaving care to poor folks, hence poor people dying in the streets.

  108. esr: This is an important point, because the delusion of “preventative care” as a cost saver is one of the major shuck-and-jives being used to sell fully socialized medicine.

    Okay… so if it’s not done by providing preventative care, how do countries with socialized medicine manage to provide healthcare to more people, with better outcomes, for a smaller per capita cost?

  109. >Okay… so if it’s not done by providing preventative care, how do countries with socialized medicine manage to provide healthcare to more people, with better outcomes, for a smaller per capita cost?

    Probably they don’t and the numbers are being massively cooked. No, I’m not kidding; socialist systems are notorious for this sort of flim-flam.

    >Really? Individuals routinely sue large companies for assault or torts and succeed in gaining proper restitution in a sensible timeframe, and can do so without massive personal investment or risk?

    Yes. In fact, this sort of thing is probably more common than it should be in the U.S., due to the combination of joint-and-several liability and gunslinging lawyers willing to work on contingency. By coincidence, I have mail informing me of two class-action lawsuits to which I may be potentially a party about three feet to the right of my monitor. (Both relate to stock purchases I made about ten years ago.)

    >Are you actually claiming that lawyers are not expensive, and so they should be used for everything that’s currently covered by regulation?

    No and yes. Lawyers are expensive, but in the kind of tort action I think ought to replace regulatory fiat the cost can be spread across lots of parties or become a profit opportunity for legal gunslingers.

    >But it already is administered that way. Faceless bureaucrats answering to the requirements of their own hierarchy (in this case, to raise profits by running patients through a mess of paperwork and denials-by-default) already do make receiving healthcare in this country more difficult for a lot of people who end up needing it.

    Don’t change the subject. If I have enough money, I don’t have to give a damn what the drones at the insurance company think is appropriate. Political allocators in a single-payer system wouldn’t leave me that option. The situations aren’t symmetrical. The efficiency of the system is inversely proportional to the amount of money that allows you to tell the allocators to go fuck themselves.

    >Oligarchies built atop a disposable underclass are “fair” to you?

    No, and they’re not efficient either – not since the Industrial Revolution, anyway, and arguably not before then either. Crap like that doesn’t happen because it’s a Pareto-optimal outcome, it happens because master classes don’t give a fuck about efficiency as long as they get to be masters.

  110. Oops… did I get caught in your spam queue? I’m used to my comments showing up right away.

  111. > Please, please find me some examples of well-off folks in Canada who’ve been denied treatment because “a bureaucrat” didn’t like their attitude. I can find you plenty of examples of people who’ve actually been hurt by the “impersonality of the market” which conveniently doesn’t bother you.

    Does Chaoulli v. Quebec fit the bill?

  112. > >You forget “county” and free clinics. However, the point is that the poor do have free basic healthcare in the US so any argument assuming otherwise is wrong.

    > Free clinics aren’t available everywhere

    However, they are where the vast majority of the people are, so it’s dishonest to dismiss them.

    Note that “county” is everywhere in the US. Yes, they’ll send you a bill, but you can ignore it and continue to get treatment. That’s no-cost.

    > and a lot of places simply won’t see people on Medicaid because it pays so little.

    County isn’t medicaid. However, medicaid and the various state versions is yet another source of free healthcare.

  113. > Again, if you provide healthcare solely in emergency cases, you’re going to have a lot more emergency cases,

    Since we don’t provide healthcare solely in emergency cases….

    This whole discussion started with Moorier’s demand “A safety net that will always give them enough medical care that they won’t die, no matter how little money they have, and will also take care of non-life-threatening illnesses if they are prepared to wait.”

    Now that even he is beginning to figure out that said safety net exists, he’s now trying to back out of the “if they are prepared to wait”.

  114. > Okay… so if it’s not done by providing preventative care, how do countries with socialized medicine manage to provide healthcare to more people, with better outcomes, for a smaller per capita cost?

    It is generally believed that “lifestyle” accounts for most/all of the difference.

    Let’s take obesity. How does socialized medicine handle it? How do you plan to deal with it under Obamacare. (Hint: I can send letters to every American from “Dr. Gene Scott” telling them to lose weight for a lot less than Obamacare will cost.)

    Britain’s NHS uses obesity and smoking as reasons to deny care. Is that your plan?

  115. I am willing to experiment on roughly half the population. That’s the half that currently receives govt funded medical care. It includes all govt medical programs, the Indian Health Service, the military, and all govt employees and elected officials (federal, state, and local), and perhaps even folks whose employers do a majority of their biz with govt.

    You get to do whatever you want with them. However, starting in 2011, your per-person budget gets cut by 5%/year for four years. (You’re predicting a 30% savings, so less than 20% should be no problem.) You can even use that savings to cover additional people, so the total expenditure need not change.

    In 2016, we look and see if the covered folks are actually better off. One of the measures we’ll use is how hard they fight to get out of the system and into the private system.

    Deal?

  116. Note that “county” often goes by the name “public”, as in “public health service”.

    They’re in the phone book. Every cop, firefighter, and social worker knows how to reach them. However, they’re not under my couch.

    Perhaps Moorier will tell us where he looked.

  117. >Really? Individuals routinely sue large companies for assault or
    > torts and succeed in gaining proper restitution in a sensible
    > timeframe, and can do so without massive personal investment or risk?

    Perhaps people outside the US are unaware how messed up our tort system is. So let me offer an example I saw recently. In the US you can buy a soluble vitamin called “Airborne”, which is basically a mega dose of Vitamin B complex, along with a nice fizzy taste. On their adverting they said something like “Helps reduce the incidence of colds and flu.”

    A group of lawyers got together, and got a few people who had bought this vitamin, and sued the company, because the FDA had not approved the claim that it helped reduce the incidence of colds and flu. The makers were eventually forced to settle. The result was a 28 million dollar fund. Anyone who had bought this vitamin could claim six dollars from the fund, if they had a receipt, and filled out a lot of paperwork. Limit three refunds per person. Maximum claim for anyone in the class? $18. How much did the lawyers make from this? About 14 million dollars.

    Nice work if you can get it.

    Did you guys watch Erin Brokovich? Allegedly there was an unusually high incidence of cancer, allegedly caused by some substance in the water (which was undoubtedly bogus science.) Settlement? Kids dying of cancer? $30,000. Lawyers, including folk hero Erin? $150 million.

    Why she is seen as some kind of hero is beyond me. They even say in the move that the lawyers got 40%.

    > Are you actually claiming that lawyers are not expensive, and so they should be
    > used for everything that’s currently covered by regulation?

    Expensive, yes. However, plaintiffs lawyers are, as they like to say in socialized medical care, free at the point of delivery.

  118. Oh man, I have learn a lot from this dialogue;

    +Internet needs better support for tablets-diagrams and stuff that makes visualizing concepts easier.

    + Internet needs voice and tone on conversations.

    + Text is dull and boring(I love colors, text should be colored and different).

    Note to self:make something about it.

    I’m in middle ground, here in Spain, healthcare is given by the state, that uses its immense negotiation power as monopoly to pay peanuts to doctors. I heard that in USA doctors are rich, here they work a lot, they need to study a lot(university=5 years+specialization+MIR 4-5years=10YEARS) once working their job is secure, but are not very good paid.

    In USA healthcare cost per patient is double than the rest of the civilized world. I agree that in an ideal free market things should be better but today USA cant give lessons about it.

    I agree for a system to be perfect, it has to be controlled: it needs continuous feedback, and that is the main issue: Free markets like USA are in real not free market but private monopolies or oligopolies, state monopolies tend to be not so monopolies because there are private entities too. So in fact we hae something similar.

    For me the state and big companies are the same thing, the same bureaucracy and inefficiency problems. In USA there are big companies that in fact are bigger than a lot of other countries states. People forget to remain alert when they think their system is free-market, when it’s not.

    Health like energy is a “natural monopoly”, companies merge and get bigger and you have a monopoly by the state or by a company.

  119. “Free markets like USA”

    Whoa! Whoa! Whoa! The USA is not even close to being a free market, especially with regard to both health care and medical insurance, both of which are highly regulated. Please do not draw conclusions based on this notion. Go back a century and the USA had a relatively free market for both. Now? Not close.

    Yours,
    3om

  120. > At least in a market system you’re not going to be denied treatment because a bureaucrat doesn’t like your attitude, skin color, your accent, or your politics and can creatively interpret the rules to fuck you over. Far, far better the impersonality of the market than the personality of the petty tyrant.

    I hope you realize that the claim that in the free market you cannot be denied a service because someone doesn’t like your attitude is not exactly true, to say the least.

    More to the point, a bureaucrat doesn’t have a priori incentives (except for personal traits) to creatively interpret the rules, while insurance companies have quite a few.

    > If I have enough money, I don’t have to give a damn what the drones at the insurance company think is appropriate. Political allocators in a single-payer system wouldn’t leave me that option.

    “Enough money” not to give a damn what the drones at the insurance companies think is unachievable by most of the population. I don’t quite see why the system providing high quality service to the rich should be preferable to the one which provides mediocre quality to the entire population.

    > Yes, they’ll send you a bill, but you can ignore it and continue to get treatment. That’s no-cost.

    Similarly there wasn’t any problem of hunger in medieval ages, you could have always stolen a loaf of bread.

  121. Jose says:
    >For me the state and big companies are the same thing, the same
    > bureaucracy and inefficiency problems. In USA there are big
    > companies that in fact are bigger than a lot of other countries states.

    There is one huge difference: force. If my insurance company doubles my rates, I can go get a different insurance plan. If the government doubles my taxes, I can smile and write a check, or go to jail. Companies, big and small, have to convince you to buy their stuff, Governments insist you buy their stuff. That means that companies have to please you (that is to say, you, Jose, personally), governments have to please their political masters (and vague things like “the electorate”.)

    This goes to heck of course when government works in partnership with big business, and starts making laws that force you to do business in a certain way. Then you get something between government and business. For example, if licensing laws, and oppressive regulatory and legal barriers make it really difficult to start a medical insurance company, you get what you got in the USA.

    > People forget to remain alert when they think their system is free-market, when it’s not.

    That is correct. The US health care market is more free that it is in Europe, but it is still far from an open free market. Nearly all of the problems stem from the simple fact.

    > Health like energy is a “natural monopoly”, companies merge and get bigger and
    > you have a monopoly by the state or by a company.

    A natural monopoly is anything a government bureaucrat thinks should be under his control. Health care is about as far from the massive infrastructure based, putative natural monopolies as it is possible to be.

  122. Thomas Covello says “One way we know this is that the US and nations with socialized medical systems have similar life expectancies”

    Um, no. The life expectancy statistics are comparing applies and oranges. Find out what’s included in those figures before you try to compare them.

  123. “a” thinks that bureaucrats have an infinite pool of money to pull from, and thus they have no reason to try to deny an insurance claim. Anybody else think he even BEGINS to be correct?

  124. JessicaBoxer,

    sorry for taking my sweet time to reply. I was away from net access…

    > You say “your neighbors don’t sell you food anymore.” Why not?

    Think political crisis. Or even economic. It doesn’t need to have anything to do with “our” country or the relations between “our” country and the neighbors who supply us with cheap food.

    You say an integrated EU would not prevent an evil EU leader from blocking food sales to us, and that it would be better to have more friends to choose from instead of only the EU. So um, how is it with the USA? I don’t actually know, but I’m tempted to bet that not every state has self-supporting agriculture. If being in a union does not save a state that relies on food imports from other states, and it would be better off without the union, then why should such states not secede from the USA? Of course if a single state leaves the union, it is still surrounded by N-1 union members. That’s different from starting with N independent states and pondering if they should form a union or not. But the USA was also, I am told, formed from more independent states.

    Regarding whether we could keep domestic production running without import supplies: we do happen to have mineral resources for several metals, we do refine the metals ourselves, and we have machinery industry. So we could make our own tractors and tools — in fact we export them currently. Without gasoline, we can use wood for energy — that’s the one thing we have a lot. We ran our cars on wood during the WW2 and the technique is still known. Biodiesel or ethanol are also options. We also produce fertilizers.

    You also pointed to specialization. While I do agree that to some extent specialization is good, it should not be taken to extremes or it becomes a burden. For instance, despite occupational specialization, every person needs a basic set of skills for running their own household. People who lack these are called “neo-helpless” over here, and that term is deeply derogatory. Likewise, on international level, every country should have basic amenities on their own, or they will be hosed sooned or later. The ones that have specialized to the extreme are commonly called Banana Republics, their economy close to 100% dependent on one single export product. We don’t see a huge rush of more and more countries aspiring to become like that.

    There is also the question of scale. It’s all well and good for a single village to have a farmer, a blacksmith and a carpenter. It’s still fine to have skillful glassmakers in one town and specialist winemakers in another. But to buy your pork from Denmark and your potatos from Germany? The wider you take this specialization, the longer the supply routes come, and it becomes less unlikely that the route is disturbed somehow. For non-necessities like fashion clothing, fine wine or exotic fruits, it can be tolerated as by definition such trade items are not really necessary for day-to-day life. We can get by without them, although we desire to enrich our lives with them, when available. Basic food is not a non-necessity.

  125. >There is one huge difference: force. If my insurance company doubles my rates, I can go get a different insurance plan. If the government doubles my taxes, I can smile and write a check, or go to jail. Companies, big and small, have to convince you to buy their stuff, Governments insist you buy their stuff. That means that companies have to please you (that is to say, you, Jose, personally), governments have to please their political masters (and vague things like “the electorate”.)

