Markets Know No Borders - Freedom Must Stretch Across All Humanity

My progressive friend Yitz and I had another interesting discussion on Facebook, this time regarding healthcare, free markets, and socialism, inspired by a BusinessWeeks news post Yitz linked to and summarized:

Finland recently signed a law which provides every citizen there with a legal right to a 1 MB/second internet connection as of July 2010, and 100MB/second by December 2015. The Finnish government says that people "need broadband connections to live normal lives."

Yitz followed up this summary with his thoughts:

While I believe in socializing basic needs such as food and healthcare, I had never thought of broadband internet access as a basic need -- but apparently the Finnish are looking towards a future where bandwidth and healthcare are equally vital. Still, all in all -- go Finland.

While the Finnish are a great people - they make the best metal in the world - I'm not so sure we should be following in their footsteps on economic policy. Here is my initial comment in response to Yitz:

Socialized food? So like ban private supermarkets and implement a 5 year agricultural plan, Soviet style?

Or do you mean providing a basic minimum through vouchers like we do with foodstamps?

Personally, I think food and healthcare are too important to be left to a government monopoly heavily influenced by entrenched corporate interests. That's how we got the worst-of-both worlds health care system we have in the U.S. today.

Another commenter challenged me on my characterization of the U.S. health care system as "worst-of-both worlds":

It's interesting how people from all over the world come to the "worst-of-both-worlds health care system we have in the U.S. today" for medical care.

As for free (*someone* i.e. taxpayers pay for it) broadband for all citizens, how about indoor plumbing and toilets? Are those also provided free by the government? I would think that they're more of a "basic need" than broadband Internet.

A different commenter took issue with preexisting condition clauses in insurance contracts:

The second biggest besides the Pre Existing conditions clause, which to me is criminal negligance, is the uncontrolled price gouging on medicines, whereas Canada,Israel etc force low prices and competitiveness.

I clarified and responded to both:

Our system is the worst of both worlds in the sense that either a real free market or a real socialized market would be better than the status quo. We spend more money under our mixed, corporatist system and receive worse health outcomes than we would under outright socialized medical care.

That fact is not incompatible with the fact that people from all over the world come to the U.S. for medical tourism. Our system can be great for people with money; not so great for people without it.

As for preexisting condition clauses, without them, health insurance would not be *insurance*. Insurance insures against risk; if you have a preexisting condition, there is no risk, only certainty. You cannot insure against certainty; you can only pay for it outright. Whether the money to pay for preexisting conditions should come from one's own wealth, charity, or forcibly taken away from others through taxes is a separate question, but you can't fault insurance companies for not insuring against certainties. They wouldn't be insurance companies; they would be welfare companies.

At this point, Yitz joined back in:

I just can't see how a real "free market" system (i.e., you pay, you get healthcare, you don't pay, you die) is even palatable to a society. First of all, it literally puts life-and-death powers EXCLUSIVELY in the hands of corporations (you want to talk about death panels? are they better when called 'ROI Assessment Committees'?).

Second of all, let's take swine flu for instance. Relenza, Tamiflu, all the anti-flu antivirals were made available to populations sometimes with heavy government subsidy. A real "free market" system would have set a price per dose, perhaps offered some sort of sale or promotion, but established prices based on "market value". Thousands of people would have died.

This assumption that people are just going to be charitable AND THAT there will be enough voluntarily offered resources TO SUSTAIN THE POPULATION is just not the case. Why would any society CHOOSE to have a percentage of its citizens destitute (health care cost is the #2 reason for bankruptcy) -- and much more prone, therefore, to crime and other social ills?

Scandinavia is right on the money with that. Internet might be a bit much...

