Force or Reason?

"Force and reason --
which last is the essence of the moral act --
are at the two opposite poles.
The one who compels his neighbor...
treats him, not as a being with reason,
but as an animal in whom reason is not."

-- Auberon Herbert (1838-1906) English author (HT Liberty Quotes)

Minimum Insurance laws and the Uninsured

Although not universally agreed upon, a strong theoretical and empirical connection exists between a legally mandated minimum wage and the rate of unemployment:

When the minimum wage that is legally-allowed increases, so does the number of unemployed.^{1, 2, 3}

A similar cause-and-effect relationship exists between insurance mandates and the uninsured. Understanding the effect of "minimum insurance laws" is complicated by the fact that different mandates have different cost consequences, and each state has its unique mix of mandates. There are four main types of health insurance mandates: benefit mandates (which are not cost equivalent across benefit types), community rating, guaranteed issue⁷, and mandatory insurance. Each of these categories will increase the cost of insurance, but to different degrees. Insurance mandates all raise the price of obtaining insurance, which in turn increases the number of people unable or unwilling to pay the premiums:

When the minimum insurance that is legally-allowed increases, so does the number of uninsured.^4,5,6

1. Mythology of the Minimum Wage http://mises.org/story/2130
2. Minimum Wages and Employment http://papers.ssrn.com/sol3/papers.cfm?abstract_id=961374
3. Minimum Wages http://www.econlib.org/library/Enc/MinimumWages.html
4. Health Insurance Mandates in the States 2008 http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf
5. Mandated Health Insurance Benefits: Tradeoffs Among Benefits, Coverage and Costs?http://www.kff.org/insurance/loader.cfm?url=/commonspot/security/getfile.cfm&PageID=13995
6. The effect of State regulations on Health Insurance Premiums: A Revised Analysishttp://www.heritage.org/research/healthcare/cda06-04.cfm
7. Impact of Guaranteed Issue and Community Rating Reforms on Individual Insurance Markets, 2007 http://www.ahip.org/content/pressrelease.aspx?docid=20794

Obama's State of the Union.

State of the Union in One Sentence: "We need to rise above fear, hesitation, and partisan politics–to give the government all the power it needs to solve all our problems." from Voices for Reason.

Cato Institute exposes Falsehoods and Misleading Statements:

What the President isn't Mentioning

When listening to or reading President Obama's State of the Union address, please keep the following in mind:


The above figures should considered grossly incomplete and inadequate estimates since the CBO must project costs based on what Congress says it will do in each bill (such as allow the Medicare care pay cut to go into effect) rather than what is most likely to occur (postpone scheduled pay cuts, as has occurred without fail in the past.) The entire healthcare bill was written in order to create the illusion of cost savings, moving the budget-busting, deficit-increasing measures to other bills so they would not be included in cost calculations for the healthcare bill itself.


(And check out this article which connects this to special interest legislation and spending.)


Per Carpe Diem: "The entire burden of job losses during the recession has fallen on the private sector, while the public sector has actuality expanded and added jobs during the economic downturn...to the extent that the stimulus has created or saved any jobs, they've been in the public sector, and have likely come at the expense of crowding out the growth..in the private sector." [Yet another example of What is Seen and Not Seen.]


For an explanation on the insolvency of Medicare, read "Social Security and Medicare:"Trust Funds" at Krazy Economy.

Other revealing facts:
Currently, 19% of federal employees earn over $100,000--up from 14% at the beginning of the recession. From USA Today:

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000...

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared with $40,331 in the private sector.

Ancient Wisdom

“Republics decline into democracies and democracies degenerate into despotisms.”

— Aristotle


Just where in this progression are we?




(HT The Forgotten Man)

Alternative Energy at its Best

I just finished reading The Boy Who Harnessed the Wind by William Kamkwamba and Bryan Mealer. This is the inspirational story of the 14 year old boy from Malawi who built a windmill from scrap metal and other materials collected from a junkyard in order to provide his family with electricity for lighting and an irrigation pump--and he did it in the middle of a famine! A fabulous story of perseverance, courage and innovation.

The opening line from the book hints at the distance this young man had to travel:

Before I discovered the miracles of science, magic ruled the world.

Nothing came easy. Every step required focused determination and confidence in his own ability to accomplish the goals he set for himself.
(Isn't this smile just fabulous?)

The following clips are a great introduction, (especially his second TED talk) but I highly recommend reading the book. It not only tells of the process William went through to build his windmill (and homemade electrical switch and circuit breaker!) but it also introduces you to the story of Malawi and its struggles under corrupt government.

