Wednesday, 28 November 2018

Snow

I remember seeing this cute little meme posted, without irony, on facebook a couple years ago.

Related image

Clearly the fact that the picture highlighted the failure of a state program escaped the OP.

More seriously though, it's hard to see how the removal of snow would pose any problem for the private sector at all. Some entrepreneur (or community serviceman reprisenting a nonprofit organisation) comes round the neighbourhood and asks if people are willing to contribute however much (or little) would be necessary to insure them against heavy snows. If necesseary, the organisation could draft a contract which says if the necessary amount of people to fund the program is not reached, the people who agree do not have to pay.

Everyone who does pay up gets placed on a register, and gets a nice big siver snow-flake medallion to put on their mailbox or gate to show off to their neighbours that they have contributed. If some people can't afford to pay they can be offered a discount rate, or perhaps they could be included on register in return for agreeing to volunteer for the snow removers should their help ever be needed.

If people choose not to buy into the system, when the snow falls eventually come, the company will drive by houses that are not on their register and don't have a snow medallion on display, or they will bill them out of pocket for a far larger sum than the original insurance fee to clear their driveway, offsetting the costs for everyone else. Perhaps they will think better in future. Even so, they will not necessarily be stranded - they can pay the neighbours children to take shovels and clear it like in the old days.

Problem solved.

Similar arrangements could be made for other services considered "public goods", like municipal garbage removal. For things like street lighting, which are near impossible to exclude those who do not pay for provision of, the medallion system would allow neighbours to apply social pressure to free riders without applying the use of coercion to subtract funds. Those who don't have theirs on display might attract disapproving looks, or have people round saying, "hey man, you are taking money out of everyone's pocket, when everyone pays, everyone pays less." With the technology we have today, it would be easier than ever to apply pressure to those who shirked the responsibility of sharing in the costs of local services they benefit from. The local shop could choose not to serve them and they may need to drive further to the supermarket which will not be worth the hassel of not buying a medallion. Their neighbours could choose not to allow them to collectively buy other services unless they paid in, meaning they would have to make their own arrangements which would prove costlier than choosing not to cooperate.

Sunday, 21 October 2018

Thursday, 5 July 2018

The NHS is a False Prophet

According to a recent article in The Guardian by Polly Toynbee, The NHS is our religion in the UK and that's why the conservative government can't destroy it. Of course, the Conservative government has never actually tried to destroy the NHS. They haven’t even reduced the amount spent on the NHS. They haven’t even halted increases in healthcare spending. The only thing they have done is reduced the rate at which spending is going to continue to increase.

Before the National Health Service was created in Great Britain, our nation was a world-leader with an unrivaled record in making major medical breakthroughs. People came from all over the globe to study medicine, and to be treated in the UKDr. John Snow proved that the source of cholera epidemics was the water supply in London. Edward Jenner pioneered a vaccine for smallpox in rural England, and Sir Almroth Wright one for typhoid. Sir Humphrey Davy, also a Briton, first suggested the use of nitrous oxide as an anaesthetic in 1800. Sir Joseph Lister pioneered the use of antiseptics in operations in 1865 using impure carbolic acid, saving countless people dying from infections after surgery. Alexander Flemming, the Scottish physician discovered Penicillin in one of the charitable hospitals in London in 1928. Howard Florey and Ernst Chain, brought it to fruition working in a laboratory in Oxford in 1941.1 Britain had established the best record in the world for achieving major medical advances and had just developed the landmark drug of the 20th century, as well as playing a leading role in 5 out of the 7 leading medical breakthroughs between 1750 and 1948 when the NHS was established.2 Britain is no longer a leader in medical advances. Despite its costliness, nepotism, and other flaws, America’s private system has taken the lead.

Image result for the nhs is our religion

Britain has less of the latest equipment and the old equipment is often being kept beyond the time when it is safe.3 If a private company was using out of date intensive care machines and x-ray machines, obsolete cancer care equipment, and operating tables over twenty years old – double their safe life span – the champions of the NHS would no doubt be clamouring for more government oversight and regulation. When government agencies are culpable, they are more or less given a pass on public outrage because they are perceived to be acting in the public interest rather than for profit.

