Ed Brayton is a journalist, commentator and speaker. He is the co-founder and president of 
Here's an absolutely mind-blowing clip of Rush Limbaugh arguing with William Shatner about health care. Okay, that's surreal enough as it is. But the argument Limbaugh makes is just astonishingly bankrupt morally. He actually argues that having access to health care is no different than having a house on the beach; the wealthy get the house on the beach and the poor don't, and the same is true of healthcare, and that's just fine.
And then he says he believes this just because he wants the country to be as good as it can be -- without poor people, presumably.
Politics
Comments
Anyone know when this was recorded and/or what show this was?
Posted by: JakeS | December 3, 2009 9:48 AM
If it was a choice between a house on the beach or a bungalow - metaphorically speaking - it wouldn't be too bad. But the current state of healthcare in the US is between a house on the beach and a leaky cardboard box next to the sewage treatment plant - again, metaphorically speaking.
Posted by: Blaidd Drwg | December 3, 2009 9:53 AM
"Shatner's Raw Nerve" is the name of the show.
http://www.biography.com/shatner/
Posted by: Andrea | December 3, 2009 9:57 AM
I was Rushbo, the last thing in the universe that I would want is a bunch of pissed-off Trekkie geeks on my ass. Fuck with Captain Kirk, you fuck with Starfleet.
On a totally different topic. Has anyone heard that the Salvation Army has decided to NOT pass out presents to "illegals" this year. Nothing says "the Love of GOD" like choosing who's eligible to receive it. I would think that they would be worried that such an action on their part would allow teh GAY menace to convert thousands of sortabrowns to the lavender side of The Force!
Posted by: democommie | December 3, 2009 10:03 AM
Ed, I am astonished. As a libertarian you are supposed to agree with Limbaugh's argument in this instance. Moral failure aside, it's simply an economic argument, of a sort very common in Republican and libertarian circles.
The real problem is not that Limbaugh made an economic argument. After all, at some point, costs have to be met, decisions have to be made, and the fact that we are not going to build world-class hospitals every six blocks in every major and minor US city is never going to be considered a moral failure. Pretending that economics is irrelevant here is as foolish as asserting that morality is irrelevant. (NB: I am not accusing you of the first error, I am just writing rhetorically.)
No, the problem is that it's a bad economic argument. It's so bad that even Adam Smith rejected it way back when. It's kernel of truth is based on the theorem that the free market is provably ideal in various reasonable ways. The error is that not all goods and services fit the mathematics, and the theorem flat out does not apply. People, both those who know better (like Phil Gramm, econ PhD) and those who don't (long long list), ignore this pesky little detail whenever it suits them.
In the case of health as a commodity, it's a positive externality. Health for me improves you in two ways, because I work better in my corner of the economy and I also spread less illness in your general direction. Yet instead of thanking me with appropriate pictures of Ben Franklin, you keep it to yourself.
The result is people spend less on health.
For example, going into work when you really should stay at home is an example of not supporting freeloaders--after all, your employer is not paying you to keep your distance.
The economic argument is solidly for direct government support. The difficult economic questions are how and how much.
Posted by: william e emba | December 3, 2009 10:10 AM
Weird chair setup there. Wow, Shatner is almost 80 now.
So, Rush Limbaugh is a fool and a moral reprobate. As someone here once cleverly posted, "In other news, water is wet and the Earth revolves around the sun."
Posted by: Adrienne | December 3, 2009 10:12 AM
Limbaugh probably believes the myth that The Almighty Market is absolutely perfect, and therefore every single poor person deserves to be poor, and every single rich person deserves to be rich. He probably sits around thinking, "Why don't all those poor people just do what I did and become rich like me?"
Posted by: catgirl | December 3, 2009 10:16 AM
The beachfront property analogy is an interesting one coming from the Drugster. If we follow his guidance on climate change, there is a good possibility that the rich peoples' beach houses will wash out to sea while the poor folk who live inland may find themselves owning oceanfront property before too long.
Posted by: JusticeLeague | December 3, 2009 10:25 AM
Limbaugh always makes me think of Hannity, which reminded me; yesterday I saw a "Hannity/Palin 2012" bumper sticker on the SUV in front of me as I was heading home from work last night. I’m not so much surprised that someone could feel that ticket would be a good idea or even that they’d feel strongly enough to express it in sticker form, like some school kid expressing their love of unicorns. Rather, it was that the SUV was in motion, indicating this person had probably managed to understand a driving test well enough to get a license, which caused me shock and alarm. But what can I do, apart from make sure everyone in the car is wearing their seatbelt and giving the other driver plenty of room? Something is definitely wrong with this picture.
Posted by: Abby Normal | December 3, 2009 10:29 AM
@democommie - You were Rushbo? How on Earth did you cure yourself of that?! ;)
Yeah, I heard about that story too. But it's all cool because in the Salvation Army Bible Jesus checks the documents of the sick and the blind before he heals them.
Posted by: Imrryr | December 3, 2009 10:32 AM
I can see how he arrives at that question - given how his road to riches required an amount of skill, talent and effort that should be easily in the purview of any non-comatose human being and vast swathes of the Animal Kingdom. He just fails to take into account that not everyone can have the sort of dumb luck he had...
Posted by: Phillip IV | December 3, 2009 10:35 AM
Pissed off trekkies, hell - does Rush qualify for firearms like the bankers to protect himself when the hobos revolt? (I suppose he could just hire Blackwater.)
Posted by: Uncle Glenny | December 3, 2009 10:37 AM
The seat design, incidentally, is called 'a love seat'. I leave the visual images that this conjures up* to your imaginations. :) - DJ
-------
* vis-à-vis Shatner and Limbaugh, that is
Posted by: DingoJack | December 3, 2009 10:50 AM
Why is that sort of thing called a "love seat" anyway? It's easier to snuggle up to someone you love in a regular sofa. This is more like a "spy meets his contact seat:" two people can talk to each other while facing in opposite directions -- and even joining in different conversation-circles -- and pretending not to know each other.
Posted by: Raging Bee | December 3, 2009 11:04 AM
@5: In the case of health as a commodity, it's a positive externality. Health for me improves you in two ways, because I work better in my corner of the economy and I also spread less illness in your general direction.
William you're forgetting a highly important third way. Health for me means I can defend your life and property in a war. I can't do that if I'm sick. It may be jingoistic, but keeping the citizenry healthy in a very direct way provides for the common defense.
Posted by: eric | December 3, 2009 11:11 AM
"It's kernel of truth is based on the theorem that the free market is provably ideal in various reasonable ways. The error is that not all goods and services fit the mathematics, and the theorem flat out does not apply."
Nope. The free market is morally ideal, not just ideal in terms of economic efficiency.
Look. Any economic system is about distributing scarce (ie, non-unlimited) goods and services based on some criteria of worthiness. In a command economy like Soviet Russia, worthiness is determined by your position in the Party. In a free market, worthiness is determined by money - does the individual have enough money to buy the item? and if so, does he value the item enough to spend that money? Because making a purchase always involves an opportunity cost (if you buy X, you can no longer use that money for Y and Z), rational actors spend their money first on things most important to them; the free market distributes goods and services to those that value them most.
"But Pat", says the socialist, "what about the poor people who can't afford things - like health care - that they value greatly? Isn't it unfair that the wealthy can buy health care while the poor cannot, no matter how much they value it?" The socialist (as one might expect) does not understand what money, in a free market, is. If money was handed down from some higher power at random - if wealth and poverty were arbitrary - then yes, distributing goods via the free market would be completely unfair. But it's not. Money is a marker representing value; in the free market (see above) consumers give their money to producers in exchange for goods which they value, and the amount of money they spend represents the amount of value they place on that good. In other words: in a free market, an individual's wealth is a direct representation of how much other members of society value his contribution to their well-being. You are, literally, worth what you earn; your value as a person and a member of society is demonstrated by your income.
The wealthy are wealthy because they produce goods and services that other people find valuable (as demonstrated by their income). The poor are poor because they produce little or nothing of value to others (as demonstrated by their income, or lack thereof). To spend valuable resources (health care, for instance) on someone who has not, and will never, produce enough to equal the value of the resources spent on him is a net loss, and a society that wastes resources on the nonproductive (see again: Soviet Russia) will drive itself inevitably into bankruptcy.
There is no moral difference between a beach house and a heart transplant. If you can afford it, you deserve it; if you can't, you don't. God bless Rush Limbaugh for making the argument.
Posted by: Pat Donohue | December 3, 2009 11:11 AM
@16: There is no moral difference between a beach house and a heart transplant.
Wow, that pretty much says it all.
Posted by: eric | December 3, 2009 11:17 AM
william e emba, #5: The error is that not all goods and services fit the mathematics, and the theorem flat out does not apply.
The other error is to assume that even if the market does what it is alleged to do then we are obligated to adopt "market efficiencies" as a goal. It is perfectly reasonable to decide on ethical considerations that some or all goods and services should be allocated by a different standard than "market efficiencies".
Posted by: Chiroptera | December 3, 2009 11:17 AM
Nope. The free market is morally ideal, not just ideal in terms of economic efficiency.
Even most free-market ideologues know that's bullshit. In fact, that's almost as stupid (and almost as damaging to whatever credibility you have left, if any) as your previous gem about how there weren't any permanent polar ice-caps during the Colonial period (yes, Pat, I'm still laughing about that one).
Posted by: Raging Bee | December 3, 2009 11:18 AM
Yes, I'm sure that Jesus would prefer that poor people die rather than go against the almighty free market.
Posted by: catgirl | December 3, 2009 11:24 AM
The wealthy are wealthy because they produce goods and services that other people find valuable (as demonstrated by their income).
I really can't speak for our more successful con-men, pimps, drug-dealers, gunrunners, and other well-heeled gangsters, but I'm pretty sure they're grateful for the yeoman's work you do to justify their concentration of wealth. (Just don't ask them to pay you for it, it could go wrong for you.)
Oh, and people don't get rich by producing things, they get rich by organizing and facilitating production. There's a bit of a difference. They also get rich by forcing DOWN wages for the people who actually do the production. You know, the WORKERS.
The socialist (as one might expect) does not understand what money, in a free market, is.
Actually, I have yet to meet a socialist who is as ignorant of money -- or anything else -- as you are.
Posted by: Raging Bee | December 3, 2009 11:28 AM
Oh man, Limburger the Militant Dumbass was arguing with the Shatmeister?
Shatner wins. Hands down.
Posted by: Katharine | December 3, 2009 11:33 AM
democommie:
About the Salvation army toy give away -
Here is a snopes message board thread that discusses it with a few links. I believe it is only in Texas...
http://message.snopes.com/showthread.php?t=54100
Posted by: KeithB | December 3, 2009 11:35 AM
The wealthy are wealthy because they produce goods and services that other people find valuable (as demonstrated by their income).
Paris Hilton.
Posted by: Personal Failure | December 3, 2009 11:38 AM
1) The criminal element exists in ALL economies, be it socialist or free-market. The reason that pimps, drug-dealers, and gunrunners are successful and wealthy is EXACTLY for the reasons Pat mentioned: they provide a service that people find valuable! You only reinforce is point with those examples.
2) The rich don't become richer by pushing down wages. They go out of business if they push them down too far. Folks won't work effectively for too low a wage; if they don't work effectively, your product suffers; if your product suffers, it won't sell; if it doesn't sell, you are out of business and POOR. It is in a business owner's best interests to maintain a REASONABLE wage that allows both management and laborer to succeed. These wages are generated by the FREE MARKET, based on comparable wages in similar regional work forces.
Posted by: The Franchise | December 3, 2009 11:46 AM
The problem with this summary of libertarian economics is the same problem that capitalism in general has.
The irrestible trend of any capitalist economy is to gradually go from a totally free market situation of independant, competing, small-size producers (in the "pure and perfect competition" model of neo-classical economics) to an ever increasing concentration, culminating in a very small number of very big actors. Each one, of course, has enough power to influence, not only the market (contradicting the basis of "pure and perfect competition") but also external actors such as the State. When industry giants live almost only on taxpayers' money (think military industries, road and infrastructure building...), the "free market" becomes so different from what it was that it hardly deserves its name anymore.
Same thing (a bit long, sorry) for the simplistic equation "your wages = your value". Once economy actors become so big that they can weave deep and strong links with government structures (hmm... can you think of people who went from high positions of power in private business to high government positions, back and forth? I knew you could), they don't need to produce anything that's highly valued. They can just make people believe that they do. They can be pure parasites of the system, and make incredible sums of money.
Posted by: Christophe Thill | December 3, 2009 11:47 AM
My daughter graduated from the nation's first integrated school district and one that has an almost unsurpassed minority achievement record, and now goes to a deep Midwest college, and her views have changed from Shattner's to Limbo's all in a year. Actually it is better that we have a gilded age advocate like Limbo being open about thievery and thuggery of the looters. Rather that than the sham squaring the circle inanity of the pseudocompassionate conservatives.
Posted by: impal | December 3, 2009 11:48 AM
This is a common argument of people who haven't actually bothered to study economics, but think they understand the subject better than economists themselves do.
Pretty much like creationists.
Posted by: James Hanley | December 3, 2009 11:56 AM
The rich don't become richer by pushing down wages.
Yes, they do, and you know it. Lower wages mean lower production costs, which means either more profit for the owners and/or more competitive pricing of their goods, which means the business is healthier and better able to compete. That, at least, is what the rich themselves say when they're busting unions and/or outsourcing production to China. This is especially true when there's a significant surplus of workers.
Franchise's brand of bald-faced dishonesty and disregard for reality is precisely the sort of thing that helps capitalism to dig its own grave and make socialism -- if not Communist revolution -- inevitable. Thanks for nothing, comrade.
Posted by: Raging Bee | December 3, 2009 12:03 PM
To spend valuable resources (health care, for instance) on someone who has not, and will never, produce enough to equal the value of the resources spent on him is a net loss, and a society that wastes resources on the nonproductive (see again: Soviet Russia) will drive itself inevitably into bankruptcy.
The Western Europeans spend far fewer resources on health care than we do, while insuring everyone with better results than we get. Of those countries, none of which operate under a Soviet communist system, only Italy and Belgium have markedly higher debt by percentage of GDP. None of them are going bankrupt because of universal health care.
Further, our senior citizens fall into the non-productive category. I'm sure that huge voting block would appreciate it if the right took up your banner.
Posted by: Robert Faber | December 3, 2009 12:04 PM
You bastard.
That image is going to be with me forever. I'm going to have to see a neurosurgeon to get that part of my cerebral cortex removed.
Posted by: T. Bruce McNeely | December 3, 2009 12:05 PM
Pat Donahue and The Franchise:
Hey, wait, whatever I was going to say can hang for a minute. What a great name for another lackluster, no talent group of hack "musicians". You guys could go on tour with Tubby Keith, Teddy Nuggets and Lee Greenwood. Dumbfuckapalooza.
Oh, yeah, back to the task at hand. Pat, me boyo, as hard as it is for me to find fault with another son of the auld sod like meself, well I hate to say this but; you're as Irish as Padraig's pig and about half as fucking smart.
What you and a lot of other clueless rubes think of as "free markets" are anything but. The so called "Healtcare" industry in this country has rigged the game with better odds than those small timers in Vegas ever dreamed of having.
The Franchise:
I'm not sure where to start with your arguments, it's a bit like trying to prise the whole kernels of truth out of an enormous pile of bullshit. Except that there are no kernels of truth.
The pure business model is amoral. Unfortunately for us, most of its practitioners are amoral as well.
I'm going out on a limb here and guessing that neither you or Mr. Pat Donahue have ever been impoverished by having to pay for medical care. Hopefully you will have that opportunity at some point in the near future so you can examine the real world manifestations of the idiocy that you think passes for sound policy.
Posted by: democommie | December 3, 2009 12:06 PM
This is a common argument of people who haven't actually bothered to study economics, but think they understand the subject better than economists themselves do.
That's not an argument, it's an observation -- one I've heard both economists and non-economists make.
Posted by: Raging Bee | December 3, 2009 12:07 PM
@ Pat Donahue:
I'm glad that as a public schoolteacher, my value to society is accurately represented by my income.
Really, a lot of people act like their value as a person is determined by their income, but it's quite disturbing to hear someone espouse the idea as a literal truth. I guess I shouldn't be so nice to the substitute teachers, cafeteria workers, and janitors. They just need to work harder and be more like Rush Limbaugh.
Posted by: Eric R | December 3, 2009 12:17 PM
It is my contention that El Rushbo is fundamentally lacking in empathy; he truly can't put himself in the shoes of those who are poor, without basic healthcare, etc. He makes frightening comments like the one above with the flippancy we've come to expect from him because he lacks the ability to comprehend what anyone with a lifestyle and mindset variant from his own thinks and feels.
Posted by: Sadie Morrison | December 3, 2009 12:17 PM
@Pat Donohue. You lost me at "non-unlimited." What the fuck is that? The rest of your post must be crap.
Posted by: Owen | December 3, 2009 12:21 PM
"Nope. The free market is morally ideal, not just ideal in terms of economic efficiency."
Well then, Pat, I hope you are prepared to hire your own personal police force, your own personal fire department and your own personal military. Because, obviously, if you do not make enough money to pay for these various services then you do no deserve to have them.
You see, Pat, I'm a doctor. And when I was in school for those many years it takes to become a doctor, I made no money, zero. In fact I lived on loans and was uninsured for a time. If I had poor enough fortune to become ill or injured during that time I would have been wiped out, or dead under a free market system because I was "worthless" - making no money. But, seeing as how I did not get ill and got insurance, my earning potential was realized, and I am now quite "valuable" to a free market society.
That is the problem with a real free market applied to health care. The penalty for not having health care is death, or permanent disability. Thus the free market system fails to recognize an individual's potential, cuts off its nose to spite its face.
Ask just about any rich guy (including Limbaugh). They were once worthless poor people who could have died in the black-hearted system you propose.
Posted by: Dr. Steve | December 3, 2009 12:23 PM
RB@14:
Why is that sort of thing called a "love seat" anyway? It's easier to snuggle up to someone you love in a regular sofa.
Maybe "love seat" means something different to Aussies like DJ than to me, because I have always understood that a "love seat" is basically like a miniature sofa.
This is more like a "spy meets his contact seat:" two people can talk to each other while facing in opposite directions -- and even joining in different conversation-circles -- and pretending not to know each other.
Yeah, or a "fighting couples seat", so you can talk past each other.
Posted by: Adrienne | December 3, 2009 12:25 PM
Catgirl @20:
Yes, I'm sure that Jesus would prefer that poor people die rather than go against the almighty free market.
