Minor Thoughts from me to you

Archives for Free Market (page 1 / 2)

Limited Government Limits Corruption

Alberto Mingardi, writing at EconLog:

We are back to the original argument: "liberalising" policies, that go in the direction of decreasing government powers, are in a sense the best competition policy. The less the government can give away, the least a private business could ask from it.

Most people seem to think that there's a way to limit government corruption while continually expanding the areas of our lives that the government controls or affects. This is a false. As long as governmental policies can have a large impact on the economy, people will find a way to make sure that the impact is positive for them (or at least negative for their competitors).

The only effective way to reduce corruption is to reduce the government's ability to make some groups winners and some groups losers.

How Libertarianism Promotes Civil Society

How Libertarianism Promotes Civil Society →

Jeffrey Tucker wrote, at the Foundation for Economic Education, about the differences between the alt-right and libertarianism. I enjoyed, and agreed with, his descriptions of what libertarians believe.

Creating a Harmony of Interests

A related issue concerns our capacity to get along with each other. Frédéric Bastiat described the free society as characterized by a “harmony of interests.” In order to overcome the state of nature, we gradually discover the capacity to find value in each other. The division of labor is the great fact of human community: the labor of each of us becomes more productive in cooperation with others, and this is even, or rather especially, true given the unequal distribution of talents, intelligence, and skills, and differences over religion, belief systems, race, language, and so on.

And truly, this is a beautiful thing to discover. The libertarian marvels at the cooperation we see in a construction project, an office building, a restaurant, a factory, a shopping mall, to say nothing of a city, a country, or a planet. The harmony of interests doesn’t mean that everyone gets along perfectly, but rather than we inhabit institutions that incentivize progress through ever more cooperative behavior. As the liberals of old say, we believe that the “brotherhood of man” is possible.

Small Acts of Rational Self-Interest

The libertarian believes that the best and most wonderful social outcomes are not those planned, structured, and anticipated, but rather the opposite. Society is the result of millions and billions of small acts of rational self interest that are channelled into an undesigned, unplanned, and unanticipated order that cannot be conceived by a single mind. The knowledge that is required to put together a functioning social order is conveyed through institutions: prices, manners, mores, habits, and traditions that no one can consciously will into existence. There must be a process in place, and stable rules governing that process, that permit such institutions to evolve, always in deference to the immutable laws of economics.

Breaking Down Barriers

The libertarian celebrates the profound changes in the world from the late Middle Ages to the age of laissez faire, because we observed how commercial society broke down the barriers of class, race, and social isolation, bringing rights and dignity to ever more people.Of course the classical liberals fought for free trade and free migration of peoples, seeing national borders as arbitrary lines on a map that mercifully restrain the power of the state but otherwise inhibit the progress of prosperity and civilization. To think globally is not a bad thing, but a sign of enlightenment. Protectionism is nothing but a tax on consumers that inhibits industrial productivity and sets nations at odds with each other. The market process is a worldwide phenomenon that indicates an expansion of the division of labor, which means a progressive capacity of people to enhance their standard of living and ennoble their lives.

Suspicion of Democracy

as many commentators have pointed out, both libertarians and alt-rightist are deeply suspicious of democracy. This was not always the case. In the 19th century, the classical liberals generally had a favorable view of democracy, believing it to be the political analogy to choice in the marketplace. But here they imagined states that were local, rules that were fixed and clear, and democracy as a check on power. As states became huge, as power became total, and as rules became subject to pressure-group politics, the libertarianism’s attitude toward democracy shifted.

Surf’s Up, and the Ocean Is Nowhere in Sight

Surf’s Up, and the Ocean Is Nowhere in Sight →

Diane Cardwell and Matt Higgins report for the New York Times on artificial surf parks. I started out feeling bemused by the entire idea. But the article is interesting and the technology and challenges are fascinating.

The quest to surf on artificial waves has long been challenged by the difficulties of mastering the fluid dynamics, engineering and mechanics necessary to mimic the ocean. And the energy required was often too expensive.

...

Mr. Townend was also an investor in the Ron Jon Surfpark, in Orlando, which was scheduled to open in 2008. It promised to produce saltwater waves eight to 10 feet high and to transform artificial waves from water park attractions into stand-alone operations.

The wave test run at Ron Jon Surfpark was “unreal,” Mr. Townend recalled. “But it tore the bottom up.” Investors lost millions in the failed experiment.

​So what's changed?