In the UK we cannot compete with cancer survival rates in the US. A 2011 report demonstrated that the average cancer survival rate was 71.18% in the USA as compared to 54.48% in England.4 Our healthcare may be free at the point of service, but fewer of us survive it. It is costly in terms of lives. In fact, the BBC recently ran an article that reported “patients ‘dying in hospital corridors’.”5 In one month 300,000 patients were made to wait in emergency rooms for more than four hours before being seen, with thousands more suffering long waits in ambulances before even being allowed into the emergency room.

The sad reality is that in the UK or Canada people die waiting in line for what would be quick and routine medical treatments in the US. In Britain a shocking 4 million people languish on waiting lists according to official sources6 up from a 7 year high of 3.4 million in 2015 as reported by The Guardian, a left-leaning newspaper,7 and this in a population of scarcely over 65 million. At current trends this number is set to rise above 5 million in 2019 unless we do something to reverse them.8

In the UK you could turn up to an emergency room with an appendix about to burst and still be asked to wait overnight before they find you a bed. One patient reported that a lack of treatment rooms led hospital staff to examine her for gynaecological problem which had left her in severe pain and bleeding in a busy corridor, in full view of other patients. Such humiliating anecdotes could be dismissed as embarrassing one-offs were it not for the shocking fact that as many as 120 patients per day are being attended to in corridors and waiting rooms, in the public areas of hospitals, and some even dying prematurely as a result. In the first week of 2018, over 97% of NHS trusts in England were reporting levels of overcrowding so severe as to be “unsafe.”9

25% of British cardiac patients die waiting for treatment, and an investigation by a British newspaper found that delays in treatment for colon and lung cancer patients have been so long that 20% of cases were incurable by the time they finally received care.10 193,000 NHS patients a month wait beyond the target time of 18 weeks for surgery.11 According to the OECD Britain has the lowest number of doctors per thousand population in the advanced world.12 A chart displayed in James Bartholemew’s book The Welfare State We’re In in 20 documented that while only 1% of patients of patients in the USA had to wait over four months for surgery, while the number was 12% in Canada, 17% in Australia, 22% in New Zealand, and a shocking 33% in the UK.13

Where free-at-the-point-of-entry resources are limited older patients are viewed as a drag on the system – especially since they require the most frequent care which costs much more. The average 65-year-old costs the NHS 2.5 times more than the average 30-year-old. An 85-year-old costs more than five times as much.14 Although a third of all diagnosed cancers in the UK are found in patients seventy-five and over, only one in fifty lung cancer patients over seventy-five receives surgery, and the NHS does not even provide cancer screening to patients over the age of sixty-five.15

The government can make waiting lists look shorter by denying patients services outright because those who have been refused services will no longer appear in statistics. If someone’s disease proves fatal because they failed to receive treatment in time, the government figures appear more cost effective because instead of having to budget for a series of expensive surgeries, they have a deceased person on their hands who will not rack up a whole lot of medical accounts. It’s not to say that anyone is perniciously trying to kill off patients, but with pressure constantly mounting for officials to show meaningful improvements, the incentive to coldly take advantage of manipulated statistics “for the greater cause of saving the NHS” will always loom. It is, after all, our religion. In one interview, prominent columnist Dr. Dalrymple reported “Managers going around the wards telling the doctors who they thought ought to be discharged. They had no medical training or knowledge. But they would try and influence the doctors to discharge patients quickly… This is a problem, of course, wherever the person paying for the care is not the patient himself… But where you have one giant organization that decides everything the hazard is even greater.”16

The failings of socialised medicine are invariably blamed on budget cuts and a lack of funding by advocated of the NHS who are used to expecting medical services to be paid for by the government. The assumption is that if we were just spending more money none of this would be happening. The thing is, we are spending more money than ever before already.

Image result for nhs budget has grown

In fact, the budget of the NHS doubled in real terms between 1995 and 201517 and now waiting lists are longer than ever! This is because the shortages and inferiority of services are not caused by a lack of funding in the first place. They are caused by how we are choosing to pay for healthcare.


If you are interested in receiving and advanced copy of my eBook Why Healthcare in America is so Expensive, please email me at frequency528@hotmail.co.uk to let me know.

