Tag: market

Credit Where It’s Due: Sarah Kliff Edition

On Friday, President Obama announced an “accommodation” to those who object to his contraceptives mandate. Since then, I have been astonished at how many reporters have portrayed the president’s announcement as some sort of compromise, even though it would not reduce – not by one penny – the amount of money he would force Catholics and others with a religious objection to spend on contraception.

In fact, the only reporter who seemed to grasp this may also have been the first out of the box. The Washington Post’s Sarah Kliff:

“If a charity, hospital or another organization has an objection to the policy going forward, insurance companies will be required to reach out to directly offer contraceptive care free of charge,” one administration official explained…

Numerous studies have shown that covering contraceptives is revenue-neutral, as such preventive measures can lower the rate of pregnancies down the line…

“Contraceptives save a lot of money,” a senior administration official argued.

The catch here is that there’s a difference between “revenue neutral” and “free.” By one report’s measure, it costs about $21.40 to add birth control, IUDs and other contraceptives to an insurance plan. Those costs may be offset by a reduction in pregnancies. But unless drug manufacturers decide to start handing out free contraceptives, the money to buy them will have to come from somewhere.

Where will it come from, since neither employers nor employees will be paying for these contraceptives? That leaves the insurers, whose revenues come from the premiums that subscribers pay them. It’s difficult to see how insurance companies would avoid using premiums to cover the costs of contraceptives.

The Post’s subsequent coverage would have benefited from such scrutiny of the president’s spiel. If I missed such scrutiny in the Post or elsewhere, I hope someone will let me know.

Cochrane on ObamaCare’s Contraceptive-Coverage Mandate

My Cato colleague John Cochrane – who is way smarter than I am – has a generally excellent op-ed in today’s Wall Street Journal on ObamaCare’s contraception mandate:

Salting mandated health insurance with birth control is exactly the same as a tax—on employers, on Catholics, on gay men and women, on couples trying to have children and on the elderly—to subsidize one form of birth control…

The tax rate and spending debates that occupy the media are a small part of the effective taxes and spending that the government achieves by these regulatory mandates…

The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society…

Sure, churches should be exempt. We should all be exempt.

My only quibble is with his claim, “Insurance is a bad idea for small, regular and predictable expenses.”

That’s generally true. But medicine is an area where, potentially at least, small up-front expenditures (e.g., on hypertension control) could prevent large losses down the road. So it may be economically efficient for health plans to cover some small, regular, and predictable expenses. Both the carrier and the consumer would benefit. In fact, that would be the market’s way of telling otherwise uninformed consumers, “Hey! Controlling your hypertension is a really good for you!” And really, if someone is so risk-averse that they want health insurance with first-dollar coverage of everything – and they’re willing to pay the outrageous premiums that would accompany such coverage – why should we take issue with that?

ObamaCare’s contraceptive-coverage mandate demonstrates that government does  a horrible job of picking only those types of “preventive” services for which first-dollar coverage will leave consumers better off. But I also think advocates of free-market health care generally need to let go of the idea that health insurance exists only for catastrophic expenses.

The Ethos of Universal Coverage

Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.

(AP Photo/Noah Berger)

Many Cato @ Liberty readers will get it immediately. They can stop reading now.

For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.

Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente’s offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn’t steal it) plus his time. He probably even felt good about himself afterward.

Unfortunately, the money and time this genius spent vandalizing other people’s property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).

The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church’s efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.

In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market’s ability to discover cost-saving innovations that bring better health care within the reach of the needy. That’s to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente’s, the Catholic Church’s

I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people’s rights as well as their own stated goal of “health care for everybody.”

Of course, it is always possible that, as with their foot soldier in Oakland, the Church’s efforts are as much about making a statement and feeling better about themselves as anything else.

Free Market Capitalism vs. Cronyism in Russia

Russian philosopher Leonid Nikonov explains the differences between socialism, cronyism, and free market capitalism.  Nikonov is a contributor to The Morality of Capitalism, a new book that is being distributed worldwide by the Atlas Network and the Students for Liberty.  (You can download the introduction to the book here.)  Students can obtain copies of the book here; all others can obtain copies here.)

ObamaCare, Round 2

Today POLITICO Arena asks:

House Republicans are expected to approve a bill on Wednesday that would repeal the Obama health care law. But they are not yet offering a specific replacement for “Obamacare”. Will they pay a price politically for not immediately presenting an alternative? Or is the 2010 law sufficiently unpopular that repeal itself will be enough heading into the 2012 elections?

