Category Archive: Politics & Policy
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Professor Mark Lilla of Columbia University makes the case that when people become too wrapped up in identity politics, they can lose sight of how to affect the change they want to see in society.
Comments Off on The dirty word that gives us our freedom
Competition is often considered a dirty word, with many critics of free market ideas emphasizing the cutthroat competition of Wall Street as an example of how competition brings out the worst in people, encourages us to cut corners, and undermines our altruistic tendencies.
Proponents of competition often talk in terms of innovation: competition spurs innovation, giving consumers options they didn’t have before. But even that defense isn’t enough for people who don’t understand the true importance of competition and innovation. Take Bernie Sanders’s derision of innovation as just a way to get lots of different deodorant on the shelves, for example.
The Problem with the Way We Think about Competition
What’s problematic about both the criticism and the common defense of competition? Both underestimate precisely why competition is so important. Competition does more than spur innovation or provide people with different kinds of deodorant. In some cases, competition provides us with the powerful freedom to decide what happens to our bodies and is the only thing that makes informed consent meaningful. This connection is particularly important in health care, but the importance of competition to human freedom applies in other areas as well.
A particularly painful and poignant case study came out of Kentucky earlier this month: after one birth center owner spent many hundreds of thousands of dollars fighting the state’s Certificate of Need process, a Kentucky Appeals Court ruled that birth centers cannot compete with hospitals for maternity patients. This decision ignored that pregnant women in Kentucky want birth centers, are demanding birth centers, and that birth centers provide higher quality and lower cost care for low-risk pregnant women than hospitals do.
The Broader Implications of Kentucky’s Ruling on Birth Centers
While this may seem like a narrow case that applies just to pregnant women in Kentucky, its implications are far broader. What this case really does is tell pregnant women in Kentucky what they are allowed to do with their bodies. It tells entrepreneurs who are providing a safe and effective service that they are not allowed to make a living helping other people. It condemns birthing women to worse outcomes, higher rates of interventions, and worse treatment than they want, expect, and demand. And cases like this happen all over the United States each day, affecting everyone from children to the elderly. Government at all levels controls the options you have access to for urgent care clinics, surgical clinics, hospitals, and other health-care providers.So what’s the point? Competition doesn’t just allow for innovation. Competition prevents us from being hemmed in by what other people want for us. It provides us with choices about what happens to the things we hold most dear. Without the diversity of options competition provides, freedom is literally meaningless.
Pregnant women in Kentucky have been denied the opportunity to make basic decisions about what happens to their bodies. If you think this kind of intervention only applies to pregnant women, you’re wrong. Once you peel back the layers of other kinds of government regulation, you’ll find that the government controls a lot more than you realize about what happens to your body, your livelihood, your family, and your community.
So let’s stop talking about competition as the thing that provides us with lots of different brands of deodorant. Instead, let’s start talking about competition as perhaps the most necessary component of a free society.
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Myth 1 is that the government owes “only” $20 trillion. (In reality, it’s much more.) But luckily, Myth 10 is that there’s no way to fix this problem…
Comments Off on 3 reasons why the NRA is so powerful
Why is the National Rifle Association such a powerful organization? The reason is that in politics, small but organized groups win.
Politics in Washington is about concentrating and focusing power. Large groups have trouble doing that, but small groups focus power very well. The reason is that effective political groups form if individuals think that they benefit by participating. Social scientists call this the free-rider problem.
Imagine you belong to a club or fraternity. You have a party. People promise to show up the next day to help clean the house. The free-rider problem is that everyone likes having the house cleaned up, regardless of whether they helped clean it. So, who shows up to help clean the house?
Mancur Olson, the renowned 20th-century economist, identified three factors that will help us predict what happens.
- Individual benefits — Not many people enjoy cleaning up the house after a party. Still, in any group, some people always show up for everything. But there aren’t enough of those people to solve the problem.