The newer surfing pools have been made possible by advances in computing, allowing for better simulations of how the water will behave and for more sophisticated controls. Slight changes in timing, pressure or angle of the water can determine whether a wave will form a curling barrel — the holy grail for skilled surfers — or a soft hump that’s easier to ride.

​The focus of the article is the new NLand Surf Park, in the Texas desert. (I just love the visual of ambitious investors trying to bring the most quintessential beach activity to one of the harshest and least beach like areas in America.) What is NLand?

a much-delayed attraction under development by Doug Coors, a scion of the beer-making family ... a giant artificial body of water within 160 acres of cactus-studded former ranch land here in Hill Country.

And how does NLand produce its waves?

The waves at NLand, like those at Mr. Slater’s site in California, which uses its own closely guarded technology, are produced using a hydrofoil. The large blade moves through the water, pushing it into formations as it hits the contoured bottom of the pool.

“Essentially a chairlift motor with a snowplow on it,” Mr. Coors said, the mechanism travels beneath a central pier, creating waves that flow off both sides until it reaches the end, where it resets and runs back the other way. The water comes from a rain catchment and filtration system, and the approach is less energy intensive than older wave-making practices that involved pumping.

Still it takes a lot of energy to make a wave — roughly equivalent to running 10 cars. Mr. Coors is considering installing solar panels to help generate the electricity.

​What are the advantages to surfing in Texas instead of in California?

“It takes a long time to become a surfer,” said Fernando Aguerre, president of the International Surfing Association, the global governing body for the sport. “If you’re in the ocean for an hour, and you get six, seven waves, you’re very lucky. Learning to surf is like learning to play the guitar when you can only strum once every 30 seconds.”

Some who have surfed NLand say it feels just like natural waves but with more frequent and longer rides — up to 35 seconds — that give novices more time to properly position themselves and advanced practitioners the opportunity for more maneuvers.

The entire article is interesting and includes some video of the NLand Surf Park. Sure, real beaches are the best, but I'd like to have some other options for waves when I'm stuck in Wisconsin, far from the beach.

Drop-In Chefs Help Seniors Stay In Their Own Homes

Drop-In Chefs Help Seniors Stay In Their Own Homes →

This is a very interesting service, from a local Madison company.

“A healthy diet is good for everyone. But as people get older, cooking nutritious food can become difficult and sometimes physically impossible. A pot of soup can be too heavy to lift. And there’s all that time standing on your feet. It’s one of the reasons that people move into assisted living facilities.

But a company called Chefs for Seniors has an alternative: They send professional cooks into seniors’ homes. In a couple of hours they can whip up meals for the week.”

“According to some estimates, there are hundreds of thousands, maybe even a million seniors living in their own homes who are malnourished. In long-term care facilities, up to 50 percent may suffer from malnutrition. This leads to increased risk for illness, frailty and falls.”

“Part of the business plan is keeping the service affordable. In addition to the cost of the food, the client pays $30 an hour for the chef’s time. That’s usually a couple of hours a week of cooking and cleaning up the kitchen. There’s also a $15 charge for grocery shopping. So clients pay on average $45 to $75 a week.

And while there are lots of personal chefs out there and services that deliver meals for seniors there are few services specifically for older adults that prepare food in their homes.”

This isn't what most people would think of as healthcare, but I'd call it healthcare innovation. Living a healthy life—and eating right— is a big part of staying out of clinics and hospitals. If people spend money on this service, they could very well be saving thousands of dollars in other healthcare expenses.

This strikes me as the kind of service that insurance companies won't want to provide but that patients would be willing to pay for, if they have control over their own healthcare dollars.

Australian Travel Notes from a Policy Wonk

Australian Travel Notes from a Policy Wonk →

From Alex Tabarrok, at Marginal Revolution:

Australia farmers pay for water at market prices. Water rights are traded and government water suppliers have either been privatized or put on a more stand-alone basis so that subsidies are minimized or at least made transparent.

Australia has one of the largest private school sectors in the developed world with some 40% of students in privately-run schools.

Australia has a balanced-budget principle (balanced over the business cycle) which has been effective although perhaps more important has been a widely held aversion to deficits combined with an understanding of sustainability and intergenerational fairness (factors which also played a role in the decision to create private, pre-funded pensions).

If things go badly in the USA, I may have to head for Australia. (The scenery's nice too.)

