6 ms·

Why hasn't Amazon declared war on their customers? It doesn't have to do the market, and it certainly has nothing to do with capitalism. It has to do with rent

by mruts 7y ago

Why hasn't Amazon declared war on their customers? It doesn't have to do the market, and it certainly has nothing to do with capitalism. It has to do with rent seeking on behalf of lobbyists are the corruption of government. Imagine a world where drugs go off-patent in 5 years (or if you really want to be radical, no patents at all) and every drug was available without any prescription whatsoever. I guarantee you prices for pretty much all drugs would be 10-100x lower. How do I know this? Because I moved to a country (Tanzania) in which no one has health insurance and there are practically no controls on any drugs at all. Medications that had costed me $500 with insurance per month in the US I can buy for $20/month. One of my friend's father is diabetic, and he spends maybe $40/month on insulin. The patent system in the US combined with the 3rd party payer system has created astoundingly bad incentives for every party. And the result of all of this is sky high drug prices. People seem to think that the defective US healthcare system is an indictment on free-market capitalism. But there's nothing free-market at all about our system. What it's really an indictment on is cronyism, corruption, and rent-seeking. The question becomes, what do we do about it? The tangled and corrupt web of healthcare will be almost impossible to undo. I'm a staunch neoliberal but even I don't think it's going to be possible to go back to that in the US. It pains me to say/think this, but maybe the only solution for us is single-payer. Single-payer has pretty terrible incentives too, but probably not even as bad as the current system.

