25 of the Greatest Quotes on Economics and Capitalism (That You've Probably Never Heard)

If you never understood anything else from the social science of economics, but you truly understood the truth of the 25 quotes below, you will understand much of the truth that economics has to offer.

Excerpted from an article by Jon Miltimore, writing in FEE Stories

October 28, 2021 FEE.org

1. “The farmer and manufacturer can no more live without profit than the labourer without wages.” - David Ricardo
2. “The most basic question is not what is best, but who shall decide what is best.” - Thomas Sowell
3. “Nothing is more deadly to achievement than the belief that effort will not be rewarded, that the world is a bleak and discriminatory place in which only the predatory and the specially preferred can get ahead.” - George Gilder
4. “I prefer true but imperfect knowledge, even if it leaves much undetermined and unpredictable, to a pretense of exact knowledge that is likely to be false.” - F.A. Hayek
5. “Prices are important not because money is considered paramount but because prices are a fast and effective conveyor of information through a vast society in which fragmented knowledge must be coordinated.” - Thomas Sowell
6. “What one person disdains or values lightly is appreciated by another, and what one person abandons is often picked up by another.” - Carl Menger
7. “Demand and supply are the opposite extremes of the beam, whence depend the scales of dearness and cheapness; the price is the point of equilibrium, where the momentum of the one ceases, and that of the other begins.” - Jean-Baptiste Say
8. “The disdain of profit is due to ignorance, and to an attitude that we may if we wish admire in the ascetic who has chosen to be content with a small share of the riches of this world, but which, when actualized in the form of restrictions on profits of others, is selfish to the extent that it imposes asceticism, and indeed deprivations of all sorts, on others.” - F.A. Hayek
9. “All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out.” - Ludwig von Mises
10. “Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.” - Frédéric Bastiat
11. “Everything we get, outside of the free gifts of nature, must in some way be paid for. The world is full of so-called economists who in turn are full of schemes for getting something for nothing.” -Henry Hazlitt
12. “The principle that the end justifies the means is in individualist ethics regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule.” - F.A. Hayek
13. “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.” - Milton Friedman
14. “All trades, arts, and handiworks have gained by division of labour, namely, when, instead of one man doing everything, each confines himself to a certain kind of work distinct from others in the treatment it requires, so as to be able to perform it with greater facility and in the greatest perfection. Where the different kinds of work are not distinguished and divided, where everyone is a jack-of-all-trades, there manufactures remain still in the greatest barbarism.” - Immanuel Kant
15. “It is not true that Congress spends money like a drunken sailor. Drunken sailors spend their own money. Congress spends our money.” - Dr. Art Laffer
16. “The message from history is so blatantly obvious—that free trade causes mutual prosperity while protectionism causes poverty—that it seems incredible that anybody ever thinks otherwise. There is not a single example of a country opening its borders to trade and ending up poorer.” - Matt Ridley
17. “Love locally, trade globally.” - Russ Roberts
18. “The great danger to the consumer is the monopoly— whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him.” - Milton Friedman
19. “People who lack the capacity to earn a decent living need to be helped, but they will not be helped by minimum-wage laws, trade-union wage pressures or other devices which seek to compel employers to pay them more than their [labor] is worth. The more likely outcome of such regulations is that the intended beneficiaries are not employed at all.” - James Tobin
20. “Nothing should be more obvious than that the business organism cannot function according to design when its most important ‘parameters of action’—wages, prices, interest—are transferred to the political sphere and there dealt with according to the requirements of the political game or, which sometimes is more serious still, according to the ideas of some planners.” - Joseph A. Schumpeter
21. “Failure is part of the natural cycle of business. Companies are born, companies die, capitalism moves forward.” - Thomas Sowell
22. “The way to maximize production is to maximize the incentives to production. And the way to do that, as the modern world has discovered, is through the system known as capitalism—the system of private property, free markets, and free enterprise.” - Henry Hazlitt
23. “A people averse to the institution of private property is without the first elements of freedom.” - Lord Acton
24. “Once the principle is admitted that it is the duty of the government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments.” - Ludwig Von Mises
25. “Citizens who over-rely on their government to do everything not only become dependent on their government, they end up having to do whatever the government demands. In the meantime, their initiative and self-respect are destroyed.” - Charles G. Koch

What Economists Know about Prices

Prices that emerge in markets are signals wrapped up in an incentive. We can thank the economist Alex Tabarrok for stating this very old truth in a single, pithy sentence.

