What if everybody in Canada flushed at once?

Up to 80% of Canadians watched last week's hockey medal game.

Why I oppose government programs

As a contemporary example, Cato argues Cash for Clunkers is among the dumbest ever:

• A few billion dollars worth of wealth was destroyed. About 750,000 cars, many of which could have provided consumer value for many years, were thrown in the trash. Suppose each clunker was worth $3,000 at a guess, that would mean that the government destroyed $2.25 billion of value.
• Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.
• Taxpayers were ripped off $3 billion. The government took my money to give to people who will buy new cars that are much nicer than mine! 
• The federal bureaucracy has added 1,100 people to handle all the clunker administration. Again, taxpayers are the losers.
• The environment was not helped. See here and here.
• The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.   

Sane folks should agree these outcomes are outrageously dumb.  B-b-but, Obama bragged the program was popular!  And truly, it was.

Offering everyone $100 towards burning an old set of ugly clothes and buying a sleek new replacement might also prove popular, both to consumers and the clothing industry.  Huzzah, let's do it!  Regrettably, such popularity does not make it a good idea nor mean that implementing it would make any kind of economic or environmental sense—which it clearly wouldn't.

This basic problem of economic inefficiency, generalized, is why the majority of other government programs and economic interventions are also really bad ideas. What is politically popular seldom implies economic efficiency.  Often, quite the contrary. Political popularity foments fiscal insanity.  First you get your Democrats, who want to give every person on Earth a free cake, dog, and pony—plus the choice of a prepaid subscription to either People or The Washington Monthly.  This proves popular.  Then as a reaction you get your Republicans, who don't want to pay half a cent toward anything.  This also proves popular.  Unsurprisingly, voters want to have their cake and not have to pay for it, too.  Politicians are happy to pander to both sides.  The emerging compromise?  Massive deficits—a.k.a. having our children and grandchildren deal with it somewhere down the line.

Yes, Virginia—I don't mean to scare you with technical phrasing, but politics and government really do suck.

A sufficiently free market, by contrast, implements a method that almost always results in superior efficiency to either political popularity or technocratic fiat.  It's called price signals.

Unfortunately, due to a history of misguided (but politically popular!) government interventions and regulation, the U.S. health-care system does not have price signals.  This works out very poorly.

Allow me to paint you an analogy.  It would be as if credit cards were issued by "insurance card" companies who agree to provide their customers with "consumption coverage".  You would pay them a pre-arranged monthly "consumption premium", and in exchange they would "cover"—with just a small co-pay!—any shopping you do with their card, provided it was clear that you "needed" it.  Ramen noodles would probably be covered—eat more than you can puke.  So would most canned goods.  Even many of the cheaper fruits and veggies.  But the fine entrée you wanted to serve at your next dinner party?  Sorry, your insurance card company doesn't think you "need" it.  Oh, and there would also be limits on things like how much gas you can buy per week or how many drinks you're allowed at the bar per night.  Sound good?  Meanwhile, more and better ways would be developed to game and profit off the convoluted system.  Retailers would overcharge whatever they could get away with making the "insurance card" companies pay, and consumer demand for more and better purchase coverage would rapidly increase. Thus the monthly cost of these "consumption premiums" would also soar.

The above scenario is basically the status quo of U.S. health-care.  Obviously, it sucks.   In lieu of price signals, people always want more and better health-care to be provided, just like in the above they always want more "consumption coverage".    When the consumer doesn't pay for services, markets become dysfunctional. (Also true of some marriages >_>)

So how to reform the system?  Apart from those unfortunate Brits—who tragically got the idea during WWII that it would be good for their state to stay in the business of directly providing care—the left's favored solution tends to be single-payer: a government takeover of health insurance companies, analogous to taking over the odd "insurance card" ones above.

Insurance companies make great villains, but as we saw with Cash for Clunkers and can observe by looking at many other programs—particularly socialized health plans in other countries—they all have their own kinds of problems.   These problems are different from the US status quo: better in some ways, worse in others.

For example, one thing other countries' socialized systems are better at is cost control (.pdf).  They use their monopsony power to negotiate lower prices, and they can often be better at saying no to consumers.  They say no in more equitable ways, such as long waiting times, and some Canadian towns run regular lotteries to decide which families get a doctor.

Controlling costs would be nice, especially compared to an expensive system like the US status quo.  But one thing centralized bureaucratic cost controls also do is reduce the incentive for future private innovation.  Why spend your time experimenting with and further developing a new health product if you can't know whether the health bureau will decide it's a cheap and effective enough treatment to get it off the ground?