- Group size — If there are only six people in your frat, it’s easier to get help than if there were a hundred. In a large group, everybody thinks, “Let someone else do it. I’ll just sleep.” But if there are only a few members, you know you need to help.
- Selective incentives — One word: donuts. Or maybe sausage biscuits. Some reward that only goes to the people that actually show up and work for the group.
What does this have to do with the NRA? Suppose you’re opposed to guns and favor stricter gun control laws, but you know the individual benefits to any one person from organizing are very small. Further, if stricter laws are passed, all the supporters win, whether they contributed or not. There are thousands and thousands of people who think that way. So, the potential group size is very large, and it’s hard to organize.
What about selective incentives? Not much hope there, either. If you go to a gun control meeting, all you see is some very earnest people handing out folders and wondering why so few people came to the meeting. Is the NRA different? You bet.Gun rights supporters are not a small group, so group size isn’t the reason. But individual benefits are important because NRA members not only like guns but, in many cases, actually own guns. So, they have something personally at stake in the issue.
Furthermore, if you go to a meeting of pro-gun folks, you’ll get to see … guns! Old guns and rare guns. You can join safety classes and marksmanship classes. Even people who might support gun control would enjoy a gun show.
These sorts of differences explain a lot about our political system generally. Special interest groups that have focused benefits, relatively small numbers, and the ability to offer selective incentives have disproportionate power.
The problem is this means government policy may not be guided by what’s best for the public at large. Organized interest groups are able to control a lot of policy making, even if most people in the unorganized public disagree with them. Perhaps that’s a reason to be wary of giving the government certain powers in the first place.
The article above was adapted from the transcript of a Learn Liberty video featuring Professor Michael Munger, “Why Is The NRA So Powerful?”:
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Does Identity politics cut us off from important conversations on issues that affect us all? Watch the Unsafe Space Tour panel discussion at Rutgers University featuring Kmele Foster, Sarah Haider, Bryan Stascavage, and Mark Lilla. Moderated by Tom Slater (of Spiked Magazine).
Comments Off on What politicians really mean when they say they’re pro-business
You often hear politicians say that they’re pro-business.
What do they really mean when they say this? It’s true that more business activity is good for cities and states. It leads to more jobs, more products and services, and to a better standard of living. The problem is there are two very different ways that a politician can try to bring more business to a state.
Two Approaches to Being Pro-Business
The first approach treats the economy like a wilderness. A politician acts like a smart forest ranger whose only job is to make sure that nothing impedes the economic freedom and business growth that occurs naturally. Businesses aren’t directed, they aren’t stimulated, and they aren’t suppressed by government intervention.
However, politicians rarely do this. Instead, they treat the economy like a machine and they think of themselves as machine operators, trying to produce a pro-business environment by pushing buttons and pulling levers. Typically, these are in the form of special subsidies, tax breaks, and incentives for particular industries or firms.
For example, let’s say your governor wants to encourage auto manufacturers to build factories in your state. He can use the first approach: He can choose to eliminate senseless regulations or reduce burdensome taxes for everyone; create a more open and level playing field. Or he can choose to give special advantages to just one auto manufacturer in the state.
Five Problems with Government Subsidies and Privileges
To a lot of people, the second approach makes sense. It creates jobs, right? But there are big problems when politicians try to create jobs through special handouts.
- Opportunity cost — where might that money have gone instead? When politicians provide special handouts to a business, the money must come from somewhere. Either everyone else’s taxes must go up, or the amount of money available for public goods, like law enforcement, must go down.
- It’s anti-competitive. When one company gets a special privilege, it’s unfair to other companies, such as local small businesses who don’t get the same benefits. This gives the favored companies some measure of monopoly power which can allow them to charge higher prices or offer lower quality services at a detriment of consumers.
- When businesses are playing with taxpayer money, they’re more likely to make bad decisions. For example, they might choose to set up shop in a place where it doesn’t make sense economically. With enough subsidies, you could get a business to grow oranges in Alaska. Is that really a good idea?
