Topic: Cato Publications

Those Who Sell Out Will Eventually Be Punished

In a sick way, I’m enjoying the debate over price controls for prescription drugs under Medicare Part D. Of course, I don’t want Congress to dry up the stream of drugs that will keep me alive and vigorous when I’m a geezer. It’s just … what were the Republicans and the drug companies thinking when they created Part D? What did they think would happen? Did they really believe that, if they’d create this program, Congress would never impose price controls?

As I argued on TV today, Part D has Congress buying — through the middleman of the private drug plans — a product with high research and development costs and low marginal costs. And Congress buys those drugs for a politically powerful group of citizens (the geezers). That kind of setup cannot last. The temptation for Congress to pay nothing more than the marginal costs will be inexorable, because doing so pleases constituencies that are paying attention (seniors and current taxpayers) and harms only those constituencies that are either unpopular (drug manufacturers) or else aren’t paying attention (future seniors, including those not yet born).

The writing is on the wall. It may not happen this year, but unless we scrap Part D, sooner or later we will get price controls on seniors’ prescription drugs.

So let’s scrap Part D.

What? You’re a Republican who voted for Part D, against conscience and better judgment?? And now you’re afraid to scrap Part D for fear of (gasp!) flip-flopping or offending the geezers?? Then start talking about fundamental Medicare reform, buddy. And start now.

‘Net Wars

It’s a politician’s dream:

Congress is about to embark on new policymaking that will make some of America’s largest and wealthiest corporations into big financial winners and others into big losers. Given the money at stake, firms are dispatching lobbyists, armed with perks and campaign contributions, to D.C. to ensure that their clients end up on the good side of the legislation.

Making the dream even more wonderful is that the issue is obscure and complex. Most Americans will be affected, but few Americans will understand the issue and thus be able to hold politicians accountable for bad policymaking.

Welcome to the Net Neutrality fight.

To understand the fight, think of how the Web is increasingly making use of video and audio content, e.g., YouTube’s video streams, Internet radio’s audio streams, even Cato’s webcasts and podcasts. And now, on the technological horizon, is the ability to receive whole movies over the Internet. The flow of all of that data places considerable strain on high-speed Internet service providers (ISPs), who have to maintain and upgrade their portions of the Internet in order to keep the streams moving quickly.

Notice the economic asymmetry that results: content providers benefit from the upgrades, but high-speed ISPs like Comcast and AT&T pay the cost. Such asymmetries open the way for consumer-harming inefficiency and mischief.

The ISPs have responded to this situation by threatening to charge content providers for priority access. That is, a modest, text-driven website like Cato@Liberty, which doesn’t use much bandwidth, would likely go uncharged because it wouldn’t need priority service, but YouTube, with its bandwidth-consuming media streams, would need priority service and thus have to pay fees to the high-speed ISPs.

The content providers would prefer to avoid those fees, of course. They’re asking Congress to prohibit the ISPs’ proposal, and instead mandate “net neutrality” — ISPs giving equal priority to all Internet content, regardless of uneven bandwidth demand.

The New York Times nicely summarizes this fight:

Beyond the debate, the fight over net neutrality is, like most regulatory political battles, a fight over money and competing business models. Companies like Google, Yahoo and many content providers do not want to pay for the kinds of faster Internet service that will enable consumers to more quickly download videos and play games.

There are interesting arguments for both neutrality and non-neutrality. For a good argument for neutrality, read this article [pdf] by Stanford Law School’s Larry Lessig that appeared in the Fall 2005 issue of Regulation. Lessig’s Stanford colleague Bruce Owen makes a good argument for non-neutrality in this article [pdf] from the Summer 2005 issue.

NYT: Americans Consume Too Much Health Care, and What’s This Obsession with Coverage?

It is customary for friends of liberty to denounce the New York Times for its left-wing bias. But it would be a mistake to write off the Grey Lady completely. In fact, with two recent articles on health care, the Times seems to be building the case that our obsession with expanding health coverage is, well, unhealthy.

1.

Yesterday, the Times ran an essay titled, “What’s Making Us Sick Is an Epidemic of Diagnoses,” by three researchers with the VA Outcomes Group in Vermont: Drs. H. Gilbert Welch, Lisa Schwartz and Steven Woloshin. What the authors call “an epidemic of diagnoses” is another way of saying we consume too much medical care. The authors write:

[T]he real problem with the epidemic of diagnoses is that it leads to an epidemic of treatments. Not all treatments have important benefits, but almost all can have harms.

