Posted tagged ‘Market Solutions’

Must Reads For The Week 4/21/18

April 22, 2018

GOVERNMENT CENTRAL PLANNING DESTROYS COMPLEX SYSTEMS

Why Systems Fail, by Charles Hugh Smith, at oftwominds.    Excerpt from the article: 1) “Systems are accretions of structures and modifications laid down over time. Each layer adds complexity which is viewed at the time as a solution.”

“This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income.”

“In short order, insiders and outsiders alike habituate to the higher complexity…….. Few people can visualize alternatives, and any alternative that reduces the budget, payroll or power…..is rejected as “unworkable.”

“In this set of incentives, the “solution” is always: we need more money. But increasing the budget can’t fix what’s broken….. As a result, new layers rarely replaces previous layers; the system becomes more and more inefficient and costly as every new layer must find workarounds and kludgy fixes to function with the legacy layers.

2) “The organization is incapable of instituting deep reforms due to organizational sclerosis…… The structure itself has lost the feedback loops and accountability needed to radically restructure a failing organization.”

These dynamics can manifest in both private-sector corporations and public-sector agencies….All of this contrasts with self-organizing networks which lack the hierarchy necessary for sclerosis, self-serving insiders and fatally blinded management. Since “this is the way the system works,” we have a hard time imagining how public agencies and corporations might be obsoleted by self-organizing, opt-in transparent rules-based networks.”

“Since failing systems are incapable of structural reform, collapse is the only way forward. Unfortunately collapse doesn’t guarantee success; if the rot is deep enough, the wherewithal to assemble a new more sustainable system may be lacking.”

EXAMPLES

Kentucky Teachers Want A Taxpayer Bailout, by Troy Vincent, at mises.org. Teachers unions and Government bureaucracies are examples of what is talked about above. Teachers unions are incentivized to get as much money for its constituency group as possible. That constituency is not the students it is the teachers. Politicians and bureaucrats cave in to these demands because the future fiscal problems that will arise, because of their decision, will be the problems for future politicians. And even if they are still in office, no one will remember that the previous decisions were responsible for the current fiscal problem. In this case the  feedback loop for politicians comes from the voters. But if voters are not informed enough to know what caused the problem, they can’t exercise their power. Ultimately voters will bear the fiscal burden of the decisions made by teachers unions and politicians. But voters have only themselves to blame for the problem because they were economically ignorant voters in the first place.

The War Between Public Pensioners And Tax Donkeys Is Heating Up, by Charles Hugh Smith, at oftwominds.com. Many State public pension systems are underfunded. Raising taxes is the only solution because we know the teachers unions will never give up anything. And politicians will always cave to the unions. Unfortunately someone will have to give something up. And that means tax payers will have to give up more of what they have produced. At some point this will come to an end. Because if you continue to consume more than you produce, at some point there will be nothing left.

US Budget Deficit Hits $600 Billion In 6 Months, As Spending On Interest Explodes, at zerohedge.com. And this: US Deficit To Soar Over 40% In 2019, Exceed $1 Trillion By 2020, at zerohedge.com. This debt is unsustainable. There will come a point where this debt can’t be paid off. We may have already passed the point of no return. Politicians and bureaucrats will never shrink the size of their fiefdoms, so collapse may be the only solution.

Californians Flee The State In Droves Over Taxation And Housing Costs, at zerohedge.com. Politicians have caused this problem. The solution is going to be forced on States like California when enough people leave. Where will the revenue come from when enough people leave. The scale will be tipped in the wrong direction. You can’t confiscate money from people who don’t exist.

Illegal Immigrants Shielded From University of California Out-Of-State Tuition Hike, by Keil Huber, at thecollegefix.com. If they are lucky they will spend more so the collapse can happen sooner.

LA Is Painting Some Of Its Streets White And The Reasons Why Are Pretty Cool, at cbsnews.com. Do the environmental crazies think there is no cost to their policies. $40,000 a mile adds up quickly. I hope this happens so California has to face economic reality sooner rather than later. It will be less costly.

Revealed: Mueller’s FBI Repeatedly Abused Prosecutorial Discretion, by Mollie Hemingway, at thefederalist.com. The legal system is important if a country is to function properly. But the rule of law has been in the process of breaking down for decades. When the rules don’t apply equally, and prosecutors are above the law, you no longer have a legal system.

What Attorney-Client Privilege?, by Andrew Napolitano, at lewrockwell.com. You may think this is OK because it is happening to Trump. But what is going to stop  prosecutors from doing this to you. Or rights are being trampled on. This is another example of the erosion of our the legal system.

