Category: Economics

Thus always with socialists?

A few days ago, Andrew Sullivan linked to a story about (now deceased) English broadcaster Tony Wilson with this quote:

“I’ve never paid for private healthcare because I’m a socialist. Now I find you can get tummy tucks and cosmetic surgery on the NHS but not the drugs I need to stay alive. It is a scandal,” – socialized medicine patient Tony Wilson

The title of this entry doesn’t refer to any sense of hypocrisy. Mr. Wilson’s friends chipped in to pay for a five-month’s supply of the medicine he needed, so I’ll accept that he was stuck on his socialist beliefs. But I am not surprised at the irrational disbelief and outrage at finding out that socialism doesn’t work. It probably is a scandal that the NHS will pay for something unnecessary while rationing away from something necessary. But again, this isn’t a surprise.

In socialism, rationing decisions will be made by bureaucrats. Bureaucrats can’t know, and almost by definition don’t care, about individual needs or desires. Their job is to manage with limited resources, so they will make the tough decisions. There is some balance of uninformed and political involved, but neither should be reassuring or viewed as a path to competent choices. Success is percentages and luck, not merit.

As such, I’m fascinated by this mixed-up e-mail sent to Andrew Sullivan by a reader:

Every healthcare system, public or private, must choose which care to provide and the cost versus efficacy arguments must be weighed carefully. It is always bad to base public policy on a single anecdote and we certainly should not be denying people Sutent solely because someone taking it died within the month. It is telling, however, that you used this story to bash the NHS for being conservative with other people’s money – rather than bash the drug company for refusing to sell its product at a price the customer is willing to pay.

The first statement I’ve bolded is misleading if you don’t dissect it properly. Of course difficult rationing decisions must be made. This is true of any good or service with a finite supply. The correct analysis is who does the choosing. In public health care, it’s the government, with a preference for your opinion only if you’re politically connected or important. In private health care, the individual makes the decision.

The second bolded statement demonstrates what advocates for socialized medicine claim is the fatal flaw of the free market. We must bash the drug company because it didn’t sell at whatever cost the customer is willing/able to pay. No. Life has costs and no party should be expected or forced to offer something in a way that doesn’t meet its preferred terms. The result can be viewed as heartless, but coerced compassion is merely coercion, not compassion.

It would be better to run with this quote from Mr. Wilson:

“I used to say some people make money and some make history – which is very funny until you find you can’t afford to keep yourself alive.

Decisions have consequences. Socialists are just as capable of making “bad” decisions as capitalists. It’s a tragedy when anyone can’t afford to keep himself alive. I am not advocating heartlessness. I do not believe that a free market system should or would allow poor patients to die. I’m just saying it’s more effective to raise standards for everyone rather than setting a maximum standard so that everyone can be covered minimally on the public dime.

It is not reckless or immoral to earn wealth. Mr. Wilson apparently contributed much to his industry, but eschewed personal financial gain for his efforts. I wouldn’t make that choice, but it’s not my place to force him to earn wealth. But wealth isn’t a zero-sum game. It doesn’t have to be finite, to be stolen and shared.

To me, there is no greater achievement than when a man can take care of himself. I accept that someone can disagree. Everyone is free to pursue a goal of voluntary collective responsibility and support. But don’t try to force me to join you. If your economic idea can’t survive without force, it’s immoral.

Families harmed by government, seek government protection.

This article on the rising price of milk is a week old, but I’m just getting to it now. It shows the unintended consequences of stupid government policies, although it doesn’t try to do that. But that’s not what I want to focus on. Instead, I’m amused by the lede.

Record-high milk prices are stinging Americans at the dairy case, just as millions of thirsty school children are returning to classes.

First, that’s a quaint indirect use of “for the children”. I’m just frustrated that the basic economic truth doesn’t show up. These thirsty children have many options to satisfy their thirst. Some are good, some are bad, but there is a plethora of choices. Those who can’t afford or don’t want to pay for higher-priced milk can drink something else¹. This is basic economics, which is probably why it’s so readily ignored.

¹ We’re not going to delve into the myth that cow’s milk is the only, or even best, source of calcium, among other nutrients. Right?

