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In addition to speaking on tax competition at the European Resource Bank in Moldova, I also appeared on a panel about healthcare.

I used the opportunity to explain how government-created “third-party payer” has crippled market forces in the United States and produced inefficiency and needlessly high costs.

There are two visuals from my presentation I want to highlight.

First, I took Milton Friedman’s explanation of the how people care about cost and quality depending on whether they’re spendingf their own money and whether they’re buying for themselves, and I then showed how it applies to America’s healthcare system.

Ideally, purchases are made in quadrant 1. Thanks to government distortions, however, most health spending in America occurs in quadrants 2, 3, and 4.

When purchases occur in quadrant 1, buyers and sellers directly interact and there are incentives on both sides to get the most value.

That’s not the case, though, with purchases in the other quadrants.

I illustrated the problem with a slide that looks at the layers that exist between health consumers and health providers.

I also shared data on how third-party payer causes higher prices in every sector where it exists and also pointed out that we see falling prices in the few parts of the healthcare sector where people actually buy with their own money.

But that’s old news.

Let look at some new information.

Doctor Scott Atlas, in a column for today’s Wall Street Journal, concisely explains the problem of government-created third-party payer.

In an effort to bring down the costs of medical care, the Trump administration wants to make prices visible to patients, and it’s moving aggressively to make that happen. …A new executive order will require providers paid by Medicare to post prices for a range of procedures. Meanwhile, the Centers for Medicare and Medicaid Services recently finalized its mandate requiring pharmaceutical manufacturers to disclose the list price of prescription drugs in direct-to-consumer television advertisements. …Yet these moves won’t be enough to bring down prices. Transparency, though essential, is not sufficient. Nor does it always need to be legislated. Laws aren’t required to force sellers of food, computers or clothing to post prices. That information is driven by consumers who actively seek value for their money. …But patients typically don’t even ask about prices, because they figure “it’s all covered by insurance.” The harmful U.S. model is unfortunately that insurance should minimize any out-of-pocket payment. Health care may be the only good or service in America that is bought and used without knowing its cost. Unfortunately, the Affordable Care Act instilled even broader coverage requirements and added counterproductive subsidies that encouraged more-widespread adoption of bloated insurance, reinforcing a model of coverage that prevents patients from caring about prices.

How do we fix the problem?

Dr. Atlas says people need to have control over their healthcare dollars.

To bring prices down, …patients must have stronger incentives to consider price. …But as long as insurance minimizes the patient’s share of cost, the patient won’t bother price shopping. For price-transparency to have the most impact, it must increase visibility of the only price relevant to patients—out-of-pocket costs at the time of purchase. Cheaper insurance policies with higher deductibles, coupled with large, liberalized-use, permanently owned health savings accounts, are also important to motivate consideration of price. …We can make medical care more affordable without moving to a single-payer system. Centralized models uniformly regulate costs by restricting health-care use, generating lengthy delays for needed care, limiting access to important drugs and technology, and ultimately resulting in worse disease outcomes. The better path will involve reducing the cost of medical care itself by creating the conditions that bring down prices in every other area of the economy: incentivizing empowered consumers and increasing the supply of medical care to stimulate competition among providers.

Amen.

That means reforming Medicare and Medicaid, where the government directly creates third-party payer.

And it means reforming the tax code, where the government indirectly creates third-party payer with a big preference for over-insurance.

At the risk of upsetting some people, it even means defending the “Cadillac tax,” a provision of Obamacare.

And even agreeing with the Washington Post, which opined today in favor of that provision.

