Category: free trade & free markets

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free trade & free markets too much government

Heap Bad Medicine

Could medical insurance — insurance for “health care” — itself act like a drug?

Are we addicts?

Third-party (“insurance”) payments sure are super-convenient. But their convenience comes at a cost: insurance (and other third-party payers) that remunerate doctors and hospitals directly is what’s driving much of the price inflation in this sector.

Automobile insurance policies overwhelmingly pay the insured, not the mechanics, and we have no automobile repair crisis.

This was related with utmost clarity by Jeffrey A. Singer in his recent Wall Street Journal commentary “The Man Who Was Treated for $17,000 Less.” A patient got an astoundingly better price for a surgery by simply setting aside his insurance program and paying in cash. Singer explains why:

  1. “Hospitals and other providers make their ‘list’ prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price.”
  2. “[M]ost people these days don’t have health ‘insurance.’ They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party.”
  3. “It is the third-party payment system that interferes with true price competition, so ‘market clearing prices’ can’t develop.”

Singer reminds us that specialty services like Lasik eye surgery, which tend not to be covered by insurance policies, have improved in quality and gone down in price.

Alas, as he laments, the United States is “headed in the exact opposite direction” from a real, cost-reducing solution. To a nation addicted to third-party payers in medicine, Obamacare is nothing more than upping the dose of the same old drug.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Work, Shirk, or Bug Out?

Which is better: helping the working poor through regulations on business, mandating employee benefits, and cushy hire-and-fire terms . . . or through higher unemployment benefits, assistance to families, or other direct aid?

Both yield unfortunate consequences.

Italy’s employment policies protect workers, on paper. Whatever the ostensible worker salary is in the country, the mandated benefits cost the employer more than twice as much.

This proved a problem for businessman Fabrizio Pedroni, whose factory near Medona hasn’t made a profit in five years. He blames high taxes, heavy regulatory burden, and low worker productivity. So, while his employees were off on holiday, he packed up his factory and shipped it to Poland.

Actually, the tail end of his move was stymied, for a while, by a hasty union blockade. Pedroni cited this as evidence for his need to bug out in secret. Had he announced the plan, the government would have just taken the property for the benefit of his employees. “I had three options — either close, move the factory, as many other businesses have done, or shoot myself in the head.”

Meanwhile, a new Cato study shows that in 16 of our United States, a “combination of food stamps, temporary cash grants, WIC, and housing assistance is worth a pre-tax value more than $30,000” to families that qualify. For some, it’s much easier to live well unemployed than employed.

No wonder unemployment persists. And economic recovery is so slow.

In both cases, programs to help everyday folks hurt them in the long run, undermining productivity, increasing dependence, and scuttling the source of progress: business enterprise.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture

A Briefing for the President

Say we have evidence that entrepreneurs can build roads, railroads, and other means of transport even without government-spewed largesse and macro-mismanagement.

Would President Obama tell us?

Considering the man’s wonted denigration of individual achievement, probably not. Why should mere track records put a damper on his lust to conclude that social cooperation as such, especially as shoved and molded by government, somehow renders individual achievement less pivotal or praiseworthy? “You didn’t build that,” not all by your little lonesome, the Discourager-in-Chief says of anyone too proud of personal accomplishment; government’s always been there to help, however hinderingly.

Turns out, though, that as historians Larry Shweikart and Burton Folsom detail in a recent article, we do “build that,” even roads, when allowed to. Nothing about getting from here to there is intrinsically gotta-be-made-by-government.

The authors observe that auto makers put cars in “almost every garage” long before the 1956 Highways Act. They “began building roads privately long before [governments] got involved.” Businessmen also helped build the first transcontinental highway in 1913.

Before the Civil War, railroads were built and financed privately. When government decided to push for transcontinental railroads, the only continent-spanning railroad to be consistently profitable was the only one not scooping federal stimulo-funding: James J. Hill’s Great Northern.

What about, earlier, Robert Fulton’s steamboat? Was the steamboat able to ride the rivers even before subsidies for canals?

Must airports be government-owned?

Read the whole thing.

You too, Mr. President. It is, after all, a brief brief. But if you are looking for longer accounts, complete with footnotes and citations of primary documents, they are available, too.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets

Pot, Kettle; Walmart, The Nation

Writing about Walmart is like reading The Nation: neither is as much fun as shopping at Walmart.

At Walmart I get good deals. In The Nation I get skewed analysis. Just look at the old progressive rag’s online “petition” to Walmart:

While Walmart rakes in annual profits of more than one billion dollars, the average hourly wage of a Walmart sales associate . . . is just $8.81. That translates to an annual salary . . . far below the federal poverty level for a family of four.

