15 September 2009

What Is To Be Done?

Even knowing that I sometimes work with long lead times, I'm somewhat embarrassed to admit that I'm still toying with a thought I first had about fifteen years ago. When Hillary Clinton was pushing for national health insurance -- and how times change -- she was asked about the effect compulsory health insurance for employees would have on employers. Her response was something to the effect of "Why should I worry about the fate of undercapitalized businesses."

I was struck then, and have been struck repeatedly since then, by the relationship (I would even say co-dependence) of big government and big business. Big government needs big business, because big businesses are a nice pot of assets that can be coopted for the purposes of big government without having to use the "t" word. Big business likes big government because (a) in a world where only big businesses can afford the cost of regulation only big businesses survive and (b) big government will be a big client.

Mix in some Olsen (Theory of Collective Action) and some Stigler (Regulatory Capture) and, hey presto, you've got the corporatist state not through right-wing fascism but as the most likely path from where we are (or were 20 years ago) to lefty nirvana.

It strikes me that there is some meaning to all this, and something should be done about it, but after 15 years, I'm just not sure what.


erp said...

To (mis)quote ending line from "King Kong." It wasn't the congress, it was arrogance killed the beast. (I hope)

joe shropshire said...

In the future, everybody will be Lenin for 15 minutes.

Susan's Husband said...

Become a libertarian and oppose government regulation as much as possible. People wonder why rational libertarians are so anti-regulation. This point is generally at the top of the list.

Harry Eagar said...

If your competitors get to spread the risk and you don't, you will be undercapitalized no matter what.

That's what drove RtO to support universal health care.

The fact that it provides medical care to people who don't otherwise have it is nice, but that's not drove me to it.

If you're going to compete in global markets, you'd better start thinking globally.

David said...

Because government mandated health care is free and no one has to pay for it?

I think you'll find, Harry, that even after health insurance reform, on average, we'll all be paying the average price for our health insurance.

Susan's Husband said...

I completely agree with Mr. Cohen. Your analysis implies that government mandated universal health care is either much cheaper or is paid for non-domestically.

Harry Eagar said...

Nope. I thought some of you guys ran businesses.

The national cost is not what matters when a company determines its inputs and decides how to price its wares.

If you guys were right, then businesses would never think of relocating out of, say, California, in order to cut labor costs.

Bret said...

I'm having a heck of a time following these comments. Are y'all talking about the same thing?

Susan's Husband said...

I do run a business. Government mandated health care will either reduce my profits through taxes, or raise my labor costs through taxes, both of which are worse for being internationally competitive than the current system.

What would actually be better is less regulation and the discontinuing of favorable tax treatment for corporate health care spending. But that's not on the table.

joe shropshire said...

A rather particular kind of business. AOG, do you mind if I link to your company website here?

Susan's Husband said...

"Peculiar", is it? Sure, go ahead and link, although I don't know if would be interesting to any one here.

joe shropshire said...

Particular, not peculiar; and it is interesting, to me at least, maybe to David also. Here 'tis:

Network Geographics

And click on the Staff link.

This is what a globally-competitive firm probably looks like, from this day forth: a PhD from Illinois-Urbana partnered to a PhD from Carnegie-Mellon. Quantity doesn't have a quality all its own anymore. Only quality does. Note that I'm not for an instant putting myself on the same side of that divide as you. You've got your folks who can compete, and then you've got your turd-burners,and Harry and I both know who we are.

Harry Eagar said...

There is no economic reason why universal health care (I am agnostic about the form although I accept the likelihood that it would eventually be governmental because of the crowding out factor) should cost more, in aggregate, here than it does elsewhere.

For the same degree of care.

What we have is a wildly skewed system, with the skew working hard against most exporters.

You would think that people devoted to globalized exchange would want to do something about that, but, as is often the case when it comes to economic advantage, you'd be wrong.

Susan's Husband said...

There are all sorts of reasons, including demography.