Domestic Drones Are Coming Your Way

Domestic Drones Are Coming Your Way →

Reason argues, very persuasively I think, that commercial drones could be immensely useful and innovative. The argument against hasty changes to law is even, dare I say it, a conservative one.

Six hours into his epic filibuster last week, Sen. Rand Paul had to settle for Mike & Ike’s from the Senate candy drawer to quell his hunger. But is there any question he would have much rather had some delicious carnitas delivered by quadrocopter?

...

Restrictions on private drones may indeed be necessary some day, as the impending explosion of drone activity will no doubt disrupt our current social patterns. But before deciding on these restrictions, shouldn’t legislators and regulators wait until we have flying around more than a tiny fraction of the thousands of domestic drones the FAA estimates will be active this decade?

If officials don’t wait, they are bound to set the wrong rules since they will have no real data and only their imaginations to go on. It’s quite possible that existing privacy and liability laws will adequately handle most future conflicts. It’s also likely social norms will evolve and adapt to a world replete with robots.

By legislating hastily out of fear we would be forgoing the learning that comes from trial and error, trading progress for illusory security. And there is no clearer sign of human progress than tacos from the sky.

Moving Beyond Free-Market Minimalism

Moving Beyond Free-Market Minimalism →

The Foundation for Economic Education has an informative article out, regarding what's necessary for a "free market" to function. After I read it, I realized that it explains what I couldn't, regarding how and why markets and competition work.

In a free market, “Scrooge-like behavior” is certainly permissible as long as it doesn’t initiate violence or fraud. But where do the high quality, low price, and innovation we associate with the free market come from? Well, as most economists will tell you, much of it comes from the fear of competition. If you cut corners and charge consistently high prices, even though you may be within your rights to do so, many free-market advocates would rightly point out that free entry and hungry entrepreneurs will tend to keep you in line. That’s important, but it’s not the whole story; not by a long shot.

Honesty and fair play, trust and reciprocity, are principles that FEE has always upheld as crucial parts of the “foundation of economics.” They go far beyond the indispensable but bare minimum of private ownership of property, free trade, and individual self-seeking—or what one might call “free-market minimalism.”

... A chapter called “Murder, Reciprocity, and Trust” in Paul Seabright’s excellent book The Company of Strangers, proposes that we divide society into “calculators” and “reciprocators.” A pure calculator is the economic-man caricature who is ready to act opportunistically (with guile) at any moment. A reciprocator is someone who is going to repay what is done to her, good or bad, no matter what. If someone cheats a reciprocator, she’ll go to the ends of the earth to make him pay; if someone does her a favor, she’s going to return it, even at great inconvenience to herself. A reciprocator keeps her promises.

Seabright argues that even pure calculators would have to pretend to be reciprocators at least sometimes lest everyone, including other pure calculators, shun her. It’s people with a norm of reciprocity, an internalized rule to give tit-for-tat even when you don’t have to, who are critical to the free market.

Note also, however, that if B reciprocates and repays A, A must have first trusted that B would indeed repay her. Trust means here that A is willing to make herself vulnerable to B’s opportunistically not keeping his promise. Trust is the flip side of reciprocity.

But if A is too trusting, calculators will take advantage of her, which gives A an incentive to be a calculator at least part of the time. That’s why Seabright argues that in the real world people have an incentive to find the right balance between opportunism and trust/reciprocity.

... The free market is a great engine of discovery and development because the people in it have the opportunity and the willingness to take chances. Bringing many strangers together who have diverse knowledge, skills, and tastes—which we find markets doing around the world—presents the opportunity. Being willing to trust people we don’t know—new employers, suppliers, coworkers, customers, neighbors, and friends—enables us to take advantage of those opportunities.

Of course, sometimes trusting someone who turns out to be untrustworthy hurts us. But even those unpleasant experiences teach us something: we learn the circumstances under which people are trustworthy or not. That’s valuable knowledge we would never have learned if we were unwilling to trust in the first place.

If we are unwilling to trust when the opportunity arises, if we are mere economizing calculators, we shouldn’t expect the free market nor any other system to develop the complex division of knowledge and labor necessary to achieve real prosperity. The greatness of the free market, however, is that, more than any other system that we know, it enables us to learn and to grow, even as it allows us to flourish.

Why cancer patients do better at hospitals that specialize

Why cancer patients do better at hospitals that specialize →

Specialization in cancer care could lead to better outcomes at the same price. Instead of having every hospital perform every procedure, it might be better to have hospitals specialize in different procedures.

