The first lawsuit the government filed ended disastrously for the Justice Department: The Supreme Court ruled in 1895 that the American Sugar Refining Company was not guilty of becoming a monopolist when it merged with the E. C. Knight Company. The evidence suggested that the merged companies would have made for a very strange monopoly indeed—one that substantially increased output and greatly cut prices to consumers.
In The Antitrust Religion (Cato, 2007), Edwin S. Rockefeller explains how the self-serving legal community invented sinister-sounding terms for quite natural phenomena and at the same time enjoys a feeling of self-righteousness in “protecting” the public from those evils. Such terms include “reciprocity” (“I won’t buy from you unless you buy from me”); “exclusive dealing” (“I won’t sell to you if you buy from anyone else”); and “bundling” (“Even though you only want Chapter One, you have to buy the whole book.”) Another work I strongly recommend on this subject is a classic by economist D. T. Armentano, The Myths of Antitrust.
In a free market unencumbered by anticompetitive intrusions from government, these factors ensure that no firm in the long run, regardless of size, can charge and get any price it wants:
1.Free entry of newcomers to the field, whether they be two guys in their garage or a giant firm that sees an opportunity to expand into a new product line.
2.Foreign competition. As long as government doesn’t hamper international trade, this is always a potent force.
3.Competition of substitutes. People are often able to substitute a product different from yet similar to the monopolist’s.
4.Competition of all goods for the consumer’s dollar. Every business competes with every other business for consumers’ limited dollars.
5.Elasticity of demand. At higher prices, some people will buy less.
Bottom line: Consider competition in a free market not as a static phenomenon but rather as a dynamic, never-ending leapfrog process in which the leader today can be the follower tomorrow.
SUMMARY
•Competition is actually a very important kind of cooperation: It prompts people to serve others in the best ways they know how
•A company that gets a high market share because of its efficiency and service is both competitive and cooperative in the sense that it earns the satisfaction and patronage of customers
•An economy without competition would be larded with waste and indifference
•The core assumptions of antitrust law are dubious and nebulous
#14
“HEALTHCARE IS A RIGHT”
BY MAX BORDERS
HEALTHCARE IS IMPORTANT. PEOPLE GET SICK AND INJURED. AS COMPASSIONATE human beings, we should do what we can, within reason, to see that people are treated—especially when they don’t have the means to get treatment themselves. We can build and support charity hospitals. We can volunteer for free clinics. We can take sensible policy measures that will reduce the costs and increase the access to medical goods and services.
But we cannot pretend that healthcare is a right.
This sort of verbiage is just that—verbiage, until it requires enforcement. And if you have been tempted to think of basic needs as being rights, remember this: Rights confer duties upon others. That has tremendous implications for any healthcare system.
Think about a right of free speech. That right confers a duty onto others not to interfere with or mute your expression, as long as you’re not harming or threatening anyone. But when it comes to certain other purported rights involving things that must be produced by others, like education or healthcare, that means others have a duty to produce that good or service. Once we slide from the apparently benevolent talk of people having rights, to the reality that other people will then have enforced duties to produce that right, we also slide from individual compassion to state compulsion. In other words, any such right necessarily conflicts with others’ rights not to be treated as means to some end.
In the process of outsourcing our sense of compassion to a central producer of healthcare goods and services, we cede our healthcare choices—and charitable instincts—to a central authority. How else is the government going to ensure that healthcare is produced, by right, for everyone?
This central authority, with its attendant healthcare bureaucracy, is not very good at figuring out who needs what and how much they need of it. Socialized, or “single payer” healthcare systems that are meant to allocate healthcare goods and services have very different incentives than systems in which people exchange goods and services freely.
In the Soviet Union, planners had no price system to help them determine how many shoes were needed in Minsk or boots were needed in Moscow. Supply and demand was guesswork and “targets”—with all the attendant problems of political allocation, buck passing and waiting lines. The Soviet economy, marked by shortages and gluts, could not very effectively be planned. The same can be said about the modern single-payer healthcare system.
Consider our neighbors in Canada. In the Fraser Institute’s annual report, “Waiting Your Turn: Wait Times for Health Care in Canada,” the Canadian think tank says the median wait time in 2013 hit 18.2 weeks, three days longer than in 2012. The average wait time for orthopedic surgery, in particular, reached 39.6 weeks for treatment, while patients waited an average 17.4 weeks for an appointment with a neurosurgeon. During this time, people were suffering. Some even died. Yet all of this is happening in a country where healthcare is considered a right that confers duties on taxpayers. Can the suffering that flows from rationing be considered compassionate? If treating healthcare as a right has these sorts of perverse consequences, shouldn’t that lead us to question all such rights talk?