    If the insurance company doubles your rates, it’s likely the other insurance companies will do the same. They’ll only compete enough to get your business and then raise your rates later. But your rates are irrelevant anyway because they’ll try to find a way not to pay a claim no matter how much or how little you contribute (unless you’re rich enough to contribute a considerable sum, but that’s, what?, 2% of the population…oh and that 2% probably owns a stake in the insurance company). The insurance companies, like any other big industry, collude to screw the customer. They’re money-making entities, not insurance providers.

    Libertarians assume that businesses suddenly become less greedy in a free market and that consumers become less sheep-like. There are two types of people in any market, free or otherwise: wolves and sheep. There’s no third option. The prevailing business philosophy in any market is, “someone’s going to get taken advantage of, and I’d prefer it not be me, so I’ll be the one to take advantage of others.” The market is a war zone and the concept of a polite war in which no civilians are killed and no cities are carpet-bombed or atomic bombed is dead. If the bureaucrats disappear and companies get this mythological free market wild west frontier, they will just directly swindle the consumer more directly instead of having to fight a two front war. Greedy people will adapt to whatever market system they find themselves in. In the supposed-but-not-really communist USSR, the greedy just became party members. In capitalist America, they started corporations.

    No system will be perfect and the poor will always be exploited, but the system which presents fewer obstacles to the greedy is worse for the poor. And I’m not talking about the lower class, less-than-$20k/yr folks. You and I are poor compared to the owners of companies. Proportionately, we might as well only make $20k/yr. It’s a drop in the bucket compared to what they make/earn/exploit/bleed from turnips/sue for/swindle/connive/etc.

  126. Sagodjur Says:
    >Libertarians assume that businesses suddenly become less greedy in a free market

    Let me answer your comment with a quote from Adam Smith, author of “The Wealth of Nations”, and father of modern economics:

    “But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

    That is to say, every business deal entered into (including buying insurance) is entered into for the benevolence of both parties involved. To make this work you need a few other things:
    1. A stable economic system where force is used to ensure that people fulfill their parts of the agreement.
    2. A wide distribution of information to allow reputations to be made or destroyed based on your actions.
    3. A variety of specialists, who are independent experts, to help guide you through the maze.
    4. A free market to allow the bad to be destroyed and replaced by the good.

    The present situation exists because of an absence of some of the above. The situation with medical insurance in the USA is complicated and made much less free due to massive regulation, legal barriers to entry, regulatory baloney and the massive confusion of third party payers. I think few people have any idea how much less expensive medical care would be in the absence of employer paid insurance, government regulation and regulatory load.

    For example, a while ago, I was in hospital for a minor procedure. The nurse and I got talking, and he showed me a plastic bag containing an 18 inch piece of plastic tube (used for catheters.) He told me that it is billed to the patient at $300. I can buy the same tube at Walmart for about 10 cents. (I can subsequently boil it to make it sterile, costing another cent.) Why does it cost $300? For the reasons cited above. That is a 30,000% mark up. Really, if you had any part in paying that bill, would you, under any circumstances pay $300 for a piece of plastic tube? A friend of mine’s dog had an operation to remove some cancerous lesions, and a few other things. Cost to the owner? About $600. How much if I had the same operation? I don’t know because I would never see the bill, but I doubt I would get much change out of $50,000. (BTW, the dog weighs more than me, so probably took move drugs.) Nice mark up, huh? What is the difference? The difference is who pays.

    Do the math on the rest of your medical bill.

  127. >Libertarians assume that businesses suddenly become less greedy in a free market and that consumers become less sheep-like

    This is only true in your fantasies.

  128. TOK says:
    > Think political crisis. Or even economic.

    Correct me if I am wrong, but I believe I addressed this in the second scenario in my original.

    >[If centralization of power is bad...] So um, how is it with the USA?

    I think you will find that most libertarians oppose the strong centralization of government (that is to say the assumption of responsibilities at the federal level) for exactly this reason.

    > So we could make our own tractors and tools

    Of course you could. Do you? Or would you have formulate a whole tractor industry. How about tires? How about catalytic converters (you do have mineral resources of platinum right?) How about the computer chips for managing the engine? Do you have extensive experience in embedded programming? You might be able to use wood for your fuel (it is going to take a while to make your tractors run on wood though), but what are you going to lubricate your engines with? What about your machine tools? And a million other dependencies. I am not familiar enough with Finnish industry to give really good examples, but even a massive economy like the USA would have a very hard time operating entirely in isolation.

    >For instance, despite occupational specialization, every person needs a basic set of skills for running their own household.

    You do know this used to be a full time job right? It used to be there was so much work managing a household that wifey had to stay home to have the time to do it. What do we have now to reduce the cost of running a household? Massive specialization, especially in tools and outsourced services. Refrigerators, indoor plumbing, home delivery pizza, microwaves with frozen breakfast, lunch and dinner. Bakeries to make your bread, vacuum cleaners to clean your floor. (Even robot vacuums so you don’t have to push them around.) Day care to look after your babies, TV to look after your teenagers. Here in the USA it is fairly common for working couples to have a maid service come and clean their house. Some richer people have all their meals delivered. Many people have laundry service. Some order their groceries on the Web, and have them delivered and put in the pantry by helpful delivery people.

    The main problem with these domestic services is the high transaction costs, but the advantages of scale are piece by piece ramping up to overwhelm them. (For example, it is much cheaper to do laundry en-masse, but there is a high cost to separate individuals clothes, collect them, deliver them and insure them. However, the free market is aggressively solving and reducing the transaction costs.) The point is that specialization is good everywhere, even in the areas you mention as an exception, however, our economies are not necessarily rich enough to afford them all right now.

    (BTW, this is not just for the rich. Two hundred years ago only the very rich patronized resturants. Today one of the biggest problems for the poor in the west is patronizing restaurants too often.)

    One other thing worth mentioning. If Finland is dependent on Germany for grain (and Germany is dependent on Finland to buy their grain), the cost of Germany declaring war on Finland is increased quite significantly on both sides, meaning war between the two is less likely. That alone should be incentive enough for global, broad based trade.

  129. I’ve ignored the distorted leftist comments so far, but I’ll address Sagodjur since he does lay out the basic leftist assumptions and there’s a kernel of truth there. First, let me modify your language a bit, away from wolves and sheep, towards elites and plebes, since elites don’t actually eat plebes :) (elites is not quite right either, as they’re fairly ignorant themselves, but the elite label has a long history so I’ll reuse it). Sagodjur is right that elites in a free market will often try to trick the plebes into giving away their money, as it’s often easier to trick the plebes than to create a better mouthwash. Free marketers often paint a rosy picture of the market, whitewashing away this sordid reality, but that’s just for public persuasion: most of us understand the reality. Then, perhaps the central divide between the statists and the free marketers is how to create institutions to regulate the elites. The statists believe that by empowering the plebes to vote bureaucrats into power, they can create powerful public institutions to safeguard the interests of the plebes. The free marketers believe instead that the only way to channel the elites towards worthwhile purposes is to pit them against each other in the free market. The statists want to appoint an all-powerful govt with a blessed philosopher-prince at its head, think Obama, followed by his academic priesthood, Geithner, Summers, Romer, etc, (note for all the left’s superficial irreligiosity, how they’ve recreated their own secular version of the prince and priesthood) while the free marketers want Gates to compete against Ellison against McNealy.

    Running this experiment the world over has shown resounding victory for the free marketers, because the elites capture the govt bureaucracy as easily as they do corporations. The central fantasy of the statists is that the sheep/plebes need to be protected from the wolves/elites, but that the plebes can somehow avoid voting wolves in sheep’s clothing/politicians into power. The great free market contribution is to realize that the only way to somewhat control the elites is to pit them against each other. Not only that, but when they’re pitted against each other, they keep thinking of new ways to improve things, innovation, which causes more for all, growth. However, when they capture the govt as politicians, they’re content to keep milking the cows/plebes for more and more wealth. The failure mode of collectivist govts the world over is that the political elites inevitably choose to be kings in hell rather than nobles in heaven, despite the latter being an objectively better life in many ways, they choose to rule over a nation of paupers rather than become a C-level executive in a rich country. They might not always be cognizant of how their massive overspending and constant breaking of the rule of law ensures this, I don’t know, but they do make the choice to take these actions regardless. In a free market, elites are held in check by the constant referendum they’re held to: I can choose not to vote for Warren Buffet by canceling my GEICO insurance at any moment of any day, rather than being limited to govt elections every 2-4 years.

    As for Sagodjur’s coda about all of us being poor compared to the super-rich, the free marketer’s answer is so what? We’re not starving on that “proportionately” $20k/year and we realize that we live in a far better country, where we can buy plenty of PS3′s and Big Macs and MRIs with that money. If you’re so convinced that your collectivist ideas are better, feel free to move to San Francisco or New York or some such statist enclave and prove us wrong. We’ll be happy to leave those cities and let you enjoy your hell.

  130. > “a” thinks that bureaucrats have an infinite pool of money to pull from, and thus they have no reason to try to deny an insurance claim.

    You are mistaken. A priori a bureaucrat has less incentive to deny an insurance claim because it’s less likely a government agency would set a “creatively deny as many claims as possible and ensure the rules are vague enough to make it possible” policy, if only because some outrage would ensue, whilst free market companies can implement such policies as they please. Just because something is not a subject to verification by customers’ cash, does not entail its customers cannot influence its behavior.

    And this aside, the original claim was that you were less likely to get a service denied because of your attitude/skin color in the free market, than by a government agency. Anybody else thinks it even BEGINS to be correct?

  131. > And this aside, the original claim was that you were less likely to get a service denied because of your attitude/skin color in the free market, than by a government agency. Anybody else thinks it even BEGINS to be correct?

    It’s quite correct.

    A private vendor who doesn’t like your biz because of the color of your skin or any other reason doesn’t get your money. Some private vendors will make that choice, but others won’t.

    A govt, on the other hand, gets your money no matter what.

    That’s why Jim Crow was instituted with laws, to keep the private vendors in line.

    Laws which, by the way, were passed by Democrat Party dominated govts. The relevant legislators retired as party members in good standing. (Bull Connor, the sheriff famous for turning firehoses on civil rights protestors, was a prominent elected Democrat and was a regular at the presidential nominating conventions.)

  132. Laws which, by the way, were passed by Democrat Party dominated govts. The relevant legislators retired as party members in good standing. (Bull Connor, the sheriff famous for turning firehoses on civil rights protestors, was a prominent elected Democrat and was a regular at the presidential nominating conventions.)

    But the bulk of the racist contingent who put the Dixiecrats in power jumped ship and sided with the GOP right around the time Nixon was elected. It was a calculated strategy on the part of Nixon’s advisers (the so-called Southern strategy) in order to win votes, in the wake of Kennedy and Johnson adopting civil rights as a plank in the Democratic platform.

  133. As for Sagodjur’s coda about all of us being poor compared to the super-rich, the free marketer’s answer is so what? We’re not starving on that “proportionately” $20k/year and we realize that we live in a far better country, where we can buy plenty of PS3’s and Big Macs and MRIs with that money.

    People are happier and healthier where there is greater material equality. This fact, shown empirically by Wilkinson and Pickett, will revolutionize twenty-first century politics and economics.

  134. My grandfather has a friend in England who can’t walk because her hip is messed up. When she went to the public clinic, they told her she was too young to qualify for a hip replacement and would have to wait a number of years before they would do anything. No insurance company is going to take her with a pre-condition like that and she couldn’t afford the out of pocket medical expenses so she is stuck until she reaches the appropriate age.

    One might argue that the insurance companies should be forced to take people with expensive pre-conditions. However, in a place like England, most of the people who would want private insurance are people with expensive pre-conditions that the public system won’t treat very well. Consequently, no insurance company would be profitable (or stay in business) unless they charged premiums that were nearly as high as the expensive treatments themselves.

  135. >People are happier and healthier where there is greater material equality. This fact, shown empirically by Wilkinson and Pickett, will revolutionize twenty-first century politics and economics.

    This is true to a certain extent and it is relevant to the health care debate. From what I’ve read, there are a number of countries where people, on average, have inferior health care to the US but are more satisfied with it. It turns out that if people know all their neighbors, friends and relatives have the exact same health care they do, they don’t seem to mind (or even know) that it sucks.

    Obviously someone with a very serious problem that the public system refuses to treat (like a hip replacement) will cause discontent. However, the majority in places like England have no idea that their chances of surviving, say, breast cancer are less then in the United States.

  136. Anybody else thinks it even BEGINS to be correct?

    Absolutely correct. As Andy Freeman pointed out, the segrationists had to institute laws to keep their segregation. I remember reading a story about how some white-owned businesses in the South during Jim Crow would still secretly serve blacks despite the Jim Crow laws at great risk of criminal liability to themselves.

    To most business enterprises, money is money whether it comes from someone who is black, white, yellow, red or neon green. Those who would run a business refusing to serve a certain demographic will quickly find themselves lagging behind their money-greedy competition, especially in today’s society.

  137. ChrisGreen says:
    >Consequently, no insurance company would be profitable (or stay in business)
    > unless they charged premiums that were nearly as high as the expensive
    > treatments themselves.