I responded:

Yitz, we actually had something very much like a true free market in health care with low costs and widespread accessability, until the government "fixed" it. And it didn't involve corporations at all. The Jewish community was a particularly good example of how such a cooperative system could and did function. See Roderick Long's article here: http://libertariannation.org/a/f12l3.html

A snippet: "In the late 19th and early 20th centuries, one of the primary sources of health care and health insurance for the working poor in Britain, Australia, and the United States was the fraternal society. Fraternal societies (called "friendly societies" in Britain and Australia) were voluntary mutual-aid associations. Their descendants survive among us today in the form of the Shriners, Elks, Masons, and similar organizations, but these no longer play the central role in American life they formerly did. As recently as 1920, over one-quarter of all adult Americans were members of fraternal societies. (The figure was still higher in Britain and Australia.) Fraternal societies were particularly popular among blacks and immigrants. (Indeed, Teddy Roosevelt's famous attack on "hyphenated Americans" was motivated in part by hostility to the immigrants' fraternal societies; he and other Progressives sought to "Americanize" immigrants by making them dependent for support on the democratic state, rather than on their own independent ethnic communities.)"

As for vaccines and other medications, keep in mind that the current system we have is in no way a free market system. A free market does not grant government protected monopolies in the form of patents to drug companies. A free market does not have a single, monopolistic regulatory organization like the FDA that increases the cost of bringing new drugs to market dramatically. If you want someone or something to blame for the outrageous cost of modern pharmaceuticals, don't blame the free market: blame FDA regulation and government-created pharma patents.

Finally, if you don't assume that people care enough about each other to be charitable and voluntarily help each other when they are in need, why in the world would you assume that people would care enough to vote for a workable state socialist system to force themselves to be charitable? Electoral democracy doesn't magically transform selfish people into philanthropic people.

Yitz then wrote:

OK so no patents. So no intellectual property rights? On anything? Where I DO agree with you is that a patent only means "I invented the X. If you create an X, you must give me royalties." MONOPOLIZING the production of X's, however -- it makes me wonder why this isn't ALREADY illegal under anti-trust legislation (Microsoft Internet Explorer locks out competition and it's illegal, Pfizer locks out competition and it's good business?).

Teddy Roosevelt's "famous attack on hyphenated Americans" only stemmed from the "anti-hyphenate" sentiment in America at the time (America was virulently anti-Semitic and anti-Irish) -- this would be most shocking in Woodrow Wilson's administration where the Ambassador to the UK suggested America "shoot our hyphenates". I agree with you in that the Progressives back in the day were extremely pro-assimilationist (as are some Latinos and Asians in the GOP today btw) -- but we know that the civil rights struggle saw a flip of right & left in America.

Why do you think a "free market" situation would benefit America? How would there not be a horribly destitute underclass created, with no recourse and no resources? Why would "free market" 911 services, let's say, not create Hurricane Katrina-esque situations with every natural disaster? Where does "free market" stop?

My most recent comment in response:

No intellectual property rights on anything. There is a long and rich libertarian/classical liberal history of opposition to intellectual property. See: http://praxeology.net/anticopyright.htm

Asking how a free market would benefit America is a great question, and it's the project of left-libertarians to show progressives how and why this is the case, but it's not the sort of case that can best be made in a Facebook comment thread. The best I can do is try to answer specific questions and point to other resources for longer explanations.

I found your formulation of the question jarringly nationalist. I don't think you intended it to be read this way, it's just a habit that we get into when we stop thinking of people as separate persons and start thing of them as mere parts in a collective. (Hence, free-market left-libertarians are individualists.)

The question is not best phrased as how a free market would benefit *America*, but more accurately, how it would benefit *Americans* and non-Americans alike. For markets know no borders, and there is no justifiable reason for us to treat a person lucky enough to be born into a first world country better than a person unfortunately born into an impoverished developing (or regressing) country. Haitians deserve as much of a right to our care and concern as Haitian-Americans. Anything less is a form of bigotry, discrimination on the basis of national origin; i.e. xenophobia.

This is a huge intellectual hole in modern progressive thought: the interplay between the welfare state and non-citizens. As one of my co-bloggers posed the problem,

"Suppose there are two brothers in Nicaragua. Brother A illegally comes to the United States and gets cancer. Brother B stays in Nicaragua and gets cancer. Why should I pay for Brother A's chemo and not Brother B?"
http://distributedrepublic.net/archives/2009/08/21/immigration-and-national-health-care

So to answer your specific question, the free market, and freedom, and morality, stop no where. They should stretch across all of humanity, and perhaps beyond. This is what humanism means.

