4 ms·

> The dogma of the day is Free market/capitalism GOOD , all other systems EVIL! The number of times I have heard a respected economist say this can likely be c

> The dogma of the day is Free market/capitalism GOOD , all other systems EVIL! The number of times I have heard a respected economist say this can likely be counted on zero hands. In econ 101, you learn, "here's the free market model, it's wrong but it's useful", and much of the rest is learning about the scenarios when it's wrong.

zaptheimpaler 9y ago
I agree, economists don't say shit like that. But plenty of people who only take econ 101 (or no econ education) think like that anyways! The question of what the perfect market structure is is not "settled" and beyond debate. I can see plenty of cases where the market, left to itself is not the best solution for society. Healthcare is one. Doesn't mean free market is evil either. It just means it might benefit from some regulation. I'm against stupid reductive poles like "free market/no regulation/efficient market" VS "socialism/communism". That whole axis does not make sense. The whole idea of assuming you are either (pro EVERY effect of the free market) OR (pro socialism) is a false dichotomy. Thats what I mean by dogma. I don't know where it comes from but education might help dispel that kind of black and white thinking.
- gbacon 9y ago
  But healthcare is an example of dirigisme — regulated at every conceivable turn — not the market left to itself.
  - zaptheimpaler 9y ago
    Again, regulations are not all the same. It is heavily regulated in the direction of privacy and safety. Not so much in affordability. Is the unaffordability of healthcare an indictment of capitalism? No? Then why would it be an indictment of all regulation? "Regulation" is not one thing - there are many many choices. Profit-seeking incentives don't always align with societal good. When health insurance companies are not required to cover everyone, they can and DO reject very sick people because their models forecast a loss. This happened for a long time before ACA with pre-existing conditions... Thats what happens in a completely free market - insurance only serves the already healthy and leaves the sick (who need healthcare the most!) to die or pay exorbitant amounts. That is a direct result of a system that incentivizes profit. Thats one area it would benefit from regulation. It already does in so many other western countries where government either directly provides healthcare or ensures that insurers cover everyone at affordable prices. If we aren't willing to examine and interfere with the free market when the most basic need of society - health is being compromised, where does it end?? The market exists to serve society, not the other way around. This has been forgotten.
    - gbacon 9y ago
      “Health” “insurance” under the American model is indeed perverse. There is a lot to unpack here. Buckle up. Bona fide insurance is a paid transfer of risk. With your auto insurance, you pay set premiums to Progressive, say, in return for them to replace your car if it is destroyed. With homeowner insurance, you pay monthly or annual premiums in return for Allstate to accept the risk of replacing your house should it burn down, be flooded, and so on. You pay premiums to MetLife, and in return, they pay out a cash lump sum or stream of payments should you die before a certain date. All of these pay hard-core green-visor number crunchers called actuaries whose job it is to accurately price risk. Given a certain profile, how likely are you to be involved in an auto accident, suffer a house fire, or pass away? The profit motive is strong incentive for insurers to price risks accurately: too expensive and competitors can undercut them profitably, and too cheap will mean they lose money paying out more in claims than they collect in premiums. It turns out that risk is not uniformly distributed. From their experience with USAA, the Goodwins determined that government employees are more risk-averse than the average American, and thus was born the Government Employees Insurance Company or GEICO. Before 1974, you had to be a civil servant to get a GEICO policy. In 1974, Geico began insuring the general public but still in some cases gives discounts to government employees. This is not done out of the goodness of their hearts. Imagine you were CEO of InsureCo responsible for keeping the lights on and paychecks flowing to your employees. You cannot (for long anyway) pay out more than you are taking in. Your premiums have to remain competitive. Clever insurers also invest their “float” (money collected in premium not yet paid out in claims) to increase profit. However, if a potential customer comes to you requesting a policy quote but who represents greater risk in terms of expected claim payouts, a straightforward mathematics exercise means you must charge that customer more in premiums to offset the greater risk InsureCo would be accepting. “Health” “insurance” turns this all completely on its