- Subsidies encourage business leaders to focus more time and energy on politics than on their businesses and on customers. This can be enormously costly for a society in the long run.
- Ultimately there’s a cultural cost. When politicians cut special deals with favored corporations, it makes people think that the government is only there to serve special interests. How often do you hear people say that they don’t trust the government? And it gives people the impression that success in capitalism is all about whom you know and not what you do.
Whenever a politician claims to be pro-business, stop to look at what they actually mean by it. Are they proposing to lower barriers for all businesses to make it easier for everyone to succeed, or are they just trying to favor a few firms at the expense of taxpayers, competitors, consumers and the economy at large? The approach makes all the difference.
Video: What Does a Politician Mean When They Say They’re Pro Business?
How Cronyism is Hurting the Economy (video): Jason Brennan explains the problems caused by cronyism and how to prevent cronyism.
Should the Government Subsidize… Silly Walks? (video): Art Carden explains why government subsidies are problematic for the economy.
“Is Capitalism “Pro-Business?” (video): Steve Horwitz explains why capitalism is good for everyone, not just big business.
Comments Off on Reddit AMA with Professor Ilya Somin of George Mason University
Ilya Somin is Professor of Law at George Mason University. His research focuses on constitutional law, property law, and the study of popular political participation and its implications for constitutional democracy.
Professor Somin has written extensively on constitutional theory, federalism, political ignorance, property rights, immigration, and a wide range of other important policy issues. He is a prolific contributor to the Volokh Conspiracy blog hosted by the Washington Post, and his work has been featured in other major publications such as the Wall Street Journal, New York Times, Los Angeles Times, CNN, USA Today, and Forbes. He’s also the author of several well-received books, including Democracy and Political Ignorance: Why Smaller Government is Smarter (Stanford University Press, Second Edition, 2016), and The Grasping Hand: Kelo v. City of New London and the Limits of Eminent Domain (University of Chicago Press, 2015).
Fans of Learn Liberty will recognize Professor Somin as the star of our popular video, I Can’t Breathe: How to Reduce Police Brutality, and as a regular contributor to our blog, where he has written about the politics of sci-fi and fantasy series such as Star Wars, Star Trek, and Game of Thrones.
Mark your calendar for Tuesday, September 19th at 3:00pm ET and join us for a conversation at Reddit.com/r/Politics where you can ask him anything!
Update: The AMA is now live!
Comments Off on Will voters punish Republicans for not changing health care?
Republicans are fretting over their failure to repeal Obamacare. President Donald Trump claimed Senators who voted against its replacement, the American Health Care Act (AHCA) had “let down Americans.”
The Club for Growth and Tea Party Patriots are targeting Republican senators like Lisa Murkowski, Susan Collins, and Rob Portman, who opposed one or more versions of the GOP bill. Several others face serious primary challenges from irate activists. A Republican donor from Virginia Beach has even sued the party, claiming its inability to terminate Obamacare constitutes fraud.
This all presents an interesting question. Will the failure to expunge President Barack Obama’s signature legislative achievement cost Republican candidates in elections for federal office over the next few years?
It’s just one bill … right?
If we think of this episode as merely the inability to pass a single bill, it is difficult to imagine the AHCA’s defeat making much of a difference. As elected representatives are wont to do, Republican legislators gauged their constituents’ views and voted accordingly.
Most of the 20 House GOP members who voted “no” came from districts with relatively few conservative voters, and the rest of those Republicans already had a history of bucking the party — just like John McCain in the Senate. In other words, the specific Republicans who voted “no” probably did so because they think a large number of their voters actually wanted them to.
But Obamacare hurt Democrats at the polls — will it hurt Republicans too?
Democratic politicians who voted for Obamacare in 2009–10 suffered at the polls in the 2010 midterms, costing them votes and, by one analysis, around 25 seats — enough to give Republicans the majority.
But Obamacare repeal is different from Obamacare passage in two important regards.