    No life insurance company would be profitable were they required to take clients regardless of their medical history. If that were the case I might hold of my life insurance purchase until I was diagnosed with terminal cancer. So how to life insurance companies work? The answer is pretty simple. They sell you life insurance when you are young at a low rate, in exchange for a guarantee to continue coverage at that rate for however many years you agree (typically 10, 20 or 25.) Medical insurance could work exactly the same way. Buy it when you are young to provide insurance now, and guarantee your premiums when you are old.

    This addresses most of the problems with pre-existing conditions. Since most people are healthy when they are young, they enter the system with no pre-existing conditions, and carry the same policy through their lives. Consequently, your friend would not have needed a hip replacement when he was 21, but assuming he carried the insurance through, would get the condition during the existing insurance coverage, and get the treatment he needed.

    So why doesn’t it work that way? For several reasons. The most important reason though is that individuals do not buy medical insurance, it is purchased by their employer and, as they change job, they change insurance. This defeats the whole underlying mechanisms of insurance entirely. Government regulations add to the confusion, both the good intentioned ones (that are fingers in the dike of the leaking system) and the bad ones that impose massive bureaucracy and regulatory load.

    > she couldn’t afford the out of pocket medical expenses

    This again is a big part of the problem. Medical care is so massively overpriced due to the dissociation of incentives, large amounts of rent seeking, lack of competitive market and so forth, that, in a free market system she might very well be able to afford it, or at least save up for it. Like I said in an earlier comment, if a dog needed a hip replacement, it might cost less than $1,000. That, surely, is in the realm of affordability should a person be able to operate in the much more free market environment that veterinary care has.

    > When she went to the public clinic, they told her she was too young to qualify for a hip replacement

    Doesn’t this statement scare the heck out of anybody who advocates for the public takeover of health care? Is this really what we want: petty tyrants deciding if your pain is sufficient to warrant medical treatment?

    Sorry, you are too young for a hip replacement — no soup for you.
    Sorry, you are too fat for a hip replacement — no soup for you.
    Sorry you smoke cigarettes — no soup for you.
    Sorry the district you voted in didn’t vote for the current president — less soup for your district, no soup for you.
    Sorry you are white, and there is an an unfairly low number of black people getting hip replacement ops — no soup for you.

    ****Shudder*****

  138. Ajay,

    You seem to perceive that anyone who opposes libertarianism must be a liberal. I might sound like a left-leaning (or drowned in the kool-aid) liberal to you, but I’m far from it. You also didn’t read my post very well.

    I said:

    >Greedy people will adapt to whatever market system they find themselves in. In the supposed-but-not-really communist USSR, the greedy just became party members. In capitalist America, they started corporations.

    >No system will be perfect and the poor will always be exploited, but the system which presents fewer obstacles to the greedy is worse for the poor. And I’m not talking about the lower class, less-than-$20k/yr folks.

    That second part is where my interest lies – playing the bureaucrats against the rich people. Really, pitting anyone with power and/or money against others with power and/or money – to the benefit of the impoverished minority. That’s the competition that I want to see.

    I don’t think the US will turn towards socialism to the extent the conservatives fear (or rant about on Fox news). As far as conservatives are concerned, anything that isn’t conservative must be [insert popular enemy here - communist, socialist, terrorist, un-American, etc] and it’s all, “if you’re not with me, you’re against me.” But the current push by the Democrats isn’t that socialist (this is stated by the socialists themselves). I also don’t see the US going completely free market either.

    I don’t like the democrats anymore than the republicans and I don’t approve of collectivism either. Communism is a nice ideal but cannot be practically executed. In a communist system, everyone is equal because everyone shares an equally dismal living standard, except of course the party members. In capitalism, there’s a large expanse between rich and middle-class/poor. Companies give to charities and are praised for philanthropic behavior, when the true philanthropy would be to give your workers a higher salary and better benefits.

    My ideal (which will likewise never happen and wouldn’t be practical) is a true democracy (as opposed to a representative democracy) in which everyone votes on everything. But once again, the people are sheep and the wolves are always waiting to exploit them. So ideals are not going to happen. No free market paradise. No socialist utopia. People will never truly be equal or actually free. Libertarian and socialist armchair philosophers can rant and argue and propound and expound all they want, but it won’t make a difference. The best possible scenario is to keep the wolves at each others throats so the sheep can walk passed in peace.

    Competition can make things better, but competition between political and economic philosophies rather than competition just between business interests. If everyone’s in the same libertarian free market mindset, then it’ll be easier to game the system. If everyone plays by the same rules, someone is going to come along and use that to their advantage. Likewise if everyone is playing by the same socialist mindset.

  139. > But the bulk of the racist contingent who put the Dixiecrats in power jumped ship and sided with the GOP right around the time Nixon was elected.

    Not even close.

    A couple switched parties, but, as I wrote, the vast majority retired or died in office, good Democrats until the end. (Fulbright, Clinton’s mentor, was one of the many.)

    That was still happening into late 80s and early 90s. (Byrd may be the last.)

    We still occasionally hear “the first Republican elected to {seat} since Reconstruction”, but the bulk of that happened in the 80s, not the 70s.

  140. Ajay, thank you for a detailed answer. But:

    > The failure mode of collectivist govts the world over is that the political elites inevitably choose to be kings in hell rather than nobles in heaven, despite the latter being an objectively better life in many ways, they choose to rule over a nation of paupers rather than become a C-level executive in a rich country.

    The underlying assumption of your argument is merging of politicians and CEOs into a single notion of elites. Here’s a simple explanation of the kings/nobles phenomen. The skills necessary to be a successful politician have little in common with the skill necessary to become successful in the free market. You can’t pit them against each other in the free market, because half of them will simply appeal to the spectator crowd to pull them out.

    The Jim Crow example is problematic on at least two grounds. First, the right to vote of the discriminated was hardly working properly, so the incentives of government to be nice to them were not in place. Second, it can actually be construed as the argument _for_ my claim. After all, the laws were in the end abolished. Suppose US becomes France tomorrow as far as social legislation is concerned. Would you argue that the situation of African Americans would be worse than before Brown, because the free market would be much more restricted?

    > Those who would run a business refusing to serve a certain demographic will quickly find themselves lagging behind their money-greedy competition, especially in today’s society.

    Only if there’s enough competition in its market and if the business is not doing just fine without that demographic. Just how many of the businesses esr mentioned as the reason for him seeking to carry concealed will quickly find themselves lagging behind their money-greedy competition?

    > Medical insurance could work exactly the same way. Buy it when you are young to provide insurance now, and guarantee your premiums when you are old.

    It couldn’t, if only because the goal is fundamentally different. The main motivation for purchasing life insurance is to provide compensation for the remaining life earnings lost.
    So it is very well acceptable for it not to be obtainable after certain age.

  141. > People are happier and healthier where there is greater material equality. This fact, shown empirically by Wilkinson and Pickett, will revolutionize twenty-first century politics and economics.

    Actually, what they’ve shown is that propaganda works.

    We basically have a choice between envy (worrying about what someone else has) and greed (worrying about what I have). Greed produces more stuff than envy, but unfortunately, the propaganda pushes envy.

    The reason that the propaganda pushes envy is that envy makes people easier to control. You can use envy to get people to gang up on “the other”.

  142. > shown empirically by Wilkinson and Pickett, will revolutionize twenty-first century politics and economics.

    Like all of the free trade, minimum wage, rent control, and other research has revolutionized politics and economics?

    Like the research showing that “stimulus” doesn’t work mattered earlier this year? (Politicians are still babbling about a “multiplier” when the research has shown that the multiplier is less than 1.)

    If it has an effect, that effect will have nothing to do with reverence for science/truth/what-have-you and everything to do with cherry-picking.

  143. > It turns out that if people know all their neighbors, friends and relatives have the exact same health care they do, they don’t seem to mind (or even know) that it sucks.

    Umm, they don’t know that they could have it better isn’t actually much of an argument.

    I find it interesting that the equality folks are always satisfied with so little. Equal is relative, not absolute, but the equal folks always go for the bottom. It’s almost as if they like misery as long as it’s shared.

    Except that when push comes to shove, you always find them arguing that they should get special treatment.

  144. Sagodjur, If you’re not a full-throated liberal, perhaps you’d like to claim a different banner because every value you espouse points me to that same diagnosis. Funny how you say I didn’t read your post well, presumably because you mentioned in passing that the elites can also take over the Communist party, then repeat your desire for govt bureaucrats to safeguard the impoverished from the rich, that I had exactly stated as the classic liberal fantasy. The current US govt is already turning to socialism to the extent the conservatives fear, look at Obama’s huge spending initiatives and massive deficits. Of course the Democrats and the socialists are not going to say their programs are socialist when socialism is a dirty word, doesn’t mean it isn’t so. As for the US going free market, that’s where technology is driving the whole world in the coming years.

    Interesting how you obliquely refer to the inequality in communist countries and then clearly state that there is a large gap in capitalist countries. Yes, there’s a gap in capitalist countries and that’s the way it should be, as people are not equal. What matters is whether anybody can get to the top and with the preponderance of billionaires who come from poor or middle-class backgrounds, that’s clearly happening. What also matters is whether success is based on merit, not politics, and that’s mostly the case. It’s true that executives are often overpaid based on what they accomplish compared to everyday workers, but that’s because executives’ higher-level skills are difficult to evaluate and their jobs are a thinly traded market, while Wal-Mart workers’ skills are much easier to evaluate and there is a huge market to set their wages. This disparity will lessen in the coming tech revolution, but the lower-skilled Wal-Mart types will always get paid less. Companies give to charities because that goes to the poor, they have no reason to do the same for their business partners, their employees.

    I have no idea why you think a true democracy would be better, given the horrible choices voters now make. Yes, people will never truly be equal, nor do we wish them to be. As for actually free, that depends on your definition of free. ;) While I agree that a lot of philosophy is useless, the part that isn’t is hugely important, as it provides the ideas and institutions that we use to live our lives. I disagree that having the wolves at each other keeps the sheep in peace, the wolves are just as likely to use the sheep as clubs. In the liberal fantasy, the sheep come together every 4 years and choose a great leader to keep them safe, then go back to being sheep. However, the only way for them to become something more is to constantly face the consequences of their actions, to continually participate in a free market where they’re forced to become more than sheep. They won’t become elites, but by learning some basic economic principles, supply and demand, competition causing growth, and learning to avoid situations they don’t understand, they can be much better off in a free market. This means avoiding putting your money into tech stocks in the ’90s and into real estate in recent years just because others were. As smart a guy as Warren Buffett stays out of tech because he doesn’t understand it.

    I see no reason why a free market monoculture would be easy to game, any socialist program is easy for the reasons in my last comment. However, I’m not advocating a monoculture, despite my belief that a free market one would be unambiguously better, because I think people should have the freedom to choose their own path. That’s why I’m glad that our federalist system lets people choose their own politics for their own community. If a bunch of idiots want to congregate in SF or France and live out their socialist fantasy, so be it. The problem is when they try to mandate health insurance to all of us, despite this approach already being a disaster in MA.

    a, I did lump the elites together but I think that’s largely true. At the extremes of success, Bill Gates won’t make much of a politician, nor Bill Clinton much of a CEO. However, on the whole, the average elite can do well at whatever they choose: Jesse Ventura would make a good businessman and Carly Fiorina a good politician. Yes, there will always be an Obama who’s only good for empty promises as a politician but in a truly free market, there will be no govt, or at the very least extremely limited, for him to abuse to thwart the market. This will only happen when the populace realizes this simple fact, but we’ve now made 30 years of pretty good progress towards that goal. I believe that was just the beginning and that there’s a big surge toward freer markets coming, driven by technology and the success of free markets so far.

  145. >If you’re not a full-throated liberal, perhaps you’d like to claim a different banner because every value you espouse points me to that same diagnosis.

    “As far as conservatives are concerned, anything that isn’t conservative must be [insert popular enemy here - communist, socialist, terrorist, un-American, etc] and it’s all, “if you’re not with me, you’re against me.””

    Thanks for proving my point. This is where reading comprehension comes into play. Just because I think you’re wrong, it doesn’t mean that I think the person who would support the exact opposite perspective is right either. People CAN be something other than liberal or socialist and still oppose a free market and libertarianism.

    My desire is not for the bureaucrats to safeguard the impoverished from the rich, at least not by direct intention or action. I don’t trust the bureaucrats to have my interests at heart anymore than corporations or lobbyists. I only trust them when they’re distracted and fighting each other and then, the only thing I trust them for is to fight, not to be honest or to actually do anything to my benefit. But that’s better than doing something to directly harm me, which is what they typically do when they’re left to themselves.

    This is why I’d prefer a direct democracy. Representation is a myth. I only trust myself to have my own welfare at heart and I know that I would often make decisions that would go against my own welfare. The problem with that political philosophy is that you have to trust other people to likewise make good decisions. Like I said before, it’s not practical. It’s an unattainable ideal. So you work with what you’ve got. And the best we have right now is a system where diverse destructive interests can get some embattled (like conservatives and liberals, socialists and libertarians) that the rest of us can live in peace.

    >look at Obama’s huge spending initiatives and massive deficits.

    Better to go into debt for the public welfare than to waste money blowing up expensive ordinance in a middle eastern country and killing civilians while looking for fictional WMDs.