More Hilarious Facts About Tesla From A Hedge Fund Shorting The Stock, at zerohedge.com. Government has been subsidizing the purchase of electric cars. This allows the waste of scarce resources to continue long after this waste would have been stopped under normal market conditions. Losses are just as important as profits in transmitting information to producers. Producers need to know what, and how much, to produce. When Government tries to pick winners, they usually fail miserable. And once again taxpayers get caught without a chair when the music stops.

WHERE SOLUTIONS COME FROM

Solutions Only Arise Outside The Status Quo, by Charles Hugh Smith, at oftwominds.com. Excerpt from the article: “…Institutions are fundamentally incapable of responding effectively or reforming themselves. The universal solution of failing institutions and hierarchies is throw more money at the failings in the doomed hope that doing more of what’s failed will magically solve the systemic problems. We see this dynamic in all the major public-private structures or our economy/society: Higher education (solution: make students borrow even more trillions, or have the government borrow more trillions); Healthcare (government needs to borrow more trillions), and national defense/security (government needs to borrow more trillions).”

“As a result, solutions are only possible outside these ossified, self-serving centralized hierarchies.”

“When faced with fiscal crises, central states/banks inevitably succumb to the temptation to print/borrow currency in whatever sums are needed to fill the shortfall of the moment. This….seems to be magic at first…..but eventually gravity takes hold and the currency’s purchasing power declines, as the real economy the production of goods and services) grows at rates far below the expansion of currency. Even the greatest empires in human history have been unable to resist the “easy” solution of devaluing currency…….

“Existing systems optimized for bygone eras and maximizing the security and wealth of insiders are doomed to fail…… Solutions will only arise outside the control and boundaries of existing systems, as all structural solutions threaten to obsolete or replace existing structures, displacing all the incumbents and insiders who benefit from the continuing failure of the institutions they manage and control.

Institutions like markets, money and law were created by spontaneous order. Government central planning did not create them. Since people don’t understand that these came about spontaneously, they also don’t understand that Government central planning has created all the problems with these institutions. Allowing solutions to come from the spontaneous order created by individuals making decisions, is the only way these problems can be solved. Government central planning can’t solve the problems it created, because it has no incentive to do so. Taking decision making power away from centralized Government, and returning it to individuals, is the only way this ends well.

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Healthcare: Market Solutions vs. Bureaucratic Decrees

March 28, 2017

Modern thin line design concept for HEALTHCARE website banner. Vector illustration concept for healthcare diagnosis and treatment.

Our current battle over healthcare is being debated from a false premise. Most people have bought into the lie that healthcare is or should be a right. It isn’t a right as understood by most people. The right to keep and bare arms doesn’t mean someone else is obligated to supply a gun. The right to free speech  doesn’t mean someone else is obligated to supply a microphone, a stage and an audience. But for some reason we think a right to healthcare means someone is obligated to provide it.

The truth is healthcare is an economic good or service produced by individuals. These individuals own what they produce. It is their property. No one has a right to what someone else produces.

How can you gain possession of what someone else owns? 1) You can produce something they want and exchange it for what they have produced. 2) They may give it to you as a gift. 3) You can steal it. 4) You can have someone steal another persons production, exchange it for what you want, and have them give it to you indirectly. 5) You can have someone else steal it and give it to you directly.

Government intervention into the healthcare market, up to and including Obamacare, has been an incremental march away from the first two and toward the last two. Everyone knows that direct theft of another person’s property is unethical and immoral because it is illegal. But when we are one or two steps removed from the direct theft, for some reason we think it’s ethical and moral because government says it’s legal.

hand writing economic demand - supply graph on chalkboard

ECONOMIC REALITY OF HEALTHCARE

Healthcare is an economic good ruled by the laws of economics. Scarcity, subjective value, supply and demand are a few laws we need to look at in order to understand why government central planning isn’t the right process to ration the scarce good we call healthcare.

SCARCITY: Healthcare has to be produced. It is a scarce good. It isn’t like the air we breathe. Air doesn’t have to be produced by anyone. The abundant supply of air exists naturally. You might say the air I put in my tires Isn’t free. The air you put in your tires is first compressed and then forced into your tires. Compressed air has to be produced, therefore it is an economic good and not free like the air you breathe.

SUBJECTIVE VALUE: Everyone values healthcare differently. There is no objective value that can be placed on healthcare. The value for healthcare is subjective depending on each individual’s needs and wants. Both the demand for and the supply of healthcare is valued subjectively.

SUPPLY AND DEMAND: Since healthcare is scarce and valued subjectively, the law of supply and demand comes into play coordinating its production and consumption. The price reflects subjective valuations by individuals related to supply and demand. The subjective valuations at the existing price drives supply and demand to a new coordinating price.