Consider the House supermajority, made up of Democrats and Republicans favoring repeal of the excise tax on high-cost health insurance plans, which would otherwise take effect in 2022. …the bill is backed by a potent lobbying coalition including insurance companies, labor unions — and even ExxonMobil. …Known as the “Cadillac tax” because it applies to especially generous “Cadillac” health plans, the tax equals 40 percent of the value of private-sector health benefits exceeding $11,200 for single coverage and $30,150 for family coverage in 2022. Albeit indirectly, the tax chips away at one of the largest subsidies in the health-insurance system, the tax exclusion for employer-paid health insurance… A wide consensus of economists identifies the tax exclusion as a major source of distortion in the U.S. system, building a higher floor under costs… The Cadillac tax would curb these tendencies… killing the Cadillac tax… The United States’ already out-of-whack health-care system will become more so, and bipartisan profligacy and pandering will have triumphed again.

Let’s close with a bit of dark humor.

One of my many frustrations is that people blame the free market for the various government-caused problems in healthcare. Here’s a way of visualizing it.

Government intervenes, which causes problems, and those problems are then used as an excuse for additional intervention. Sort of a turbo-charged version of Mitchell’s Law.

Ultimately, this process may lead politicians to adopt something really crazy, such as “Medicare for All.”

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The so-called Green New Deal is only tangentially related to climate issues.

It’s best to think of it as the left’s wish list, and it includes a paid leave entitlement, government jobs, infrastructure boondoggles, and an expansion of the already bankrupt Social Security system.

But the most expensive item on the list is “Medicare for All,” which is a scheme concocted by Bernie Sanders to have the government pay for everything.

Would this be a good idea? In a column for Forbes, Sally Pipes of the Pacific Research Institute explains that government-run healthcare in the United Kingdom has some very unfriendly features.

Nearly a quarter of a million British patients have been waiting more than six months to receive planned medical treatment from the National Health Service, according to a recent report from the Royal College of Surgeons. More than 36,000 have been in treatment queues for nine months or more. …Consider how long it takes to get care at the emergency room in Britain. Government data show that hospitals in England only saw 84.2% of patients within four hours in February. …Wait times for cancer treatment — where timeliness can be a matter of life and death — are also far too lengthy. According to January NHS England data, almost 25% of cancer patients didn’t start treatment on time despite an urgent referral by their primary care doctor. …And keep in mind that “on time” for the NHS is already 62 days after referral.

If this sounds like the VA health care system, you’re right.

Both are government run. Both make people wait.

And both produce bad outcomes. Here’s some of the data from the British system.

Unsurprisingly, British cancer patients fare worse than those in the United States. Only 81% of breast cancer patients in the United Kingdom live at least five years after diagnosis, compared to 89% in the United States. Just 83% of patients in the United Kingdom live five years after a prostate cancer diagnosis, versus 97% here in America.

Just like I told Simon Hobbs on CNBC many years ago.

The best part of Sally’s column is that she explains how the flaws in the U.K. system are being copied by Bernie Sanders and other supporters.

Great Britain’s health crisis is the inevitable outcome of a system where government edicts, not supply and demand, determine where scarce resources are allocated. Yet some lawmakers are gunning to implement precisely such a system in the United States. The bulk of the Democratic Party’s field of presidential candidates — including Senators Kirsten Gillibrand, Kamala Harris, and Elizabeth Warren — co-sponsored Senator Bernie Sanders’s 2017 “Medicare for All” bill. That plan would abolish private insurance and put all Americans on a single government-run plan… Britons face long waits for poor care under their country’s single-payer system. That’s not the sort of healthcare model the American people are looking for.

The bottom line is that Medicare for All would further exacerbate the third-party payer problem that already plagues the health care system.

And that means ever-escalating demand, rising costs, and inefficiencies.

There are only two ways of dealing with the cost spiral. One option is huge tax increases, which would result in a massive, European-style tax burden on the lower-income and middle-class taxpayers.

Taxpayers in the U.K. endure higher burdens than their counterparts in America, But they also suffer from the second option for dealing with the cost spiral, which is rationing.

Some of the data was in Ms. Pipes’ column.

If you want more examples (and some horrifying examples), you can click stories from 2017, 2016, 2015, 2014, 2013, and 2012.