    >Yes, there’s a gap in capitalist countries and that’s the way it should be, as people are not equal. What matters is whether anybody can get to the top and with the preponderance of billionaires who come from poor or middle-class backgrounds, that’s clearly happening.

    I think this reveals one of the fundamental differences in our perspectives. “Getting to the top” is not my ambition. I don’t want to be a billionaire. I don’t envy CEOs and investment bankers for their wealth. I couldn’t be happy with that much money. Being a billionaire is not a measure of success to me. The issue with the gap is not that there is one. It’s that the gap is increased at the detriment of the people at the bottom of the scale. I don’t want billions of dollars. I just don’t want someone else to greedily make billions of dollars off of me and people like me simply because we were unwilling to be ethically compromised for the sake of our greed to become the exploiters rather than the exploited.

    I prefer that people at the bottom be able to make enough to survive, feed their families, and be able to afford decent healthcare. But they’re not making enough to survive. Why? Because the people at the top are exploiting them. Squeezing out blood from turnips.

    > What also matters is whether success is based on merit, not politics, and that’s mostly the case.

    I’m all for merit. But who’s determining merit? Apparently being born to a rich/powerful family is considered merit. Being a part of a boys club of elite schools and private fraternities is considered merit. Being able to network and kiss-ass is merit. Not actually, but it’s what people are getting jobs and higher pay for. Is being descended from Sam Walton considered merit?

    > It’s true that executives are often overpaid based on what they accomplish compared to everyday workers, but that’s because executives’ higher-level skills are difficult to evaluate and their jobs are a thinly traded market, while Wal-Mart workers’ skills are much easier to evaluate and there is a huge market to set their wages.

    It’s not difficult to evaluate an executive’s skill level when the company folds under his leadership, but that doesn’t stop him from getting a golden parachutes while his underpaid employees lose their 401ks.

    > Companies give to charities because that goes to the poor, they have no reason to do the same for their business partners, their employees.

    The poor ARE their employees if they’re paying them a crap wage and not giving them decent benefits. How many Walmart employees are on welfare or having to get aid through some other program? How poor do you have to be to be considered poor?

    The capitalist ideal is summed up in the phrase, “What the market will bear.” But what that actually translates to is, “I will charge as much as I can (and manipulate the market as much as I can to raise that amount) and I don’t care how it affects those who need or want to buy my product/service.” That is inherently unethical. To knowingly take more than you need to just because you can. That’s how parasites die – they bleed their hosts dry and then starve to death.

    I’m not against profit. It is necessary for innovation and expansion. But I’m against crazy mark ups. I’m against rich people having more money than they know what to do with while poor people don’t have enough food to feed their families. You’d think that if rich people were into the capitalist ideal, they’d give more to the worker and less to charity. After all, the worker is the one with the job doing the work that makes their companies run. It would be self-interest to do so. But the rich people have colluded to reduce the bargaining position of the worker so that you are guaranteed to get crap wages no matter where you work because the executives only have their own interests at heart (and no, not the interests of the stockholders either necessarily).

  146. I think the reason (okay, one reason) you people have trouble finding people willing to be persuaded to another viewpoint about economics is that after a bit, your discussions get too technical for a layperson to hold in his/her head. I got about halfway through the comments before I realized that there’s a couple of viewpoints with evidence behind them and it would take a bunch of studying to understand enough to understand the discussion, never mind actually defend one or the other in an argument. (This is actually the longest I’ve seen an argument this friendly go on online.)

    And J.P. Russel, thanks for your response. I was going for originality, to try to think of a way of doing things that hasn’t been tried before. The part about the military wasn’t so much for efficiency as to do what the military already does, except more so: move massive amounts of material to where its needed no matter what the conditions from here to there. Although you do make a key point about the stick half of the carrot-and-stick. I was trying to minimize it, instead of thinking that it might have a purpose.

  147. JessicaBoxer:

    > Correct me if I am wrong, but I believe I addressed this in the second scenario in my original.

    Um, no. You discussed only price increases and political ill-will specifically against “our” country. But also a completely external crisis can cripple trade routes. For example, a disease outbreak may shut down all traffic between place of production and place of consumption, or a political/economic crisis that cuts off fuel availability from the market completely. Supposing that another country specializes in selling food to others, it is in their interest to be able to actually sell it, like you said at the end. But they may be unable to get it to us, even if they’d gladly sell to us at a price we are willing and able to pay.

    About the USA:

    > I think you will find that most libertarians oppose the strong centralization of government

    That sounds more like a quantitative rather than a qualitative position. Why be in the union at all, centralized or not? I would say it’s because without borders all around, everything is easier and that helps the economies of everyone a lot.

    For clarity, I should perhaps correct my earlier wording “integrate the EU tightly”. That was not meant to refer to strong central power, but to a situation were borders between member states are thoroughly open, much like the USA of today. The more open the borders, the stronger the ties between member states become, and that makes it a lot less likely that trade between them gets disrupted. This strategy has in fact been a driver in European economic integration, chiefly to make France and Germany such close trade allies that they do not wish to wage war with the other.

    > > So we could make our own tractors and tools
    > Of course you could. Do you?

    Yes, we have a tractor-building industry. Look up “Valtra” for example. Of course, in a state of free trade, foreign brand machines are imported but we also export our own.

    > How about tires? How about catalytic converters (you do have mineral resources of platinum right?) How about the computer chips for managing the engine? Do you have extensive experience in embedded programming?

    Catalytic converters are hardly necessary when you want to avoid starving. Wheels likewise work well even if made from steel or wood, rubber is only a convenience. And as a matter of fact, Finland has a large software industry (ever heard of F-Secure or SSH?) and I myself am an embedded sw programmer ;) As a perfect example of how today’s world can give technological advances without creating dependencies, look at MegaSquirt, a do-it-yourself fuel injection and ignition control kit originally from two U.S. guys. For lubrication we can (and do) make oil from rapeseed and other such plants, and we have large oil refineries — currently for refining imported crude, but the plants and chemical know-how are here.

    But all this is rather beside the point. The original issue I had in mind was to be able to have food at hand during a crisis that lasts from a few months to a few years. Existing machines would serve this period well. Tires, for example, are typically used for a decade or two in tractors, likewise catcon’s and control chips. Some parts of course break every now and then, but maintenance is not a problem given our machine shops and the short timeframe.

    > > every person needs a basic set of skills for running their own household.
    > You do know this used to be a full time job right?

    Sure. We have made a few technological and scientific advances since then. This means we get to have fun for an ever increasing part of the time, instead of literally hunting food all day. Progress is supposed to let you enjoy life more, instead of tangling you in a mess of dependencies so that whenever anything goes wrong anywhere in the world, everyone’s life comes to a screeching halt. As a programmer I know a thing or two about dependencies and ESR can surely entertain us about the topic for a long time ;)

    > Today one of the biggest problems for the poor in the west is patronizing restaurants too often.

    Something about paying too much for their food, right? They would be less poor if they obtained raw materials and prepared their food at home. (Or perhaps you refer to junk food. But if one chooses to eat fries and cheeseburgers with cola, that doesn’t change even if it isn’t done in a restaurant.)

    I also don’t buy (pun unintended) the argument that centralized washing service can be more efficient than home-washing, at least in a suburban-like environment with nontrivial distances. There’s no way around the transportation needs, no matter what kind of effcient delivery networks are invented. There is also the time delay — sure, you can own more copies of clothing items to cover a longer washing time, but that has a cost. Essentially, what there is to save from home-washing with modern machines is hanging the wet clothes to dry and taking them down when dry. And that one-time, not-so-huge investment of buying the machine. They go for a few hundred bucks and routinely last more than a decade without much maintenance.

    What next, centralized showers and toilets to avoid costly installations of sewers to every house?

  148. Ajay said:
    >However, the only way for them to become something more is to constantly face the consequences of their actions, to continually participate in a free market where they’re forced to become more than sheep. They won’t become elites, but by learning some basic economic principles, supply and demand, competition causing growth, and learning to avoid situations they don’t understand, they can be much better off in a free market.

    This is a possibly unfounded assumption that I see made a lot by libertarian/conservative proponents. (I am one, I’m just saying.) As intelligent people, we manage chaos and rapid change well – we can learn and adapt easily, with a minimum of disruption. This isn’t true for the entire population. As intelligence decreases, the time and resource cost of making decisions equivalent to a superior intelligence increases, possibly exponentially – until it becomes more efficient to abdicate decision-making to trusted specialists, who are prone to abusive behavior in favor of personal interests.

    I suppose the entire above point is solved by the class of freelance helper experts that got mentioned at some point above. Does this exist already, and I simply haven’t seen it for some reason? If it does not exist, what conditions prevent it from being created by market forces?

  149. Only if there’s enough competition in its market and if the business is not doing just fine without that demographic. Just how many of the businesses esr mentioned as the reason for him seeking to carry concealed will quickly find themselves lagging behind their money-greedy competition?

    @A: Of course, at the end of the day, it’s really a moot, right? Businesses can refuse to serve whomever they choose. There are no laws on the books that limit or preclude that right of private business owners. As a counterpoint, note what happened to Denny’s when it was merely perceived that they were discriminating against blacks? Their business dropped as they were skewered by the mainstream media. (As an aside: it wasn’t just black people that got poor service from the staffs of various Denny’s restaurants. Their service just sucked during that period, and, to some extent, it still does. I chalk this up to management issues, not racial discrimination.)

  150. As a programmer I know a thing or two about dependencies and ESR can surely entertain us about the topic for a long time

    Indeed. It might be interested to note for you non-programmers that programmers so often find themselves addled and annoyed by dependencies that we have written entire software packages practically dedicated to resolving them. (Think autoconf or apt-get for those sysadmins out there.)

  151. Morgan Greywolf:

    > It might be interested to note for you non-programmers that programmers so often find themselves addled and annoyed by dependencies that we have written entire software packages practically dedicated to resolving them. (Think autoconf or apt-get for those sysadmins out there.)

    Where I work, the shit is deeper than what APT alone can float on top of. We’ve seen first-hand that it is not enough to have a tool like APT than can resolve dependencies. The proper way is to not create dependencies in the first place. Of course some packages build on top of others (say, applications use libraries) but the number of dependencies any package has should be kept to a minimum, and additionally some architectural thought is necessary so the dependency network as a whole does not become a tangled mess. If dependencies are sprinkled around carelessly, the whole system tends to break in non-obvious ways when seemingly innocent changes are made somewhere else.

  152. @Ajay
    > What matters is whether anybody can get to the top

    Which, at the very least, implies free health care for children, no?

    @Morgan Greywolf
    > Businesses can refuse to serve whomever they choose. There are no laws on the books that limit or preclude that right of private business owners.

    Which, given that it’s not the case with government, exactly supports the position that ‘the original claim that you were less likely to get a service denied because of your attitude/skin color in the free market, than by a government agency.’ is false.

  153. It might be interested to note for you non-programmers that programmers so often find themselves addled and annoyed by dependencies that we have written entire software packages practically dedicated to resolving them.

    They might wonder whether there was necessarily that much to be learned about dependencies between exclusive goods from dependencies between non-exclusive ones, though.

  154. a, no it doesn’t mean “free” health care for anyone because what you really refer to is taking money from the better off to pay medical providers to tend to sick kids, inflating medical costs further in the process. If the kids’ parents don’t buy insurance and the cost is huge and private charity doesn’t cover it, I have no problem with kids dying. Kids die all over the world for far more preventable reasons, I don’t prescribe to your statist delusion that the millions of kids in this country are somehow an extended part of my family. The central paradigmatic failure of liberals is to extend the family beyond all reasonable scope, in the process handing the reins of power to petty tyrants and bureaucrats who then proceed to abuse that naivety to pad their and their patrons pockets, as Obama’s doing now for the unions and others. In the process, the main ingredient that will affect a child’s future, learning, gets worse and worse every year as more and more money is dumped into shitty public schools. The dimwits don’t even give parents the choice of using their tax money elsewhere with educational vouchers, that even the Nordic socialists have realized the benefits of. But this is the classic failure of govt, obsessing over idiotic issues like SCHIP, while actually destroying the much more important process of education every year by continually diverting money towards union coffers. Not going to matter much though, as the twin forces of technology and markets will destroy all these publicly subsidized markets soon, just as email and FedEx have killed the US post office. :)

  155. I normally lurk in the RSS Feed. But I will have to come here more often or subscribe the comments as well.

    I vaguely remember Eric laying down the law on what content he would allow or not so I guess I need to step up and provide something of value.

    It is all about choice. Denying choice is denying freedom to act as you see fit. When you no longer have a choice of providers for a service or product you demand, the supplier of that demand does not have to trade value for value with you.

  156. Where I work, the shit is deeper than what APT alone can float on top of. We’ve seen first-hand that it is not enough to have a tool like APT than can resolve dependencies. The proper way is to not create dependencies in the first place. Of course some packages build on top of others (say, applications use libraries) but the number of dependencies any package has should be kept to a minimum, and additionally some architectural thought is necessary so the dependency network as a whole does not become a tangled mess. If dependencies are sprinkled around carelessly, the whole system tends to break in non-obvious ways when seemingly innocent changes are made somewhere else.

    Well, while I agree that you have to handle dependencies carefully, not creating any dependencies doesn’t seem to be a solution, either.