“If all patients needing surgery for colon cancer were referred to hospitals that have consistently achieved mortality rates in the bottom half of all hospitals performing this operation, then the average mortality rate could fall from a rate of 3.8 percent to 2.4 percent,” Ho said. “And if all patients who require surgical resection for pancreatic cancer were referred to hospitals performing 11 or more of these operations per year, mortality rates could fall by half, from a rate of 6 percent to 3 percent.”

“We were concerned that the centralization of cancer care that would result from referring patients to a smaller set of higher-volume hospitals could give these hospitals additional market power to raise prices,” Ho said. “We also wondered whether higher-volume hospitals might have a different cost structure that would raise or lower costs per patient. We found no statistical evidence that hospitals that performed more of these cancer operations were able to charge higher prices to patients for these services. We found that costs per patient were indeed higher for hospitals performing more pancreatic cancer surgery. However, these higher costs were not passed on to patients as higher prices for patient care.”

“A new market for weddings”

“A new market for weddings” →

Here's a new entry in Tyler Cowen's always interesting "markets in everything" series. This is a fantastic idea.

Here is a new service:

Over 250,000 weddings are called off every year. We purchase cancelled weddings and resell them to new couples.

Sellers recover deposits and upfront costs hassle-free. Venues and providers enjoy uninterrupted business as usual. Buyers find beautiful, pre-planned weddings at a fraction of the price.

Register with us and help us build a new market for weddings.

Health Care: A Future Free-Market Alternative

Health Care: A Future Free-Market Alternative →

Ross Levatter offers a vision of what truly free market healthcare might look like. It's radically different from what we have now, but it's the system I, personally, want to have.

... Many healthcare items–from CTs to cholecystectomies–are clearly priced, and people compare prices and shop for quality as well. You can look up surgeons and radiologists on the Internet, for example, and see what prior customers thought of the quality of their services. Other people choose to use a qualified middleman to recommend a local physician of high quality and reasonable price. Such middlemen advertise their services and list many reasons to use them, including the opportunity to take advantage of volume discounts and to have someone knowledgeable to guide you through the various medical options. Yet others make their own decisions, using the Internet and new software programs, just as they use software to help them make the right tax-paying decisions.

Mayo and Kaiser, among others, take strong advantage of their brand name, which signifies quality, but the competition from many other physicians makes it difficult for them to charge too much additional for “value-added.”

Government Is Not Society

If I was going to sum up my political philosophy as succinctly as possible, I think this is how I’d do it.

Perhaps the difference that most fundamentally separates true liberals and libertarians from others is that, to one degree or another, true liberals and libertarians are, unlike non-liberals and non-libertarians, dutiful sons and daughters of the Scottish Enlightenment. And one of the great lessons of that remarkable intellectual movement is the refinement of the understanding that state and society are not the same thing. Society is not created by the state, and the state’s activities not only do not define those of society but often diminish society’s activities.

Professor Don Boudreaux says this in the course of pointing out that FDR did much to destroy the private market for unemployment insurance. Prior to governments providing “free” unemployment insurance, many religious organizations, charities, businesses, and private societies provided it. People helping each other, reaching out, lending a hand to a neighbor in need. All of that was blown away and destroyed once the federal and state governments started providing unemployment insurance.

I found out today that it is possible to buy supplemental unemployment insurance to augment what the government provides. That’s welcome news but it’s a far cry from the vibrant assistance provided by society prior to the government’s take over.

Government has not brought us closer together by providing services that the private sector used to provide. Instead, it has pushed us further apart and made us less reliant on each other. That’s the exact opposite of the brotherly love and caring that President Obama constantly claims to want.

If you want a close knit society of caring people that look out for each other—slash government spending and get government out of the business of replacing society with bureaucracy.

Health care is not a human right

This morning I saw a new Facebook poll: "Is Health Care a Human Right?". I voted no.

Do you have a right to health care? Yes. And no. My answer ultimately depends on what you mean by a "right" to health care.

Rights come in two varieties: negative and positive. A negative right can be thought of as the right to be left alone. It's the right to do something without the fear that someone else will restrain you. A positive right can be thought of as the right to be served. While a negative right requires only that someone leave you in peace, a positive right requires that someone actively do something for you.

I believe you have the right to work with the doctor of your choice -- whether or not that doctor has been credentialed by a government.

