A Fractal Case for Big Government
Brad DeLong made a case for big government and higher deficits. Paul Krugman wrote an exagerated pun of praise.
The part he liked was the appeal to myopia and paternalistic proposal “The problem is that as we move into the twenty-first century, the commodities we will be producing are becoming … more subject to myopia and other behavioral-psychological market failures.” I think that any hint of paternalism is rhetorical poison — even Brad doesn’t quite say that he thinks the government knows best whether, say, kids should stay in school. School attendence in mandatory, but we don’t talk about it much. Here my only contribution is to note a paradox of freedom. if people have time inconsistent preferences, they will choose to precommit. This means that people freely choose to reduce their future freedom. One example would be to introduce a payroll tax used to fund pensions. Notably that is a very very popular policy.
But I focused on something else.
1890. Since then, over any extended time period for major North Atlantic industrial economies, g > r without fail. That is now 125 years.
[skip]
That fact strongly suggests that North Atlantic economies throughout the entire 20th Century suffered from a form of dynamic inefficiency, in that there was excessive accumulation of societal wealth in the form of net government capital—in other words, government debt was too low. Given the debt secured by government-held social wealth ought to be a close substitute in investors portfolios with debt secured by private capital formation, it is very difficult to understand how economies can be dynamically efficient with respect to private capital and dynamically inefficient with respect to government-held societal wealth in the absence of truly mammoth financial market failures.
Like Brad I follow John Quiggin in believing that the low return on public debt compared to corporate equities is a truly mamoth financial market failure. In other contexts, this view has caused Brad to advocate bond financed public purchases of stock, that is a sovereign wealth fund. This would be a huge expansion of the government and the public debt (public assets aren’t counted). I think risky assets are worth more to the US Federal Government than to any other entity, because it has the deepest pockets and is so big that if it fails, the world economy fails with it. The gigantic profits the US government made while saving the US financial sector are strong evidence of this.
Nothing new yet, but now I want to argue that the advantages of gigantic risk bearing capacity affects optimal public sector employment and public provision of private goods. The Medicare advantage experiment provides evidence that the public sector CMS is more efficient than health insurance companies. Part of this is the high required return on equity, some of the extra cost of Medicare advantage goes to health insurance company profits. Importantly profits are not theft. Insurance companies must have equity and investors demand high returns on equity. However, it is also a fact that public sector bureaucrats are paid much less than private sector managers (even counting the more generous benefits). It is also true, as passionate bureaucracy hater James Q Wilson taught me long ago, that they tend to be, if anything, more qualified on paper. Here I think people are willing to accept much lower incomes for much higher job security.
Now, it is generally believed that the low salaries correspond to extremely low work effort and that the job security leads to extreme moral hazard due to shirking. I am sure this can be a gigantic issue (I work in the Italian public sector — but not very hard). But I’m not convinced that it outweighs the advantages of public employment in many other countries including the USA.
So if offering job security is efficient, why can’t a profit seeking corporation achieve higher profits by offering job security ? One issue is, again, deep pockets. A corporation just can’t guarantee lifetime employment — if demand for its product falls it will go bankrupt. GM offered only lifetime health insurance and ended up bankrupt. Civil service job security corresponds to the US Treasury bearing risk. This can be efficient given its unique risk bearing capacity.
But another issue is dynamic consistency again. As noted by Schliefer and Summers, the possibility of corporate takeovers can be costly to shareholders, because it makes it impossible for shareholders to precommit to an implicit contract with workers by hiring a manager who really wants to keep her word. Managers can’t promise workers that they will stick to an agreement even if, in the event, it would be better for shareholders for the firm to renege. The shareholders can and do toss the managers.
Interestingly Summers (and DeLong) worked for the Clinton administration which had a project to reinvent government by replacing public provision of services with vouchers so they would be provided by the efficient private sector. I don’t think this has worked out very well (say Blackwater 10 times before commenting if you disagree). I think part of the problem is the risk bearing issue I discussed above.
But I think a much larger part of the problem is the nature of typical government failure. I think that the largest losses for citizens occur at the edge of the state, where lowly paid civil servants negotiate with highly paid managers as both stand near the revolving door. If so, this would mean that the cost is proportional not the volume of government but to the surface area of government. Outsourcing tasks reduces government employment, but it increases the number and dollar value of contracts negotiated by agents with extremely asymmetric incentives. I honestly think that the least efficient approach is the mixed approach where money collected with taxes is used to pay profit seeking firms to provide services.
