While reading the Federalist Paper No. 6, I came across another great Hamilton quote that we should keep in mind.

In No. 6, Hamilton was arguing that in order to prevent unnecessary wars both internally between the colonies and externally between the colonies and foreign nations, they should ratify the Constitution to form the Union. With the Union, there would be rationality in calming the fervor for war with other nations, because one area of the country may be hurt by the war that another part of the country was calling for. With seperate colonies or three or four confederacies, one confederacy or colony could start a war without regard to the others. This would lead to more wars.

Internally, he was arguing with separate colonies or confederacies, there would more than likely be wars between them. He used examples of Britian’s wars with Scotland.

After laying out the historical proof, Hamilton was calling for the dismissal of the arguments to remain separated. He started by asking what would make us think that despite the history of similar nations’ experiences with inter-quarreling we would be able to have peace with separate confederations or colonies.

To shut down the claims from the anti-federalist, Hamilton wrote the following quote to ask why we think that we are different.

“Have we not already seen enough of the fallacy and extravagance of those idle theories which have amused us with promises of an exemption from the imperfections, the weaknesses, and the evils incident to society of every shape? Is it not time to awake from the deceitful dream of a golden age and to adopt as a practical maxim for the direction of our political conduct that we, as well as the other inhabitants of the globe, are yet remote from the happy empire of perfect wisdom and perfect virture?”

Hamilton is basically saying. We aren’t  different. These human traits that have led to war for other nations will not forgo us simply because those who want to maintain the separate colonies say so.

While, Hamilton was talking about war, I think the quote fits perfectly into our modern context. It fits in respect to the our further slide towards socializing as much as possible in our country. Surely, history has laid out the disaster of socialism whether it be the famine in China that killed countless millions, the never ending impoverishment of Cuba, or the horror stories of health care in Britain and Canada. If Hamilton was writing about our governments taking over banks, car companies, possibly newspapers and health care, I am guessing he would say what makes us think we are different? Why do we think we can ignore history?

Today, the columnist Thomas Frank of the Wall Street Journal wrote a column in which he basically says modern day conservatives are bizarrely paranoid. From reading his article, he’s talking about those conservatives who believe in capitalism, are against government propaganda, and are against government social engineering. Here’s a snippet of his piece.

Back in Hofstadter’s day this sort of thinking at least had something supremely rational going for it: The existence of the Soviet Union and its desire to bring the West to its knees.

But take that away and the theories become something far more remarkable. Consider, by contrast, the widespread belief that President Barack Obama’s birth certificate was forged. What could have been his parents’ motives for committing such a bizarre deed, or his home state’s motive for colluding in it, or the courts’ motives for overlooking it?

Or consider the widespread conservative conviction that we are being marched secretly into communism or fascism. Why would someone bother? It seems equally likely, given today’s circumstances, that conspirators would trick us into becoming a colony of Belgium or the imperial seat of the Bonaparte family.

The paranoid pattern persists regardless. It is impervious to world events; a blurting of the American subconscious that has not changed since Hofstadter analyzed it 45 years ago. Consider the recent wave of fear that the hypnotic Mr. Obama was planning to indoctrinate schoolchildren. In “The Paranoid Style,” Hofstadter wrote, “Very often the enemy is held to possess some especially effective source of power: he controls the press; . . . he has a new secret for influencing the mind; . . . he is gaining a stranglehold on the educational system.”

via Thomas Frank: From John Birchers to Birthers – WSJ.com.

Let me start off by saying, I agree to some extent on the birth certificate issue. I don’t know whether the issue is valid or not, so I don’t claim that it is. It’s a distraction, and it let’s people like Mr. Frank lump all conservatives together and say they are nuts.

With that said, I do have a problem with the remaining arguments in Mr. Frank’s article. To say that conservatives are claiming we are marching secretly to communism or fascism, and that somehow that is nuts, should highlight how the intellectuals among us are so blinded by their supposed brilliance. Apparently, the government take over of our largest financial, automotive, and soon to be newspaper institutions is of no concern to Mr. Frank. That is just silly talk. So what if the government controls them, and they say what is going to happen in the market place. How is that communism or fascism?