To be fair to Pat Donohue, he (is Pat a he?) was only espousing free market capitalism, not Christianity.
Biblical Christianity is fundamentally incompatible with absolute free market capitalism, something the Roman Catholic Church actually admits. Not so sure about the Southern Baptists or the other conservative Xtian sects.
Posted by: Adrienne | December 3, 2009 12:28 PM
Didn't get a chance to read the comments first so please forgive any redundancy. I also don't have time to provide citations but could if asked near the end of the work day (EST).
Limbaugh's economic argument is fatally flawed on a number of counts, here's some of them:
1) Universal health care is a net benefit to GDP, about 0.5%, which is about $700 billion/year. Given that other regulated capitalist societies have went through this process, our confidence on this is high if we execute a plan equal in competence to other countries with similar schemes.
2) We are in trouble on costs. Our current rate of economic growth and future tax committments already put us in the hole by about $56 trillion dollars in unfunded liabilities (forgot how far out this window goes, I'm assuming more than 10 but less than 50), $8 trillion is merely Medicare Plan D, most of the rest is Medicare and Social Security obligations.
3) We now have global competitors in the business world, not merely for cheaper labor, but also in doing business requiring strong development, a financial center, and an educated, skilled work force. Many of these countries have substantial cost advantages because of their economies health care costs are both lower and not as punitive as they are on our businesses. Michigan lost a lot of manufacturing jobs to Canada where health care cost differentials were higher than $1000/vehicle.
4) Our current demographic trends will only aggravate our trend towards becoming less competitive and financing retiree health care costs.
There are more, but this is what pisses me off about conservative leaders being able to avoid informed interrogations by people with some hair on their balls. We need to destroy the cocoon where Limbaugh, Palin, and even elected conservatives are able to thrive.
Posted by: Michael Heath | December 3, 2009 12:28 PM
By Pat's definition, sand is scarce on a beach.
Posted by: Taz | December 3, 2009 12:28 PM
So Rush thinks the best country we can have is one in which poor people have no healthcare. Wonderful. I bet he'd also love to see emergency rooms turn away the critically ill who can't pay.
Posted by: Adrienne | December 3, 2009 12:30 PM
So Rush thinks the best country we can have is one in which poor people have no healthcare. Wonderful. I bet he'd also love to see emergency rooms turn away the critically ill who can't pay.
-I'd like to bring him and Pat up to the cancer floor at my local children's hospital. They could review each family's finances and have the personal pleasure of telling the poor ones to go home. If either of them had the stones to do that I would concede their point.
But of course they don't have the stones for it, being the posturing fools they are. Healthcare chicken hawks.
Posted by: Dr. Steve | December 3, 2009 12:36 PM
Big Typo on my post @ 40, point # 1.
Net rise of GDP would translate to $70 billion per year for the size of today's economy at a rate of 0.5% of more GDP, not $700 billion/ year. 'Net' means after all cost inputs (tax hikes, premiums paid) are considered and deducted from the marginal benefits (like increased productivity).
Posted by: Michael Heath | December 3, 2009 12:36 PM
I love the fact that the most rabid defenders of unchecked free-market capitalism also consider themselves devoted followers of a penniless, homeless man who lived off love gifts from women & healed the sick for free.
Posted by: Rob Jase | December 3, 2009 12:37 PM
Rob Jase @45I love the fact that the most rabid defenders of unchecked free-market capitalism also consider themselves devoted followers of a penniless, homeless man who lived off love gifts from women & healed the sick for free.
You're forgetting about the Randians/Objectivists. And actually the Scientologists are pretty pro-free-market capitalism too, aren't they? I think they think the ill and poor just haven't been enlightened/audited enough, so their condition is their own damn fault.
Posted by: Adrienne | December 3, 2009 12:43 PM
Or they can inherit money like I did, or scam people out of money in a technically-legal way, like my father did. I know that I'm smart and talented, but I also know that I wouldn't be where I am if I didn't inherit the money to go to a good college and get a high-paying job. I also know that there are plenty of poor people who work much, much harder than I do.
Posted by: catgirl | December 3, 2009 12:44 PM
In this case I'm all for judging Pat's comment by his own standard. Lets see, the value of that comment. He earned nothing for posting it. So nothing... divided by nothing... carry the zero...
Posted by: Abby Normal | December 3, 2009 12:45 PM
Rush: "Doctor, I keep hearing this nagging whine in my head."
Doc: "That's your conscience."
Rush: "Oh. Why does it hurt?"
Doc: "Because you're ignoring it, you insufferably egotistical, self-centered cunt*."
*Note: "Shrew" went over like a lead balloon among some in an earlier thread, but I think that this is appropriate. Note too that I can count on the fingers of one hand the number of times I've used that last word.
Posted by: Modusoperandi | December 3, 2009 1:02 PM
Wonderful. I bet he'd also love to see emergency rooms turn away the critically ill who can't pay.
I've heard some very selfish and shortsighted "conservatives" say exactly that. Without irony or humor.
Posted by: Raging Bee | December 3, 2009 1:07 PM
One would hesitate to say this about economies as a whole, but certainly it holds true (all else equal) about the market for any good subject to significant economies of scale. And given that powerful economic actors have disproportionate government influence, it doesn't seem unreasonable.
Posted by: shiny__things | December 3, 2009 1:09 PM
Im getting tired of hearing the free market people talking past the socialist people.
Im a rationalist. I just follow data. Lets look at the free market argument, since thats an under represented minority here.
Free market is the most efficient way of distributing finite resources to an economy. Pat is correct in claiming that. If we were to have a true free market for health care, prices would surely drop. What most free market proponents fail to mention is that we currently do not have a free market, we have a heavily regulated market. I feel confident saying that the health care and insurance industries are the most heavily regulated industries in the US. If we were to institute a true free market for health care in the US, we would need to strip most, if not all, of the regulations. Second, we would need to remove all government sponsored healthcare programs. Medicare, Medicaide, Schip, health care for public employees, health care for Senators and police officers, it would all have to become the responsibility of the individual. We would need to remove the tax deduction for employer supplied health care. Only then, with each person paying the actual cost of health care could we use the market to lower prices. AND IT WOULD WORK. People would fall through the cracks, people would die. But all in all, this is the best way to lower prices in heath care, if lower prices is your only goal.
I don't think that system is viable in the US. We could never get the electorate to agree to it. It's not a realistic option in our country at this time.
The halfway socialism we have right now is the heart of the problem. Private contractors have always viewed government projects as an open checkbook. Any contractor knows that when its government paying, double it.
Those who support a socialist plan need to quit denying that the free market works. We need to start making the free market people put up a real free market plan. That will get the American people to jump behind a public plan quicker than you can say Laissez-faire.
Posted by: Revyloution | December 3, 2009 1:22 PM
Pat Donahue writes: "If you can afford it, you deserve it; if you can't, you don't. God bless Rush Limbaugh for making the argument."
"Deserve" is a word loaded with moral implications. It's not the same as saying you CAN have something because you can afford to buy it. Rather, it's saying you SHOULD have it as a moral imperative solely as a function of your willingness and ability to expend an amount of money sufficient to cause the seller to engage in an economic transaction with you.
If conservatives really believe that you DESERVE anything you can afford to buy, then I suppose this also means they're for legalizing drugs and abortion on demand... Oh, I forgot, only conservative exceptions to free market principles are valid.
Posted by: JohnC | December 3, 2009 1:29 PM
Adrienne,
I agree. What Shatner and Limbaugh were seated in is much closer to the Love Toilet.Considering the quality of their discourse and Limbaugh's analysis, that seems about right.
Posted by: cm | December 3, 2009 1:33 PM
I feel confident saying that the health care and insurance industries are the most heavily regulated industries in the US.
They're also pretty heavily regulated in Western Europe and Canada; and they get better results than we do. So maybe "heavy regulation" isn't the problem.
If we were to have a true free market for health care, prices would surely drop.
"Surely?" By what mechanism? "The magic of the marketplace?" We don't do magic here, sorry.
...AND IT WOULD WORK. People would fall through the cracks, people would die.
If people fall through the cracks and die, then -- pretty much by definition -- it would not be "working." And since people are falling through the cracks and dying in today's "system," what you're describing doesn't look like an improvement.
(Also, your total refusal to offer any NUMBERS of people who might fall through the cracks and die in your vague pie-in-the-sky ideal world, really doesn't make for a credible argument. Oh well, at least you admitted your "system" would have cracks to fall through.)
Those who support a socialist plan need to quit denying that the free market works.
Those of you who oppose a "socialist" plan need to man up and quit substituting name-calling for real grownup discourse. Look up the word "socialist" for once in your talking-point-driven life -- I don't think it means what you think it means.
We need to start making the free market people put up a real free market plan.
Which they'll never do, since they're AGAINST the very idea of planning (STALIN HAD FIVE-YEAR PLANS ELEVENTY-ONE!!!!111!!!!). Where's your plan? You don't have one; all you have are empty pie-in-the-sky promises (with no cause-and-effect links) that can't be verified because the ideal world you imagine never existed.
Posted by: Raging Bee | December 3, 2009 1:41 PM
I'm gong to say that one of the things people forget about capitalist economics is that it assumes everyone is going in as an equal participant.
In labor markets, there is almost always someone else who needs the job more than you do unless there is a labor shortage of some kind, and that is pretty rare. The idea that you can walk up and negotiate wages in the jobs most people have (since most jobs don't depend on unique skills, that is one reason there are more jobs like that in the first place) the whole argument that the market can determine wages and still have them be liveable falls apart pretty quickly.
Remember, you need a job to survive, absent any government run safety net. In a world of subsistence farmers that isn't the case but we haven't lived in that world for centuries. (Even the colonials had to sell food at a local market and be part of a cash economy, even if to a lesser extent than today).
This is the problem with every market -- people do not have complete information and in the case of labor, I cannot magically teleport to wherever a job is and cannot know what is being offered to every other person who applies, or gain skills instantly to fit a job -- there's a cost to all these things. In fact, information is so important to the way markets function that the stock market has a phone book-thick suite of regulations defining who can know what, and when, before and after you trade. (This is why insider trading is against the rules).
In the case of health care, you have something that you need to live -- if you get hit by a bus or cancer you will die. So the guy offering health care can basically say "do what I want pay what I want, or die." You can't shop around for cancer care, and pick the best one based on price or services because you will either die by the time you evaluate it or aren't qualified to evaluate it in the first place because you aren't a doctor. Medical care is a mite more complex than shopping for a plumber. And you often only get one chance. You can't go back and say "Oh, you didn't treat my cancer well." and go elsewhere. You're dead.
Since most people can't plan for health problems (you cannot predict when you will get sick or get hit by a bus) we have insurance, which would theoretically cover it.
But the problem there is that in a system where insurance companies can just do whatever is most profitable, there is no incentive whatsoever to provide for people who actually get sick, because paying out a claim is a cost. MetLife makes no money when they pay my claim -- this is the whole reason why they pay people millions a year in total wages, whose sole purpose is to deny coverage. And the incentive, absent any controls, is to make sure you try not to insure people who might actually need the care.
So at a minimum you need an insurance company that is willing to insure the maximal number of people. But absent a monopoly or price controls there aren't many ways to do it and make sure people get covered. Many countries (Taiwan, the Netherlands) have private insurance markets, but the difference is that they have very strict price controls, so you need to compete on service. In the US you don't need to compete on service because there are no price controls and no choices, as private insurance has essentially priced most folks out unless they get it through employers.
That's about coverage, BTW. Care is another matter, really. All the debates so far have talked about coverage, not care.
Meanwhile there is another kink to health care that makes it rather unlike other goods-- the more you use it the cheaper it gets. That is, if I see a doctor every six months and get a full physical, even with an expensive test or two once a year, it is vastly cheaper to treat me than if I go to the ER once in my life. That's because by the time you go to ER it's too late for many diseases, such as TB.
In Germany, the emphasis is on preventative care, and it saves them craploads of money. In Britain, while people "overuse" the system, it means that a lot of things are caught early and as such cheaper to treat. TB is early stages costs 50 cents a tablet to treat. When you are coughing it's $1,000 for the meds. When you are bleeding it's $10,000 for the ER visit. The antibody test is a few bucks but it is given before symptoms are visible.
But fee-for-service actively discourages preventative care (you pay for visits and you will make fewer of them, since it's a cost). And insurance companies aren't much better. But it is a lot pricier to cover folks who need to go to the ER. And that we all end up paying for indirectly.
Limbaugh is arguing also that people's worth to society is determined by their wealth. A very Calvinist notion, in its way, but it discounts inherited wealth completely. Not just rich daddies, but the vast difference between my relatively privileged upbringing (dad and mom had jobs) and someone who might be just as smart and talented but had none of that. And what of the guy who inherits millions? Is Paris Hilton worth more health care than a doctor who works for very little in rural Arizona?
Money should not be the determining factor as to whether you are worthy to live or die. Period. We ration health care already -- it's just rationed in the cruelest way possible.
Another thing: Name any measure of health. Any of them. Find an OECD country that does worse than the US. Life spans? Check, we're ahead of the Czechs, Mexicans and Turks. Infant mortality? Check, we're a bit worse than Cuba. That's just two. Somehow or other all these countries with supposedly abysmal health systems do better than we do. SO it seems to me pretty obvious we're doing something wrong since we are spending more (by almost any measure I can think of) and get crappier health.
(I always hated the question "Are you satisfied with your health care?" because unless you are sick you are by definition satisfied. And even if you are sick, you can be dissatisfied with the service or the delivery -- but that is a different question. Ask anyone if they felt their insurance company did a good job paying a claim with no hassle and the answer will differ I bet).
Do we have better technology for some things? Yes and no. Great technology isn't any good if only a very few can afford it. If you are an ordinary worker and need a 500K heart transplant, you die. (Go ahead and ask your insurance company if they would cover it. You'd be surprised). Bill Gates? Not so much. And great technology is often addressing a problem that could have been solved more cheaply and easily if access to care wasn't such an issue.
end rant.
Posted by: Jesse | December 3, 2009 1:43 PM
The whole "rich people are rich because they are more valuable and therefore deserve more" falls apart when one considers rich children. A child doesn't chose the parents to whom they are born.
The question of whether the market "works" or not really depends on what one means by "works." Most people say the market works because it achieves an optimal allocation of goods and services. And for a lot of things, this is true. However, there are some people who simply cannot afford to participate in the market. No matter how much you look, no one will sell you a flat-screen TV for $1. If the goal of the market for TVs was to ensure that everyone got at least a basic set, the market would be viewed as a dismal failure. But we don't know the optimal allocation of TVs, so we let the market function, understanding that some people won't get TVs, and that's OK because not everyone needs a TV.
Health care is different. Access to health care (or lack thereof) is something that can have a profound impact on one's productivity and future contribution to society. Other people's access to health care can also have profound impacts on other people's productivity and future contributions to society.
The problem, as every other developed country but ours has realized, is that if we leave things to the market, then there will be people priced out. And inevitably, the ones priced out will (under our insurance-based model) be the ones who will or are perceived as being the more expensive to treat. Insurers don't make money by paying claims, so they will either refuse to cover those they see as being likely to make claims, or refuse to pay large claims on pretextual grounds. They've certainly got the economic incentive to do so.
One could make gross generalizations and say that all those people are priced out because they deserve it. But that really doesn't hold up, unless we go really old school and say that all illness and infirmity is the result of demonic possession or something equally silly.
Posted by: Sanjiv Sarwate | December 3, 2009 1:54 PM
Damn, Jesse, if that's a "rant," I'd hate to argue with you when you're being rational.
Am I the only person here who notices that the arguments of the "free markets uber alles" crowd have so little connection to any specific observable reality in any country? "The unfettered free market will meet everyone's needs, as long as no one has the temerity to demand it meet our needs when it doesn't want to." Gosh, where have we heard that sort of BS before? Angry-sky-daddy religion, that's where.
Posted by: Raging Bee | December 3, 2009 2:02 PM
In other news, a leaked memo urges Congressional Republicans to use every technique possible to completely halt health care debate.
http://www.politico.com/static/PPM110_091202_minorityrights.html
Would it be uncivil of me to say that in terms of human life, the Republican party commits fifteen 9/11-level atrocities each year?
Posted by: Brandon | December 3, 2009 2:09 PM
It doesn't matter, Brandon, they support human fetal life! So it doesn't matter what other atrocities they commit or support, they're "pro-life!"
Posted by: Sadie Morrison | December 3, 2009 2:12 PM
LimpBough hasn't a clue about being poor or having to work for a living. He grew up the spoiled son of a rich lawyer and hasn't actually worked a day in his life.
To make the "free market" actually work and reqard the individual, the first thing that has to go is the ability to inherit anything. If Limpbough and catgirl start out broke and get rich by the dint of their own sweat, good on them. If the fatboy sponges off his daddy until he finally stumbles into something he can sell to morons, notsomuch.
Posted by: MoM | December 3, 2009 2:21 PM
If people were actually paid what they're worth, all farmers would be millionaires. They're the only profession we absolutely cannot live without.
Posted by: Brandon | December 3, 2009 2:30 PM
If people were actually paid what they're worth, nurses would make more money than pro-football players. Whaddaya think THAT would do to health-care costs? Either NO ONE could afford to get sick, or pro-football players would be making minimum wage and have shitty health-insurance that would deny all their claims because their wounds were caused by reckless behavior.
Posted by: Raging Bee | December 3, 2009 2:48 PM
Got nothing to add to the economics debate except to observe that the abstract demographic known as "the shareholders", to which Boards of Directors have the responsibility of maximizing the value of their shares, happens to overlap the demographic known as "we the people" who have other concerns than just the value of our shares (whether owned directly or indirectly via our pension schemes etc). This overlap is ignored.
Love Seat: is actually a Victorian invention for preserving the purity and chastity of young women when their suitors came to visit, since it presents a notional barrier between their dirty bits, acting as a sort of in loco chaperone. You try making love in one. Doesn't work. But they're great for fooling around on. Typically placed in the parlor, visits are with the door open, the parents in the adjoining kitchen. Be quiet and you can get away with almost anything. Like everything else to do with Victorian propriety, it's lip service only (and I mean that in many ways ;) I was of that age in the early 60's and those attitudes and furniture were still around then.
Posted by: Gray Gaffer | December 3, 2009 2:53 PM
I'm not a fan of bumper stickers (as in, never had any) but I would totally put that one on one of my cars.
Maybe not for the reason some would, but still ...
Posted by: D. C. Sessions | December 3, 2009 3:09 PM
Oh, lord, I just noticed this from Pat Donahue,
Look, I'm sure I'm well known on this blog as a free-market ideologue, but I absolutely reject this claim. In my political economy class (just had our last session today--woohoo!), I explain all the ways in which government intervention in the economy can make things worse, rather than better. But from the beginning of the term to the end, I emphasize that I am not making a moral argument.