Thanks for the econ lesson, you say, but so what? The once-in-a-century cold snap that caused Texans grief last week is a great example of so what. Estimates of the damage caused by the power outages in Texas are in the billions of dollars.

Without price-distorting subsidies from politicians, all those wind turbines in Texas wouldn't have been built. And all those freezing Texans wouldn't have been freezing. And  the billions in damages could have been avoided. 

Hind sight, you say? Not really. It's an old story that's well known by economists. Benefits concentrated on a tiny subsidized few, with costs spread widely over a huge tax-paying majority. How hard will you work to keep someone from stealing ten cents a day from you? How hard will you work to keep a subsidy worth $1,000 a day coming your way? 

Why did politicians subsidize the wind turbine industry to the point that as much as 30 to 40 percent of the Texas electricity grid is supplied by wind turbines on some days? Because politicians respond to popular sentiment; it's part of what keeps them in office. And because politicians also respond to money, which is another part of what keeps them in office.

Politicians are not dummies, regardless of what it looks like. They know which parade to jump in front of to stay in office. That parade goes by the name, "climate change." Politicians know they won't be blamed 100 years from now; everybody knows that we have to get rid of fossil fuels, right? Why not give the folks what they are clamoring for, and make some cash to boot?

K-street in DC spent a lot of money to get those subsidy dollars flowing. The beneficiaries of the subsidies made sure of that; dollars well spent. Politicians have nothing to worry about. People will forget about power outages in Texas by next week. Move along; nothing to see here.

An Open Letter to the President and Governors: Stop Killing Our Economy

That we face incredible challenges over the next weeks and months is obvious. Events that ensure a world-wide recession have already happened. The only questions that remain are how deep and how long will the crippling of the world’s economies be.

Since the onset of the COVID-19 crises, we have all been witness to extraordinary steps taken by the Federal government headed by the President, and by state governments headed by their Governors. Private businesses have been ordered to close normal operations. Schools have shut down. The governors of California and New York have ordered that citizens remain in their homes, except for “essential” activities. Other Governors have ordered less drastic actions, but may soon follow suit. In short, civil and commercial society is being ordered to shut down, all in the name of slowing the spread of COVID-19 and the loss of life the contagion may entail.

Put aside all talk and thinking of who to blame. Put aside all talk and thinking of violations of the civil rights of Americans. There will be time enough for such talk and thinking after America emerges from this crises. Of critical importance now — right now without a day’s delay — you, the President and Governors of every state, must think clearly about what must be done to avert absolute catastrophe.

The ordered shutdown of businesses and lockdowns of citizens must be lifted. Americans must be told that they can and should get back to work.

I know this advice is contrary to what you are being told by epidemiologists and others whose expert credentials give them voice and credibility. These people are intelligent, well-meaning. They are no doubt correct about the contagion and how to “flatten the curve.” The problem is that flattening the curve by shuttering businesses and locking down citizens has unintended consequences that will be absolutely catastrophic for American citizens.

Large modern economies are interconnected in unfathomable and incomprehensible ways. There are no “nonessential” businesses. No one, no collection of experts — regardless of intelligence and training — can know what goods and services to produce, how to produce them, or how much of them to produce. The information required to know resides in millions of individuals, each going about the business of making a living and making individual choices.

Americans must keep working at whatever they do. We must not be told to “shelter in place.” If we are not allowed by the President and the Governors of states to do so, the human misery that will follow is unthinkable.

I am unqualified by training or knowledge to predict the spread and mortality of COVID-19. But I am qualified by training and knowledge of economics and history to predict that even if the COVID-19 pandemic were as much a threat as the H1N1 pandemic was, it doesn’t matter — if we continue on the path of killing our economy and depriving individuals of the opportunity to go about their business, whatever their business is.

Now, a silly story to illustrate my claim. Surely, production and distribution of food is essential; all would agree. Therefore, we must allow farmers to produce; we must allow food processing businesses to continue to operate; we must allow truckers to carry food to market; we must allow grocery stores to remain open so that people may buy the food.

But surely we can and should require bars to close; we can and should require restaurants to close or serve only carry-out orders; we can require that computer technicians stay home; we can require auto mechanics stay home; we can require that office workers in corporate offices work from home; we can and should require that golf courses close; we can and should require that all “nonessential” activities cease. Surely we can and must, because we simply must slow the spread of COVID-19, so that fewer people will die of the comorbidities the virus will bring on.

