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Archive for the ‘Price Controls’ Category

While I have no objection to applauding Donald Trump’s good policies such as tax reform and deregulation, I also don’t hesitate to criticize his bad policies.

His big missteps are protectionism and fiscal profligacy, but he also does small things that are misguided.

I’ve already written about his energy socialism and his increased handouts to the World Bank.

Today, we’re going to analyze his proposal for price controls on certain prescription drugs.

For some background on the topic, we’ll start with a very sound editorial from the Wall Street Journal. Here are the key passages.

…the U.S. shouldn’t put the world’s most innovative drug market at the mercy of what Greece is willing to pay for a cancer treatment. …a potential rule…would tether what Medicare Part B pays for certain drugs to a price index of what other developed countries pay. The goal is to bring prices down to 126% of what other countries pay, versus 180% today. …The reason European countries pay less for drugs is because they run single-payer health systems and dictate the prices they’re willing to pay. …Other countries have the luxury of extortion because the U.S. produces more drugs than the rest of the world combined. Mr. Trump mentioned these realities in his speech but blew past them to suggest importing the same bad behavior.

If we import bad policies, we import bad outcomes.

Europe does pay more—in the form of reduced access. Of 74 cancer drugs launched between 2011 and 2018, 70 (95%) are available in the United States. Compare that with 74% in the U.K., 49% in Japan, and 8% in Greece. This should cure anyone of the delusion that these countries will simply start to pay more for drugs. They’re willing to deny treatments… Better quality care in the U.S. is why America outpaces 10 European countries on cancer survival rates… Any investor who wants to bankroll the cure for Alzheimer’s is already staring at a very small chance of success—and the Trump HHS proposal adds another a potential limit on return that will be restricted further if Democrats retake power and use it as a precedent.

Here’s the bottom line.

Mr. Trump is right that Europe, Australia and many others are freeloaders on U.S. innovation, and better intellectual property protections in trade deals might help. But that is no reason to repeat their price-control mistake and undermine the reasons the United States is the last, best hope for medical progress.

Sadly, there aren’t many politicians willing to say and do the right thing.

Which is why Congressman Bucshon of Indiana deserves praise. Here are some details from a report by the Hill.

Rep. Larry Bucshon (R-Ind.) on Friday criticized a drug pricing proposal President Trump made last month, marking some of the first public resistance to the move from congressional Republicans. Bucshon told The Hill that Trump’s proposal to lower some drug prices in Medicare by tying them to cheaper prices in other countries is too far of a move toward “price controls.” …“I understand that we do want to get drug prices down but I think that any proposal that would lead to government price-fixing in that space is a pathway we don’t want to follow.” Trump’s move, announced in October, went farther in the direction of price controls on drugs than what Republicans typically support. Some Democrats praised his move… Bucshon helped lead opposition to a somewhat similar Medicare drug pricing proposal from former President Obama in 2016.

Amen.

A bad Obama policy of intervention doesn’t suddenly become a good policy simply because Trump has adopted it.

Here’s some of what I wrote about the issue in a column for FEE.

…prescription drug prices are typically higher in the US than many other nations. That’s both because bad domestic policies restrict the kind of competition that would keep prices in check and the fact that many foreign governments enact price controls while threatening to steal patents from companies that don’t cooperate. So, it’s especially troubling to see a proposed rule from the Trump administration that would index prescription drug reimbursements under Medicare Part B—which covers drugs exclusively handled by physicians and hospitals like vaccines and cancer medications—based on the prices paid in other countries, including those with nationalized health care systems. To borrow a legal metaphor, it’s fruit of the poisonous tree.

And what happens when we import bad policies?

At stake aren’t just high-minded free-market principles but the vitality of the most innovative pharmaceutical market in the world. US drug companies have only weathered the abuses of foreign governments because the domestic market is large enough that they can recoup the losses. That’s why the president is right to call it “very, very unfair” for other countries to keep their prices artificially low at the expense of American patients; but importing those losses by allowing foreign abuses to set US prices will mean no more market in which to offset losses to socialized systems and thus an inevitable decline in research and development of new medications.

What’s the bottom line? As I noted, we’ll get bad results.

From rent control to the gasoline lines of the 1970s, the connection between price controls and shortages has been well established.

In the case of pharmaceuticals, I fear the main result will be a decline in innovation. The drug companies make nice profits in drugs that already are developed and approved, so I doubt they’ll have much incentive to withhold production on existing drugs if price controls are imposed.