There are some moral arguments in favor of markets. The most significant one, I think, is that voluntary exchanges are normally superior to coerced exchanges. Because voluntary exchanges don't violate anyone's will, and make each party better off. Coerced exchanges violate at least one party's will, and makes at least one party worse off.
And if government intervenes in a market failure, and actually makes things worse, then government has made people even worse off, and that obviously is not morally defensible.
But you will find precious few economists who call markets morally ideal, because there are more aspects to morality than just those mentioned above. To claim a market is morally ideal, you have to claim that it's morally ideal to let helpless people suffer unless someone voluntarily chooses to take responsibility for them. And that's bullshit.
And if Mr. Emba goes as far as I suspect he might go, with an extreme version of caveat emptor, then he'd probably argue that it's morally ideal to lie and cheat fools who aren't particularly aware. And I don't personally know any moral theorists or economists who would agree with that.
So I do believe the market is much more morally defensible than its critics generally believe. It's certainly not entirely amoral or immoral. But morally ideal? No, simply not true.
Posted by: James Hanley | December 3, 2009 3:14 PM
Raging Bee @29
True, but not quite complete. An important added point is, "more competitive pricing means cheaper goods, which means lower wages don't necessarily make someone any worse off."E.g.,. If I make $100 an hour, and a movie ticket costs $100, I'm no better off than if I make $10 an hour and a movie ticket costs $10. (And all other goods following the same trend in prices, of course.)
The mistake most non-economists make is to equate wealth with absolute dollar amounts, when wealth is actually the ability to purchase goods and services. The absolute (or nominal) dollar amounts of wages and prices don't really matter--all that matters is the relationship between prices and wages.
Posted by: James Hanley | December 3, 2009 3:19 PM
"Because voluntary exchanges don't violate anyone's will, and make each party better off. "
Show did the voluntarily consummated subprime mortgages now being foreclosed in my neighborhood make the soon-to-be evicted better off, the banks that will sell houses at a lost better off, or are we, the remaining folks, who have to deal with declining property values, rotting homes, and hobos and transients living in those falling part homes better off?
Posted by: History Punk | December 3, 2009 3:27 PM
Actually economics has nothing to do with morals, so the free market, as an economic system, is neither moral or immoral, it just is. If you do "A," then the consequence is "B," is economics. Is doing "A" worth the impact of "B?" That's a moral question. The problem with so many free market advocates is that they have converted an economic concept into what amounts to a religious belief. The market as the one true way!!! The problem is, history has shown quite clearly that an unregulated free market is as flawed as any other system.
I love Limbaugh's attitude. It is the age old attitude of the wealthy. A thousand years ago the nobleman was certain that God himself made him better than the peasant. One hundred years ago Carnegie and Rockefeller were absolutely certain that they were superior, they manipulated science to explain their greatness into social darwinism. Today, Rush and the idiots posting here make the same argument.
Simplifying it to match their general intellect, it boils down to:
I have money because I am a good person, you don't have money because you are a bad person.
You can change the wording, the language, but basically in their mindset wealth = personal worth. They've converted economic and financial terms into moral concepts to the detriment of both.
----------
Actually to maximize profits a business owner will strive to lower all variable costs, including wages as much as possible. Business owners don't keep wages down? One word for you:
OUTSOURCING
That is, quite simply and purely, an attempt to force wages down. We have a long history of business owners seeing labor as both a resource to be exploited, an expense to minimize, and an enemy to conquer. Why do you think Marx and Engels wrote what they did? Do you think those attitudes and beliefs arose in a vacuum? They were a direct response to the reality of free market capitalism. As was mentioned earlier in this thread, free market capitalists ignore reality and pretend that everyone has an equal opportunity to compete. They ignore the inequities, the fact that some are born to wealth and opportunity and others are born into abject poverty. They ignore the massive concentration of wealth in this country along with the associated inequities in all facets of our society.
Posted by: dogmeatib | December 3, 2009 3:30 PM
Love Seat: is actually a Victorian invention for preserving the purity and chastity of young women when their suitors came to visit, since it presents a notional barrier between their dirty bits, acting as a sort of in loco chaperone.
Why didn't they just call it a chastity seat, then? Or Chastity couch? I looked in google images for pictures of loveseats, and while most of the results were the mini-couches I was picturing, a few were of the "love toilet" design used by Shatner on his show. Well, I learned a new historical furniture fact today.
Posted by: Adrienne | December 3, 2009 3:37 PM
Yeah, those poor people are a nuisance; they should all be neutered. Don't they know that the USA was established by religion to serve the wealthy?
Posted by: MadScientist | December 3, 2009 3:38 PM
I believe in the prosperity gospel, BTW.
I also don't believe that the free market 'just happened'. It shows obvious signs of irreducible complexity and so must have been created by a Designer. The invisible hand is God's.
Posted by: Pat Donohue | December 3, 2009 3:42 PM
True, but not quite complete. An important added point is, "more competitive pricing means cheaper goods, which means lower wages don't necessarily make someone any worse off."
Not quite complete, and not quite true either. If outsourcing to China means more competitive prices and cheaper goods for American consumers (some of whom may have lost their jobs due to the aforementioned outsourcing), then the LOSS OF WAGES (not just lower wages) will have made some consumers poorer; only those who still have jobs and can buy stuff would benefit from the lower prices.
Furthermore, every American laid off due to outsourcing means one less source of demand for whatever consumer goods he'd otherwise buy from other Americans. And that means fewer people able to benefit from cheaper goods, no matter how cheap they get.
The Chinese might benefit, a little, depending on how much their corrupt totalitarian government allows them to be paid, and whether the cheaper goods they make are sold for lower prices in China, subject to change without notice...
Posted by: Raging Bee | December 3, 2009 3:44 PM
Poe?
Posted by: Rick R | December 3, 2009 3:46 PM
Pat Donohue, badly in need of psychiatric care:
Then your god is an incompetent asshole, totally unworthy of the worship of any sane or moral person. Of course, since you are not such a person, you think it's just peachy to worship a nutjob who has no idea what the fuck it's doing and leaves countless people to suffer and die because they don't have money.
Posted by: phantomreader42 | December 3, 2009 3:50 PM
But that really doesn't hold up, unless we go really old school and say that all illness and infirmity is the result of demonic possession or something equally silly.
News flash: a lot of the people who embrace/hide behind free-market fundamentalism really are that old-school. Their contempt for those less fortunate than themselves slides into a range between hatred and depraved indifference, and they'll gladly accept any excuse their ministers, sophists or demagogues can cobble up to justify it.
Posted by: Raging Bee | December 3, 2009 3:55 PM
Pat @72 Creationism in economic systems? That's got to be Poe.
Posted by: Owen | December 3, 2009 3:57 PM
Raging Bee "Their contempt for those less fortunate than themselves slides into a range between hatred and depraved indifference, and they'll gladly accept any excuse their ministers, sophists or demagogues can cobble up to justify it."
It's what Jesus would do...apparently.
Posted by: Modusoperandi | December 3, 2009 3:58 PM
I believe Pat just outed himself as a Poe (or is getting impersonated by one). If it was an outting, you've had me going for quite some time (much like mad the swine did). If he's getting impersonated....the man (woman...can't tell, it's PAT!) spews enough crazy on his own, and probably doesn't need the "help".
Posted by: TBRP | December 3, 2009 4:03 PM
Pat donOhuE
Posted by: D. C. Sessions | December 3, 2009 4:04 PM
If the free market is the best means for a healthcare system, then why are countries in Europe surpassing care in the United States for less money per capita?
Surely it makes sense to model a healthcare system (or any other system for that matter) on what pragmatically has the best outcomes as opposed to what ideologically seems to have the best outcomes.
Posted by: Kel | December 3, 2009 4:11 PM
What a false debate. Is it moral to confiscate (steal) someone's money to pay someone else's medical bills?
If I embezzle money from my company to pay for my grandmother's operation, this is moral?
Posted by: Juice | December 3, 2009 4:13 PM
I suppose that depends on what you regard as more valuable: a few hundred dollars or your grandmother's life. I know that if my only option to save a loved one came down to embezzlement, I wouldn't hesitate.
Posted by: Sadie Morrison | December 3, 2009 4:18 PM
Raging Bee,
Trade may destroy particular jobs, but it doesn't destroy jobs on net. We can begin by quoting Adam Smith:
And finish by quoting Nobel Prize winning and definitively liberal economist Paul Krugman.
Ah, Krugman, that raging right winger!
Keep in mind that the money I save by buying a product of outsourced labor, rather than paying more to buy a product made for by your laid-off friends, is money I will either spend or invest, creating other jobs. But if I have to pay more for the product, so your friends can keep their jobs, I can't help provide jobs for those other people. Do your friends have a morally superior claim to a job than do they?
Further, you are assuming that this person who has lost their job has some right to demand that my choices about buying products be limited, so that I do not have the right to buy it from some cheaper source, but that I must buy it from him, paying more, so that he can keep his job. By what logic is he justified in limiting my choices of who to buy from?
Posted by: James Hanley | December 3, 2009 4:19 PM
I've suspected for awhile that Pat Donahue's a Poe, and it's gratifying to finally have it confirmed. It's been a good run, Paddy!
Posted by: Sadie Morrison | December 3, 2009 4:23 PM
Juice:
What a false debate. Is it moral to murder an innocent woman so you can get a few hundred dollars to spend on frivolous luxuries?
Human beings are real. Disease, alas, and health care are real. Money is an abstraction. Property in things other than our selves is not inherent: as a society we have something resembling a (shifting) consensus on what things can be owned, who owns them, and whether or how they can be transferred. For example, if I own my body, is it legal for me to sell plasma? If not, why is it legal to give it away? If I say no to the first and yes to the second, I'm not thinking absolute property rights, I'm thinking about statistics and public health consequences. (Conversely, if you don't own your body, is it legitimate for me to stop you on the street and force you to donate plasma?)
Posted by: Vicki | December 3, 2009 4:28 PM
The doctors and the hospitals are the ones expecting exorbitant payments.
Why don't the doctors treat them for free or at a greatly reduced cost?
Each to his own according to need.
Posted by: Juice | December 3, 2009 4:29 PM
DogmeatIB,
No, it's an attempt to remain competitive. Paying high wages doesn't do anyone any good in the long run if it causes you to go out of business. It also doesn't do any good if it causes products to be higher priced. Again, a $100 an hour salary isn't any better than a $10 an hour salary, if in the first case a movie ticket cost $100, and in the second case it only costs $10.
You're an intelligent guy whom I really respect. I wish you'd bone up on economics, because it's the only thing I see you write about where I recognize a lack. I recommend any of Krugman's popular books, Todd Buchholz's New Ideas from Dead Economists, and Charles Wheelan's Naked Economics for starters.
HistoryPunk
Most people who received subprime mortgages are in fact better off, as they now comfortably reside in homes that are nicer than they could otherwise have afforded.But I in fact agree with your point, and would note that only people who haven't bothered to closely look into the causes of the mortgage crisis think it was a free market phenomenon. In fact it was caused by a series of misguided government policies that screwed up the market (non, not the repeal of Glass-Steagal, it's more complex than that). I don't blame anyone for not closely looking into it. It's so complex that economists are still arguing about the details, although they're agreed on the broad outlines. I spent several months researching it earlier this year, and it took a long time to get a handle on it. Here's a link to the policy brief I wrote about it, explaining how government policies created the problem. If you don't think I know jack, just use it as a bibliography to find the articles I relied upon, by economists who--I readily admit--know more than I do.
Posted by: James Hanley | December 3, 2009 4:31 PM
Then you wouldn't mind mailing all of yours to me?
I'll put it with the rest of my abstractions.
What frivolous luxuries? How was a woman murdered?
You make no sense.
Posted by: Juice | December 3, 2009 4:35 PM
"If I embezzle money from my company to pay for my grandmother's operation, this is moral?"
No, by all means, let granny die. She wasn't on social security and medicare?
Posted by: democommie | December 3, 2009 4:36 PM
Does anyone know how to avoid the formatting problems my prior post exhibits? In my post @84 everything is fine, but in my post @88, the second paragraph following a blockquote is indented,which seems to happen to me most of the time.
Posted by: James Hanley | December 3, 2009 4:37 PM
You are totally incoherent.
Yes, it's legal to both sell and donate your plasma. And?
What?
It's your plasma. You do what you want with it.
Of course you own your body. And no, it's not ok to force my plasma from me.
Posted by: Juice | December 3, 2009 4:38 PM
No she wasn't. Granny didn't believe in coercion and extortion. She thought it was immoral.
Posted by: Juice | December 3, 2009 4:40 PM
@82: Is it moral to confiscate (steal) someone's money to pay someone else's medical bills?
Who's talking about theft? The constitution invests the people's representatives with the power to levy taxes for the general welfare. I'm astounded how many libertarians miss the simple point that "Democracy" still means you have to obey laws you didn't vote for.
Posted by: eric | December 3, 2009 4:43 PM
Juice,
Do you know factually that it is legal to sell plasma in every state? Each state writes its own property laws, and exchanging body parts for compensation is illegal in most. Plasma is the least controversial of these body parts, so I am sure it is legal in most (I used to sell mine in Oregon), but I don't know with certainty that it's legal everywhere.
And while you and I would argue that it ought to be, the fact remains that Vicki's question is quite possibly relevant in a particular state.
Posted by: James Hanley | December 3, 2009 4:44 PM
Whoah, Raging Bee, I think you should re-read my post.
I'm in favor of socialized medicine, and I know the definition of socialism quite well thank you.
I was just pointing out that free markets do perfectly well at controlling price, but that heavy regulation stifles the markets ability to do so. Then I pointed out that stripping regulation in the US is unrealistic at best.
The constant smearing of the free market doesnt help. It would lower prices, IF everyone wanted to have an unregulated health care industry. I sure as hell don't want that, and I think most rational people wouldn't want it either. Between a free market health care, or a socialized one, I would pick socialism.
Posted by: Revyloution | December 3, 2009 4:44 PM
My buddies and I got together and wrote up a law. We all signed it, too, so it's legit. It invests them with the power to levy taxes. We'll send you a bill. If you don't pay it we'll send men over to collect. Don't worry, the money will go to the public good. Trust me.
Posted by: Juice | December 3, 2009 4:48 PM
@97: My buddies and I got together and wrote up a law.
Good for you. Let me know when you actually get elected, then I'll care.
Posted by: eric | December 3, 2009 4:50 PM
James,
The problem is, for your argument, and anyone advocating the free market system over all others, we don't have a perfectly competitive free market system. From that point then, the market is not going to be as efficient as free market advocates like to claim; misallocation of resources is going to happen, abuse, etc. Also, because of the fact that the market is not perfectly competitive, businesses with more capital are able to manipulate not only the market, but our political system as well.
History shows, quite clearly, that the non-interventionist free market leads to massive inequities, poverty, abuse, corruption, etc. Look at Europe and the United States prior to the Great Depression. We had massive booms and busts roughly every 20 years. Free market advocates will argue that I have no right to force you to make an involuntary exchange, but they seem to completely ignore the fact that, through the actions of the free market, people are forced to make exchanges they do not wish to make; people lose their property, lose their access to resources, even lose their lives based on the decisions of others.
To claim that the free market is some sort of magical land where all are able freely and fairly compete, where all transactions are voluntary, and all success or failure is based on actual ability is utterly laughable. It is what makes pure free market libertarianism as much a utopian fantasy as pure communism.
The free market is not better nor worse than any other system. When it works, it works well, when it fails it fails dismally. So many free market advocates are willing to ignore and dismiss the failing dismally part.
Posted by: dogmeatib | December 3, 2009 4:50 PM
Look, eric, I know you didn't vote for us or the law that we wrote, but that doesn't mean that you are exempt.
Posted by: Juice | December 3, 2009 4:52 PM
Juice "What frivolous luxuries? How was a woman murdered? You make no sense."
Vicki just flipped yours around, so if hers doesn't make sense, it must be a characteristic of yours. Yours, incidentally, can be used against all socialised services. I, for one, really don't want to pay for the firemen who put out a fire in your house, protecting your worthless ass, but if that's the price I have to pay to have them save everybody else, I'm fine with it.
Posted by: Modusoperandi | December 3, 2009 4:53 PM
This is true. Freedom isn't about the best "system" for distributing wealth "fairly."
Posted by: Juice | December 3, 2009 4:54 PM
Then pay voluntarily and don't threaten violence on people who aren't fine with it.
And so all people who die in a hospital are murdered? Ridiculous.
Posted by: Juice | December 3, 2009 4:57 PM
@100 Look, eric, I know you didn't vote for us or the law that we wrote, but that doesn't mean that you are exempt.
BZZT. I said "The constitution invests the people's representatives with the power to levy taxes." You are not a constitutionally elected representative. Gathering your buddies together does not make you Congress, and text you write with them might properly be called a "screed" or perhaps "manifesto," but its not a law. Therefore you have no right to tax.
Posted by: eric | December 3, 2009 5:08 PM
Posted by: Dave | December 3, 2009 5:12 PM
Juice: You're adorable. Ammoral, but adorable. Like a sociopathic bunny.
Posted by: Modusoperandi | December 3, 2009 5:15 PM
I think this images sums up Juice's position:
http://www.bobcesca.com/images/tea-bag-fail-public.jpg
Posted by: Brandon | December 3, 2009 5:18 PM
We can begin by quoting Adam Smith...
Um...how about you begin by discussing what's really happening in the real world today, as opposed to just endlessly repeating what some long-dead theorist said WOULD happen? Is anyone making any attempt to TEST the free-marketeers' reasoning and predictions against the current reality? Or are we just assuming they'll always be right?
No, it's an attempt to remain competitive.
...by forcing wages down.
Most people who received subprime mortgages are in fact better off, as they now comfortably reside in homes that are nicer than they could otherwise have afforded.
The same sort of thing can be said of ANY scam, as long as there are some people who didn't get screwed by it. Just because SOME people didn't get hosed, doesn't make it right, nor does it prove the particular scheme was really the most beneficial thing for them to do. Perhaps, if they hadn't had the opportunity of a subprime loan, they might have been better off staying in a smaller house or rented property.
But I in fact agree with your point, and would note that only people who haven't bothered to closely look into the causes of the mortgage crisis think it was a free market phenomenon. In fact it was caused by a series of misguided government policies that screwed up the market...