“Surface area” — what a useful perspective.
Couple of comments: yes, profit is not theft. However, beyond a certain necessary level, profit IS inefficient. It is by definition the cost to the buyer of a good or service above the cost (to the provider.
It also matters who gets that extra profit. If the excess goes to working people, in the form of high wages and benefits, we get democracy and Happy Days. If instead it goes to nonworking, or even nonliving recipients, we get the Great Recession.
The problem isn’t profit. By definition, modern societies lavishly overproduce. The problem is who gets it.
Another comment: I have become very protective of beaurocracies, even the somewhat bloated ones. They are the liver, kidneys, lungs and little green wobbly things of the body politic. They are not supposed to be inventive, nimble, or efficient. They are supposed to execute their tasks in a regular, reliable, boring way, year after year. And for the most part in America, they do. Cheques are mailed, licenses are renewed, buildings are inspected, things get done in the background and we don’t see them, the same way Medicare recipients might not grasp the machinery behind their health care.
The beaurocrats provide another, unnoticed service. They are (or have traditionally been) steadily, boringly employed, and pensioned afterwards. They provide a steady flywheel for the economy. The coffee shops and call centres of America might falter, children might leave college and enter unemployment, but city, state and federal employees will still be there, buying and investing and opening their basements for their childrens’ return.
Finally, the job of government is most evident at extremes of time and governance. Planning over decades or centuries? Gov’t’s your man. Acting instantly to repel invaders or manage disasters and plagues? Ditto. Knocking together the heads of businesses, banks and agencies to prevent national and international frack-ups? Boo yah! Luna, here we come!
In short, mobilizing the energy and attention of the population irregardless of profit considerations is absolutely the core business of government. Demanding gov’t be efficient simply hobbles gov’t in its essential functions. And (back to your post) as small government reduces the stability and income of its people, they will either sell out the those heads they are supposed to be knocking together, leave for greener pastures, or continue to try to do their job with fewer resources and worse results.
Noni
Robert,
I do not know where that quote came from, Brad maybe? But it certainly is not what Piketty reports, with him claiming that only holding for a period in the early to mid part of the 20th century. Maybe adjusted for taxes it holds, or maybe the focus is on r for gov bonds, pershaps adjusted for taxes. That may be true, but not for r and g generally.
Would someone define g?
Noni, thanks for reminding me of all that the government does do right, and the need for capacity.
It’s probably also worth mentioning one of the consequences of actively bypassing and undermining “regular reliable boring” bureaucracies.
When MERS was invented by the major mortgage lenders to bypass the traditional registration process for liens and mortgages it facilitated one of the largest financial crises in history. If the boring old county register of deeds had continued extracting their nominal fee every time the slicing and dicing of mortgage liens it would have evaporated the profitability of that activity while also making the apparently rampant fraud a lot more difficult.
It should probably become axiomatic that every time a “disruptive” financier decides to bypass some regular reliable boring bureaucracy, a reasonable inquiry would involve whose ox was getting gored. Will citizens miss their boring old reliable bureaucracies that regulated terms for say, taxi licensing? Regulation of hotel rates and taxes? Wait and see.
Wiki tells us “…[Piketty’s thesis is ] when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability
In turn, if I have it right, g is tied pretty closely to population growth under most circumstances.
So then, what is capital? The Noni Thesis holds that capital is also directly tied to population. Human capital is what makes up any economy — the attention, time and energy of individuals. One man is not an economy, despite living on an island of treasure. A hundred might be.
As population rises, g rises. Not linear, and rather lumpy as different technologies and tastes evolve and push attention and energies this way and that, but steadily.
And as population grows, synergies allow a population to create a great excess to their needs. It is plenty, not insufficiency, that creates the thing we call an economy.
So then what is r, in this layout?
It is simply a structured, often anonymous claim upon the energies of other people, almost always offset in time.