1 Tooley, J. (2004, 2013) “The Welfare State We’re In” p106-109
2 Tooley, J. (2004, 2013) “The Welfare State We’re In” p109
3 Tooley, J. (2004, 2013) “The Welfare State We’re In” p131
5 Triggle, N. http://www.bbc.co.uk/news/health-42572116
6 https://fullfact.org/health/four-million-hospital-waiting-lists/
7 http://www.dailymail.co.uk/news/article-3158591/Hospital-waiting-lists-seven-year-high-3-4m-need-treatment-6-000-forced-wait-year-operations.html
9 Pickering, G. https://mises.org/wire/patients-are-%E2%80%9Cdying-corridors-britain%E2%80%99s-socialised-health-system
10 See DiLorenzo, T. J. (2016) “The Problem With Socialism” Chapter 9. p96-97
11 https://www.theguardian.com/society/2017/jan/13/193000-nhs-patients-a-month-waiting-beyond-target-for-surgery
12 http://www.dailymail.co.uk/news/article-2533698/Britain-just-2-71-doctors-1000-people-fewer-Latvia-Estonia-Lithuania.html
13 Bartholomew, J. P126
14 Triggle, N. (2017) "10 charts that show why the NHS is in trouble" BBC News, Health
15 See DiLorenzo, T. J. (2016) “The Problem With Socialism” Chapter 9. p101
16 Gunn, C. and Dr Olsson, P. R. (2015) "Wait Till It's Free." Gunn Productions LLC, Waco, Texas. p67
17 Author Unspecified (2015) “Health Spending”, The Institute for Fiscal Studies.

Tuesday, 5 December 2017

Can Government Make a Business Run "For The Good of Society" ?

The New York Post recently reported that a judge in Indiana has temporarily barred Starbucks from closing 77 Teavana stores that were failing because "the very profitable Starbucks could absorb the financial hit". Industry experts said the ruling will send a chill down the spines of distressed retailers, and with good reason! The prospect of not being able to shut down an outlet that is bleeding the rest of the business may have countless unintended consequences that will affect not just owners but consumers in general. Firms are likely to take this as a signal to be more cautious about opening up new stores, and become reluctant to invest, take risks, and employ people in the first place. Customers stand to lose.

Amidst the debate upon the justice of the justice in question, I heard a voice clamour, "The question is not of profit, but whether a business should be run for society or society should be run for business!" and to be quite frank the claim struck me at first as vacuous; professing much while saying very little. Yet we must admit that throughout history many governments have believed they were "serving society" (rather than the business community) by forcing companies to fix prices, continue operations at a loss, or even subsidising or bailing them out with public funds. Many have believed this is in the interest of "the greater good."

Could it be that government forcing Starbucks to maintain unprofitable stores - in some circumstances - would be good for society?

First we should examine the use of the word "society" itself. Rather than bring clarity, it obscures the issue, making it more difficult to apprehend the facts of the matter. Who exactly is society and how do we measure what is and isn't good for it? Society is made of a whole bunch of different individuals and groups with different interests, and what is good for one might not necessarily be good for another.

It's not that keeping a Teavana open despite the owner's desire to close it won't be good for anyone; clearly the proprietor of the shopping centres is willing to fight hard for what they stand to gain, and certainly regular patrons will be happy to be able to get their regular cup of chai before leaving a hard-days-shop. However, the point is the move privilege a few individuals who want to continue going to those outlets at the expense of everyone else in the area who has demonstrated that they would rather something else opens up in that space instead. Starbucks then will need to recuperate the loss somehow or other, perhaps by increasing prices slightly at all other locations. If the locality can only sustain the demand for three tea houses and the unprofitable Teavana happens to be the forth then they are also bleeding demand away from the other three, and so on. We can continue counting negative consequences to other parties.

If Starbucks are deprived of however many millions it costs to operate 77 unprofitable stores that is less money they have to invest in stores that are wanted by enough people to keep them afloat. It's less cash for shareholders who will take it out to the shops to spend it or reinvest it in other businesses, it's less for Starbucks customers who have to pay slightly more for a cup of coffee and therefore don't have to spend on something else, it's less for Starbucks employees who might have to forego a raise because there is less to go around..

Clearly the effect of this policy is not something that can be broken down into whether it ‘benefits society’ or not. All we can say is that it benefits some groups and harms others.