"Government policies" that included radical deregulation that allowed much shakier loans and other financial schemes that weren't allowed before. In other words, it WAS a free-market phenomenon, made possible by, among other things, allowing financial institutions to choose who "regulated" them, and encouraging regulators to (yes, literally) take chainsaws to financial regs that could have prevented the financial collapse we saw after eight years of Bush Jr.
I was just pointing out that free markets do perfectly well at controlling price, but that heavy regulation stifles the markets ability to do so.
And I was pointing out that your arguments were based entirely on abstractions, with no reference to real-world situations. If your ideology doesn't make contact with the real world, it doesn't matter how "right" it is.
The constant smearing of the free market doesnt help.
Abstract reasoning that avoids contact with facts and experience doesn't help.
And once again, in comes juice with another spurt of the same old babyish nonsense about how taxes are the same as armed robbery. I suspect he also called his parents "Nazis" when they tried to make him clean up his room.
Posted by: Raging Bee | December 3, 2009 5:19 PM
So what's it like living off the grid?
Posted by: Sadie Morrison | December 3, 2009 5:20 PM
DogmeatIB
Precisely correct. And so the problem of the market not being freely competitive is to...ensure that it is regulated ever further away from that? That's a logic that's never made sense to me. With respect, that history is written by historians who have never studied economics. Those booms and busts were caused primarily by government manipulation of the money supply. They were not in fact caused simply by free market competition.Why take the word of historians about what the free market does, when the overwhelming majority of them have studied history rather than economics? I'm quite serious about that. Historians tend to fall prey to the the tendency to talk about economics without actually bothering to study it, just as my fellow political scientists (and the politician who spoke at my college recently) do.
Posted by: James Hanley | December 3, 2009 5:22 PM
James,
My point was, in their effort to remain competitive, the business outsources to a less expensive labor pool. For the business, the salary is a variable cost that they are attempting to reduce to remain competitive, to the worker it is seen as an attempt to force wages down.
I'm not saying that it is a positive or negative thing, I am simply stating that claiming that businesses don't try to keep costs, including labor costs down is quite silly.
Posted by: dogmeatib | December 3, 2009 5:27 PM
My buddies and I got together and wrote up a law. We all signed it, too, so it's legit. It invests them with the power to levy taxes.
OK. I'm already in deals like that with a couple of gated communities. Basically us shareholders have gotten together and set up by-laws and maintenance schedules, and we collect dues to finance it. It's all perfectly voluntary; you agree to the arrangement when you sign the contract to move into the community (or when you accept ownership of a membership that you've inherited).
It's worked out well so far. Some of the rules are a little restrictive, but, on the other hand, I like how I don't have people blasting their stereos at 3AM and I like that there's not garbage strewn all around the common areas. If I ever decide I don't like the way things are going, I'll move someplace better.
One of the gated communities is my condo association, and the other is the United States. (Technically the United States is called a "nation", but that's just a fancy word for a really big gated community with a private security force.)
Just out of curiousity, can you tell me more about the gated community that you and your friends have set up? I might consider moving there if it's better than where I'm living now.
Posted by: chaos_engineer | December 3, 2009 5:29 PM
No, it's an attempt to remain competitive. Paying high wages doesn't do anyone any good in the long run if it causes you to go out of business.
If it causes you to go out of business, that's bad. Otherwise, however, higher wages for workers have the effect of distributing wealth (and thus economic and political power) more evenly across the country, helping workers become more self-sufficient, giving them opportunities to better themselves through education and training they might not otherwise afford, and diverting more money to businesses that sell useful goods to the workers. In short, higher wages for workers is good for communities (and local businesses) as a whole, and strengthens a country's middle class.
You know what I think would be good for all of humanity? All of China's workers forming unions and standing up for better pay and benefits. Our prices would go up (after the workers win the biggest civil war in history, that is), but we'd be getting a better world for our money. Would you support such a movement? Or would you support the Communist crackdown in the name of "free markets" and cheaper goods?
Posted by: Raging Bee | December 3, 2009 5:39 PM
Raging Bee,
Just because you haven't read Adam Smith doesn't mean he's not relevant. He's actually still quite relevant, which is why every economist still reveres him. He is to economics what Charles Darwin is to evolutionary theory. Would you tell a biologist to stop quoting a long dead theorist and look at the real world?
Besides, I also quoted Paul Krugman, who is not only alive, but won the Nobel Prize last year. He's also a bane to conservatives and libertarians, so it's not as though I'm just relying on my ideological brethren to make the point. How incredibly dishonest is it for you to tell me to stop quoting dead theorists, and ignore the fact that I quoted a living Nobel Prize winner.
I'll just repeat my main point: Read some economics before you think you're competent to talk about it, and certainly before you think you're competent to reject Adam Smith. You really are precisely like the creationists, pretending they understand evolutionary theory's alleged failures better than biologists do.
You ask me to look at what's going on in the real world, but you ignore the fact that I researched and wrote a policy brief--which I linked to for ease of access--precisely about the financial meltdown. I did look specifically at what's going on in the real world, but you dishonestly ignore that and continue to claim that I haven't. So you twice in one comment engaged in dishonest argumentation. How admirable! In that policy brief I show exactly which government policies distorted the market, but you're afraid to look at the evidence--you'd rather rely on your preconceived ideology. You're one of those brilliant folks who can completely understand an extraordinarily complex event without actually doing any real research, apparently.
To sum up: Until you actually learn some economics, your comments on economics are precisely as credible as the comments of Ray Comfort on evolution.
Think about that. You laugh at guys like Comfort because they pretend to be knowledgeable despite not having studied the subject. But you pretend to be knowledgeable about economics, even though you've never studied the subject. So just how are you different from him?
Posted by: James Hanley | December 3, 2009 5:42 PM
Can we increase wages without increasing the price of goods?
Understand, I'm not arguing for pushing wages down while prices go up. I'm not arguing for impoverishing anyone. I'm saying that low production costs, including low wages, keeps prices low. And low wages with low prices is mathematically equivalent to high wages with high prices.
You don't even need to study economics for that to make sense. Elementary school math will answer that question for you.
Posted by: James Hanley | December 3, 2009 5:46 PM
Re juice
Shorter juice: every man for himself and let the devil take the hindmost.
Posted by: SLC | December 3, 2009 5:47 PM
Raging Bee, dont chop my statements in half to make it look like I support a capitalist solution for health care. The second half of my quote you took out of context said 'stripping regulation in the US is unrealistic at best.'
And you keep asking for specifics, but I dont see anyone else laying out pie charts and graphs. This is a discussion for petes sake.
If you want a real world example of medicine and the free market, look at Mexico. Most of their services are available for purchase directly. Many of the citizenry have to purchase doctors visits directly, with no assistance. They also have many 'alternative' doctors that compete for the same healthcare buck. The cost for procedures in Mexico is far less than it is in the US. There is, or at least was before the narcos became so violent, a vibrant medical tourism industry. There was some great medical care you could purchase for much cheaper than the US, but there was also some seriously crappy, and even dangerous medicine being practiced. Also, many people who couldn't afford medical care simply went without it.
Without the tight government regulations of the US, the Mexican medical industry was able to provide health care at a reduced cost. Before you bring up the disparity of the economies between the US and Mexico, remember that many Mexican doctors train in the US, they purchase their medical equipment from us, and many consumer goods are on par or even more expensive in Mexico.
My economics prof taught us that there is no such thing as a pure capitalism (unless you count anarchy, but they never last) and a pure socialism is just a hypothetical. I think the best form of government is one that is flexible. Government needs to step in and create parity when the balance of power shifts to too few people, and it needs to be able to loosed up regulation to spur innovation.
Modusoperandi brought up fire departments. I love them, they are a beautiful example of socialism when it works well. Capitalist fire departments are possible, and they do work. Ancient Rome had firemen who would show up while your home was on fire, and begin bartering on the price to put it out. I prefer the system we have today.
My original point is that arguing that capitalism doesn't work is false. It can and does, but most people (including me) don't want it. I've found that a far better argument is asking the pro free market people to outline exactly what they want. Let them cut their own throats. Its the same as the arguments between creationism and evolution. As long as we let the creationists sit back and poke holes, we never get anywhere. Instead, demand that they come up with a testable creationist theory that explains phylogeny, or radio isotopes, or anything else based in reality.
Whether its Pat Donahue, or Ray Comfort, sitting back and defending your hard won theory while they poke holes is a loosing proposition. Demand they put up a complete viable plan, only then will their supporters see that the emperor has no clothes.
Posted by: Revyloution | December 3, 2009 5:53 PM
Pat Donohue wrote (in part): "You are, literally, worth what you earn; your value as a person and a member of society is demonstrated by your income."
So, Pat Donohue, Bernie Madoff must be about the most valuable person around.
(I suspected PD might be a Poe, and with his second message — about believing in the prosperity gospel — I was sure of it. But I still feel it's worth responding. I'll just keep it shorter.)
Posted by: Chris Winter | December 3, 2009 5:54 PM
Those booms and busts were caused primarily by government manipulation of the money supply.
Pure bullshit. First, it is the government's DUTY to control the money supply. Second, monetary policy decisions are made IN RESPONSE to economic circumstances, including all those waves of growth, speculation, crash and contraction that result from aggregate private business decisions. Third, boom-and-bust cycles predate the USA, and happen all over the world, throughout history, regardless of who's in charge or what laws they make. Blaming government for responding to business activity is typical of the rank pandering dishonesty of pro-business libertarians.
Historians tend to fall prey to the the tendency to talk about economics without actually bothering to study it...
Historians "tend to fall prey to the the tendency" to talk about things that happened in the past. Including economic booms and busts that happened in the past. That's their job. That's what "historian" means. Pretending they can't discuss past experience because they're hot economists is more horseshit. HONEST economists rely on, and work with, historians, and don't pretend their work is invalid.
Posted by: Raging Bee | December 3, 2009 5:55 PM
There is a division between positive economics and normative economics. PE is the more-or-less scientific attempt to study economics without any issues of morality. This is the standard textbook material, and it's incredibly vast as a field, loaded with data and formulas. NE is the more-or-less philosophical attempt to study economics as a moral question, and it's comparatively small. There have even been mathematical aspects to it that are interesting, but it remains intractably difficult.
The fields are quite distinct, and should never be confused. Unfortunately, it is a common failing among positive economists.
Posted by: william e emba | December 3, 2009 6:02 PM
Really, Raging Bee, this is laughable. I never said the government didn't have a duty to control the money supply, but that duty doesn't prevent them from manipulating it, it's precisely what makes such manipulation possible. And you have a magical theory of government goodness if you think they only made those decisions in response to economic circumstances, rather than with an eye toward re-election (economic booms help with that), and if you think they actually always made the right decisions. Apparently, in your theory, government can do no wrong economically when it intervenes in markets.
Second, how does a global history of booms and busts negate the point? Who has controlled the money supply throughout history? Primarily governments.
And I'm not saying historians don't write about the past. I'm saying that if they write about economic events in the past, they need to understand economics to make sense of those events. Would you advocate that a historian of science need not bother to learn to understand science, because he only needs to write about events that happened in the past?
Please, Raging Bee, explain to me why you think that you don't need to study economics to understand it. Explain to me why you're not just like Ray Comfort.
Must go. I'll check in tomorrow to carry on. Right now, class calls, then I must watch the Ducks beat the Beavers. Far more important than silly debates like this.
Posted by: James Hanley | December 3, 2009 6:05 PM
What I find most ironic about this clip is that Shatner takes it to Limbaugh far more effectively than any so-called journalist I've ever seen, people who are usually too busy pitching softballs in awe of His Drug-ness.
Posted by: CHV | December 3, 2009 6:08 PM
Dr. Steve @ 43:
>>>So Rush thinks the best country we can have is one in which poor people have no healthcare.
Limbaugh's notion of the economy is all about levying the haves versus the have-nots, and the former stepping on the heads of the latter on the way up.
This is not to say that being wealthy is innately immoral or evil.
Far from it.
Limbaugh literally seems to think that America's streets are paved with gold, and for him they pretty much are. But Rush's own fiscal success has apparently made him forget how 99.99% of other Americans have to work its collective asses off (provided they can find employment) just to make ends meet, and cover basic expenses including child care.
Posted by: CHV | December 3, 2009 6:18 PM
What a false debate. Is it moral to confiscate (steal) someone's money to pay someone else's medical bills?
Posted by: Juice | December 3, 2009 4:13 PM
I guess in your book, taxes = theft. OK, then:
Is it moral to confiscate (steal) someone's money to pay for someone else's child's education?
Is it moral to confiscate (steal) someone's money to pay for a road you personally don't drive on?
Is it moral to confiscate (steal) someone's money to pay for others to protect your neighbourhood from crime?
Is it moral to confiscate (steal) someone's money to pay for a copy of Atlas Shrugged and ask you to shove it up your lame ass?
Posted by: We Are The 801 | December 3, 2009 6:28 PM
Pat D @ 72:
>>>I believe in the prosperity gospel, BTW.
Well, that explains everything - as Jehovah (and His only begotten daughter Ayn Rand) is certainly the God of capitol gains, gated communities in suburban Dallas, and time-shares on St. Bart's.
Praise be.
Posted by: CHV | December 3, 2009 6:29 PM
That is simply false, as I explained. In a mathematically idealized economy, it is true. But we are nowhere close to such an idealized economy.
Goods with positive externalities (health, education) are underproduced. Goods with negative externalities (pollution, congestion) are overproduced. The crude way to solve this is to tax the negative goods and fund the positive goods. One thing economists try to do is to devise clever regulatory schemes that somehow trick the problem goods to more accurately reflect their true costs, and then let the free market work on that. That's the point of cap-and-trade. Done wrong it's proven to be useless, done wrong it's proven to be fantastic.
Another distinction between the idealized markets and reality are the problem of oligopoly. The only cases that are really understood are monopoly and perfect competition. We almost never see perfect competition, and most of the economy is oligopolistic.
This might not be a bad thing. The excess profits oligopolists earn tend to be invested in research and development, a luxury that pure competitors can't afford.
Which brings us to another vexing mathematical problem: economic growth. Which is supposedly a very good thing, yet its existence is poorly understood. One thing is obvious: it contradicts equilibrium. In other words, a truly free market would kill economic growth: investing in the future is inherently irrational today, so far as the math goes.
And this is just the tip of the iceberg. The theorems, for example, don't work with goods sold at a bulk discount! Part of what many academic economists do is try to figure out how many ways we are away from the mathematical ideal, and then to figure out their implications.
But someone passing off these idealizations as the proven answer to real world markets are complete fools.
Posted by: william e emba | December 3, 2009 6:30 PM
"The wealthy are wealthy because they produce goods and services that other people find valuable (as demonstrated by their income)."
I'll take "Facile Economic Theories for 400, Alex".
I'm sure that it comforts Prince Charles to know that he's filthy rich because he produces goods and services that other people find valuable. Now if only there were some kind of example of this...
Posted by: RickD | December 3, 2009 6:35 PM
Datapoint: Henry Ford famously doubled his worker's wages to make sure they could afford his cars. And he attracted a remarkably better class of workers to boot.
Posted by: william e emba | December 3, 2009 6:35 PM
@124
Well, I'd agree with at least one of those four. :)
Posted by: RickD | December 3, 2009 6:37 PM
I have no idea what you are referring to in my name (perhaps you're picking me out of a quoted block?) but I'll reiterate: I can do a good job of explaining what positive economics says, with emphasis on its complete amorality. That is not the same as advocating the same.
Milton Friedman famously favored the legalization of insider trading. His view was it moved stocks to their "correct" prices faster. You didn't personally know him, right?
Posted by: william e emba | December 3, 2009 6:43 PM
Rush Limbaugh "I study this stuff", rarely cites his sources, and when he does, most often takes things out of context or paraphrases. I have an asshole like this at work, a freelance economist, touting the Milton-Friedman free market Chicago School soundbites. Love it. And where does Milton Freidman actually live? Liberal San Francisco. Friedman even conceded (On Frontline interview PBS.org archive) that where racism is concerned, government action was necessary to to interfere in the market. So if markets cannot handle racism (Jim Crow Laws, Separate but Equal, ect.) than what else was he wrong about? Quite frankly, in a world where men are the dominate economic actors, perhaps game theory works, but I serious doubt when you include ALL participants including the sick, the aging, the infirm, children, women, than you have a different reality that needs a new explanation. The work by recent Nobel prize winner in economics is a good place to start.
Posted by: lilorphant | December 3, 2009 6:44 PM
Actually, Prince Charles is not filthy rich. You're thinking of his mother. Read his divorce settlement.
Posted by: william e emba | December 3, 2009 6:44 PM
James:
But the converse argument, deregulating the market, is an equally illogical argument. How will deregulating an unfair market in any way enhance freedom and equity? I have yet to see anyone explain how removing the government from the already unfree, uncompetitive market will in any way make it more free or more competitive. Is Bill Gates going to give everyone a million dollars and a "GO!" at the beginning of this new, free, competitive free market?
That's why pure libertarianism is as much of a pipe dream as pure communism. They wont work because reality, quite frankly, is a bitch. It's basically like saying the best way to end discrimination is to get rid of the 14th amendment requirement for equal protection or ending crime by getting rid of the police.
You mention manipulation in the market as being a major part of the housing market bubble but at the same time minimize the impact of Gramm-Blilely-Leech, I would disagree with that assessment. Glass-Steagall worked as planned for the most part during the 70 years it was in place. Removing it resulted in a massive bubble not that different from the speculative bubble from the 20s that GS was designed to eliminate or mitigate. Yes, the Fed leaving interest rates down helped it along, but a pure free market unmoderated banking system could have accomplished much of the same mess with speculative lending, inflated property values, etc. (you know, like it did in the 20s?)
What I basically predict is that conservative, free market economists will argue that it was the government's fault for stepping in at all, liberal economists will argue that it was the government's fault for not properly regulating the market (along with industry culpability), and moderate economists will argue that it was a combination of the two.
Just because the government didn't successfully handle this crisis doesn't mean that removing government oversight would have, in any way, better handled the crisis and that is the critical flaw in pure libertarian free market arguments.
With respect, this was corroborated by some of the macroeconomics discussions I had with economics professors while upgrading my certs. The problem is, as William Emba pointed to, there is a significant amount of mixing of normative and positive economic concepts and arguments on this thread. Personally I would argue in favor of slightly less economic growth and expansion in favor of more economic equality, and that is where I believe we disagree James.
Over the last decade we saw a massive spike in phony wealth, a boom that mirrored that of the 20s. Interestingly enough we saw many political, social, and economic policies that also mirrored the 20s. What we also see, on top of all of that, is the greatest concentration of wealth in the United States than we have seen in decades. Depending on your measure (annual income, total worth, etc.) it's either the 1920s or the 1890s. Interestingly enough, both of those spikes in unequal distribution of wealth correspond to massive economic downturns.
