Market Process Blog

John Stossel has an article today on Competition and the health care system that quotes Nobel Laureate F. A. Hayek. In addition, he quotes Steve Horowitz’s piece from the Freeman on profits. Horowitz writes “Critics may consider eliminating the profit motive the equivalent of giving the Tin Man from Oz a heart; in fact it’s much more like Oedipus’ gouging out his own eyes.” Thanks to Art Carden for making me aware of this piece.

Steve H. Hanke a professor of applied economics at The Johns Hopkins University in Baltimore and a senior fellow at the Cato Institute had an interesting article in Forbes Magazine last week on the Fed in which he writes “The federal reserve is scrambling to convince the public that it is not a secretive institution that acts at the behest of Wall Street, but the public isn’t buying the Fed’s line. According to a Gallup Poll conducted in mid-July, the Fed received the lowest approval rating of the nine government agencies and departments evaluated–even lower than the Internal Revenue Service.” Read the rest …

Economist Hernando de Soto has a new video from the Free to Choose Network called “The Power of the Poor.” It emphasizes the entrepreneurial spirit of the informal economy. Click here to see the preview.

The WSJ had an interesting article this week on France’s health care system. I thought it did a nice job pointing out some the potential costs and benefits of such a system and there was more of an emphasis on some of the economic issues. For instance: “The quasi-monopoly of Assurance Maladie makes it the country’s largest buyer of medical services. That gives it clout to keep the fees charged by doctors low. About 90% of general practitioners in France have an agreement with Assurance Maladie specifying that they can’t charge more than €22 (about $32) for a consultation. For house calls they can add €3.50 to the bill.” This imposes a price ceiling on certain health care services that has serious economic implications that I do not think are being addressed in the debate. People are too focused on how government may ration care, but the rationing may not be because some bureaucrat decided you could not have a procedure, but because there may be a shortage of health care providers. I thought Peter Klein had a good commentary this week about “Heterogeneity and Health Care.” These are areas and aspects of the issue that need to be discussed as this debate goes forward.

Leland B. Yeager, Professor Emeritus of economics at Auburn University and a leading monetary theorist has an interesting article on the current economic crisis in the latest is issue of Liberty Magazine. Yeager offers a Monetraist explanation as well as what we can learn from the situation. He writes “If you think that the free market should be blamed for our current economic woes, you are on the wrong track.” … Read more

Every semester my students in my principles classes read the story of the broken window from Henry Hazlitt’s Economics in One Lesson. I explain that despite the fact that Bastiat wrote it originally in the 19th century and Hazlitt’s writing was originally published in 1946 this is still an extremely relevant concept. I explain that individual’s, economists included, continue to commit what is now referred to as the “Broken Window Fallacy.” The cash for clunkers is the most recent example of committing this fallacy. Jonah Goldberg does a good of explaining this point in the LA Times this week.. The one point I think he misses is that the cars in the cash for clunkers have to be destroyed. If we think of the cars as assets than destroying them cannot make us any wealthier than replacing breaking windows.

Recently, I saw a Venn diagram overlapping narcissism, stalking and ADHD the overlapping areas determined whether you should be on MySpace, Facebook, or Twitter. I commented that maybe I should be on twitter, which is where all three of these area overlap. I was told ADHD was not my problem. Maybe I think I have it because my attention is being constantly diverted by one new government program after another and I do not know where to look, or how to react fast enough.

Spending on the first stimulus package to resuce the economy, most of which has not been spent and they are trying to decide its success or failure.

The government bailout the automobile industry including overseeing the bankruptcy process for Chrysler and GM. I will not even get into the ownership issues, which are the real problem.

The talk of a second stimulus package? Although that seems to have quieted down for now.

Instituting major healthcare reform where the government will be the single payer. This issue is misunderstood by so many individuals in and out of the healthcare profession it deserves to be discussed on its own.

The cash for clunkers program is so successful they ran out of money and the Senate will have to approve more funding. Is there an environmental benefit? Maybe? Most people will now have a new car payment, the old autos have to be destroyed (I wonder what impact that will have on used parts and repairs). Could the car’s being traded in, many far from being old and true clunkers, have been sold as used cars that would generate potentially more business for dealerships and provide some consumers with an alternative that may be more within their budget. Let’s not forget the simple point that the subsidies are being paid by taxpayers. This program seemed simple, but they did not estimate the spending, or the response of consumers accurately, but we trust this same group to decide which medical procedures will be best for us and estimate the costs correctly?

Now with record spending the administration is realizing that they may have to increase taxes to pay for it. Raising taxes during a recession is generally not a good idea.

What’s next? I am not sure, but I am guessing I will not have to wait long to find out. F.A. Hayek wrote that before the end of democratic institutions and a totalitarian regime begins officials will argue that there must be quick government action. Ask yourself, if you have been hearing that call lately?