    Think about, say, a typical GUI application. Unless your name is Spencer Kimball, you’re not going to go around writing you own GUI toolkit; you’re either going to use GTK+, Qt, or, on Windows, native Win32, or for Java, AWT/Swing, etc. If you’re using a database, you might use on of the popular database libraries: I can’t imagine anyone would want to re-invent the client code everytime they wrote an application that integrates with MySQL or Postgres or Oracle. Re-inventing the wheel not only creates re-work, it also drives the possibility of additional errors.

    Of course, this is now completely off-topic. Or is it? :) My point is, that in programming dependencies can be a nightmareish hell to deal with. Too many dependencies creates problems; not enough depencies also creates problems.

    This happens in life as well: we necessarily must depend on others for certain things. Everyone here can build their own PC, right? You might be able to assemble your own PC from components you ordered off the Net, but of course, there’s a dependency already. Unless you have your own chip fab and circuit card manufacturing facility.

    What about the guy who can’t assemble his own PC? He doesn’t know a hard drive from a motherboard. Dude, he’s gettin’ a Dell!

    I guess what I’m saying without continuing to ramble on forever here, is that dependencies exist, and must exist, but, of course, the fewer the better.

  157. They might wonder whether there was necessarily that much to be learned about dependencies between exclusive goods from dependencies between non-exclusive ones, though.

    After what I just posted, I don’t think I’m making too much sense right now. :) Maybe you could explain better.

  158. Morgan Greywolf:

    > Well, while I agree that you have to handle dependencies carefully, not creating any dependencies doesn’t seem to be a solution, either.

    It’s a case of the famous engineering principle by Saint-Exupéry: perfection is attained when no more can be taken away.

  159. One of the reasons why Excel is such a well-written piece of software is because the Excel team was ruthless about eliminating dependencies, going so far as to draw their own controls and even custom-writing a C compiler that was used only for Excel.

  160. > For example, a disease outbreak may shut down all traffic between place of production and place of consumption.

    Actually, no. Disease outbreaks won’t shut down traffic in goods, because that mostly doesn’t involve people these days. And, there are very few choke points on land these days.

    The worst for the US would be the ports, such as LA or Seattle. However, one could easily staff ports with folks who didn’t have any contact with the surrounding areas. Those folks would do what port workers do today, move containers from ships to trucks and trains, both of which can move through “disease outbreaks” without any problems.

  161. Andy Freeman:

    > Actually, no. Disease outbreaks won’t shut down traffic in goods,

    Yeah, like a BSE outbreak in the UK didn’t shut down cow meat traffic to the rest of Europe. Would have sucked bigtime if all our cows had been in the UK… Beef aside, we wouldn’t have had much milk either for some time. Nor ice cream, etc.

  162. However, one could easily staff ports with folks who didn’t have any contact with the surrounding areas.

    Only if their in the union. :-P

  163. Yorick,

    Excellent point. Do you realize that you just described almost the entire voting populace of the US? You definitely just described religion. My mother will vote for whoever some Christian radio personality tells her to because she can’t be bothered to think for herself.

    Sadly, I don’t see American voters getting better educated about the issues in order to make informed decisions. In school, I was one of the few students interested in history and politics and many of the others who were did so only to get better grades.

    You would have to cull the population of stupid people for a free market to be manned by informed decision-makers. It’s not a truly free market if you’re doing what someone else says to do (even if they supposedly have your interests in mind).

  164. >You would have to cull the population of stupid people for a free market to be manned by informed decision-makers. It’s not a truly free market if you’re doing what someone else says to do (even if they supposedly have your interests in mind).

    Not true. It’s a free market if you have the option to do whatever you want; it’s irrelevant whether you exercise that option. Arguing otherwise is like saying that because most people refrain from making offensive racist comments, those comments are not protected by the First Amendment.

  165. The problem isn’t simply that people are ignorant, it’s that their ignorance is often rational ignorance. If it costs more to learn about something than the benefit of making an informed choice (vs an ignorant one) then the rational thing to do is to make a choice out of ignorance, sparing yourself the cost of actually learning about the matter.

    Of course this problem is much greater when it comes to voting. Worse, when you make an ignorant choice when buying something for yourself, you hurt only yourself, but when you make an irrational choice when voting, you contribute to hurting everyone.

    But rather than try to solve this problem via any sort of test or tax for voting, I’d prefer to have it made legal to freely buy and sell votes. (Of course minimizing or eliminating the things we use voting and government to decide on in the first place would be even better, but that is a more difficult reform.)

  166. So I’m sitting here reading this post, and I suddenly get a phone call from my husband telling me that he’s been in a big crash while mountain biking, and had totally smashed his face (broken nose, big cuts). I’m at home with the baby freaking out, but at least I know that his friend is taking him to a hospital to get the best care, and that cost won’t even be a consideration. I can’t even imagine how I would be feeling right now if I was unlucky enough to be an American without health insurance.

  167. Deep Lurker:

    > when you make an ignorant choice when buying something for yourself, you hurt only yourself

    I would say that by buying crappy stuff instead of good quality, the buyer contributes to hurting everyone. The reason is that buying crappy stuff means that crap is produced more and stocked more in stores; it can eventually displace better alternatives to a lesser or larger extent, just because people first chose the crap out of ignorance and then it became the most prominently stocked kind (’cause it sells the best) so everyone chooses it, since that’s what everybody else seems to be buying…

    The “cost of actually learning about the matter” is typically intellectual laziness, I would say. The world would be a much better place if people stopped to think and learn (often only requires a quick net lookup) before they buy stuff.

  168. But rather than try to solve this problem via any sort of test or tax for voting, I’d prefer to have it made legal to freely buy and sell votes.

    @Deep Lurker: So the candidate with the most money wins? Get ready to start saying things like “Thy wish, m’Lord?” ;) Because what you’ll end up doing is creating a ruling elite based solely upon how rich they are.

    I would say that by buying crappy stuff instead of good quality, the buyer contributes to hurting everyone. The reason is that buying crappy stuff means that crap is produced more and stocked more in stores; it can eventually displace better alternatives to a lesser or larger extent, just because people first chose the crap out of ignorance and then it became the most prominently stocked kind (’cause it sells the best) so everyone chooses it, since that’s what everybody else seems to be buying…

    Case in point? :-P

  169. TOK says:
    > The “cost of actually learning about the matter” is typically intellectual laziness, I
    > would say. The world would be a much better place if people stopped to think and
    > learn (often only requires a quick net lookup) before they buy stuff.

    No doubt people stopping to think and learn would be good. But time is a limited resource. The more time you spend learning about the best dishwasher (or political candidate) the less time you have to spend learning about how to do your job better, or how to train your children better, or how to have a really great time at the beach. It is not obvious that dishwasher knowledge is necessarily better than beach knowledge. To put it another way, you would be correct if you entirely discount opportunity cost. However, in the real world of limited resources the world could be a much worse place if people stopped to think and learn before they buy stuff (because they would not spend that time doing something more valuable.)

    (BTW, I am sorry I have not answered your previous comment about international trade, I have just been busy at work.)

  170. the world could be a much worse place if people stopped to think and learn before they buy stuff (because they would not spend that time doing something more valuable.)

    I don’t know about you, but before I plunk down $200-1000 worth of my hard-earned money, I want to know something about dishwashers. Maybe I’m not going to go the library to do research or start pulling apart every dishwasher I can get my hands on to see how it works, but I’m definitely going to spend at least some amount of time on the Internet reading about various dishwashers and about dishwashers in general, and I’m most probably going to call the person I think knows the most about dishwashers.

    My vote for a political candidate is, to my mind, at least, a bit more serious than a dishwasher. I’m going to do quite a bit more than listen to a few soundbytes or vote the candidate that I think is the best-looking.

  171. >My vote for a political candidate is, to my mind, at least, a bit more serious than a dishwasher. I’m going to do quite a bit more than listen to a few soundbytes or vote the candidate that I think is the best-looking.

    And yet, ironically enough, absent a really major fundraising effort you have absolutely no chance to influence the outcome of a presidential election (somewhat better for a state or local election, but not by much), while one assumes that you have some large proportion of control over which dishwasher you buy.

  172. >I don’t know about you, but before I plunk down $200-1000 worth of
    > my hard-earned money, I want to know something about dishwashers.

    Yup, I probably would too. However, I would be looking for an adequate dishwasher, but not necessarily the one that gave absolute optimum value for money, because I have to factor in the value of my time into the calculation. If I save $5 in price by spending $100 of my time, then I have made a bad bargain. (Though it is not always possible to monetize your time quite so simply, I presume you get the general idea.)

    > My vote for a political candidate is, to my mind, at least, a bit more serious
    > than a dishwasher.

    Same goes in this calculation too. What is the benefit of the research weighed against the cost of doing so? Of course who runs the government is something that can potentially have a radical effect on your life. However, you have almost zero control over who runs the government, since your vote essentially of zero consequence.

    Think of it this way: if C is the impact on your life, and I is your influence on C. Now lets say your time is worth $ dollars per hour. How much time should you spend on your decision? If n is the number of hours you should determine n such that:

    n.$ = C.I

    Since I is effectively zero, then n is also zero. There is a small transaction cost, which is to say the responsibility of citizenship, which means that n is slightly larger than zero.

    This corresponds with reality too. Our political systems are generally bifurcated, and you usually have a tribal identity to help you decide which of the two options you should choose, and, barring special cases, that is the way most people vote. Frankly, it is a rational choice.

    When C becomes insanely large then I can be increased by various non voting mechanisms (like influencing friends in letter writing campaigns, organizing demonstrations, starting the Heritage Foundation, funding Air America, or sending money to a candidate.) However, even the most involved citizen has only a tiny value of I, and it is usually focused on specific slices of C (for example the recent republican revolt against the Illegal Immigration amnesty, or the limited success of the homosexual marriage movement.)

    Additionally, there is an additional benefit that might be factored in there, which is the enjoyment people receive from researching and debating political issues, though they have very little real practical influence on I.

  173. TOK:

    >The “cost of actually learning about the matter” is typically intellectual laziness, I would say.

    People are “intellectually lazy” when they don’t research the best choice but just pick one at random in the same way they’re “greedy” when they don’t buy something at a high-priced convenience store, but get it somewhere cheaper.

    Morgan Greywolf:

    > Get ready to start saying things like “Thy wish, m’Lord?”

    No more so than to the current crop of politicians, to whom people now give away their votes for free.

  174. Coase’s Theorem: maybe this was asked before, but anyway: AFAIK CT is purposefully looking only at efficiency and not at justice. Isn’t this a problem? I don’t mean justice in the “social justice” BS sense, just in the normal, basic sense of justice: “you broke it: you bought it” etc. etc.

    One canonical example of CT is the train that burns down the farmer’s crops, I think many people here are familiar with it. CT says no matter who sucks up the cost, the farmer or the train company, both situations can lead to an “efficient outcome”. Fine, but I care about justice too: I want the train company to suck up the cost and not the farmer, because that’s the just solution, an efficient solution isn’t enough for me, I want some basic justice too. I know there are free-market solutions for that (lawsuits etc.) but it still worries me that it is explicitly left out of CT.

    For this reason I cannot consider CT alone a “killer joke”, perhaps, amongs efficiency-oriented people (like hackers) yes, but not amongst people who are more sensitive to the “human” side of transactions f.e. basic justice. I think CT is typically something for hackers, it answers questions about fine-tuning a system to maximum efficiency and tends to leave out the “human side”.

    As for me I’m not really sure I’m even interested in efficiency at all: after all efficiency means the efficient fulfillment of desires and I’m not sure at all the fulfillment of desires is the most important part of living a good life and having a good society. After all, 3 weeks after fulfilling a desires we get used to it and it brings no more joy. So I don’t consider the efficient fulfillment of desires the most important thing. I’m more interested in the relationship between the market and moral virtue, of character development,of a good and moral society etc. and CT doesn’t help much with that.

    Generally, I think the most important thing is to be anti-egalitarian, because IMHO justice explicitly must mean inequality, a good kind of inequality: to everybody what he deserves, to each according to merit, and character can develop only in when differences and inequality are clearly and explicitly accepted and are used for motivation, when they are just differences, of course. When the market is a good solution for that (usually it’ not too bad) I welcome it, when not (see banking), I rather think about alternatives. (Not that I see any good alternatives in modern i.e. egalitarian i.e. populist-democratic-tyrannical systems.)

  175. >Coase’s Theorem: maybe this was asked before, but anyway: AFAIK CT is purposefully looking only at efficiency and not at justice. Isn’t this a problem? I don’t mean justice in the “social justice” BS sense, just in the normal, basic sense of justice: “you broke it: you bought it” etc. etc

    What makes you suppose these are distinguishable?

    Your interpretation of the train-and-farmers example is mistaken. What it actually says is that given sufficiently low transaction costs, the market equilibrium will evolve to one on which the railroad pays the farmers for damaged crops – exactly the “just” outcome you desire. High transaction costs thwart this outcome by, e.g., making it uneconomic for the farmers to measure the damage or sue to recover.

  176. Actually the “best” solution to the train-and-farmers problem might not be for the railroad to pay the farmers for damaged crops. It might be for the farmers to stop growing crops there, or for the railroad to switch to switch to an engine that doesn’t start crop fires, or…

    What makes Coase’s Theorem a killer joke is that low-enough transaction costs will produce the optimum result whatever the initial conditions are. Suppose the railroad was there first, with an established property right to spew sparks. Then the farmers came along and started planting crops. In this case, it’s not at all clear that it’s “just” to make the railroad suck up the cost.