But those profits help to offset the very high cost of development and testing. Including for all the research and development that doesn’t produce marketable products.

So the real victims will be all of us since we won’t have access to the potentially life-saving and life-improving drugs that might be created in the future – assuming an absence of price controls.

The economics of price controls are clear. The consequences are always bad, whether we’re looking at price controls on labor, price controls on gasoline, or price controls on other products.

Which is why such policies generally are supported by the world’s most economically illiterate governments (or, in the case of Nixon, the most venal politicians). Oh, and don’t forget Puerto Rico.

We need Ludwig Erhard, but we got Donald Trump.

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Responding to Hurricane Harvey last year, I shared three very good videos explaining why laws against “price gouging” are misguided.

Simply stated, politicians can’t wave a legislative wand and change underlying conditions of supply and demand.

Laws that artificially dictate the price of something almost surely will have adverse consequences (just as artificially setting the price of labor causes some joblessness and artificially controlling price of health insurance can cause a death spiral).

Needless to say, this is not a welcome observation in some quarters.

John Stossel addresses price gouging in a new Townhall column. He starts by describing the political response.

Officials in states hit by Hurricane Florence are on the lookout for “price gouging.” People who engage in “excessive pricing” face up to 30 days jail time, said North Carolina’s attorney general. South Carolina passed a “Price Gouging During Emergency” law that imposes a $1,000 fine per violation. …These are “bad people,” said Florida Attorney General Pam Bondi angrily during a previous storm.

He then explains some basic economics.

Pursuing profit is simply the best mechanism for bringing people supplies we need. Without rising prices indicating which materials are most sought-after, suppliers don’t know whether to rush in food, or bandages, or chainsaws. …Who will bring supplies to a disaster area if it’s illegal to make extra profit? It’s risky to invest in 19 generators, leave home, rent a U-Haul and drive 600 miles. …If prices don’t shoot up during disasters, consumers hoard. We rush to gas stations to top off our tanks. Stores run out of batteries because early customers stock up. Late arrivals may get nothing. … America should have learned that when Richard Nixon imposed price controls on gasoline. That gave us gasoline shortages and long gas lines. …allowing prices to rise, even sharply, is the best way to help desperate people get supplies they need. As supplies rush in, prices quickly return to normal. We shouldn’t call it gouging. It’s just supply and demand.

He concludes with some advice that politicians almost certainly will ignore.

The best thing “price police” can do in a disaster is stay out of the way.

Price police? I wonder if they get the same training as the milk police and bagpipe police?

But I’m digressing.

I’m going to augment Stossel’s analysis with some simple supply-and-demand curves. We’ll start with a look at a normal, competitive market. The supply curve shows producers are willing to provide ever-larger amounts of a product at higher and higher prices.

Conversely, the demand curve shows that consumers are willing to buy a lot of a product when prices are low, but the quantity they want declines as prices increase.

The “equilibrium price” is where the two curves intersect.

Now imagine you live in North Carolina and the hurricane is wreaking havoc. Two things are likely to happen. First, some sellers will be knocked out of the market. Maybe they lost power, got flooded, or went someplace safe for the duration of the storm.

The real-world impact is shown by this next graph. The supply curve has shifted to the left, meaning that there is less product available at any given prices. The net result is that the market price will go up.

The second effect is that there presumably will be more demand. Consumers will suddenly decide that certain goods (milk, bread, candles, batteries, generators, plywood, etc) are more valuable than they were last month.

This chart shows the effect of increased demand.

By the way, the way I randomly created the charts shows the quantity staying roughly the same, but that all depends on market conditions. Prices can rise a lot or a little, and quantity demanded can fall a lot or rise a lot.

Here’s all you really need to understand. If the government has anti-gouging laws that prevent prices from adjusting to market conditions, the result will be a shortage.

Which is what’s depicted in this chart. Consumers will want a lot of the product, but they won’t be able to find enough willing sellers.

That might seem like a good outcome if you were one of the lucky people who was willing to wait in line or otherwise got lucky (the “seen”). But it means a lot of consumers get left out (as Bastiat points out, those are the “unseen”).

For instance, look at what happened after Hurricane Sandy, for instance.

Perhaps most important, it means that there’s very little incentive for entrepreneurs to incur a lot of expense and effort to get much-needed supplies to a disaster area.

So people would be left waiting for the government, which means a sluggish reaction and often the wrong kind of help.