imtyler 7y ago
>People seem to think that the defective US healthcare system is an indictment on free-market capitalism. But there's nothing free-market at all about our system. What it's really an indictment on is cronyism, corruption, and rent-seeking. Isn't the allowance of 'cronyism' etc, what makes the market "free?"
- XCabbage 7y ago
  Given that 'cronyism' means private business inducing government officials to use state force to benefit said businesses, no, it's certainly not what makes the market 'free'. The use of force by the state to entrench the position and profits of a particular business - whether by suppressing competition on threat of violence, or by straight up taking money from people via the tax system and handing it to the business - is not only not part of the "free market" ideal, but antithetical to it.
  - phry 7y ago
    > The use of force by the state to entrench the position and profits of a particular business This is a natural and obvious end following from the foundation of capitalism, which is the existence of private property ensured by the state.
    - kjsbfkjbf 7y ago
      This thread is fun. The problems are X, Y, Z but not A (even though A results in X, Y, Z). Do people think lobbiests and corporations are somehow operating outside of capitalism?
- itsananderson 7y ago
  I believe "cronyism" here refers to government interference on behalf of certain companies or industries, driven by lobbying etc. It may be a common failure mode for capitalism, but it's hardly "what makes the market free". https://en.m.wikipedia.org/wiki/Crony_capitalism https://en.m.wikipedia.org/wiki/Crony_capitalism
- skohan 7y ago
  If you believe that then the billions of dollars corporate interests spend on think-tanks to produce messaging is probably working. The original concept of free-market economics, as envisioned by Adam Smith, was defined in opposition to entities governments and guilds using their power to impose artificial rules in the market to subvert natural market forces like supply and demand. Pharma companies use regulatory capture to do exactly that: they set up a legal landscape for their own benefit and everyone else's detriment. Rent-seeking is anything but free-market.
  - imtyler 7y ago
    >...They set up a legal landscape for their own benefit and everyone else’s detriment. So if I’m understanding correctly, the problem is not a lack of willingness to break up/regulate this monopoly, but instead the regulations and lobbying that explicitly facilitated its creation? Are there any inherent facets of a free market that prevent such abuses?
    - mruts 7y ago
      The inherent weakness of any and every society is always going to be the government. As the entity with the monopoly on force, the corruption and influence on government from interest groups will necessarily be the weak point in the system. It's incredibly hard to generate the political will of many people who will slightly be hurt by something against the will of the few who will be significantly hurt even if the aggregate damage is far greater for the many than the few. Almost all legislation follows this sort of calculus: zoning laws, tariffs, minimum wage, etc.
      - deleted 7y ago
        [deleted]
    - skohan 7y ago
      > Are there any inherent facets of a free market that prevent such abuses? No, there's nothing about free market which will automatically mitigate this issue. Markets are very good at certain things, like delivering goods and services efficiently if certain conditions are met, but they are not some panacea which can magically solve every problem. There are certain cases where markets are not very good at serving a majority of people: for instance in the case of monopolies, or when there are negative externalities which are not priced into the market (for instance it can be profitable for a company to burn a lot of fossil fuels to produce products cheaply, and everyone else suffers the environmental costs). Strict libertarians will disagree with me, but markets alone are not enough. In every example of what we could consider a well-functioning society, the government plays a role in guiding and constraining the market where necessary. Regulatory capture does represent a problem, and is an example of bad government, but that does not negate the need for good government.
skohan 7y ago
> People seem to think that the defective US healthcare system is an indictment on free-market capitalism. But there's nothing free-market at all about our system. What it's really an indictment on is cronyism, corruption, and rent-seeking. That might be because those corrupt rent-seeking cronies have been selling their behavior as "free-market capitalism" for decades. I agree with you that corruption is the real problem with the US healthcare system, but I'm not sure I agree that an unregulated free market is the best solution. It seems to me that it would work very well for regulating the prices of popular treatments and procedures (insulin, vision correction etc.) but it seems to me there would be no incentive to do the same for rare or difficult conditions. For instance, treating some types Leukemia require teams of dozens of caregivers over months-long hospital stays. It seems to me that there's no way a market would make that affordable to the average person, and it seems inevitable you would end up with a two-tiered healthcare system. > Single-payer has pretty terrible incentives too, but probably not even as bad as the current system. What's so terrible about single-payer? It seems like it's pretty effective at bringing costs down where it's implemented.
- mruts 7y ago
  > For instance, treating some types Leukemia require teams of dozens of caregivers over months-long hospital stays. It seems to me that there's no way a market would make that affordable to the average person, and it seems inevitable you would end up with a two-tiered healthcare system. I think that's a pretty good and fair point. Clearly the healthcare system in Tanzania is more primitive and leads to worse best case outcomes. Or in other words, the best care you get can here doesn't even get close to the best care you can get in the US. In fact, the US probably has the most advanced care in the world. The downside of this is that it creates a system in which everything is expensive. Doctors only consider the efficacy and quality of treatment, instead of making trade-offs based on efficacy and cost. I think this is a largely a culture issue, though the Hippocratic oath and the litigiousness of American society are certainly contributing factors as well. > What's so terrible about single-payer? It seems like it's pretty effective at bringing costs down where it's implemented. Single payer systems result in inflation of costs and creates individual incentive to pursue inefficient options. If my healthcare costs are amortized through payment from primarily other people instead of myself, I don't care how much money anything costs. From an individual perspective, it would make sense to have doctors spend another million so I can live another month. Moreover, it incentives risky behavior (smoking, getting HIV, etc) because I personally will not have to bear the financial burden of those choices. The only way to get around this would to to institute caps on lifetime medical credit. And if that happened, people would be screaming about "death panels" and such. I find it hard to imagine a simple and clear single-payer system that would a) provide individual incentives to maintain health b) not impose exorbitant costs on the majority by the few c) fairly allocate healthcare resources to people who would derive the most benefit.
deleted 7y ago
[deleted]
maxxxxx 7y ago
The free market is very good at reducing prices in some areas but then it would also not serve other areas where there is no profit. So in a free market health system you would see cheap prices for some stuff but people with certain diseases would just be left to die. You would also see a lot of bad drugs that kill people.
- hippich 7y ago
  Also, the free market can't co-exist with heavy regulations - you can't just make insulin product and start selling it - you have to go through FDA first, and then market it to doctors who is an ultimate gatekeeper for the drug.
hippich 7y ago
In general I agree about corruption being a primary reason for that, but small correction - lack of access to insulin is not due to patent system, but due to combination of companies evergreening these patents, doctors being a gatekeepers when deciding which product to use, FDA being a gatekeeper deciding which product to allow to sell. All of these come from (ab)use of government power, so the core of your message is right - with these three things there can be no free market. You can't pick "old" version of insulin and just inject it yourself using regular syringe. You have to use whatever doctor and FDA approves only in the name of the safety of patients. https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop...
- notfromhere 7y ago
  high insulin prices are about companies using a chronic disease treatment for cash flow.
- clavalle 7y ago
  There is an even more fundamental blocker to a free market in healthcare: free markets don't work when one of the parties to the transaction has their very life on the table in a transaction. It's a minor miracle and a testament to the moral standing of health-care industry execs up until recently that the market has worked as well as it has for most of the last hundred years.
  - chroma 7y ago
    > ... free markets don't work when one of the parties to the transaction has their very life on the table in a transaction. So why is food so cheap? Why is water so cheap? We need both to survive but nobody is jacking up rates for them.
    - clavalle 7y ago
      Water is a publicly managed resource (for this very reason). If T.Boone Pickens has his way, the rates will be jacked up for water. As for food, there are lots of options. If I charge too much for corn, you can buy lima beans. Plus, there is time to explore options. When that becomes untrue, people do gouge for such things. The more immediate the need, the more extortionary it can become. Medicine tends to be fairly immediate.
clavalle 7y ago
>Why hasn't Amazon declared war on their customers? They're still building up an unassailable position. Wait until they are firmly embedded in critical supply chains to where it is almost unthinkable to remove them and see how they behave. There's a reason they have been operating for most of their existence at break-even yet their stock continues to rise -- investors expect for them to begin to leverage their dominance very, very soon.
andreilys 7y ago
Of the drugs in Tanzania, how many were invented there? It's typically US companies that take the brunt of the R&D costs to develop novel drugs. Then once they're developed, it's easy for them to spread to other countries for cheap. That said I do agree the healthcare system is pretty messed up, and patents are part of the problem. But you have to recognize that R&D in this space is not cheap, and companies need some incentive to spend billions of dollars