When everyone has similar and sufficient levels of claim on others, in the forms of money, respect, sympathy, threat, admiration, goods, deceit and more, then you have a low Gini, a vigorous society, and a rather egalitarian society. But when most people have little claim on the energies of others, but a few have very great, anonymous and wide reaching claims, you have a high Gini, and stagnant and generally brutal society. The extreme example of this would be a slave society.
So, to my mind the form r > g says, in plain English, that unless controls are put in place, over time a few people will accumulate control over the multitude, and that beyond a certain level of control their society will stagnate and deteriorate.
Hope you’re still with me. If so, here is a video of a clever mouse.
Noni
@Barkley Rosser
The quote is from Brad’s blog (the linked post). It is only apparently the opposite of what Picketty (and as far as I know everyone else who has studied the issue) claims. The r in Brad’s formula a the safe interest rate the average weight on treasury securities of different maturities.
The r Picketty discusses is the average rate on all outstanding assets. This is much higher. Brad agrees that this r is greater than g.
@Beene g is the average rate of GDP growth over a long period of time.
If overall average over all assets r < g then the economy is called "dynamically inefficient". It is possible to have higher consumption now and forever just by saving less. Bubbles can last forever without bursting ever.
Noni & Robert, thanks for the help.
Noni,
Going back to your original post, you state, ‘yes, profit is not theft. However, beyond a certain necessary level, profit IS inefficient…It also matters who gets that extra profit…The problem is who gets it….’
Why, in an open and competitive market, would any business owner or capitalist enjoy profits in excess of an appropriate, and efficient, risk-weighted return on his or her business for a more than a short time? Assuming that a business is enjoying these unfair excess profits what is stopping other greedy capitalists from entering that market and competing away that excess profit…hence making the return to all market participants efficient and fair?
Likewise, assuming that—via government dictate— these greedy businesses are restricted from achieving some arbitrarily determined profit margin that is less than a fair market-determined risk-weighted return to capital (profit) why should they stay in the market and continue to operate? Why wouldn’t they leave that business, industry, and/or country and go where they can get the appropriate return for the risk they are taking?
Free markets tend to efficiently regulate the return to investors so that they are not making ‘extra’ profit for long. The only time excess profit occurs for long is when government gets involved and gives them a right to extract these ‘extra’ profits through patents (a protection of a marketable idea) or through market restrictions such as quotas, tariffs, bans, etc (that protect markets and industries), or through subsidies, etc. These protections of government businesses and industries are what allow businesses to achieve above-market ‘extra’ profit…at the expense of consumers and other competitors (and their workers).
If anything, your fear that businessmen are getting too much profit is just another reason to limit government intervention in free markets, right? Let the greedy capitalists compete amongst themselves to the point that they drive out any ‘extra’ profit any one market participant might be getting.
K
Waldmann
GM went bankrupt because it built crappy cars.
if you are working not very hard it may be because there isn’t much work to do. we may have reached a point where productivity is so high we don’t need to work hard. but we do need to work some. that’s why job security is more important than high wages.
a factor in GM bankruptcy was the destruction of the economy by bank fraud.
the wonderful pfree market that kai fanatasizes has never existed.
low taxes and less regulation have always opened the door to predators of great wealth who have impoverished the country, not made it richer.
kai won’t see the distinction between high end criminals and real honest entrepreneurs. but the latter CAN work with taxes and within regulations.
a failure to make the distinction also cripples leftist politics… who think that all wealth is theft.
Coberly, you may find the answer in this URL; why leftist fail to make a distinction. Its a depressing read.
http://www.planck.org/publications/Financial-Capitalism-vs-Productive-Capitalism/
Beene
something there, and worth thinking about. i am not ready to buy all of it, but i don’t know much.
if i understood him about resource prices, i think we can afford higher resource prices. in fact i think we can’t afford not to have higher resource prices. a future economy that doesn’t kill the earth will involve low-resource value added productivity. or less productivity while we go back to the business of enjoying life without excessive consumption.
and if i understood him about “social security,” i think he is wrong up to a point. as long as workers are making enough for their own present needs and enough to set aside for their future retirement, American style Social Security pays for that without regard for the financial markets. Instead of “investing” in stocks and bonds “for the future” the workers simply invests in the Social Security system. He pays for the needs of the currently retireed, and in turn his needs in retirement will be paid for by the still-working who will at the same time be paying (in advance) for their own retirement. There is no reason why this cannot work at any level of “wages”, as long as the worker can make enough (product) during his working years to provide for his current needs and expected needs in retirement. retiem
Ah yes, efficiency. It’s in the eye of the beholder. Are we trying to make money efficient or are we trying to make people efficient in their lives (reduced risks of living). One will cost the other some of the profit…but that is only an illusion if using snap shot models like demand and supply curves instead of ecological models.