My response:

Does anyone really expect the scores of new House Republicans, who’ve just now arrived in Washington, to already have a plan to replace ObamaCare? Let’s be serious. The first step for new members is to keep their campaign promise by voting to repeal this unpopular scheme – if for none other than symbolic reasons. The next is to hold hearings and then to start defunding various of its provisions. And in the course of that, a better approach will emerge, one hopes. Remember, Republicans were shut out of the process that created ObamaCare.

Yet at the Arena this morning we see the usual Democratic responses. Timothy Jost writes, for example: ”Health care is rapidly becoming unfordable [sic]; to the government, to employers, to ordinary Americans.” So government, for which health care is becoming unaffordable, is going to solve that problem?! How? By printing money? By imposing price and service controls? That’ll be popular – with doctors and patients alike!

The basic problem is too much government in the health care arena. It’s anything today but a market. Those approaches that have reintroduce market forces – like health savings accounts – have worked quite well. We have them at Cato. We like them. But they won’t be allowed under ObamaCare. Why? Because the Democrats know what’s best for us. What’s best, they believe, is for us to be dependent on government for our health care. No thanks.

James C. Scott at Cato Unbound

This month at Cato Unbound, political scientist James C. Scott joins us in a discussion of his landmark book Seeing Like a State. His lead essay “The Trouble with the View from Above” gets readers up to speed and reviews some of the key themes of the book. Here’s an excerpt:

State naming practices and local, customary naming practices are strikingly different. Each set of practices is designed to make the human and physical landscape legible, by sharply identifying a unique individual, a household, or a singular geographic feature. Yet they are each devised by very distinct agents for whom the purposes of identification are radically different. Purely local, customary practices, as we shall see, achieve a level of precision and clarity—often with impressive economy—perfectly suited to the needs of knowledgeable locals. State naming practices are, by contrast, constructed to guide an official “stranger” in unambiguously identifying persons and places, not just in a single locality, but in many localities using standardized administrative techniques.

To follow the progress of state-making is, among other things, to trace the elaboration and application of novel systems which name and classify places, roads, people, and, above all, property. These state projects of legibility overlay, and often supersede, local practices. Where local practices persist, they are typically relevant to a narrower and narrower range of interaction within the confines of a face-to-face community.

Local knowledge both empowers and constrains – it allows and/or encourages some social practices, while making others more difficult. The progress of state power, meanwhile, depends on systematized, uniform knowledge of a wide area, with a loss of local particularity and the knowledge that goes with it. Seeing like a state has costs, in other words.

Over the next couple of weeks, we’ll be joined by discussants Donald Boudreaux, Brad DeLong, and Timothy Lee, each of whom will have a chance to ask Scott about his work, discuss its significance, and relate it to their own thinking about states, markets, and societies.

Goodbye to Locally Processed Meats?

The Atlantic has posted (h/t Future of Capitalism) an article by Virginia artisanal meat provider Joe Cloud sounding the alarm about how as regulation intensifies, only producers with the scale and sophistication to deal with it will be left standing:

Although species go extinct on Earth on a regular basis, every so often there is a major event that comes along and wipes out 40 or 50 percent of them. The same thing happens in the small business world. A few businesses fold every year due to retirement, poor management, and changes in the market, and that is quite normal. But then every so often a catastrophe comes along and causes a wholesale wipeout.

For small meat businesses in America, catastrophic events result from changes high up in the regulatory food chain that make it very difficult for small plants to adapt. The most recent extinction event occurred at the turn of the millennium, when small and very small USDA-inspected slaughter and processing plants were required to adopt the costly Hazard Analysis and Critical Control Point (HACCP) food safety plan. It has been estimated that 20 percent of existing small plants, and perhaps more, went out of business at that time. Now, proposed changes to HACCP for small and very small USDA-inspected plants threaten to take down many of the ones that remain, making healthy, local meats a rare commodity.

I’ve been following this particular controversy for a while, and perhaps its most depressing aspect is how very typical the pattern is. In 2008, following demands that it do something about much-publicized Chinese toy recalls, Congress passed the Consumer Product Safety Improvement Act, which devastated many hundreds of smaller manufacturers, importers and retailers of children’s clothing and playthings while leaving relatively unscathed Mattel, Hasbro, and the biggest discount retailers (all of which had in fact supported passage of the law). More recently, major food and agribusiness firms have signed on to support a major new round of federal food safety regulation despite warnings that it could pose big compliance challenges for many local bakers, fruit-baggers, and other small providers whether or not their products pose any notable risks.

I generally share many of the views of the “locavore” movement regarding the value of distinctive local food cultures and the importance to kids and cooks of getting a more direct sense where food comes from. Trouble is, some of us who imagine ourselves friendly to locavore thinking reflexively support whatever regulatory proposals are billed as most stringent and thus most protective. By the time we realize the choices we have lost, it can be too late.