On top of being unjust, Walmart’s low wages come at a high price for American taxpayers: a recent report revealed that, because the retail giant’s employees are forced to utilize government benefits to supplement their meager income, a single Walmart Supercenter could cost taxpayers from $900,000 to $1.7 million per year.

Typical: there’s so much left out.

What would Walmart workers’ wages be if Walmart hadn’t employed them? More? Not plausible. Walmart’s mom-and-pop competition typically pay lower wages.

Net effect: Walmart lifts workers out of poverty.

Whose responsibility is it to feed “a family of four”? The employer of one family member? No. The parents in the family, who might be morally compelled to develop more lucrative skills or a plan for abstinence. (Of course, many Walmart workers are single, or have spouses or parents who work as well.)

Recently, a Walmart bigwig got a bit testy and sent out an email noting that The Nation has been paying its interns a monthly stipend of $150 per week, far below the minimum wage.

Normally I’d defend The Nation’s (and the nation’s) internship policies. But for now let’s just chuckle.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets national politics & policies

Forced to Innovate

Not everything new is wonderful.

When a company improves its operations, it seeks to do so in a way that decreases costs or produces features customers want enough to pay for. It works to ensure that the benefits of adopting new procedures outweigh the costs.

At least, this is what profitable companies do when free to act in accordance with their reason for being.

Government regulations clash with this, however. One of the “we have to pass the bill so that you can find out what is in it” provisions of Obamacare, for example, forces medical practitioners to convert to electronic record-keeping — even if they think the burden unjustified.

A businessman may be wrong about whether to try a new way — and, if he does adopt an innovation, about how fast or thoroughly to adopt it. If he’s wrong, he’s free to change his mind as evidence comes in. But, in medicine, government edict replaces entrepreneurial judgment.

Mandates and prohibitions are already rife in the medical industry; Obamacare makes a bad situation worse. “In today’s health care system,” writes blogger Rituparna Basu, “a doctor’s judgment as to whether it makes sense to adopt a new technology for his practice is deemed irrelevant. The government is the one calling the shots, and jeopardizing doctors’ practices in the process.”

A sound diagnosis.

The prognosis might not be so negative, however. While governments tend to prescribe uniform, one-size-fits-all “cures,” ongoing advances in genetics point the other direction, to individualizing medical practice, finding specific causes of illnesses, and developing genetics-informed, patient-specific cures.

But it’s just possible that individually focused medicine would be enhanced by a healthy dose of individual freedom.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

Tweet, Tweet, Zoom

Recently, Peter Thiel, a very interesting mover and shaker in today’s most vibrant markets, criticized the upshot of today’s technology: “We wanted flying cars, instead we got 140 characters.” That’s a slam at Twitter, a free service that somehow makes enough to stay afloat.

The lack of flying cars, though: Is that a problem?

Joshua Gans thinks we should ask ourselves whether we really want flying cars. You know, in our heart of hearts. After all, kids want to be Superman.

Markets only deliver the possible.

And much of what they deliver we hadn’t thought of before: iPods/iPhones/iPads weren’t really dreamed about much, outside of Dick Tracy/Star Trek fandom.

As for Twitter, Gans says it’s “a new communications protocol and more than just social media,” which makes it “more than merely trivial.” I’m sure he’s right. But I still keep kicking myself: whose time is worth so little that it’s worth complaining about free stuff?

Thiel’s focus is on technology, not markets — but it is the market that brings us stuff. Free markets are not “free” as in no price, they are free as in being unencumbered by busybody regulators, prohibitionists, and thieves. Such markets strike me as amazingly effective at providing a wide range of goods to the rich and the poor and everyone in-between. Hobbled, subsidized markets, on the other hand, exhibit Tweetable perversities — and usually serve the rich better than the poor.

Still, a lot of folks complain about what markets have to offer. I don’t get that, either. Hey, I reject most offers. So can they.

I say we stick to complaining about offers we can’t refuse.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

D.C. Protectionism

Some things are a bit hard to grasp. One of them is intra-national protectionism.

Most forms of protectionism try to shield businesses within a country from competition outside, using tariffs or price controls to “even the playing field,” so to speak. What these laws do is make goods more costly for consumers within the protected country, in effect taking wealth from consumers and awarding it to the protected businesses.

In the United States’ capital district, politicians are in the process of pushing through a “living wage” bill that would apply only to big box stores like Costco and Walmart. While Costco and Walmart will be required to pay their employees a minimum of $12.50 an hour, other companies in the district could still pay wages as low as $8.25.

Doesn’t seem exactly fair, does it? The bill has been pushed by organized labor to supposedly help smaller retailers, but — surprise, surprise — exempts unionized grocery chains such as Giant and Safeway.