None of this suggests that “price gougers” are heroes. Yes, some of them take a risk with time and money (and maybe even personal safety) by rushing to a disaster zone. But others simply want to take advantage of an opportunity to jack up prices and get a windfall.

My point is simply that laws against gouging are bad since many consumers will be denied the opportunity to get desperately needed goods and services.

P.S. If you want more evidence of the folly of price controls, see how they backfired in Puerto Rico and Venezuela.

P.P.S. The post-war German economic miracle was triggered by the removal of price controls.

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I generally use Texas as a good example when discussing public policy. Particularly compared to places such as California.

I like the sensible attitude about guns, but the absence of an income tax is particularly admirable when considering economic issues, and I confess to being greatly amused when I read about jobs and investment escaping high-tax states like California and moving to the Lone Star State.

But being more pro-market than California is a low bar to clear. And I’ve written that government is too big in Texas.

And now, because of Hurricane Harvey, I have another reason to criticize the state.

Texas has a law against “price gouging,” which means politicians there (just like the politicians in places like Venezuela) think they should get to determine what’s a fair price rather than allow (gasp!) a free market.

The state’s Republican Attorney General is even highlighting his state’s support for this perverse example of price controls.

>Price gouging by Texas merchants in the path of Hurricane Harvey has drawn the attention of Texas Attorney General Ken Paxton, who said Saturday that his office is looking into such cases. …”We’ll be dealing with those people as we find them,” he said. …Paxton issued a warning about price gouging Friday as the hurricane approached the Texas coast. Texas law prohibits businesses from charging exorbitant prices for gasoline, food, water, clothing and lodging during declared disasters.

Paxton is right about Texas law, but he is threatening to enforce a terrible policy.

To help explain why Texas law is bad and why the Attorney General is misguided, here’s a video from John Stossel on so-called price gouging.

It’s disgusting that Mississippi arrested John. The guy should have received a medal for putting his money at risk to serve others.

To augment Stossel’s analysis, here’s a video from Learn Liberty that explains why politicians shouldn’t interfere with the price system.

And here’s Walter Williams discussing the role of “windfall profits” and how high returns encourage the reallocation of resources in ways that benefit consumers.

The bottom line on this issue is that buyers understandably want low prices, particularly in emergency situations.

But that makes no economic sense. However, since buyers generally outnumber sellers, politicians will always have an incentive to demagogue on the issue.

I’m not surprised when we get economic illiteracy from certain politicians. Nonetheless, it’s very disappointing when Texas lawmakers sink to that level. I hope Mr. Paxton at least is feeling guilty.

P.S. But I’ll close on an upbeat note by sharing my collection of Texas-themed humor: Here, here, here, and here.

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When discussing government involvement in the health sector, I usually focus on the budgetary implications. Which makes sense since I’m a fiscal wonk and programs such as Medicare, Medicaid, and Obamacare are diverting ever-larger amounts of money from the economy’s productive sector.

I also look at the tax side of the fiscal equation and complain about how the healthcare exclusion mucks up the tax code.

Though it’s important to understand that government involvement doesn’t just cause fiscal damage. All these programs and policies contribute to the “third-party payer” problem, which exists when people make purchases with other people’s money. Such a system is a recipe for inefficiency and rising prices since consumers generally don’t care about cost and providers have no incentive to be efficient. And since government figures show that nearly 90 percent of health care expenditures are financed by someone other than the consumer, this is a major problem. One that I’ve written about many, many times.

But there’s another economic problem caused by government – price controls on insurance – that is very important. Indeed, the fights over “community rating” and “pre-existing conditions” are actually fights about whether politicians or competition should determine prices.

Simply stated, politicians want insurance companies to ignore risk when selling insurance. They want artificially low premiums for old people, so they restrict differences in premiums based on age (i.e., a community rating, enforced by a guaranteed-issue mandate), even though older people are statistically far more likely to incur health-related expenses. They also want artificially low premiums for sick people, so the crowd in Washington requires that they pay the same or similar premiums as healthy people (i.e., a pre-existing conditions mandate), even though they are statistically far more likely to incur health-related expenses.

Set aside that the entire purpose of insurance is to guard against risk. Instead, let’s focus on what happens when these types of price controls are imposed. For all intents and purposes, insurance companies are in a position where they have to over-charge young and healthy people in order to subsidize the premiums of old and sick people. That’s sounds great if you’re old and sick, but young and healthy people respond by choosing not to purchase insurance. And as fewer and fewer young and healthy people are in the system, that forces premiums ever higher. This is what is meant by a “death spiral.”