head, but that is mainly because Americans have been conditioned to have bizarre expectations unlike any other form of bona fide insurance. Pricing risk accurately runs afoul of regulations, so “health” “insurance” becomes a transfer scheme under which younger, healthier customers are overcharged to make up for regulatory requirements to undercharge older, sicker customers. We do not expect homeowner insurance to pay for new light bulbs, cutting the grass, or other routine maintenance. Car insurance does not pay for oil changes, new tires, replacement radiators, and so on. Bona fide health insurance which used to be called major medical but is now derided as “junk insurance” worked similarly in that it has a deductible where expenses below it are the insured’s responsibility. This means less risk to the insurer and thus lower premiums. With all other insurance, we recognize that attempting to take out a homeowner policy after a house has already burned down is silly at best and fraudulent at worst. That’s because it is a preëxisting condition. With the negative event having already happened, it is no longer a risk but a reality and beyond the scope of insurance. The complexity does not end here. In America, health insurance is connected to employment. Tracing backward through the economic cause-and-effect leads to the Stabilization Act of 1942[0], signed into law by FDR. This economically wrongheaded policy capped executive pay, and to attract and retain talent, companies routed around this brain damage by offering other fringe benefits including health insurance. Over time, more and more employees wanted in on the game. It seems fine until someone has both a gap in employment and a negative health event. [0]: https://en.wikipedia.org/wiki/Stabilization_Act_of_1942 https://en.wikipedia.org/wiki/Stabilization_Act_of_1942 But why are the costs of health services so expensive to begin with? For that, and pardon the driving tour, we have the American Medical Association to thank. Being a self-interested industry group, they wanted to develop ways to increase their fees — beyond what ordinary Americans wanted to or could afford to pay. By panning price competition among physicians as “unethical” and pushing for more employer-sponsored insurance plans, the result was setting up large pools of money to be mopped up. Large insurers are necessarily much less price sensitive than families who are paying out of pocket. This pushes prices up. Perverse medical and health insurance regulations drafted by politicians whose primary concern is re-election and who pay no price for being wrong or inflicting massive damage on industry push prices up further. Consider that when you pay comparatively small or zero price for a service, you are not the customer: the one who pays the bill is. TV, radio, Google, and daily newspapers are essentially free. You are not the customer: the advertisers are. When you go to the doctor and pay a $20 copay, you are not the customer: your insurer is. You have no money by comparison, but your insurer has lots. You are a vector to get to the real customer. The sad reality is the system is working exactly as it is designed, but the object is not positive health outcomes. The health care industry gets their payola, and tax policy and other regulations protect the flow of premium payments to the big insurers. Coincidentally, all of these industries contribute generously to politicians’ campaign coffers, PACs, and so on. Call “single payer” what it is: a welfare rationing scheme. It is far better to be a valued customer than a liability. The country’s crumbling infrastructure is in the condition it’s in because it is on the public books and viewed as a liability rather than an asset. Infrastructure spending is barely enough to keep it maintained, which also conveniently serves as a hotbutton issue for political campaigns. Government schools and other public services are chronically underfunded. “Single payer” public services will work out the same way. Canada makes no secret about their waiting-time “challenges,” which they attempt to sweep under the rug by saying waits are for elective procedures only, but they do not stop to define elective. The deplorable state of “health” “insurance” in America is a symptom of the problem. The real issue is that health care is so obscenely expensive in the first place, and that is because we the patients have been displaced from customer status. The market already provides essential and life-critical services cost effectively. Look around you: food, water, computers, clothing, shelter, etc., etc. Amazingly, they do so even at a profit. Sure, government bureaus have attached themselves to these industries in various places, but do not allow emotion or ideology to cause you to confuse the direction of economic cause-and-effect. The American health care market is so heavily regulated and tax-favored that it is a textbook failure of dirigisme, where failure is success. Liberate and liberalize one-sixth of the economy to fix the problems.