Too conditioned to question the system?

Kevin, MD links to a story from England. The headline to the story states “I was too shy to talk to my doctor – and it nearly killed me”. That’s an interesting way of characterizing the facts. While the man, Andrew Wilson, did delay seeking treatment for six months, in part out of embarrassment, he also said he was too busy. If it said his delay almost killed him, it’d be much closer to the truth.

Unfortunately, the headline ignored what was clearly a much larger factor. Consider:

‘But as I doubled over in agony, I thought: ‘I wonder if…’ His GP gave him a prescription to treat an upset stomach. ‘Having suffered bowel problems for six months, I mentioned bowel cancer, but he said there was nothing to worry about and told me to come back if the pain persisted.
…

‘I rang my GP but he told me not to worry – “It’s probably piles,” he said.
…

‘My GP had said to me before I left for the States: “Don’t go on the internet and look up your symptoms or you will give yourself a fright.” But I was already frightened.’

The easier of at least two conclusions is medical incompetence for ignoring the symptoms because Mr. Wilson didn’t fit the typical bowel cancer case. But is it possible that in addition to, or in place of, incompetence, socialized medicine is to blame? The people are paying and the people don’t want to waste money on low probabilities, even though low probabilities mean that someone will actually have cancer. That’s sane?

The “right” to health care doesn’t include the right to live in spite of the well-considered economic rationing decisions of the majority? No. The article makes a cursory nod to its own title when it includes “many people are too embarrassed to report symptoms until they become debilitating.” That does not justify the title.

Before we rush into socialized medicine, we should understand the warning signs cancerous economics. Or are we too embarrassed to consider that economic populism is wrong?

If you can vote, you’re blameless to a politician.

From George Will in today’s Washington Post:

Moral hazard exists when a policy produces incentives for perverse behavior. One such existing policy is farm price supports that reduce the cost to farmers of overproduction, and even encourage it. Another is the policy of removing tens of millions of voters from the income tax rolls, thereby making government largess a free good for them.

If there’s one thing government is good at, it’s repeatedly amplifying moral hazards into a populist zeal for worsening the problem. Will’s column deals with the sub-prime mortgage meltdown and how Democrats are inevitably going to exploit it to push stupider economic policies to “protect” the little guy. Will points out that the primary problem with this is that the little guy who gets protection is the same little guy who willingly entered into the deal that is now causing him problems.

Granted, Democrats would seek to take from him if he’d won, exactly as they want to take from the big guys who won. So we should just ignore that some little guys won, too, and some big guys lost. That’s capitalism. Democrats don’t like capitalism.

The Schizophrenia of Economic Populism

In his lede to set up a different topic, George Will utilizes this story about Sen. Barack Obama, from the campaign trail:

Sen. Barack Obama recently told some Iowa farmers that prices of their crops are not high enough, considering what grocers are charging for other stuff: “Anybody gone into Whole Foods lately and see what they charge for arugula?”

Want to bet that Sen. Obama’s plan to get the prices of crops higher will involve some form of government subversion of economics? Want to also bet that he’ll campaign against the Whole Foods merger because it leads to higher prices? How about the possibility (probability?) that he’ll promise to help working families who have trouble paying their weekly grocery bills?

I’m joking, but I won’t be surprised if I’m prophetic.

Unsurprising news:

Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers, especially those shopping for their first homes.

Four out of 10 first-time buyers used no-down-payment mortgages in 2005 and 2006, according to surveys by the National Association of Realtors. But some lenders are now scrapping such loans completely. Others are pickier about who gets them. All figure that the more cash borrowers put down, the less likely they are to default.

This is good, of course, and should’ve been lender policy all along. But this is just proof that irresponsibility can’t last in a (mostly) free, competitive market¹. Capitalism works.

I’m curious how long it will be before some politician decries this as a policy designed to deny the poor access to the American dream, forcing him to legislate guidelines requiring lenders to offer no-money-down mortgages to disadvantaged borrowers.

¹ No, I will not be surprised if we see a Congressional bail-out of failed and failing mortgage companies. Hence, mostly.