Yeah, I said it.
noni
i wouldn’t say that “excess” profits are inefficient necessarily. though i do not embrace kai’s theory of the magic of the free market.
suppose i invent something i can sell for a dollar that enables you to make ten dollars. and suppose further that by paying a wage of one dollar per unit to my employees i break even (counting myself at that one dollar per — this is ambiguous, as we will see)
now suppose that i can sell the product for two dollars, still making you ten dollars, and still paying my employees one dollar per unit.
i make the extra dollar per unit. how many units do i have to sell before you decide my profit is “inefficient”? what if i sell a million of them and donate half a million to “the arts”?
really, you have to distinguish between “excess” profits (whatever that means) and simple greed on behalf of the workers… who may be making quite a decent living at the dollar-per.
i don’t know if you pay your cleaning lady (i am assuming you have one) the same as you pay yourself (i am assuming you are a highly paid professional) but if you are, on what basis to you value your work more than hers, and why can’t the “owner” value his work more than yours?
there are problems with “excess” profits… but maybe we ought to identify them before we adopt a share the wealth … that is share the other guy’s wealth… as a mindless principle of economics.
Becker
here i thought I said that. but it was on another thread. glad i agree with you.
Dear coberly, I am flattered that you think I am a highly paid professional. It must be my pellucid English and my widely informed intellect that give that impression. But whooo-eee, no cleaning lady here. Rather, I supplement a little pension (~$17,000/year after taxes) with dog-walking and babysitting gigs. I may THINK middle class, but I don’t live it.
Reducing the “excess profits” argument to a dollar here and a dollar there it to minimize its impact. Proportions and frequencies of impact are important in judging the effects of certain prices.
For instance, in the past 40 years, the effective price of clothing has plummeted. I’ve got a bushel of decent clothes, and their cost didn’t dent my income appreciably. But, new clothing isn’t a necessity. I have some favorite pieces I have worn regularly for up to a decade. If my income, or anyone’s, dries up, I can go months or even years without buying anything but underwear and socks.
The prices that have swelled include housing and education, health care, and so on. These things can’t be negotiated, postponed or eliminated from ones budget, which is, I think, why their cost has risen so relentlessly. Elizabeth Warren detailed this in her talk on “The Coming Collapse of the Middle Class,” which you can view on youtube and elsewhere.
My cleaning lady (me) doesn’t get paid. I am not vacationing in Cuba or the south of France. If some business wants to charge a 1000% markup on a 2 cent widget, I can manage that. But other upstream players, those who get a stab at my pocketbook before the widget guy has a chance, are the ones whose profits should be monitored.
Noni
Off to drink some white wine and lounge at poolside*
* not
Noni:
An aside with some reference material: http://www.migrationpolicy.org/article/foreign-born-health-care-workers-united-states “Foreign-Born Health Care Workers in the United States”
Clothing and other items imported to the US as well as made in the US are “highly” subject to Capital with little influence from Direct Labor and Wages which still remains the smallest cost in manufacturing after decades. Some seem to favor a macro view to cloud the issue proposing attacks on Labor rather than examine the costs with any detail. Old accounting methodology. Pick up some Drucker.
Noni
i was relying on your pellucid English to recognize a sort of parable when you saw one, even in the hands of someone who says “you” when he means “a person.”
The giveaway should have been “i assume…” Granted that means “for the sake of assumption to generate the argument…” but could have meant “i stupidly just assume that you ARE…”
In any case, I think you got to the real point. Don’t worry about the inequality or the profit, worry about the abuse of power that drives people to destitution and economies to destruction.
you are correct to note that education, housing, medical care, and so on are the traditional places where “the rich” parasitize “the poor.”
while i am arguing that people focus on the actual criminals, they always think i am shilling for the rich.. as a class… you know, like the j___ or the N______.
btw
i also am my own cleaning lady. that’s why i always pay her exactly the same as myself. per hour.
and would even if i wasn’t.