In addition, I think Mr. Frank doesn’t realize that this isn’t a new march. Surely the government permanently impoverishing a large population with welfare and using Medicare and Social Security to induce fear when needed on another large segment of our population could be considered something other than just crazy, paranoia.

I guess, Alexander Hamilton was paranoid when he wrote in the Federalist Papers, “.. that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidding appearance of zeal for the firmness and efficiency of goverment. History will teach us that the former has been found a much more certain road to the introduction of despotism than the latter, and that of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people, commencing demagogues and ending tyrants” What kind of crazy is Alexander Hamilton warning us about those tenderhearted politicians?

We all know Jefferson was a loony, paranoid, nut case when he said, “A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.” What a weirdo.

Don’t worry about the government trying to take over the 1/6th of our economy via health care. They would never use your health care to make you behave in a certain way. They would never hold it up at election time to scare people into voting for them. Why would you think that?

Surely, this “paranoia” that Mr. Frank so arrogantly puts down is nothing new. What most people would call skepticism has been with us since our founding. It is what led our country to revolution and then to form our union under a constitution.

As far as the school children, the media may have blew it out of proportion, but that was before the post speech exercise assignment was revised to not make it sound like the student had to do something that the President asked. I think it also went hand and hand with the video from Hollywood asking students to pledge allegiance to the President.  Surely, that’s just a little disturbing is it not? Surely, if this video and this homework assignment was from Bush, Democrats and the left would have rightfully went nuts. Oh wait, but that’s not paranoia. When Bush was in, he only purposefully let a couple thousand  New Orleanians die. Maybe I should go back and read Mr. Frank’s article on those crazy lefties.

Lastly, in part of the article that I don’t have sited here, you can read it at the Journal, Mr. Franks poo-poohs Glenn Beck as the master conspirator. Glenn Beck must be a lunatic questioning the Federal Reserve, oh along with all Austrian economists. Surely, the Federal Reserve had nothing to do with the tech bubble, followed by the housing bubble and who knows what bubble they are creating now.

Mr. Frank’s complete lack of historic and conceptional perspective is an embarrassment for my paper of choice. While, he’s entitled to his opinion, maybe he can keep his head in ground. We’ll pull him back out once we take our country back.

How do you get health care reform, which will harm doctors, patients, health related companies and all tax payers? Simple. You lie, cheat, steal, and if need be, you bang some heads. That is exactly what the Obama administration and congressional democrats are doing. Today’s Wall Street Journal highlights just one such scam being employed to get the support of the American Medical Association.

President Obama has made serial promises that he will not sign a health-care bill that “adds one dime to our deficits, either now or in the future, period.” This was never plausible, but now we can begin to understand what he meant: Democrats plan to make ObamaCare “deficit-neutral” by moving nearly a quarter-trillion dollars off the books, in the fiscal deception of the century.

Later this week, or maybe next, Senate Democrats plan to vote on a stand-alone bill that strips a formula that automatically cuts Medicare physician payments out of “comprehensive” health reform. Rather than include the pricey $247 billion plan known on Capitol Hill as the “doc fix” as part of ObamaCare, they’ll instead make this a separate contribution to the deficit, without compensating tax increases or spending cuts. Majority Leader Harry Reid explained at a press conference last week that “All we’re doing is wiping the slate clean by adjusting the baseline to what is current policy. This is not new policy.”

Wiping the slate is right.

It’s true that Congress likes to pretend that the “sustainable growth rate,” or SGR, is real. Created in 1997, the SGR slashes Medicare reimbursements if costs rise too steeply, as they always do. In January, doctors fees are scheduled to fall by 21.5%, and 40% over the next five years. That would force many doctors to stop seeing Medicare patients, so Congress intervenes every year and temporarily overrides the cuts.