Looking at this same situation, you would argue in favor of greater economic freedom, I would, and do, argue in favor of greater economic equality. It isn't that I don't see the reduction in economic growth that is likely based on greater government involvement, it is that I am unwilling to continue to accept the greater disparity of wealth, the increasing poverty, and the increasing political and social instability caused by the inequities of the current economic status quo. I am willing to accept the reduction in profitability and potential growth in favor of stability. It isn't that I don't understand economics, it is that I disagree with your assessment and believe that our other problems outweigh your desire for a more competitive free market.
You are frustrated because you see the potential for economic booms being greater and longer frittered away by government involvement, I am frustrated because I see the potential for economic busts being deeper, longer, and more lasting increasing with every failure of the government to intervene. In this case you are the optimist and, while I would consider myself to be a realist, I will accept the argument that I am the economic pessimist.
Posted by: dogmeatib | December 3, 2009 6:50 PM
OT Sorry again...
this is what my friend came up with...
http://epw.senate.gov/public/index.cfm?FuseAction=Minority.Blogs&ContentRecord_id=84e9e44a-802a-23ad-493a-b35d0842fed8
which has bad names all over it.. but says that THIS GUY Stephan Schwartz has a peer reviewed paper in the Journal of Geophysical Research.
anyone know the hole in this paper? I have not read it. I would say that he is minimising CO2 effects to say that there is no danger that man is warming the planet and its all the sun's fault.
http://www.ecd.bnl.gov/steve/pubs/HeatCapacity.pdf
Posted by: Kevin (NYC) | December 3, 2009 6:55 PM
One of the things that almost no-one wishes to address is what we are finding out about the brain and how that impacts both economics and politics. It may not at first seem relevant to the conversation, but on closer inspection, it is actually relevant to every single area of our lives (which is why creationists are starting to "address" it).
If we are fully caused; that is, if determinism is even roughly true (and I believe that it is); then it becomes hard to see how anyone deserves to be praised for their supposed "achievements", or on the flip side, punished for their "failures", above and beyond the wish to cause or influence a change in a persons behavior.
In other words, "deserve" no longer really comes in to it, at least not in the sense that most people mean it. Our only concern should be with the way in which we can best encourage or influence a person to either do better, or to encourage a person to carry on as they are. Retribution becomes meaningless and incoherent.
Now, this scares a lot of people, but that is largely because they don't understand what this really means. It does not mean that we shouldn't put people in jail for committing crimes, and nor does it mean that we cannot influence a deterministic process — we can. We still need to do something to cause a change of behavior, or in the case of a violent individual, keep them away from the rest of society.
What it probably does mean, however, is that all arguments that suggest that somehow poor people "deserve" to be in the position that they are, and consequently, that rich people "deserve" all of their wealth, are laughably misplaced and wrong. And not just morally wrong, either, but scientifically, as well.
It's obvious, but nevertheless true, to say that if I had been Warren Buffett (meaning that if I had exactly the same genes and life experiences), I too would have made the amount of money that he has. There is a tremendous amount of luck or chance involved in everything that happens to us, and also far more help from the outside world than is ever given credit for. And that is part of the reason why, in my opinion, people that are tremendously wealthy should pay a far higher percentage of that wealth in taxes.
Unless you can argue that an individual could have, given the circumstances, done differently than they actually did — and I don't believe that anyone can — it becomes difficult to see how they "deserve" to benefit from those decisions to the kind of degree that many people still believe that they do. That is not to say that they deserve no benefit, of course.
The only really persuasive argument for why people should pay lower taxes is economic: that the current system (or one that is similar) is economically beneficial to all people, and not just those who become very wealthy, and that all other systems (or derivations of the current system) would likely harm those who are least well off. There is clearly some truth to that, which is why almost no-one wishes to live in a communist system instead. But we then have to decide where the balance lies, and I'm not at all certain that any country has truly looked at that problem in either a serious or comprehensive fashion, as yet, weighing up all of the considerations in the process.
One of the things that bugs me about any conversation such as this, particularly in an American context, is that too many self-proclaimed libertarians believe the US is literally the best of all possible worlds (countries). That may well be case when looking at certain economic indicators, but there are many more, both economic and otherwise, that suggest that it is in actual fact among the worst (in the western world, that is), not the best, for a large number of people.
Being the richest country in the world is utterly meaningless to someone who is living without health insurance, or someone who is living on the street. And the idea that there is equal opportunity in the US is also utterly contradicted by the evidence. It's just not true, and yet, I hear it time and again like a mantra.
Until there is real equal opportunity (or something close to it), I can't see how we can do anything other than "artificially" lift people out of poverty, as well as provide opportunities for them that they would not otherwise have access to. And while charity works in the US as well as just about anywhere else, the empirical evidence shows that it doesn't work well enough to be deemed a total success, either, meaning that it probably doesn't make up for the disparity in tax rates, when compared to many other countries.
Europeans may well pay higher taxes, but most indicators suggest that they benefit from them for the betterment of their societies to a greater degree than the average American benefits from lower taxes. I could, of course, be wrong about that, though.
Posted by: Damian | December 3, 2009 6:57 PM
"I'm glad that as a public schoolteacher, my value to society is accurately represented by my income."
That isn't the case at all. Schoolteachers are not paid nearly as much as they should be, if we're talking societal value. Teachers are essentially responsible for shaping, well... every single person that's going to be in the workforce. Home-schooling aside (cause we know what comes from that).
Posted by: ThatOtherGuy | December 3, 2009 7:10 PM
The Family and C St. explicitly base their everything on the idea that power and wealth are bestowed by God and are the signs of being his anointed representatives on Earth. If you have power and/or wealth, then God meant it and you are a 'good' person, even if to the rest of the world you are a genocidal maniac. They think Jesus' "suffer all the children to come unto me" means let the poor kids die and he'll take care of their souls, it's not our business.
And these lunatics have hold of the tiller of our ship of state. It is fruitless to debate economics theories while this situation exists. They and their paid for cronies decide who gets what and who gets punished regardless. Obama is not immune. Ohio State University is not immune. We are not immune.
Posted by: Gray Gaffer | December 3, 2009 7:31 PM
Posted by: llewelly | December 3, 2009 8:13 PM
Posted by: llewelly | December 3, 2009 8:21 PM
Re: comment shape--lilorphant, how did you get that cool taper on your comment (131)? Is there an app for that?
Rush Limbaugh was able to avoid service in Vietnam despite a draft-bait number because he had (has? eww! but wait, maybe worth it...) a big zit on his ass.
PS second the analogy fail on Rush's 'house on the beach.' Beach houses are perhaps the most subsidized and socialist perk of the wealthy. Without the Corps of Engineers and direct support of various other forms, most beach houses would be prohibitively risky and expensive even without global warming. Like your Weekend in Rodanthe? Here's the house after a November Northeaster:
http://www.flickr.com/photos/bryanelkus/4101234225/
This is emblematic of (repeatedly and more effectively described by the folks above) Rush's happy tupping at the socialistical teat while bravely arguing for free markets. In a free market he'd be a completely different person.
Ice9
Posted by: ice9 | December 3, 2009 8:27 PM
Kevin (NYC) | December 3, 2009 6:55 PM:
Realclimate analyzed that paper some time ago. Please read carefully.
Posted by: llewelly | December 3, 2009 8:28 PM
Rush evidently feels that pre ghost Ebeneezer Scrooge is the way to go for here he almost says "better to die and decrease the surplus population" (I have always wanted to get poor Ebeneezer into a post). Clearly this is an old attitude because most major religions argue against this point of view both the Abramhic and others. The religions to some degree feel we are our bothers keeper. In Christianity the evangelical right neglects that bother Jesus because he inconveniently says you are your brothers keeper, and in the parable of the good Samaritan defines your brother as anyone.
Posted by: Lyle | December 3, 2009 8:39 PM
I hate to break it to you, but Milton Friedman's been dead for three years.
Posted by: SteveWW | December 3, 2009 8:47 PM
"Just because you haven't read Adam Smith doesn't mean he's not relevant. He's actually still quite relevant, which is why every economist still reveres him. He is to economics what Charles Darwin is to evolutionary theory. Would you tell a biologist to stop quoting a long dead theorist and look at the real world?"
Yes, if what he was quoting does not actually relate to the real world. It's called scientific progress - we take what exists in reality and modify the moodel. I hope you're not making the creationist mistake of thinking Darwin is an authority over everything. Any biologist will say that he got some things right, some things wrong. If you want to discuss natural selection, would you rather I quote Darwin or give you the latest in genetic testing, evo-devo, etc.?
Posted by: Badger3k | December 3, 2009 9:29 PM
Re:the wage supression issue
What pushes wages down is the over abudance of workers.
If we want labor to be valued more highly, the answer is staring us right in the face.
I getting my tubes tied as soon as I'm old enough so that a doctor will perform the surgery.
6.6 billion people on this planet is way too much and deep down I think everyone knows that.
When there are so many humans, the value of one individual is greatly depreciated.
Posted by: Jenn | December 3, 2009 9:42 PM
And you have a magical theory of government goodness...
When a libertarian tosses out this false dichotomy, you know he's got nothing else to say. Does anyone here really think you have to have a "magical theory of government goodness" just to believe that government isn't the root of all bad economic events?
Apparently, in your theory, government can do no wrong economically when it intervenes in markets.
Where and when did I say anything remotely like that? Which Raging Bee are you arguing with -- me, or the one you have to imagine in order to validate your arguments?
Second, how does a global history of booms and busts negate the point? Who has controlled the money supply throughout history? Primarily governments.
So now you're suggesting that monetary policy was the sole cause of ALL recessions and depressions? Can you prove that? Probably not. Anyone with a smidgen of common sense and perception can tell you that such events are caused by the cumulative results of very complex business decisions, the overwhelming majority of which are made by profit-seeking individuals and firms. (If there's any monetary policy that causes recessions, don't you think policymakers everywhere would have identified it and resolved not to do it? Or do they just do it because they're evil like Pol Pot?)
Oh, and while governments may control the money supply, private businesses have lots of control over the CREDIT supply; and when they mismanage the credit supply through shortsighted profit-seeking investments, THAT is what causes the financial-sector collapses that either cause or exacerbate recessions. Blaming monetary policy for problems caused by dishonest and risky credit practices is the kind of stupidity that gets fruit-bats like Ron Paul in trouble.
And I'm not saying historians don't write about the past. I'm saying that if they write about economic events in the past, they need to understand economics to make sense of those events.
That's totally ass-backwards: history informs economics, just like it informs political science, sociology, etc.; economists need to understand history in order to formulate and validate their economic theories. Economic theories are based on, and tested by, historical experience.
Please, Raging Bee, explain to me why you think that you don't need to study economics to understand it.
I never said that, and you know it.
Posted by: Raging Bee | December 3, 2009 11:09 PM
My original point is that arguing that capitalism doesn't work is false. It can and does, but most people (including me) don't want it.
If it "works," then why do most people not want it? Probably because they know it doesn't really "work" for their vital interests unless it's properly regulated.
Posted by: Raging Bee | December 3, 2009 11:12 PM
Ed, given that the bulk of people who describe themselves as "Libertarians" have basically the same perspective Rush does, it's not clear to me why you hold and defend the label if you don't agree with them on these things.
Posted by: Azkyroth | December 3, 2009 11:16 PM
In before Ed does a rant on how he doesn't prescribe to meaningless labels.
Posted by: Brandon | December 3, 2009 11:36 PM
SteveWW "I hate to break it to you, but Milton Friedman's been dead for three years."
Nooooo! Now I'll never get my hedgeclipper back.
Azkyroth: The thing about Libertarianism is you have the Liberty to disagree with other Libertarians. There are Economic Libertarians and Social Libertarians, with some overlap. The Economic ones are the nuts, the Socials just want to get laid in peace (and from that statement I think it's pretty clear which group's pretty eyes make me swoon). The latter are far more fun to party with, while the former are best if you find the weight of a conscience too much to bear (for one thing, the latter always seem to have put their wallet in their other suit, the cheap bastards) or want to have the Liberty to be a gross polluter or scam artist without the interference of nefarious State forces like the EPA or SEC. Sometimes, it's fun to put the two groups of Libertarians in a ring and see them fight it out. They all punch like girls. That's the thing that holds them together as a group. True story.
Posted by: Modusoperandi | December 4, 2009 12:13 AM
Sorry about the length, but I have to do this...
James Hanley:
I normally tend to agree with you, but I'm going to have to strongly disagree with that statement--at least with the use of the word "caused." There's not doubt that government policies exacerbated the problem, but there is simply no government intervention that can cause the type of obvious misvaluation of assets that we saw.
The most obvious problem was the Fed's loose money policy. I flatly reject the Austrian notion that Fed policy necessarily causes malinvestment in general (mainly because there's no reason for it to be true), and in this case especially. Excessively low interest rates should cause an investment boom across the board, eventually leading to inflation. The only reason for this boom to be concentrated in housing debt is simple: Investors were not valuing housing debt correctly (for a variety of reasons) when compared to other types of debt. No amount of interest rate fiddling will cause (or fix) that.
That being said, the Fed's mistake was taking a lack of across-the-board inflation as a sign of stability rather than noting that the market was (incorrectly) funneling too much investment cash into a bubble. As I see it, if you're not in a liquidity trap, consistently low interest rates with no inflation, especially combined with a so-called "jobless recovery" should have you looking for a bubble somewhere.
Regulations like the ones your paper bring up can't explain it either--even partially. There's room for debate about their effectiveness, but they seem to me to be a red herring. In most cases, the lenders doing the worst type of lending were not subject to those types of regulations. The notion that Bob's Fly By Night Mortgages, LLC would normally be a responsible lender but for regulations that apply to traditional banks just doesn't make sense. Bob was making mortgages left and right while selling penis enlargement pills by night because he had a healthy secondary market for them--a market full of lenders who couldn't care less about any equal opportunity banking regulations.
To me, the thought experiment is clear: If you're a lender who is forced to lend money to people you believe will be unprofitable, you do the bare minimum. You don't set new records making as many unprofitable loans as you can. We're talking about US government regulations, not mandates from Stalin.
The GSEs, while you can say a lot about their abuse of their implicit government guarantee an their thin capital margins, were also clearly not driving the boom. During the bubble's run-up, they were rapidly losing market share to "non-bank lenders."
Finally, there's the tax incentives for mortgages. Structuring capital gains tax to make short term housing "investment" a good idea can definitely contribute to volatility in the housing market. It causes people to treat houses the way they treat stocks, which is bad. Most people can't borrow a half million dollars at greater than 5:1 leverage to buy stocks. I don't think that most of our tax incentives for home ownership are a particularly good idea, with the exception of emergency home buyer credits during a real-estate collapse, which can help soften the landing into mere stagnation instead of total Armageddon.
My problem with all this analysis is that there are a lot of smart, analytical people who see an obvious market failure and go looking for a government program to blame, even when it's clear that it was simply a speculative bubble caused by poor modeling of risk and exacerbated by a flood of easy money. The simple matter is that people were clearly:
1) Not measuring risk accurately.
2) Investing money based on speculation about other speculators.
Government can contribute to the magnitude of the problem, but sometimes a widespread misvaulation is just a widespread misvaluation.
Posted by: Troublesome Frog | December 4, 2009 12:20 AM
Modusoperandi, don't ever change. Seriously.
Posted by: Troublesome Frog | December 4, 2009 12:23 AM
@william e emba
There are at least three positive benefits for "you" arising from "me" having access to healthcare. You identified two - me being more economically productive and me being a reservoir of fewer infections. However, in societies which are more equal, everyone benefits regardless of their position in the social pecking order. As a result of universal access to healthcare, even the richest are less likely to have cardiovascular diseases or experience mental health problems, are more likely to live longer and volunteer in the community.
Posted by: DavidW | December 4, 2009 1:37 AM
I'm a "libertarian" only up to a point (which is why I usually prefer the related, but distinct, labels of "classical liberal" and "neo-liberal"). I believe generally in a free-market economy, as the most efficient means of allocating resources and responding to demand, and as the form of socio-economic organisation which tends to be most conducive to individual freedom. Socialist economic policies are demonstrably ineffective in most cases. But unlike the Randians and Rothbardians, I don't believe that interference with the free market is intrinsically a priori wrong in all cases. The market shouldn't be an ideological article of faith; where state intervention demonstrably improves individuals' quality of life, it is legitimate. As such, I believe in a basic level of welfare, public education, public emergency services, and the like. And while I'm not in favour of a publicly-run healthcare system (such as we have here in the UK), I do think the state has a legitimate role in facilitating access to healthcare for those who couldn't otherwise afford it.
When it comes to social issues, I'm radically liberal; since I abandoned religion, I came to realise that most social-conservative positions make little or no sense from a secular perspective. So I'm totally pro-gay rights (including same-sex marriage), pro-marijuana legalisation, and so on. Generally, I would move towards a society in which the individual is free to pursue happiness, within the constraints of allowing others the chance to do the same. The use of private recreational drugs should not be a matter for state interference; nor should individuals' sex lives or domestic living arrangements.
Posted by: Walton | December 4, 2009 3:53 AM
"Mr. Limbaugh," said the gentleman, "many thousands are in want of common necessaries, sir. A few of us are endeavouring to raise a fund to buy the Poor some meat and drink and means of warmth. What shall I put you down for?"
"Nothing!" Rush replied.
"You wish to be anonymous?"
"I wish to be left alone," said Rush. "I can't afford to make idle people healthy. I help to support prisons and poor houses, and those who are badly off must go there."
"Many can't go there; and many would rather die."
"If they would rather die," said Rush, "they had better do it, and decrease the surplus population."
Seeing clearly that it would be useless to pursue his point, the gentleman withdrew.
Posted by: Ebeneezer Scrooge | December 4, 2009 8:29 AM
Pat: I believe in the prosperity gospel, BTW.
In other words, poor people deserve both to be poor and go to hell.
I also don't believe that the free market 'just happened'. It shows obvious signs of irreducible complexity and so must have been created by a Designer. The invisible hand is God's.
An imbecile and a piece of shit (if not, in fact, a Poe). That's two trolls in one!
Posted by: Jeff Eyges | December 4, 2009 8:33 AM
As someone who spent some time speaking to investors (people who ran funds, both debt and equity) and writing about it...
The housing bubble, as far as I can see, had a few causes:
1. The market was saturated. That is, by the time 2000 rols around, everyone who could afford a house realistically had bought one.