    (David Friedman’s Laws Order lays it out nicely. http://www.daviddfriedman.com/laws_order/index.shtml See chapter 4)

  177. > [Coase's Theorem] … low-enough transaction costs will produce the optimum result…

    Is that true? AFAIK, Coase’s theorem states that when the transaction costs are zero, the optimum result will come about through trade. Zero is not the same as low-enough. “Zero” is qualitatively different from “small.” Is there any evidence that the degree of optimality of a result is inversely proportional to the transaction costs, or does Coase discuss only a special singularity? (If so, Coase is irrelevant, since the transaction cost is never zero. For example, if you use money as a medium of exchange, you have an in-build transaction cost.)

    I don’t know, I’m not an economist, but it seems an important question.

    (BTW, if you are confused by “zero is qualitatively different from small”, consider this: why did micro-payments for viewing web pages never take off? The answer is that “zero is qualitatively different from small.”)

  178. >Zero is not the same as low-enough.

    True, and the original Coase-Stigler formulation from the 1960s only addresses the zero-cost case. But the form of the proof makes it clear that the zero case is not singular, and most modern discussions of the theorem are in the generalized form I have given.

  179. “What it actually says is that given sufficiently low transaction costs, the market equilibrium will evolve to one on which the railroad pays the farmers for damaged crops – exactly the “just” outcome you desire.”

    Completely sure? I got the info from here: http://www.sjsu.edu/faculty/watkins/coasetheorem.htm

    Excerpt:

    “This is the essence of Coase’s Theorem: The same levels of production are achieved whether the perpetrator of the negative externalities is legally liable for the externality costs or is the victims of the negative externalities make a payment to the perpetrator that is reduced by the amounts of the externalities”

    “the victims of the negative externalities make a payment to the perpetrator” = efficient but unjust solution

    Either this article gets it wrong (note: it’s from the Econ dept of a uni) or you, but what you said and they have seem to be incompatible for me.

  180. “In particular, most libertarian arguments I’ve seen seem to ignore the possibility of revolutions when the people are not very happy. More social oriented countries are more _convenient_ to live in, whether there’s more to that than a feeling or not.”

    Good point. I’d go further: what I miss from most Libertarian discussions is how such a system should come about, why didn’t it before, and how could it it be enduring, and why didn’t the not quite L. but closer to them that the current ones systems of the XIX. century endure. Generally, there seems to be something too rationalistic in the L. mindset: that all that it requires to set up a good system to convince everybody by logic and reasoning. This I consider a misunderstanding of human nature. Usually we aren’t that rational, heh, maybe, except hackers (there seems to be a hacker -> L., L. -> hacker connection on the Net).

    Generally, if I look deeper into what L. means what I find it’s basically nothing really that new, it’s nothing but the crystallization of the essence of civilization _itself_. At the end of the day it’s simply calculating the difference between more and less civilized societies in history and extracting the essence of that difference. Right?

    But then, if it’s clear we are talking about the essence of civilization itself, then it becomes clear a large number of other things need to be examined, generally, and by large: how human beings work. Psychology, human nature, the relationship between moral character and L., the relationship between culture, religion and moral character etc. The question L. people should ask is what sort of people are necessary for desiring a L. society i.e. a fully (maybe, even: extremely) civilized society: what sort of people don’t covet other people’s property and what sort of people WANT to be responsible for themselves? And just what institutions can educate people to be so?

    Because one thing is sure, civilization never came about only by rational persuasion. A whole lot of other factors were always there. Hint: read Max Weber’s The Protestant Ethic and The Spirit of Capitalism for starters. That explains one such other factor. Hint 2: read John Schumpeters writings about how capitalism relies on attitudes inherited from pre-Capitalistic aristocratic systems. That explains another such factor. And so on…

  181. >“the victims of the negative externalities make a payment to the perpetrator” = efficient but unjust solution

    You omitted “reduced by the amount of the externalities”. That’s the key part. They appear to be talking about a case in which the farmers are paying the railroad for services, and can reduce that payment by the anount of the damaged-crop externality. Again, just solution.

  182. “Technically speaking, democracy produces outcomes closer to a Pareto or Marshall optimum than monarchy. Free-market voluntarism should produce still closer ones, in fact as close as you can ever get in a human society.”

    Don’t be so sure about the first one. OK I know “selling” monarchy to an American is quite a bit like selling bacon in Ryadh :) but Hoppe has some interesting arguments, both historical and theoretical: http://www.mises.org/journals/jls/11_2/11_2_3.pdf

    Basically, when government (a device of exploitation of tax-payers) is privately owned (monarchy) with all the usual attributes of private ownership f.e. inheritance (hereditary rule) etc. , you find the same advantages as with the private ownership of everything. Democracy means the public ownership of government with the usual problems of public ownership.

    Monarchy vs. democracy is the correct, exact and appropriate application of the usual private vs. public question.

    “A private government owner will tend to have a systematically longer planning horizon, i.e., his degree of time preference will be lower, and accordingly, his degree of economic exploitation will tend to be less than that of a government caretaker”

    “Moreover, private ownership of government implies moderation and farsightedness for yet another reason. All private property is by definition exclusive property. He who owns property is entitled to exclude everyone else from its use and enjoyment; and he is at liberty to choose with whom, if anyone, he is willing to share in its usage. Typically, he will include his family and exclude all others, except as invited guests or as paid employees or contractors. Only the ruling family — and to a minor extent its friends, employees and business partners — share in the enjoyment of the expropriated resources and can thus lead a parasitic life. Because of these restrictions regarding entrance into government and the exclusive status of the individual ruler and his family, private government ownership stimulates the development of a clear “class consciousness” on the part of the non-governmental public and promotes the opposition and resistance to any expansion of the government’s exploitative power.”

  183. >Generally, there seems to be something too rationalistic in the L. mindset: that all that it requires to set up a good system to convince everybody by logic and reasoning

    Where did you get that silly idea? Most of the libertarians I know are well aware that logic and reasoning aren’t enough. You have to create the objective conditions under which people decide for themselves that libertarianism is the best option.

    >At the end of the day it’s simply calculating the difference between more and less civilized societies in history and extracting the essence of that difference. Right?

    I never looked at it that way before, but yes.

  184. “Assume there isn’t enough treatment to go around. We feel this is the moral equivalent to a sinking ship without enough lifeboats. What is the most moral method for deciding who gets on a lifeboat? It sure isn’t cash!”

    If the only two options on the table are

    1) cash on an open auction
    2) who is a better friend of the captain, who bribed him more, who blackmailed him more, or who can return the favour better,

    I think I would take the cash option, because it is _somewhat_ more just than the other one, i.e. cash is not a very good signal of merit but surely better than the other option!

    Realistic discussion begins with understanding that most modern (and not so modern) countries offer these two options.

    The first part of the solution is, if only these two options are offered, choose cash.

    The second is trying to create other, more noble options but this won’t work in a morally-neutral, egalitarian liberal-modern framework, this requires discussing about stuff like moral character, culture, maybe even religion etc. because people won’t become more noble just because you say them they should, how to educate people to be nobler requires taking a renewed look at “regressive”, “reactionary” pre-modern societies and institutions because, if you remember, on the Titanic they used neither of these options, they were nobler…

  185. > “Assume there isn’t enough treatment to go around. We feel
    > this is the moral equivalent to a sinking ship without enough
    > lifeboats. What is the most moral method for deciding who
    > gets on a lifeboat? It sure isn’t cash!”

    Perhaps at a surface level, however, you forget that the cash can be used to buy more lifeboats. Economies, are not zero sum games.

  186. Hmm, it appears this blog ate a long comment of mine from 3 days ago, should I repost?

  187. JessicaBoxer:

    > The more time you spend learning about the best dishwasher (or political candidate) the less time you have to spend learning about how to do your job better, or how to train your children better, or how to have a really great time at the beach.

    The law of diminishing returns applies. Beyond a point (which comes pretty early) there is not much to win by researching quality differences between brands of a home appliance. But that does not mean there is nothing to gain before that point. It’s a rather exotic piece of equipment if it takes more than 15 minutes to find a comparison review of that kind of appliances. Starting from the best-ranked model, go down until you find one you can afford. That’s a pretty small effort investment but it already gives you insight into what is on the market and which ones are any good. For a slightly larger investment, look up another independent review and check that they mostly agree with each other. IMO that strategy beats random choice hands down; in my experience there are significant feature and quality differences between home appliance models (as well as pretty much every device and tool).

    I’d say the above translates to politics as well, at least in a multiparty system like Finland where you really have a sea of choices, not just Blue and Red. There are all these fringe movements and populist groups; if you choose randomly, there’s a fair chance you happen to vote for some fringe lunatic, a beauty queen or a pop star. Spending a few minutes looking up candidates’/parties’ political goals will guarantee your choice makes some sense at least. It’s more important to vote for somebody who is generally up to the task instead of a random fool, than it is to fiddle who is #1 best and who is only #2 best. Either is a major win over anyone who is below #50 best. (Local elections easily have over 200 candidates around here, from maybe 10 parties.) For cases like presidential finals, it doesn’t then usually matter which one you vote, since the remaining two are most probably the top two candidates or at least very close to the top.

  188. > You have to create the objective conditions under which people decide for themselves that libertarianism is the best option.

    Now all you need to do to feel the chill of this sentence is to substitute “libertarianism” with “communism”.

    ESR says: Bullshit. Communism is uninterested in anyone deciding for themselves.

  189. “It’s not that anyone is stupid or evil, it’s that the incentives are all wrong.”

    Um, such avoidance of moral judgements looks a little bit unrealistic to me. There seems to be a different kind of utopia than Communism, pretty much the opposite kind, popular amongst left-liberals, right-liberals (libertarians, like ESR), and most of all, amongst most sorts of economics. While Communism was based on the utopia that incentives don’t count because people can be magically made good, this sort of utopia seems to be the opposite extreme, that incentives are all that count and moral judgements, questions of character, moral education, character-building, moralizing about good and bad, right and wrong are not necessary, incentives can solve everythink. No, they can’t.

    There is a subtle assumption about human nature in the above quoted statement, which is very typical of economists: people are generally of a “middling” nature, somewhere between good and evil. Typically, this assumptions says f.e. an average doctor will not be so evil to poison you because he is getting kickbacks from the undertaker and he will not be so good to work his ass off to heal you for the salary of a teacher, but he will be somewhere in between: he will try to put in some reasonably hard work to actually help you, but will try to shaft you with an expensive bill when and if he can get away with it, thus, he (and most human beings) are usually somewhere between good and evil.

    Granted, this assumption is looks reasonably close to reality if you look at the average First-Worlder citizen in 2009, but is it an _enduring_ assumption? Do you think such “middling” nature is built into us or is a temporary stage of a historical process? Progressives might assume this is a temporary state before we all become perfectly altruistic socialists, unfortunately, I tend to think exactly the opposite: that this is a temporary state in a process of decivilization from more moral societies of the past (again, think how lifeboats were distributed on the Titanic: neither with cash nor with political connections, but in a noble and self-sacrificing ways: would it happen so today? I really doubt it.) towards a completely immoral barbarism. And I think the difference between the First World and the rest is not that the later develops slower than the FW, but rather that the First World is going down, is decivilizing slower than the rest. Decivilization, decadence is faster outside the First World because there is less moral and social capital to waste, but wait 50 or 100 years and the average First World citizen will probably be as immoral as, say, the average Russian or Argentinan or Southern Italian or Hungarian (my folks) is right now. The reason of this decivilization is largely that after the withdrawal of religions we haven’t really found any other way of moral education and character-building, and we are simply afraid of moral judgements, of calling people and actions good or evil, right or wrong, we are using weasel words like “bad incentives” and “violation of ethical rules” and “gaming the system” and stuff like that, instead of calling it what it is: thievery and cheating, and saying clearly thieves are BAD PEOPLE and should be shunned by others and ashamed of themselves, in other words, instead of defining what a good character, a good citizen is and educating (with incentives, too) towards building such characters. Nothing system can work with such “non-judgemental” logic, this is the primary reason of the decivilization: all societies are becoming less moral because pretty much in no societies do people talk about morality and its cause (character) anymore.

    If you ever lived outside the FW (and I know you did, Southern Italy is pretty much outside it), you can and should know that the mechanics, the incentives, the system, the “objective conditions” are not everything. Any institution, be that government, market or somewhere between (like suing for tort) can only withstand a limited amount of thievery and fraud, or in your “non-judgemental” expression: “gaming the system”. When a society collapses into a state where thievery is the rule rather the exception, no “objective conditions” and incentives can make it work. Such institutions can only work if the majority of the citizens are more or less moral not because of such institutional incentives but because they think that’s the right thing to do and they were raised and educated to actually care about what is right and what is wrong. But such education is impossible withing the framework of morally-neutral economistry.

  190. >Um, such avoidance of moral judgements looks a little bit unrealistic to me

    You may not understand the argument, then. Perverse incentives are a guarantee that political allocation will fail. Sure, it would be more realistic to include stupidity and evil, but it’s not necessary and would complicate the argument.

    >If you ever lived outside the FW (and I know you did, Southern Italy is pretty much outside it),

    I have, but in Venezuela rather than Italy. I’ve traveled in the poverty-stricken south of Itaiy, but not lived there – we lived just south of Rome, in the prosperous central region.