The American Medical Association’s asking price for supporting ObamaCare is scrapping the SGR. House Democrats did just that, but it pushed the total cost of their bill above $1 trillion, a political red line. The Senate Finance Committee chose the subterfuge of fixing the problem for only one year, which is how Chairman Max Baucus could claim he had done the miracle-work of designing an entitlement that reduces the deficit over 10 years. The AMA wasn’t pacified.

So now Democrats are simply going to “untether” this spending on doctors from ObamaCare, hiding even more of its true costs. At a meeting on the Hill last week, Mr. Reid and White House Chief of Staff Rahm Emanuel made the quid pro quo explicit, telling the AMA and about a dozen specialty societies that in return for this dispensation they expect them to back ObamaCare, no questions asked.

via Democrats Plan to Strip Sustainable Growth Rate Formula from Health-Care Reform – WSJ.com.

Already the Democrats are gathering support from horrible Big Pharma, Big Insurance, and now they are twisting arms to get Big Docs. We all know how evil these groups are, while the government is so virtuous and compassionate. Why would these groups that are going to be harmed by health care reform decide to back it? Is it because it’s what’s best for America? We are told that Big Pharma and Insurance are so evil and too many doctors would cut off  your left leg just to make a buck, but then when they back Obama all the sudden we are supposed to say, “Oh, well if they are backing it, it must be a fabulous idea.” Either they are evil, or they are not, Obama.

So to see who is evil, let’s just see who is pulling the fast one. In the article above, the government currently has a policy of slashing medicare payments to doctors if medicare costs rise too quickly. As we’ve discussed in previous posts, costs always rise “too quickly”, because government money floods the market driving up demand and third party payer hides price signals from the consumer. Also, “too quickly” is an arbitrary measure based on medicare budgeting. It has nothing to do with a what is really happening economically.

Anyways, in the end doctors are going to have their reimbursements cut yearly as costs exceed bureaucratic expectations. If you are a doctor, how many times are you going to let the government put the screws to you before you stop treating medicare patients? Then what happens when doctors begin dropping medicare patients? Well, we’ve already discussed that cost or price is effected by supply and demand. Even if demand stayed the same, which it won’t because this is a new expansion of medicare, supply is going to be cut. Doctors will be dropping out, leaving less doctors and choices for patients on the government’s dole. Oh, and guess what. With the decrease in supply, guess what happens. You guessed it, costs increase. Hmm, what did the government say they would do if costs increase above expectations? Oh yeah, they would cut reimbursement rates, leading to a circular decline of medical care.

“Hold up buddy. The article above says they are scrapping that.” Oh, that’s right. In a bargain with the devil, the AMA is going to support this if congress drops the SGR. Does dropping it fix the budgetary problems? No it doesn’t, and as soon as the budget ceiling explodes, you will hear how evil the doctors are again. Congress, like the decievers they are, will undoubtedly renege on their agreement with the AMA and re-instate the SGR.

There is nothing good about the government involvement in health care. It’s making a deal with the devil expecting him to uphold his end of the bargain. The problem is once the devil has gained control of your life, it takes an act of God to get him out.

Thursday, unelected bureaucrats will be making a major decision on behalf of the American people that can have far reaching implications to our freedoms. Here is an article from My Way News with my commentary.

Oct 18, 12:57 PM (ET)

By JOELLE TESSLER

WASHINGTON (AP) – With Democrats in charge in Washington, supporters of so-called “net neutrality” rules seem poised to finally push through requirements that high-speed Internet providers give equal treatment to all data flowing over their networks.

These rules – at the heart of a five-year policy debate – are intended to guarantee that Internet users can go to any Web site and access any online service they want. Phone and cable companies, for instance, wouldn’t be able to block subscribers from using cheaper Internet calling services or accessing online video sites that compete with their core businesses.

The Federal Communications Commission is set to vote Thursday on a proposal by the agency’s chairman, Julius Genachowski, to begin crafting regulations to prohibit broadband providers from favoring or discriminating against Internet traffic.

