The Angry Economist

Here's a letter that I sent to North Country Now. If it gets published, it will come out next Tuesday.

One of the sound-offs points out that the US doesn't have universal healthcare (except that it does -- nobody gets turned away from an emergency room), and that we should be leaders. I agree. We should lead the rest of the world away from a system of government-rationed health care to a system of free-market health care.

Before anybody tries to suggest that we already have a free-market health care system, let's compare socialized medicine vs. our current corporate-insurance medicine vs. free-market health care.

socialized: out-of-pocket expenses are minimal, so everybody loves it, but nobody has any reason to economize. Nobody gets bankrupted by catastrophic health care, but on the other hand, some people are denied care at any price (good thing Canadians have the US to fall back on). You pay the full cost because it comes out of your taxes.

corporate-insurance: if you have a good job, you have health care, with a low deductible and small co-payment. If you switch jobs, you lose your health care, and maybe the new job's insurance company will cover your pre-existing condition. If you have no health care, you go to an emergency room. The corporation pays the insurance company which then rations out payments to doctors. Patient is not consulted. Technology is expensive. You pay the full cost because it comes out of your salary.

free-market: cooperation is maximized by multiple competing plans. The doctor's union (the AMA) has no power to restrict entry, so doctors' pay is competitive and bad doctors aren't protected. Technology reduces costs just like everywhere else in the economy. Genetic testing and preventative care keeps the worst illnesses at bay. Doctor's charity (or government, if necessary) covers losers of the genetic lottery. Non-patenting of drugs (and no FDA) reduces costs of drugs to level affordable by all. You pay the full cost because it comes out of your pocket.

Make no mistake about it -- health care is a hard problem to solve. There are no good solutions, only least-bad solutions. It will require all of us, competing and cooperating freely, to devise a solution we can accept. A single government solution imposed on us by the exigencies of politics will likely be controlled by politically powerful groups: drug companies, insurance companies, and doctors. You'd be correct to notice that patients aren't listed among the politically powerful, so when politics controls medicine, patients lose out.

Let's put the patient in control of the purse so they can choose the solution that's best for them. Free markets -- they're not just for breakfast anymore.

Progressive taxation is not logical. It assume that not only should we tax the rich at the same rate as the poor and middle class, we should tax them at a HIGHER rate. And yet if they didn't the money, why did they bother to earn it? Taxing them at a higher rate can only give them a lower incentive for the most productive people in our society, who employ the most people.

And what do they do with their money? They INVEST it, usually back into their own business, but into the general economy as well.

Progressive taxation is taxation of capital. If you ask any economist, they will explain that taxing capital is eating your seed corn.

If you want to understand that progressive taxation is unfair, then give four pennies to one boy, and eight pennies to another. Then charge the first boy a penny for some candy, and the other boy three pennies. When he objects, and surely he will, tell him "but you have twice as much money." If he can do simple math and then says "But that's no fair! I should only be paying twice as much." You can then try explaining how under the theory of progressive taxation, it's no hardship for him to pay three times as much.

I had an interesting conversation at OSCON last week over a couple of beers. Since this conversation was alcohol-involved, I decline to name the person who said the following. I can only assume that he wasn't at his logical best.

"Freedom of speech is just libertarian bullshit. If people have the right to say anything they want, then you can't punish fraud."

I was nonplussed. How do you respond to a statement like that? Of course, you always realize the right thing to say hours or days later. The right thing to say is simply this:

"We trust people to vote for anyone they want; we trust anyone to run for office; we should trust them all to say anything they want."