    >When a society collapses into a state where thievery is the rule rather the exception, no “objective conditions” and incentives can make it work.

    I think you have the causality backwards. Societies collapse into thievery and graft because that’s the class of strategies the objective conditions reward. More generally, you see “morality” as a sort of primary cause, but I reject that view – morality and ethics are adaptive mechanisms, and to get real predictive power you have to ask what they are adapting to.

    Scratch a society in which thievery and graft are endemic, and you’ll find one in which markets are shallow and property rights are weak and hard to enforce. It’s the latter that causes the former; Hernando De Soto has written eloquently about this in a South American context.

  191. @esr

    Your interpretation of the train-and-farmers example is mistaken. What it actually says is that given sufficiently low transaction costs, the market equilibrium will evolve to one on which the railroad pays the farmers for damaged crops – exactly the “just” outcome you desire. High transaction costs thwart this outcome by, e.g., making it uneconomic for the farmers to measure the damage or sue to recover.

    Okay, so if I’m understanding Coase’s Theorem, it is the economics equivalent of the colloquial notion that “everything works itself out in the end?” Or, perhaps more accurately put, an economics equivalent to the scientific notion in chemistry, biology and physics that all systems seek towards equilibrium and that the end result of all reactions, no matter how unstable, will eventually that the system attains a state of equilibrium (or at least near equlibrium), all else being equal? Is that a pretty good explanation?

  192. >it is the economics equivalent of the colloquial notion that “everything works itself out in the end?”

    Yes, but only if (a) transaction costs are low enough, and (b) nobody is using force to prevent the market from clearing.

  193. Yes, but only if (a) transaction costs are low enough, and (b) nobody is using force to prevent the market from clearing.

    Am I correct in reading this as “taxes and regulation”? ;)

  194. >Am I correct in reading this as “taxes and regulation”? ;)

    Regulation can certainly do it, for example by raising barriers to entry so that entepreneurs who would like to profit by making a market can’t do it. One case where this sort of market-rigging is notoriously common is insurance; generally speaking, the big insurance companies totally own the state insurance regulators. Taxes screw up things less directly by imposing deadweight losses that make otherwise viable lines of business unprofitable.

  195. “More generally, you see “morality” as a sort of primary cause, but I reject that view – morality and ethics are adaptive mechanisms, and to get real predictive power you have to ask what they are adapting to.”

    Um, OK then we have to clarify what the objective conditions people are adapting to actually mean. If you mean by them the conditions how individual (monetary) gain can be maximized, I have to disagree. But if you include social dynamics like prestige, respect, and shame, then I can agree but this is largely what I was talking about: if thievery or free-riding is considered shameful, that’s a very powerful incentive, but of a different kind than the ones you mean.

    Human nature is probably too complicated to model it in a comment, but I think Adam Smith’s old model, although very simplified, is quite usable: people want (monetary) gain, one hand, surely, and this gives a powerful selfish drive, but people also desire the affection and respect, even sometimes the admiration of others. This tends to limit selfishness to an ethically acceptable level and can even often induce altruism.

    You cannot set up any system that cannot be gamed as long as you only look at one kind of conditions, the “objective”, “selfish” conditions like rules, markets etc., i.e. the conditions that determine how much profit, gain a given course of action will produce. To have a working system you have to use the other aspect: the prestige/shame aspect: freeriding or thievery need not only be unprofitable but also downright shameful, must lead to social exclusion, the loss of prestige. These two together can work. However, for this second part, the general culture needs to be more “judgemental”, bit more “moralizing”.

  196. To make it a bit clearer: using Adam Smith’s simple but IMHO working model of human nature ( there are 1) incentives regarding personal gain 2) social incentives regarding prestige, respect, shame and exclusion ) , morality is “primary” in the sense that 1) never creates 2) but 2) creates 1). In a society where people consider freeriding shameful and loathesome, they are more than willing to set up incentives of type 1 too, in order to prevent it more efficiently. Where not, just why would people set up incentives of type 1? This is what I mean under morality as primary: such incentives (or conditions, or: culture) cause the type 1 incentives to be installed too.

    Isn’t it possible that you as a citizen of the perhaps most “Weberian” (in the sense of protestant ethics -> capitalism) country of today’s world you simply take these type 2 incentives more or less for granted? But even there it won’t last forever if it’s not reinforced, the “moral capital” can be used up – this is the hidden stake behind the otherwise quite childish-looking “culture wars”.

  197. ESR, I don’t see how regulatory capture is any less of a problem where externalities are addressed using the concept of tortious assault then under regulation. How do we decide who the judges are? The only ways I can see are by fiat and by vote. In the latter case, you have introduced the same vulnerability as that which you criticize in government.

  198. >ESR, I don’t see how regulatory capture is any less of a problem where externalities are addressed using the concept of tortious assault then under regulation.

    For one thing, the lack of any single center of power makes capture more difficult. It’s easy to develop an incestuous revolving-door relationship with (say) a state insurance commission than it is to suborn in advances all the judges whoo might try your case.

  199. That’s one thing that I wonder about the ideal libertarian/Coase’s Theorem model; where do you get courts, sans a government? To sue someone meaningfully, you need a court that has authority and the ability to enforce it; and how is that different from a government?

  200. >>> You have to create the objective conditions under which people decide for themselves that libertarianism is the best option.

    >> Now all you need to do to feel the chill of this sentence is to substitute “libertarianism” with “communism”.

    > ESR says: Bullshit. Communism is uninterested in anyone deciding for themselves.

    Why the need for expletives? And your statement, apart from being unrelated to my point, is quite unjustified. Any political ideology craves believers.

  201. >To sue someone meaningfully, you need a court that has authority and the ability to enforce it; and how is that different from a government?

    It’s possible to have a court and enforcement system designed so that nobody involved is above the law – no raisons d’etat, no privilege to initiate force, no taxation. And there are, in fact, historical precedents for such systems

  202. OK, I’m reposting my previous comment, split up into two parts to avoid the long comment-eating gremlins:

    Sagodjur, funny how you keep talking about reading comprehension yet fail to demonstrate it. Nowhere did I call you a liberal in my original comment, I simply noted your leftist assumptions and punctured them. Only when you denied being a liberal did I point out that you espouse all their silly values. Nobody’s assuming that you support the opposite perspective, you’ve made that clear by making all the silly liberal arguments. If you claim some other imaginary label instead, feel free to say what that is. However, you do not because you’re clearly of the left. Whatever your desire for the bureaucrats may be, trusting them to fight each other is silly considering they’re easily paid off by corporations. Why would the corporate elites bother fighting in a free market when they can just pay off the refs, your bureaucrats? Nobody’s out to harm you, they just don’t care what happens to you and they’re empowered not to when they’re not held to the discipline of a free market.

    Direct democracy is even more of a myth than a free market or representative democracy. The founders specifically avoided it because they didn’t want mob rule, for reasons I detail later. If you think govt bureaucrats are embattled, they’ve clearly succeeded in pulling the wool over your eyes. That’s what they want you to think while they feast on your taxes. As for Bush’s military spending, it’s dwarfed by Obama’s recent initiatives: most of us prefer a cheaper mistake to a hugely expensive one. It doesn’t much matter that you’re unwilling to work hard enough to be a billionaire, but you’re clearly envious of their success (“You and I are poor compared to the owners of companies. Proportionately, we might as well only make $20k/yr.”). Your whining about some imagined con that Warren Buffett has perpetrated on you is ridiculous considering Obama’s now throwing an order of magnitude or two more money than Buffett’s net worth down the drain. The people at the “bottom” make enough to survive and afford medical services. However, they pay more than they should for those medical services because they like to imagine that they’re getting something for nothing through govt interference, and end up paying more in the process. As for exploitation by the rich, your Marxist delusions are hilariously outdated.

    Merit is determined by the people you work with. If you think people use silly methods like family lineage and elite schools, welcome to politics, where everybody comes from Harvard or Yale and it’s much harder to break in. Sam Walton could come from nowhere and become a huge success in a free market, you don’t see that much in govt. As for his kids, what’s the alternative, the govt confiscating his estate and giving it to taxpayers? No thanks, I prefer that a man who’s contributed so much can choose where his wealth goes. His kids have an advantage, which he worked hard to provide, but considering practically no billionaire today inherited his fortune decades ago, meaning past rich kids lost the money, inheritances don’t really matter much. Madoff defrauded many European nobles of their money, that’s what happens to inheritances. Yes, executives often negotiate contracts that let them open golden parachutes even upon failure, blame that on boards of directors and stockholders that get stars in their eyes and let them sign excessive compensation contracts. If an employee is dumb or greedy enough to invest his savings or 401k in his own company, just as Bear Stearns and Enron employees did, they deserve to lose it for not understanding the concept of diversification. That’s how a free market works, you get burned for bad decisions so that you’re more careful next time.

  203. Wal-Mart employees are not poor, they’re lower class: there is a difference. As partners in a business relationship, the company doesn’t have to give them anything they don’t want to. If those employees unionized, maybe they’d do better. I don’t think Wal-Mart employees qualify for welfare and there’s a big difference between being homeless and having a retail job. “What the market will bear” means what people are willing to pay, nothing more or less. Wal-Mart employees are willing to take a lot less because they know there are millions of similarly unskilled workers willing to undercut them. CEOs demand a lot more because they know there are stupid boards of directors willing to overpay for “rock stars.” Nobody much cares what others need, buyers determine the price of their product through their bids. Yes, parasites are a big problem, such as the medical and education unions who have bought off the govt to chew up more and more of GDP.

    Heh, you’re not against profit, just crazy markups, that’s hilarious. Microsoft and Google make high margins because people like you are incapable of entering their market and competing. Oil companies make huge profits when the price of oil spikes because your beloved govt bureaucrats prostitute themselves and, more importantly, the exclusive oil rights to their oil fields. Rich people make more money because they do something far better than poor people: maybe something valuable like knowing where to invest people’s money, maybe something frivolous like being a great singer or athlete. The capitalist ideal says nothing about giving more to the worker, I think you’re confused. There’s no self-interest in giving money away. Ah yes, that magic theory of crazy leftists everywhere, collusion, it’s all a conspiracy to keep poor people down. The truth is everybody’s out for themselves, free marketers understand this. Liberals either don’t or fantasize that the right philosopher-king in charge will make the world just, that’s why they lose.

    Yorick, obviously less capable people have to rely on freelance helper experts, they’re called doctors and lawyers and mechanics. The world is a complex place and most people cannot grasp most of it, that’s why they farm it out to specialists. The difference is that the experts of the FDA can abuse their monopoly while private drug certification agencies would constantly have to compete. Instead of voting for a representative every 2-4 years, which is also based on the principle that the average voter cannot possibly be steeped in the minutiae of policy, consumers in a free market constantly vote for products and services by choosing whether to buy them or not. There are quick feedback loops for making bad decisions, like buying Enron stock cuz you heard it was hot, and you can’t just blame a vast govt bureaucracy for everything that goes wrong, as it is only your decisions that matter. You either learn some simple heuristics to survive, such as avoiding subjects you don’t understand, or you get burned. This forces people to become more than sheep, which benefits us all, as the true strength of any society is in the distributed wisdom of its people, not in a handful of so-called leaders. The alternative is to stay sheep and get fleeced much worse, as they do by govt today.

  204. Thanks for the reply, Ajay.

    Perhaps it’s just personal paranoia, and I perhaps repeat myself – but seems t’me like our abdicating consumers run headlong into imperfect knowledge about the market of specialists. That is, consumers have little to no idea which specialists they can trust. This seems to seek an equilibrium and solve itself, because services can be priced and are subject to market influences. However, for a variety of reasons – the service company just hired a FNG, the freelance lawyer is having an off week, a Grey/Lizard-men/MIB commune putting fluoride in the water – the quality of service is not guaranteed for an individual consumer. It varies over companies, and over time. So, trust is required that quality of service is held constant, without favoritism or, equivalently, without uneven incompetency.

    Fora dedicated to reviewing service providers can address this in part, along with consumer-protection organizations and – heh – subscription services that review other services. These can be counteracted through astroturfing and other kinds of guerilla marketing, and human corruptibility, error, and laziness, respectively. At present, there doesn’t seem to be a formal method of solving this. People can ask for recommendations from trusted advisors – friends and family. But those recommendations can be both malicious, if the trust is misplaced, or flat-out wrong, if the service has changed since the advisor last sampled it.

    There’s lots of potential here for verification of services – by other experts, who are certified by OTHER experts, dangit! – and webs of trust and all that fun crypto-wankery.

    What mechanisms would address this need? Is it actually needed, or just personal noise? Is a public reputation market/tracking system indicated, a la Cory Doctorow’s whuffie, or would other methods work that I’m not aware of? (I note that someone has started such a tracker on SourceForge, but it seems dead.)

    …woah. Random idea: whuffie as a solution to the non-zero transaction cost of micropayments. It’s already a BS ‘currency’, with no direct bearing on existing financial systems, and verifiable network transactions are very cheap. Seems a perfect match.

  205. > But also a completely external crisis can cripple trade routes. For example,
    > a disease outbreak may shut down all traffic between place of production
    > and place of consumption, or a political/economic crisis that cuts off fuel
    > availability from the market completely.

    If Europe is shut down by disease, then you can ship expensive food in from Canada. If the Mid East goes nuts, you can buy your gas from Nigeria. Where there are multiple independent suppliers you can always find an alternative (usually at a premium.)