Popular Economics versus Valid Economics

David Weigel, reporting on YearlyKos, provides this recap of a speech by Sen. Barack Obama:

Policy-wise, lots of spending, not as much “let’s stop government waste.” On health care: “If I had to design a system from scratch I’d design a single payer system.” On Katrina reconstruction: you want money, you got it.

There are (at least) two points to make on this. First, Kip’s Law says that “every advocate of central planning always — always — envisions himself as the central planner.” I think that applies here since centrally planning health care is exactly what Sen. Obama is trying to do with his “solution”.

More importantly, though, we’re not at scratch with our health care system. We have so many intricacies built in – and many of them are good – that jamming more socialist crap into the system than the government’s already forced is hardly a fool-proof plan for success. That said, if we take him at his thought process without the complicating issue of our existing system and assume he’d design a single-payer system, I’m left to conclude that he’s not particularly bright economically. I’ve already come to that conclusion, but he shouldn’t keep trying to reinforce it.

For example, Weigel reports on a blogger Q&A at YearlyKos:

1:25: Obama on deficits: “This is the most fiscally irresponsible administration in… memory.” (Obama was 8 when LBJ left office.) Would he deficit spend in order to eventually shrink the deficit? “Yes, but the question is, are we investing in the American people instead of in wars that should have never been waged?”

When a politician starts talking about “investing” in the American people, what he means is that he’s looking to take more of the American people’s money and give it back to them in packaged, limited, inefficient choices. I’d rather my representatives focus on the legitimate tasks of government and leave me with my money to invest in myself as I prefer.

Update: I changed the original title because I didn’t like it.

Economics won’t bow to populism.

Because Democrats incorrectly believe government is part of the solution, not part of the problem¹:

While John Edwards was winding up a tour of America’s most impoverished areas, another Democratic presidential candidate, Sen. Barack Obama (D-Ill.), came to Anacostia yesterday to stake his own claim as a poverty warrior — and to present a vision for fixing struggling inner cities that directly challenges that of Edwards.
…

To the Edwards campaign, Obama’s move to address poverty is a sign that Edwards has shifted the debate. “This is another example of Edwards leading on the issues and other candidates following,” campaign spokesman Eric Schultz said.

The Edwards campaign should refrain from patting itself on the back. Every economic populist in this (or any) campaign will wrap himself in this issue. That’s what economic populists do. It’s always a marketing push to the middle rather than an economic push to the top.

¹ Note that this does not mean I’m against a limited public safety net, which is the claim levied against libertarians. There is a difference in believing that government is ineffective at solving the problem and believing that Americans living in poverty “deserve” to be there or should stay there until they can dig themselves out.

Politicians should get merit-based pay.

Andrew Sullivan links to discussion about Barack Obama floating the idea of merit pay for teachers. I wonder if the idea has any staying power. In the system we have, it’s necessary and there should be no resistance to such common sense. Of course, debating this distracts from the need to get government out of the provision of education, but we may need to try smaller market-based reforms first. So be it.

It won’t make me vote for Sen. Obama, though. I have a hard time getting excited about a politician wanting to give some people a pay raise when all he intends to do with that raise is tax it more than it’s already being taxed. That’s nothing more than a shell game. I’m not interested.

Stirring Incomplete Information from Michael Moore

I touched on this yesterday, especially in the comments, but Michael Moore has trouble with facts. I wouldn’t call him a liar, because he’s a skilled propagandist. The facts, out of context, are still the facts. Forget that such abuse of context fails to reveal anything intelligent about policy. As long as it’s a fact, it can be defended.

That’s his tactic today in challenging CNN’s reporting on Sicko, with the requisite omission of any context. For example, Moore praises Cuba’s health system, although the WHO ranks Cuba 39th compared to the U.S. ranking at 37. Moore rebuts this “gotcha” moment from CNN by stating that he put this figure in the movie. Fair enough; I don’t doubt that he did. He’s generally guilty of omission, not commission. He’s a propagandist, so no surprises.