Broadband providers such as AT&T Inc., Verizon Communications Inc. and Comcast Corp. argue that after pouring billions of dollars into their networks, they should be able to operate those networks as they see fit. That includes offering premium services over their lines to differentiate themselves from competitors and earn a healthy return on their investments.

Genachowski’s proposal has also encountered misgivings among Republicans on the FCC and in Congress, who fear network neutrality rules could discourage broadband providers from continuing to expand and upgrade their systems.

“The risk of regulation really inhibits investment,” said Republican Commissioner Robert McDowell. Noting the agency’s estimated price tag of up to $350 billion to bring broadband connections to all Americans, he added: “How do we pay for all that?”

via My Way News – Hurdles remain as FCC ponders Internet data rules.

To start, what gives the government the right to tell private companies, who invest their own money in building these broadband networks, that they have to provide unfettered access to all internet users whether customers or not. This is rediculous enough, but let’s show how the free market would do this without the loss of liberty?

First, in most places there are multiple internet providers. For example, where I live in Pittsburgh, I can get internet from Comcast via cable, Verizon via DSL, Verizon via FiOS, and other providers of DSL and satellite services. If for example Comcast decides to limit monthly download to say 250GB, which they did, then customers will decide whether it is worth it for them to abide by their rules or switch to Verizon.

We make these decisions all the time. For instance, last year I switched from Comcast to Verizon for my internet. Why did I do this? Because Comcast thought they could hold me hostage to purchase all their services or rape me on the remaining ones. Surely enough the free market delivered. I dumped Comcast, went to Verizon for my internet, Dish Network for my TV, and Phone Power for my phone. I cut my costs and got more service. What government doesn’t seem to understand, probably because they only know force, is that the free market cannot coerce you into doing anything.

“Well, the internet is interconnected, and if Comcast decides to restrict access to a service that if offered by a competitor,  they can hurt the competitor even if the end user isn’t a Comcast customer. For example, if Verizon’s customer’s traffic has to travel over Comcast’s network to get to its destination, then that customer can be harmed even though they aren’t a Comcast customer.”

Hmmm, let’s think this through. If the internet is interconnect, which it is, would it make sense financially for Comcast to start a war with another carrier? Also, the internet is interconnected, but it is not one link. Most carriers have a plethora of routes to use to get to the destination they are seeking. They also have protocols that decide which route to take based on things such as available bandwidth. With this technology, they would bypass Comcast. (Warning: I’m using Comcast as an example. They aren’t the target of this legislation that supposedly is going to help consumers.)

Also, in a free market, companies are incentivized to innovate and offer new services because of profits. If profits are cut because of government force, then it is without a doubt going to cut into innovation, which ultimately hurts everyone.

Providers don’t only provide one solution. If they are providing phone services to businesses and end users, they must be able to meet that service obligation. If they are required to ignore those needs in order to provide “net neutral” access to their broadband, then those services become worthless. Those services cannot sustain, because they would be unreliable. This would decrease their profits (which we already explained hurts innovation), and hurt the consumers of those phone services. Now you have less competition in the phone service arena.

Government always seems to want to address problems that do not exist. Where has this been a long term problem? Where has the consumer, who has no right to these services, been harmed by the monstrous internet providers? I think one could argue that the most unregulated part of our lives these days, the internet, is without a doubt the most innovative and quickly advancing parts of our lives. This isn’t happenstance. This is because the government isn’t dampening the motive of companies to make a profit, not yet that is. It would appear that the government can’t stand to see a sector of our economy flourishing without it.

If you want the internet to continue it’s phenomenal advancement and betterment of our lives, I’d suggest you let your representatives know that “net neutrality” is disaster. Let them know your vote could be swayed by their stance on this legislation, and that internet service providers have delivered as promised in regard to our communications needs. We can decide what providers to use and punish ourselves. We do not need them taking our liberty in order to do it, which we already know they can’t.

Tony Blankley has column out today that talks about the insane notion that the government seems to have that it can continue spending with out regard to the debt. The debate on health care is so ridiculous when you think about where we are heading already without adding any new programs ever going forward. Here is a small piece of his column.