On the one hand, the Washington, D.C. city council is punishing Walmart, forcing it to pay more than its competitors for labor. On the other hand, the city has spent $40 million in direct subsidies to the company and another $28 million to advance projects that involve building six new Walmarts.

“I can’t imagine that they will proceed on any of the unbuilt stores if this bill passes,” says Grant Ehat, the principal of the company building the two Walmart projects already underway.

Mayor Vincent Gray expressed his hope to “find a way to, say, thread the needle” between the company and the council.

Or our nation’s capital might experiment with common sense laws, equally applied.

Yes, Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Texas vs. No-Growth Coasts

Governments must rely upon profitable businesses. Without them, government has next to nothing.

And yet “next to nothing” is what governments can do to best help businesses succeed.

Thank Texas Governor Rick Perry for these thoughts . . . and Matthew Yglesias, who commented on Perry’s recent “nuclear-strength” video promotion, inviting businesses to leave places like New York and locate themselves in Texas, which has fewer regulations and no income tax. The ad claims Texas is “big for business.” Yglesias quibbles:

If New York was a terrible place to live, work, and do business, then it would be cheap to live in New York. But New York is not cheap. It’s not Detroit. It’s not even average. It’s, in fact, hellishly expensive. If New York emulated Texas and eliminated its income tax, rich people would bid up the finite supply of New York City land at an even more furious rate—the city wouldn’t see Houston or Dallas growth rates.

I’m no economist, but I have quibbles with Yglesias’s critique. New York is expensive, yes. But the cause of the expense isn’t just that people bid up housing and services. It’s expensive in no small part as a result of all those regulations, especially courtesy of one regulation in particular: rent control. Get rid of rent control and the city income tax? Watch housing grow.

And growth, Yglesias rightly points out, is what’s really in Texas’s favor. Texan low-impact government policies favor growth, while “the residents and politicians” of blue-state/beach-front states, though “liberal,” have, in fact, “become exceptionally small-c conservative and change averse.” Because they do too much, allegedly to “help.” But mostly to gentrify.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Biting the Apple

Apple is on trial for refusing to pretend that the company has done something wrong.

In 2009, Apple invited five major publishers to sell e-books through the forthcoming iPad, on the basis of the “agency model.” The publishers would set the prices, Apple would take a 30% cut. Apple also required that the e-books not be sold more cheaply elsewhere.

The publishers were happy to agree because Amazon had been buying new e-books wholesale and steeply discounting them, sometimes at a loss to itself, in order to sell them at $9.99. In the eyes of the publishers, this price seemed too low a benchmark. Apple’s deal gave them new clout in negotiating with Amazon.

The government says average book prices rose in the wake of this “conspiracy.” Apple says prices declined. It’s irrelevant.

To charge a price that some persons dislike violates nobody’s rights. Nor does stipulating terms of contract that a prospective partner dislikes and may reject. Anti-trust law has nothing to do with justice. It’s a bludgeon that some businesses — in conspiracy with the government — use to thwack competitors.

No violation of anyone’s rights has even been claimed in this case, let alone established. Yet five innocent parties have been forced to pay tens of millions to the government and accede to curtailment of their right to contract. And Apple, having refused to be bullied, must defend itself in court.

That’s the crime, and government officials are the ones committing it.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Fed Up

No one is really fit to “run the economy.” The pretense of the ability can be fun to watch, amongst economists as well as pundits. But because they’re doing the impossible, what they say can lurch from wisdom to utter folly in the space of a paragraph.

Neil Irwin, at the Washington Post, admits that the Federal Reserve’s current policy of pumping more and more money into the economy may finally be working, “but that may not be a good thing.”

I suspect he’s right.

But not for the right reason.

Irwin notes that the Fed “in September introduced a policy meant to boost housing and stock prices, and now, nine months later, housing prices and stock prices have risen quite a bit. Enough, indeed, to (so far) offset the impact of higher taxes that went into effect Jan. 1 and federal spending cuts that took effect March 1.” But the problem, he goes on, “is that these channels through which monetary policy affects the economy tend to offer the most direct benefits to those who already have high incomes and high levels of wealth.”

Irwin sees the problem as inequality: the policy helps the rich get richer and does little for the poor. His solution is fiscal policy that throws more money directly at the poor.

Yet there’s not much reason to believe his preferred giveaway would actually “stimulate” the economy. The Fed’s current policy, on the other hand, may stimulate, a bit, but will lead to a new boom-bust cycle.

The poor need jobs; the rich need to invest. But all this requires a degree of stability and trust and sustainable prices — not government-knows-best tinkering with the money supply. Or yet more deficit spending.

This is Common Sense. I’m Paul Jacob.