Life Expectancy Improvements in the U.S.

HT: Carpe Diem

Politicization of Health Care Reform

Donald Boudreaux‘s letter to the Baltimore Sun on the politicization of health-care reform:

You are right to decry the increasing politicization of health-care (”Medicine trumps politics,” Nov. 24).

But you are also unreasonable to do so.  Yours is among the most strident voices in support of Obamacare.  To demand more government-enforced and financed health-care arrangements and to decry the inevitable politics that arises in response to this government intervention is like demanding government-enforced and financed free love and decrying the inevitable resulting increase in unwanted pregnancies and STDs.

Sincerely,
Donald J. Boudreaux

Quote of the Day

“I am a sinner that does not expect forgiveness. But I am not a government official.”

~ Francis Wolcott, Deadwood

Government Financing: Heads I win, tails you lose

In Ayn Rand’s Capitalism: The Unknown Ideal, she writes,

Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others. By what criterion of justice is a consensus-government to be guided? By the size of the victim’s gang.

The logic behind this statement is simple and largely self-evident, though often ignored in policy discussions. It should be noted that the article I write about below has nothing to do with the above quote – which is precisely the problem.

A November 19th article from The Economist ponders the question of how governments can best raise revenue through taxes. To the author’s credit, he states in the first paragraph:

Although spending cuts could, and should, be the preferred route to prudence, taxes are all too likely to be part of the mix—at least judging from the experience of those countries that have already acted.

Unfortunately, the article concludes that developed countries would do best to focus on “efficiency” rather than “fairness.” If a government’s goal is to pursue the utilitarian goal of the “greatest good for the greatest number,” this preference for efficiency over fairness would be correct. However, any government with such utilitarian goals is an abomination.

The author does make some important points about alternate tax systems. Taxes on consumption, including a value-added tax (VAT), are regressive; meaning the lower an individual’s income, the higher he is taxed. Consumption taxes do, as the author points out, encourage saving – but they simultaneously discourage spending. Corporate taxes, it is noted, are particularly market-distorting. The critical numbers of the article can be found in the graph below (click to enlarge).

The author also illustrates an interesting phenomenon that often goes overlooked. Very collectivist (communist, socialist, fascist, etc.) have government revenues that make up a relatively large percentage of GDP, when compared with economically liberal countries such as the U.S. Russia, for example, has government revenues equal to 47.7 percent GDP, while the U.S. has government revenues equal to 33.7 percent GDP. But these percentages do not tell the whole story. It is also important to look at the components that make up these percentages. In Russia, non-tax revenues (largely related to state-owned oil companies) make up 14.5 percent of GDP, while in the U.S. non-tax revenues comprise only 5.7 percent of GDP.

At first, this may seem to be a much more efficient way for governments to raise revenue (though, to be sure, the article never makes this claim). It is easy to understand why a person unfamiliar with the record of history may see no difference between a government-run entity earning revenues and a private firm collecting profits. Is there any real difference between the Russian government selling oil and ExxonMobil selling oil?

The answer is a definite “yes”.

History and economics  both teach us that no central body can determine the amount of goods and services needed by individuals. Only the invisible hand of market forces can provide society any degree of efficiency. So even if government raises its revenue through so-called production instead of taxation, there will still be massive transaction costs and inefficiencies on both the supply and demand side. And of course, the government has incentives that conflict with offering the best product at the best prices. Governments typically have two goals: 1) gain power, 2) create social value. Yes, these are often at odds;  and yes, the second is often a means to the first. Regardless, governments are not motivated by profits. And the profit motive is the driving force behind real economic efficiency.

But all of this talk of efficiency misses the point. I’ll return now to the point of the quote I began with.

When reading such articles, it’s easy  to get wrapped up in the author’s arguments and lose the ability to distinguish the forest from the trees. Though the free market is far more efficient than a centrally-planned market, is that really a concern when so many tax systems and government sources of revenue violate individual rights? ExxonMobil has vast resources at its disposable to best its competition. But the one thing it does not have is the ability to coerce by force. Only by offering its customers the greatest value at the lowest price can it win in a free market. While the Russian government (or any other government) only has to pass laws – backed, of course, by men with guns – to maintain its supremacy. Take the U.S. Post Office, for example. If FedEx and UPS were allowed to carry mail, would the USPS have any chance at remaining viable? Of course not. Only by regulation and force can the USPS continue to provide income for the U.S. government.

So whether you are concerned with efficiency or freedom, the property confiscated by government should be reserved only for the protection of our individual rights.

One final thought from Ayn Rand on the subject:

There can be no compromise between freedom and government controls; to accept “just a few controls” is to surrender the principle of inalienable individual rights and to substitute for it the principle of the government’s unlimited, arbitrary power, thus delivering oneself into gradual enslavement. As an example of this process, observe the present domestic policy of the United States.

One way to boost GDP

From the Wall Street Journal:

South Africa has found an interesting way to bolster its gross domestic product: include illegal activities.

Stats SA in its latest GDP report expanded its survey to include previously uncovered areas of the economy such as crime, the drugs trade and illegal mining. The “non-observed element” of the economy accounted for 0.2% of GDP in 2008, it said.

“Information was obtained from administrative and enforcement records of the South African Police Service (SAPS), South African Revenue Service (SARS), other associations (e.g. SWEAT for prostitution) and information on other country experiences,” Stats SA said.