It seems ironic to me that most of those who will cheer on the judges ruling, forcing Starbucks to run 77 tea outlets - against their own interests - for the interests of others are probably the most likely to complain when a Teavana opens up that it will "drive out" locally owned tea houses (which are probably actually collapsing under the strain of the regulations they have to comply with, not being able to afford Starbucks team of expensive lawyers and accountants.) If anything you'd think this crowd would be cheering on the closures! As they carry with them a certain prejudice that whatever vexes big business is necessarily good for the rest of us, we can only conclude that supporting the ruling is less about what is good for society and more about what is bad for Starbucks.


Friday, 15 September 2017

Surplus Value

It's still a very prevalent view that employers are somehow exploiting the people who work for them when they draw a profit from their business, despite the fact that a person's employer is clearly doing more for their finances than all of the people who are not employing them. I might add, perhaps somewhat facetiously, including those keyboard-warriors who claiming that entering someone into employment is exploiting them.

It is true that workers do get paid less than the total value of what they produce, but that is because what they produce is made with other resources which have to be bought, and in a factory or work place which has a price and requires overheads to operate. The capitalist is responsible for paying for marketing and advertising to link the product to potential buyers - and at the end of the day, if the product doesn't sell, everyone else has already been paid but the capitalist walks away with the loss.

The capitalist lays out a vision of what he thinks will meet people's needs better than they are being met at present. This requires a particular expertise which is in itself a labour contribution over and above that of the other employees which is unique to the entrepreneur. If his vision is clear, indeed he will make a profit. If it is faulty he will make a loss. This is not a necessary risk, absent the profit motive a rich person is more likely to buy a bigger house or go on a cruise. But the capitalist takes a risk now, and foregoes consumption, in hope that he will reap the benefit later. That is part of what he is being paid for.

Another part of what he is being paid for is the time between making the investment and getting paid for that investment. We would all rather have resources in the here-and-now than some time in the future, because the future is uncertain, that is why lenders can charge interest on money that they borrow. They are choosing to forgo a smaller amount of consumption now for a larger one in future. The workers get paid now, the capitalist gets paid later only after the product has sold, and only IF it is sold, after everyone else has been paid. Austrian Economist, Eugen von Böhm-Bawerk explained that far from exploiting labour, the capitalist removes the burden of waiting for income from the workers. If they wanted to produce the goods themselves they would also have to wait until they could find a buyer before gaining a stable wage, and first save or borrow in order to accumulate the resources to buy a factory or workshop without the help of the capitalist.

Finally, it's worth mentioning that the capitalist is increasing the value of the workers labour! If a man decides to try out the same manoeuvres which might get them somewhere in a factory out in a field it will not produce much of value to anyone else. Clearly workers can earn more working for their employer than for themselves otherwise they would simply declare themselves self-employed and get on with making a higher income. Perhaps some of them can earn more working for themselves but do not want to take on the responsibilities entailed which are currently met by the firm which employs them. This too is evidence that capitalists are providing value.

Marxists hold that capitalists simply skim their profits off the top while providing no value of their own. That they are "extracting surplus value" from their workers. But if that was true, non-profit organisations would just swoop in and undercut profit-making firms by eliminating the "dead weight" costs of paying a capitalist. They do not because they cannot. Capitalists are clearly providing some competence or vision which benefits their workers. Each benefits from the mutual exchange, as evidence by the fact that if the worker could get a better deal s/he would take it, and if the employer could find a better worker s/he would hire them instead.

Ultimately, wages are not an arbitrary figure but a reflection of how much value an employee is able to provide to a customer. If a person wants to do away with an employer they can do so by learning skills, either on the job or on the side, which will allow them to work for themselves. Likewise, profits are not arbitrary but a reflection of how much value a company is providing on the marketplace. Provided - of course - that they are drawing their profits from serving the market place rather than lobbying or appealing to the state, but that is another article.


"In order to show that it is a half-truth, we must have recourse to long and dry dissertations."
- Frederic Bastiat

Thursday, 24 August 2017

Human Action for Beginners

The Austrian Economist Ludwig von Mises (1881-1973) authored his Magnum Opus Human Action (1949) in which he laid out his case for laissez-faire capitalism based on  a rational investigation of human decision-making. Mises, and the work by extension, is often maligned for "rejecting the scientific method" but this criticism is based on a lack of understanding of Mises' arguments. Admittedly, while few of his critics have read the man himself, Human Action was not exactly written with a lay audience in mind and so the basis of his ideas cannot be easily grasped at a glance. In the interests of clarity, allow me to make his case for him in my own words.