2. So you needed to sell more houses. But people need to borrow to do that. That's where the lower interest rates came in. I don't think Greenspan was thinking of housing to the exclusion of all else. But I do think that keeping rates low fit with a longstanding policy of encouraging home ownership. That's not terrible all by itself -- it worked well for a long time (for instance, note that FHA loans and the GSE loans provided to lower income families had a lower default rate). Anyway the secondary effect of keeping rates low was to encourage borrowing. By itself that wouldn't have made the bubble so big tho.
3. At the same time, mortgage backed securities became a major trading vehicle. Again, not a terrible idea by itself. But now the banks, who have loans on the books, can sell those loans to someone else. Banks used to make money off the loan -- so it was in their interest to have yo pay it back. That put an automatic brake on lending. But when you introduce MBS to the mix, you remove that brake. Why? Because the bank isn't making money on your loan anymore. Now they have to make money by charging fees on the origination of loans. Lending became a volume business. This wasn't just housing, by the way -- eLoan appeared around this time and that was no accident.
4. Easy lending -- desperate lending -- led to banks saying "we need to lend more to make those fees" so they went to the people who previously had been considered not worth lending to. But they were unable to pay back those loans a lot of the time -- it was almost a mathematical impossibility, especially with variable rates. That in turn pushes up the price of housing because everybody can and wants to buy one.
James Hanley said that wealth is measured by the ability to buy and he is right. But if one looks at the ratio of house prices to average wages you can see the divergence. As an extreme example, my parents bought a house at a time when interest rates were double digits (1974) for $30,000. (That's 125K or so now). But my father's wage was around 15-20K, maybe less. But the current equivalent is $80K. So he had, in his yearly wage, something like half the price of the house he was buying, probably more when you figure in the 20+% down payment.
In 2007 the average home price was about $190,000. If you pay 20% down and have the median wage (about 45K), your ratio of house price to wage is a lot higher than my father's was. (It goes from 2:1 to nearly 4:1). So over 30 years people are actually less able to afford housing. One reason is that real wages were stagnant for two decades.
But the lender says "don't worry, the price will go up and you will make money on this." But very few people actually make money on their house once you figure in the interest over the life of the loan even if you sell before the loan is paid. The WSJ did a great study on this a while back. Basically you are better off putting the money for a house into the stock or bond markets. A good rule of thumb: if the house is 100K, your total cost (including interest) is 200K over 20 years or so. Or: your house must gain value not only faster than inflation, but faster than the interest rate. Even with no inflation you would need a lot of value appreciation to make a profit.
You combine all this and you get a perfect storm. The incentive was to originate loans -- whether they would be paid back was a moot point to the banks, who no longer had them on the books. This is also one reason so many people had to default -- in the old days, the bank would work with you because the cash you gave (for your loan) directly affected them. Now it doesn't. The guy holding the MBS doesn't care, because as long as a certain number of people pay back he is okay. On top of that, the price of the MBS (which is a whole other discussion) is not always dependent on the individual payment rate.
Glass-Steagall's repeal didn't help. Two reasons: it was repealed essentially because Travellers and Citigroup said "we dare you to enforce the law" and the government backed down. That's a terrible precedent to set. More important, the reason for G-S was to make sure that banks, brokers and insurance companies would be protected from themselves. Given the function that banks serve, you really don't want them using their assets to fund trading positions. But that's what happened minus G-S. If you can't make money on loans, you do it with trades -- but you have to fund those.
Yes, G-S limited the growth of certain companies. But it also limited the damage that any one institution could do. When Barings went down in 1995, it was with $1 billion in losses. Compare that to Bear Stearns or Lehman. Barings didn't have much effect on the rest of the system (except to finally convince brokers that the back office should not be under traders' authority -- a good thing Allied Irish refused to heed seven years later).
Growth in and of itself isn't always good. Cancer grows, that doesn't make it a good thing.
James Hanley, I think, discounts the fact that to keep capitalism running people have to be able to buy stuff. If nobody can afford things, then the whole thing comes to a halt.
When you have a society in which the disparity between rich and poor grows too large, you have to either export a lot of stuff or you have to hope enough rich people buy stuff. And the idea that someone who is wealthy will automatically invest (and thus create jobs) is deeply flawed -- I can spend millions on stuff that creates almost zero wealth. (Like buying vintage art, for instance). And this is exactly what has happened, especially in uncertain times. This is why the death of manufacturing is so important -- service and extractive industries create very little wealth (much different from their profitability).
But less wealthy people actually spend more money on stuff that creates wealth -- they can't buy art or blocks of gold (I know I can't) -- they have to buy things that you need to survive with. Like a car to get to work or food or gas. That's also the reason that the booms and busts in societies with more even wealth distributions are less severe. (Compare the US's modern booms and busts to say, Argentina or Brazil, and compare the US to as, France or Germany).
Posted by: Jesse | December 4, 2009 8:47 AM
@ post 148 Azkyroth
I would guess from reading the blog that the main reason he calls himself a libertarian is because of how strongly he supports civil liberties. I would guess this because of how many posts are about Obama abusing exec. power and corrupt practices in our justice system. I don't actually recall ed calling himself a Libertarian (I've been reading the blog for a couple of months), only people in the comments do that I have seen.
Posted by: Zaxro | December 4, 2009 8:58 AM
Not so. The worth of a farmer obviously depends on how many people he feeds. And indeed, Big Agri farmers are rich.
Also, they frequently have help from numerous government subsidies and price supports, but that's really a bonus. Ironically, such laws are typically based on the view that the free market isn't good enough to pay farmers "what they're worth".
Posted by: william e emba | December 4, 2009 8:59 AM
eric quoted me and replied:
Eric, you're not thinking like an economist (yet). That third way is automatically covered under "I work better in my corner of the economy". This includes my volunteering for the military, being drafted, or paying someone to take my place in the draft.
Do note that a draft, economically speaking, is a coarse form of taxation. Like all taxes, it distorts the economy. But I'm still contributing to my corner, whether voluntarily or not.
Posted by: william e emba | December 4, 2009 9:15 AM
Jesse,
I basically agree with you regarding the stagnation of income and increase in housing prices, but have to pick a couple of nits with you.
First, if your father's income was somewhere between $15,000 and $20,000 in 1974, it would have been between $65,000 and $85,000 today. Median income for a family of four in 1974 was just under $15,000 for a family of four according to the US Census, so your father made roughly median to 33% above median depending on his actual income at the time. Median income in 2007 for a family of four, to remain consistent, was actually $67,000 (the lower number reflects smaller households, to remain consistent though...)
The price your father paid for a home was actually $5000 less than the average in 1974 (three sources). That means his home was 86% of the average. The average home price in 2008 (remaining consistent) is all over the place, ranging from the $196,000 you quoted to $290,000. We'll stick with the $196,000, really to be charitable to the market. That means your father would have been making in the neighborhood of $65,000 and buying a house valued at $170,000, still significantly worse than 1974, but more of a 2 1/2 to 1 versus the original 2:1. Now if we go with the high end figure of $290,000, then it becomes as bad as you portrayed it, $250,000, a 3.5 to 1 ratio.
So if we're being charitable and pretend that the free market (as free as it ever gets), and we're giving the low end figure for the average house, we're still talking a slippage in buying power from 2:1 ratio to 2.5:1 ratio. If we're being more honest, we're probably talking a 3:1 ratio versus the older 2:1 ratio. In many areas we're talking a 4:1 ratio or higher. What we're also ignoring is the fact that, in 1974, it was a single worker making the household income in the vast majority of households. In 2008 the vast majority of families were dual income in order to accomplish what a single worker did in 1974 (accounting for inflation). On top of that, the average family was (in 2007) 133.7% of income, the average credit card debt in 2008 was just under $9000. The average non-mortgage debt in 2003 (sorry, only hard number I could find at this time of day) was more than $18000.
These combination of factors suggests strongly, to me, that our "free market" has some very serious flaws. The government didn't force people to buy these products (enter in the exchange), the government didn't require credit card and mortgage companies to make these loans (and as has been pointed out, there is little evidence that a purely market driven lending industry would have been any more responsible), there is ample evidence that businesses in the last 40 years have worked very hard to "remain competitive" which has definitely forced wages down, two incomes necessary in 2008 to stay in pace with one income in 1974 and we actually fail to accomplish this, on average falling deeper and deeper into debt every year.
As has been pointed out, the free market folks will look at this and blame the government. I argue instead that, while the government is culpable, it is more in the neighborhood of 70-80% market driven with 20-30% the fault of government policies. I would also argue that the 20-30% fault figure completely ignores the government policies that actually improve/offset some of the negative market forces.
Posted by: dogmeatib | December 4, 2009 9:25 AM
Yeah, what Jesse said. Another factor in the recent housing bubble, IMHO, is that after the last boom ended around 2000, lots of investors realized they couldn't expect stocks to grow in value anymore, so they invested instead in something they thought (rightly or wrongly) would be more stable than securities: houses. That (and low interest rates, of course) contributed to the absolutely idiotic inflation in house prices. (Not to mention the speed with which houses got sold. I bought a house in 2000, after seeing other houses I wanted sold in a matter of hours from the posting of the information on the real-estate database, for bids around $100K above the original asking price, even for houses whose owners hadn't even bothered to spruce them up. And it just kept getting WORSE for years after I got mine. (I don't even want to know how much my house is worth now.))
What too many libertarians fail -- or knowingly refuse -- to admit is that lenders will lend as much as the law allows, without regard to how much they actually have, because that's how they make their money. History shows they don't even slow down their lending until either the law requires them to, or too many debtors simply default and the whole bank collapses. The fault of governments in all this is not too much regulation, but too little.
(for instance, note that FHA loans and the GSE loans provided to lower income families had a lower default rate)
That doesn't stop some of the less scrupulous libertards from blaming such government-orchestrated loans for this or that financial collapse. Why? Because by focusing attention on these loans, libertards can blame both "government intervention" AND poor people for the damage caused by the rich. As Penn would say, "What a scam!"
Posted by: Raging Bee | December 4, 2009 9:32 AM
Jesse wrote:
This is indeed where classical economics has a major loophole. If the demand for potatoes drops, potato farmers notice and switch to corn. There's a bit of wastage, but adjustment happens in a year or so.
If the demand for labor drops, the newly unemployed are still around. They are not potatoes, and can't just be thrown away. Even worse, they vote. Conversely, if there is a spike in labor demand, people aren't available in a flash.
In the very long wrong, adjustment happens. We switched from agricultural to manufacturing, at great personal loss to millions of people along the way. But the economy eventually--long eventually--reached a new generally satisfactory division of labor. And since WWII, we have switched over to a primarily service economy, and again disruptions occurred but we've sort of adjusted. And now we're having new upheavals--information and globalization and massive increases in health spending--and yes, there are people suffering for it, and yes, in the long run, we'll adjust and almost nobody in the future will remember, let alone comprehend, what the contemporary fuss had been about.
So while traditional free market economics is correct that the market will correct itself in the long run, as Keynes observed, in the long run we are all dead, meanwhile, what are we to do regarding decades long adjustments?
The role of information in free markets is in fact a major area of research economics. It can be added to the list of reasons why the mathematical proof that free markets are best doesn't actually apply to the real world.
Classical free market economics says this is impossible, for the same reason that cheating in ordinary day-to-day shopping has long since disappeared: a class of merchants (Quakers and later Jews in England) set a higher standard for their products, and profited immensely.
One of the most insidious problems regarding insurance, from a strictly theoretical point of view.
Of course, that took a century or so, so it's not very palatable as a free market in action triumph.
As a matter of fact, there's a more basic flaw in free market insurance that makes even the above very long run fix unlikely. Insurance does not work like other industries in one fundamental aspect. With most products, the watchword is caveat emptor. Cautious buyers create a market demand for superior quality sellers, and ultimately the cheats and losers did become a small minority. But with insurance, the watchword is caveat vendor! The person knows his medical history, and knows better what kind of deal he is getting. The seller does not. The high risk people are far more willing to buy insurance than the low risk people, and nothing short of government coercion will get get more low risk people to contribute. There are no cautious buyers.
In other words, insurance is completely backwards. Classical free market economics simply does not apply. This alone kills the free market libertarian "let the market solve the health crisis" claim. It can't.
So long as health was a small scale issue, this inherent failure was irrelevant. So 1% of GDP is messed up. That's just noise. But the explosion of health options and longevity and information means that health as a part of GDP has grown. Immensely. In the 10-20% range, this inherent failure is highly relevant. And it is only going to get worse.
Posted by: william e emba | December 4, 2009 9:55 AM
T Frog,
Perhaps "caused" is a bit strong, as it implies sole causation. But I think the government policies, particularly the pressure on banks to ease lending requirements, and the Clinton-era tax rule that made houses a good short-term investment, have more causal power than you allow them.
In the end, you point the finger to:
I agree that these factors matter, but as sole causal factors they are wholly insufficient because you don't provide any explanation as to why these things happened at that point in time, rather than previously. Along similar lines, many have noted that "greed" is not a sufficient explanation, simply because it's always present, but crises aren't. I think that, likewise, the two factors you point to are always present, so we have to explain why they misfired on a grand scale only at a particular point in time, which requires some other causal factors. The power of my explanation is that is goes a long way toward explaining the timing of the event.But I appreciate that you recognize that government policies were, at the least, an exacerbating factor. And for those who have no interest in reading my paper (and, honestly, I'm not assuming many people do have such an interest--I'm not that arrogant), please take note that I don't say government was stupid and/or evil. All of the policies I point to were ones that were well-intentioned, and none by itself would have helped instigate such a massive problem. It was, in many respects, a sort of "perfect storm," requiring multiple factors to come together.
Posted by: James Hanley | December 4, 2009 10:02 AM
Lets hope that Pat Donohoe never has to have a transplant; because for medical reasons, even if he could buy the organ, to get one satisfactory he might have resort to maiming or murder.
Posted by: Hathor | December 4, 2009 10:02 AM
Excellent point. I always find it amusing how people point to Soviet Russia as being an inefficient command economy, talk about the millions who died during the civil war and the industrial plans, 5 year plans, etc., but at the same time ignore how, in 20 years, Soviet Russia accomplished what it took the western capitalist countries 150 years to accomplish, IE modern industrialization. I've read a couple of journal articles (can't recall the title, etc. anymore) that showed rather strongly that death, destruction, malnutrition, and other negative impacts of industrialization in the capitalist countries was, per capita, effectively as bad in those countries as it was in the Soviet Union. The big difference is, for most observers, that it was spread out over decades rather than a short burst of activity. It is similar to the irony of the attitudes towards the Holocaust of WWII versus the Holocaust of the Americas. The impact in the Americas was far, far worse, death toll from direct action, not accidental disease, direct acts of Europeans, far higher, but because it wasn't systematic and scientific, most people in the world simply ignore what happened to Native Americans (except in a rather vague academic way).
Both command and free market economies can be efficient and inefficient. Problem is free market advocates always seem to emphasize the positives about the free market while ignoring the negatives and do the reverse for the command economy. I'm not advocating a command economy, before anyone pounces and tries to claim I am, I am simply pointing out the hypocrisy.
Posted by: dogmeatib | December 4, 2009 10:06 AM
Wiliam E. Emba wrote:
That's not quite correct. The length of the run is determined by how much adjustment can take place. The concept was developed by Alfred Marshall in the late 19th century.In the "short run," producers can make minor adjustments to supply. For example, if demand increases, they can hire more employees and buy more raw materials--things that don't require major structural adjustments or capital investments.
In the long run, adjustment involves those major structural changes to business (new product lines, etc.) and major capital investments (new equipment, new factors, expanding retail outlets, etc.) in response to changes in demand.
I think a fair reading of what you meant--and correct me if I'm wrong--is that what you mean by the very long run is large scale economic adjustment throughout multiple sectors of a country's economy. Big enough for us to call it a "social change." And if that's what you meant, I wouldn't disagree. I just wanted to quibble about the concept of "adjustment" for more precise understanding.
Posted by: James Hanley | December 4, 2009 10:14 AM
It's is plainly obvious that none of you ever listen to Rush. Yet let's leave that part aside.
DOGMEATIB - The FREE market does what a FREE market does. It reacts to what is available. Your claim of 20-30% government responsibility is enough to screw up the entire system. The Government is 100% at fault here.
First start with the Community Reinvestment Act of 1977 (CARTER) then follow that up with the Clinton Admin in 1999 forcing FREDDIE to ease credit requirement to lower income (unqualified) individuals. They also forced banking institutions to sell to this sector or else...
When you had Freddie and Fannie (
Finally add in the ridiculous market low interest rates set by the Gov and you get the results expected. Conclusion – the government cause this disaster!
Posted by: aGift | December 4, 2009 10:49 AM
James Hanley:
Quibble all you like, I don't mind. I'm painting a broad picture of what is right and what is wrong about classical economics. Pretty much every single word I type can be quibbled to death here!
One of the biggest adjustments of the Industrial Revolution from the point of view of economics was the vast drop in animal use. From the animals' point of view, it was a genocide.
Human employment has continued, simply because there are still too many tasks that require human intelligence to be done, even for things that we consider brute labor. But as machines get more intelligent, automation is going to cross a threshhold that is going to really change the economy. On the one hand, most people won't have any skills to offer whatsoever. On the other hand, most needs might be meetable at costs too cheap to worry. I expect an incredibly traumatic adjustment.
Posted by: william e emba | December 4, 2009 10:51 AM
Actually, liberals ought to support outsourcing. I see no reason that an American having a job is morally superior to a Chinese having that job.
On the other hand, treaties like NAFTA are not fully free trade. Jobs can freely relocate, yes, but not people.
Posted by: william e emba | December 4, 2009 10:54 AM
william @160: [eric] William you're forgetting a highly important third way. Health for me means I can defend your life and property in a war. [/eric]
Eric, you're not thinking like an economist (yet). That third way is automatically covered under "I work better in my corner of the economy".
I agree with that - economically, soldier health is just an example of worker health. However, politically I think calling out this particular example is important. Libertarians in the U.S. typically espouse an extremely limited, crabbed definition of "public welfare" but a more expansive definition of "common defense." Describing how citizen health supports the common defense provides an additional argument to support some form of health care that makes sense even to people who may not see "publc welfare" as a legitimate reason. I think the example is worth calling out, even if, to an economist, welfare and defense, soldiers and workers are all fungible.
Posted by: eric | December 4, 2009 10:59 AM
I agree that these factors matter, but as sole causal factors they are wholly insufficient because you don't provide any explanation as to why these things happened at that point in time, rather than previously.
That's just nonsense: Speculation and bad risk-assessment do indeed lead to bubbles that inevitably burst, based on chains of events that are fairly easy to understand; and they can be cited as major or primary causes of financial-sector crashes, whether or not they alone can explain why a crash happens on date Y and not date K.
