Wednesday, April 30, 2014

Diminishing Returns in Healthcare

Many people are ignorant of economics. This sad fact leads to misguided beliefs with regards to how states should allocate resources. The problem has never been clearer than in healthcare.

Diminishing returns has to do with how the average cost of a good or service increases as the amount produced of the good or service increases. At lower levels of output, we experience increasing returns, meaning the average cost decreases. As output increases, we reach a point where the average cost starts to increase. This point is determined by our level of technology.

As an example, historically grocery stores were small. They provided the necessary goods people needed within a small community. As technology improved, both in the ability of consumers to travel further and in the ability of grocery stores to get and hold larger inventories, the average cost of larger grocery stores fell. This has lead to the rise of large stores like WalMart who is able to provide more goods than so-called mom and pop stores at lower prices.

How does this apply to healthcare? There is a natural progression from small hospitals who take care of the need of a small community to larger hospitals that have more specialized nurses and doctors. By serving more people, they take advantage of increasing returns and can care for more specialized needs.

But what happens if the state comes in and tries to increase the number of people they serve? Resources that should be directed to assisting in more specialized treatments have to be directed to deal with more generalized treatments. This is why in countries with socialized medicine, getting in to see a general practitioner is faster than in the US but the wait to see a specialist is much longer.

Since we are talking about government services, it is hard to see how the cost of medical care is higher. The cost of devoting more resources to general practice is the forgone ability to serve those with more specialized needs. Since prices are set by government for these resources, we cannot accurately measure the true costs this imposes on society in dollar terms.

When resources are allocated by market forces, meaning according to the needs of the people, the way firms increase profits is by investing resources in improving technologies. Under government directed healthcare, resources are misdirected and investment is misallocated due both to the inefficiency of government due to lack of prices and the effect of diminishing returns.

Sunday, April 27, 2014

The Anti-Free Speech Left

While the Left often claims to be champions of civil rights, but often vehemently oppose free speech rights. One class of speech the Left often tries to suppress is political speech. They support this form of political oppression on the grounds that money spent on speech corrupts politicians. By contributing to a politicians political campaign, supposedly if the politician wins he will reward the donor. This may or may not be true, but limiting people's ability to support their candidate will not stop politicians from being corrupted.

One way that people voice their support or opposition to a candidate is by coming together as part of a corporation. The Left claims silencing the views of these corporations does not violate anyone's right because corporations are not people. But corporations are people. They came together to use a corporation as a means of jointly expressing their political views. These are the people the anti-free speech Left wants to suppress.

The case that brought this issue to the forefront was Citizen's United vs FEC. Citizen's Unitedwas a corporation, a group of people, who produced a video opposing Hillary Clinton. They wanted to run ads for this film during 2008 Democratic primaries. This was in violation of the the McCain–Feingold Act which attempts to silence such political dissent.

These types of laws have the clear purpose of silencing speech. This is not about if a corporation is a new independent person. The intent of the laws is irrelevant as the ends do not justify the means

The Left supports giving the government grand powers to take from one group and give to others. To change the basic rules governing the economy, to set regulations that benefit one group at the expense of other. These powers are what are corrupting politicians not the contributions of donors. As long as they refuse to accept that the government they want will always be corrupt, they will not deal with the real problem.

Wednesday, April 23, 2014

Defending liberarianism: against modern liberalism

Modern liberals are a peculiar bunch. They advocate the use of violence against the very people the purport to want to help. Few will claim they want violence, but they want laws to prohibit or mandate certain activities which are enforced through violence as I explain here.

There are several areas where liberals attack the ones they propose to help. In healthcare, they advocate for a single payer system, also known as universal healthcare. The problem with such a system is that resources are misallocated. A free market system would be logically superior. Since government misallocates resources, prices are forced up. Not too surprisingly, healthcare cost have gone up in the US since the government has gotten more involved. Virginia is proposing a single payer healthcare system but since such a system would require the state to almost double its budget, there is no way to support such a system without massive tax hikes which would result in massive economic harm. Since health is highly correlated with income, such an effort would be expected to hurt overall health, not improve it.

Liberals also advocate using violence to sut down businesses who cannot afford to pay their employees a "liveable" wage.What the minimum wage does is drive out businesses and kill jobs while at the same time reducing competition and forcing up prices of finished goods. This double whammy against the poor, low skilled laborer forces them out of the job, destroying their ability to improve their standard of living through learning job skills and forces up the prices of the goods they once produced.

