“Economics studies human choice under scarcity. Humans must act in the present to provide for the future. Informed choice relies on market data in the form of prices—specific prices for specific things, as we assess various different means to satisfy our ends—that is what economics is about.
Macro-statistics such as GDP and CPI, whether they are rising or falling in the aggregate, do not help much with this vital task. These statistics are compilations of vast amounts of data to come up with averages across entire countries and time-periods. It’s a dilution of the data, not an enhancement.
” “What a country wants to make it richer, is never consumption, but production. Where there is the latter, we may be sure that there is no want of the former,” said John Stuart Mill, citingSay’s law.
In a tune of rapid change and disruption, weneedprices to do their job more than ever so the entrepreneurial process can work. High prices show which industries to move more resources into, and low prices show which ones to move resources out of to free them up for more urgent uses. From the point of view of consumers, high prices show us what we should cut back on, and low prices show where we can pick up bargains.
This process takes time. Interfering with this process just locks in shortages and surpluses. So-called “stimulus,” just thrown at “the economy” to increase “aggregate demand” in the abstract, cannot work, when there are supply constraints in some industries and prohibitions in others.
Government policy should be on mending holes in the social safety net, compensating those it has forced out of business and jobs, and reducing the tax and regulatory burden it places on businesses, workers and consumers as they try to adjust.
These are all microeconomic responses to relieve suffering and remove impediments.”
Smoot-Hawley and the New Deal are hardly the only examples of government actions making a panic worse.
Thomas Sowell recounts several instances in which governments turned small problems into major ones by using blunt force—often price controls—to respond to public panic about rising costs of a given commodity.
One of the more famous examples of this is the gasoline crisis of the 1970s, which started when the federal government took a small problem (temporary high costs of gasoline) and turned it into a big one (a national shortage).
As Sowell explains, however, there was not an actual scarcity of gasoline. There was nearly as much gas sold in 1972 as the previous year (95 percent, to be precise).
Similar examples kind be found throughout history, fromthe grain shortagesin Ancient Rome brought about by Diocletian’s “Edict on Maximum Prices” to themortgage crisisin 2007.
It is no coincidence that crises—foreign wars, terrorist attacks, and economic depressions—have often resulted in vast encroachments of freedom and even given rise to tyrants (from Napoleon to Lenin and beyond). In his bookCrisis and Leviathan, the historian and economist Robert Higgs explains how throughout history, crises have been used to expand the administrative state, often by allowing “temporary” measures to be left in place after a crisis has abated (thinkfederal tax withholdingduring World War II).
Like an economic panic, pandemics incite mass fear, which can lead to flawed and irrational decision making.
The Healthcare industry, or medical-industrial complex, wears the armor of Government-sponsored protectionism; chinked together by pieces of the tax code, The McCarren-Ferguson Act, Certificate of Need laws, Medicare billing regulations, HIPAA, HITECH, and the ACA.
You would be hard pressed to find a more entrenched, impenetrable cartel.
As we continue to examine the outcomes of socioeconomic initiatives throughout our history, it becomes apparent that society’s benefits are not necessarily derived from good policies as much as from the absence of bad ones.
Counter-intuitively, the less trusting of government we become, the more likely we are to call for more regulation by that same government. “When individuals distrust others, they prefer government officials to regulate and control, even when they know that these officials themselves cannot be trusted,” observed Philippe Aghion, Yann Algan, Pierre Cahuc, and Andrei Shleifer in the aforementioned Quarterly Journal of Economics article.
Their paper drew on the World Values Survey, which has collected data from 50 countries for decades. One example they cite involves relative levels of regulation on starting new businesses. “High-trusting countries such as Nordic and Anglo-Saxon countries impose very few controls on opening a business,” they write, “whereas low-trusting countries, typically Mediterranean, Latin-American, and African countries, impose heavy regulations.” A similar pattern occurs when it comes to setting wages. Residents of low-trust Russia, Slovenia, East Germany, and Bulgaria “exhibit[ed] the strongest support for government control of wages. Approximately 92% of Russians and 82% of East Germans favor wage control. Respondents in Mediterranean countries also strongly favor wage control by the state: 78% of the Spaniards and 60% of the French agree” that the government should control wages. Meanwhile, “in Anglo-Saxon and Nordic countries, less than half the population agree.…Similar patterns obtain for the support of government control of prices.”
But why do people in low-trust countries turn for protection to governments they know are at best incompetent and at worst corrupt? I talked about this dynamic with one of the paper’s co-authors, Andrei Shleifer, who grew up in the old Soviet Union, moved to the United States as a teenager in the mid-1970s, and now teaches economics at Harvard.
When people perceive that their world is out of control and unpredictable, Shleifer says, they want order to be restored—the faster the better. “They want regulation. They want a dictator who will bring back order.” Often, he adds, the rules and restrictions create a negative feedback loop. In response to loss of trust, governments set up new regulations that make it harder to start businesses. Those policies tend to lead to fewer businesses and less employment, which in turn leads to slower economic growth, which leads to calls for more redistribution and yet more regulation.
Weak or nonexistent economic growth is the deep background for the loss of trust throughout society, according to the George Mason University economist Alex Tabarrok. Like Shleifer, Tabarrok is an immigrant, in his case from Canada. Up through the early ’70s, he explains, annual economic growth averaged about 3 percent a year in the United States. Since then, it has become both more volatile and weaker overall. For most of the 21st century, it has averaged around 2 percent. “When everyone is getting wealthier and the economy is humming along and things are improving, it’s easier to trust other people,” Tabarrok says. “If the economic pie is relatively fixed, you distrust other people more because you know the only way someone can get ahead is by screwing you and vice versa.”
Then there’s the populist rhetoric, coming from politicians as different as Donald Trump and Bernie Sanders, that accuses American leaders of selling out their own citizens while furthering the interests of the European Union, Russia, China, and other foreign powers. The idea that “the system is rigged” is far more widely represented in retail politics than it was a few decades ago. That’s both a cause and an effect of the loss of confidence in government. Shleifer stresses that while things in the aggregate are getting better—for virtually everyone in the United States, the standard of living keeps ticking up—the situation is “more volatile.” You don’t get a job until later in life, he says, and when you do, it seems less secure than the one that your parents or grandparents had.
Shleifer points to the economic expansion that has been underway since 2009. “This economy has bounced back tremendously from the Great Recession and much faster than Japan or Europe,” he says. Yet there’s still a widespread perception among many people that getting and keeping a job are beyond their control. That palpable lack of agency orients people to push for government intervention.
Great insight and perspective by Heath McAnally, MD, MSPH, regarding the sometimes reactive, albeit good intentioned, response of gov’t and private entities to the opioid crisis. Worth the read for sure.
Pendulum swings in medicine aren’t new, but damping the oscillation rarely bears such urgency. To paraphrase the original document, we call on our leaders to:
Recognize that opioid tapering requires evidence-based careful selection, patient-centered methods, realistic goals, and close monitoring for adverse events.
Include the expertise of pain management subspecialists at every level of decision-making about future opioid policies and guidelines.
Put a halt to policies forcing opioid tapering/cessation outside the contexts of diversion or unequivocal, documented harm: benefit ratio imbalance
Dr. McAnally is a board-certified anesthesiologist, pain physician, and addictionologist practicing in Alaska (the military sent him there and he decided to stay). If he wasn’t trying to guide people in improving their own lives, teaching medical students to do the same, or writing about it, he’d probably be outdoors right now slogging up a mountain with a good friend or two.
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