What is behind this epidemic?

More diagnoses mean more money for drug manufacturers, hospitals, physicians and disease advocacy groups. Researchers, and even the disease-based organization[s] of the National Institutes of Health, secure their stature (and financing) by promoting the detection of “their” disease. Medico-legal concerns also drive the epidemic. While failing to make a diagnosis can result in lawsuits, there are no corresponding penalties for overdiagnosis. Thus, the path of least resistance for clinicians is to diagnose liberally — even when we wonder if doing so really helps our patients.

In other words, providers over-diagnose (and are over-paid) because there is insufficient restraint placed on excessive diagnosis and treatment.

Why is there insufficient restraint in health care but not in other areas? Because government has worked diligently to create tax breaks and subsidies that remove consumers’ natural incentives to curb their consumption. (And yet Republicans and Democrats alike continue to push for even less restraint.)

The authors do offer one mild proposal to address this epidemic:

People need to think hard about the benefits and risks of increased diagnosis…Perhaps someone should start monitoring a new health metric: the proportion of the population not requiring medical care. And the National Institutes of Health could propose a new goal for medical researchers: reduce the need for medical services, not increase it.

The way we usually get people to think about costs and benefits is to let them own the money involved. That’s a prescription for less government.

2.

Today, the invaluable Gina Kolata reports on researchers’ efforts to identify the factors that contribute to a long life. Though there are lots of questions to be answered, Kolata writes:

Year after year, in study after study, says Richard Hodes, director of the National Institute on Aging, education “keeps coming up.” And, health economists say, those factors that are popularly believed to be crucial — money and health insurance, for example, pale in comparison.

Kolata goes on to quote James Smith, a health economist with the RAND Corporation, as saying that health insurance “is vastly overrated in the policy debate.”

So…

Health insurance doesn’t seem to extend longevity. Too much health care can be dangerous. And patients don’t examine the costs and benefits of health care as they should.

It looks like health policy wonks on both the right and the left need to renew their subscriptions to the Times.

Is Bush Helping Africa?

On Sunday, December, 31, the Washington Post featured a banner headline reading “Bush Has Quietly Tripled Aid to Africa.” The article noted:

The president has tripled direct humanitarian and development aid to the world’s most impoverished continent since taking office and recently vowed to double that increased amount by 2010 — to nearly $9 billion.

The moves have surprised — and pleased — longtime supporters of assistance for Africa, who note that because Bush has received little support from African American voters, he has little obvious political incentive for his interest.

“I think the Bush administration deserves pretty high marks in terms of increasing aid to Africa,” said Steve Radelet, a senior fellow at the Center for Global Development.

Conservative press critics might be surprised at the positive tone of the article, which ran for 34 column inches, about a third of a page. But one could also wonder why the Post, in all that space, couldn’t find room for a single critical comment from a foreign aid skeptic. For decades, economists have argued that government-to-government aid bolsters dictatorial governments, increases dependency, and discourages local entrepreneurship and enterprise. People can hardly fail to note that Africa has been the largest recipient of economic aid for decades, and the continent remains poor and undeveloped. So will Bush’s huge increase in aid be more successful? The outlook isn’t good.

Post readers who want the full story might consult foreign aid critiques by pioneering development economist P. T. Bauer, former World Bank economist William Easterly, Ugandan journalist Andrew Mwenda, longtime aid practitioner Thomas Dichter, Cato’s Ian Vasquez, or four African economists, or this story from the BBC.

That Other Lesson We’re Not Learning from Iraq

In the wake of last November’s election, there has been talk of a paradigm shift in American politics and a new public interest in “progressive ideas.” I’m not sure that a one-Senate-seat legislative advantage marks a “shift,” but there certainly is much chest-thumping on the left, and intense rallying on the right.

Both edges of the political spectrum are promising their adherents that they will redouble their efforts to molding the nation according to their “ideals.” Imagine: our decisions about our persons, our relationships, our children and their education, our health, our property, our political activity, our activities in the marketplace, etc., will be pushed toward even greater conformity with the preferences of Washington politicians. Meanwhile, those individuals with different preferences will suffer the eternal hostility of a Nancy Pelosi or a Trent Lott or a John McCain.