    Let me take a trip of imagination with you to illustrate. Imagine that there is a special magic powder, that when ingested made you feel really good. However, the moral scolds in your government did not want you to feel good, or to get access this magic powder. They put in place draconian laws to put magic powder users and sellers in jail for decades, they created special police forces, with special rights beyond those of normal police, the commit their military to eradicating it, they worked together with other governments to prevent the distribution of magic powder, and bomb the ones who don’t cooperate.

    Despite all this I believe that the free market would ensure a huge, effective market for magic powder that created mechanisms to get round all these restrictions, that created complex international trade organizations to supply magic powder, that overcame all the restrictions. Perhaps you don’t agree that that would happen, but I think, should such a magic powder exist, such mechanisms would spontaneously form. Call me Pollyanna, but that is the power of customers’ demand to buy, and producers desire to sell.

    Now, although my imaginary magic powder is pretty addictive, nobody actually dies from lack of magic powder. Food, on the other hand, is so addictive that the only people not consuming it are the dead and dying. Moral scolds might rail against the evils of magic powder, but few rail against the evils of food. Our politicians might complain about how magic powder is corrupting our children, but few complain about feeding hungry children.

    The point is that the incentives are higher, and the barriers are lower to getting food to hungry people. If the magic powder guys can do it, the farmers and their agents can do it too.

    >[About the USA and centralization of the economy] That sounds more like a quantitative
    > rather than a qualitative position. Why be in the union at all, centralized or not?

    Governments produce goods and services, and, as with all producers, size offers some benefits. For example, removing trade barriers and standardizing weights and measures are two things that governments can be good at. The EU has done a fair job with this (despite the British lamenting the loss of their pound of beef.) However, the more concentrated the power, the more subject to abuse.

    The United States Constitution is a pretty good document in terms of the powers it does grant centrally, selecting ones that offer the benefit, and limiting ones that procure abuse. However, as with all political systems the constitution has largely been redefined into meaninglessness. And so your criticism above is not without merit.

  206. Jessica,

    Congratulations on the “magic powder” argument. For some strange reason the term “rhethorics” is rather considered a negative one in the modern world, although it was not so in the Classical one, but we don’t necessarily need to accept the modern view: rhethorics can be an art, a good and useful art, and in this Classical sense your comment using the “magic powder” allegory was an example of excellent rhethorics.

  207. Yorick, all the problems you list are endemic to any complex environment, where the common person cannot possibly be expected to become an expert on everything. However, there are two alternatives to deal with this complexity. One is to vote for politicians who will occasionally choose experts for you and staff the FDA and Fed monopolies with them. The other is to constantly choose for yourself from private certification agencies, based on their track record of success or advice from people you trust. Both alternatives have to deal with the information problems you suggest but the first has been shown to perform much worse everywhere it has been tried. Reputation systems that use a new form of reputation currency and the webs of trust that you mention will be widespread online and will help make this easier. However, it is interesting that you mention the main ingredient that will be the catalyst for all else, micropayments, the existence of which is a sufficient condition for another tech boom. Already, you see hints of how all this information will be collected and easily related online, on websites like newegg.com or resellerratings.com, but what holds them back is monetization. With micropayments, we’ll see an explosion of such useful information online, along with easily being able to pay for news, webapps, wifi, practically every online service. That is why I’m working on a micropayments frontend myself and why it is the critical technology remaining for the coming information revolution, despite Jessica’s skepticism. ;)

  208. @esr: Interesting that you should bring up the point of insurance with regards to government regulators. I live in Florida, and I don’t know if you know anything about the property insurance mess down here, but while it’s a classic example that falls in line with this blog entry on Political Economics and the utter failure of socialized or totalitarian market control.

    Government regulators in Florida forced insurance companies to set rates for property insurance through the political process (petition government regulators). The state government has been monkeying with property insurance rates for decades. Meanwhile, in the wake of natural disasters along the lines of Hurricanes Katrina and Rita, rates in coastal areas (there are really no non-costal areas in Florida ;) have of course skyrocketed. But under government regulations that attempted to curb any increases, almost all the property insurers pulled out of Florida. So in response to the rash of highly active hurricane seasons in the late 90s and early 00s and increasing problems with sinkholes (the ground sinks because they keep pumping water out of the aquifers without consideration as to what happens to aquifer once all the water is drained – !clue), The Florida state government decided to form it’s own insurance company!

    You can see where this is going. As a result of government regulators trying to keep prices down artificially, and then insurers having to compete with the state-run insurance pool of “last resort,” the remaining insurers pulled out, too! The result is: Now there is only the government insurance company (Citizens). Yep, there’s your single-payer insurance! Except now, Citizens is practically bankrupt and can’t afford to insure anybody. If they have to pay out claims as the result of a big hurricane season, the whole system is likely to collapse. And since no one else provides property insurance in Florida….?

    Classic example of an inept government trying to “make things better” by creating a socialized system!

    So all those saying “single payer, single payer,” well, there it is, and it fails it.

    ESR says: This is a truly classic case study in public-choice economics.

  209. esr:
    >>Okay… so if it’s not done by providing preventative care, how do countries with socialized medicine manage to provide healthcare to more people, with better outcomes, for a smaller per capita cost?

    >Probably they don’t and the numbers are being massively cooked. No, I’m not kidding; socialist systems are notorious for this sort of flim-flam.

    This is just plain fud. Countries like France, Sweden, Germany, Japan and the UK have excellent systems for tracking expenditure as well as statistics for quality of life factors. They are fully open and transparent and here is no reason to mistrust them. You are just making this argument because the facts don’t support the dogma you are teaching. You are being dishonest to yourself as well as others. Either, you need to find actual facts that put the official statistics in question, or you need to adjust your political and economic models to what the numbers tell you.

  210. > Countries like France, Sweden, Germany, Japan and the UK have
    > excellent systems for tracking expenditure as well as statistics for
    > quality of life factors. They are fully open and transparent and here
    > is no reason to mistrust them.

    Don’t know much about Sweden, Germany or Japan (don’t speak the language), nor about France (Le Figaro’s headlines stretch my resources), however I do know a little about the British National Healthcare System. Here is what Professor Allyson Pollock, Professor of Public Health Policy at the University of Edinburgh had to say regarding the “transparent” NHS:

    “The proper and productive use of public money is an indispensable element of any modern, well managed, and fully accountable democratic state. [...] Our analysis raises four main issues, which are supported by other commentators:
    * First, lack of access to data…
    * Second, incompleteness of data…
    * Third, in this instance the contract…departed radically from normal reporting and costing…
    * Fourth, the government’s failure to release the value for money methodology means that the claim has no basis in evidence… ”

    From what I read in the British papers Docs who are tasked with researching the efficiency of the public health system regularly are made to “sign the official secrets act”, a peculiar British institution meant to tacitly threaten the signee with draconian penalties should they blow the wrong whistle. The papers are rife with deliberate distortions of the waiting lists, by using any trick to get people off the list without treatment — scheduling procedures deliberately at times they can’t make, disqualifying them for various and sundry reasons, splitting the lists into different categories to divide the list in half, incentivizing doctors to shorten the list, enlisting them in the evil political endeavors.

    The current labor government came to office on the promise of reducing waiting lists for medical procedures. They promised to reduce wainting lists for some procedures from two years (!) to 18 weeks. How did they do this? Hiring more doctors? Doing more procedures? God forbid! How do you reduce waiting lists without doing more procedures? I will leave the reader to fill in the blank. (Suffice it to say that the bureaucrat to doctor ratio increased under Mr. Blair’s watch.)

    Of course, for us Americans the idea of a waiting list is entirely alien anyway. Doctors are incentivized to treat people, not to fiddle the statistics, because they are paid when people are treated. This has its own problems, but some problems are better than others.

    I might add that I am not advocating the present American system, it is deeply broken too. I have commented on the solutions in the past, but in summary, the solution to American healthcare is to set off on a journey in exactly the opposite direction from our current administration’s proposals.

  211. > Of course, for us Americans the idea of a waiting list is entirely alien anyway.

    Especially for those 45 million uninsured, to whom likely the idea of affordable medical treatment is entirely alien anyway.

  212. > Especially for those 45 million uninsured, to whom likely the idea of
    > affordable medical treatment is entirely alien anyway.

    Your assessment of the facts, while rhetorically effective, is, nonetheless, both misleading and inaccurate. It in no way represents the state of medical care in the United States. Here are the facts:
    1. A large number of this group are illegal immigrants and should not even be in the United States. (The US does not provide medical insurance for Zimbabweans or Bolivians either.)
    2. Many of this group are eligible for public assistance programs already, and are too lazy to either find out, or fill in the appropriate forms. (Oftentimes because they are not sick, and so don’t much care.)
    3. Many of this group can afford reasonable insurance, but choose to spend it on other things too.
    4. Many are on public assistance already, and so choose not to get a job. Many could readily get a low grade job, and work their way up the ladder to get a job that both supports them and provides medical insurance. They choose not to, because they consider life on the dole easier.
    5. All this group can get reasonable medical care at the very large number of county hospitals and free clinics, and every hospital is obliged to provide basic medical care regardless of ability to pay. So even the people without medical insurance can get medical care.

    No doubt there are some charity cases out there who do need assistance. But the large majority of people in this famous 47 million are there because they choose to be.

    However, medical insurance is too expensive, and it makes everything far more difficult. This is due to the massive interference in the market conducted by our government as mentioned by me on a number of occasions in the past.

  213. eric: >Now, you create a futures market in shares of class-action lawsuits

    interestingly, that’s the essence of the old Icelandic Criminal Law — apart from the centralisation of the Code/meme, it was wholly decentralised/distributed: victims could and would sell the rights of restitution and enforcement to 3rd parties

  214. ESR thinks that health care subsidies lead to overconsumption? Pshaw! As we can see in the comments here, all government health care has to do is provide people “enough medical care that they won’t die”. So taxes won’t go up indefinitely, just until we’ve spent enough money to end death.

  215. I was almost killed by the Canadian medical system.
    The only reason I am alive is because of the actions of my mother.

    15 years ago, when I was 15 There was only one MRI machine in the entire
    province of Alberta (3 million population, twice the size of Texas).
    At this time I was told most small hospitals and the US had at least one
    MRI machine. This expensive machine was running for 6 hours a day Monday
    to Friday, because that was the budget for the operators. There were lots
    of operators graduating unable to find work and the ones that were
    working wanted to work full time.

    Private MRI clinics were illegal.
    If you could get a referal the waiting time for an MRI was 6 – 9 months.

    (Eventually this situation became a political scandal.
    The health boards all alleged government underfunding
    A government minister alleged that the budget increases to the health
    authorities were not being spent on highly visible ways as a strategy for
    increased budgets)

    One day in night December my knee started to hurt. The next morning my knee
    started was swollen and I could barely walk. I went to a medicenter in a
    strip mall to see a doctor, 4 hours later I was examined for 5 minutes
    and send refereed to xray. xray machine was in another clinic luckily took
    only 2 hours of waiting. Another 4 hour wait at the medicenter and the doctor
    examined my xrays found nothing, noted that I was getting worse quite quickly
    refered me to MRI which was scheduled end of June. We were informed that

    6AM the next morning we went to emergancy (at the only hospital in Alberta that
    had and MRI machine). At this point I could not walk, my knee was 2-3 times
    its former size and I was getting getting week.

    About 11 AM I got to see a emergency room doctor, He consulted other doctors
    noted that I was getting worse and they were able to get an MRI appointment for
    two weeks. We were told to go home, as they could do nothing more and there were
    not enough hospital beds to admit me. I was told if I got worse to quickly come
    back to emergency, but to go home for now.

    My mother is charismatic, persuasive and a refugee for the communist country
    who knew how to work the system.

    Other doctors, different heads of hospital departments and the head of hospital
    were all approached, and my case was plead.

    We were able to get to these important by tracking them down and pleading with their
    staff and many many boxes of donuts.

    Eventually we caught the head of hospital going for lunch, he asked us to leave we
    offered to buy him lunch, he said he was meeting other people, we offered to buy everyone lunch.

    He relented and gave us 5 minutes, noticed that I had gotten worse since we were
    told to go home by emergency, and sliped me onto MRI schedule sometime between 2 and 3pm.
    He was insistent that we not pay for his lunch.

    At this point the Canadian medical system started to work.
    I went from the MRI room into surgery. I had bone eating bacteria in my knee.

    I was latter told by my doctors that I would not have survived if the surgery
    was delayed by another 2 hours. I remember regaining conciseness out of morphine
    in early January. I was in hospital till march. I still needed (nasty) IV antibiotics
    till early June, I could stay in hospital and the drugs would be free to us
    (at a cost over $1000/day to the taxpayers) . Or my parents could pay over $1000
    and I could go home and eventually school, nurse visit checking IV at home once
    a day was free to us. My parents payed for the drugs.

    I am a computer geek and introverted and would not be capable of successfully doing
    what my mom did to save a relatives life.

    Kamil

  216. kamil Says:
    > I was almost killed by the Canadian medical system.

    Kamil, that is an amazing story. (Sorry I didn’t see it till today.) I had a friend who needed an MRI here in the USA. He got one privately (without insurance), he got an appointment in two hours, and it cost him $100. I think with all its flaws, I like our system better.

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