Mises did indeed attest that  the empirical method (positivism, or the scientific method) is not the correct methodology for reaching reliable conclusions on matters of economics. However, he did not reject the scientific method. He merely pointed out that the empirical method is ideal for matters of the natural sciences because when it comes to inanimate objects results are predictable. This is because the natural world is deterministic. Copper always melts at 1,085 °C. That which does not melt at 1,085 °C is not copper. Human beings, however, have differing values, tastes and information all of which strongly influence their decision making. Will a person buy a hamburger at half price? Certainly many more will than at full price, but for example I will not because I am a vegetarian, whereas some others may buy several times as many. It all depends on their individual ideas, expectations and preferences.

When it comes to matters of economics there is no way to set up an experiment and control for all factors as we can in a laboratory. We cannot, say, increase the minimum wage in one region to measure the effects on overall employment and compare it to the effects in another region where it is not increased, firstly because the implementation (or lack of it) in one region will also affect the behaviour of individuals in the other (some may move to take advantage of higher wages, others may stay to take advantage of cheaper labour costs.) Secondly because an economy is complicated, and thousands of other factors would also be at play in both regions which cannot possibly be controlled for. We cannot say (for example) that just because employment rose in one region after a minimum wage increase that this change was due to the minimum wage increase, only that it happened. Because we have no counter-factual there is no way to tell if employment would have increased even more if the minimum wage increase had not been enacted.

In light of this, Mises attested, a more suitable method of approaching economic questions would be necessary than the empirical one, based upon the foundation of certain axioms about human nature which could be reached by introspection (or thymology as Mises labelled it to distinguish from different uses of the term introspection.) In the interest of brevity and simplicity we only need to consider three of these; and I will explain why each should be uncontroversial.

The first is that humans act. This claim is hard to argue against because the very act of doing so would be to make a performative contradiction. The second is that when people act, they do so in order to substitute a state of affairs which they consider preferable for one they consider less preferable according to their own values. Again, I see no argument against it; if one is completely satisfied with their situation as it is they do not act but stop. Even the attempt at meditation or mindful acceptance of the present moment is based on the impulse to substitute a pleasant state of surrender to circumstances outside of ones control for a less pleasant state of resisting them. Finally, I add, that people respond to incentives. This axiomatically true because what people do not respond to can hardly be considered an incentive by the very definition of the word.

(To anticipate a potential objection I draw an analogy; a person might scold a dog for poor behaviour in the hope of stopping that behaviour, without realising they are reinforcing it because their dog enjoys negative attention better than no attention whatsoever. This does not mean that the master is failing to incentivise the dog; it just so happens that he is not incentivising the dog to do what he thinks he is.)

An acceptance of these three axioms (for which their is unlikely to be any disproof) reveals that it is incentives which guide economic decision making among individuals. This we all accept, if not in our conscious philosophy then by our actions. To illustrate with our earlier example of the half-price hamburger, the business owner offers this deal in the hope of selling more burgers by creating knowledge of his product. A person buying the burger at the lower price incentivises burger joints to offer burgers at a lower rate. (One might argue that not everyone will respond to incentives, illustrated by the fact that I will not buy the burger because I'm a vegetarian - but in fact in my case the incentive is simply not great enough to suit my values; were the price of the burger was -$10 [minus ten dollars] I might take the money and give the burger away to a homeless person.) Our policy-makers are often led by their unconscious acceptance of these axioms, for example, they may put a tax on alcohol do discourage its consumption, while placing a subsidy on a solar panel to encourage its use. These are not policies guided by the empirical method which is better suited to the natural sciences, but by the aprioristic understanding that humans act, and in their actions they respond to incentives. That is the method, named praxeology, which Ludwig von Mises advocated.


Wednesday, 23 August 2017

Slavery did not advance Western Civilisation.

Every now and then someone will say something like "Despite the fact that slavery was immoral the modern world was build upon slavery and we owe the lifestyle we enjoy to the sacrifice of slaves..." Sounds compelling - except its not true. Slavery held back the advance of civilization because its pointless to innovate, invent or automate when you have (free) slave labour. Absent slavery the agricultural revolution may have begun decades earlier. Slavery was an abomination, and positive ends can never become of corrupt means.