Thursday, November 3, 2016

How to Talk to Liberals About the Obamacare Meltdown

Let's jump the gun a little and imagine that Donald Trump wins on November 8. What are we going to say to our liberal friends over Thanksgiving dinner?

I think that the best thing would be to blame the whole thing on Obamacare -- more in sorrow than in anger, of course.

The whole problem, I'll say, is that liberals don't want to learn the science about administrative government, from socialism to the administrative rule of the experts. If I were a liberal, I'd say that liberals were in denial about the settled science on socialism and administrative government. But since I'm not I'll just say that you could look it up. It's all out there, in books not yet banned by the SJW book burners.

Look, everybody does this. It's not just Christians denying the fact of evolution.

Take the Marxists. I've noticed, reading Marxist tomes, that there is remarkably little interest in the marginal revolution of 1870. Karl Marx wrote his Capital around the apparent contradiction between the idea of use value and exchange value. Food is useful, yet it is cheap; gold is useless, but it is dear. What gives? So Marx built a whole world view on the notion that the change from working for use to working for wages resulted in alienation from the real world into an imaginary world where labor was nothing more than a commodity sold on the market. The idea of marginal value explained all this by saying that people live and work and exchange on the margin. They ask: do I want to work some more or would I rather go to the pub? Do I want to buy this gold ring at this price, or for a slightly lower price.

Why would a Marxist want to learn about that? It would destroy the whole elegant system that Marx set up. And so, a century later and more, Marxists still prattle on about commodification and alienation as though the marginal revolution never happened. Millions have suffered and died in consequence.

The same thing happened to the world view of the rule of the "best men" and the rule of the experts through administrative government programs that got going in the late 19th century. In 1918 Ludwig von Mises published a paper "Economic Calculation in the Socialist Commonwealth" that argued that socialism couldn't work because it could not compute prices. Then 30 years later his student F.A. Hayek reminded the administrative left what this meant for them. It meant that bureaucratic government could not work because of a bandwidth problem. A few thousand bureaucrats and their ukases could not out-perform a million consumers and producers and their prices.

The point is that prices tell consumers and producers whether or not to change their behavior. If prices go down they tell consumers to buy more. If prices go up they tell producers to find an innovation to make things less expensive.

The point about a government program is that the bureaucrats and the program clients do not change their behavior when things change, because of the absence of prices. And so government programs always fail.

Obamacare is a program based on the world view of administrative government. Just set up an administrative system with the right people in charge and you can deliver lower-priced health care to the 30 million without health insurance. That is the idea.

OK, Sherlock, so what is the problem with Obamacare? Let me count the ways.

  1. It doesn't make sense for many people to buy health insurance. The whole point of health insurance is to protect your assets from a catastrophic expense. So health insurance makes sense for people with retirement assets and homes. It does not make sense for young and poor people without assets, because if they get huge health bills they can just declare bankruptcy. It does not make sense for millionaires that can afford a million or so in health expenses. This means that most of the 30 million do not have health insurance because it does not make sense for them, and that employers were right to offer mini-plans to their young employees who just needed a bit of help with their medical bills.
  2.  A big administrative system like Obamacare cannot adjust to changing conditions. That's because it is an administrative system that does not respond to price signals.
  3. A big administrative program like Obamacare ends up being Springtime for the Special Interests. It was passed with a handout to hospitals and insurance companies, and is falling apart now that the government is trying to claw back the "risk corridors" that bought the support of the insurance companies.
  4. Program beneficiaries learn how to scam the system. The people signing up are the people that are eligible for subsidies. Unfortunately they still face big deductibles and they hate that. Most beneficiaries of government programs think that free is the only fair price for a government program.
  5. Most people already have health insurance and they hate having to pay for other peoples' insurance as well.
  6. The difference between insurance and government insurance is that government insurance has free stuff up front. This helps pass the program (just listen to President Obama in his speeches defending Obamacare) but it just raises the cost overall. For instance, science says that preventative medicine doesn't improve health outcomes. Tell that to a liberal.
  7. Single-payer is not the answer. Single-payer just means that the whole health care system will be freed from price signals and turn into extremely expensive bureaucratic mush. That is what the science says.
But the big problem is the big problem with all government programs. It is impossible to reform them. Of course it is, because the reason people like them is the free stuff, and they will hang onto their free stuff even while the world collapses around them. People should pay for their own pensions, for their own health care, for their kids education, for the relief of the poor in their town. Anything else is theft.

There's another bit of science that my liberal friends seem never to have heard of. It comes from Buchanan and Tullock's The Calculus of Consent. The book is an analysis of legislative voting systems. What happens is what we all know. The proposers of any initiative find that they must buy the votes of people on the fence. So, with majority voting, the proposers must buy the votes of the legislators in the middle to get a majority. And the minority that doesn't stand to benefit from the program gets to pay without getting any benefit. Buchanan and Tullock discovered that there is one voting system that does not screw the minority. It is the system of unanimous consent. With unanimous consent, the proposers are forced to pay the minority for the costs they impose on them. I think there is a word for that: justice.

Now, if liberals had listened to all this, and got themselves up to date on the settled science they could have avoided the disaster of 2016 and they would be settling in for a generation of Democratic majorities. What a pity that they just couldn't bear to crack those books and learn their lessons like good little boys and girls.

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