And then the unforeseen, unconsidered linkages and interdependencies of an economy kick in.

A network technician cannot repair the digital network used by the Walmart distribution warehouse, resulting in a one day lag in deliveries to hundreds of Walmarts in a region of the country. The one day delay leads to even more panic buying from people who have every right to fear the next day. A fight breaks out in one of the affected Walmarts. Ten people are arrested and one man is so badly beaten he must be hospitalized.

The mechanic sheltering in place in California does not do a repair on a truck broken down on I-5, which results in a load of pharmaceuticals going undelivered for two days. Tens of people suffer ill effects of not getting their medication; three people die.

The nonessential office worker working from home for the ISP company, Spectrum, fails to see an email due to looking after her seven year old who is not in school. Unfortunately, the oversight causes thousands of others working from home to lose their Internet connection for eight hours. Ten of those who lost their connection also lose their streaming TV service and fail to see news warning them to take shelter in a tornado watch zone. All ten are struck by the tornado. Fortunately, only one dies.

Multiply my silly little story by literally millions of similar incidents that can be imagined without end. None of us can think of but a handful of such fanciful stories and interconnections. But any good economist knows that the unrecognized, unseen interconnections number literally in the millions of millions for any modern economy.

Mr. President and Governors of the fifty United States, please end the shutdowns and the sheltering in place orders. Instead, encourage all Americans to get back to work. Yes, the threat of COVID-19 is real. Yes, we will face risk. Millions of us might contract the virus; thousands might die. The epidemiologists do not know.

Maybe this contagion will be as bad as the N1H1 outbreak was in 2009. No one really knows. But Americans face down far worse and more deadly risks every day. By now, most of us have learned that tens of thousands of Americans will die of flu this year. About 90 Americans died yesterday on our highways. And so it goes.

Ultimately, the consequences of Americans not working and not functioning as a free society are going to be far worse than the risks posed by COVID-19.

We know that some people are at great risk of dying due to the virus. We are all concerned about protecting these people. We have learned how to do that, thanks to instruction from the good people of the world’s public health institutions. We can and must do everything to shield those people from exposure to the virus. They can be and should be sequestered, with help from us all. Regardless, some of them will contract the virus, and they will die. Reality is not always kind; it is still reality.

But we can know and must understand  that shutting down our economy and sequestering ourselves is a certain path to catastrophe. Mr. President, Governors, I beg you to save us from that catastrophe.

Friedrich A. Hayek won a Nobel Prize in economics teaching us this truth. In his words, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” He was talking about central planning of economies. Whether we recognize it or not, our experts are imagining that they can design an easier way out of the COVID-19 pandemic. They are well meaning, but they cannot.

The Election of A Lifetime

It is understatement to say that the November 2020 elections will be momentous for America. Regardless of the outcomes, about half the politically aware public will be outraged the day after the results are final. But more important, America’s future will be shaped for generations to come.

The lines of division among Americans are bright and important. Two major factions comprise American society: the "never Trump" folks, and the “thank-God-for-Trump” folks. Few Americans are indifferent. Never Trumpers despise Trump beyond all reason. Thank-God-for-Trump folks absolutely adore what he has accomplished so far, and they support what he promises to accomplish in the future.

It is also understatement to say that leaders in the Democrat Party and their rank and file core are obsessed with removing Trump from office — if not by the ballot box, by whatever other means possible. Additional impeachment attempts are not out of the question, if the Democrats hold the House and Trump is reelected.

Why are Democrats so determined to depose Trump? Is it really the case that Trump is such a despicable human being that he simply must be deposed? I have friends and colleagues who say "yes, absolutely, yes." These friends and colleagues tell me that Trump is loathsome, a racist, a liar, a hound dog, and a cheat in business who in no way deserves to be wealthy. These people will tell you that Trump is an “existential threat,” which appears to be one of their favorite expressions.

In years past, it's been popular for political pundits to say "it's the economy, stupid." My hypothesis for explaining the extreme animus of Democrat leadership and the party faithful against Trump is "it's the courts, stupid." And even more to the point, "it's abortion, stupid."

The Democrats understand completely that should Trump get to appoint even one more Justice to the Supreme Court, never mind tens of additional federal court judges, and God forbid two Justices, the future for Democrat ideological preferences will be significantly dimmer for at least 30 to 40 years, if not longer.