Ah.
My metaphor spotting is somewhat hampered by a busy life of Shih-Tzu’s, Poodles and a rather evil orange cat who wants to shred my shins. Carry on!
Noni
Noni
‘Tis a far better thing you do…
Daniel,
You state, ‘Are we trying to make money efficient or are we trying to make people efficient in their lives (reduced risks of living). One will cost the other some of the profit…’
Totally agree with that sentiment.
But the question is, who should decide the value of that efficiency to the consumers and how much they are willing to pay the people who provide it (profit). The market and the multitude of transactions that price the value of that efficiency, as well as the alternatives and determine the profit margin that suppliers get for providing that efficiency is better at that calculus than any centralised planning that tries to dictate what consumers want and what they should pay for it. Obamacare comes to mind.
The remainder of you response was intriguing, ‘but that is only an illusion if using snap shot models like demand and supply curves instead of ecological models.’
Even ecological models are subject to the immutable laws of supply and demand. There is no escaping it.
K
Noni,
You state, ‘For instance, in the past 40 years, the effective price of clothing has plummeted. But, new clothing isn’t a necessity….If my income, or anyone’s, dries up, I can go months or even years without buying anything but underwear and socks’….and then, ‘he prices that have swelled include housing and education, health care, and so on.’
One market, clothing, is highly subject to the market….and the other markets, housing, education, and healthcare, all have heavy government interference. Markets have have driven down prices and squeezed out the excess profits in textiles, computers, phones, etc and as such you get a a lot more for a lot less money, ceteris paribus. However, with education, healthcare, and housing, state-granted cartels and protections (insurance, doctors, nurses, etc) that protect them from competition, especially foreign competition (try being a famous german or Spanish physician and getting your medical license in the States, or being Philippine and getting a nursing license…or being a foreign insurer and providing insurance in Tennessee, etc) or subsidies, (housing) or both (education) is what drives up prices in those markets and allows ‘extra’ profit.
Thanks for making another case against big government. It looks like we are on the same side of the debate on this topic.
K
“In any case, I think you got to the real point. Don’t worry about the inequality or the profit, worry about the abuse of power that drives people to destitution and economies to destruction.” Run
Perhaps what we need is leadership like China, which is making a clean sweep of political and business leaders whose business dealing fail to enhance the nation’s growth or damage the nation.
Since we no longer require warrants to arrest or hold anyone, we just start in the US Congress and hold person till he/she admits to what we’re looking.
Beene
actually it was coberly who said that.
i like to think we could manage by simply(again) making stuff illegal that amounts to an abuse of power. no need to join the hysteria to dispose of civil rights just to get the bad guys.
Coberly, my apology for the miss quote.
“i like to think we could manage by simply(again) making stuff illegal that amounts to an abuse of power. no need to join the hysteria to dispose of civil rights just to get the bad guys.” Coberly
Coberly, do not think you’re keeping up on civil rights. There are a number of charges the government my use to hold you without warrant or simply murder a citizen. The least of these losses are free speech.
Beene
don’t imagine I have any illusions about the state of civil rights, much less human rights in this country. that’s why i said “join the hysteria…”
Perhaps a context issue on my part.
“One example would be to introduce a payroll tax used to fund pensions. Notably that is a very very popular policy.”
This is not necessarily a reflection of the personal myopia of the people involved, but may reflect their fear of the myopia of others. Remember that people know that there are a position goods (especially land) where they compete in zero sum contests with others subject to a disposable income constraint. Restricting others may be more important to them than being restricted themselves.
Kai-HK
What other fairy tales do you believe?
P.S. For Kai-HK
It is not that I don’t believe in the price mechanism, or that in some circumstances increasing prices may (in the medium term) increase supply, or that competition in general improves the welfare of consumers. It is that I don’t believe that the presence of government regulation is the only cause of lack of competition or high prices, and in fact the presence of government regulation in democracies generally in fact reflects a history of market failure in that industry. Your use of the health industry as an example is just absurd.
Robert,
by the way sorry to ignore the main point of your post, which I find interesting, and probably correct, but I’m to put it into the back drawer at the moment. And I’m inclined to think fighting corruption is a never ending fight that needs a much higher priority than it has, but the institutional structure is not the main driving factor. Public concern is much more important (I don’t think the level of outsourcing explains the difference between Sweden and Italy, sorry).