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When I think about social welfare spending, I mostly worry about recipients getting trapped in dependency.

But I also feel sorry for taxpayers, who are bearing ever-higher costs to finance redistribution programs.

Today’s column won’t focus on those issues. Instead, we’re going to utilize new OECD data to compare the size of the welfare states in developed nations.

We’ll start with the big picture. Here it total redistribution spending, measured as a share of economic output, for selected countries that are members of the Organization for Economic Cooperation and Development.

Nobody will be surprised, I assume, to see that France, Finland, Belgium, Denmark, and Italy have the biggest welfare states.

The United States is in the middle of the pack. American taxpayers might be surprised to learn, though, that they finance a bigger welfare state than the ones that exist in Canada, Iceland, and the Netherlands.

The overall numbers are important, but it’s also educational to consider the various components.

And the largest chunk of social spending in most nations is for their old-age programs. The biggest burdens are found in Greece, Italy, France, Portugal, and Austria. The United States, once again, is in the middle of the pack.

By the way, keep in mind that there are many factors that determine why some nations spend more than others.

  • How generous are benefits? – This is often measured as the “replacement rate,” which compares retirement benefits to income during working years.
  • When can people retire? – Some countries allow people, or some classes of people, to get benefits while relatively young. Others are more stringent.
  • Does a country have an aging population? – Demographic changes already are beginning to have a large effect on the finances of some systems.
  • Is there a private savings system? – Nations such as Switzerland, Australia, Chile, and the Netherlands have significant private retirement savings.

Now let’s look at government spending on health.

Here’s the area where the United States is more extravagant than almost every other nation. Only France spends more money.

Actually, since per-capita GDP is significantly larger in the United States than in France, American taxpayers spend more on a per-person basis.

Some people will observe, with great justification, that the data for the United States may be a measure of the inefficiency of the American system rather than taxpayer generosity. This is a topic for another day.

Last but not least, let’s look at traditional welfare. In other words, cash assistance to the working-age population.

The fiscal burden of this spending is highest in Belgium, Finland, the Netherlands, Norway, and Luxembourg. The United States, meanwhile, is comparatively frugal.

P.S. Here are a couple of caveats for number crunchers and policy wonks.

First, there are methodological challenges when comparing OECD nations. Eastern European nations tend to be significantly less prosperous than Western European nations, thanks to decades of communist enslavement. So looking at this data does not really allow for apples-to-apples comparisons. Moreover, there are a handful of developing nations that belong to the OECD, such as Mexico and Turkey, so comparison are effectively meaningless. And Chile is on the cusp of becoming a fully developed nation so it’s in its own category.

Second, as I briefly mentioned above, nations have different levels of per-capita GDP. If we look at the last chart, Austria and Spain spend a similar share of GDP on welfare, but since Austria is a richer nation, its taxpayers actually finance a lot more per-capita welfare spending. The same is true if you compare Canada and Estonia, Sweden and Slovenia, and Germany and Greece.

P.P.S. There was virtually no welfare state in OECD nations prior to the 1930s and very small welfare states until the 1960s. For what it’s worth, the huge reduction in poverty in those nations occurred before the welfare state.

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There’s a long and sordid history of people in Western nations acting as dupes and apologists for communism.

This is especially the case with the wretchedly impoverished totalitarian outpost 90 miles south of Florida.

Based on what he wrote for the opinion pages of the New York Times, Nicholas Kristof belongs on that list of “useful idiots.”

Cuba…in health care…does an impressive job that the United States could learn from. …an American infant is, by official statistics, almost 50 percent more likely to die than a Cuban infant. By my calculations, that means that 7,500 American kids die each year because we don’t have as good an infant mortality rate as Cuba reports. …a major strength of the Cuban system is that it assures universal access. Cuba has the Medicare for All that many Americans dream about. …It’s also notable that Cuba achieves excellent health outcomes even though the American trade and financial embargo… Cuba overflows with doctors — it has three times as many per capita as the United States… Outsiders mostly say they admire the Cuban health system. The World Health Organization has praised it, and Ban Ki-moon, the former United Nations secretary general, described it as “a model for many countries.”