After he finishes high school at the African Leadership Academy, William will attend college in the US in the fall of this year. He has started a nonprofit organization in order to support projects to improve conditions in his village. You can check it out at MovingWindmills.org.

First TED Talk 2007


Second TED Talk 2009


Moving Wind Mills: The William Kamkwamba Story


TV Interview

Pelosi: House lacks votes to pass Senate Healthcare bill

From The Hill:

House Democrats lack enough votes to pass the Senate's healthcare bill, Speaker Nancy Pelosi (D-Calif.) said Thursday.

Pelosi threw cold water on the idea that the House could muster enough support to pass the Senate's bill, which includes a number of provisions liberals in the House find distasteful.

"I don't see the votes for it at this time," Pelosi told reporters during her weekly press conference. "The members have been very clear."

Haiti: Poverty is the Problem

Walter Williams has an excellent op-ed which compares the devastation wreaked by the 7.0 earthquake in Haiti to the much less devastating earthquakes in California (7.1 Loma Prieta 1989, 7.8 San Fransisco in 1906.)

Why such a difference? Wealth.

Why is Haiti so poor? Corruption and lack of economic freedom.

Read the article for details.

Haiti's Avoidable Death Toll by Walter Williams, Jan 20, 2010 Townhall.com




(HT The Atlashpere.)

John Coleman on Climate Change: Brief, Eloquent and Scientific

There is nothing particularly new in meteorologist John Coleman's 8 minute video clip. He simply presents a brief, eloquent, scientific explanation of why we do NOT need to fear the burning of fossil fuels. This clip could be used as a starting point for discussions about why we do not need economy-crippling legislation to address global warming.




More by John Coleman can be found here with his televised special rport, "Global Warming: The Other Side."

No Time for Complacency

Scott Brown has won the Massachusetts Senate seat--which will give Republicans 41 votes to filibuster undesirable bills. It's not all cake and roses though. Brown voted for the disastrous government-run healthcare plan in Massachusetts (complete with an individual mandate to purchase health insurance) and has supported greenhouse gas curbs--so he's not a die-hard free-market guy by a long shot. But, Brown centered his campaign on promises to vote against Obamacare and cap-and-trade---and it was those promises that turned this race into a referendum on Obama's political agenda.

So, there is a chance that we may escape some of the more egregious assaults on our freedom and prosperity---- a least for a while. But there is also a chance that we won't.

In the article, "Why Massachusetts Doesn't Matter," from today's American Prospect, Paul Waldman outlines ways the Democrats can ignore the message of Massachusetts' election (as well as the growing disapproval throughout the country with Washington's attempts to rapidly pass massive, expensive and intrusive legislation.) It's actually pretty frightening just how easily they could pull it off. Please read the whole article, but here are a few salient paragraphs.

[E]ven if Brown should prevail, there is a path -- more than one, actually -- for Democrats to lunge across the finish line and pass health-care reform. It might not be pretty, but after the last year of legislative ugliness, it won't much matter.

The first path would be for the House -- where they have this strange tradition in which the majority rules -- to simply pass, as is, the bill that already passed the Senate. Obama would sign it, and the infrastructure of reform would be in place. Then they could attempt to correct some of the Senate bill's weaknesses in the reconciliation process, which only requires 51 votes (though it does limit which parts of the bill can be addressed).

The other path -- and the preferable one, from a policy perspective -- would be to get the bill done before Brown is sworn in. Keep in mind that the White House and congressional leaders are nearly done hammering out the differences between the two chambers' bills. Though reports about what is in this version are sketchy, it looks to be a considerable improvement on the Senate bill. They have to get a score from the Congressional Budget Office, which takes a few days. Then depending on how the bill is offered in the Senate, a vote could come within a few days after that. In other words, no matter what happens in Massachusetts, if Democrats decide to move things through quickly, we could get a vote on health care within 10 days.

Last week, Brown alleged that a conspiracy was afoot to prevent him from taking office until health reform passes. But no conspiracy would be necessary. According to the person in charge of elections in Massachusetts, Secretary of State William Galvin, state law requires local election officials to wait 10 days after the election to make sure that all overseas and military ballots have been returned; they then have five more days to submit their official results. That's over two weeks right there. Then the Senate has to arrange for the vice president, in his role as president of the Senate, to preside over the swearing-in. That could add a few more days, depending on his schedule. Put it all together, and it should be relatively easy to pass health-care reform before the new senator takes office, even without engaging in any of the delaying tactics Republicans routinely use (recall that because of Republican challenges to his victory in the 2008 Senate contest in Minnesota, Al Franken didn't take office until eight months after the election).

