More examples of signals rather than causes

Being a homeowner makes one responsible.  More likely: Responsible people become homeowners.

Going to preschool improves ones chances of success. More likely: Having parents that do a lot of things, including sending kids to preschool, improves ones chances of success.

A college degree increases your earnings. More likely: Ambitious folks find ways to make more money. I’ve heard of studies that look at non-college graduates that have similar ambition and work ethic as college graduates that show that they have about the same earnings as college graduates.

Countries with government health care have better health, as measured by life expectancy and infant mortality, than the U.S. More likely: Other factors like health habits, diet choices, demographics, lifestyle choices and differences in the way these health stats are tracked from country to country have bigger impact than whether the health care system is provided by government or not.

Can you think of any?

Another reason we spend so much on health care

We hear lots of reasons why the U.S. spends so much on health care. But, there’s one obvious reason that I don’t recall hearing all that often.

On a recent EconTalk podcast, guest Esther Dyson offered this reason:

…one reason health care costs so much in the United States is that we are so unhealthy.

Could be.

It would be interesting to break down health care spending across various indicators of a person’s health to see if there’s anything to that.

Government caused the pre-existing condition problem

In this post I explained why I think the tax advantage to employer-provided health insurance, over individually purchases health insurance, is the government-induced cause of the pre-existing condition problem that most folks prefer to solve by introducing even more government, rather than addressing the root cause.

In John Cochrane’s health care essay, he agrees.

Before ACA, the elephant in the room was the tax deduction and regulatory pressure for employer‐based group plans. This distortion killed the long‐term individual market and thus directly caused the pre‐existing conditions mess.  Anyone who might get a job in the future will not buy long‐term insurance. Mandated coverage, tax deductibility of regular expenses if cloaked as “insurance,” prohibition of full rating, barriers to insurance across state lines – why buy long term insurance if you might move? – and a string of other regulations did the rest.

 

Anecdotes are powerful political tools — but shouldn’t be

I just had to add this passage from John Cochrane’s health care essay:

The critics adduce a hypothetical anecdote in which one person is ill served, by a straw‐man completely unregulated market, which nobody is advocating, with no charity or other care (which we’ve had for over 800 years, long before any government involvement at all).  They conclude that the anecdote justifies the thousands of pages of the ACA, tens of thousands of pages of subsidiary regulation, and the mass of additional Federal, State, and Local regulation applying to every single person in the country.

How is it that we accept this deeply illogical argument, or that anyone in making it expects it to be taken seriously? If you can find one person who falls through the cracks, the government gets to regulate the whole market, not that we craft a minimal solution to fix that person’s problem.

But wait, will not one person fall through the cracks or be ill‐served by the highly regulated system? If I find one Canadian grandma denied a hip replacement, or someone who can’t get a doctor to take her as a medicare patient, why do I not get to conclude that everyone must be left to the market?

 

What if it doesn’t work?

A moderate/liberal, but mostly uninterested in politics, friend of mine recently told me that he may not vote for Obama next week.

Why?

I’ve worked with this friend for years.

One thing I influenced him on over the years was the idea of emergent order. I pointed out that success stories are often a matter of random luck and the best way to ensure a company’s success is to try as many of the happenstance of random luck as possible.

We saw it over and over at our business. Many things that seemed like they should have worked, didn’t. Some things that seemed like they shouldn’t have worked, did. Many of those things were discovered by accident.

I pointed out to him that centralized management and politically powerful constituent groups in the organization stifled the emergent order that is evolutionary, random, experimental discovery. Stifling that process led to lackluster results — unless the company happened to be very lucky.

My friend said health care was the issue that made him reconsider his presidential vote. Obamacare is a centralized system that will stifle discovery and innovation. It doesn’t allow us to experiment with plans B, C, D, etc. if Plan A doesn’t seem to be working. It only allows for us to keep tweaking Plan A — which puts us on the same path as a mature company that can only manage to tweak its core products, rather discover new ones.

My friend has seen Plan A not pan out enough times that he thought Romney’s approach of letting the states experiment seemed to make more sense.

I don’t know if he will follow through, but it’s good to know that I’ve at least caused him to think about it.

Free Market Masterpiece

I agree with Don Boudreaux, of Cafe Hayek, that John Cochrane’s health care essay is a must read.

I first titled the post, “Health Care Masterpiece,” but then changed it to “Free Market Masterpiece”. In his essay, Cochrane does a masterful job of contrasting free market success stories to our government-restrained market for health care.

Here are a few snippets.

I bet you didn’t know:

About 70% of hospitals and 85% of health‐care employment is in non‐profits,whose legal and regulatory treatment protects much inefficiency from competition.

Maybe for‐profit companies pay too much attention to stock prices. But non‐profits can go on inefficiently forever, with no stockholders to complain.  The whole point of a non‐profit is to pursue goals other than economic efficiency.

Here he summarizes the competing goals of various government actions in health care:

…here we have the government forcing small size in order to boost competition with one hand, stopping entry to protect hospitals from competition with another, trying to force larger “networks” through “Affordable Care Organizations” to obtain the needed economies of scale with the third, but laws preserving doctor independence with the fourth.

And:

On reflection, it’s amazing that computerizing medical records was part of the ACA and stimulus bills. Why in the world do we need a subsidy for this? My bank computerized records 20 years ago.

Why, when you go to the doctor, do you answer the same 20 questions over and over again, and what the heck are they doing trusting your memory to know what your medical history and list of medications are?

He answers that question (read it to find his answer) and OMG:

No, we did not get cheap and amazing cell phones by government ramping up the pressure on the 1960s AT&T. Southwest Airlines did not come about from effectiveness panels or an advisory board telling United and American (or TWA and Pan AM) how to reorganize operations. The mass of auto regulation did nothing to lower costs or induce efficient production by the big three.

When has this  ever worked?  The post office? Amtrak? The department of motor vehicles? Road construction? Military procurement? The TSA? Regulated utilities? European state‐run industries? The last 20 or so medical “cost control” ideas? The best example and worst performer of all,..wait for it…public schools?

I will post more quotes later. But, I also agree with Boudreaux that you should take the time to read the whole thing.