Kristof admits in his piece that there are critics who don’t believe the regime’s data, but it’s clear he doesn’t take their concerns seriously.

And he definitely doesn’t share their data. So lets take a close look at the facts that didn’t appear in Kristof’s column.

My first recommendation is to watch Johan Norberg’s video on the real truth about Cuba’s infant mortality.

But there’s so much more.

Jay Nordlinger authored the most comprehensive takedown of Cuba’s decrepit system back in 2007. Here are some of the highlights.

The Left has always had a deep psychological need to believe in the myth of Cuban health care. On that island, as everywhere else, Communism has turned out to be a disaster: economic, physical, and moral. Not only have persecution, torture, and murder been routine, there is nothing material to show for it. The Leninist rationalization was, “You have to break some eggs to make an omelet.” Orwell memorably replied, “Where’s the omelet?” There is never an omelet. …there is excellent health care on Cuba — just not for ordinary Cubans. …there is not just one system, or even two: There are three. The first is for foreigners who come to Cuba specifically for medical care. This is known as “medical tourism.” The tourists pay in hard currency… The second health-care system is for Cuban elites — the Party, the military, official artists and writers, and so on. In the Soviet Union, these people were called the “nomenklatura.” And their system, like the one for medical tourists, is top-notch. Then there is the real Cuban system, the one that ordinary people must use — and it is wretched. Testimony and documentation on the subject are vast. Hospitals and clinics are crumbling. Conditions are so unsanitary, patients may be better off at home, whatever home is. If they do have to go to the hospital, they must bring their own bedsheets, soap, towels, food, light bulbs — even toilet paper. And basic medications are scarce. …The equipment that doctors have to work with is either antiquated or nonexistent. Doctors have been known to reuse latex gloves — there is no choice. …So deplorable is the state of health care in Cuba that old-fashioned diseases are back with a vengeance. These include tuberculosis, leprosy, and typhoid fever. And dengue, another fever, is a particular menace.

Wow, I guess shortages extend well beyond toilet paper.

Next we have some very sobering data from a 2004 article in Canada’s National Post.

…a small bottle of tetracycline costs US$5 and a tube of cortisone cream will set you back as much as US$25. But neither are available at the local pharmacy, which is neat and spotless, but stocks almost nothing. Even the most common pharmaceutical items, such as Aspirin and rubbing alcohol, are conspicuously absent. …Antibiotics, one of the most valuable commodities on the cash-strapped Communist island, are in extremely short supply and available only on the black market. Aspirin can be purchased only at government-run dollar stores, which carry common medications at a huge markup in U.S. dollars. This puts them out of reach of most Cubans, who are paid little and in pesos. Their average wage is 300 pesos per month, about $12. …tourist hospitals in Cuba are well-stocked with the latest equipment and imported medicines, said a Cuban pediatrician, who did not want to be identified. …”Tourists have everything they need,… But for Cubans, it’s different. Unless you work with tourists or have a relative in Miami sending you money, you will not be able to get what you need if you are sick in Cuba. As a doctor, I find it disgusting.”

And here’s some scholarly research from Katherine Hirschfeld at the University of Oklahoma (h/t: Scott Johnson).