The law of supply and demand states that more is demanded at a lower price than a higher price and more is supplied at higher price than a lower price. Price changes are constantly re-coordinating supply and demand according to the subjective valuations of individuals.

The supply of healthcare is limited by the scarcity of the resources, labor, capital and time needed to produce it. It is also limited by the demand for healthcare. If the demand for healthcare increases against a fixed supply, the price will go up in order to ration the scarce resource. As the price rises more resources, labor, capital, and time will be attracted to producing healthcare. As the supply increases to meet the higher demand a point will be reached where the price will stabilize and then decrease as supply outpaces demand.

The changing price sends information to consumers and producers about the scarcity of healthcare. These price changes are figured into the subjective valuations of how much each consumer will demand and how much each producer will supply.

Free market prices are the most efficient way to ration healthcare in a world of scarcity and subjective value.

government regulations, magnifier, pencil

GOVERNMENT INTERVENTION INTO HEALTHCARE

Government mandated healthcare subsidies, taxes and regulations distort the prices that would normally exist in a free market. Consumers demands and producers supplies are going to change according to these distorted prices. A mismatch of the supply of and demand for these scarce resources is brought about by government intervention.

What did you think was going to happen when more consumers were brought into the market by the Obamacare individual mandate? Subsidies also increase demand. Prices were guaranteed to rise as demand was artificially increased.

What happens when prices for healthcare services paid by Medicare and Medicaid are fixed below what they would be in a free market? The supply of health care would decrease at these lower prices.

Obamacare created more demand and at the same time created the incentive to supply less. What happens to the price when more is demanded and less is supplied? Even though our politicians told us costs would go down under The Affordable Care Act, anyone who understood basic economics could have predicted which way the price would go. And that isn’t even including paying for the government bureaucracy needed to implement the ACA.

NOW WHAT?

The failure of the Republican repeal and replace bill is a good thing. The bill was just an exchange of a set of not quite as bad new government regulations for the existing bad government regulations. Their is only one way to reduce the cost of healthcare. Get rid of government subsidies, taxes and regulations. Unfortunately all Democrats and a majority of Republicans don’t understand basic economics.

Quoting Ludwig von Mises – “Economic history is a long record of Government policies that failed because they were designed with a bold disregard for the laws of economics.

Republicans are also scared of political fall out when they get rid of healthcare entitlements. The Democrats and their accomplices in the main stream media will trot out all the sob stories of people whose ‘access’ to healthcare was taken away. Of course the MSM didn’t tell the stories of all the people who had their healthcare costs sky rocket under the ACA. These rising premiums paid for the increased costs and subsidies caused by government intervention.

Millions of families got crushed by the higher cost of healthcare. These were small businessmen and people who worked for small businesses in the more rural counties in America. These are the same people who were barely able to stay afloat when the economy crashed in 08. They cut their discretionary spending to the bone. Many had to use their savings and retirement accounts to make it through the recession.

When the Affordable Care Act was implemented after 2013 there was no spending left to cut to pay for the higher cost of healthcare. Wives had to go back to work just for the insurance. Men took second jobs for the same reason. These are the people in the swing states of Ohio, North Carolina, Florida, Iowa, and the Democrat States of Wisconsin, Michigan and Pennsylvania who voted for Trump. He was their only hope. They literally couldn’t afford to vote for Hilary.

Fortunately market alternatives to Obamacare are starting to appear around the country.

Read Here- Direct Primary Care, A No-Insurance Model.

Read Here – Florida West Virginia Lawmakers Take Interest In Insurance Free Approach.

Read Here – Atlas MD, Wichita’s Premiere Cash-Only Clinic.

As the price of Obamacare goes higher the demand for Obamacare will decrease. This higher price will also bring about lower cost market alternatives to the Government run system. These alternatives will be outside of the system. We can call these free market alternatives as long as Government doesn’t try to shut them down with regulations. If they do try to shut them down they will then become black market alternatives (the new free market).

Fracking is an example of a market alternative to the OPEC cartel and our Governments regulations on drilling off shore and on public land. When the price of oil rose to above $110 dollars a barrel it became affordable for hydraulic fracturing to take off on private land. Now that it is profitable to frack at $45 a barrel the OPEC cartel has lost its monopoly power. The high price of $110 was what eventually brought the price of oil down. Healthcare will be no different. The market will find an alternative as the price goes higher.

Read Here – Trumpcare Defeat Could Be A Small But Important Victory For Healthcare Freedom.

Read Here – Ryancare Is Failing -What Should Happen Next?

Read Here – Forget Obamacare, Ryancare, And Any Future Reformcare – The Healthcare System Is Completely Broken.

Economic reality will end Obamacare. Let’s hope the Government doesn’t end the market alternatives that have started to take root.