Hopefully they won't have the hubris to attempt any of those tactics, but since they are politicians, it's hard to feel too safe.


UPDATE 1/20/09: Commenter Chris Hibbert gave an important (and encouraging) clarification on the bill-passing process:

Waldman is a little confused about the legislative process. His first proposal is that "The House [would] pass, as is, the bill that already passed the Senate. Obama would sign it, and the infrastructure of reform would be in place. Then they could attempt to correct some of the Senate bill's weaknesses in the reconciliation process." But reconciliation happens before a bill passes, when there are two versions to reconcile, one produced by the Senate, and the other produced by the House.

If the House passes the Senate's bill, they have to pass new legislation if they want to clean things up. The could still pass the Senate version, but that would mean abrogating any deals made with recalcitrant congresscritters. They'd have plenty of reason to say "this wasn't the deal I agreed to."

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Haiti's Un-natural Disaster

News on Haiti has focused on the horrible and devastating destruction of the recent earthquake. Deaths, injuries, collapsed buildings and ruined infrastructure have overwhelmed the country. People need help immediately--and help is being sent by both governments and charity organizations. But, and this "but" is key: once the immediate needs have been met, a hard look needs to be taken at why Haiti is so vulnerable, why is it the poorest country in the Western Hemisphere? Attention now necessarily goes to relieving the massive suffering---but unless the underlying forces which keep the bulk of Haitians destitute are understood and reversed, all the current rescue efforts will only be a temporary patch work.

The real tragedy of Haiti is not the earthquake's aftermath. That plight, as horrific as it is, is a short term problem which has the attention of the world, and will be solved. It is the long term disaster of Haiti's economic stagnation and political corruption that must be corrected before Haitians will have a chance to participate in the world's growing prosperity.

I recently read a fascinating book about Dr. Paul Farmer's heroic efforts to improve the healthcare received by Haitians. Farmer's story is inspirational for demonstrating what a single dedicated and passionate individual can accomplish--and for that example, it is a story worth reading (Mountains Beyond Mountains). And yet, although he is clearly an astute diagnostician and clinician of infectious disease, his understanding of economics is mistakenly Marxist.

Richard Ebeling has an article which begins to look at the man-made aspects of the current disaster.

At a time when many countries in the less-underdeveloped areas of the globe have been rising out of poverty over the last several decades, Haiti, however, is one of those countries that has continued to stagnate with a 50 percent rate of unemployment of the work force and with 80 percent of the population estimated to be living below the poverty line before the earthquake. At a time when more and more countries are becoming industrialized and economically more diversified, over 65 percent of the people in Haiti still depend upon low productivity farming for their meager standard of living.

The government, not just for decades but also for more than two centuries, has been notoriously corrupt, brutal and tyrannical. If there is any instance of Frédéric Bastiat's notion of "legalized plunder," under which the powers of government are applied to steal the wealth of some for the benefit of others who are politically well connected, it is Haiti throughout its sad history.

Billions of taxpayers' dollars from the United States and many other countries have all gone down a huge government rat hole that has lined the pockets of the rulers and their political cronies in Haiti.

From slave colony and pirate haven, through the despotism of rebel leaders such as Jean-Jacques Dessalines, the serfdom of Jean Pierre Boyer, international meddling by France, Germany, the US and Great Britain, dictators Trujillo and the Duvaliers, the Tonton Macoutes death-squads, and the controversial presidency of Jean-Bertrand Aristide---the government instability, as evident by 32 coups in 200 years, has allowed almost continual violation of personal liberty and property rights, which even at its best were never truly secure.

So send dollars to charity to help with the immediate needs---but the longer lasting help must consist of eliminating the un-natural disaster of corrupt, unstable and exploitative government. Rule of law, protection of individual rights and and economic freedom must be established in order for the Haitians to generate the wealth they need to raise themselves permanently out of poverty and protect themselves from the devastation of future natural disasters.


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Healthcare Posts Recap

Just in case you want to write your Representative or Senator regarding healthcare reform, here is a collection of posts with relevant information.

Do American's pay more for their healthcare?
--Price control limits dollar amounts but increases costs in terms of waiting times, lost productivity, pain and suffering.