…the Cuban government continues to respond to international criticism of its human rights record by citing…praise for its achievements in health and medicine…the unequivocally positive descriptions of the Cuban health care system in the social science literature are somewhat misleading. In the late 1990s, I conducted over nine months of qualitative ethnographic and archival research in Cuba. During that time I shadowed physicians in family health clinics, conducted formal and informal interviews with a number of health professionals, lived in local communities, and sought to participate in everyday life as much as possible. Throughout the course of this research, I found a number of discrepancies between the way the Cuban health care system has been described in the scholarly literature, and the way it appears to be described and experienced by Cubans themselves. …After just a few months of research, …it became increasingly obvious that many Cubans did not appear to have a very positive view of the health care system themselves. A number of people complained to me informally that their doctors were unhelpful, that the best clinics and hospitals only served political elites and that scarce medical supplies were often stolen from hospitals and sold on the black market. Further criticisms were leveled at the politicization of medical care… Public criticism of the government is a crime in Cuba, and penalties are severe. Formally eliciting critical narratives about health care would be viewed as a criminal act both for me as a researcher, and for people who spoke openly with me. …One of the most readily apparent problems with the health care system in Cuba is the severe shortage of medicines, equipment, and other supplies. …Many Cubans (including a number of health professionals) also had serious complaints about the intrusion of politics into medical treatment and health care decision-making.

Three academics at Texas Tech University also found very troubling data when they investigated the nation’s health system (h/t: David Henderson).

With 11.1% of GDP dedicated to health care and 0.8% of the population working as physicians, a substantial amount of resources is directed towards reducing infant mortality and increasing longevity. An economy with centralized economic planning by government like that of Cuba can force more resources into an industry than its population might desire in order to achieve improved outcomes in that industry at the expense of other goods and services the population might more highly desire. …Physicians are given health outcome targets to meet or face penalties. This provides incentives to manipulate data. Take Cuba’s much praised infant mortality rate for example. In most countries, the ratio of the numbers of neonatal deaths and late fetal deaths stay within a certain range of each other as they have many common causes and determinants. …Cuba, with a ratio of 6, was a clear outlier. This skewed ratio is evidence that physicians likely reclassified early neonatal deaths as late fetal deaths, thus deflating the infant mortality statistics and propping up life expectancy. Cuban doctors were re-categorizing neonatal deaths as late fetal deaths in order for doctors to meet government targets for infant mortality. …Physicians often perform abortions without clear consent of the mother, raising serious issues of medical ethics, when ultrasound reveals fetal abnormalities because ‘otherwise it might raise the infant mortality rate’. …The role of Cuban economic and political oppression in coercing ‘good’ health outcomes merits further study.

The bottom line is that Cuba is a hellhole and statistics from a repressive regime can’t be trusted.

Though the real message of today’s column is that we should be revolted by people who are willing to be dupes for totalitarianism.

And I can understand why people willing to debase themselves in that way are so sensitive to criticism.

P.S. The New York Times has a pathetic history of covering up for the crimes of communism, most notably Walter Duranty, who was given a Pulitzer Prize in 1932 even though he despicably lied in his reports to promote Stalin’s horrid regime. He even covered up Stalin’s holocaust of the Ukrainian people. Even though Duranty’s evil actions are now public knowledge, the Pulitzer Prize Board has not revoked the award. The New York Times, to its credit, at least has acknowledged that Duranty lied to promote Stalin’s brutal dictatorship. One wonders if the newspaper eventually will apologize for Kristof.

P.P.S. I’m also not impressed that a former Secretary General of the U.N. endorsed Cuba’s health care system. After all, it was an official from the U.N. who praised the lack of obesity among the starving people of North Korea.

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I periodically mock the New York Times when editors, reporters, and columnists engage in sloppy and biased analysis.

But all these instances of intentional and unintentional bias are trivial compared to our next example.

The New York Times has gone above and beyond conventional media bias with a video entitled, “How Capitalism Ruined China’s Health Care System.”

Here’s the part that caused my jaw to drop.

After the sad opening story about the guy with the sick mother, there’s a section from 1:33-2:27 that makes two observations that basically show the premise of the video is totally wrong.