by mruts 7y ago

imtyler 7y ago

XCabbage 7y ago
Given that 'cronyism' means private business inducing government officials to use state force to benefit said businesses, no, it's certainly not what makes the market 'free'. The use of force by the state to entrench the position and profits of a particular business - whether by suppressing competition on threat of violence, or by straight up taking money from people via the tax system and handing it to the business - is not only not part of the "free market" ideal, but antithetical to it.
- phry 7y ago
  > The use of force by the state to entrench the position and profits of a particular business This is a natural and obvious end following from the foundation of capitalism, which is the existence of private property ensured by the state.
  - kjsbfkjbf 7y ago
    This thread is fun. The problems are X, Y, Z but not A (even though A results in X, Y, Z). Do people think lobbiests and corporations are somehow operating outside of capitalism?
itsananderson 7y ago
I believe "cronyism" here refers to government interference on behalf of certain companies or industries, driven by lobbying etc. It may be a common failure mode for capitalism, but it's hardly "what makes the market free". https://en.m.wikipedia.org/wiki/Crony_capitalism https://en.m.wikipedia.org/wiki/Crony_capitalism
skohan 7y ago
If you believe that then the billions of dollars corporate interests spend on think-tanks to produce messaging is probably working. The original concept of free-market economics, as envisioned by Adam Smith, was defined in opposition to entities governments and guilds using their power to impose artificial rules in the market to subvert natural market forces like supply and demand. Pharma companies use regulatory capture to do exactly that: they set up a legal landscape for their own benefit and everyone else's detriment. Rent-seeking is anything but free-market.
- imtyler 7y ago
  >...They set up a legal landscape for their own benefit and everyone else’s detriment. So if I’m understanding correctly, the problem is not a lack of willingness to break up/regulate this monopoly, but instead the regulations and lobbying that explicitly facilitated its creation? Are there any inherent facets of a free market that prevent such abuses?
  - mruts 7y ago
    The inherent weakness of any and every society is always going to be the government. As the entity with the monopoly on force, the corruption and influence on government from interest groups will necessarily be the weak point in the system. It's incredibly hard to generate the political will of many people who will slightly be hurt by something against the will of the few who will be significantly hurt even if the aggregate damage is far greater for the many than the few. Almost all legislation follows this sort of calculus: zoning laws, tariffs, minimum wage, etc.
    - deleted 7y ago
      [deleted]
  - skohan 7y ago
    > Are there any inherent facets of a free market that prevent such abuses? No, there's nothing about free market which will automatically mitigate this issue. Markets are very good at certain things, like delivering goods and services efficiently if certain conditions are met, but they are not some panacea which can magically solve every problem. There are certain cases where markets are not very good at serving a majority of people: for instance in the case of monopolies, or when there are negative externalities which are not priced into the market (for instance it can be profitable for a company to burn a lot of fossil fuels to produce products cheaply, and everyone else suffers the environmental costs). Strict libertarians will disagree with me, but markets alone are not enough. In every example of what we could consider a well-functioning society, the government plays a role in guiding and constraining the market where necessary. Regulatory capture does represent a problem, and is an example of bad government, but that does not negate the need for good government.

skohan 7y ago

> People seem to think that the defective US healthcare system is an indictment on free-market capitalism. But there's nothing free-market at all about our system. What it's really an indictment on is cronyism, corruption, and rent-seeking. That might be because those corrupt rent-seeking cronies have been selling their behavior as "free-market capitalism" for decades. I agree with you that corruption is the real problem with the US healthcare system, but I'm not sure I agree that an unregulated free market is the best solution. It seems to me that it would work very well for regulating the prices of popular treatments and procedures (insulin, vision correction etc.) but it seems to me there would be no incentive to do the same for rare or difficult conditions. For instance, treating some types Leukemia require teams of dozens of caregivers over months-long hospital stays. It seems to me that there's no way a market would make that affordable to the average person, and it seems inevitable you would end up with a two-tiered healthcare system. > Single-payer has pretty terrible incentives too, but probably not even as bad as the current system. What's so terrible about single-payer? It seems like it's pretty effective at bringing costs down where it's implemented.