The Adverse Incentives of Health Care Spending
--The bulk of healthcare costs are due to personal behavior choices. Controlling health care costs requires controlling behavior and life styles.

Actually, Mr. President--our health care is too cheap!!
--How third-party payment increases costs

Health Care Disaster, Let us Count the Ways
---A list of the coercive mechanisms employed under the current healthcare reform bills: taxes, bureaucracies, mandates, and wealth distributions.

Public Option and Individual Mandate BOTH Destroy Real Choice
--Many who understand the destructiveness of a Public Option, fail to see that mandating health insurance will lead to the same result.

Medical Services Received: The Uninsured in U.S. = Canadian Universal Coverage
--The uninsured in the US receive more healthcare than Canadians in some key preventive health areas.

Lasik: A Model for Health Reform
--An 8 minute video clip addressing how costs and quality improve in a free market, even in health care.

Mammograms: The Road to Rationing?
--The recent controversy over recommendations for breast cancer screening is just the tip of the ice berg if we increase government control over our healthcare. This post gives a detailed analysis of the research on mammograms, compares the various recommendations, and highlights the dangers of letting the government set the standards.

The Legal Plunder of Healthcare
--A political cartoon and a quote from Frederic Bastiat on the problem of legal plunder (government redistribution of wealth.)

Reducing Costs (of medical care) through Freedom
--Video clip and a brief summary of a speech by Dr. Jane Orient.

HR 3962: Expanding Immoral Medicine
--An exceprt and link to an article by Dr. Lee Hieb. on the immorality of government-controlled healthcare.

5 votes further away from freedom
--On the passing of HR 3962.

A Letter to My Representative about HealthCare Reform
--Exposing how politicians misuse the vocabulary of a free markets to hide the coercive actions by the state.

Pay the price, or pay the consequence
--Excerpts and links to a series of articles on health care costs by economist Thomas sowell.

Healthcare Morality and Practicality
--When moral principles are breached, when individual rights are violated, the results will not and cannot be practical.

Whole Foods Healthcare--Choice without Force
--Video clip on the whole Foods health plan---a free market alternative to Obamacare which lowers costs and increases satisfaction through patient choice and responsibility.

Statism: The Essence of Government-Run Health Care Reform
--Government-run health care or health insurance or mandates ALL are forms of statism.

Robert Reich on Health care Reform: No Additional Comments Needed

The Moral Case for Private Medical Care
--Speech by Dr. John Lewis

Nationalized Medicine: A War of All Against All
--There is no right to the life, liberty or property of another human being. any attempt by government to provide health care or assure access necessarily involves the violation of those individual rights--a path which pits one man against another.

de Tocqueville decribes Obamacare
--200 years ago, de Tocqueville warned about the dangers of an incremental loss of liberty

You Can't Change Reality by Mandate
--Costs don't change just because the government restricts payment or implements price controls. Just as private property is the remedy for the Tragedy of the Commons, so personal responsibility operating within a free market is the remedy for run-away health care costs.

Do American's pay more for their healthcare?

A major rationale in the push for government involvement in the U.S. health care system is the claim that the U.S. pays significantly more per capita for medical services than countries with some form of nationalized (e.g. government controlled) health care.


Source: Organization for Economic Co-operation and Development. OECD Health Data 2006, from the OECD Internet subscription database updated October 10, 2006. Copyright OECD 2006, http://www.oecd.org/health/healthdata.

Or that we spend a greater amount of our GDP on health care:



Source: Organisation for Economic Co-operation and Development. OECD Health Data 2006, from the OECD Internet subscription database updated October 10, 2006. Copyright OECD 2006, http://www.oecd.org/health/healthdata.

But looking at dollars spent on the purchase of medical goods and services does not capture the full costs of healthcare decisions.

In all forms of nationalized health care, spending for medial care is capped, either as a budgetary total, or in the form of price controls on reimbursements. Limits on budgetary totals lead to obvious rationing, but a less obvious form of rationing also occurs with price controls. Whenever the price of something is held artificially below its true costs, demand rises and shortages occur. This is a basic, fundamental economic fact.

When demand exceeds supply, the normal economic response is for the price to rise. Higher prices signal greater scarcity and discourage overuse and waste.* People have the information they need to prioritize and to make better decisions about their purchases of these scarce resources.

When prices are not allowed to rise, means other than price discrimination emerge for allocating resources. Waiting times lengthen, and quality deteriorates. Office visits shorten. Some services--like phone consultations or home visits--disappear. Procedures that used to be accomplished in one visit, now require two or more. All of these are ways of shifting the "costs" of a good or service elsewhere.