I believe you have the right to take the drugs of your choice -- whether or not those drugs have been approved by a government panel of experts. I believe you have the right to take experimental cancer drugs, especially as a last ditch attempt to save your life. I believe you have the right to take marijuana to treat pain, to build appetite, and to relax.

I believe you have the right to buy insurance from any company, located in any state, covering any combination of conditions. I belive you shouldn't be limited to only the health insurance that covers a government approved list of condition from a government approved list of companies.

I believe in a strong negative right to health care. That's something that doesn't really exist in America today. Right now, you are not free to receive health care from anyone you trust, you are not free to take the drugs of your choice, and you are not free to buy whatever health care you desire. I am in favor of more freedom in health care. I believe you have a right to consume health care as you see fit, even if the majority of people around you disagree with your decisions. That's freedom.

I don't believe you have a right to force someone else to pay for treatment, medications, or medical supplies. I don't believe you have a right to force a doctor to work with you. It's one thing if you and the doctor can come to a mutual agreement regarding pay and hours of availability. It's something else entirely to require a doctor to treat you at a price of your choosing (not his) and at a time of your choosing (not his). I don't believe you have a positive right to health care.

To be blunt, I don't believe you have a right to turn doctors into slaves (by requiring them to treat for free or at a steep discount) or a right to turn your fellow citizens into slaves (by requiring them to work in order to pay the bills for your health care).

The current discussion of health care rights revolves almost entirely around positive rights -- getting someone else to pay for our health care. It includes an "exchange" that would strictly limit the options available. It includes subsidies forcibly taken from some people through taxes and used to pay for someone else's health care.

It includes a requirement for insurance companies to charge everyone the same price for health care. This practice, known as community rating, allows sicker people to pay less than the cost of their care and requires healthier people to pay more. In effect, community rating is a subsidy to the sick courtesy of the healthy. Community rated health care is a very bad deal for young, healthy individuals. So the current discussion revolves around a health care mandate. Most of the plans under consideration would require young people to purchase something that's a bad deal. They would be required to do this solely to provide a good deal to sick people and the elderly.

Claiming a positive right to health care is nothing more nor less than the claiming the right to enslave your fellow man. I don't believe you have that right.

John Stossel on health care markets

I should know by now that whenever I try to explain something John Stossel has already explained it better. First, he delivers a great quote about why competition keeps prices low.

In a free market, a business that is complacent about costs learns that its prices are too high when it sees lower-cost competitors winning over its customers.

I posted yesterday about why "exchanges" are worse than free markets. Stossel takes that on too and does a far better job than I did.

... Competition is not a bunch of companies offering the same products and services in the same way. That sterile notion of competition assumes we already know all that there is to know.

But consumers often don't know what they want until it's offered, and their preferences and requirements change. Businesses don't know exactly what consumers want or the most efficient way to produce it until they are in the thick of the competitive hustle and bustle.

Nobel laureate F.A. Hayek taught that competition is a "discovery procedure." In other words, the "data" of supply and demand emerge only through the market process. We need open-ended competition not merely to see which rival is better, but to learn things we didn't know before and aren't likely to learn any other way.

"Competition is valuable only because, and so far as, its results are unpredictable and on the whole different from those which anyone has, or could have, deliberately aimed at," Hayek wrote.

The health care bills are perfect examples. If competition is a discovery process, the congressional bills would impose the opposite of competition. They would forbid real choice.

In place of the variety of products that competition would generate, we would be forced "choose" among virtually identical insurance plans. Government would define these plans down to the last detail. Every one would have at least the same "basic" coverage, including physical exams, maternity benefits, well-baby care, alcoholism treatment, and mental-health services. Consumers could not buy a cheap, high-deductible catastrophic policy. Every insurance company would have to use an identical government-designed pricing structure. Prices would be the same for sick and healthy.

The problem with health insurance "exchanges"

In today's New York Times, David Leonhardt talks about the problem of health care choice. Specifically, the fact that most people don't have any choice. He starts out making a lot of sense.

Health insurers often act like monopolies -- like a cable company or the Department of Motor Vehicles -- because they resemble monopolies. Consumers, instead of being able to choose freely among insurers, are restricted to the plans their employer offers. So insurers are spared the rigors of true competition, and they end up with high costs and spotty service.

But then, discussing the Wyden-Bennett bill, he makes less sense.

In the simplest version, families would receive a voucher worth as much as their employer spends on their health insurance. They would then buy an insurance plan on an "exchange" where insurers would compete for their business. The government would regulate this exchange. Insurers would be required to offer basic benefits, and insurers that attracted a sicker group of patients would be subsidized by those that attracted a healthier group.