Reason:
You state, ‘It is that I don’t believe that the presence of government regulation is the only cause of lack of competition or high prices…’
I would agree with you. I never claimed otherwise. It is not the ONLY cause. I would point out that the government intervention in markets as a participant, as opposed to a disinterested regulator of market processes, creates perverse incentives, distorts market mechanisms, and often creates the conditions that lead to market failures.
You continue, ‘…and in fact the presence of government regulation in democracies generally in fact reflects a history of market failure in that industry.’
To what market failures are you referring and why did they occur? I can bet most of them had a government intervention element to that failure; the Great Depression and Great Recession come to mind since both were government created. The drop in markets and increases in unemployment are the result of the MARKET correcting for government interference in the market. Government force is no match the forces of the market. But please, give me the massive list of market failures.
Finally, you state, ‘Your use of the health industry as an example is just absurd.’
Why is Obamacare, as an example of government intervention distorting prices and competition, absurd? It does both.
K
I don’t believe for an instant that you know what you are talking about.
And what I mean by your use of the health industry, is that it shows you just don’t understand that market mechanisms demonstrably don’t work well with health (which is why every wealthy interferes in the market).
(This is because the conditions for the market to work well, especially regarding information asymmetry and ability to make choices free from pressure are not met. Besides which the examples of market failure pointed to – queueing – are in fact preferable to most people to the market solution – unaffordable or ineffective treatment.)
If you believe in “Austrian” economics as I learnt from another post (especially the empirically implausible ABCT) then you are beyond reasoning with, so I won’t bother in future.
Reason,
You state, ‘And what I mean by your use of the health industry, is that it shows you just don’t understand that market mechanisms demonstrably don’t work well with health (which is why every wealthy interferes in the market).’
You really need to learn how to stay on point and defend your position. I would disagree with you and argue that the market mechanisms in healthcare work just like the market mechanisms in any other good or service being traded by people. And that they are also just as susceptible to being manipulated by and distorted by government intervention in those markets. Your incoherent clause in parentheses at the end makes no sense: ‘(which is why every wealthy interferes in the market)’. What the heck do you mean by that? Do you mean that is why the wealthy interfere in the health market? Like who, Steve Jobs? Bill Gates? Soros? And, if so, what is the problem with that? Or do you mean that the wealth that can be made in the health industry perverts the market for health services? Or do you mean that because some people are wealthy and get health care services, it distorts the prices for everyone else who is not wealthy? Can you please expound?
Regardless, of you point above. It does NOT refute my main point which is that government interference in the healthcare market and the creation of PPACA (Obamacare) distorts prices and competition. Are you refuting that? If so, let’s see your support. The fact that ‘wealthy’ somehow ‘interferes’ in the healthcare market does not refute that the government also interferes in the healthcare market. Both could be true. How could ‘wealthy’ impact market prices and competition but the government interference not? Debate much?
The other parenthetical sentence also makes no sense and is irrelevant to my point that government interference in the market distorts prices and competition. Again, debate much?
Finally, you state, ‘If you believe in “Austrian” economics as I learnt from another post (especially the empirically implausible ABCT) then you are beyond reasoning with, so I won’t bother in future.’
I get this a lot from true-believer progressives who cannot support their talking points and nonsensical views. Afraid of losing the debate (or failing to defend their specious talking points), they slink away like feckless cowards…and in their wake mumble something about ‘you are beyond reasoning’, etc. It is sad but understandable when in a losing position.
Well, bye-bye…your facile and vacuous reasoning won’t be missed.
K
“…distorts prices and competition…”
Absolutely true! The government distorts the income of B&E practitioners, fraud artists, and invading foreign forces by heartlessly hiring police and soldiers to persecute them. It prevents entrepreneurial snake oil salesmen from making a decent living. It prevents large corporations from adding sawdust, ethylene glycol and melamine to their food products, forcing them into a much less profitable business model.
And it is trying to force insurance companies to charge reasonable rates for the health care that sick people need, for which premiums are paid up front. How is a poor helpless insurance company supposed to make zeppelin-sized profits when so heartlessly hobbled?
