On Healthcare

A friend of mine emailed me this message regarding a quote from Rick Santorum:

 

So would you call this one slightly over-the-top?

"Almost 60,000 average Americans had the courage to go out and charge those beaches on Normandy, to drop out of airplanes who knows where, and take on the battle for freedom.  Average Americans.  The very Americans that our government now, and this president, does not trust to make decision on your health care plan.  Those Americans risked everything so they could make that decision on their health care plan."  

First, that is just plain dumb....storming beaches of Normandy for health care.  Second, what choice?  Do you have a realistic choice outside of taking what your employer offers?  

Grade:  FAIL!

Here’s my response (rant):

Under Obamacare, healthcare companies must accept all patients, even those with pre-existing conditions; they must spend 80% (MLR) of their premiums on healthcare; and they cannot now implement a cap on lifetime coverage. 

Ignoring the social aspects of these new rules, what do you predict will occur with the average premium cost?  Yes, it will increase.  Now, Senator Feinstein has introduced a bill that would give federal regulators the power (only state regulators currently have this power) to stop insurance companies from raising premiums.

So, Obamacare forces insurance companies (whose profit margins are in the 3-5% range) to incur increased costs and subsequently strip them of the power to pass along some of those costs to consumers. Genius.

 In sum, our government wants to bankrupt the industry, bail them out, and take them over ~ ergo, single-payer system.  This will undoubtedly happen.

I object to 271 people (219 Reps and 51 Senators + 1 Prez) using our legal system to completely rearrange, to their personal liking, our healthcare system.  The private sector, NOT government, over the decades has built, advanced, perfected, and delivered healthcare services to customers despite heavy regulatory burdens and massive government intervention. 

Entrepreneurs and innovators risked their labor and capital to deliver a product/service (healthcare) in exchange for profit.  This profit, a vital market signal that customers value highly the corresponding product/service, ensures that more of the product/service (healthcare) will be brought to market.  Falling profits, or worse, no profit, signal that the product/service isn't valued by customers OR that government has intervened to an extent that it has captured (through regulation or taxes) all economic profit.  The latter will prove true in our case.

Government, through its decrees, mandates, and directives cannot successfully centrally manage an industry as complex and as large as our healthcare system.  Government cannot predict with any degree of accuracy which services will be valued by customers; it doesn’t possess the knowledge of millions of consumer’s preferences about healthcare; it cannot efficiently allocate capital (and labor) across broad sectors of an ever-changing industry; it cannot effectively guarantee every single citizen access to healthcare without suffering severe shortages which must be overcome by rationing.

I could go on, but I have work to do.  It’s pure hubris to think that Senator Reid could fashion a 2,000 page bill behind closed doors to improve healthcare.  Not one committee hearing was held on this bill.  How many experts (doctors, lawyers, healthcare administrators, etc.) were brought to Capitol Hill to testify about the bill’s consequences?  NONE!  Never before in our history has a bill, laden with huge social policy ramifications, been rammed through the Congress (on Christmas Eve mind you!) without any vetting by a Senate or U.S. Representative hearing/committee.  This was pure foolishness, hubris, insanity, regrettable, arrogant ~ in short, a crime.

That’s what I have to say about Obamacare.  I pray the Courts find this bill as obnoxious and sickening as the majority of Americans find it.  If the bill is struck down, every single person who voted in favor should resign in shame, for they will have failed in their sworn duty to uphold the U.S. Constitution.

Consumer Financial Protection Bureau…”Protecting You”

This is what the new CFPB professes to do – Protect You

But do we need protecting?  A fine statesman once said “a government big enough to give you everything you need, is big enough to take away everything you have”, and this new step-child of Dodd-Frank can do just that.  The CFPB will have vast new powers to write rules affecting everything from payday loans to mortgages to bank accounts.  What will this mean for you?  Less choice, for sure.

This Bureau, with the stroke of a pen, can disappear businesses, like pay-day loans, with zero accountability.  This will have a chilling effect on innovation, dis-incentivizing entrepreneurs from developing new products and services.  Even worse, the Federal Reserve, not Congress, determines the bureau’s budget, paving the way for unchecked growth and expansion.

The CFPB is tasked with an impossible and foolhardy mission: determining which products and services are “bad” for consumers before they are brought to market.  Government bureaucrats can’t determine this, only consumers engaged in free exchange with merchants can decide which products and services win out.  Certainly, there exists miscreants prowling about ready to cheat you out of your money, but they usually don’t survive for very long.  And if you are cheated, the rule of law affords you redress. 

Smart and savvy consumers are the best market watchdog, not another unruly government agency masquerading as the Money Police.  Our liberty is at stake and every new government program, agency, and bureau threatens to take it away – all in the name of “protecting you”. 