Economic events happen when, and only when, the aggregate of preceding events lead up to them. I know that sounds facile ("they happen when they happen because they had to happen sometime"), but it is indeed a valid explanation, and it disproves the notion that ONE PARTICULAR SMALL EVENT, government or private, caused a crash that would not have otherwise happened. Were it not for the event in question, the crash and depression would still have happened, just on a different date.
(People sometimes say things like "The stock-market crash began with the failure of Bank X on date Y," and there's an intended or unintended implication that the failure of Bank X CAUSED a crash that would not have happened otherwise. But looking at the overall picture, it becomes obvious that if Bank X had been saved in time, the crash would still have happened, for the same general reasons, but this time beginning with the failure of some other Bank Z on date K.)
Along similar lines, many have noted that "greed" is not a sufficient explanation, simply because it's always present, but crises aren't.
The fact that greed is always present does not mean it was not a cuase of a crisis; it only means it leads to a crisis when other factors are present, and resists countermeasures that could have prevented or mitigated the crisis.
All of the policies I point to were ones that were well-intentioned, and none by itself would have helped instigate such a massive problem. It was, in many respects, a sort of "perfect storm," requiring multiple factors to come together.
Therefore, as I said before, you can't blame government policies for causing a financial-sector collapse; and the libertarians' "blame gummint" default explanation fails. It would have happened anyway, due to the basic nature of human economic activity -- much of which could have, and should have, been regulated by the government to at least ensure a less catastrophic landing.
Posted by: Raging Bee | December 4, 2009 11:16 AM
Horsemuffins: "aGift" that keeps on giving -- no matter how many times we can say "No, thanks, you shouldn't have, no, really..."
Posted by: Raging Bee | December 4, 2009 11:21 AM
James Hanley:
Be careful with that reasoning. It's a small step from there to assuming that every microscopic twitch of the price of Google stock is based on real new information rather than a large portion of it being a complex feedback loop based on a game of anticipation between short term investors seeking capital gains on noise.
To distill my original point from my giant post, the only way a bubble like this happen is when market players misvalue an asset en masse. All other factors simply change the severity of the problem. So what you're looking for is what caused the change in the way people value housing loans relative to all other places their cash could have gone. I would point to the proliferation of new types of asset backed securities in the 90s. They were new and difficult to value correctly, and the way people decided to evaluate them was totally broken.
When I use the word "cause," I mean something like, "Would not have happened without this one factor, and could have happened in the absence of any other factor." The Fed wrongly deciding that it would be easier to clean up after a housing bubble than to pop it and hit the rest of the economy couldn't *cause* the housing bubble in that sense. It could only exacerbate it.
Posted by: Troublesome Frog | December 4, 2009 12:09 PM
@dogmeatlib --you are right about the numbers, I was using CPI by the way, and doing a ittle backwards-calculation, but the point is made I think -- with lower down payments and price inflation a lot of people would be priced out without a gigantic (and a 2:1 to 3:1 is a 50% increase in the ratio of price to income) increase in debt load. Plus the lower down payments to stimulate sales, and you have it right on -- esp. your point about dual incomes. (For average prices I used the Nat'l Assoc. of Realtors).
(Interestingly, my income at my bet job was less than my dad made at the same age. When I was 25 I was making about $21K in 1994. My dad at the same age would have been making the equivalent of about $40K working at GE in a factory. I have yet to reach -- at age 40! -- the same level of income he had at 35, not even close, once adjusted for inflation. And at that time he was a drill-press guy at GE).
The gap becomes even more stark in areas like the tri-state (NYC metro) where an average modest house (say a 3-bed) can set you back $500K + and average incomes are in the neighborhood of $50K. (In fact, people who make $75K or so I know have bought into laces that are in the $400-$700K, and that's after a price decline). How the hell anyone will pay off the loans is beyond me, but you just can't go any lower and live within a reasonable distance of your job. (4-hour commutes are just too ridiculous for some people).
Posted by: Jess | December 4, 2009 12:11 PM
"Realclimate analyzed that paper some time ago. Please read carefully.Posted by: llewelly"
so you didn't read it either? or don't remember what they said? or want to hit me with a stick for asking?
Posted by: Kevin (NYC) | December 4, 2009 12:14 PM
"OK. I'm already in deals like that with a couple of gated communities"
funny how that works.. we don't even HAVE a gate but we need to collect money to plow and fix the streets and have some left over to send out a newletter and buy hamburgers for the summer bbq. and beach sand!
Posted by: Kevin (NYC) | December 4, 2009 12:28 PM
william e emba:
this is called Adverse Selection, its a well understood market failure. In fact Ackerloff got a Nobel for his work on it back in '02. But market failure isn't binary a market can be less than perfect and still work tolerably well. Many of the arcane practices of insurance companies are designed to combat adverse selection.
For instance, the reason why insurance companies won't cover pre-existing conditions is precisely so that this problem is ameliorated. Insurance companies also collect a lot of actuarial data so they can tailor their premiums as closely as possible to the risks they are adopting.
Its important to note that in the US insurance market this mechanism is defeated by community rating and coverage mandates. In this case the regulatory framework isn't correcting market failures, its exacerbating them.
If you banned states from requiring community rating or mandating treatments be paid for and you eliminated the tax deductibility of employer-provided health insurance you'd end up with a pretty good system, not perfect but close enough that anything the government did to fix it would probably make it worse.
There'd only be one real problem left: making sure people can afford health care. This is a big problem, but its simple to fix, a combination of subsidised catastrophic insurance and subsidised Health Savings Accounts for poor people. Given how much your governor spends on health care already, you should be able to do this well within baselines. In fact, you may even be able to take a little off that massive structural deficit of yours.
Now many libertarians would find that last policy (government subsidised care for poor people) unacceptable, but I'm not one of them. This should address the issue of poor people not being able to afford health care without the need for another massive government intervention.
Posted by: James K | December 4, 2009 3:05 PM
James: instead of subsidised catastrophic insurance, why not have subsidized preventive care insurance? Seems to me this would take care of one of the worst problems we have, which is that people who can't afford preventive care end up in ERs getting catastrophic care they also can't afford, thus creating more demand for ER care, not being able to pay for it, and driving up health-care costs. Subsidize preventive care, and you could well make a huge dent in demand, and costs, for the big-ticket medical treatments.
Also, I'm not really sure about this, but subsidizing preventive care could be cheaper than subsidizing the catastrophic stuff.
Posted by: Raging Bee | December 4, 2009 3:20 PM
Kevin (NYC) | December 4, 2009 12:14 PM:
Uh, what the heck? Why do you ask if I want to hit you with a stick?
I have read the paper. The real climate article I linked to is the best analysis I know of.
Posted by: llewelly | December 4, 2009 4:22 PM
yeah and? what did it say? I know they wrote something, but I'm asking for the jist...
I found your "read carefully" un-helpfull.
Posted by: Kevin (NYC) | December 4, 2009 5:02 PM
Bee,
James K did point out subsidizing preventive care when he said "a combination of subsidised catastrophic insurance and subsidised Health Savings Accounts for poor people." (emphasis added).
Subsidized HSA's aren't only preventive care, the owner can spend the money on whatever health costs they need to. Which is better, because I may be past the preventive care stage, but could avoid a health catastrophy if I spend X dollars to get care Y.
I still have two questions for liberals:
What are you going to do after you have implemented a socialized (not "socialist") medical plan, gotten all these vulnerable people onto it, and then the right wingers gain power again and de-fund the whole thing?
Which provides more long-term health security: Using market forces to lower the cost of medical care, or relying on the whims of the legislature to set prices and mandate plans?
Posted by: 10,000li | December 4, 2009 5:42 PM
What are you going to do after you have implemented a socialized (not "socialist") medical plan, gotten all these vulnerable people onto it, and then the right wingers gain power again and de-fund the whole thing?
That question can be asked of ANY government spending program; it's not, in itself, a valid argument against any such program.
Also, none of these "socialized medicine" schemes do anything to remove private insurers from the picture.
I could also ask you: what are you going to do after you manage to shout down, once again, any grownup debate about health-care reform, and got all those vulnerable people dependent on the unspecific promises of "the free market," and the insurance companies and employers have nothing to offer them?
Posted by: Raging Bee | December 4, 2009 6:14 PM
JamesK wrote:
Nor would I. I support free markets because they make us wealthier overall. That makes it possible to help out those who, for various reasons, don't get much of a share in those benefits.But without free markets, we're all poor. Who helps us then?
Posted by: James Hanley | December 4, 2009 6:44 PM
But without free markets, we're all poor. Who helps us then?
James, you're arguing in absolutes here, jousting a strawman that (I believe) no one is making. No one is saying to entirely eliminate the free market, we just disagree as to which degree government should regulate the markets, which markets should be free and which should be public. I have yet to have a free market absolutist explain to me why:
Law enforcement, education, or the military (for example) should be public, but health care should be private. People rarely argue against government regulated monopolies of energy companies (which virtually every city has), but they get upset when the government oversees the stock market? Government subsidizes most of the research done in our country, few arguments against that aside from paying for it, but government shouldn't oversee banking and lending?
Sorry, but again, trying to argue in favor of a "free market" and government involvement when you like it, but against government involvement when you don't like it and presenting it as a principled position is less than honest.
Posted by: dogmeatib | December 4, 2009 7:00 PM
Kevin (NYC) | December 4, 2009 5:02 PM:
In that case I apologize. It's not a simple issue (not for me, anyway), and I don't feel comfortable summarizing it.
I guess the best I can do is to highlight these two bits:
...
I apologize to everyone else for the long off-topic post.
I'm providing another link to the RC article so that other readers do not need to track down my previous post to find the article I'm quoting from.
I hope that's helpful.
Posted by: llewelly | December 4, 2009 7:35 PM
There's something that sometimes gets lost in the debate over free market health care. I personally believe that subjecting health care to the free market would lower prices on it in general. I also believe that we will noticeably lower the quantity of health care in general.
We have artificially high demand for health care right now due to a combination of government incentives and distance between buyers and prices. Are people willing to accept the fact that the market-clearing quantity of health care goods and services (especially expensive, life saving ones) is probably quite a bit lower than the current quantity? This is not something I've heard the proponents of the "OMG! Rationing!" argument address.
Posted by: Troublesome Frog | December 4, 2009 9:22 PM
DogmeatIB,
If you think no one is arguing against free markets, you should re-read Raging Bee's past posts in our numerous arguments.
And I'm not arguing absolutes, which I think is an uncharitable reading of my posts. I was just pointing out that I recognize there are limits to the pro-free market argument, and that I don't take the argument to the extent of saying, "let those who don't succeed in a market economy die on the streets." And for noting the limiting point of my argument, you call me dishonest?
But the more important point is that even to the extent we are just quibbling over the extent of government regulation, about just where, when, and what it should be, those who want to jump with both feet into that debate really ought to take time to educate themselves on the subject, rather than make a pretense that they can somehow understand better in the absence of such basic eduction. I am not simply trying to score cheap debating points when I compare it to creationists--it is precisely analogous to creationists who want to "correct" biologists without bothering to learn even a smidgeon of what the biologists know.
You are one of the regulars on this blog whom I respect the most, so I particularly regret having to engage in this kind of argument with you. But I respect you precisely because you almost always make sense in your postings, having a solid understanding of the subject. But in the case of economics, it is abundantly clear that it has not been a part of your education. So be it, you're obviously broadly and well-educated. But we all have our areas of limitations.
Posted by: James Hanley | December 4, 2009 9:24 PM
Bee,
You didn't even bother to address what I wrote. I never said that my questions were showstoppers, reasons to prevent socialized medicine from coming into play. You're arguing with the voices in your head again.
As usual, any coversation with you comesto the point where the other party has to ask you to answer the question that was asked, or quit wasting time.
What aere you liberals going to do to make sure the vulnerable people keep getting care after you've lost political power to the right and they try treat the medical care recipients the way they treated the Gulf Coast residents after Katrina?
We know the right is against the programs, they've been fighting it with everything they've got all this time. When they are back in the majority, they will pull the plug on the program. What happens to the politically weak then? What can you offer them other than rants about how evil the right and the libertarians are?
Posted by: 10,000li | December 4, 2009 9:33 PM
Jesse @157
Again, an argument that stems from not knowing basic economic concepts.Jean Baptiste Say famously noted that every production cost is income to someone. So there would always be enough income to afford everything that was produced. Hence, we can't produce things without making it possible for people to afford things. Or in other words, capitalism doesn't depend on the ability to buy stuff, it creates the ability to buy stuff. The argument is generally referred to as Say's Law.
Three caveats. First, Say's law doesn't say that the things produced will actually be desired by consumers. Second, it doesn't say that everyone will be able to afford what they want or need--only that collectively there will be enough income to afford all things produced. Third, the transformation of Say's law into supply side economics was a vulgar and intellectually unsophisticated political maneuver, so Say is not responsible for Reaganomics.
Posted by: James Hanley | December 4, 2009 9:34 PM
If Raging Bee is willing to classify his position as such I'll retract my statement, but given that he and you have disagreed over what he intended, what he said, etc., I have to maintain my position until he actually confirms your characterization of his position.
Sorry, but I read this...
But without free markets, we're all poor. Who helps us then?
As a rather absolutist statement.
Posted by: dogmeatib | December 4, 2009 9:36 PM
Posted by: James Hanley | December 4, 2009 9:37 PM
Raging Bee:
Preventative care would be better handled through HSAs rather than insurance. Insurance should only be for large, unpredictable expenses. For everything else a HSA is the way to go.
My impression was that preventative care was overrated, but since I'm an economist not a doctor it would be better for a panel of appropriate experts study that question.
dogmeatib:
We all agree that government shouldn't do everything and shouldn't do nothing. The questions are: when do markets fail and what can the government do about it?
As a rule, governments provide services poorly, they're best at writing cheques and setting a few ground rules (I think there's some potential for a few transparency-related regulation when it comes to health service pricing) but congress should not be trying to design a health insurance system, that kind of institutional detail is best left to markets.
Posted by: James K | December 4, 2009 9:40 PM
"There's something that sometimes gets lost in the debate over free market health care. I personally believe that subjecting health care to the free market would lower prices on it in general. I also believe that we will noticeably lower the quantity of health care in general."
That would only be true if the cost of consumption goes down and the cost of production remains fixed. I can think of some atypical Walras equilibria in which that may be true, but I don't see it happening for medicine. Could you elaborate?
Personally, I think focusing on free markets for health care misses the point. Free markets for health coverage are problematic due to problems like adverse selection and the moral hazard. We know for a fact that private markets don't work well when there are vast information asymmetries, as there are in insurance markets. Then we'd all have to agree on a definition of what "working well" means. Even if private markets reached the Pareto optimum in the case of private insurance, one could (and I would) argue that the Pareto optimum is a bad metric when it comes to public health.
Posted by: Tyler DiPietro | December 4, 2009 9:51 PM
"Three caveats."
You missed the biggest one: Say's law doesn't hold in the general case because of liquidity preference, it's a special case where loanable funds equal liquidity preference
Posted by: Tyler DiPietro | December 4, 2009 10:00 PM
If this is so obvious, then why are the other industrialized countries so successful at implementing government run programs? Opponents of the current health care reform effort keep insisting that government is incapable, less effective, less efficient, yet none of them are able to answer how and why every other major industrialized country in the world provides better quality health care for less money with greater government involvement.
I'm sorry, but that blasts a massive, gaping hole through the claim that government involvement in health care is a bad thing.
Posted by: dogmeatib | December 4, 2009 10:11 PM
Tyler DiPietro,
Say's law in its most basic sense is just an accounting statement, saying that, collectively, expenditures equal revenues. And that's pretty hard to deny, I think. If I pay you a penny for your thoughts (a good deal for me!), I have expenditures of a penny and you have revenues of a penny.
But in relation to your broader point, if people were planning to hold more money than they had, then the demand for money would outstrip the supply, causing the price of money (interest) to go up, bringing their liquidity preferences back to equilibrium. And in neo-classical economic models, equilibrium is the general case, and a disequilibrium such as you're talking about is a departure from the norm.
And it's now 10:42 p.m. Eastern Time, and I'm heading home, from whence I won't be able to post. By next Monday, I assume this will be a dead thread, which I won't attempt to zombify. So I'm now at everyone's mercy--treat me kindly, good gentlefolk! And a happy weekend to all.
Posted by: James Hanley | December 4, 2009 10:49 PM
James, look at the sentence right after that.
Simply put, if one can export goods that local folks can't afford -- food is a good example -- then for the producers, everything is fine. In Bangladesh, for example, there was plenty of food. It was just more profitable to sell it someplace else because none of the locals had any money to pay for it. Since they could no switch crops (food takes time to grow) subsistence farming wasn't an option. The production cost -- paying the laborers -- was not an issue because they weren't in a position to demand anything.
On top of that, what's the incentive to pay them more when you make a ton of money selling food somewhere else? The same applies to any goods that you can sell overseas. The problem of course, with export-oriented economies, is that you can saturate your market. Or eventually the receiving country starts making the stuff you exported to them previously.
That's why US policy was to create local markets -- the whole point of the New Deal and postwar policy was to make it so loads of Americans could consume. That absorbed a lot of unemployment and solved several problems. (Encouraging home ownership was part of this).
Posted by: Jesse | December 4, 2009 11:09 PM
IMO--and I admit to not being an expert, remotely, in this area, so emphasis on the "O"--is that two of the causes of high costs in the U.S. are 1) that we effectively subsidize pharmaceuticals for much of the world, because when European countries negotiate discounted prices with big pharma, we're left to pick up the remainder; and 2) phenomenally wasteful end of life care. If we discounted for those two factors, I think we'd probably find that the remainder of our healthcare costs wouldn't be greater than the rest of the world.
So in saying we spend more and get less, it depends in part on where that spending's going. We actually have the "best" end of life care, if by "best" we mean the greatest amount of medical effort put into extending life at its final margin. Now I personally think we're nuts for doing so, but it is "good" care in the sense that it does what it's supposed to do--keep grannie living in the hospital for a few days longer. So much of that mass of greater spending is spent on care that is wasteful, but it is not actually spent on care that is sub-standard.
And much of our extra spending goes to more cutting edge technologies, which are of course the most expensive, but which are more commonly first developed in the U.S. than elsewhere.* Again, that's not spending on sub-standard health care.
So I think it's an overstatement to say we spend more and get less. We spend more and get different. Some of that different I think we should try to shift away from (too much end of life care), but some other aspects of that different we may want to be careful about shifting away from (incentives to develop new pharmaceuticals and new medical technologies).