In short, the choice between the U.S. status quo and a single-payer system offers trade-offs.  I won't spill more ink trying to formally pin them all down: it's a big topic, kind of like going on about the difference between Republicans and Democrats.

At this point someone usually pipes up and wails about the plight of the uninsured poor.  But that is not a health-care system problem, it is an income problem.  And one of the few ways to directly mitigate an income problem is to provide subsidies to low-income families (some ways are more economically sound than others).  Point is, you could implement subsidies and attain universal health insurance coverage in the U.S. without directly changing anything about our health-care delivery system or the insurance companies themselves.  It would just be really expensive and balloon either the deficit or tax rates, which is why it shouldn't be done in isolation.

Happily there's a reform that would lower costs for everyone while actually increasing innovation:  bring back the price signals that are so essential to market efficiency.  Here's how this might be accomplished:

Firstly, repeal any state-level regulation—often called "patients bill of rights"—that require insurance companies to fully cover particular procedures or put an artificial ceiling on deductibles.  This would clear the regulatory barriers for health plans that sport low premiums and high deductibles, suitable for catastrophic coverage only.  This is how real insurance is supposed to work, like the kind we have for our cars and homes.  By contrast, the sort of thing we call "health insurance" today is actually "pre-paid health care".  Just imagine how high your car insurance payments would be if it were required to cover 80% of the cost of oil changes, tire rotation, wiper blades, new tires, regular service, etc.

Secondly, implement something like Health Savings Accounts (HSAs) for all the routine, preventative, non-catastrophic care.  Apart from trimming administrative jobs in our bloated health insurance industry, this would free consumers to shop for their own health care (Enter price signals, mission accomplished).

Of course, esteemed Nobel laureates like Paul Krugman shall protest:  "Health care is not a bowl of cherries...or a carton of milk, or a loaf of bread."

Indeed, shopping for health-care probably sounds like an odd idea to most.  But HSAs have been tried right here in America, and the data suggest they work well:

Consumer-driven health (CDH) products [i.e., high-deductible health plans relying on HSAs or Health Reimbursement Arrangements to reimburse for qualified expenses] have been marketed in various forms since the early 2000s. While emerging data is [sic] not entirely conclusive, general directional conclusions can be drawn from the studies published to date. […]

With regard to first-year cost savings, all studies showed a favorable effect on cost in the first year of a CDH plan. CDHplan trends ranged from -4 percent to -15 percent. Coupled with a control population on traditional plans that experienced trends of +8 percent to +9 percent, the total savings generated could be as much as 12 percent to 20 percent in the first year. All studies used some variation of normalization or control groups to account for selection bias.

For savings after the first year, at least two of the studies indicate trend rates lower than traditional PPO plans by approximately 3 percent to 5 percent. If these lower trends can be further validated, it will represent a substantial cost-reduction strategy for employers and employees.

Generally, all of the studies indicated that cost savings did not result from avoidance of appropriate care and that necessary care was received in equal or greater degrees relative to traditional plans. All of the studies reviewed reported a significant increase in preventive services for CDH participants. Three of the studies found that CDH plan participants received recommended care for chronic conditions at the same or higher level than traditional (non-CDH) plan participants. Two studies reported a higher incidence of physicians following evidence-based care protocols.

Bottom lines: the status quo puts health care rationing in the hands of insurance companies.  Single-payer puts rationing in the hands of bureaucrats.  A free, CDH market places it in the hands of consumers.

Which of the three do you prefer?

Contrary to popular belief, those of us on the economic right do not advocate market solutions because we have some arcane faith in mythical powers of the market.  We do so because they actually work better—even when they're politically unpopular.

(At this point someone usually pipes up to rail about how the financial crisis, like, totally discredits the idea of markets being better. Let's try not to be distracted by this different, macroeconomic topic that has more to do with a combination of poor regulation and lack of understanding the business cycle.)

The mean socially conservative Republican voter is our useful idiot. They don't understand free market economics any better than the left does, and are liable to show up at your local town halls spouting all sorts of nonsense about government conspiracies to kill more babies.  But the socons are willing to vote with us, so we often have to hold our nose and work with them.  It's called fusionism, and it's been the price to pay for an economic way of doing business that—while superior on the merits—would otherwise be too politically unpopular.  See for example the situation in contemporary Europe, which unlike the US has managed to purge socon fervor the old-fashioned way: through a long, tragic history of disastrous war.