Man, Economy, and State & Mainstream Economics

I was inspired to write this post by the discussion at Coordination Problem regarding the use of Man, Economy, and State (MES) as a principles textbook. MES is Murray Rothbard's magnum opus on economic principles. The concern that one commentator had was the utility of MES as a preparatory text for higher-level economic study. I think the main concern is not the quality of economic insight one will get from Rothbard, but rather the methodology used by Rothbard.

The Austrian economists use verbal logic and a priori reasoning to develop theory. Mainstream economics uses symbolic logic and develops hypotheses that are empirically tested. Austrian economics weaves its theory into narrative history to explain economic events. Mainstream economics uses econometric modeling to see if the hypothesis fits the data. The skill sets for each are somewhat different, so I understand the concern.

As one trained in the mainstream who is transitioning to the Austrian view, I think I have some insight here. First, at the undergraduate level, the main tools and conclusions offered by Austrian economics and mainstream (neoclassical) economics won't be much different. Supply and demand curves are derived in different ways but this follows from different views on the nature of homo economicus. This, though, is an important point. Neoclassical economics assumes the economic agent is rational and greedy. Austrian economics assumes the economic agent is just an ordinary person with his or her own tastes and desires. Austrian economics is based on a much more realistic view of humanity than neoclassical economics. So while Austrians might talk about utility, they don't think that utility curves can be modeled as functions of wealth, for example - it's much more complex than any math function can capture.

So for the undergrad, a class using MES would be better, I think, than the typical mainstream class. Would is hamper the person who wanted to major in economics? After all, the upper level classes may not use Austrian economics texts. As I said, the main knowledge expected from an intro class would exist, and then some. The MES trained student would know more economics but have a different view of some key areas. Chiefly, the Austrian view of production is substantially different from the neoclassical view. But this is a good thing - the neoclassical view is easy to learn, but the Austrian trained student will be able to intellectually engage and criticize this story, rather than just accept it. This may be frustrating for some professors, but will be very fruitful for the student.

Well, that's micro, but what about macro? Well, the Rothbard-trained student would have a hard time with a Keynesian-style macro, but not as much of a hard time with a neoclassical-style macro, simply because the Rothbardian student would announce "bullshit!" so many times. In the Austrian view, all economics is micro, and anything termed "macro" is just a statistical description of some economic data. As Roger Garrison (I think) said, there are macro problems but only micro solutions. But, neoclassical macro is often modeled in micro terms, but here too is a problem since the neoclassical style makes heavy use of the "representative agent" technique and Austrians can't accept that all people are the same, or similar often to use one or two households to represent an entire population.

Now, what about graduate study? Well, I did Ph.D. level economics without any senior economics courses from my undergraduate or Master's degree. The thing about Ph.D. level econ (my book was Mas-Collel et al. if you want to have a look at what we did) is that it doesn't assume you already know economics. It does assume you're pretty good at math, however. I viewed my Ph.D. micro as applied mathematics, and I didn't find I really increased my economic intuition or really learned the 'economic way of thinking.' So MES won't prepare you for that - but I think it's a critical complement to it.

Thus, my conclusion is that studying Austrian economics as an only course in economics would give the students all the grounding they need to really understand the world and especially the effects of policy interventions. For an econ major, it is an invaluable complement to mainstream learning, but may require the student to do a little extra math on the side if the student wants to major in mathematical economics. And finally, for the graduate student in econ, MES won't help with your classes, but it will be an invaluable antidote to them.

A Visit to the Doctor…and Nanny State

My wife recently dragged our kids to their annual well checkup.  It was their first doctor visit in a while, and our two yayhoos weren’t exactly looking forward to the shots, pricks, and other bodily tests rendered by the doctor’s staff.  As a bonus, this “well checkup” was absolutely free, thanks to Obamacare.  I’m told annual checkups do not cost a thing.  I guess the benevolent doctor donates her precious time, as well as her staff, to all appointments such as mine.  I was unaware that we could just legislate free medical care, but what do I know.

My wife tells me that the visit went generally well, except for the last part, when the doctor began to ask my girls seemingly irrelevant non-medical questions.  The first question posed by the doctor was ‘do you girls ride in a car seat’, and ‘do you ever ride in the front seat of the car.’  Fortunately for everyone, I wasn’t there to intervene – and ask the doctor a few questions of my own.  The doctor then asked ‘do you have a gun in your house’ and ‘what would you do if you were at a friend’s house and they had a gun?’  Really?!  (I would have answered the last question with ‘I’d go home and get my gun!’)

It seems our doctor visit turned into an interrogation.  What if the kid, any kid, gave the wrong answer – would the doctor then dial up child protective services only to have the child snatched up by the all-caring state?  Now, if the doctor suspects abuse, additional questioning can be justified.  But this sort of probing and fishing seems inappropriate and unwarranted.  My private physician has no business asking my children if I keep weapons in the home or if they ride in the front seat of the car.  Doctors should do what they do best: make us well when we are ill, and not inquire about car seats and guns.  Those kinds of questions only make me sick.