First, non-repeal is the absence of action and therefore a failure to change the status quo. Republican voters might be upset that their congressional party did not kill the policy, but that surely is not the same as establishing it in the first place. It was Democrats who did that, and they presumably maintain significant “ownership” of any future problems in the health-care sector.
Second, President Obama signed the Obamacare bill (the Affordable Care Act) in March 2010, only eight months or so before the midterms. Republicans aborted their effort much earlier in the Congress and therefore at a point considerably more distant from future elections. A lot can happen between now and November 2018.
But Republicans tied themselves to repeal!
Still, this wasn’t just a vote. Republicans have been trying to reverse Obamacare for seven years. There have been over 50 votes in the House to repeal one aspect or another of it. Getting rid of the ACA was a central feature of the legislative agenda of the current 115th Congress, and the failure has had significant negative effects on the remaining items the Republican leadership and White House would like to see passed, particularly tax reform.
Research shows majority parties in Congress pay a price at the polls for failing to pass their legislative agenda. The public expects the legislature to be productive and use policy to solve economic and social problems. Over the past 40 years, as the parties have polarized and Congress become more partisan, Americans have increasingly associated the institution’s collective performance with its majority party. If the Congress isn’t doing anything to change the country, it must be the Republicans’ fault. Obamacare repeal was a pivotal test of the party’s capacity to govern.
Or do voters mostly care about their own lives and wallets?
But there’s also an argument that it is the effects of government action that really matter to voters. A veritable library of research reveals the electoral performance of a governing party is closely related to the country’s general health, largely the state of its economy. By virtue of its partisan connection to the president, during unified government the congressional majority will pay for bad times and be rewarded for good ones — although these effects tend not to be symmetrical (the American public prefers retribution).
Policy is nothing but an instrument, and Americans respond to the impact it has on their lives. They do not pay particular attention to the process of making it.
In this way, Obamacare caused Democrats problems in 2014 and 2016. Many Americans were clearly pleased to gain coverage, but much of that feeling was dampened by the high premiums, deductibles, and co-payments that accompanied the introduction of the ACA. For those who already had insurance, these cost hikes were especially bad news — average policy premiums more than doubled between 2013 and 2017 in 24 of the 39 states that use the national healthcare.gov exchange.
The danger for Republicans here is that Trump now has an expressed strategy to let Obamacare die through neglect. His administration plans to do nothing to prevent insurers hiking premiums and leaving many markets across the country. Despite his assertions to the contrary, many Americans may now believe he and his party are responsible for health care policy.
And — exhibiting their innate status quo bias and temperamentally conservative approach to change rather than a deep love of the program — Americans are increasingly saying they like Obamacare. A July Gallup poll reported that for the first time a slight majority of respondents approved of the ACA.
Would the GOP have been better off passing any kind of ACA repeal?
In the long term, a health care system that increases competitiveness by allowing insurers to cross state lines and that uses cost-containment rather than mandates and taxes to broaden coverage would probably be more popular than Obamacare. But passage would have meant short-term disruption and problems for Republican candidates in 2018 and 2020.
Given that “repeal and replace” now seems dead, it’s not certain how voters will treat Republicans, especially those who voted against it, in 2018 and beyond. Will they think of the failure to repeal as a failure to govern? Will they punish Republicans for high health-insurance prices? Or will voters have more pressing issues on their minds when the next election rolls around?
Comments Off on How this screwy IRS policy kickstarted the American health care crisis
Have you ever wondered why, in the United States, we get our health insurance through our employers, but not our car insurance or home insurance? A 1943 New Deal decision making health benefits tax exempt is the answer.
As a believer in small government, I usually favor anything that reduces taxes. But this tax break has wreaked havoc on American health care. As Congress struggles to fix, or “repeal and replace,” the Affordable Care Act (ACA, or “Obamacare”), probably no single policy change is more important than getting rid of that tax break.
Because the health insurance premiums employers pay on their employees’ behalf are tax exempt, your employer can give you what amounts to extra income without paying the additional Social Security and Medicare taxes it would pay if you got a bigger paycheck instead. And employer-provided health insurance isn’t taxable to you, the employee, either, so you save on income taxes, Social Security taxes, and Medicare taxes.