What he fails to do is provide any context for those rankings. The latest link I can find describes it’s methodology in determining that ranking:

In designing the framework for health system performance, WHO broke new methodological ground, employing a technique not previously used for health systems. It compares each country’s system to what the experts estimate to be the upper limit of what can be done with the level of resources available in that country. It also measures what each country’s system has accomplished in comparison with those of other countries.

WHO’s assessment system was based on five indicators: overall level of population health; health inequalities (or disparities) within the population; overall level of health system responsiveness (a combination of patient satisfaction and how well the system acts); distribution of responsiveness within the population (how well people of varying economic status find that they are served by the health system); and the distribution of the health system’s financial burden within the population (who pays the costs).

Broke new methodological ground. Oh, and employing a technique not previously used for health systems. Don’t forget comparing to what the experts estimate. Is it possible to have methodological flaws, or to at least draw irrelevant conclusions based on estimates?

But let’s get to the last two measures. For distribution of responsiveness, how many people in the United States are denied adequate health care, a question independent of whether or not they’ll face an economic burden from that health care? In the answer, would you rather be the average American or the average Cuban? I suppose if you believe that Moore’s visit to Cuba first-rate hospitals was more honest than mere propaganda from a Communist state, the answer isn’t obvious. But any answer other than the U.S. is wrong.

Of course, that doesn’t mean we have the financial burdens perfectly figured out, which is the last measure from the WHO. Again, no one is denied medical care, which should matter. Moore ignores that when he (apparently¹) fails to mention long waits and rationing for essential services in countries with single-payer health care. But specifically to funding, it’s not objective to decide that too many people face economic ruin (not a percentage of bankruptcies, as Moore states, but how many people?) from the system we have, so we should place the burden exclusively on taxpayers. That’s a pre-determined solution without concern for the actual problem, which is economic burden.

If we’re looking to reduce the economic burden from a health crisis, insurance to cover catastrophic medical care is the way to go. Have people pay for their own preventive care, or buy separate insurance for that, if they choose. But disentangle coverage for catastrophic events from coverage for routine care. The current situation we have where the two are co-mingled is largely a government-created problem. Fix the broken government incentive problem by removing improperly targeted incentives, such as tax-subsidized employer health insurance.

Instead we’re left with disingenuous framing of the problem while ignoring what would actually resolve the issues we face. This quote exemplifies focusing on wrong assumptions:

“It is especially beneficial to make sure that as large a percentage as possible of the poorest people in each country can get insurance,” says [Dr Julio Frenk, Executive Director for Evidence and Information for Policy at WHO]. “Insurance protects people against the catastrophic effects of poor health. What we are seeing is that in many countries, the poor pay a higher percentage of their income on health care than the rich.”

Dr. Frenk’s opening sentence is fine, if he understands the true problem. The rest of his quote suggests he does not. If he understood, he would’ve stated that insurance against catastrophic medical events protects people from the catastrophic financial effects. He didn’t, offering only the empty, obvious fact that the poor pay a higher percentage of their income on heath care than the rich. Of course they do, just like the poor pay a higher percentage of their income on food, housing, gasoline, clothing, and every other generally necessary expense. This is not news, nor is it specific cause for government intervention through economic redistribution² and health care financing and provision, contrary to what Moore believes.

Moore also thinks the 20 to 30 percent of Canadians who disapprove of their waiting times for health care don’t matter. The minority never matters to a populist, or the liberty lost to mob rule. Now ask yourself if Moore’s comparison of American and Cuban infant mortality rates, for example, might have a bit more nuance than he’s letting on.

Link to Moore’s rant via Boing Boing. Moore’s rant on CNN here.

¹ Full Disclosure: I still haven’t seen Sicko. Viewing it isn’t necessary for my analysis here. Also, I have no respect for the WHO, since it promotes a gender bias in unnecessary, forced genital cutting, and it’s incapable of understanding that circumcision to prevent HIV infection is better suited for sexually active adults who volunteer for the procedure based on their own evaluation, rather than forcing the surgery on infants who will not be sexually active for well over a decade.

² I wonder what Dr. Frenk’s position would be on taxes to pay for health care. Would he be as distressed that the rich pay a (much) higher percentage of their income in taxes than the poor? If it’s about fairness in percentage, a little fairness in analysis might be useful.