The immediate advantage would be that people could choose a plan that fit their own preferences, rather than having to accept a plan chosen by human resources. You would be able to carry your plan from one job to the next -- or hold onto it if you found yourself unemployed. You would never have to switch doctors because your employer switched insurance plans.

The problem with this idea is that it really doesn't offer much choice. Insurance companies are still protected from competition by the friendly confines of a government controlled "exchange". True choice would consist of an open market place where any entrepreneur can offer any product to any interested consumer. The success or failure of the product would depend on one all important criteria: whether or not consumers saw any value in it. Insurers would no longer be able to foist their plans on consumers who don't want them. And entrepreneurs would be free to introduce radical, new products that threaten the current insurance companies.

That kind of free choice wouldn't exist under an insurance "exchange". Each new product would have to be carefully weighed and analyzed by government bureaucrats. Nothing new would be approved unless they determined that it was worthwhile and useful. Existing insurance companies would have a hand in writing the regulations and only products that conform to the current status-quo would be allowed in. Anything that threatens that status-quo would be barred from the "exchange" and never offered to consumers. The end result would be akin to Ford's infamous statement that consumers could buy any color car they wanted -- as long as it was black.

Instead of fostering innovation and creativity in health care, the Wyden-Bennett bill would take the current "insurance" industry and lock it in cement. Consumers would continue to be forced to buy health insurance not health care and bureaucrats would continue to dicatate how, when, and where their health care dollars can be spent.

All of this makes me happy to hear that Wyden-Bennett doesn't have much support in the Senate.

Health care without bureaucrats

Any bureaucracy -- public or private -- is going to make pointless decisions and complicate your life. This applies to health "insurance" as much as it applies to anything else. It's easy to find stories of people who were heartlessly treated by their health bureaucracy. In Britain, the bureaucracy is the government run NHS. In America, it's often a private company. But the end result is often the same.

John Goodman points to a recent story and then offers an alternative.

Is there a better way? Yes. It's called casualty insurance -- similar to the kind of insurance most people have on their homes and automobiles. In the case of a catastrophic illness, the insurer makes a lump sum available -- ideally enough to cover all reasonable care. But when there are differences of opinion, patients can add their own funds to the insurer's payment and buy any type of care from any provider. For Medicaid, additional funds could be provided by private charity (which is what is happening anyway for Dr. Pollard's patients).

This is not a small change from the current system. It is a huge change. It would lead to a real market for catastrophic care in which patients and their families become real, empowered buyers. Providers would compete for patients based on price and, therefore, on quality. Doctors would be free to act as the agents of their patients rather than agents of third-party-payer bureaucracies.

Why would you want to hand control over your health care over to a bureaucracy? And why would you believe that a government bureaucracy would run more smoothly -- and treat you more fairly -- than a private bureaucracy?

Where Do You Buy Your Books?

When is a monopoly not a monopoly?

"If Barnes & Noble does buy Borders, we're facing a real monopoly," she said, though such a deal would also be likely to receive regulatory scrutiny. "We would see an initial deep discounting, trying to keep or attract the Borders customers to Barnes & Noble."

Meade argues that Barnes & Noble would gain a "monopoly" position, if it bought Borders. I don't think that word means what she thinks it means. Her quote comes from an article on The Changing Bookstore Battle.

Barbara Meade could not resist a little schadenfreude. After the Borders bookstore chain announced recently that it was exploring "strategic alternatives" -- corporate lingo for "there's trouble" -- the co-owner of the independent store Politics and Prose, which has held on against the chain's cost-cutting competition, took note in her online newsletter.

"We have never been tempted by the allure of corporate imperialism -- invading new book markets, slashing prices, demolishing the competition, and then back to business as usual, poor inventory and poor customer service," Meade wrote, reporting that "Borders announced a shift in direction from selling books to selling the whole business."

While it is tempting to marvel at, or even gloat about, the potential demise of a tough competitor, analysts and publishing industry executives say Borders's troubles are emblematic of an ironic shift in book selling. Large corporate booksellers, once an enemy of the little guy, now have enemies of their own: Amazon.com and big-box retailers like Costco and Target are taking on Borders with even deeper discounts than the chains used against the independents.

Barbara Meade, Amazon, Costco, Target -- it seems like Barnes & Noble would still have plenty of competition, even after buying Borders. What monopoly is Barbara Meade referring to?