The pro-intervention crowd has a supposed solution to this problem. Just impose a mandate that requires the young and healthy people to buy insurance. Which is part of Obamacare, so there is a method to that bit of madness. But since the penalties are not sufficiently punitive (and also because the government simply isn’t very competent), the system hasn’t worked. And to make matters worse, Obamacare exacerbated the third-party payer problem, thus leading to higher costs, which ultimately leads to higher premiums, which further discourages people from buying health insurance.

So how do we solve this problem?

One of my colleagues at the Cato Institute, Michael Cannon, is a leading expert on these issues. And he’s also a leading pessimist. Here’s some of what he wrote a week ago as part of a column on the Senate bill to modify Obamacare.

ObamaCare’s “community rating” price controls are causing premiums to rise, coverage to get worse for the sick and insurance markets to collapse across the country. The Senate bill would modify those government price controls somewhat, allowing insurers to charge 64-year-olds five times what they charge 18-year-olds (as opposed to three times, under current law). But these price controls would continue to make a mess of markets and cause insurers to flee.

But he wasn’t enamored with the House proposal, either. Here are some excerpts from his analysis earlier this year of that proposal.

The House leadership bill retains the very ObamaCare regulations that are threatening to destroy health insurance markets and leave millions with no coverage at all. ObamaCare’s community-rating price controls literally penalize insurers who offer quality coverage to patients with expensive conditions, creating a race to the bottom in insurance quality. Even worse, they have sparked a death spiral that has caused insurers to flee ObamaCare’s Exchanges nationwide… The leadership bill would modify ObamaCare’s community-rating price controls by expanding the age-rating bands (from 3:1 to 5:1) and allowing insurers to charge enrollees who wait until they are sick to purchase coverage an extra 30 percent (but only for one year). It is because the House leadership would retain the community-rating price controls that they also end up retaining many other features of the law.

Though existing law also is terrible, largely because of Obamacare. Here are passages from Michael’s column in the Hill.

ObamaCare’s core provisions are the “community rating” price controls and other regulations that (supposedly) end discrimination against patients with preexisting conditions. How badly do these government price controls fail at that task? Community rating is the reason former president Bill Clinton called ObamaCare “the craziest thing in the world” where Americans “wind up with their premiums doubled and their coverage cut in half.” Community rating is why women age 55 to 64 have seen the highest premium increases under ObamaCare. It is the principal reason ObamaCare has caused overall premiums to double in just four years. …Why? Because community rating forces insurance companies to cover the sick below cost, which simply isn’t sustainable. The only solution ObamaCare supporters offer is to keep throwing more money at the problem — which also isn’t sustainable.

Anyone who wants to really understand this issue should read all of Michael’s work on health care issues.

But if you don’t have the time or energy for that, here’s an image that I found on Reddit‘s libertarian page. Using not-so-subtle sarcasm, it tells you everything you need to know about why price controls ultimately will kill health insurance.

P.S. None of this suggests we should feel sorry for health insurance companies. They got in bed with the previous administration and endorsed Obamacare, presumably because they figured a mandate (especially with all the subsidies) would create captive customers. Now that it’s clear that the mandate isn’t working very well and that increased Medicaid dependency accounts for almost all of the additional “insurance coverage,” they’re left with an increasingly dysfunctional system. As far as I’m concerned, they deserve to lose money. And I definitely don’t want them to get bailout money.

P.P.S. Republicans aren’t doing a very good job of unwinding the Obamacare price controls, but they deserve a bit of credit for being bolder about trying to undo the fiscal damage.

Addendum: A comment from Seb reminds me that I was so fixated on criticizing price controls that I never bothered to explain how to deal with people who have pre-existing conditions and therefore cannot get health insurance. I’m guessing the answer is “high-risk pools” where the focus of policy is directly subsidizing the relatively small slice of the population that has a problem (as opposed to price controls and other interventions that distort the market for everyone). But the main goal, from my perspective, is to have states handle the issue rather than Washington. A federalist approach, after all, is more likely to give us the innovation, diversity, and competition that produces the best approaches. States may discover, after all, that insurance doesn’t make sense and choose to directly subsidize the provision of health care for affected people. In the long run, part of the solution is to get rid of the health care exclusion in the internal revenue code as part of fundamental tax reform. If that happened, it’s less likely that health insurance would be tied to employment (and losing a job is one of the main ways people wind up without insurance).