More to the immediate threat for Democrats, they fear that Trump’s reelection would almost guarantee the Supreme Court reconsidering Roe v. Wade. As everyone knows and agrees, the issue of abortion is important, divisive, and quite possibly irreconcilable.  

The mad-dash impeachment foisted by the Democrats was a failed attempt to forestall a potential third SCOTUS appointment before the November elections, in my opinion. With eight months to go before the November 2020 elections, even now that possibility is still not off the table. Can you imagine the turmoil and havoc that will ensue, should a SCOTUS vacancy occur during the next six months?

In my opinion, the probability is high and growing that Trump will be reelected. If he is, the future of America depends critically on whether the U.S. Senate remains in Republican control. Control of the House is less important. After all, Republicans controlled both the Senate and the House during the first two years of Trump’s first term, without delivering funding for Trump’s wall and without repealing Obamacare.

Nonetheless, should Republicans hold on to the Senate and also regain control of the House (scenario 1 below), we might see repeal of Obamacare, reforms to immigration policy, and extension of federal tax cuts passed and signed into law in 2017.

The U.S. Senate is arguably the most important and significant political institution in America. It is so because the Senate confirms Supreme Court Justices and federal court judges. And as we saw in February 2020, impeachment by the House is empty, if the Senate does not convict. The significance of Supreme Court appointments is clear enough, but federal court judge appointments are also important. As we have seen during the past three years, federal court judges can impede and hamper the President’s power of executive orders.

Decisions of the Supreme Court over the decades have utterly shaped the America we live in today, and will do so in the future. For example, the high court’s decisions concerning the Article 1, Section 8, Commerce Clause of the Constitution (Gibbons v. Ogden, 1824, and Wickard v. Filburn in 1942) had profound implications for subverting the limits of federal government power intended by the Founders.

In my opinion, it is U.S. Senate races that matter most come November, not the presidential race. Election scenarios 1, 2, 7, and 8 below are remarkable because each keeps the U.S. Senate in Republican control. Scenarios 1 and 2 are significant, because Trump remains President and the Senate remains in control of Republicans. Scenarios 1 and 2 mean the SCOTUS will become more originalist and constructionist, and federal court judges will be replaced with moderates and conservatives, instead of progressives.

But scenarios 7 and 8 are also important, because a Republican controlled Senate could and likely would seriously limit the ability of a Democrat president to nominate successfully any but moderate candidates for the Supreme Court and federal courts.

     President   Senate    House 
1.      R                 R             R
2.      R                 R             D
3.      R                 D             D
4.      R                 D             R
5.      D                 D             D
6.      D                 D             R
7.      D                 R             R
8.      D                 R             D

Everyone knows and agrees that independent voters will decide which scenario we get in November 2020. In my opinion, the decisions of Democrat leaders Pelosi, Schumer, Schiff, and Nadler have made scenarios 1 and 2 more likely outcomes of the November elections. Because independent voters have seen the depths to which Democrat leaders have been willing to sink to depose Trump, right-of-center Democrats and independents may well be in no mood to vote for Democrats, regardless of the office in question.

Democrat leaders pulled out all the stops in 2018 - 2020. The Kavanaugh confirmation debacle, the nothing-burger Mueller investigation (brought about by a nefarious FISA court warrant), followed by the failed impeachment proceedings, may well be remembered negatively by voters in November 2020.  No political actions have been beneath the Democrats, precisely because the stakes for the Supreme Court and the federal courts are so high.

How To Fix America's Health Care System

Problems with health care in America are not failures of voluntary market exchange; they are failures of government interference with voluntary market exchange. To fix the problems, eliminate government interference with voluntary exchange in health care markets.

1.    Eliminate involvement of employers in health care altogether; do this simply by removing from federal and state tax codes all tax implications of health care goods and services, for both businesses and individuals. Remove all tax deductions, tax credits, and tax preferences of any kind that involve health care services or health insurance premiums; remove all interactions between health care and the tax code.

2.    Eliminate supply-side restrictions on health care.

a.    Rely entirely on private voluntary exchange on the supply side of health care markets.

b.    Eliminate barriers to entry for hospitals, clinics, dental schools, nurse training schools, and medical schools, including "certificates of need," and government imposed restrictions on health care training organizations.

c.    Eliminate municipal, tax financed, government-subsidized, tax advantaged hospitals and clinics.

d.    Allow consumers to decide what levels of health care training are sufficient for their health care needs.