Put another way: Let’s grant for a moment that healthcare is a right, or, at least, let’s assume everyone wants healthcare to be something that our fellow citizens have access to. If we all agreed to that, what if we determined that a free market in medical care allowed more people to gain greater access to healthcare goods and services in a timely manner? Would a “right” to healthcare then confer duties upon policymakers to introduce measures that would make the healthcare market freer, for example:
•Let people choose less expensive health insurance policies and policy options that fit their circumstances and budgets—across state lines and free of some or all of the state mandates that price low-income people out of the marketplace?
•Encourage policies that restore a functioning price system to healthcare so that people can make wiser purchasing decisions, all of which will help rein in spiraling costs?
•Allow individuals, not just employers, to get a tax deduction when they buy health insurance, which would make insurance more personal and portable?
•Dismantle any and all healthcare schemes (like Medicare) that provide subsidies for the rich and tax the poor and middle class in the process?
•Remove barriers to competition such as professional licensing, certificates of need, and other regulations that hike costs and limit access?
•Encourage people to use financial healthcare products like Health Savings Accounts, which give people incentives a) to be wise healthcare consumers, and b) to save resources for future healthcare needs and c) to invest in preventive measures?
Combined, the measures listed above would revolutionize the healthcare system in terms of price, quality, innovation, and access by the least advantaged. Talk of “rights” is just a rhetorical game progressives play to get the policies they want (usually a single payer system). But talk of “rights” does nothing for the goal of actually figuring out how to get people reasonable access to the healthcare they need. To do that, we have to deal directly with the problems of affordability (as in the U.S.) or with the perverse consequences of rationing (as in Canada). The disastrous rollout of Obamacare just might stimulate a serious, widespread discussion of these options for the first time.
Yes, healthcare is something we’ll all need at one time or another. But it is not a right. If we really
care about people getting healthcare, let’s focus on how to reform the system for good—so that free people can generate abundance in healthcare. If we can do it for mobile devices, we can do it for medicine.
SUMMARY
•Claiming that one has a right to healthcare is rhetorical exercise. The rubber hits the road when it’s actually enforced, which means somebody has to be compelled to provide it or pay for it
•Centralizing healthcare decisions is a movement in the wrong direction, away from the individual consumer and toward planners who have no special knowledge that would allow them to make good decisions for others
•Market-based, consumer-focused options for healthcare deserve more serious consideration
#15
“WE ARE DESTROYING THE EARTH AND GOVERNMENT MUST DO SOMETHING”
BY SANDY IKEDA
PEOPLE OFTEN COMPLAIN THAT MANKIND IS DESTROYING THE EARTH: THAT INSATIABLE consumption and relentless production have laid waste to irreplaceable swaths of our planet, and that these activities have to stop or someday it will all be gone. Which raises the question: What does it means to “destroy” something?
When you burn a log, the log is destroyed but heat, light, smoke, and ashes remain. It’s in that sense that physics tells us that matter is neither created nor destroyed. Similarly, cutting down a forest destroys the forest but in its place are houses and furniture and suburbs.
The real question is: Is it worth it?
What people usually mean when they say mankind is destroying the earth is that human action causes a change they don’t like. It sounds odd to say that my wife, by eating a piece of toast for breakfast, is “destroying” the toast. But if I wanted that toast for myself, I might well regard her action as destructive. Same action, but the interpretation depends on purpose and context.
When a missile obliterates a building and kills the people in it, it may serve a political purpose even though the friends and family of those killed and the owners of the building are harmed. The perpetrator’s gain is the victim’s loss. In the political realm, one person’s gain is necessarily another person’s loss. You rob Peter to pay Paul; you kill Jack to appease Jill. It’s a “zero-sum game.”
In the economic realm, however, a thing is destroyed to the extent that it loses its usefulness to somebody for doing something. Someone may want to bulldoze my lovely home just for fun. If she pays me enough I may let her do it and be glad she did. When not physically coerced, a trade won’t happen unless each side expects to gain. If it does happen, and if the people who traded are right, then all do in fact gain. Each is better off than before. The trade has created something–value. If they are wrong, they destroy value and suffer a loss, which gives them an incentive to avoid making mistakes.
In free markets, gains manifest themselves in profit, either monetary or psychic. (In the short run, of course, you can sustain a monetary loss if you think there’s a worthwhile non-monetary aspect to the trade that will preserve the profit.) Now, the free market is not perfect, despite what some economics professors say about the benefits of so-called “perfect competition.” People don’t have complete or perfect knowledge and so they make mistakes. They trade when they shouldn’t, or they don’t trade when they should. Fortunately, profits and losses serve as feedback to guide their decisions.
There’s another source of market imperfection. People may be capable of making good decisions but they don’t trade, or trade too much, because the property rights to the things they would like to trade aren’t well-defined or aren’t effectively enforced. In such cases their actions or inactions create costs they don’t bear or benefits they don’t receive. The result is that their decisions end up destroying value.