You mention Hurricane Katrina. It's a terrific example, because it was a disaster only as a direct result of outrageous government mismanagement, which caused the initial flooding, as well as horrible government mismanagement once the levees broke and the government blocked civil society from responding. To take one famous example, Wal-Mart, that corporation so hated by progressives, was a model of decency and efficiency, while the government was a model of chaos and confusion. From a Washing Post article published shortly after the hurricane:

"While state and federal officials have come under harsh criticism for their handling of the storm's aftermath, Wal-Mart is being held up as a model for logistical efficiency and nimble disaster planning, which have allowed it to quickly deliver staples such as water, fuel and toilet paper to thousands of evacuees. [...] During a tearful interview on "Meet the Press" on Sunday, Aaron F. Broussard, president of Jefferson Parish in the New Orleans suburbs, told host Tim Russert that if "the American government would have responded like Wal-Mart has responded, we wouldn't be in this crisis.""

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/05/AR2005090501598.html

And to address your question "How would there not be a horribly destitute underclass created, with no recourse and no resources?", let to me point to my friend Charles Johnson's excellent article, "Scratching By: How Government Creates Poverty as We Know It."

http://www.thefreemanonline.org/featured/scratching-by-how-government-creates-poverty-as-we-know-it/

Far from helping the poor, the government consistently and systematically hinders them. (One need look no further than this country's insane and racist drug policies to confirm that this is the case.)

I should have noted, of course, that Yitz's horror scenario, "a horribly destitute underclass created, with no recourse and no resources" is what we already have now under a democratic, supposedly progressive, corporatist government.

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Broadband + indoor plumbing = "plumband"?

As for free (*someone* i.e. taxpayers pay for it) broadband for all citizens, how about indoor plumbing and toilets? Are those also provided free by the government? I would think that they're more of a "basic need" than broadband Internet.

Admittedly broadband service and indoor plumbing are not exactly mutually exclusive services. But had you considered the possibility that they might be complementary services?

Pre-existing clause gushes

Pre-existing clause gushes evil because of how it interacts with our system. The solution of course is not to eliminate the innocent pre-existing clause but to change the evil system that surrounds it. I only want to clarify why so much evil pours forth through the pre-existing conditions clause.

As for preexisting condition clauses, without them, health insurance would not be *insurance*.

In a free world many people would start buying insurance for their babies before conception and that insurance would be continuous throughout life, so the pre-existing conditions clause would be moot, because there would be no point in life at which a person was not insured. The clause becomes an issue in part because insurance is tied to employment and people change jobs. It is the tie to employment that is evil.

Suppose you start buying insurance when you are twenty and healthy. When you are fifty a condition develops which becomes chronic. At age 55 you change jobs. Because insurance is tied to your job you lose you are forced to switch insurers. The new insurer refuses to pay for your chronic condition.

So you have been paying for insurance continuously since you were a healthy twenty-year-old, but a condition that begins at age fifty becomes a "pre-existing condition". That makes no sense but that's the way it is in a world where insurance is tied to employment.

Since you have been paying for insurance continuously since you were twenty and yet a condition that began when you were fifty becomes a "pre-existing condition", you are being screwed by somebody. Who is it? Well, the government for sure. But the company that is benefiting the most from this is you previous insurer, who you were forced to drop when you changed jobs. You had paid them continuously for many years in order to insure against possible future medical needs, but when you leave your job then they no longer have to pay.

In a free world many people

In a free world many people would start buying insurance for their babies before conception and that insurance would be continuous throughout life, so the pre-existing conditions clause would be moot

Well, the DNA profile of the parents might matter...

As long as the DNA profile

As long as the DNA profile does not make some specific disease a near-certainty, then there is an insurable risk, even if the probabilities and therefore the price of insurance differs. I'm using an iPhone so it's not convenient to check what was said but I believe the claim was that pre-existing conditions could not be insured by the very definition of insurance. But as long as a certain genetic type is merely at greater risk, then this is insurable.

All true, but DNA profiles

All true, but DNA profiles can create a problem of assymetric information and adverse selection. David Friedman discusses these problems in the final part of Chapter 6 of Law's Order, with the section titled "The Risks of Regulated Biotech or How to Hurt People by Helping Them."