It sounds innocuous, doesn’t it? It even sounds good!But it’s not, because taxing people differently, depending simply on whether they or their employers pay for their health insurance, distorts people’s incentives so as to distort the health insurance market in ways that have far-reaching, destructive consequences. The consequence we’ll discuss here is that it causes sick people to lose health insurance.
This article gives a brief history of how and why this tax break came to be, and explains how it leads, ironically, to people losing their health insurance just when they need it most.
From wage controls to widespread employer-provided health insurance
Like so many other government interventions, this tax break resulted in part from a previous intervention.
The original act of government that set the whole sorry process in motion was the wage and price controls implemented in World War II. The New Deal involved government limits on the wages companies could pay employees.
Those wage controls did what all binding price ceilings do: they caused shortages. Companies could not get as many qualified workers as they needed at the wages they were allowed to pay.
So some companies attracted the workers they needed by offering fringe benefits in addition to pay. One such fringe benefit was health insurance.
The question then arose as to whether the health insurance premiums employers paid for their employees, which clearly were a part of the employees’ total compensation, would be treated as income to those employees for tax purposes. In 1943 the IRS ruled that they would not.
That fateful decision made employer-provided insurance less expensive to workers than insurance they could purchase for themselves.
A simple example shows why: Suppose that you want a health insurance policy that costs $200 a month, your employer is willing to spend $1,200 a month for your services, and your income tax rate is 20 percent. If your employer gives you your $1,200 compensation entirely in the form of cash each month, you will have to pay $240 in tax on it, and then you will have to buy your health insurance with your after-tax income of $960. That would leave you, each month, with a $200 health insurance policy and $760 in cash.
But if your employer gives you $1,000 in cash plus a $200 payment for your health insurance, then you only pay $200 in taxes. So you’re left, each month, with the $200 health insurance policy and $800 in cash rather than only $760.Even after the New Deal wage restrictions were repealed, the differential tax treatment remained, so employers continued to offer health insurance, employees continued to take it, and employer-provided health insurance became widespread. We accept it as a matter of course now: when considering a new job, we ask, “What are the health benefits?” as if it’s natural for employers to offer health insurance.
But absent the tax exemption, it would make no more sense for our employers to buy our health insurance than to buy our home or car insurance.
Employers have no special knowledge about health insurance, and they can offer us fewer options than we could find in an undistorted individual marketplace. But here we are. Like most people, I buy my health insurance through my employer; it is much cheaper that way than buying it for myself. But as we’ll see next, it is riskier in an important way.
Why very sick people lose their employer-provided health insurance
Unfortunately, there’s a dreadful unintended consequence of having so much health insurance provided by employers.
When people get sick and stay sick long enough to lose their jobs, they also lose the health insurance that goes with those jobs. The irony is painful. The main reason we buy health insurance is to protect us if we get really sick. But if we do get really sick, we lose our insurance. It’s crazy.
This craziness is caused, ultimately, by our government’s policy of not taxing pay in the form of health insurance premiums. Absent that wrong-headed policy, people would pay for health insurance themselves, as they do home and car insurance. And most would certainly choose policies that are “guaranteed renewable,” meaning that if the insured person does get sick, the insurer agrees not to cancel the contract as long as the insured keeps paying the premiums.
In short, the problem of people losing their insurance when they get very sick (or get laid off, or change jobs, or for a number of other job-related reasons), is caused by the special tax treatment of employer-provided health insurance. Congress needs to end this. It could eliminate the tax exemption for employer-paid premiums, or exempt the premiums individuals pay, but it must treat them the same.
If Congress were to do that, people would stop buying health insurance through their employers and start buying it individually, as they do their home and car insurance. They would buy guaranteed renewable policies. And they would stop losing their health insurance when they get sick.
