The Angry Economist

When a government spends money, there are only three places that money could have come from:

1. Taxation -- by taking the money away from someone.
2. Borrowing -- by temporarily taking the money away from someone, with a promise of returning it at a higher value.
3. Inflating -- by printing money, which reduces the value of all the other money that people hold.

Of these, the last is the most regressive and pernicious. Not only does it reduce the savings of the middle class, but it also causes people to think they have more money than they really have.

Which one, do you suppose, do politicians choose most often? Right: inflating and borrowing. That's because taxpayers feel the pain of taxation most directly.

Seems like every handful of years, somebody starts yammering about how much money candidates spend to get elected. About how that spending is going up and up and up. And they claim that that's a sure sign of corruption.

Not likely. Look instead at the ratio of federal spending versus spending by presidential candidates over several decades:

See how the ratio varies between 1 and 20.5 and 2.5? That's because candidates spend in proportion to the power they'll have. If you want them to spend less, expect them to do less and spend less of your own money.

UPDATE 2/8/2010: Sam Nelson of clevernamehere.com fame (which would let you guess his email address) noticed that I was plotting the wrong column from the DebtArticle.csv dataset. I've re-generated the plot, and included 2008 spending (which is for a partial year, so in your head, move the rightmost point lower). The graph is a little more noisy, but still serves to make my point.

Data sources: Federal spending and Presidential campaign spending.

On a cloudy day, the macroeconomist, on being asked where the sun is, will point up, and think he has been helpful.

Well, I listened to Larry talking about how Obama failed to change anything. And I heard about Larry's plan to change this: Citizen Funded Elections. It's astounding how someone so smart can miss the mark by so much. The problem is not that special interests are buying congressmen. The problem is that congressmen have power to sell to them. As long as they have the power, they will be able to demand a price.

So, first things first: If we want to be able to trust Congress again, first we have to take away their power. How do we do that? Well, for one, people could vote Libertarian, but I don't think that's likely. More likely would be to demand that state legislators take back the power that rightfully belongs to them, according to the design of our country.

I've been rude to a friend of mine (Simon Phipps) on Twitter. On the one hand, why should I be rude to a friend of mine? On the other hand, if I don't call him out for quoting stupid things (as if he agrees with them), then how much of a friend do I consider him? If I'm not willing to be harsh with him, then I can't value his friendship much. If I'm not able to be harsh with him, then he doesn't value my friendship much.

In particular, I feel very strongly that the wealthy should be responsible for the poor. "Responsible" means several things. First, it means only lending aid appropriately. "Give a man a fish and you have fed him for a day. Teach a man to fish and you have fed him for a lifetime." It also means charity should only be for the deserving. "Give an ailing man a crutch and you have gotten him back on his feet. Give a healthy man a crutch and you have taken away his ability to walk."

Responsible also means not using the power of wealth against him. This is a tough one. It's very easy to look at someone who is not as wealthy as you, and decide how they need to be helped. Everyone who has more than someone else can fall into this trap. Certainly my country does it all the time, sending food aid to countries that can't use that food, or to countries where their competitive advantage is that food.

And responsible means consistently advocating for free markets (not using the power of wealth) and private property. When my friends harm that cause, I get very upset. I can understand my enemies, and the people that hate me advocating for coercion. But my friends? That cuts me to the quick.

All evil starts with one person threatening to hurt another person. The purpose of government is to threaten to hurt people (that's what makes it different from any other organization). Thus, the only way that government can not be evil is if it only threatens to hurt people who threaten to hurt other people. When government undertakes any other activity, it becomes a source of evil.

A society of libertarians is not an oxymoron. Libertarians aren't loners; in fact we're usually even more socially oriented than socialists. What we are is individualists; meaning that all relations between individuals should be voluntary. Socialists think that it's acceptable for some relations to happen at the point of a gun. Note that someone may hold individualist and socialist ideas; while they may think of themselves as pragmatic, compromising towards a worthy goal; instead they're just confused. You can't compromise on a principle, otherwise you lose it entirely. For example, it's wrong to kill; thus it's wrong for a group to kill; thus it's wrong for a government to kill; thus capital punishment is wrong. At best it's a cheaper method of life imprisonment -- but when you compromise your principles to save money, you are not principled at all.