Another way the modern liberals hurt the poor is through anti-discrimination laws. After the Jim Crow laws were repealed, laws that mandated discrimination, states have done an about face and gone to the complete opposite extreme. These extremist laws force people to associate who otherwise would not. These laws have been in the news lately because they compel involuntary servitude and people trying to exercise their freedom of religion refused to serve gays. While liberals usually stand for civil rights, this is an instance where the rights of one are trumped by the political prejudices of others. Liberals have no basic principles and will stomp on whom ever they don't like. A classic example of irrational behavior, using an inappropriate means to achieve an end. Worse, these anti-discrimination laws hurt the people they claim to help. If a business owner hires a member of a special class protected by these laws, they could potentially face discrimination law suits for any number of activities including overlooking them for a promotion or firing the, even if justified. With these threats looming over employers, it is no wonder being a protected class, exempted from the equal protection clause of the 14th amendment to the constitution, makes it harder to find work.

I could go on about how liberals hurt the poor and middle class. They force their views through regulations forcing businesses to serve the government and not customers. They support child labor laws which keep children of desperate families from being able to acquire legal work and often forcing them into prostitution.

Tuesday, April 8, 2014

Defending libertarianism: Monopolies

There is a certain amount of irony hearing people complain that a libertarian society would be controlled by monopolies. These same people support monopolies on law enforcement and contract enforcement. The state has created monopolies that control our money and our mail. In most cities, basic utilities like water, sewage, gas and electricity are controlled by government protected monopolies.

What is not important is if monopolies exist but if transactions are voluntary and voluntary transactions are not prohibited. There are few real monopolies that exist without government protection. At one point, Microsoft was declared a monopoly, and due to copyright laws it is to a certain extent, but Microsoft still faced competition. Microsoft's biggest competitor for its Windows operating system is actually older versions of that same system.

Antitrust laws are supposed to protect us from monopolies. Unfortunately these laws use coercion to force companies to behave the way politicians want. The anti-trust case against Microsoft was based on the fact that Microsoft integrated its web browser into its operating system. This means that the government went after Microsoft for trying to improve consumer experience.

Worse, antitrust laws ignore the reality of how firms form and expand to serve customers. This is documented by Alan Greenspan.

Sunday, April 6, 2014

Defending libertarianism: What about the poor

One of the most common criticisms of libertarianism is "What about the poor?" It is a bizarre question. Would the person who is concerned about the poor not be willing to help the poor if the government were not forcing them too?

To meet immediate needs, access to food and monetary handouts would be necessary. These are done on a regular basis by private charities. Before government got involved, private charities were more numerous. Thanks to the New Deal, the role of charity has been significantly diminished.

 The poor also need access to low paying, low skill jobs. These are the kinds of jobs that disappear due to misregulation. When government gives special privileges to labor like mandatory benefits or minimum wages, it becomes relatively cheaper to substitute capital equipment in place of labor. Increased use of capital equipment requires more skilled labor and less unskilled labor.

The poor would be better off if voluntary employment transactions including working in more dangerous or less comfortable conditions or for lower wages were permitted. The reason anyone would choose to work until these conditions or for low pay would be because those are their best options. Making someones best option illegal does not make them better off.

As poor people gain experience, they can move up the social ladder. There will always be poor people, those on the bottom of the social ladder. We do not make them better off, however, by removing the bottom rungs.

Friday, April 4, 2014

Defending libertarianism: Who will build the roads?

Today I would like to deal with one of the easiest and silliest objections to libertarian philosophy, "Who will build the roads?"

This is an easy objection because it is clear that the market can provide roads. Historically, roads were done privately in the US until the they were seized by the government. There are still some private roads in operation.

Roads provide an essential service for  businesses because they provide consumers access and provide transportation routes. Local businesses will support roads that make it easier for consumer to reach them. Exporting businesses will support highways that allow for the transportation of goods to areas were their consumers are located at.

Roads would be built and maintained by private entities who wish to serve consumers. Right now, there is monopoly on the building of roads. Governments use eminent domain, a legal form of theft, to take property to construct roads often for political gains.

The question should not be"Who will build the roads?" but "Should the roads serve the people or the politicians?"

Thursday, April 3, 2014

Defending libertarianism: The non-aggression principle

I want to start a series of posts defending libertarian principles against the critics of libertarianism. To start, I want to explain what libertarianism is. The founding principle of libertarianism is the non-aggression principle.

Simply put the non-aggression principle states that "It is wrong to initiate aggression." Most people will claim to agree with the principle but most confusion about the libertarian position constitutes a failure to understand the application of this principle.

Broadly speaking, the non-aggression principle asserts that it is wrong to use violence or threats of violence in a non-defensive manner. Going forward, I will apply this principle to refute objections and defend libertarian conclusions.