Don’t take my word for it. In June, the Congressional Budget Office published “The Long-Term Budget Outlook,” its summary reading in part: “The federal budget is on an unsustainable path — meaning that federal debt will continue to grow much faster than the economy over the long run. … Rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly.”

And yet the same Congress and president who want to stop the banks from taking too much risk cannot stop themselves from expanding deficits.

The federal government is giving the “green light” for the country to drive to the poorhouse — and drive there, I would argue, by way of the lunatic asylum.

Before Sen. Max Baucus’ health bill is enacted, $9.3 trillion of newly created deficit already has been added to the national debt. The Baucus bill is considered a triumph of careful budgeting because it may cost only $829 billion

via Debt-driven madness – Pittsburgh Tribune-Review.

Now, I don’t think the American public is as crazy as the government, in particular the Democratic party. That is why the majority of the public does not support a public option. Also, this is partly why you see a mass movement against the government’s ever expanding welfare state. The future of our country looks extremely dire with the predictions of the CBO, and yet politicians keep pressing on for more spending. Could it be that the statists would love to see the downfall of the capitalist United States or at least a partial collapse, so that they can grab even more power from a frighten and impoverished citizenry?

As responsible Americans, we have to forget even the notion of any type of health care bill that leads to government expansion. Not only that, we need to start realizing the party is over, we’ve drank way too much, and the hang over is going to be nasty. It’s time for us to make drastic cuts in the welfare state. We can no longer hand out government dollars for today’s “me, me, me” population to the detriment of future generations.

Today I finally picked up my own copy of The Federalist Papers at Half Priced Books for $3.48. Thank God For The Free Market #TGFTFM as I like to say on Twitter. Anyways, I only made it to the third page before I found my first gem.

Alexander Hamilton wrote, “.. that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidding appearance of zeal for the firmness and efficiency of goverment. History will teach us that the former has been found a much more certain road to the introduction of despotism than the latter, and that of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people, commencing demagogues and ending tyrants”

What he was saying here is there are people who will benefit from weak or inefficient government, and those people will use their fake concern for the people to hide their bad intentions. While I don’t believe our government is weak. It would have been weak if the Constitution was not ratified. In that circumstance there would have been people who benefited from the chaos. There were those who argued against the Constitution to maintain the weak Articles of Confederation. Many of them claimed to be looking out for the people, but they were really trying to maintain their status and power.

What we can take from this is the warning about inefficient government and the warning about those who are excessively for “the people”.  Surely, in our current day and age we can see how inefficient our government is compared to the government that our founders envisioned. How many times have you heard of unaccounted for billions in HUD, the department of education, or medicare?

Surely, you can recall how those who pushed these inefficient programs screamed their great attentions, “zeal”, from the rooftops. They are looking out for the people, the down trodden, or the most often group of concern, “the children”. How about this one? “We have to bail out Wall Street in order to bail out Main Street.” Really? It’s not because you want to bailout your buddies at your former companies? That’s right. Of course, not. It’s for the people.

The waste is horrible, but the second part of Hamilton’s warning is more disturbing. He warns that listening to the people who proclaim to be the champions of the people are the ones who more often than not are the ones who overturn liberties and become tyrants.

Keep this in mind next time you hear politicians claiming to be looking out for the people with health care, student loans, jobs, or the myriad of other government programs. The next three years are sure to be a case study on the warning above from Alexander Hamilton.

Over the past week, I’ve been writing about how the free market is the best solution to health care reform. I also argued that the best way to fix health care is to get rid of third party payer, typically employers, from the health insurance purchase. The second fix was to get rid of third party payer for day to day medical expenses. For some reason, despite the fact that the market delivers food to you to survive, Americans think the market without the government involvement would not provide the insurance and medical solutions needed.

Now I’ve already argued that they would. Examples like walk-in health clinics, $4 prescriptions, and HSAs abound. The biggest fear for most people though is the pre-existing conditions and finding health insurance. I’ve exclaimed and still do that the market will address this need, because that is what the market does. It addresses needs.