Folks, I have bad news for you. The Barack Obama Health Care Reform (shepherded through by Nancy Pelosi) will be, as written, an utter and unmitigated disaster. It attempts to do two things which are, in combination, impossible. First, it makes health insurance much more widely available through the mind-boggling deal it made with the insurance companies. To wit: the health insurance companies agree to insure everyone, and the federal government forces everyone to buy health insurance. While that's a huge give-away to health insurance companies of your personal tax dollars, that's not impossible.

No, the impossibility comes when you combine that with: Second, Barack is going to pay for this new plan by reducing costs. There's two problems with this idea. A) if costs could be reduced, insurance companies would have already done it, and pocketed the money. B) when you pay less for something, you get less of it. This is one of the iron laws of economics, which is just as inviolable as the laws of thermodynamics, or the laws of mutual attraction (things fall at 32ft/sec/sec absent wind resistance).

So Obamacare will attempt to 1) increase the amount of medical care needed because you have all these newly insured people, AND 2) decrease the amount of medical care available by paying less for it.

No, really.

Stop laughing.

This is our PRESIDENT, and he deserves the same respect due to any other politician who is ignorant of economics yet tries to regulate markets: zero.

There can be only two results: either we'll have less medical care (think you're having a hard time finding a doctor now??), or we'll pay a lot more for it (think your doctor's visits are expensive now??).

But there is a different way: free market health care. Reduce every possible barrier to health care. First, stop protecting the doctor's union. Let anybody practice medicine, but give the doctor's union a super-trademark on the term "physician", just like the 4-H shamrock and Olympic rings are protected. If you want a graduate of a medical school, you can have one; just go looking for a physician. Second, stop treating us like children, and let anybody buy any medicine they want. Abolish the FDA. Pharmacies will compete to provide the safest and most effective medicines. Abolish the patent system. Drugs are only expensive to develop because of the FDA and don't need patent protection. Testing can be provided by pharmacies. Stop expecting doctors to be medical deities. Greatly reduce the available torts to only those things that doctors have control over, like leaving sponges inside patients after surgery. I'm sure there is more government hampering that I'm just not thinking of right now. Oh, yes, stop the war on (some) drugs. Abolish the ONDCP.

You will, from time to time, see people ask for more regulation of markets. I don't really need to cite any examples, do I? They're all over today's newspapers, claiming that unregulated or deregulated or free markets are responsible for the collapse of various businesses.

There is no such thing as an unregulated market, however. The term "free market" is a bit of misnomer. Participants in a free market are not free to do anything they want. If you fail to make a product that people choose to buy, that is a freedom you will find unavailable in a free market.

Let us be clear: there are markets which are regulated by politicians, and there are markets which are regulated by customers. There are no unregulated markets. There are no free markets. There are only markets in which customers are free to reward or punish businesses, and markets in which customers are prevented from rewarding or punishing businesses.

Which kind of that market do you want? One where you are free to buy or not buy? Or one where you are hampered?

John Kay makes a similar point.

The whole "health care reform" thing totally baffles me. Where do all these idiots (and yes, you ARE idiots) who support health care reform think the money is going to come from for all these improvements? Cost savings?? Sorry, idiots, but if savings were already available, insurance companies would have already gotten them, and kept them for themselves. Is that not completely obvious? It's GONNA cost more, and it's GONNA cover less.

There is a way to get more for less, but it requires that people understand and accept that free markets actually work. And yet there are so many people who are convinced that somehoww health care is some kind of magic market where the laws of economics don't fly, where pigs do fly, and where everyone can get all the health care they want for almost no money.

And a pony.