                                 i.         Eliminate legal restrictions on health care providers at all levels.

                               ii.         Eliminate government licensure requirements for all levels of health care providers

                             iii.         Promote private certification, like we see for Certified Public Accountants (CPA), Certified Financial Planners (CFP), and Civil Engineering Certification (CEC). Neither federal nor state governments would play a role in certification.

e.    Rely on wide-spread information dissemination about individual health care providers, hospitals, and clinics — similar to nutritional content on food packages, Yelp for restaurant reviews, and Consumer Reports for goods and services.

f.     Eliminate 3^rd party payer models that have removed price competition from health care.

g.    Eliminate Medicare, Medicaid, Veterans Administration hospitals, and all other health care programs run by government.

3.    Eliminate state boundaries for health insurance; allow nationwide competition for whatever health care insurance markets emerge. Eliminate restrictions of any kind on pricing and characteristics of health insurance products.

4.    Give low-income individuals and families means-tested health care vouchers to purchase routine health care, similar to the SNAP program. Pay for vouchers from general tax revenue.

5.    Eliminate patents for pharmaceuticals. Rely on academic research to develop new drugs, as we largely already do. Academic research is highly motivated by institutional prestige, not sales of drugs. We have no evidence whatsoever that eliminating patents on drugs would reduce research and production for new efficacious drugs in America, notwithstanding loud protests to the contrary from the rent-seeking big pharma corporations.

     Implementing the 5-point plan outlined above will lead to the following benefits for people in America:

A.  Creation of market prices in health care. As noted by professor Alex Tabarrok, of George Mason University, a market price is "a signal wrapped up in an incentive" for both producers and consumers. Without market prices, producers and consumers have no way to maximize economic efficiency.

B.   Reduction in the cost of health care across the board, due to increased supply and reduced demand for health care services.

C.   Increased supply of health care services, due to removing supply-side restrictions put in place by government operatives who have catered to rent-seeking health care providers.

D.  Greatly reduced wait times in doctors’ offices and hospital emergency rooms, as health care providers begin competing on price and quality of service.

E.   Much greater diversification of health care delivery models, such as online diagnosis and service, walk in lab testing, online diagnosis services, quick-service health care clinics, and other business models that no one has yet even imagined (http://reason.com/archives/2014/09/30/supply-side-health-care-reform ).

F.    Greatly reduced cost for routine health care services that providers with much less training than an MD can provide with great competence.

G.  Lowest feasible cost for health care services across the full range of health care services.

H.  The absence of government and its operatives from health care markets, thereby improving economic efficiency and equity across the board.

I.     Elimination of the deadweight costs created by subsidies, price controls, and supply-side restrictions. A greater number of people will receive a greater quantity of health care with a higher quality and benefit to individuals, at the lowest possible cost.

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10 Questions and Answers about Health Care

1.    Is health care different from other goods & services?  If so, how?

a.    Is health care a public good?  Definitely not, since

                   i.     It is excludable; non-payers can be excluded.

                 ii.     It is not jointly consumed; all of us do not consume all that is produced.

               iii.     It is exhaustible; units of health care consumed by Ben cannot be consumed by Betty.

                iv.     It does not have zero marginal cost in consumption; adding another consumer requires additional production, and therefore, additional cost.

                  v.    And yet, health care does generate a positive externality in consumption, because most people are unwilling to ignore suffering of others; therefore, we all gain value from the consumption of health care by others; most people are willing to pay something for the health care of people who unable to pay for their own health care.

b.    Is health care scarce?  Definitely yes;

                   i.     The quantity of health care available is insufficient for everyone to have all they want without sacrificing something else they also want.

                 ii.     Production of health care requires the use of valuable land, labor, and capital, just like other valuable goods. The owners of the land, labor, and capital used must be paid the opportunity cost of their valuable resources, which makes the supply curve of health care upward sloping.

               iii.     Because it is scarce, health care must be rationed somehow; if not by willingness and ability to pay money, then what?

c.    Do people "need" health care?   

                   i.     Health care is not a single, homogeneous economic good; health care ranges from a band aid and an aspirin to heart replacement surgery.

                 ii.     If some quantity of health care is needed, how much? People do not need any particular quantity and quality of health care.

               iii.     Substitutes for professional health care include watching and waiting (human bodies have incredible recuperative abilities), home remedies, and self care (although the possibilities for self care are substantially limited by law).