mruts 7y ago
> For instance, treating some types Leukemia require teams of dozens of caregivers over months-long hospital stays. It seems to me that there's no way a market would make that affordable to the average person, and it seems inevitable you would end up with a two-tiered healthcare system. I think that's a pretty good and fair point. Clearly the healthcare system in Tanzania is more primitive and leads to worse best case outcomes. Or in other words, the best care you get can here doesn't even get close to the best care you can get in the US. In fact, the US probably has the most advanced care in the world. The downside of this is that it creates a system in which everything is expensive. Doctors only consider the efficacy and quality of treatment, instead of making trade-offs based on efficacy and cost. I think this is a largely a culture issue, though the Hippocratic oath and the litigiousness of American society are certainly contributing factors as well. > What's so terrible about single-payer? It seems like it's pretty effective at bringing costs down where it's implemented. Single payer systems result in inflation of costs and creates individual incentive to pursue inefficient options. If my healthcare costs are amortized through payment from primarily other people instead of myself, I don't care how much money anything costs. From an individual perspective, it would make sense to have doctors spend another million so I can live another month. Moreover, it incentives risky behavior (smoking, getting HIV, etc) because I personally will not have to bear the financial burden of those choices. The only way to get around this would to to institute caps on lifetime medical credit. And if that happened, people would be screaming about "death panels" and such. I find it hard to imagine a simple and clear single-payer system that would a) provide individual incentives to maintain health b) not impose exorbitant costs on the majority by the few c) fairly allocate healthcare resources to people who would derive the most benefit.

deleted 7y ago

[deleted]

maxxxxx 7y ago

The free market is very good at reducing prices in some areas but then it would also not serve other areas where there is no profit. So in a free market health system you would see cheap prices for some stuff but people with certain diseases would just be left to die. You would also see a lot of bad drugs that kill people.

hippich 7y ago
Also, the free market can't co-exist with heavy regulations - you can't just make insulin product and start selling it - you have to go through FDA first, and then market it to doctors who is an ultimate gatekeeper for the drug.

hippich 7y ago

In general I agree about corruption being a primary reason for that, but small correction - lack of access to insulin is not due to patent system, but due to combination of companies evergreening these patents, doctors being a gatekeepers when deciding which product to use, FDA being a gatekeeper deciding which product to allow to sell. All of these come from (ab)use of government power, so the core of your message is right - with these three things there can be no free market. You can't pick "old" version of insulin and just inject it yourself using regular syringe. You have to use whatever doctor and FDA approves only in the name of the safety of patients. https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop...

notfromhere 7y ago
high insulin prices are about companies using a chronic disease treatment for cash flow.
clavalle 7y ago
There is an even more fundamental blocker to a free market in healthcare: free markets don't work when one of the parties to the transaction has their very life on the table in a transaction. It's a minor miracle and a testament to the moral standing of health-care industry execs up until recently that the market has worked as well as it has for most of the last hundred years.
- chroma 7y ago
  > ... free markets don't work when one of the parties to the transaction has their very life on the table in a transaction. So why is food so cheap? Why is water so cheap? We need both to survive but nobody is jacking up rates for them.
  - clavalle 7y ago
    Water is a publicly managed resource (for this very reason). If T.Boone Pickens has his way, the rates will be jacked up for water. As for food, there are lots of options. If I charge too much for corn, you can buy lima beans. Plus, there is time to explore options. When that becomes untrue, people do gouge for such things. The more immediate the need, the more extortionary it can become. Medicine tends to be fairly immediate.

clavalle 7y ago

>Why hasn't Amazon declared war on their customers? They're still building up an unassailable position. Wait until they are firmly embedded in critical supply chains to where it is almost unthinkable to remove them and see how they behave. There's a reason they have been operating for most of their existence at break-even yet their stock continues to rise -- investors expect for them to begin to leverage their dominance very, very soon.

andreilys 7y ago

Of the drugs in Tanzania, how many were invented there? It's typically US companies that take the brunt of the R&D costs to develop novel drugs. Then once they're developed, it's easy for them to spread to other countries for cheap. That said I do agree the healthcare system is pretty messed up, and patents are part of the problem. But you have to recognize that R&D in this space is not cheap, and companies need some incentive to spend billions of dollars