Oh the humanity!
kai
i am sure that reason simply left out the word “nations” following “wealthy.” i think it is suggestive that you didn’t guess that.
since i’m here, i’ll offer a few comments on your latest. they won’t do you any good, but one doesn’t like to see you go unanswered.
“you really need to stay on point…” i have actually gotten a little sick of people who can’t think at all employing the language they have heard others use simply because it sounds “smart” to them. it’s not smart (of you); it’s sad.
market mechanisms work even when there are taxes and government regulations. taxes and regulations are essentially the same as gravity and entropy, facts of life that the market (and manufacturer) must take into consideration. all the market does is “determine” price and quantity given the real world facts of life. taxes are necessary, and so are regulations.
in what you call a free market in medicine, the market rule is “your money or your life.” this is so well established that all nations with sufficient government to prevent anarchy have established “regulated” markets to prevent the abuses of monopoly, fraud, mal-distribution of wealth etc. oddly enough “with sufficient government” turns out to be the same as “wealthy nations.” the law of the jungle (unrestricted “free” markets) just do not support enough “general welfare” for anyone but warlords to make enough money for a decent life.
we saw in this country between 1933 and about 1983 what regulated free markets could accomplish in raising the standard of living for everyone… including the rich. but some very stupid people have been working very hard since about 1980 to return us to the good old days of 1920, 1880, 1860, 1780… the ancien regime, the dear old ante-bellum south, the gilded age, the roaring twenties.
most people understand that a nation where most people can’t afford health care is not a healthy nation.
of course the government interferes with “market prices and competition.” that’s the point. government interference is needed when “competition” does not provide sufficient protection for the people. as for “debate much”, there isn’t much fun debating someone who has an iron-clad “reason” for everything that excludes any fact or concept he doesn’t want to face. tiresome.
now me, feckless coward that i am, will most probably not return to answer your incisive and stellar reasoning. why don’t you find someone to debate with who meets your standards.
Noni:
Again, nice straw man you are constructing there but has nothing to do with the point I am making.
I am not arguing that government does not have a role in regulating fair market processes. However, the government should relegate itself to its core function: that of protecting of property rights (including security) and as an unbiased regulator of fair process that applies to all equally or to no one at all; instead of what it is today a subjective distributor of fair outcome for some at the expense of others.
Its interference in the market as a participant or as a biased-adjudicator for a specific social outcome distorts the competition and prices of the markets it is most heavily involved. As I stated above, and to which you have failed to sufficiently reply:
‘You state, ‘For instance, in the past 40 years, the effective price of clothing has plummeted…, ‘the prices that have swelled include housing and education, health care, and so on.’
I state, ‘One market, clothing, is highly subject to free market forces….and the other markets, housing, education, and healthcare, all have heavy government interference. Markets have driven down prices and squeezed out the excess profits in textiles, computers, phones, etc and as such you get a a lot more for a lot less money, ceteris paribus. However, with education, healthcare, and housing…[they go up and up]
You then state, ‘And it is trying to force insurance companies to charge reasonable rates for the health care that sick people need, for which premiums are paid up front. How is a poor helpless insurance company supposed to make zeppelin-sized profits when so heartlessly hobbled?’
Government has been heavily involved in healthcare, education, and housing for a long time (going back decades). How have the price distortions they created helped the poor.
Seems like the best response to get the low prices you want is more free market forces, not less. Open up the market to more competition, not less.
But you keep constructing weak straw men arguments instead of addressing my point if it makes you feel better.
K
Coberly,
You state, ‘i am sure that reason simply left out the word “nations” following “wealthy.” i think it is suggestive that you didn’t guess that.’
Thanks for clarifying that my original response that government participation in markets distort prices and competition. Since your clarification of Reason’s response only strengthens my argument.
Much of you’re the rest of your response is more of the usual progressive nonsense that tries to deflect from the issues. I will only focus on your issue-related points:
You state, ‘market mechanisms work even when there are taxes and government regulations.’
Never said they didn’t. They may work less perfectly but that might be something all market participants are fine with. Again, to be clear, I am not arguing against government (and the taxes needed to fund it) as an unbiased protector of property rights and a regulator of fair market practices that apply to all Americans equally or to none at all. But government should not be taking sides between two (or more) market participants. They then fail to be a regulator of fair process and markets and instead become a consumer or supplier (or aligned with a consumer or supplier) in the market. This distorts competition and prices, right?