The Problem with American Healthcare

Why does healthcare in America seem so broken? There's actually a very simply reason: the people receiving the care are not the people paying for the care. As always, he who pays the piper calls the tune. Russ Roberts breaks it down:

So why doesn't a hospital work better? The answer I think, is that the level of specialization in medicine has emerged from a process that has very few incentives to make sure that the level of specialization is as productive as it should be. There are very few informational feedback loops. Very little accountability. Sure, if a surgeon leaves a scalpel in your chest cavity and sews you back up, the surgeon bears a cost. And as a result, it doesn't happen very often. But the kind of errors that Arnold worries about, the kind of errors that I've worried about with my Dad in the hospital (and the kind I've seen made) are the ones that have little or no consequence to anyone other than the patient.

These errors are built into the system. When a drug leads to unexpected side effects because the right questions weren't asked, when an opportunity for a safer treatment is missed, when an aggressive treatment for one illness weakens the immune system and leads to other problems, who can you blame? Who bears a cost other than the patient?

You can blame the hospital of course, whatever that means, but the costs to the human beings who work in the hospital are small. There are no feedback loops within the hospital to reward generalists who look for the costs of specializations. And the reason there are not is because the patient is not the customer. The patient is not paying the bill. The financial incentives that do exist are coming from Medicare and Medicaid and the insurance companies. The normal feedback loops that protect the customer from error and greed and simple stupidity are missing. In a way, it's amazing it works as well as it does. It works as well as it does presumably because most doctors and nurses do care about the lives in their hands. But it's imperfect and could be much better.

( Via Cafe Hayek.)

Is Dollar Doom for Real?

Lately, the dollar has been sinking lower and lower. Indeed, Nixon was President the last time the dollar was this low. A lot of people are really upset about that. I'm having trouble understanding why. Take this commenter for instance:

The dollar, as predicted is being crushed. We are now at Par with the Canadian Dollar, the Loonie as it is called. This was all so predictable. You cannot run an 800 billion dollar trade deficit and have your currency in demand. We have a lot farther to fall. Within 5 years from 2008 we should see the Canadian Dollar worth 25 % more than the U.S. dollar. The Euro at 1.40 now, should move to near 2.50, as China buys more and more of the Euro. The pound at 2.04 as I write this will be near 3.00. Be ready for CHINA. When they finally let their currency float it will appreciate 70% over a 36 month period. The US trade deficit will be cut in half and then some by 2020.

He starts out by blaming everything on our trade deficit (which is pretty much an illusion to begin with). He finishes by saying that the disastrous result of a falling dollar will be ... a smaller trade deficit. Isn't that exactly what a lot of people (not me!) have been saying that we need? Where's the problem?

A high dollar is worth more compared to foreign currencies. Consequently, imports are cheap and the country imports a lot of stuff. On the downside, our exports are more expensive and we sell less stuff overseas. A low dollar is worth less compared to foreign currencies. Consequently, imports are expensive, but our exports are cheap. We export a little and import a little.

Right now, it appears that our exports may be picking up. People living on our northern border are used to seeing Americans going to Canada to buy things cheaply. Now, the trend is reversing. Canadians are crossing the border to buy cheaper goods.

On either side of the border, a buck is now a buck, or as Canadians call it on their side, a loonie. Coupled with high prices and high taxes for many things in Canada, the strength of the Canadian dollar is driving Canadians into the United States to shop for shoes, school supplies, gasoline, used cars and second homes.

In Vermont, Buzz Roy, owner of Brown's Drugstore in Derby Line, said of his Canadian customers: "They don't buy anything in particular, but everything in general. We've seen a gradual increase over the summer, and we've seen a bigger increase this week."

Mr. Roy said more customers would make trips if it were easier to cross the border, "but they're still coming in droves."

In North Dakota, Crystal Schlecht, who works for the City of Cavalier, said the arts and crafts show in town last weekend had a surprisingly international feel in spite of the slow-go at the border crossing.

"I'd say 60 percent of the people the whole weekend were from Canada," she said. "And we've never really had that before."

Why does it matter that people choose to buy things in Euros or Loonies instead of dollars? Why does it matter that import may slow down and exports may pick up? How does that foretell that nation's doom?