I deplore social conservative attacks on personal freedom as much as the next freethinker, and I aim to counter them.  But I also deplore the left's attacks on economic freedom.  And I'm aware of the uncomfortable truth: unless I can convince a lot more of my fellow social liberals to cut back on their leftism and support freer markets, a chronic Faustian bargain with socons is necessary to preserve what economic freedoms we have.  Without this bargain, the U.S. economy would become more like Europe's, with the lower efficiency and lowered growth that over the long term is worse for everyone—rich and poor alike. Unless, of course, one is lucky enough to become a politician, bureaucrat, or have a personal connection to the business. Then the European political-economic landscape looks pretty rosy, and one can seek out all sorts of creative ways to gloss over the underlying economic inefficiency.

(Cross posted)

Government does great stuff

A fun video on "free" health care in Canada:

Science proves zombies could annihilate humans

(meme) Thankfully crack teams of Canadian military researchers are on the case...

If zombies actually existed, an attack by them would lead to the collapse of civilisation unless dealt with quickly and aggressively.

That is the conclusion of a mathematical exercise carried out by researchers in Canada.

They say only frequent counter-attacks with increasing force would eradicate the fictional creatures.

[..] their analysis revealed that a strategy of capturing or curing the zombies would only put off the inevitable.

In their scientific paper, the authors conclude that humanity’s only hope is to “hit them hard and hit them often”.

They added: “It’s imperative that zombies are dealt with quickly or else… we are all in a great deal of trouble.”

Private healthcare in Canada?

From Fox News:

Private for-profit clinics are a booming business in Canada -- a country often touted as a successful example of a universal health system. Facing long waits and substandard care, private clinics are proving that Canadians are willing to pay for treatment.

"Any wait time was an enormous frustration for me and also pain. I just couldn't live my life the way I wanted to," says Canadian patient Christine Crossman, who was told she could wait up to a year for an MRI after injuring her hip during an exercise class. Warned she would have to wait for the scan, and then wait even longer for surgery, Crossman opted for a private clinic.

As the Obama administration prepares to launch its legislative effort to create a national health care system, many experts on both sides of the debate site Canada as a successful model. But the Canadian system is not without its problems. Critics lament the shortage of doctors as patients flood the system, resulting in long waits for some treatment. "No question, it was worth the money," said Crossman, who paid several hundred dollars and waited just a few days.

A quick google turned up this 2001 story about private care in the UK, as well.

Public health insurance, antitrust, and price controls

NYT:

..critics argue that with low administrative costs and no need to produce profits, a public plan will start with an unfair pricing advantage. They say that if a public plan is allowed to pay doctors and hospitals at levels comparable to Medicare’s, which are substantially below commercial insurance rates, it could set premiums so low it would quickly consume the market.

The first sentence describes the whole point of having a new non-profit plan compete with for-profit HMOs and PPOs. They're afraid of this competition, which is understandable, but cry me a river. As a general rule, private industry is supposed to be more efficient than government programs, and if they can't compete on an even playing field then they're doing something wrong.

But how even is the playing field? If the public plan were to be subsidized by taxpayers and not self-sufficient, that would obviously be uneven.

The second sentence is also of concern. Allowing any plans—be they public or private—to fix costs and underpay at low Medicare levels will amount to an effective government price control on the industry.

Private insurers are not allowed to collude and use their combined negotiating power to underpay for medical procedures because of antitrust law. But here we have the specter of a government-run public plan coming in and sidestepping antitrust regulations, with the express goal of satisfying public demand for more and cheaper care.

Such a market distortion is unfair to health providers (i.e. hospitals and clinics) who were previously competing on a freer market. In reducing compensation, it will undoubtedly reduce the quality of care, and it may also reduce availability as providing health services becomes less competitive with other industries that are not price controlled by the government.

For general information on the consequences of such price controls, see here...

Governments have been trying to set maximum or minimum prices since ancient times. The Old Testament prohibited interest on loans to fellow Israelites; medieval governments fixed the maximum price of bread; and in recent years, governments in the United States have fixed the price of gasoline, the rent on apartments in New York City, and the wage of unskilled labor, to name a few. At times, governments go beyond fixing specific prices and try to control the general level of prices, as was done in the United States during both world wars and the Korean War, and by the Nixon administration from 1971 to 1973.

The appeal of price controls is understandable. Even though they fail to protect many consumers and hurt others, controls hold out the promise of protecting groups that are particularly hard-pressed to meet price increases. Thus, the prohibition against usury—charging high interest on loans—was intended to protect someone forced to borrow out of desperation; the maximum price for bread was supposed to protect the poor, who depended on bread to survive; and rent controls were supposed to protect those who were renting when the demand for apartments exceeded the supply, and landlords were preparing to “gouge” their tenants.

