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The Relic of Zero Sum Thinking

Glenn Reynolds writes in The USA Today, Our caveman politics- Economic policy based on 100,000-year-old emotions won’t fix healthcare.

When human beings were hunter-gatherers living in isolated bands and tribes, which was the norm for hundreds of thousands of years (and longer if you count our proto-human ancestors) the supply of goods available at any given moment was largely fixed. Some years there was more game, or more berries to be harvested, and some years there was less, but in neither case did it have much to do with human actions. Hunters or gatherers could range a bit farther, or work a bit longer, but they couldn’t increase the supply of antelopes or fruit. What the tribe had was all there was, so if one person was eating more than his share, it meant less for everyone else.

That’s not true any more. In an industrialized capitalist society, when somebody else eats more, they’re not taking food out of my mouth. In fact, they’re likely making money because they’re delivering a good or service that makes me — or at least, society as a whole — richer. (And when rich people are “early adopters” of technologies, they drive the price of those technologies down, actually making them affordable for the less-wealthy and eventually, as we see with smartphones, even for the poor.)

These evolved instincts served hunter-gatherer cavemen well (which is why they’ve survived) but they don’t work very well in a world where health care, instead of being something that members of a tribe provide for people they’ve grown up with, is something that has to be procured from strangers who make a living providing it. And, as McArdle notes, trying to sell socialism by pretending that society is one big family doesn’t actually help: “Nationalizing the health care system does not fix this fundamental disconnect between our evolved instincts and the inevitable necessities of a modern economy.

HKO

Perhaps one of the greatest advances is the market system of free trade, pricing and specialization which has rendered the zero sum thinking of the majority of human history (Malthus) obsolete.  It was zero sum thinking that generated the need for conquest and war, racism and slavery.

Zero sum thinking returns during periods of economic stagnation and explains why such periods provided fertile ground for the global conflicts of the 20th century.  It is also why poverty has dropped world wide as more nations have embraced the free market alternative.  It is disturbing how much of the current economic thinking returns to this intellectual relic.

read the rest of the article.

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Epi Politics

HKO_A

“We judge other groups by their worst examples – while judging ourselves by our best intentions.”  George W. Bush

The “scandal” of the EpiPen pricing is a picture perfect play for those who have a chip on their shoulder about rich people, corporations, and the need for government to protect us from the greed of the private sector, which of course can only be accomplished by the government because nobody in government is motivated by greed.

Kevin Williamson goes off on a full-fledged unrestrained rant, because what is the point of having a restrained rant.  From his article in National Review, The Politics of Anaphylaxis:

Pardon my bluntness here, but screw these people. Nobody, anywhere, at any time, has ever in a moment of mortal terror cried out: “For God’s sake, is there a politician in the house?” You know how many treatments for anaphylaxis have been produced by politicians over the course of human history? Zero. Congress’s sole contribution to the existence of a handy device that keeps your children from dying from bee stings is the fact that Mylan CEO Heather Bresch is the daughter of a Democratic senator, Joe Manchin of West Virginia.

If we were relying on the intelligence, work ethic, creativity, entrepreneurship, scientific prowess, and far-sightedness of the members of Congress to produce treatments for allergic reactions or any other medical problem, we’d still have a million people a year dying from smallpox and preventable infections. We’d also be starving to death.

A more restrained if different analysis from Homan Jenkins, Jr. at The Wall Street, Dear EpiPen Customers:

Newspaper and TV coverage of our pricing controversy has not been friendly to Mylan, but most reports at least mention the ways we strive to lower the out-of-pocket price for consumers with coupons and rebates to offset their copays and deductibles. We also provide free drugs to hardship cases. The Washington Post even alluded to these efforts in its headline: “Despite coupons, EpiPen’s virtual monopoly roils critics.”

Sadly, the media have proved unable to explain the finer points of pharmaceutical pricing. Not that we blame the media: health-care pricing is complicated and subject to Reporter Complexity Refusal Syndrome.

And yet the essential matter is not complicated. It can be explained in a sentence: Six hundred dollars is the price we want insurers to pay.

HKO

The fury is the same as those who do not understand the role the pricing system plays in allocating needed goods to flooded areas. Charging more for needed products in areas that need it more is functional because it reduces the need for those needed products in areas that need it less. The moral superiors who are more interested in punishing profiteers than helping the needy often end up denying them the goods they need.

Yet there are many that altruistically donate time and money to the needy and needy areas.  To praise them is not to condemn a system that works in their absence. God bless them.