*New technologies, or new applications of them, can be directly expensive, while actually more than paying for themselves. Years ago when I had a perforated ulcer, I was the first person in my town to get the surgery to repair it done laproscopically. It was a fairly new application of laproscopic technology at the time. It would have been--in terms of direct cost--cheaper to do the old method of cutting me open from ribs to navel. But that method would have required several weeks recovery, whereas the laproscopic method required less than a week of recovery, a huge cost savings when we consider how much more quickly people can get back to productive activities. Yet that savings won't show up on our national medical expenses balance sheet.
As I've noted several times previously on this blog, I'm not going to engage in arguments against a national health care plan, for various reasons. I just want to note that I think both sides tend to oversimplify and miss that each approach has its own set of benefits. I believe it's which set of benefits you find more important that will determine where you stand in the debate, which is as it ought to be. But pretending, or at least seeming to imply, that one's preferred method will have no drawbacks--will forgo no benefits--is not a legitimate intellectual approach.
Posted by: James Hanley | December 4, 2009 11:10 PM
OK, just before I go. Jesse, local food markets are not, contrary to popular belief, a good route to food security, because they limit the number of different access points to food. Have a local crop failure and everyone dies. Having widespread trade in food means there are multiple access points to food. A local crop failure, or the decision of one source to sell elsewhere, isn't devastating because there remain other sources of food.
The mistake in your reasoning is to think that food must be sold locally. I remember reading, about a year ago, a journalist bemoaning Cuba's importation of food, when they could easily produce enough to support themselves. The certainly could, but by producing sugar, rum, and cigars instead, they could afford to buy more, and more varied, food than they could have produced just by growing it directly.
As economist Tyler Cowen says, self-sufficiency is the path to poverty.
If self-sufficiency is so good, perhaps your state should cut economic trade ties with the rest of the U.S.? After all, what's so magical about the size of a country, instead of a state, or a city? Michigan, my state, is as large as most countries--would it be better off economically if it didn't trade with the rest of the U.S.?
Again, I urge you to actually study economics. The arguments you make are not new, nor are they supported by economic analysis. They sound compelling only because you lack the background knowledge to recognize the flaws in them. I don't mean that nastily, but it's simply true. Just as I didn't argue vigorously in the debate a few weeks ago about whether Germany could have won WWII if it had just invaded Russia first, instead of going after France and England. I did chime in with my two cents, and a few questions, but damned if I was going to put up a vigorous argument because that's a topic I've simply never studied.
I don't care what the topic is, biology, chemistry, history, philosophy, or economics, no one should presume to a knowledge without having taken time to study it.
Posted by: James Hanley | December 4, 2009 11:19 PM
"Say's law in its most basic sense is just an accounting statement, saying that, collectively, expenditures equal revenues."
Within its assumptions it's almost tautological, but some of those assumptions are flawed. The one that I've alluded to indirectly is that the market for currency is the same as all other commodities. The second one, which I forgot to mention, is that prices either instantaneously or rapidly adjust, which is contradicted by real world price stickiness.
"But in relation to your broader point, if people were planning to hold more money than they had, then the demand for money would outstrip the supply, causing the price of money (interest) to go up, bringing their liquidity preferences back to equilibrium."
You're missing a very a basic point, James. Demand for liquidity is not the same thing as investment and saving. When demand for liquidity goes up, interest rates (which represent the price of deferred assets) go down.
"And in neo-classical economic models, equilibrium is the general case, and a disequilibrium such as you're talking about is a departure from the norm."
I'm not talking about disequilibrium. ISLM is a equilibrium model that illustrates the point I'm making. Think about the particular case where the IS curve is horizontal (i.e., perfectly inelastic).
Posted by: Tyler DiPietro | December 4, 2009 11:56 PM
dogmeatib:
The government systems in Western Europe are adequate for the most part but they free ride of innovation that is funded by the US (you pay more for drugs which allows Big Pharma to make the money they need to justify coming up with new drugs). And France's system is very expensive, its slowly breaking the French government's budget.
Now you might reply that the US system is more expensive and less effective and that is true. Your country has a certain genius for combining the worst features of central planning and market action. But this isn't a dichotomy between the status quo and France. Its not even a continuum. Think outside the existing paradigm and you can have a world-beating health system for a very reasonable cost.
Posted by: James K | December 5, 2009 12:26 AM
I am first time at this site. After post #16 I feel like a non-person. I was a stay at home mom traveling with my hubby to a new city every few years. We are middle class.
or "bungalow folk." I was your soccer mom, girl scout leader, OM coach, crossing guard, homeroom mom and I would babysit your sick child so you could go to work at a moments notice.
I graduated college (ASU) with honors, took in 2 grandparents with dementia for 6 years so they could stay together, not be split up or need medicaid. My value is the money I didn't make? I drag my family to the rescue mission to volunteer to serve food. I'm not worth much because I didn't didn't charge the homeless to bring them coffee on christmas day. Besides make money, what did you do today?
Posted by: Jillie | December 5, 2009 12:57 AM
"The government systems in Western Europe are adequate for the most part but they free ride of innovation that is funded by the US..."
Western Europe isn't the only region to have government healthcare systems, look at Asia. Japan has one of the most innovative medical industries in the world, but over there the government dictates the cost of every procedure down to the penny and keeps prices artificially low. This is just another soundbyte that doesn't really seem to hold up against the evidence.
Posted by: Tyler DiPietro | December 5, 2009 1:08 AM
Welcome Jillie, I hope you stick around. You'll find that people like Pat are the minority around here.
Posted by: Tyler DiPietro | December 5, 2009 1:13 AM
Thank you, Tyler.
Posted by: Jillie | December 5, 2009 1:29 AM
I've been reading economic data and a plethora of other facts on this site.
My life was not dictated by my degrees.
Rush dropped out of college as did Bill Gates. I don't claim to be superior.
Don't rain on my parade as I only hold 2 BS'S and I'm poor finacially. I'd like better health care. My insurance pays $12.50 for a papsmear. Cost to me is $191.00. When I got my flu shot, I was a self pay or drive 300 miles to Lubbock, TX.
Everyone is so technical. People want to hear the real world. Alzheimers was a great joy in my life. Grandpa booby trapped the pots and pans before thanksgiving with with strings and mouse traps. A thief on Thanksgiving eve is going to steal your pots! Along our journey he thought I was his mom, pine trees were armies, and he broke the nose of a young man.
Later granny, at the age of 99,thought my hubby was her husband. She called me Jezebel. Wanted to sleep with him.
She passed at age 101.
It was really hard to get help we needed. We could have kicked them to the curb and let a 50yr marriage be separated and on the backs of taxpayers.
#16 probably has more money...but I am richer. So much richer..but I sure wanted more help!
Posted by: Jillie | December 5, 2009 3:00 AM
No more comments from me.
Grandpa with Alzheimers...could have had a few months of Medicare help. Our doc was very careful not to be premature. She "pulled the trigger" to get us help at the end. Very end because you don't get long.
A VNA nurse did an intake the next day. Next morning he wasn't breathing well...he had rails and would not wake up. He died at noon at home. It happened so fast.
The VNA nurse called the mortuary and the medical supply co. for us. Some young fellows came for his hospital bed while he was still in it. They beat the mortuary. The VNA nurse suggested a "hospital carry" where you move someone
a via sheet. She, my hubby, and the supply guys were to move him to a near sofa. I was with grannie in my kitchen.
The sheet ripped length wise between bed and sofa.
When hubby and I went to bed, we decided there was no salvation. Our favorite grandpa just hit the floor. We were doomed.
Posted by: Jillie | December 5, 2009 4:19 AM
Tyler DiPietro:
It doesn't matter where the innovation occurs, pharmaceuticals are sold in a global market. And everywhere but the US the pharma companies get their prices screwed down to at or about marginal costs. Which would be fine, except that it means that the US market is the only reason to go through the laborious and expensive process of getting new drugs through clinical trials.
Don't get me wrong, its not fair that American consumers foot the bill so that the rest of us can benefit. But if you try to copy everyone else we will all suffer. One of the most solid results in economics is that price controls are just a bad idea. They distort markets terribly for no gain that can't be had a cheaper way.
Posted by: James K | December 5, 2009 4:22 AM
I would just like to point out to Pat Donahue et al, that those undeserving, unwashed masses who aren't valuable enough to deserve health care also can't afford to miss work when they are sick. Such as the person in that food packing plant - the one that packs your favorite premade meals. Or the person who was spot checking the paper you wiped your ass with this morning. Or the person who made your lunch yesterday, when you ate out. Or the person who served your coffee this morning.
Or the person who was in the elevator with you.
It isn't like you jackasses live in a fucking vacuum that blocks out everyone who can't afford healthcare, can't afford to stay at home when they are sick. There isn't some magical fucking bubble keeping you safe from them.
Posted by: DuWayne | December 5, 2009 8:33 AM
Tim Sandefeur has a post on his blog arguing that Rush is right and Ed is wrong. I think I have to side with Tim and (cringe) Rush on this one.
However, just because health care is not a "right" does not mean we can't have a role for government in smoothing out the inequalities of the health care system. Where I don't agree with Tim is on the "taxes = stealing" principle. While I certainly respect it from an idealistic standpoint, I think it is a wholly impractical concept in the real world.
Posted by: Kevin Klein | December 5, 2009 9:06 AM
Of course health care is a right. If it isn't, then don't celebrate "life, liberty, and the pursuit of happiness" as hallowed. Those who oppose the concept of health care as a right have very little problem with greed as a right, and yet persist merrily in the delusion that they are generous.
Posted by: jws | December 5, 2009 9:27 AM
The "right to life" in your quote means the right to not have your life taken from you. It definitely does NOT mean "the right to force others to provide me whatever medical treatments I require to PROLONG my life." The whole point is that forcing others to provide you medical treatment is a violation of THEIR right to liberty, which just so happens to be the second term in your hallowed quote.
Posted by: Kevin Klein | December 5, 2009 9:48 AM
Nope. It's a guarantee that all deserve a real chance to have a reasonable quality of life. Health care is a part of life. And anyway, I don't mind helping out others and I am wondering why so many people who also celebrate generosity and charity (especially at this time of year) seem to value their own selves so much that they see civic duty as "theft."
Posted by: jws | December 5, 2009 9:58 AM
1) If Jefferson thought that a "reasonable quality of life" was a natural right, then why didn't he use words to that effect?
2) The whole point of charity and generosity is that they are freely given. If someone compels you to be charitable or generous then we use different words to describe that, namely "theft" and "slavery".
Posted by: Kevin Klein | December 5, 2009 10:23 AM
And if someone says on Sundays and December 25th that they value "life" and then on every other day of the year do everything in their power to avoid helping others then we use words like "hypocrite" and "self-centered" to describe them. We also proclaim to steer our young from emulating these short-sighted qualities.
Posted by: jws | December 5, 2009 10:29 AM
I think Pat Donohue proved himself a Poe with that little riff on capitalism being the product of Intelligent Design. Just sayin'.
Posted by: Adrienne | December 5, 2009 11:20 AM
"It doesn't matter where the innovation occurs, pharmaceuticals are sold in a global market."
True, but you have to look at the actual picture to see what causes the innovation. Japan is the leader in making cheap to operate and produce MRI machines precisely because of those price controls, for instance.
"One of the most solid results in economics is that price controls are just a bad idea. They distort markets terribly for no gain that can't be had a cheaper way."
This assumes that the market incentives that are already there are the right ones. In essence, it's the naturalistic fallacy. The market incentives in place are not for the best drugs but for the most marketable ones. Everyone wants to make fat pills, few want to make a drug for malaria.
Posted by: Tyler DiPietro | December 5, 2009 1:55 PM
Adrienne:
If nothing else, it proves he's never read Smith or Hayek.
Tyler DiPietro:
A fair point, price controlled systems still have decent incentives for cost-saving innovations. Its novel drugs and devices that will dry up. Its also true that the US has little incentive for cost savings, but the policy proposal I outlined upthread would fix that.
Nope. If there's a problem with the pricing mechanism,you either fix the pricing mechanism directly or failing that you impose taxes or subsidies. Directly regulating price is never a good idea.
Three points here:
1) Define best. Preferences are inherently subjective so who gets to decide what qualifies as best?
2) Novel drugs research, like any investment project gets evaluated on its own merits, not relative to other projects. If you stop Big Pharma making money off fat pills, they won't research fat pills any more but they won't start researching malaria drugs either.
3) If a drug is being under researched then you subsidise the research into that drug (prizes would be my preferred method here since its harder for politicians to game). You don't start screwing with something a delicate and powerful as the pricing mechanism.
Posted by: James K | December 5, 2009 2:42 PM
I freely admit my knowledge of economics is limited to reading David Landes, a couple of classes I took a long time ago, and Weber. As well as Diamond (who I actually think is a good companion to Landes). A bit of Amartya Sen as well. Tried slogging through Capital, not much success. I do, however, have a lot of experience in the financial markets.
But, let me frame this another way. I wasn't saying that self-sufficiency was the problem at all. I was saying that if I am making a product, I will sell it to where it is most profitable.
If nobody in my country can afford it I will sell it elsewhere. Until recently not many people in Taiwan could afford computers. No biggie, they were sold in the US, and after a while people in Taiwan could afford them. Same with mainland China.
But when it comes to certain other products, it isn't so easy. Food, for instance. Let's say I have a country that exports the food crops. Fine, people pay for them and the money comes back, right?
But what if most people in the country are not seeing that income? What if I pay the workers on the farms $1 a day. I sell the food for $10 a pound. I keep all the rest of the money. I can buy the imported food -- but nobody who works for me can. They starve. Remember, if these folks can't afford the imported food it doesn't matter if it gets sold in my country. That's the imbalance I am talking about and it happens all the time. (and it is as I noted one reason that in the US we have a policy of keeping food prices low, without much regard to the production cost and process).
If the people in Bangladesh could not afford the food at market price, whether imported or not, how was this magically supposed to change? Remember, there was no incentive to pay them more. Answer: it did not. As a business proposition, I am not going to sell food to people who can't afford it. So a famine occurred.
You seem to assume that someone would fill the market gap for something like food by making it cheap enough. That doesn't always happen. If people in X country are all making Y dollars and it's below the lowest Z price for food... you get famine. The same thing happened in Ireland -- there was loads of foodstuff. But nobody had any money to buy it -- the price charged for wheat was the market price. Rich people could make it. Poorer people could not.
In a cash economy being rich in land and poor in money does you little good if the land isn't providing you food and you cannot afford to replace the food with money.
The Depression had a similar phenomenon- the farmers in the Dust Bowl were stuck because the price for the crops they did grow was too low for them to buy the food they needed to eat, and when the crops failed they had no access to money at all. What were they supposed to buy food with? Barter? (Some people tried that).
Posted by: Jesse | December 5, 2009 4:54 PM
This has been a wonderfully stimulating exchange (ever since asshatPat was dropped from the conversation) but I was unable to join in as I was laying under my frigging car replacing the starter.
This may seem completely OT, but the remark about healthcare costs being subject to market forces that I wholeheartedly agree with. I drive a Ford Ranger, made in Mexico out of parts from pretty much everywhere. It's a 1999 and after 153K it still runs well, hasn't cost me more than about $1,400 a year (exclusive of fuel cost) and the starter I just put in was made in Malaysia. Cars cost a lot more than they did twenty years ago but they are manufactured to much higher standards. The market did force that and there's no reason that it couldn't be applied in some areas of healthcare.
James Hanley's gone? I say we TP his comments and shortsheet him!
Posted by: democommie | December 5, 2009 5:28 PM
"...but I was unable to join in as I was laying under my frigging car replacing the starter."
"Ooo, look at me. I'm so classy. My car has a starter." *Pbbt!* Elitist.
Posted by: Modusoperandi | December 5, 2009 6:09 PM
"Cars cost a lot more than they did twenty years ago but they are manufactured to much higher standards. The market did force that and there's no reason that it couldn't be applied in some areas of healthcare."
We should import Japanese healthcare?
Posted by: Modusoperandi | December 5, 2009 6:12 PM
"A fair point, price controlled systems still have decent incentives for cost-saving innovations. Its novel drugs and devices that will dry up."
Yes, you've claimed that several times. I see little in the way of empirical evidence to back it up. Private industry is not terribly innovative when it comes to medicine at all. In specific case of drugs, most major research is carried out with NIH funding at universities, i.e., by that big ugly government that supposedly can't do anything right. Most drug company R&D is devoted to knocking off already commercially successful drugs. Wonder why you constantly see advertisements for copy after copy of Viagra? As general rule, anyone whose worked at large private companies can tell you that they are rarely wont to try anything new at the expense of already successful formulas, especially when those successful formulas are obscenely profitable.
"Nope. If there's a problem with the pricing mechanism,you either fix the pricing mechanism directly or failing that you impose taxes or subsidies. Directly regulating price is never a good idea."
But I don't see any particular reason why "distorting" the market in one fashion is better than the other, especially when prices are kept low for the sake of public health.
"If you stop Big Pharma making money off fat pills, they won't research fat pills any more but they won't start researching malaria drugs either."
I'm not saying they will, there are alternative ways to fund research. The pharmaceutical industry already sees huge tax-incentives for R&D, you could provide direct cash rewards for specific inventions instead. Or you could just stick to universities.
Posted by: Tyler DiPietro | December 5, 2009 6:41 PM
I certainly don't think government can't do anything right. I'm actually an employee of my government (a policy analyst specifically) so I have some insight into what government does well. The core public sector can't innovate - too much bureaucracy, but arms length organisation can, so long as they're sufficiently insulated from the political BS the rest of us have to deal with.
The difference between university research and Big Pharma research is the difference between invention and innovation. Invention is coming up with a new idea, innovation is turning the idea into a market-ready product. Most of what Big Pharma does is pay the cost of jumping through the FDA's hoops. This isn't all that creative but its necessary and something tells me universities would have a little difficulty raising the capital necessary to do stage 3 clinical trials.
its a question of side effects. If you force down prices businesses will change their behaviour in any number of unexpected and unwelcome ways. With a subsidy they just respond to the increase in demand exactly as if their production costs had fallen.
Those are all prospects worth looking at. As I said above, the FDA is the main reason why Big Pharma exists at all. If the government paid the costs of the tests it insists on, universities and Little Pharma could probably take care of the rest. It just seems to me that these should supplement the private system where desired drugs aren't being developed, rather than using them as a patch to fix something an earlier government policy screwed up.
Posted by: James K | December 6, 2009 12:41 AM
""Ooo, look at me. I'm so classy. My car has a starter." *Pbbt!* Elitist."
Yes. And now, it works!
Posted by: democommie | December 6, 2009 10:00 AM