Market Process Blog

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?

CNN Money provides more detail on the congressional healthcare plan, and some of the freedoms that individuals like and will lose with the new plan. Shawn Tully explains

“To be sure, it isn’t easy to comb through their 2,000 pages of tortured legal language. But page by page, the bills reveal a web of restrictions, fines, and mandates that would radically change your health-care coverage.

If you prize choosing your own cardiologist or urologist under your company’s Preferred Provider Organization plan (PPO), if your employer rewards your non-smoking, healthy lifestyle with reduced premiums, if you love the bargain Health Savings Account (HSA) that insures you just for the essentials, or if you simply take comfort in the freedom to spend your own money for a policy that covers the newest drugs and diagnostic tests — you may be shocked to learn that you could lose all of those good things under the rules proposed in the two bills that herald a health-care revolution.

In short, the Obama platform would mandate extremely full, expensive, and highly subsidized coverage — including a lot of benefits people would never pay for with their own money — but deliver it through a highly restrictive, HMO-style plan that will determine what care and tests you can and can’t have. It’s a revolution, all right, but in the wrong direction.” Read more …

F.A. Hayek referred to socialist’s ability to think they could plan an entire economy as the fatal conceit. John Stossel in a new townhall column merely calls it arrogance

Federal Government Was Culprit in Housing and Economic Crisis, Says Congressional Report. Economists have been arguing this for several months. Now a congressional report states that “government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the “affordable” housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy.”

So was it the free market that created this problem? Only in so far as that those private firms were complying or responding to the incentives created by government regulation. It has been argued over and over again that government intervention and manipulation of monetary policy creates these unstable bubbles.

A key point here is that the government policy did accomplish its short-run goal, but the long-run consequences are devastating. Currently, there are economists and politicians arguing the Keynesian point that only the short-run that matters. That we must do something.

The interesting question to me is that now that government has been shown to be responsible will people pay attention. Will we let markets function unhampered now and demand less intervention in these markets, or will people continue to argue that government now solve the problem that they helped to create?

Many economists have long argued that prohibition of any good or service will have poor economic consequences. One of the conclusions that follow from this view is the legalization of drugs. While the economics of the issue is pretty clear, not all economists are willing to argue for legalization of drugs. However, a group in California is pushing for the legalization of marijuana to help solve the state’s budget problems. State lawmakers are bitterly debating how to close a $26.3 billion budget deficit that likely means cuts to state services. In February, Assemblyman Tom Ammiano, D-San Francisco, introduced a bill to tax and regulate marijuana like alcohol. Bill supporters estimate the state’s pot industry could bring in more than $1 billion in taxes. … Read More

Greg Sabin at Mental Floss notes some interesting taxes from around the country in his post 5 Tax Laws You Shouldn’t Have to Worry About Take a look and be thankful that you do not have pay these taxes, and then take a minute to reflect on the fact that law makers actually wrote, debated, and passed these various taxes.

Is carrying cash on to a plane illegal? That was the question that Steve Bierfeldt asked the TSA Agent. Bierfeldt was carrying cash from a Ron Paul event and as result was seriously questioned by the TSA. The ACLU is now bringing suit against TSA for harassment. The TSA agent detained and cursed at him because Biefeldt asked whether he was required to answer their questions … read more. Has the TSA made us safer by detaining people and questioning them about carrying cash? Is the TSA constitutional? What should be done? Allow airlines to go back to screening their passengers. What will happen? TSA agents will probably go through more training at taxpayer expense.