Doesn’t this sound just a bit (a nonviolent bit, yes, but still a bit) like the Sunni, Shia, and Kurds in Iraq? Why would we want to follow that model, and further erode the individual liberty model that once served us so well?

If you haven’t already done so, be sure to read the Cato’s Letter abridged version of George Will’s remarks from last summer’s Friedman Prize dinner. One section is especially on point:

You go to spring training, and a baseball manager will tell you that his team is just two players away from the World Series. Unfortunately, they are Ruth and Gehrig.

Iraq is just four people away from paradise. They need a George Washington, a charismatic, iconic, talismanic figure, a symbol of national unity, above politics. They need an Alexander Hamilton, who could create a modern economy out of human dust. They need a James Madison, a genius of constitutional architecture, for getting factions to live together. And they need a John Marshall, a great jurist, to breathe life into a parchment. They need that and they need the astonishing social soil of the second half of the 18th century, from which such people sprank with profusion.

Which is to say that they’re not close.

And, it seems, we’re drifting further and further away, ourselves.

Enlightenment Thinking on the Move: Economic Freedom of the World Report Now in Arabic

Thanks to the hard work of my colleagues Fadi Haddadin and Ghaleb Hijazi, who run Cato’s Arabic website Misbahalhurriyya.org, an elegant Arabic edition of the 2006 Economic Freedom of the World Report has now been released. The Arabic version was unveiled at a recent meeting in Beirut organized by the Fraser Institute of Canada and the Friedrich-Naumann Stiftung of Germany that we attended with our colleague Andrei Illarionov.

The printing of the Arabic edition was gorgeous, as were the cool brochures and other materials that Fadi and Ghaleb had produced in Jordan. The entire report in Arabic is available online now for downloading in PDF format. The availability of such thorough-going comparisons should, I hope, introduce a greater degree of cause-and-effect thinking into discussions of policy, which would be a great advance over the conspiracy theorizing that is unfortunately so common in the Middle East. (Besides all the data, it includes William Easterly’s hard-hitting critique of “foreign aid,” “Freedom vs. Collectivism in Foreign Aid.”)

The printed edition of the report was also delivered to the economics and politics editors at An Nahar, Al Hayat, and other papers (many more are in the mail) and will be distributed at the upcoming meeting of Arab economists in Kuwait this weekend. Congratulations to Fadi and Ghaleb and their team for such a success.

Our colleague Andrei Illarionov gave a remarkable presentation, based on statistical data, on the roots of economic stagnation in the Arab Middle East. A condensed version will appear in the Arabic press, and — if I can cajole him — in English, Spanish, Russian, and other languages.

N.C. Police Shooting Results in Murder Charge — Or Not

Police shootings have come under sharp public scrutiny in recent weeks following incidents in New York and Atlanta that led to the deaths of, respectively, an unarmed bridegroom and an elderly woman. Not only have the involved officers been chastised for their actions, but so have internal affairs investigators whom critics claim are moving too slowly.

That criticism didn’t seem to apply to the investigation of a Dec. 1 police shooting of an allegedly unarmed community college student in Wilmington, N.C. Within two weeks, one of the involved officers was fired and charged with murder.

Or not.

Within 24 hours of the indictment, the foreman of the grand jury told the court that he accidentally checked the wrong box on the indictment form. The murder charge has since been rescinded.

For the latest developments in the N.C. shooting, visit Wilmington attorney Tom Kerner’s civil rights blog.

It is unclear what lesson should be drawn from the N.C. indictment/undo. Does it show that investigations need to move slowly to prevent errors? Does it mean the cops involved really were blameless? Or does it indicate that it’s difficult to hold law enforcement officers accountable for wrongful actions, even if those actions result in the death of one of the citizens that officers are forsworn to serve and protect?

One thing that is clear is that reports of questionable police shootings are becoming far too frequent, as followers of Radley Balko and Tim Lynch’s work already know. Here’s Radley’s excellent report on the militarization of American police units. And here is Cato’s map of botched police raids, which apparently may soon include new pushpins for Atlanta and Wilmington.