  • First, it points out (from 1:33-1:42) that there is a universal, government-run health system that ostensibly covers the guy’s mother, so her unfortunate status is yet another example that coverage in a government-run healthcare system is not the same as treatment.
  • Second, it points out (from 2:05-2:27) that life expectancy soared once the communist party relaxed its grip on the economy and allowed some liberalization, which would seem to be powerful evidence that capitalism leads to better health outcomes.

These are astounding mistakes.

But it gets worse. Sarah Lilly, who lives in China, debunked the rest of the video in a column for FEE.

The New York Times…attempts to blame capitalism for the many problems in China’s health care system. …As a resident of China and a recipient of outstanding private health care here, I was confused as to why the Times would show us the horrors of a capitalist system without actually visiting a private health care facility. …All of the horrors depicted in the high-quality video—the long lines, the scalping, and the hospital fights—occurred at government-run health care facilities. …At the very least, failing to feature a single private medical facility while blaming capitalism for the dysfunction of China’s public health system is intellectually dishonest.

She points out that the big-picture analysis in the video is wrong.

In the video, the Times praises Chairman Mao’s introduction of “free” health care and claims that when capitalism was introduced into the country, the state retreated and care was no longer free. Neither statement is true. First, health care was never free; it was paid for by tax revenues. Second, the state never retreated; rather, its regulatory apparatus became vaster and even more invasive. Out of sheer necessity, China allowed for the creation of private hospitals to ease the burden of the country’s heavily bureaucratic and deteriorating health care system.

And she also explains that the details of the video are wrong.

The Times video depicts the ungodly long line most Chinese face to see a physician. …It’s an appalling scene. …There’s just one problem. The Shanghai Cancer Center is a public hospital, not a private one. The long lines, scalpers, bribes, and physical fights with hospital staff—all of these exclusively happen in the public, communist, government-run hospitals. …In an egregious bit of sleight-of-hand, the Grey Lady asserts that capitalism is ruining Chinese health care while presenting us with a hospital where capitalism is not practiced.

To be fair, we get the same type of mistake when journalists look at the flaws in the American health system. They blame capitalism when the problems of ever-higher prices and uneven coverage are the consequences of government intervention.

P.S. My columns about sloppy bias at the New York Times don’t include Paul Krugman’s writings. Debunking those mistakes requires several different collections.

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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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When I argue with my statist friends about the proper size and scope of government, they accuse me of not wanting public services.

My typical response is to explain that I am a strong supporter of markets as the method to get high-quality roads, schools, and healthcare.

But I’m wondering whether this answer pays too much attention to the trees and doesn’t focus on the forest.

After all, the debate isn’t whether we should be Liberland or Venezuela. It’s whether government should be bigger or smaller compared to what we have now.

So the next time I tussle with my left-leaning buddies, I’m going to share this chart (based on data from the IMF’s World Economic Outlook database) and ask them why we can’t be like the fast-growing, small-government nations of Asia.

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To elaborate, not only do jurisdictions such as Hong Kong and Singapore enjoy impressive growth, they also get very high scores for infrastructure, education, and health outcomes.

In other words, these nations are role models for “public sector efficiency.”

What they don’t have, by contrast, are expensive welfare states that seem to be correlated with poor outcome for basic public services.

For all intents and purposes, I want to focus the debate on how much government is necessary to get the things people want, sort of like I did in Paris back in 2013.

I asked the audience whether they thought that their government, which consumes 57 percent of GDP, gives them better services than Germany’s government, which consumes 45 percent of GDP. They said no. I then asked if they got better government than citizens of Canada, where government consumes 41 percent of GDP. They said no. And I concluded by asking them whether they got better government than the people of Switzerland, where government is only 34 percent of economic output… Once again, they said no.

I assume (hope) Americans also would say no given these choices. And hopefully they would say yes when asked if we should be like Hong Kong and Singapore.

P.S. If I rotated the above chart clockwise by 90 degrees we’d have a pretty good approximation of the downward-sloping portion of the Rahn Curve.

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