Thursday, December 17, 2009

Social Democracy

Freedom or coercion, who to choose?

New York Review of Books

December 17, 2009

To the editors,

This letter is in response to Tony Judt’s “What is Living and What is Dead in Social Democracy?” in the December 17, 2009 edition of your fine publication. Yes, Judt does a fair work of opposing of Hayek with Keynes and their differing views of a “good society”. However, Judt does miss the fact that Hayek too saw the concept of ‘uncertainty’ (of the limits to human knowledge) as inherent to the human condition. Whereas Keynes saw an increased role for the state to reduce the fear of the unknown, Hayek saw that people learn from our mistakes and therefore learn to adjust and improve ourselves given the opportunity and therefore Hayek was against the paternalistic state as a fetter on experientially-based human intellectual, spiritual and material growth. Keynes of course was of the opposite bent, he thought the state could ‘engineer’ society through economic interventionism. In fact in the introduction to the 1936 German language edition of the General Theory Keynes wrote that his policy recommendations “can be much easier adapted to the conditions of a totalitarian state”.

Judt states that Americans would “appreciate full medical coverage at lower cost, longer life expectancy, better public services, and less crime”. Of course, who would not? However, Judt misses the costs of these outcomes. Economic resources are by definition scarce. By calling on government to provide these goods, he is missing the costs of positive-rights. You cannot give everything to everyone, rationing must take place, and this is indeed socialism, where government planning decides who gets what and when. This is implicitly what Judt is calling for in his vision of Social Democracy when he asks that social-provisioning under the welfare state be a right rather than a hand-out. You simply cannot fight interventionalist wars, bailout financial institutions, insurance companies and automobile companies while at the same time expand the welfare state. There is a cost, and as we are seeing in real time, that cost is increasing debt to be passed to future generations, and a declining dollar and therefore a lower standard of living. In a Rawlsian “veil of ignorance” starting from Year One with no debt this may be possible (Hayek might differ) but to call for positive-rights now is simply irresponsible.

A better starting point might be the right to work, from which then a person would have the capacity to purchase those goods Judt states Americans would appreciate. In fact in 1945 the US Senate passed the Full Employment Act (passed by both House and Senate in a watered-down version in 1946) which states, “All Americans able to work and seeking work have the right to useful, regular and full-time employment….” The only well known economist who commented during these hearings was J.A. Schumpeter (also mentioned by Judt in his lecture), who said, yes, government-guaranteed employment was possible, but only with “coercion”.

Judt ends his piece with a quote from Orwell’s Homage to Catalonia,

There was much in it that I did not understand, in some ways I did not even like it, but I recognized it immediately as a state of affairs worth fighting for.

A world of plenty is a world worth dreaming of, and for Judt worth fighting for, but we should at least understand and be upfront about its costs, and realistic non-coercive alternatives, because we have been there before.

The Healthcare Problem in the USA

Let the providers and the users of healthcare work together

This post is just to keep it simple and lay-out the way to reform healthcare in the USA.

First off, there is a disconnect between doctors and people that need doctors, which is of course, everyone. Because 'insurance' is subsidized in the tax code (companies can write-off on taxes the health insurance they give their employees), we have too much insurance and therefore too much subsidized demand for those with insurance. Same thing with federal government medicare and medicaid. This means that third parties instead of the actual users of health services from doctors pay. This means that supply and demand doesn'twork to price health services. This means that health costs are 17% of the US economy and grow at 10% per year. The market doesn't work for health services because there is no market, there are government distortions preventing the market from working.

The solutions:

1) Remove tax breaks for company-sponsored health plans, this will create individual incentives for individuals, with their own unique health needs, to shop around for better and cheaper health services and for doctors to compete.

2) Remove regulatory policies which prevent insurance companies from offering plans nation-wide. State regulation prevents nation-wide competition, like always regulation gives monopoly profits to the regulated and increased costs to everyone else. If people want insurance let them buy insurance, but don't require it as this just puts a third-party barrier to individual incentives.

3) Reform the tort system so that 'loser pays' when frivolous lawsuits are brought against doctors, this will reduce malpractice insurance costs and allow doctors to reduce costs.

4) Phase-out medicaire and medicaid so that the government isn't in the way of individual incentives and doctor-patient relations. And too, this will reduce the ever-present fraud in government-provided goods, people do fraud when government is involved because it seems like it harms no one, when in fact it harms us all. Less government means a more ethical society because there are less incentives for fraud.

Simple as that. If the politicians reform health care it'll just mean, as always, more special interests taking their cut through coercion. Coercion is not reform, it is coercion. There are lots of special interests at play in 'reform', real reform would remove anything that gets in the way of the doctor-patient relationship, and this would reduce costs, create more innovation and as a kicker create a more ethical and responsible society.

Congrats Iggy and the Stooges

Finally recognized by their 'peers'

Well after 2 or 3 years of being denied one of the best rock bands ever in the USA are inducted into the Rock n Roll Hall of Fame, The Stooges.

These people, as Iggy once said on the Dinah Shore program, ended the hippy-dippy-trippy 1960s with their super-real and relentless yet beautiful while raw first ablum in 1969. The Stooges, which was basically Iggy Pop (Iggy Stooge at the time) and the Ashton brothers, Ron on guitar and Rock on drums were the self-acknowledged influentional group on the Ramones, the Ramones of course being the founders (or rediscoverers actually) of simple, fun and fast music, which was all but lost. The Stooges were so artful, they deconstructed the rock artform and reconstructed it into something immediate and visceral. Alot of people I guess don't like the Stooges, because, well probably their name, and well they are kinda 'punk', e.g. badass and don't suffer fools lightly, and shall we say delightfully over-the-top soulful and cool.

They were the kind of group friends told you about (Workers included, thank you Woody in New Orleans) because they certainly weren't played on the radio, except college radio, and even then, late at night.

Ron Ashton died just last year so true to the stereotype you have to be a dead artist before you can become an appreciated artist. The Stooges were iconclasts and a blast and as fresh as the morning sunrise.