Most people, when debating a question of speculation (such as whether universal health care would cost more for the same level of care) would respect the existence of different views, rather than presuming their particular view is so obviously true that any one with a different view must have ulterior motives or be a self-serving hypocrite.

Harry Eagar said...

Well, I believe in markets. If there were a public option and a private option, and the public option was as clumsy and inefficient as you apparently think it would be, then the private option would eat its lunch and we would be back to where we . . . oops!

I recognize that there is no economic reason why Detroit cannot build cars as good and cheap as Toyota City, the fact is it doesn't.

You have not given any reason why it should cost more dollars to provide the same level of care in the US as in, say, France. Maybe there is some non-economic reason, but I specified economic reasons.

Susan's Husband said...

A public option would be the opposite of a market. It would use taxpayer funds to undercut private options and destroy them over time. Then the public option would go bankrupt (see Medicare, unfunded liabilities). Both opponents and proponents of the public option know this. Either you're being disingenuous or you've become one of those who don't remember history.

Your restriction to "economic reasons" is ludicrous as your own example of car manufacturing in Detroit makes clear. Did you forget that history from one paragraph to the next?

Harry Eagar said...

I'm guessing you think I think Detroit failed because of regulation.

I know that isn't so.

It failed because of bad management. As I understand the market view, under stress a business will find better management if it can.

Certainly, Detroit could have.

I used to believe that really big companies would never go bust because exactly that -- they would throw out the bad management and could always compete for the best available management, and so would recover.

Then I paid attention to the airline business and realized that I was deluded.

Scrushy or Obama, Scrushy or Obama. How to choose? How to choose?

Susan's Husband said...

"I'm guessing you think I think Detroit failed because of regulation."

Nope, wrong guess.

"Scrushy or Obama, Scrushy or Obama. How to choose? How to choose?"

You're looking at the problem too narrowly. The failure is that you have to chose, not that the choices are so poor. It is the essence of excessive regulation to force such global, least worse choices. Far better to not have to chose at all.

P.S. Better management was found. It just wasn't in Detroit.

Hey Skipper said...

[Detroit] failed because of bad management.

No, it failed because the UAW bargaining units were legally able to collude -- it was essentially impossible for any single company to outlast a strike.

Yes, of course management made mistakes: the Pontiac Aztec is an excellent example.

However, excrescences like the jobs bank and work rules were giant millstones around the companies' necks.

A friend of mine is a network engineer at Ford. A few years ago he got really busy for several months. When we finally got together, I found out why: he was getting the network layout done in a building that was consolidating several engineering operations.

I was dumbstruck. "Why the heck didn't you use a wireless network?"

He looked at me like I was someone who took the short bus to school. "How many union jobs are in one of those?"

Harry Eagar said...

Concerning Medicare, I quote Alan Greenspan, 'The Age of Turbulence,' note, p. 418:

"How much a cut in benefits would reduce outlays on medical services is uncertain. Several years go, I requested the Federal Reserve Board staff to simulate the level of medical service outlays through 2004, assuming that Medicare and Medicaid settlements had never been enacted. The staff concluded that outlays would have been only modestly lower. Market efficiencies, however, could have been quite considerable."

The last sentence, no doubt, is as well founded as Greenspan's belief (p. 489) that "holders of close substitutes (for treasuries) such as . . . mortgage-backed securities can be induced to swap for treasuries without undue disturbance to markets."

More about this at RtO.

Susan's Husband said...

Shorter Eagar: "I am quoting some guy who I consider seriously unbelievable, so just pick out whatever sentences by random chance happen to support my point of view".

I just find it very odd to cite someone and then immediately impeach his testimony. What is the point of that?

Harry Eagar said...

Lawyers call it 'admission against interest' and consider it among the strongest kinds of testimony.

joe shropshire said...

Now this, is an admission against interest:

Senate panel votes down public option for health care bill

But we lift our glass to such a fine sense of comic timing.