Comments Off on Expert Answers on the Drug War: Highlights from Prof. Jeff Miron’s AMA
Last week, Professor Jeffrey Miron joined us on Reddit for an “Ask Me Anything” conversation as part of the Learn Liberty Reddit AMA Series.
The conversation focused on Dr. Miron’s 30+ years of study on the effects of drug criminalization. Check out some of the highlights below.
Comments Off on Reddit AMA with Professor Jeffrey Miron of Harvard University
The Learn Liberty Reddit AMA Series continues on Wednesday, August 9th, with renowned economist and professor, Jeffrey Miron, senior lecturer and director of undergraduate studies in the Department of Economics at Harvard University.
Dr. Miron has written over 100 op-eds for publications such as the New York Times, Washington Times, Boston Herald, CNN, Time, Huffington Post, The Daily Caller, and Newsweek. He has also written several books, including Drug War Crimes: The Consequences of Prohibition (2004) and Libertarianism: from A to Z (2010). You may recognize him as the star of one of Learn Liberty’s all-time fan-favorite videos: “Top Three Myths of Capitalism.”
Mark your calendar and join us for the conversation on Reddit, Wednesday, August 9th at 3:00pm ET, where you’ll have the chance to ask him anything!
UPDATE: The AMA is now live!
Comments Off on Innovation in healthcare could be dangerous, but the alternative is worse.
While the politicians debate healthcare reform (again), let’s take a moment to consider how the basic flaws in our current system of “health insurance” put someone important at risk last week. That someone was me.
I felt sluggish for a while, and I said to my wife that I felt like I had a jellyfish lodged in my chest. She suggested it might be walking pneumonia. That seemed to make sense, so I spent some time on the Internet looking up that ailment, including its symptoms.
I got to thinking about how regulation is responsible for the enormous gap between the expert and the amateur. A lot of sites counseled me to consult a physician for an official diagnosis, but noted that walking pneumonia tends to go away without treatment.
I decided I would take the second route rather than suffer the time, the hassle, and the copay that comes with visiting a doctor.
The problem is that healthcare consumers have limited options. At the two ends of the spectrum, they can see a licensed doctor, or they can do it themselves. One option is extremely expensive, time-consuming, and reliable, and the other is free and still time-consuming but not as reliable. In between, there are few other choices. It’s possible to use a service like Teladoc or visit a drugstore clinic in some areas for minor issues like strep throat, an earache, or a sprained ankle, but in the absence of the current system of occupational licensing, there’d be a much broader continuum of possibilities between my unlettered amateur visits to Dr. Google and visits to an actual doctor’s office.
The problem is compounded by the fact that we pay for healthcare via “insurance” coverage, which isn’t really insurance but just prepaid healthcare. This system requires lots and lots of rules about what can and can’t be covered and what constitutes medicine. The entire healthcare market would function much more efficiently if there were more options. For treating a lot of conditions, you don’t need someone who went to four years of medical school and worked through a grueling residency. Better to save that talent for more challenging stuff and allow people to seek marginal improvements over DIY diagnosis.
Worried about quality assurance? There’s an app for that, and it’s called the market. Just as Underwriters Laboratory and Consumer Reports test products rigorously and vigorously, a free market would lead medical practitioners to sensitively vet service providers. The American Medical Association, for example, might offer its own certification course.
Note that certification is distinct from licensing. A license means government permission. Doing business without a license could land you in jail. Certification merely says that the certifying organization vouches for the quality of the product or service. If quality differences matter a lot to patients, the AMA certification will be extremely valuable.
But who’s going to protect people from charlatans? It’s a valid concern, but market mechanisms can complement existing rules against fraud. Courts and professional associations should be able to arrive at enforceable standards. Moreover, the relevant alternative to a cheap healthcare provider for a lot of people isn’t a medical doctor. The relevant alternative is doing it oneself. It’s hardly clear that a society of patients making decisions after consulting the Internet is safer and healthier than a society with lots of different healthcare professionals providing lots of different levels of service.