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When contemplating the importance of good public policy, we can learn a lot from bad examples.

The answer, in no small part, is that economies suffer immensely when politicians don’t allow markets to function. An unfettered price system plays an enormously important role in allocating capital and labor to their most-valued uses (based on the preferences of consumers).

With central planning, by contrast, capital and labor are allocated based on the preferences of politicians and bureaucrats. And even if you assume those officials have good motives, there’s no way they can replicate the efficiency of private markets.

Capitalism is amazing because, in a system based on voluntary exchange, people can only make themselves richer by serving the needs of others. Consider, for instance, this excellent new video on the market for bread. We should all be profoundly appreciative of how the invisible hand of free enterprise produces such amazing results.

The good news is that we don’t have central planning in the United States. As such, we’re not in any danger of complete economic breakdown because of government intervention (our long-run danger is instead the result of a metastasizing welfare state).

But the bad news is that we have sectors of our economy where government intervention prevents the efficient operation of the price system.

And we have other sectors where government intervention causes considerable inefficiency.

And keep in mind that almost all intervention is not the result of well-meaning but misguided decisions.

It is driven by various interest groups scheming with politicians to manipulate the system in order to obtain unearned wealth.

In other words, it’s “public choice.”

Which is why it doesn’t make any sense to give politicians more power to solve supposed problems. Especially when the problems are probably the result of government intervention in the first place.

It’s like rewarding an arsonist for starting fires (also see this poster or the image at the bottom of this column).

But let’s not dwell on the negative.

The good news is that America ranks relatively high according to some important measures.

There’s not much economy-wide business regulation, at least compared to most other nations. And we also don’t have much “employment-protection” legislation, which means American workers are much more likely to have jobs.

And less regulation is an important ingredient in the recipe for growth and prosperity. And nations that do a better job of following that recipe get to enjoy higher living standards, so we are fortunate not to have made as many policy mistakes as other countries.

P.S. Since bread played a starring role in today’s video, it’s worth remembering what it taught us about antitrust laws in The Incredible Bread Machine.

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When I point out that Puerto Rico got in trouble by allowing the burden of government spending to grow faster than the private economy, thus violating my Golden Rule, honest leftists will admit that’s true but then challenge me on what should happen next.

That’s a very fair – and difficult – question. The amount of government debt in Puerto Rico is so large that repayment would be a big challenge. In effect, today’s taxpayers and tomorrow’s taxpayers would suffer because of the reckless choices of yesterday’s politicians.

It could be done, to be sure, just like Greece could dig its way out of debt with a sufficient degree of spending restraint.

That being said, I’m not necessarily opposed to debt relief. Whether you call it default, restructuring, or something else, debt relief would give Puerto Rico a better chance of getting back on its feet. Moreover, I’m not exactly overflowing with sympathy for investors who lent money to Puerto Rico’s profligate government. Maybe they’ll be more prudent in the future if they lose some of their money today.

But here’s my quandary (and I feel the same way about Greece): I don’t mind debt relief if it’s part of a deal that actually produces better policy.

But I’m opposed to debt relief if it simply gives an irresponsible government “fiscal space” to maintain wasteful programs and other counterproductive forms of spending.

And I see very little evidence that Puerto Rico is interested in making the needed structural reforms to alter the long-run trend of ever-rising outlays.

Nor do I see any evidence that Puerto Rican officials are pushing for much-needed reforms in areas other than fiscal policy. Where’s the big push to get exempted from the Jones Act, a union-friendly piece of legislation that significantly increases the cost of shipping goods to and from the mainland? Where are the calls to get Puerto Rico an exemption from minimum wage laws that are harmful on the mainland but devastating in a less-developed economy?

These are some of the reasons why I don’t want to reward Puerto Rico’s feckless political class by granting debt relief.

And here’s something else to add to the list. Notwithstanding 40 centuries of evidence that price controls are a form of economic malpractice, the government has decided to use coercion to prohibit voluntary transactions between consenting adults.

The excuse is the Zika virus, but the result will be failure. Here’s some of what CNN is reporting.