While the EpiPen pricings is tailor made news for those trolling for reasons to “stick” it to the greedy capitalists, it does raise a few other questions.

Why does it take so long and cost so much to get approval for a drug from the FDA? Does this restrict competition and protect greedy profiteers from the accountability and discipline of the market?

How much does the third party payment system distort the pricing system, adding layers of administrative costs while removing basic consumer accountability?

Has the CEO’s father,  Senator Joe Manchin, a Democrat, ever interfered with the FDA’s approval process for Mylan’s competitors?  Would they pursue this line of questioning further is he was a Republican?

But most important, why is this news?  This is not to discount the merit and the outrage of the story, but there are millions of products priced in the market every day, probably in the medical field alone. Transactions flow like water with little ire from the consumers or the moral preening gatekeepers we keep returning to office.  The fact that the EpiPen “scandal” is even newsworthy is testament that market pricing works so well so often that such an aberration is extremely rare. Poorly thought out regulations directed at such exceptions will likely not make it less common.  It would likely just add to the restrictions and roadblocks to innovation that caused such cases in the first place.

 

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Systemic Over Reach

Doctor Leo Spaceman

from Bob Kocher at the Wall Street Journal, How I Was Wrong About ObamaCare:

What I got wrong about ObamaCare was how the change in the delivery of health care would, and should, happen. I believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under the ACA. I joined my White House health-care colleagues— Ezekiel Emanuel and Nancy-Ann DeParle—in writing a medical journal article arguing that “these reforms will unleash forces that favor integration across the continuum of care.” We added that “only hospitals or health plans can afford to make the necessary investments” needed to provide the care we will need in a post-ACA world.

Over the past five years, published research, some of it well summarized on a Harvard Medical School site, has indicated that savings and quality improvement are generated much more often by independent primary-care doctors than by large hospital-centric health systems.

HKO

Large systems and markets have so many extraneous influences, thousands of tiny innovations and improvements,  that it was foolish to think that any credentialed elite could possibly take them into consideration.  Add the costs of additional bureaucracy and stifling rules and the perversion of crony participants and you create a system that combines the worst features of the market and central planning, not the best.

What Kocher should have learned was that the best way for the government to provide a benefit is to clearly identify it and then pay for it, not hide it behind some Rube Goldberg system of regulatory and systemic over reach.  This applies to all policy, not just health care.

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The Threshold becomes a Wall to Growth

Doctor Leo Spaceman

Health Care Law Forces Businesses to Consider Growth’s Costs by Stacy Crowley at The New York Times

When LaRonda Hunter opened a Fantastic Samshair salon 10 years ago in Saginaw, Tex., a suburb of Fort Worth, she envisioned it as the first of what would eventually be a small regional collection of salons. As her sales grew, so did her business, which now encompasses four locations — but her plans for a fifth salon are frozen, perhaps permanently.

“The margins are not big enough within our industry to support it,” she said. “It’s not that I don’t want to — I love my employees, and I want to do everything I can for them — but the numbers just don’t work.”

HKO- how hard was this to predict

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Keep The Cadillac Tax

Doctor Leo Spaceman

Democrats Asked for Obamacare but Now Try to Duck Out of Paying for It by Kevin Williamson at National Review

The teachers’ unions, it should be noted, are the biggest political spenders in the country — not the NRA, not the Koch brothers, not the Chamber of Commerce or Big Oil or Big Whatever. In the private sector, unions are in decline and have been for decades, mainly because extortion is a terrible business model in the long term. But in the public sector — in government — unions rule the roost, which is why they run the Democratic party in spite of their relatively small overall numbers. Hillary Rodham Clinton cannot be president without the support of the teachers’ unions, period, and so she supports repealing one of the main revenue-generating measures attached to Obamacare.

Speaker of the House Paul Ryan, who is a numbers guy, should have the CBO rescore Obamacare as it is actually being implemented, incorporating not only the proposed Cadillac-tax repeal but also the effects of enrollment numbers that are lower than projected — current expectations are that 2016 will see about half the enrollments originally estimated. The result will be not billions but hundreds of billions of dollars in additional deficits. Let Herself defend that on the campaign trail this year, or let that batty old loon from Vermont try to convince the public that all that lost revenue can be made up by raising taxes on 400 guys in Manhattan. By all means, let’s have that fight.

For now, eliminating the Cadillac tax is one tax cut that Republicans should resist. The teachers’ unions and the AFL-CIO put these clowns in office and inflicted Obamaare on the country, and we should make them pay for it. As Ed Koch famously said: The people have spoken, and now they must be punished.