The change that would help propel the creation of new insurance products is the consumer of the insurance actually purchasing the insurance. When we purchase goods and services for ourselves, we seek out the goods and services that address our needs effectively at the best possible price. This shopping will create a educated consumers and will generate competition among the providers of insurance and medical services.

Today while doing my bills, my mortgage company sent me this offer: “You can now get $100,000 of accident hospitalization insurance coverage for one full year for free.” Wow, free. Let’s take a look at the fine print. First, let’s make it clear this coverage is for accidental hospitalization. It is not for going to get your flu shot, which as we said before should be paid our of pocket. If our real concern is making sure we do not go bankrupt in the event of an unplanned disaster, surely a plan that covers accidents would be on the top of our list. So, this plan covers hospital stays and emergeny treatments. It even has an option to add your family and include doctors visits. Doctors visits are limited to one per month with a lifetime limit of 60 visits. Wow, I can probably count on one hand how many times I’ve been to the doctors in the past 20 years.

This plan is not total coverage, but it does address a need, accidental coverage. There are exclusions to this plan. The accident cannot be the result of drinking, drugs, committing a felony, flying a plane, war, accidents outside the US, etc. By limiting their exposure, they are able to offer a reasonable amount of coverage for a very low price. How much is this plan? After the free period, it goes up to $9.95/month. To add doctors visits, its $13.95/month, and for a family it’s $19.95/month.

So what does it say about pre-existing conditions? “All eligible customers who complete and return the Activation Form will be accepted. There are no medical questions or physical examinations required for enrollment.” Sounds pretty good for pre-existing conditions to me.

Now, I am not saying this plan here is the answer. It does not cover all scenarios. It’s for accidents. It does not cover cancer, heart attacks, or diseases. I think we could all agree, how could it at $9.95/month? What this highlights though is companies including your home mortgage company will offer solutions. When you are shopping for your own insurance, you will make good decisions to address your own personal needs. You will not be pigeon holed into a plan that doesn’t apply to you because a co-worker has different needs. You also will not go without options. The market is where options are created, and the government is where options are few and usually all bad.

Earlier this week, I posted a two part series on how to fix the health care crisis. The solution was to get rid of third party payer in respect to the purchase of health care and insurance. Immediately, I got and was glad to have received the red herring question of the pre-existing condition.

Let me start off by saying, that I have a child with special needs. My 9 year old son has cerebral palsy and has gone through years of physical therapy and occupational therapy to be able to walk on his own. He still wears braces on his legs. In additions, my niece has a severe case of autism, so bad that she is fed through a feeding tube. I say this because I know personally what parents have to deal with when it comes to pre-existing conditions.

With that said, free markets and freedom in general are principles on which this country was founded. Principles are meant to be applied in all circumstances, because they prevent us for choosing the wrong path. Our founders knew this. It is by veering off these principles that we are in the mess we are in now. Just because there is a hard issue to be addressed, doesn’t mean we throw away our principles. We don’t teach our children principles to guide them through life, just to have them toss them aside at the first circumstance that challenges their principles. Principles are meant for the hard issues. The are not meant for the easy issues.

“OK buddy. Enough preaching already.”

Agreed! We must start off this topic discussing the morality of government health insurance. Then we will move on to the economics of the issue.

In Thomas Paine’s great work “Common Sense”, he lays out how and why governments come into existence. He describes a civilization with two people, and how with two people you do not need government. Those two people can discuss their problems and come to a solution directly. As more and more people come into this society, they can no longer work out their disagreements directly. There are just too many of them, and they have other duties that require their attention and time. This is when government comes into existence. They decide to appoint select members of the society that they believe will represent their best interests. Those representatives will then setup laws and rules that protect all members of the society. What are they protecting each member of society from? They are protecting them from each other. They are making sure that one member doesn’t use coercion on another member. This coercion can be in the form of theft, fraud or even murder. This is how government is supposed to function in a free society. I think we would all agree that the government that functions in this manner is a just and moral government.

