Wednesday, July 05, 2006

Political Dogma and Trade

Let the state dissolve

The latest trade talks (the Doha round) are in trouble because of a longstanding stalemate: Poor countries won’t open their borders enough to rich nations’ manufactored goods and rich nations won’t open their borders enough to poor country agricultural products. This has been going on for longer than I can remember.

When elephants fight it is the ants that get crushed (or something like that). It’s been proven since David Ricardo’s Principles of Political Economy and Taxation book of 1817 that trade creates wealth for the traders (and that means cheaper goods for everyone, and poor people most of all need cheaper foodstuffs clothing transportation and communications). You would think that governments would have gotten it right by now. Poverty is alleviated not by taxing the rich and making them poorer, and everyone else along with them, but by making the poor richer through trade.

Politicians are usually the rich in both poor and rich countries, so who is truly looking out for the poor? Societies in general would gain if free trade would be allowed to flourish, but this would then take away the power of politicians, from which political donations flow, thus the dogma.

Health Care Inflation is Real

If someone else is paying for it you buy more

Health care costs have been going up about three times that of other prices in the economy (approx. 10% versus 3%). I got this from The New York Post (America’s oldest daily which has excellent financial coverage and spot-on editorials and local news, and deep local sports coverage if you’re into that, as Thorstein Veblen said, “sportsmanship” - in modern parlance this would translate to “ra ra-ism”). The Post cites the recent Milliman Medical Index.

New York City has the highest health-care costs ($15,255 per family of four), DC is forth highest ($13,650) and the national average is $13,382. Families pay 38% of the bill with employers (meaning insurance) covering the rest.

What is wrong with this picture? It seems strangely relevant that the percentages of out-of-pocket expenses are almost inversely proportional to the differential in medical versus other inflation. If something is subsidized, if the prices are lower than the actual cost of providing the service, then more will be demanded than would be if it wasn’t subsidized.

It is time for a change, no not universal health care, which would just mean, in essence a price cap and health care provision shortages like has been happening in Canada and the UK where people don’t get enough treatment for the complex diseases we are lucky enough to be getting because we are living longer under 200 years of an (almost) economically liberal order (eg globalization). And where Doctors have to work extra long hours because there’s not enough of them at the government salaries these government systems pay.

It is time to make the consumers of health care pay more directly for the services they get. Tax breaks for individuals, or for individual medical savings accounts, to even the playing field offered that to corporations for their payment of health care insurance is one place to start. Or better yet, remove all special treatment of health care in the tax code; remove the subsidies and remove the inflation. Incentives matter.

Green Power : Alternative Energy Choices in New York

The choice is yours

New Yorker environmentalists can now put their day-to-day money towards the cause by telling Con Ed they want to use alternative electrical-generating sources (wind, solar, biomass) for electricty at home. "Alternative" fuel currently source about 2% of the city's power.

For those choosing exclusively green - you can tell Con Ed what percentage of alternative power you want delivered - the average electrical bill will be about $9 higher per month (the “green premium”), so if you want to encourage the use of these ressources, here’s your chance. Maybe the more you buy of it the more there will be of it. Other sources on the gird now are coal (30%), nuclear (29%), gas (20%) and hydro (19%). Of course nuclear is the best generating mechanism (and why China is building 15 nuclear plants) but in the “West” we are concerned about how to dispose of the waste. Everyone has different priorities in life and preferences are subjective.