Despite the frequent use of price controls, however, and despite their appeal, economists are generally opposed to them, except perhaps for very brief periods during emergencies.

[..] The study of price controls teaches important lessons about free competitive markets. By examining cases in which controls have prevented the price mechanism from working, we gain a better appreciation of its usual elegance and efficiency. This does not mean that there are no circumstances in which temporary controls may be effective. But a fair reading of economic history shows just how rare those circumstances are.

And here.

Yglesias recently wrote a post in which he dismissed opposition to price controls by Blue Dogs as not good for deficit reduction, thus "not fiscally conservative", thus incompatible with being a Blue Dog. In this he ignores that economic conservatives are against price controls for very good reasons, e.g. preserving the quality of goods you get from a free market. If all we cared about was spending less, we'd propose a socialist system like Britain's, which spends less than half the amount per capita. Obviously their quality of care isn't as good. (And what makes Canada's better than Britain's is its location).

Another point aired in the NYT piece:

Insurance industry lobbyists are skeptical that the government can fairly referee a contest between its own insurance plan and private offerings. In an era of serial federal bailouts, they aks, would the government really let its own insurance plan fail?

This is important, becaue any situation in which the government plan is not allowed to fail would be unfair competition. Private HMOs, being normal companies, are subject to failure. (Capitalism's "creative destruction".)

If we start out with a public option that is unsubsidized, but it can't meet its sobligations at competitive rates, the odds are Congress will intervene to "save" it as a public good, i.e. find some way to subsidize it.

In sum, this is why I'm against public options for healthcare and anything else: it's very difficult to set up fair competition and ensure it remains fair.

For many leftists, however, that's the point: they're uninterested in fair competition, and would prefer a single-payer system with no competition that sets prices by fiat. Their goal is to provide equal coverage for all, with scant regard for the consequences to quality of coverage and for-profit incentives of R&D that heretofore have advanced modern medicine in the U.S. very quickly compared to states with public healthcare.

Free* government money!

* we'll tax you later

Heading to Canada might actually become a good option...

Link blag

New Hampshire's 'Live Free or Die' UNIX plate turns 20. I suppose the WINDOWS one should say 'Live, Freeze, and Die'.

Perry: Drug laws correlate with drug strength. Essentially, everyone who argues that we shouldn't legalize pot because "It's not like your father's weed" have made the problem they're complaining about worse. It's similar to how high drinking ages contribute to binge drinking, because underage drinkers try to drink all they can, when they can, in a short period of time.

BBC: A database which holds the details of every child in England has now become available for 390,000 childcare professionals to access. Brilliant! ...what could possibly go wrong?

Canadian Parliament sends takedown notice for video of their hearings posted on YouTube.

Cafe Hayek: How health care decisions are really being made.

Fallows admires Obama's speeches.

Cato: Washington DC's Union Station has an Obama shop.

Link blag

Frum at NewMajority: The stock market performs markedly worse when Congress is in session. He also notes that the Obama administration's reorganization of Chrysler is lawless.

The ratio of Dow/Gold is not a pretty picture.

FiveThirtyEight: Discussing social and economic conservatives, Huckabee fails logic 101.

Kossacks note abstinence proponents are freaking out.

ONTARIO - Asian teen strikes back at bully in self-defense, is charged with assault, rallies community.

Yglesias: Obama's don't ask don't tell hypocrisy.

Obsidian Wings: Europe succeeded because it population was controlled by fecal matter?

Laissez faire, eh?

Marginal Revolution:

U.S. government spending as a percentage of GDP is now equal to Canada's and rising, leading one Canadian op-ed writer to crow about Canada's low tax, free market economy.  Damn that hurts.

*pained groan*

Link blag

Megan understands the relevance of torture's effectiveness. RBC has a good follow-up.

TMV: Dick Cheney as faithful old retainer?

LA Times: Bill Maher excoriates Republicans.

Post: Jay Bybee has regrets.

Missing link between seals and land mammals was found in Canada.

The Post profiles Law Enforcement Against Prohibition.

The smallest man in the world and his cat, 1956

Link blag

Sen Burr (R-NC) Foolishly encourages bank runs. I keep asking myself, when did the GOP transition from fiscally responsible to financially insane? Is the FDIC too complicated a government agency for some of them to understand the value of? The United States Constitution requires Senators to be of age at least 30. Perhaps we should change that to IQ at least 130?