If we all agree to that, then we must acknowledge that coercing someone against their will directly or through the government is an immoral act. This is why the free market is always moral, and all other systems are immoral. The free market allows people, in pursuit of their own interest, to peacefully without coercion come to an agreement on trading a product or service between themselves. Both parties in the transaction walk away from the transaction better than before.

As soon as the government becomes involved, with the exception of preventing coercion (contract law, prosecuting fraud and extortion, etc), they then become the coercive power. Just because they may be acting on something that the majority agrees with doesn’t mean that coercion is now moral. I’m sure the best case of this was slavery. The majority approval for the government coercion did not make slavery moral. Immoral acts are always immoral.

What I am leading up to here is having the government force any individual to pay for another individual’s health insurance is immoral. Also, forcing an individual to buy his own insurance is immoral. In a free society, people are free to pursue their self interest. They are free to be miserly, charitable or neither. They are free to be successful, and they are free to fail. This is a just and moral society. As discussed earlier, this is a principled society. As soon as you veer away from this principle, no matter what your intentions, you then cannot say that another act of coercion, say Wall Street millionaires taking our tax dollars, is immoral.

I know this may sound like great theory, but the truth is life would be much better if we stuck to the principles of our founding fathers. I think we all know and agree to that, but then for some reason we immediately find that this special circumstance is different. It isn’t different. Our founding fathers had many reasons and opportunities to take the path we are now taking. They decided to take the principled stand. They decided to take it for us. George Washington could have easily been a king. He could have setup a monarchy that would have passed from generation to generation. Read history, and you will find how easily he could have done this. People were begging him to be king. Instead, he stood on the principles they professed during the revolution, and he stepped down after two terms.

Now, enough of my moral argument. Morals are great, and we’d all be better off if we lived by them, but how will the free market address the question that prompted this blog?

The free market operates in this manner. Individuals need many things for survival and pleasure. Because they cannot meet all their needs by their own action and invention, they offer what they are best and most efficient at creating and delivering for something they need that someone else is best and most efficient at creating and delivering. This is what is known as the division of labor. For society to benefit the most from everyone’s production, this must be voluntary and with out compulsion. When voluntary, people will seek to offer what they can create better and in more supply than everyone else. They do this based on their self interest. The more value they can create the more they will be able to get from others through trade. When government bureaucrats decide who should do what, you end up with people producing things that they are less efficient at producing. This results in a lower quality of life for us all.

This is apparent even in the most obscure products and services that are offered today. Do you think in government controlled economies, people with a fetish for purple, prince garbed, frog figurines could ever find the product they seek? In the free market, even products and services that seem so obscure that they wouldn’t be worth producing are produced. They are produced because there is a need, there is someone who can produce it, and there is a price at which both agree the product is worth producing and purchasing.

In the market of pre-existing medical conditions, this type of innovation would undoubtedly take place as well. There would be entrepreneurs that see a need that needs met. Typically, these entrepreneurs have experience themselves with being on the needing side of the tracks. They found that they couldn’t meet their own need through the market, so they say “Hey, I see an opportunty here. Why don’t I offer this to society. There has got to be many more people out there with the same need.” As we know, this happens every day, and this is why we as Americans progress so quickly. This is why the internet in a very short time went from bulletin boards to what we have today, where you can make video conference calls across the globe for FREE!

That is not to say you would not have some progress under a government controlled economy. The problem is you would only have progress in the areas that some bureaucrat, special interest or the majority believe should be pursued. If your child suffers from a less common ailment, you are out of luck.

With the free market, you will see innovation so much faster, and you will see prices of those innovations quickly drop. How much did a little 20″ LCD screen cost just 10 years ago? Politicians love to blast the rich, but guess who will fund that new medical treatment your child or you need? When it is first developed in the free market, it will be expensive. That is because of all the research and development costs that went into innovating the product or service. The rich will be the only ones who can afford it. There are only so many rich people, and eventually the manufacturer will have to figure out how to make it cheaper to gain access to a larger market. In this process, all the other companies that participate in the creation of the product will also be pursuing reductions in production costs. This will create a butterfly effect, which will result in rapidly declining prices. I know people think it isn’t fair for the rich to be the only ones who can afford it at first, but under the government controlled market or a market with out the rich, the innovation wouldn’t have taken place.