The contribution to GDP from the non-observed economy is seen steady at around 0.2% from 2002 through 2008, though it dipped to 0.1% in 2007. The calculations are used for its benchmarking revisions, but isn’t included in its regular quarterly numbers. On Tuesday, the country reported that GDP grew 0.9% in the quarter ended September, marking an end to its first post-apartheid recession.

Pressure has mounted on President Jacob Zuma, elected in April on a populist platform of poverty reduction and job creation. Unemployment rose to 24.5% in the third quarter after 484,000 jobs were lost during the three months, Statistics South Africa said last month.

Maybe the country should consider counting people who work in illegal activities to bring down its unemployment rate.

Why protectionism is a lot like racism

Post has changed locations. Click here to read this post.

After Congressional Pressure, NFL Adds Concussion Rules

Facing mounting pressure from Congress, the NFL has announced it will implement new policies to protect players in the event of a concussion. The new rule will require teams to hire an impartial, independent neurologist to treat players for concussions.

Congress has pointed to scientific studies that find increased risk for dementia, brain damage and cognitive decline in retired players due largely to concussions. Of course, several non-athletic professions cause long-term damage as well. Three questions come to mind. First, is Congress really saying they need to intervene for the safety of multimillionaires? Second, doesn’t Congress have better things to worry about? Third, what right does Congress have to get in the way of two consenting parties, players and NFL executives?

NFL Commissioner Roger Goodell has publicly stated that the league’s polices are safe and do not require third-party involvement. Congress has a different opinion.

Last month, the House Judiciary Committee summoned Goodell for a hearing on the matter where the NFL was compared to the tobacco industry for its insistence that players were safe.

“I don’t want to call it forced, but it’s been strongly urged because of the awareness of the issue these days,” Chester Pitts, a lineman and union representative for the Houston Texans, said in an interview with the New York Times. “When you have Congress talking about the antitrust exemption and them calling them the tobacco industry, that’s pretty big.”

In 2007, the NFL began requiring all players to undergo baseline neuropsychological testing and then be retested before returning to play, it prohibited players who were knocked unconscious to resume playing, and initiated a hot line where players could report being pressured to play against a doctor’s advice. These changes were done not by the fist of Congress, but by the free choice of NFL executives.

There is no need for Congressional involvement in the matter. Apart from having bigger issues on their plate, Congress has no right to intervene between two voluntary groups: the players and the league. The players know the risks when they play, it is factored into their salaries. At the same time, NFL executives don’t want injured players, that is bad business. The money is in having the stars play, not sit injured on the sidelines. Therefore, the player’s health is a primary concern.

Do Assassinations Matter?

Adam Ozimek has posted about a new paper by Benjamin F. Jones and Benjamin A. Olken on the effect of assassinations.

Assassinations are a persistent feature of the political landscape. Using a new data set of assassination attempts on all world leaders from 1875 to 2004, we exploit inherent randomness in the success or failure of assassination attempts to identify assassination’s effects. We find that, on average, successful assassinations of autocrats produce sustained moves toward democracy. We also find that assassinations affect the intensity of small-scale conflicts. The results document a contemporary source of institutional change, inform theories of conflict, and show that small sources of randomness can have a pronounced effect on history.

In sum, these results show that assassinations affect political institutions and conflict. Whether or not assassinations change “the history of the world” in Disraeli’s words, they do appear to change the history of individual countries. Our tests provide evidence that small elements of randomness – the path of a bullet, the timing of an explosion, small shifts in a leader’s schedule – can result in substantial changes in national outcomes.

The findings also inform central issues in political economy. The results inform the theory of war, lending support to those models of conflict that feature agency for leaders, with divergent incentives between the leader and the population at large. The results further suggest that individual autocrats are cornerstones of national institutions, thus informing the important, policy-relevant and empirically challenging question of how societies move to democracy. Our findings complement the literature on institutional origins by showing an important component of institutional change that lies not in distant history but in contemporary hands.

And now for some great data (click to enlarge):

The table below shows assassinations of primary national leaders since 1875. It provides the country, year of assassination, name of leader and weapon used:

This table provides summary statistics on assassination attempts. It shows guns as the most common assassination instrument (55 percent), followed by explosives (31 percent):

The two graphs below illustrate how the frequency of assassination and assassination attempts has evolved over time, plotting the frequency of attempts and successful assassinations in each decade:

This is what happens when you start handing out money

From the Lexington’s notebook:

Christian Scientists, who don’t believe in conventional medicine, are nonetheless keen to grab some of the cash the government will soon be splurging on health reform.

Church leaders want health insurers to reimburse “spiritual health” practitioners who pray for the sick, reports the Washington Post.

A proposal to that effect was stripped out of the House health bill, but the Church is lobbying to have it re-inserted into the Senate version.

Mary Baker Eddy, the founder of Christian Science, taught that sickness is a delusion. Rather than consulting a doctor when you are ill, you should pray, she advised. Her modern-day followers sometimes take this literally.

Their children occasionally die of preventable or treatable diseases. The Church would like taxpayers to subsidise this sort of nonsense. And Senators John Kerry and Orrin Hatch apparently agree.

The great thing about this sort of logic is that it can be applied to anything. If I “educate” my children by praying that they will one day get into Harvard, may I please have a subsidy from the Department of Education? And I understand that there’s a lot of money in the defence budget. If I pray for victory in Afghanistan, perhaps Congress will give me some of it.

Quote of the Day

“Today, there is a name for the political doctrine that rejoices in scarcity of everything except government. The name is environmentalism.”

~ George Will