Longer waiting times for medical treatment increases pain and suffering. Disability, and even mortality, increase due to delayed diagnosis and treatment. Significant economic consequences accrue through lost wages and productivity. Such changes in access and quality, and the increased economic costs not measured by the direct purchase of medical treatments, are not captured by the data on per capita spending.

If a person has to wait a year or longer for knee or hip surgery (as they do in Canada and Great Britain) how much economic productivity is lost as compared with receiving the surgery in less than 4 months (as occurs in the US)? What is the value of less pain and suffering? What is the dollar cost of disease progression due to prolonged wait times?


The answer to the question "Do American's pay more for their health care than people in other countries?" is not answerable by simple per capita or %GDP spending comparisons.

In fact, given our current mixed economy, and its destructive effects on price signals, it is not answerable at all.



Addendum: Also not included in official figures are any bribes, "gifts" or black market purchases--which in some countries can be quite significant. Check out this story about healthcare in Japan.

*The higher prices also allow for higher profits, which encourages others to enter the market, increase supply, and subsequently bring about lower prices.

To End Poverty: Fix Governments

What Makes a Nation Rich? By Daron Acemoglu

The average citizen of the United States is ten times as prosperous as the average Guatemalan, more than twenty times as prosperous as the average North Korean, and more than forty times as prosperous as those living in Mali, Ethiopia, Congo, or Sierra Leone. The question social scientists have unsuccessfully wrestled with for centuries is, Why? But the question they should have been asking is, How? Because inequality is not predetermined. Nations are not like children — they are not born rich or poor. Their governments make them that way...

People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate. That's what determines the haves from the have-nots — not geography or weather or technology or disease or ethnicity.

Put simply: Fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments. (Emphasis added)

Opportunities to achieve and innovate are meaningless without the security to keep the fruits of your labor. The root cause of wealth is the protection of individual rights, including property rights. The root cause of poverty is the violation of these rights, not just by criminals, but most importantly by governments.

Acemoglu's article compares the richest to the poorest. Another article compares gradations of wealth within the developed countries. If each U.S. state is treated as a country, and then is ranked with countries in Europe in terms of GDP per capita, with the exception of Luxembourg (#2), the first 20 twenty "countries" are states within the U.S.:

2006 GDP-PPP Rankings of EU Nations vs Individual US States

US State or EU Nation	2007 GDP-PPP [billions USD]	2007 Population	2007 GDP-PPP per Capita [USD] ▴
US - District of Columbia	93.82	588,282	159,479.64
EU - Luxembourg	38.14	480,222	79,421.60
US - Delaware	60.12	864,764	69,519.55
US - Alaska	44.52	683,478	65,133.04
US - Connecticut	216.27	3,502,309	61,749.55
US - Wyoming	31.51	522,830	60,275.81
US - New York	1,103.02	19,297,729	57,158.23
US - Massachusetts	351.51	6,449,755	54,500.36
US - New Jersey	465.48	8,685,920	53,590.64
US - Louisiana	216.15	4,293,204	50,346.08
US - Virginia	382.96	7,712,091	49,657.61
US - California	1,812.97	36,553,215	49,598.04
US - Nevada	127.21	2,565,382	49,588.33
US - Minnesota	254.97	5,197,621	49,055.14
US - Colorado	236.32	4,861,515	48,611.18
US - Washington	311.27	6,468,424	48,121.46
US - Hawaii	61.53	1,283,388	47,944.97
US - Maryland	268.69	5,618,344	47,822.81
US - Texas	1,141.97	23,904,380	47,772.21
US - Illinois	609.57	12,852,548	47,427.95
EU - Ireland	191.60	4,109,086	46,628.37
United States - All	13,743.02	301,621,157	45,563.85

In fact, the U.S. states holds 37 out of the top 40 slots.

Economic Freedom of the World provides a great map illustrating the correlation between wealth and economic freedom.



And what is economic freedom? James Gwartney and Robert Lawson define it thus:

Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.

Economic Freedom of the World: 1996 Annual Report

But more simply, it is individual rights applied to the realm of trade.

And what institution is designed with the purpose of protecting individual rights?

[T]o secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.--Declaration of Independence

It is through securing rights that governments provide security.
With security, of life, liberty and property, both the means and the incentives for wealth production exist.