                iv.     Different people want different amounts and qualities of health care; people seek to maximize their own net benefit from consuming health care, which means they attempt to find the quantity and quality for which MPB=MPC.

                  v.    Equal consumption of health care by everyone isn't possible, and if it were possible, few if any would say equal consumption by all would be fair.

d.    Is health care a basic human right, regardless of ability to pay? 

                   i.     If so, who has the responsibility to provide health care, since a right for one always implies a responsibility for someone else? Do not say "society" has the responsibility, because "society" is not a person, it is a collective noun.

                 ii.     If so, how much health care and what quality of health care does everyone have a right to? Do not say "enough to stay alive," or "enough to be well," because neither is definable or quantifiable.

e.    Which economic good is health care more like:  cars or food?

                   i.     Health care is more like food, so why don’t we have all the same public policy issues with food that we have with health care?

                 ii.     Why don’t employers typically provide a "food benefit” as part of their compensation to employees?

               iii.     Consider the cost of food per typical person for a year compared to the cost of health care per typical person for a year. Why is health care so expensive, compared to food?

                iv.     Why do we not eliminate restrictions on the supply side for health care?

                  v.    Is asymmetrical information a serious problem with health care? Not really; asymmetrical information is far more serious with automobiles.

2.    What are justifications for government intervention and obstruction of voluntary exchange in health care? Do the conventional justifications offered by economists apply to health care?

a.  Not market power; nothing besides government laws and regulations keeps health care from being highly competitive.

b. Not externalities; even though most people are sympathetic and willing to help others who are suffering, we have no evidence whatsoever that not enough health care will produced without government intervention. We have ample evidence to the contrary.

c.  Not the public good argument; health care has none of the characteristics of a public good.

d. Not the incomplete or asymmetric information problem; consumers know more about health care than they do about their cars.

e.  Certainly not economic stabilization.

f.   What about equity, fairness, and justice?  (is there an efficiency-equity trade off with production or consumption of health care?)  No more so than for any other economic good.

3.    Does health care fit the insurance model?

a.  Yes, for catastrophic illness, we do have low probability of high cost events, which are insurable events, but not for routine health care.

b. Health care insurance generates moral hazard, as does any insurance.

                   i.     May influence eating choices (obesity, junk food), if individuals do not have to bear the full cost of their choices.

                 ii.     May influence life-style choices (lack of exercise, smoking, speeding, riding motorcycles), if people do not have to bear the full cost their choices.

4.    Why are employers involved in health care insurance; they aren't involved in home insurance or car insurance?

a.  There is no philosophical or economic reason.

b. Employer involvement is an historical artifact of wage-price controls during WWII, which kept employers from competing for employees using wages.

5.    Is asymmetric information a serious problem with health care?

a.  No; in which economic good is information more asymmetric:  car repair or health care?

b. Are health care providers better judges of the marginal benefit of health care than patients, and therefore better positioned to decide the quantity and quality of health care someone should consume?

c.  For most goods and services, consumers can and do use price as a principal source of information about value, cost, and relative scarcity; but not for health care, because unit prices for health care services are generally nonexistent; health care providers do not compete on price, and prices generated by voluntary exchange in unfettered markets do not exist, due to government intervention.                                            

d. If we don’t use prices (willingness and ability to pay) to ration health care, then we also cannot use prices to give us information about relative value and cost of health care compared to other goods and services.

e.  If we don’t use voluntary exchange guided by relative prices to ration health care, how can we expect that MSC will equal MSB? We cannot.

6.    What's wrong with third-party payments for health care?

a.  Third-party payments are payments made to producers of healthcare by someone other than the consumer of health care.

b. For most insurable risks, insurance is not a third-party payment system, since consumers generally pay for insurance they purchase (e.g., auto insurance, property and casualty insurance, home insurance, life insurance); but for health care, what is called "health care insurance" is typically paid for by an employer or by tax payers.

c.  What economic outcomes can we expect from 3^rd party payment for health care?

                   i.     Excess demand for health care services.

                 ii.     Shortage of suppliers of health care services.

               iii.     Rising cost of producing health care.

                iv.     Rationing of health care using some criteria other than price, e.g.,

·      Waiting in the doctors' offices and emergency rooms,

·      Denial of insurance claims,

·      Burdensome, bureaucratic procedures to get insurance claims accepted,

·      Doctors who refuse Medicare and Medicaid patients,

·      Denial of medical procedures by review boards, and

·      Limitations on eligible suppliers of health care services (HMO, PPO).

