Round and round

This excellent post from Don Boudreaux, reminded me of my less worthy attempt at this in 2012.

This is the dynamic in a nutshell:

1. In a freer health care market, the costs of being unhealthy or uninsured is borne by individuals. This provides strong incentives to stay healthy and insured.

2. In #1, some people will still fall through the cracks. Some because of bad choices they made, but others because of unfortunate circumstances.

3. Attempts to solve #2 that involve anything other than encouraging people to make better choices creates moral hazards* that cause even more people to take less responsibility for their health and not buy insurance. This increases costs for those who pay.

4. The same compassionate people who wanted to solve #2 try — with no apparent awareness of this — reproducing the natural incentives in #1 to stay healthy and insured by dictating both. This appears in mandates that sound like, If we’re paying for you health care, then we have the right to tell you how to live your life.

We already see evidence of this in New York City with bans on salt, trans fats and large, sugary drinks. New York was already well down the Obamacare path, which is why New York City was one of the first areas in the U.S. to show signs of #4.

Here’s an example from Japan. I see evidence of this starting here. My employer, for example, is now collecting my BMI and waist size and will soon want to start tracking my exercise activity.

Of course, the First Lady’s efforts to reduce childhood obesity are also initial steps in the direction of #4.

*Moral hazard – A moral hazard is created when some measure taken to reduce risks, increases the risks people are willing to take.

One example of this can be seen in football. Wearing helmets sounds like a logical safety measure, but has resulted in players hitting each other harder and even taking measures (like doping on steroids to build muscle mass) to hit ever harder.

The link to the post about the BMI penalties in Japan provides an example of moral hazard in medicine.

Another example where government begets more government

A Facebook friend pointed me to this article.  If you’re fat in Japan, you’re breaking the law.  The government there is mandating that companies reduce overweight employees in 2012 by 10% and 25% by 2015.

This is a good example of government begetting more government. This means that a previous government intervention caused problems.  That fact goes unrecognized, and it is believed that more government intervention can solve it.  The idea of undoing the previous government intervention to fix the problem doesn’t get much play.

In this example, the initial government intervention was government health care.  This  weakened incentives for individuals to take care of their health, since they won’t have to pay directly for the medical care resulting from their poor health.

Of course, you might retort, That’s not a big incentive.  Taking care of yourself so you can live a healthy life is incentive enough.

That sounds good, but let’s consider a benign example.

Let’s say you have borderline high cholesterol that could be addressed by diet and exercise or taking a cholesterol lowering medication that has a real cost of $150 per month, of which you pay $10 and insurance or government pays $140.

If you paid the full cost for that medicine, you may be more inclined to modify your diet and exercise habits.  But, for $10 a month, you feel it’s worth it to make no behavior modification.

So, one approach to improving health is to put more of the individual incentives back on the individual.  In this case, the individual could be given the choice to pay the $150 per month or modify their diet.  Despite what we want to believe, incentives do matter.  Either way saves $140 per month of taxpayer money.

But, this approach is rarely taken.  Bureaucrats almost always opt to give themselves more to do.  The next wave of government intervention in this example is the mandate lower the percent of overweight people.

Lots of people go along with this type of action based on this logic,  “If we’re paying for your health care, you owe it to us to take care of yourself.”

Of course, it’s curious that they never  say, “Pay for your own health care and you can do what you want.”

Why not?

Do they not consider this option?

Do they think it sounds harsh (harsher than controlling other peoples behavior because you think you’re paying for their benefits?)?

Or, are they concerned that saying this may lead to paying for their own health care?  And, if this last question is right, is it because they don’t feel like they take good enough care of their own health?

A source of our stagnation?

Does anyone disagree with what Rep. Ryan has to say in this video (HT: W.E. Heasley)?


46 seconds in Ryan nails it:

Every dollar that companies spend lobbying for a better tax deal, is a dollar they are not spending making a better product.

The graphic at 1:17 is telling.  The U.S. ranks second behind Japan in combined federal, state and local corporate tax rate of 39.2%.  Japan has been stagnant since the late 80s.

Most folks don’t understand that they pay corporate taxes.  They see that as a tax on the wealthy.

But, most of us own corporations through our retirement and investment accounts.  Here’s a simple way to estimate the amount of corporate taxes that are paid on your behalf each year.

Find the total value of your retirement and investment accounts.  Multiply that by 2% and 4%.  That’ll give you a rough ballpark low and high range of the corporate taxes that you pay.

So, someone with $250,000 in investments will pay between $5,000 and $10,000 in corporate taxes. This is a tax that most investors never realize they pay.

Add that to the income and payroll taxes that you pay directly (and are paid on your behalf by your employer) and you’ll get a better sense for how much total tax paid you paid.

A lower corporate tax rate will help everybody.

I’m a skeptic about most politicians, but I like what Ryan says here.

The irony

This from today’s Wall Street Journal editorial:

After a once-in-300-years earthquake, the Japanese have been keeping cool amid the chaos, organizing an enormous relief and rescue operation, and generally earning the world’s admiration. We wish we could say the same for the reaction in the U.S., where the troubles at Japan’s nuclear reactors have produced an overreaction about the risks of modern life and technology.

Part of the problem is the lack of media proportion about the disaster itself. The quake and tsunami have killed hundreds, and probably thousands, with tens of billions of dollars in damage.

This from today’s Wall Street Journal main website page:

Now, I’m no nuclear Luddite.  But with many things I’ve learned to be skeptical, especially of what we don’t know.  The benefits of nuclear power are great.  The costs can be too.

Random thoughts

After reading about the Japanese quake and the collapse of a building at the nuclear power facility this morning, then reading about the NFL players disbanding their union (i.e. monopoly over player talent) so they could take the NFL owners to court over their “monopoly” of a valuable sports league, the latter seemed awfully trivial.

Second, after reading about the problems at the nuclear facility after the Japanese earthquake, I wonder if the folks who support nuclear power as a cheap and safe energy source are revising their thinking.

Third, after seeing some of the best video yet of an earthquake and the resulting tsunami, my awe of the powers of nature and appreciation for the relative calm our planet has had for the past several thousand years or so are rekindled.