Property rights, not redistribution, are the foundation of good will, compassion, generosity, equity, and justice.

To end poverty, promote freedom.


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Healthcare Reform Legislation: Where is the Transparency?

HT Patient Power via Paul Hsieh @ FIRM

Associated Press--House and Senate Democrats intend to bypass traditional procedures when they negotiate a final compromise on health care legislation, officials said Monday, a move that will exclude Republican lawmakers and reduce their ability to delay or force politically troubling votes in both houses...Both houses have already passed legislation to remake the health care system...There are literally hundreds of differences between the two bills, a House measure that ran to 1,990 pages and a Senate version of 2,074, not counting 383 pages of last-minute changes. The biggest differences involve a dispute over a government-run insurance option — the House wants one, but the Senate bill omitted it — as well as the size and extent of federal subsidies to help lower-income families afford coverage...

Bypassing a formal conference committee enables Democrats to omit time-consuming procedural steps in the Senate and prevents Republicans from trying to delay the final negotiations. Under Senate rules, three separate votes are required before negotiators for the two houses may hold a formal meeting. While the three normally are agreed to within seconds, each may be filibustered, and Democrats would then have to produce 60 votes to cut off debate.

Read more from AP here

Posted on HealthCare BS Obama Promises Transparency:


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Wealth Truly is the Solution

I had a thought-provoking conversation this past weekend with an aquaintance who consults for a medical device company. He was embarrassed to discuss the device, and ashamed of its primarily cosmetic use. The device uses radio wave energy to stimulate collagen growth in the tissue between the vagina and rectum--firming things up, so to speak. It's current market is in the U.S. as a cosmetic device. But it turns out this same technology can be used to halt excessive uterine bleeding and allows the procedure to be performed without need of sedation or the usual operating room requirements for sterility-- creating huge cost savings! This means that potentially life-saving therapy will be affordable for a greater number of individuals, and in particular, will be much easier to implement in poor and developing countries.

What my acquaintance failed to connect is that most, if not all, new technologies are expensive at first--which means the clientele will be rich, and the initial application may seem frivioulous or superfluous. One hundred years ago, cars were a luxury that only the rich could afford. They weren't even reliable enough to serve for useful transportation. Thirty years ago, pocket calculators could only add, subtract, multiply and divide, and cost over $100 dollars. It too was considered a rich man's toy. Twenty years ago, only doctors and a select few others, sported pagers on their belts. A bit later "mobile phones" appeared, a luxury solely for the rich and powerful elite. Now, cars are ubiquitous. Pocket calculators perform numerous mathematical functions and cost under $5. Cell phones have made connection to the wider world available to African businesses in places that landlines will not be economically feasible for decades, if ever.

By letting the market satisfy the seemingly frivolous and unnecessary desires of the rich, we all end up better off. The rich are the ones with the wealth to spare--so let them purchase the new, expensive "luxuries" and pay the way for our increasing standard of living! Eventually, increased demand and free market competition will bring down cost and increase availability. There's nothing shameful about that.

For all of us to gain, the rich too must be free: free to use their wealth to pursue their happiness.
Attempts at enforced equality will stifle innovation, keep costs high, and in the long run we all are impoverished.

As long as poverty is the problem, wealth will be the solution. Wealth--and the freedom to use it.


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Time is of the Essence

I just came across mention of Scott Brown, candidate in Massachusetts running for Sen. Kennedy's vacant seat in a special election to be held January 19th. He is against the current healthcare bill, and against cap-and-trade, but also seems to be a typical proponent of mixed-economy solutions to these problems. Still, he would be better than someone who would support the Democrats on these two policies.

Check him out. If you find him reasonable, consider donating to his campaign and spreading the word.

Other articles:

Rasmussen Report on the Massachusetts Senatorial race. This has some interesting details on the dislike of MA's health care with the state, and on the fact the race may be closer than the raw numbers (50% Coakley, 41% Bown) indicate.

More on the race at Keller @ Large blog.

The Washington Post has a different take on the race, apparently, the GOP is not providing much financial support.

According to this article, Brown supports treating Abdulmutallab, the Al Qaeda Christmas bomber, as an enemy combatant, not a common criminal and does not consider water-boarding an illegitimate interrogation technique. He showed poor taste and judgement in a 2007 speech to a high school, and is against gay marriage.

That's about all I can find for now.


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Mr. Summers' Sound Advice

Either Larry Summers is no longer saying the same things he said in 1996, or President Obama is not listening to his economic adviser.