If I free-ride off the oceans, if for example I don’t pay for dumping garbage into it, then the oceans will become more polluted than they should be. If there is a cleaner, more efficient source of energy than fossil fuels, but no one can profitably use it because the state prevents anyone from doing so (for example by prohibitions or excessive taxation), then again the value that would have been created will never appear.
Our esthetic sense of beauty is part of what makes us human. If we wish to protect a lake or a valley from development because we think it beautiful, how do we do that?
To some extent it’s possible to do what the Nature Conservancy does, and purchase the land that we want to protect. But that’s not always possible, especially when the land is controlled not by private persons but by the state, which makes special deals with crony capitalists in so-called public-private developments. In any case, even the free market is not perfect. Economic development and material well-being mean that some beautiful landscapes and irreplaceable resources will be changed in ways not everyone will approve.
Remember, though, that economics teaches us that an action is always taken by someone for something. There are no disembodied costs, benefits, and values. In a world of scarcity, John believes saving rain forests is more important than saving the whales. Mary believes the opposite. If we are to get past disagreements on esthetics–essentially differences of opinion–that can turn into violent conflict, we need to find some way to settle our differences peacefully, some way to transform them into value-creating interactions.
Imperfect though it may be, the free market has so far been the most effective method we know of for doing that.
SUMMARY
•Physics teaches us that matter is not really destroyed but rather, transformed, so the ever-present question is, “Is it worth it?”
•Market transactions transform resources, as well as ownership of them, and if enhanced value doesn’t result from those transactions, the resulting losses tend to minimize future mistakes
#16
“OWNERSHIP MUST BE TEMPERED BY SHARING”
BY LAWRENCE W. REED
PROGRESSIVES HAVE A PROBLEM WITH OWNERSHIP, ESPECIALLY WHEN IT’S YOURS. The very notion seems to conjure up in their minds an anti-social acquisitiveness, selfishness and greed. Far more quickly, they come to the defense of “sharing” because it suggests sacrificing ownership for the sake of others. Indeed, the most regressive Progressive is drawn to the idea of common ownership, in which no one in particular owns anything and somehow we all will own everything and share it equally.
The progressives’ hostility to ownership is neither well-founded nor consistent. While they have a visceral distaste for private ownership (and busy themselves taxing, regulating, seizing and redistributing it), they have few problems with state ownership. It’s as if men are devilish with what’s theirs but angelic when it’s somebody else’s. This is not a concept that explains life on any planet of which I am personally aware.
The fact is, “ownership” as a general concept is never really at issue in any society. It is neither possible nor desirable to construct a society in which people or the material things they create are not “owned.” Either you will own yourself or someone else will own you. As far as material things are concerned, somebody must own them too. Those “somebodies” will either be those who created them, received them as a gift, or traded freely for them, or they will be those who take them by force. There is no middle ground, no “third way” in which ownership is somehow avoided.
Indeed, ownership is both a virtue and a necessity. What is yours, you tend to husband. If it belongs to someone else, you have little incentive to care for it. If it belongs to “everyone”—the nebulous, collectivist approach—then you have every incentive to use and abuse it. That’s why over thousands of years of historical experience, life continually reinforces this essential axiom: the more the government owns and thereby controls, the less free and productive the people are.
Ownership is nothing less than the right to shape, use, and dispose. Even if you have legal title to something, you wouldn’t think you really owned it if the government told you what you could do with it, how, and when; in that instance, the government would be the de facto owner. In a real sense, ownership is co
ntrol and the actual owner of anything is the controller.
For thoroughly trashing the resources of any society, no more sure-fire prescription exists than to take them from those to whom they belong (the rightful owners) and give them to those who are convinced in the fantasyland of their own minds that they have a better idea of what to do with them. Think “Soviet.” Socialist regimes, which take from some and give to others at the point of a gun, have their cockamamie schemes for how to squander the loot, but they display an infantile ignorance of how to create wealth in the first place.
Much has been made in the past about alleged differences between fascism and communism. Sure, the Nazis invaded Stalinist Russia (after the two had made a deal to squash and divide Poland), but that was a dispute between thieves that proved the old adage that there’s no honor among them. On the question of ownership, the difference was a cosmetic one that ultimately mattered little to the ordinary citizen.
Communists didn’t let you own a factory, and if you did own one when they came to power you were shot. Fascists often refrained from nationalizing a factory, but if you as the alleged owner didn’t do as you were told, you were shot. Under either system, real ownership was in the hands of the omnipotent State, regardless of what any scrap of legal title paper said.
The myth of “common ownership” only muddies the issue. Public parks are thought of as held in common (“the people’s property”), but that really means that the government owns them, the taxpayers pay the bill, and the public gets to use them according to the rules established and enforced by the government. Some have argued that the post office is another example of common ownership. That would mean that theoretically, each American owns about one-three-hundred-and-twenty-millionth of it, but show up at the counter and try to redeem your share and you might be surprised how fast the response can be.
Excuse Me, Professor: Challenging the Myths of Progressivism Page 6