You then go on with this great point, ‘in what you call a free market in medicine, the market rule is “your money or your life.’
Yep and let’s celebrate that! Both are mine and I should be able to do with them as I want…it is called freedom! I do not want you paying for my healthcare and then dictating what I put in my body, whether I exercise, smoke, eat junk food or how big my sodas are. That is what we get now. Government starts paying for your health and they start dictating how you live your life. I prefer my money life..and my freedom!
‘The care of every man’s soul belongs to himself. But what if he neglect the care of it? Well what if he neglect the care of his health or his estate, which would more nearly relate to the state. Will the magistrate make a law that he not be poor or sick? Laws provide against injury from others; but not from ourselves. God himself will not save men against their wills.’–Thomas Jefferson (October 1776)
You go on to talk about abuse, fraud, etc. Like I said above. I am all for government maintaining its core role of being a regulator of fair process and a protector of property rights and rule of law. I am only arguing against it as a biased market participant, taking sides with one market participant against others. Today they force you to buy health insurance from rich insurance companies (who are given a protected markets free from competition by outsiders) to fund rich doctors (who are given a protected market free from competition), tomorrow they force you to buy financial products from my bank. Is that something you want?
You feel that healthcare is important to you and you want to pay into a system that protects you…fine…but why do you have to FORCE others to engage in your personal needs and wants against their will. Look, your health is important to you, I get it…I really do…. but when you decide that I must give up my liberty and property for your health, then your health becomes my tyranny, right?
You also have this great little blurb, ‘the law of the jungle (unrestricted “free” markets) just do not support enough “general welfare” for anyone but warlords to make enough money for a decent life.’
There is a difference between general welfare and specific welfare. One is broad and affects all citizens equally. The other is narrow and benefits some citizens more than others while penalizing some more than others. Obamacare falls under the ‘specific welfare’ clause….that unfairly benefits some at the expense of others. Let’s be clear on that!
You state, ’ we saw in this country between 1933 and about 1983 what regulated free markets could accomplish in raising the standard of living for everyone’
Eh…FDR’s intervention in the Great Depression prolonged it by 7 years according to Fed researchers. Want the link. If you then look at the postwar years when much of Europe and Asia was either destroyed or taken out of the market (behind the iron curtain) as an example of how regulation helped us…well eh…you may want to do better. We had less regulation back then also. Look at Federal Registry of regulations and laws…I can promise you LESS NOT MORE regulation back in the halcyon days you claim were some nirvana. No EPA, DOE, no war on poverty war on drugs programs, etc. No speed limits, no big coke cup bans, etc. You were freer then than now. Even I would want to go back to then in terms of regulation! Bring it!
You then state, ‘most people understand that a nation where most people can’t afford health care is not a healthy nation.’
Great…so you force them to live by your definition of what they want. Actions show they opposite of what you are claiming
You then make this mistake, ‘of course the government interferes with “market prices and competition.” that’s the point. government interference is needed when “competition” does not provide sufficient protection for the people.’
As I pointed out to Noni up above…look at the markets with little or no government involvement, textiles, phones, computers, etc. and then look at the markets with heavy government interference, healthcare, education, housing, etc. Which markets are better for the consumer? The ones that have more government interference or less. Want prices to come down, easy, open the market to foreign doctors and nurses, foreign insurance companies, foreign pharmaceutical companies, etc. That is competition. Not the government protected cartelization of industry you see today.
Finally, ‘for “debate much”, there isn’t much fun debating someone who has an iron-clad “reason” for everything that excludes any fact or concept he doesn’t want to face. tiresome.’
I am not sure where that is coming from. I get a lot of straw man arguments that claim points I am not making. Then the use of flaccid reasoning to try and support those weak challenges that I am not even making. When people can’t rise to the challenge I come back with they run away. I can’t help it if you and others can’t defend your talking points. I am here anytime. Come back when you can.
You conclude, ‘…feckless coward that i am, will most probably not return to answer…’
That is of course, your prerogative, But it is too bad. You actually made some good points above. Ones I easily knocked down but they were both good and valid nonetheless.
Buh-Bye!
K