Excerpts from Summers testimony to the IDB Conference on Development Thinking and Practice, Sept. 4, 1996, highlight five crucial lessons for economic prosperity.

It’s clear that there are no short-cuts in development. We have learned some profound lessons from those countries that have tried them.

The first is that inflation produces no enduring output benefit but carries a wide variety of costs...

The second lesson is that price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time...[A]ttempts to preserve price controls induce otherwise avoidable rationing schemes and goods shortages...

A third lesson is that closed markets lock in inefficiencies and, in the long run, suppress real wages. Import substitution has been discredited as an approach to development. It has led to protection that often has been used not to nurture nascent industries but to safeguard the interests of the wealthy and well-connected...I would even include in this last group the relatively well-off labor groups that work for protected enterprises.

A fourth lesson is that state-run enterprises, including state-owned banks, have a disappointing record of performance. While there are exceptions, the reality is that politics usually intrude in the operation of a public enterprise, and efficiency, financial performance and quality of service are often sacrificed...

A fifth lesson is that excessive and inappropriate regulation can strangle an economy and corrupt markets. Even if they start small and are well-intentioned, regulations tend to propagate, as both the regulated and the regulator start to see mutual advantages in their relationship...

To boil down these five lessons, we must: One, avoid inflation -- macro stabilization is an essential first step; Two, let markets set prices for goods, services and currencies; Three, open trade regimes and allow economic integration; Four, privatize state-owned companies; Five, reduce the size of government by eliminating excessive regulation. (Emphasis added.)

So how are we doing?

Lesson One: Inflation

The recession has brought us dropping prices for most of 2009 with a slight uptick (1.84%) for November, the last month for which there is available data. But that statistic is referring to price inflation *--which tells us nothing about the presence of an underlying monetary inflation which degrades the purchasing power of our currency. The extremely low Fed target rate (0.0-0.25%), along with the astronomical increase in the monetary base during 2008, indicate that an increased money supply is in fact keeping prices artificially high (e.g. falling less than they would have with a stable money supply) and interest rates artificially low.

Remember this graph? (The smaller graph magnifies the change from 2007 to now.)



Lesson Two: Price and exchange controls

What about letting the market set prices for goods...ummm like executive compensation, or doctor's and hospital charges, or insurance premiums? How's does that reconcile with cap-and-trade for fossil fuels, or subsidies for alternative energy?

Lesson three: Open Markets

How does the imposition of duties on Chinese-made steel pipe and tires, or the “Buy American” Section 1605 of Obama's first stimulus package, the American Recovery and Reinvestment Act of 2009, fit with Summers' advice?

Lesson four: State-run enterprises

What would you call these? GM. Health Insurance Exchange. Public Option. Fannie Mae/Freddie Mac. Banks. Banks. And more Banks.

Lesson Five: Excessive and inappropriate regulation

Banks again: FDIC, Federal Reserve Board, Basel I and Basel II, Bank Secrecy Act, Real Estate Settlement Procedures Act of HUD, etc.

And Health Care: HIPAA, ERISA, JCAHO, CMS (formerly know as HCFA), ASTM, all licensing of hospitals, practitioners, devises, FDA, ASTM, CCHIT, EHR/IM, HIPSS--to name a few.



Looks like we'll have to learn those lessons all over again, because those currently in power clearly weren't paying attention.




* For an interesting look at how the meaning of inflation has altered in the past few decades, check out this brief article:"What is the Real Definition of Inflation?" Because economic texts and common usage now define inflation as a rise in the general price level, it is necessary to clarify just which "inflation" you are referring to.


Update on Money Aggregates:
See today's Carpe Diem on M2 and M3. It's going to be another interesting year.



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When More is Less

More bureaucracy, inefficiency, wealth redistribution.


Less freedom and prosperity.



From The Enterprise Blog via Carpe Diem.

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The Adverse Incentives of Health Care Spending

Mark Perry is batting strong with another great post on health care over at Carpe Diem.

As I pointed out previously, health care does not cost enough to the individuals actually receiving the goods and services. Third party payers (public and private) increasingly insulate patients from the real cost of medical care, and thus protecting them from the financial consequences of poor life-style choices. (We are now down to personally paying only $12 out of every $100 spent--one of the lowest out-of-pocket expenditure ratios in the world.*)

As out-of-pocket expenditures fell, health care spending as %GDP has risen.