zaptheimpaler 9y ago

I agree, economists don't say shit like that. But plenty of people who only take econ 101 (or no econ education) think like that anyways! The question of what the perfect market structure is is not "settled" and beyond debate. I can see plenty of cases where the market, left to itself is not the best solution for society. Healthcare is one. Doesn't mean free market is evil either. It just means it might benefit from some regulation. I'm against stupid reductive poles like "free market/no regulation/efficient market" VS "socialism/communism". That whole axis does not make sense. The whole idea of assuming you are either (pro EVERY effect of the free market) OR (pro socialism) is a false dichotomy. Thats what I mean by dogma. I don't know where it comes from but education might help dispel that kind of black and white thinking.

gbacon 9y ago
But healthcare is an example of dirigisme — regulated at every conceivable turn — not the market left to itself.
- zaptheimpaler 9y ago
  Again, regulations are not all the same. It is heavily regulated in the direction of privacy and safety. Not so much in affordability. Is the unaffordability of healthcare an indictment of capitalism? No? Then why would it be an indictment of all regulation? "Regulation" is not one thing - there are many many choices. Profit-seeking incentives don't always align with societal good. When health insurance companies are not required to cover everyone, they can and DO reject very sick people because their models forecast a loss. This happened for a long time before ACA with pre-existing conditions... Thats what happens in a completely free market - insurance only serves the already healthy and leaves the sick (who need healthcare the most!) to die or pay exorbitant amounts. That is a direct result of a system that incentivizes profit. Thats one area it would benefit from regulation. It already does in so many other western countries where government either directly provides healthcare or ensures that insurers cover everyone at affordable prices. If we aren't willing to examine and interfere with the free market when the most basic need of society - health is being compromised, where does it end?? The market exists to serve society, not the other way around. This has been forgotten.
  - gbacon 9y ago
    “Health” “insurance” under the American model is indeed perverse. There is a lot to unpack here. Buckle up. Bona fide insurance is a paid transfer of risk. With your auto insurance, you pay set premiums to Progressive, say, in return for them to replace your car if it is destroyed. With homeowner insurance, you pay monthly or annual premiums in return for Allstate to accept the risk of replacing your house should it burn down, be flooded, and so on. You pay premiums to MetLife, and in return, they pay out a cash lump sum or stream of payments should you die before a certain date. All of these pay hard-core green-visor number crunchers called actuaries whose job it is to accurately price risk. Given a certain profile, how likely are you to be involved in an auto accident, suffer a house fire, or pass away? The profit motive is strong incentive for insurers to price risks accurately: too expensive and competitors can undercut them profitably, and too cheap will mean they lose money paying out more in claims than they collect in premiums. It turns out that risk is not uniformly distributed. From their experience with USAA, the Goodwins determined that government employees are more risk-averse than the average American, and thus was born the Government Employees Insurance Company or GEICO. Before 1974, you had to be a civil servant to get a GEICO policy. In 1974, Geico began insuring the general public but still in some cases gives discounts to government employees. This is not done out of the goodness of their hearts. Imagine you were CEO of InsureCo responsible for keeping the lights on and paychecks flowing to your employees. You cannot (for long anyway) pay out more than you are taking in. Your premiums have to remain competitive. Clever insurers also invest their “float” (money collected in premium not yet paid out in claims) to increase profit. However, if a potential customer comes to you requesting a policy quote but who represents greater risk in terms of expected claim payouts, a straightforward mathematics exercise means you must charge that customer more in premiums to offset the greater risk InsureCo would be accepting. “Health” “insurance” turns this all completely on its head, but that is mainly because Americans have been conditioned to have bizarre expectations unlike any other form of bona fide insurance. Pricing risk accurately runs afoul of regulations, so “health” “insurance” becomes a transfer scheme under which younger, healthier customers are overcharged to make up for regulatory requirements to undercharge older, sicker customers. We do not expect homeowner insurance to pay for new light bulbs, cutting the grass, or other routine maintenance. Car insurance does not pay for oil changes, new tires, replacement radiators, and so on. Bona fide health insurance which used to be called major medical but is now derided as “junk insurance” worked similarly in that it has a deductible where expenses below it are the insured’s responsibility. This means less risk to the insurer and thus lower premiums. With all other insurance, we recognize that attempting to take out a homeowner policy after a house has already burned down is silly at best and fraudulent at worst. That’s because it is a preëxisting condition. With the negative event having already happened, it is no longer a risk but a reality and beyond the scope of insurance. The complexity does not end here. In America, health insurance is connected to employment. Tracing backward through the economic cause-and-effect leads to the Stabilization Act of 1942[0], signed into law by FDR. This economically wrongheaded policy capped executive pay, and to attract and retain talent, companies routed around this brain damage by offering other fringe benefits including health insurance. Over time, more and more employees wanted in on the game. It seems fine until someone has both a gap in employment and a negative health event. [0]: https://en.wikipedia.org/wiki/Stabilization_Act_of_1942 https://en.wikipedia.org/wiki/Stabilization_Act_of_1942 But why are the costs of health services so expensive to begin with? For that, and pardon the driving tour, we have the American Medical Association to thank. Being a self-interested industry group, they wanted to develop ways to increase their fees — beyond what ordinary Americans wanted to or could afford to pay. By panning price competition among physicians as “unethical” and pushing for more employer-sponsored insurance plans, the result was setting up large pools of money to be mopped up. Large insurers are necessarily much less price sensitive than families who are paying out of pocket. This pushes prices up. Perverse medical and health insurance regulations drafted by politicians whose primary concern is re-election and who pay no price for being wrong or inflicting massive damage on industry push prices up further. Consider that when you pay comparatively small or zero price for a service, you are not the customer: the one who pays the bill is. TV, radio, Google, and daily newspapers are essentially free. You are not the customer: the advertisers are. When you go to the doctor and pay a $20 copay, you are not the customer: your insurer is. You have no money by comparison, but your insurer has lots. You are a vector to get to the real customer. The sad reality is the system is working exactly as it is designed, but the object is not positive health outcomes. The health care industry gets their payola, and tax policy and other regulations protect the flow of premium payments to the big insurers. Coincidentally, all of these industries contribute generously to politicians’ campaign coffers, PACs, and so on. Call “single payer” what it is: a welfare rationing scheme. It is far better to be a valued customer than a liability. The country’s crumbling infrastructure is in the condition it’s in because it is on the public books and viewed as a liability rather than an asset. Infrastructure spending is barely enough to keep it maintained, which also conveniently serves as a hotbutton issue for political campaigns. Government schools and other public services are chronically underfunded. “Single payer” public services will work out the same way. Canada makes no secret about their waiting-time “challenges,” which they attempt to sweep under the rug by saying waits are for elective procedures only, but they do not stop to define elective. The deplorable state of “health” “insurance” in America is a symptom of the problem. The real issue is that health care is so obscenely expensive in the first place, and that is because we the patients have been displaced from customer status. The market already provides essential and life-critical services cost effectively. Look around you: food, water, computers, clothing, shelter, etc., etc. Amazingly, they do so even at a profit. Sure, government bureaus have attached themselves to these industries in various places, but do not allow emotion or ideology to cause you to confuse the direction of economic cause-and-effect. The American health care market is so heavily regulated and tax-favored that it is a textbook failure of dirigisme, where failure is success. Liberate and liberalize one-sixth of the economy to fix the problems.