Recession silver lining? Misguided social conservatives aren't having much luck with their legislation, as moderates focus on real problems:

school prayer and discouraging teaching evolution has been declared dead. Prospects don't look good for a proposal to require ultrasounds for first-trimester abortions. Same goes for a bill to make marriage licenses more expensive for couples who don't take a premarriage education course.

WSJ: Fight piracy with convoys?

DoD Buzz explains the SEAL techniques likely used against pirates.

James Fallows gets an anecdotal take on the state of Iraq.

WSJ: Oregon plans to hike beer tax by 1900%

Politico: Obama will simplify the tax code? More from AP.

Texas governor thinks the state could leave the union. Didn't we have a war to settle that? HotAir calls him down.

David Frum shares my anger at Secretary of Education Arne Duncan and public school teachers' unions.

Megan: Why does Canada have cost-effective healthcare? Location, location, location.

Yglesias: Merely seeing salad on a menu makes you more likely to order junk food.

Radley listens to more left-wing radio.

Link blag

Arnold Kling: Some Libertarian Basics...

[..] your generosity is reflected in what you do with your own money, not in what you do with other people's money. If I give a lot of money to charity, then I am generous. If you give a smaller fraction of your money to charity, then you are less generous. But if you want to tax me in order to give my money to charity, that does not make you generous.

[..] being libertarian does not mean you have to have a cold heart. You can be a bleeding heart, but you show it by what you do, not what you advocate forcing other people to do.

NRO: Useful Idiots Caucus...

The awestruck members of the Congressional Black Caucus who lavished praise and gratitude upon Fidel Castro after meeting with the former dictator are either profoundly ignorant or indifferent to evil — perhaps both.

Coates: More on Cuba...

[..] it's weak to act like Castro is consistent with best of the progressive tradition. It's weak to call out Dick Cheney here, and cheer on Castro over there. It's weak to shout apartheid at Israel, and then turn around and applaud Castro. It's weak to say, "Yeah, I hear you but..." Either repressively ruling a country for half a century and then conspiring to pass power to your brother, is wrong or it isn't. We have to choose. Or we have to be jesters.

Ezra Klein: The consolations of polarization...

[..] there used to be a lot of people who believed similar things and came from similar perspectives but were in different parties. A New York Republican was probably closer to a New York Democrat than to a Mississippi Republican. [...] This halcyon era of bipartisanship was a short blip that was primarily the product of a grotesque alliance between the anti-civil rights Dixiecrats and the conservative Republicans who would eventually absorb them. There's very little to fondly recall about that.

A visual guide to deflation

CNN: White House hit by swarm of bees

Daily Mail: The Obamas order delivery... from St. Louis?

VC: Quebec Appellate Court reverses father's grounding of 12-year-old

Baptist Press: Gay marriage in Iowa more damaging than 500-year flood

Obama reaches out to the moderate pirate community

Bush in Canada

AP:

Calgary, Alberta – Former President George W. Bush , making his first public speech since leaving office in January, says he wants Barack Obama to succeed and that it's "essential" to support the new leader.

Bush declined to critique the Obama administration in Tuesday's speech, saying the new president has enough critics and that he "deserves my silence."

Former Vice President Dick Cheney has said that Obama's decisions threatened America's safety. Conservative talk-show host Rush Limbaugh has said he hoped Obama would fail.

"I love my country a lot more than I love politics," Bush said. "I think it is essential that he be helped in office."

I await Limbaugh's announcement that Bush is not a real conservative (which would be true, but for other reasons).

Not everyone in Canada was thrilled:

2004 Map of Jesusland, featuring Alberta

The invitation-only event titled a "Conversation with George W. Bush " attracted close to 2,000 guests who paid $3,100 per table. Bush received two standing ovations from the predominantly business crowd.

About 200 protested outside the event; four of them were arrested. Some protesters threw shoes at an effigy of Bush, a reference to the Iraqi journalist who tossed his shoes at the former president during a December news conference in Baghdad.

"He shouldn't be able to go anywhere in the world and just present himself as a private citizen," protest organizer Peggy Askin said. "We do not have any use for bringing war criminals into this country. It's an affront."

While Bush is unpopular in Canada, he is less so in oil-rich Alberta, the country's most conservative province and one sometimes called the Texas of the north.

"This is my maiden voyage. My first speech since I was the president of the United States and I couldn't think of a better place to give it than Calgary, [Alberta]", Bush said.

I nominate Mr. Bush to be the spokesman for Ugly Americans everywhere.

From the wilds of Canada

Dime A Dozen:

It’s every Canadian’s greatest fear - below a sequence of graphic photos from an attack by a polar bear in Manitoba

PHOTOS...

What's going on in Canada?