The Irony of Insurance

We each run some risk that a genetic defect, etc., will cause us to incur high health care bills. This cost may be catastrophic for the individual, but manageable for society – provided people can be persuaded to treat the risk as social and not individual.

Government provides one mechanism for shifting this risk. And historically, private insurance provided another. There have been a number of news accounts about how insurance has failed to play this role. Some of the failures have been idiosyncratic to one firm or another. But others seem systemic. And ironically, a growing problem with insurance arises from an irrepressible source: the growth of knowledge, and the corresponding decline of uncertainty.

Risk arises from both 1) different possible outcomes imposing different costs and 2) uncertainty. Competition should drive the price of insurance toward the expected cost of an outcome – that is, an average cost.

But averaged over what? “You’re a 40-year-old black male schoolteacher living in the Southeast that never smoked and had two speeding ticket in the last year? We have a special price for you.” In other words, insurers are looking at observable criteria to predict with every greater accuracy the medical bills for each individual, and then averaging the cost of that person’s coverage over a pool of people with only those characteristics. Insurance companies are gathering ever more data about us, and are ever more capable of using that data to forecast health outcomes. As the amount of uncertainty declines, the cost of insurance will grow ever closer to the benefit.

And as a consequence, the benefit of having insurance grows ever smaller. Yes, it’s good to have insurance if you get HIV – but since the insurance companies could predict that you were the kind of person who was likely to get HIV, the amount they charged you for your insurance was comparable to the cost of paying for HIV treatments.

Thus, the forecasting tools that insurance companies developed to gain an edge over their competitors are the same tools that render their services ever less useful to their customers. The most rational outcome for insurance companies is also the most useless for society.

The most rational outcome

The most rational outcome for insurance companies is also the most useless for society.

This would in effect, make the cost of unhealthy behavior economically painful for those who happen to "get sick" while practicing this behavior. If this also occurred without government interference, I would not consider it detrimental.

Yes, and....

Generally I would not consider this detrimental either, whether or not it happened with government interference. More to the point, I generally WOULD consider it detrimental if people's costly avoidable behaviors did NOT cause them to bear additional cost, whether or not this occurred with government interference.

But how do you know when a person's medical conditions are caused by their own choices or by circumstances beyond her control? I gave the example of a guy who whose health insurance costs are determined by the fact that he's a 40-year-old male schoolteacher in the Southeast with two speeding tickets in the last year. Should we hold him responsible for costs that correlate with being black? Being male? Being 40 years old? Being a teacher? Living in the Southeast? Getting speeding tickets?

If I present a study showing that police in the Southwest give a disproportionate share of speeding tickets to black men, do we still make him responsible for being in the same category as other people with two speeding tickets? If I present a study showing that men below the age of 50 are predisposed to speed (and men above the age of 50 are predisposed to drive with their blinkers on), do we still hold him responsible?

Maybe I should roll this into its own thread....

our race to the bottom

>Our system is the worst of both worlds in the sense that either a real free market or a real socialized market would be better than the status quo

AGREE 100%! The discussion ignores the thread title. I post on various lists and ask someone to explain to me why unemployment can't stabilize at 10%.

Raise the median wage in India and China by $10, drop ours by another $10, and the world will be within spitting difference of a world wide wage parity. Then what happens?

For the first 30 years after WW2 the US had the manufacturing edge and the union workers got 80% of the value of increased productivity. Since then manufacturing has gone off shore and our owners got the 80%.

pre-existing condition

Micha,

I have to disagree with your interpretation of pre-existing condition clauses. Insurance often covers events that are result of pre-existing conditions. For example: auto insurance covers accidents caused by aggressive driving and property insurance covers fire damage resulting from faulty wiring. Underwriting determines what the pre-existing conditions are and assesses the risk.

What insurance (as insurance) doesn't cover is what's already known or what is almost certain. The effect of these clauses is to mitigate insurance companies' exposure to what is unknown. Also, in the same vein as what Constant said, insurance is provided against damages, not conditions. Bad (or good) conditions often lead to predictable results in large populations, but less frequently to certain outcomes for individuals.