An International Race to the Top

Megan McArdle (August 29, 2007) - America: exporting high wages abroad (Labor markets)

I'm always bemused by globalisation doomsday scenarios in which all of our jobs move to China (or India) in order to take advantage of low-wage workers. If we really do lose all of our high-productivity jobs, and no longer make anything worth having, why would the Indians and Chinese continue to ship us software programs and flat screen televisions? Obviously, for individuals this may be traumatic, but in aggregate, if our economy really gets less productive, we won't have to worry about a flood of cheap Chinese goods. Although if the Chinese and Indians do want to ship us their products in exchange for absolutely nothing, I'm willing to talk.

The other reason this doesn't work, of course, is that as these economies expand, demand for workers pushes up their wages. That's why we no longer buy cheap gimcrackery from Japan. According to the New York Times today, this is already happening:

For decades, many labor economists said that China’s vast population would supply a nearly bottomless pool of workers. So many people would be seeking jobs at any given time, this reasoning went, that wages in this country would be stuck just above subsistence levels. As recently as four years ago, some experts estimated that most of the perhaps 150 million underemployed workers in the countryside would be heading to cities.

Instead, sporadic labor shortages started to appear in 2003 at factories in the Pearl River delta of southeastern China. Now those shortages have spread to factories up and down the Chinese coast, specialists say.

This summer, Mary Gallagher, a Chinese labor specialist at the University of Michigan, visited five sportswear factories near Shanghai and Guangzhou. She found them all struggling to hire and retain workers. One had shut one of its two main production lines because it had nobody to sew shirts and other garments.

"Basically half the factory was shut down and one dormitory was empty," Ms. Gallagher said.

In interviews, factory executives across the country complained of being forced to give double-digit raises in order to find and keep young workers at all skill levels. Three or four years ago, said Zhong Yi, vice general manager of a leather-jacket manufacturer in Hangzhou in east-central China, 800 to 1,100 yuan a month ($105 to $145) "was a good salary."

"Now," he said, "1,500 is the bottom" ($198).

Chinese officials are quick to say that there is no overall shortage of labor -- rather, there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s. Factories in cities like Guangzhou advertise heavily for young workers, even while employment offices consider it a success if someone over 40 can find any job in less than a year.

This entry was tagged. Free Market

Romney's Healthcare Plan

While in Massachusets, Mitt Rimney created the "RomneyCare" mandated health plan. Now that he's running for President, he's getting ready to push for a free market solution.

Romney to Pitch a State-by-State Health Insurance Plan - New York Times

It relies on federal incentives for market reforms, tax deductions and other changes to encourage people to buy health insurance and drive down costs.

There is no individual mandate in Mr. Romney's plan for the rest of the country. Instead, it concentrates on a "federalist" approach, premised on the belief that it is impossible to create a uniform system for the entire country. Along these lines, the federal government would offer incentives to states to take their own necessary steps to bring down the cost of health insurance.

According to a preview of the presentation provided by Mr. Romney's policy advisers yesterday, Mr. Romney will highlight how the nearly 45 million uninsured in the country can be divided into roughly three groups: about a third are eligible for public programs but are not enrolled; a third are low income but ineligible for public programs and need some help from the government to purchase health insurance; a third are middle income but have chosen not to buy health insurance.

In his plan, Mr. Romney proposes taking federal money currently being used to help states cover the cost of medical care for the uninsured and offering that money to states to help low-income people who are not eligible for Medicaid and other public programs to buy their own private health insurance.

The same pool of money will be wielded as a carrot for states to reform their health insurance regulations to help drive costs down and make plans affordable. That would include reducing the number of requirements for coverage that states impose on health insurance providers or lifting restrictions in some states on health maintenance organizations.

Mr. Romney, who helped found a hugely successful private equity firm, argues that the existing tax system penalizes those who do not acquire their health insurance through their employer, and that has prevented the development of a vigorous, affordable health insurance market. Those who acquire health insurance from their employers pay for their premiums with pre-tax dollars, but those who do not must use post-tax dollars to buy it. So Mr. Romney wants to allow people who buy their own health insurance to be able to deduct premiums, deductibles and co-payments from their income.

Eventually, Ms. Canfield said, the goal would be for people to be able to opt out of employer plans if they do not like them and go out on the individual market to buy health insurance on their own.

These all sound like really good ideas from the bare bones descriptions. It's a shame that Governor Romney didn't push for a plan like this while he was in Massachusets. It's possible that he didn't do so because the Massachusets legislature never would have gone along with it. On the other hand, his actions as governor leave me unsure of how President Romney would react to a stubborn Democratic Congress.