7.    What behaviors from employees can we expect, due to employers using health care benefits to compensate employees?

a.  Employees will demand more health care benefits, due to obfuscation of who is bearing the cost.

b. Low-wage employees typically won't be compensated with health care benefits (e.g., employees of McDonalds), because.

                   i.     Health care is expensive as a percentage of low-income workers’ wages

                 ii.     Low-income workers don’t tend to stay with the same employer as long as high-income workers

               iii.     Low-income workers need money, not health care benefits, since they don’t get much income to pay for food and other goods and services they want; in other words, low-income employees typically don’t want part of their pay in the form of health care benefits.

c.  Money wages of employees will not rise as fast as they otherwise would.

d. Employees will consume health care services beyond the point of MPB=MPC

e.  Employees may be less mobile, remaining in current jobs to avoid loss of health care benefits

f.   Employees may delay retirement to avoid loss of health care benefits

8.    Can government somehow achieve greater economic efficiency and equity by intervening in voluntary exchange markets? In a word, no. In fact, the opposite is true.

9.    What does economic logic tell us is the most efficient remedy, if we find someone who has little ability to pay for health care, but we’ve decided that the person deserves some minimum level of health care? Give the person some money or a health care voucher.

10.Can the U.S. health care “system” be “reformed" from where we are now? Probably not.

a.  We have no reason whatsoever to believe that government operatives will bring us greater efficiency or equity in health care, compared to voluntary exchange.

b. There is no “system” that suspends human nature and the laws of supply and demand, both of which apply to health care, just as they do for car care and food care.

c.  Voluntary exchange in competitive markets gives us as much efficiency and equity as possible, provided we make provision for the rather small number of people who are unable to pay for even modest health care services.

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The 545

Here is a link to an excellent article written years ago by Charley Reese. Every voting citizen of the United States should give this article a read and ponder its message carefully.

Redistributing Income

As you may have noticed, one of the two major political parties in the United States is all about redistributing income.  According to supporters of that particular political party, the distribution of income that results before redistribution is not equal enough and is not fair.  Consequently, much of the legislation supported by this political party is designed to take income away from Peter (who evidently has more income than would be fair) and give it to Paul (who evidently has less income than would be fair).

Members of this political party also complain that the top 1% of income earners in the United States earn way, way too much more than 1% of total income, and the lowest 20% of income earners earn way, way too much less than 20%.  Some people agree with the claims of this political party; some people do not. 

The word "fair" has no clear, settled meaning.  Yet, we all use the word as if we all know exactly what it means.  In my judgment, the word "fair" cannot be used in any logical way in talking about the distribution of income. 

Some people say that "fair" means "equal."  But it's hard to see how equal income for engineers and restaurant servers could be thought fair by anyone.  Moreover, I've never met anyone who thought engineers and restaurant servers should earn equal income.  Some people say that "fair" means "deserved."  Perhaps, but if so, what will we want to say "deserved" means?  Does Tiger Woods deserve his enormous income, just because he possesses athletic abilities particularly suited to hitting golf balls into small holes?  Does Bill Gates deserve his enormous income, just because his mind is so structured that DOS made sense to him for a computer operating system?  Don't we all "deserve" prosperity?

The distribution of income in the United States is unequal because the capabilities of people are unequal and because all people do not want the same goods and services.  Equal income cannot and will not come about in a society of people who have different capabilities and who have different wants. 

Attempts to redistribute income in the United States, which have been ongoing on a major scale since the "War on Poverty" initiated by President Lyndon Johnson in the early 1970s, have scarcely changed the real distribution of income in the United States.  Today, through a variety of transfer payment programs, government transfers about $1 trillion per year from someone who earned the income to someone who did not.  The simple truth is that if somehow overnight, income were distributed exactly equally among the nation's 125 million households, within just a few weeks, income would once again be distributed unequally.  Until people all have the same capabilities and the same economic wants, the distribution of income will remain unequal.

Human prosperity is not the same thing as the distribution of income.  As an observable matter of fact, human prosperity around the world has been rising dramatically over the past 250 years. Perhaps people would benefit by focusing more on the causes of human prosperity and less on the distribution of income.  But try telling that to the political party that favors redistribution of income.

P.S.  I am personally not a member of a political party.  I am not a partisan, so please don't disparage my simple observation of obvious truth for political argument.