The government of Puerto Rico has ordered a price freeze on condoms… Any store that hikes prices to try to capitalize on people’s fears of the virus will be fined up to $10,000. Other items on the price-freeze list: insect repellent, hand sanitizer and tissues. …The price gauging [sic] ban went into effect at the end of January on mosquito repellents. Condoms were added to the list in early February… “The price freeze remains in effect until after the emergency is over,” Nery Adames, Secretary of the Department of Consumer Affairs, tells CNN.

By the way, you’ll notice that the government didn’t address the one thing it legitimately could have done to reduce condom prices.

Condoms are subject to the island’s 11.5% sales tax, one of the highest in the nation.

But let’s focus on the policy of price controls.

With his usual clarity, Professor Don Boudreaux explains the consequences of these horrid restrictions on market forces.

 The price freeze will prevent the Zika-inspired rise in the demand for condoms from calling forth an increase in the quantity of condoms supplied to satisfy that higher demand.  The resulting shortage of condoms will prompt some people to wait in queues to buy condoms, cause other people to turn to black-market suppliers, and cause yet other people simply to not use condoms during sex.  Each of these consequences reflects the reality that the price freeze, rather than keeping the cost of condoms “cheap,” will raise that cost inordinately – and, in the process, further promote the spread of Zika.

Amen. Don is spot on about the negative consequences of allowing politicians and bureaucrats to interfere with market prices.

So we have a government “solution” that actually makes a problem worse.

Just as price controls have contributed to economic misery in Venezuela.

Or caused shortages after hurricanes in the United States.

Puerto Rico needs its version of Ludwig Erhard. Instead, it’s governed by people who apparently learned economics from Hugo Chavez.

P.S. Speaking of condoms, I hope I’m not the only one who is both amused and disgusted that politicians and bureaucrats simultaneously squander money to discover men don’t like poorly-fitting condoms while also imposing regulations that prevent condom companies from offering a greater variety of sizes.

P.P.S. Though I guess those examples of government foolishness are comparatively frugal compared to the “stimulus” grant that spent $6,000 per interview to discover why some men don’t get “stimulus.”

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The communist economic system was a total disaster, but it wasn’t because of excessive taxation. Communist countries generally didn’t even have tax systems.

The real problem was that communism was based on central planning, which is the notion that supposedly wise bureaucrats and politicians could scientifically determine the allocation of resources.

But it turns out that even well-meaning commissars did a terrible job. There was massive inefficiency and widespread shortages. Simply stated, notwithstanding the delusions of some left-wing economists (see postscript of this column), the system was an economic catastrophe.

Why? Because there were no market-based prices.

And, as explained in this video from Learn Liberty, market-based prices are like an economy’s central nervous system, sending signals that enable the efficient and productive allocation of resources in ways that benefit consumers and maximize prosperity.

And just in case it’s not obvious from the video, a price system can’t be centrally planned. Or, to be more precise, you won’t get good results if central planners are in charge.

Now let’s look at a bunch of economic policy questions that seem unrelated.

What’s the underlying reason why minimum wages are bad? We know they lead to bad effects such as higher unemployment, particularly for vulnerable populations, but how do these bad effects occur?

Why is it bad to have export subsidies such as the Export-Import Bank? It’s easy to understand the negative effects, such as corrupt cronyism, but what’s the underlying economic concern?

Or what’s the real reason why third-party payer is misguided? And why should people be concerned about high marginal tax rates or double taxation? Or Obamacare subsidies? Or unemployment insurance?

These questions involve lots of different issues, so at first glance there’s no common theme.

But that’s not true. In every single case, bad effects occur because politicians are distorting the workings of the price system with preferences and penalties.

And that’s today’s message. We generally don’t have politicians urging the kind of comprehensive central planning found is genuinely socialist regimes. Not even Bernie Sanders. But we do have politicians who advocate policies that undermine the price system on an ad-hoc basis.

Every tax, every regulation, every subsidy, and every handout is going to distort incentives for some people. And the cumulative effect of all these interventions is like a cancer that eats away at prosperity.

The good news is that we don’t have nearly as many of these bad policies as places such as France and Mexico.

But the bad news is that we have more of these policies than Hong Kong and Singapore.

The bottom line is that America could be much richer with less intervention. But that would require less ad-hoc interventionism.

P.S. There’s a bit of economic wisdom in these jokes that use two cows to explain economic systems.

P.P.S. Here are two other videos on the price system, both of which help explain why only a decentralized market system can allocate resources in ways that benefit consumers.

P.P.P.S. A real-world example of the price system helped bring about the collapse of communism.

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