Analysis of research** in preventive medicine and health promotion reveals that 70% of health care costs are driven by behavior, and that 4 chronic conditions are responsible for 74% of costs, with smoking and obesity being the two most costly contributing factors for individuals. Two other major contributors are uncontrolled high blood pressure and uncontrolled diabetes.

Putting these two factors together, that the bulk of medical expenditures are related to behaviors, and that personal financial responsibility for medical care is plummeting, is it any wonder that over-all health care spending has sky-rocketed?

Any attempts at "reform" must address these facts.

If government intervention is to effectively decrease health care costs, laws and regulations will have to coerce people into healthy behaviors--outlawing smoking completely, fining people for being overweight, mandating physical exercise, taxing hypertension and hypercholesterolemia. Is that really the path we wish to take?

Alternatively, we could choose the path of freedom and personal responsibility.

Funny how freedom is never free.




* Once I complete the end of the year excavation of my desk, I will post the sources for this fact.
**Fabulous work in this area has been performed by none other than Safeway leading to the implementation of Healthy Measures, a unique health care program for their non-union employees which has kept their health care expenditures flat. More on this will be posted in the future.
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Heroes

For a less formal post in honor of a few personal heroes, click over to today's entry on AisA Academy.

On Trade "Deficits" and Protectionism

Carpe Diem has a post today that makes an important economic point:

Nations Don't Trade With Each Other: Individuals Do

[T]he United States did NOT import $2.74 billion of steel pipe from China, at least not as a "country." It was dozens, if not hundreds, of American-owned companies that voluntarily placed hundreds, if not thousands, of individual purchase orders in 2008 to purchase Chinese steel from dozens, if not hundreds, of steel-producing companies in China who filled the orders totaling $2.72 billion, and shipped the steel...


It might be a subtle point, but it's important to realize that countries don't trade with each other as countries - rather it's individual consumers and individual companies that are doing the buying and selling...

It's possible that some of the confusion about international trade can be traced to confusion about the "trade deficit" and the "budget deficit." The relevant unit of analysis for the budget deficit is indeed the country, since it's the entire country via elected officials that is responsible for the "budget deficit." By conflating these two distinctly different deficits, it's then easy to assume that the relevant unit of analysis for both is the "country" when in fact that only applies to the "budget deficit" and not the "trade deficit."

Read the whole post.


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Health Care Disaster, Let us Count the Ways

Current, proposed Health Care Reform is poised to

1) add 111 new bureaucracies

2) levy at least 17 significant new taxes --primarily affecting the middle class.

3) enact "an unprecedented form of federal action through its "imposition of an individual mandate, or a combination of an individual and an employer mandate." [CBO, "The Budgetary Treatment of an Individual Mandate to Buy Health Insurance"]

4) give the government defacto control over 17% of our nation's economy

5) further sever the consumers of health care goods and services from the costs of their expenditures--thus increasing demand, encouraging waste and driving prices even higher

6) institutionalize burdening the young and healthy with the misfortunes of the sick, while at the same time undermining responsibility for one's own health and life-style decisions

7) violate the spirit, it not the letter, of the Constitution.

Congress is determined to shove this legislation down our collective throat, in spite of the fact that a majority of citizens oppose this legislation (52% are against--and 43% are strongly opposed, while 42% are in favor, and only 22% are strongly so)-- even going so far as to by-pass the usual debate and conferences which are normally part of the processes to reconcile bills between the Senate and the House.

At stake is nothing less than our freedom.

Will we allow Congress to push our mixed economy further towards the failed policies of socialism (government-owned businesses and the redistributive welfare state) and fascism (government control of the economy through a myriad of laws and regulations) or will we reassert our rights to freedom of association and contract, to private property, the rule of law and the ownership of our lives and the fruits of our labor?

Wanting others to share in our bounty is laudable. I too want to live in a community which cares for the less fortunate, and makes provisions for those who are truly unable to provide for themselves. But to attempt to achieve those goals through the coercive power of the state will not only fail to care for the sick and the poor, it will lead to the shriveling of the wealth we have to share. The very act of using government coercion, even for a desirable end, will destroy the basis of good will between men. Mutual respect of each man for each other man's life will not survive in a society that accepts the violation of individual rights. Any sustainable, long-term solution must be predicated on the absolute ban of the initiation of force between men---and by government most of all.

The current health care reform bills invoke the initiation of government force in every single section.

Let us use our strength, wealth and creativity to find ways to expand access to medical care, but let us not abandon our recognition of the sanctity of individual rights, and with it all chance of lasting peace and prosperity.



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