As I said previously, when you remove the third party payer from the insurance purchase, you will quickly see incentives to live healthier. According to the CDC, chronic illnesses that are caused by life style choices account for 75% of all health care expenditures. It would be a far stretch of the imagination to believe that this number would not be drastically effected if those life style choices were punished via higher premiums. A large decrease in chronic diseases would undoubtedly reduce insurance rates, and it would reduce the cost of health care in general.

Also removing the third party payer from the day to day health care purchases would drastically increase competition and lower prices for normal health issues. This would help those who have pre-existing conditions by allowing them to get the regular medical care at a fair price. Personally, this was my major issue when searching for insurance. My son’s pre-existing condition prevented him from getting even catastrophic care. The reason being is they assumed there would be a large amount of day to day care. I wasn’t concerned with day to day care. My concern was catastrophe. I needed coverage for the care that you can’t plan for. With the decrease in the cost of day to day care that would result from paying out of pocket and increased competition, you would see insurers more inclined to cover those who have pre-existing conditions. One can easily imagine an insurance company running a new marketing campaign stating that is is the “Only insurance company to offer coverage for children with autism”. That is a market that needs served, and they would be the first to tap into that market. Quickly competitors would step up to the plate, and prices would be driven down. Doctors who specialize in a particular affliction would compete for the dollars of potential clients by offering the newest and best treatments. These are the circumstances in which the market shines best.

The last wonder of the free market that would help those who really struggle financially is charity. Historically, charity has always been the way the poor was able to receive the services that they need but could not afford. Americans are the most generous people on the planet, and it would be almost a guarantee that with the government out of the market you would see increased prosperity. With that increased prosperity, you would see more charitable donations. Insurance companies and doctors would donate time and dollars to take care of the less fortunate. One must ask what would happen with charity under a government run health care plan. If the government turns you down, it would almost certainly be illegal or at minimum be detrimental to the doctors relationship with the government if he performed a procedure out of charity.

As I write this, I get super excited as a parent of a special needs child thinking of the innovation that would be unleashed in a completely free market. Unfortunately, we have already let the barbarians in the gates, and they are not going to leave of their own accord. The likely hood that we will drive them out and take back our economy and country is slim. It involves the unknown. It’s easier to accept the mediocrity of the known than it is to trust in what we know is truth but seems so far from where we currently are. I beg you not to fear. Can you imagine what fear our founding fathers, who never knew what life was like without the protection of the Royal Crown, must have felt? The amount of courage that it must have taken just amazes me, even as I write this. I’m sure we can all agree, thank God that they did. Let’s remember life isn’t only about the here and now. It isn’t just about take care of me, and the future be damned. Now is our turn to take the principled stand. It’s our turn to make the tough decisions for posterity. If we do the right thing, one day, our children and grandchildren will say, “Thank God that they did.”

After reading the following editorial in the Wall Street Journal this morning, I had to send in a letter to the editor. While I doubt it will get published, it will here. That’s another lovely thing about the free market! Here’s the editorial followed by my response.

By VERNON L. SMITH

There is widespread agreement with the principle that our health-care system needs to be reformed. But our representatives and our neighbors have much trouble in reaching agreement on the particulars. There have been many legislative bills offered and hundreds of amendments with no clear path to a resolution.

Health-care systems everywhere encounter cost overruns and rationing devices, like queues, in their diverse attempts to deliver products for which demand has long grown faster than other economic sectors. Why is it so difficult to find the private and public means, the combination of markets and government assistance, that enables a preferred outcome to emerge?

This question has a simple answer that plagues health care everywhere.

The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party—the insurance company or the government—is paying A for it.

This structure defines an incentive nightmare. You do not have to be an economist to realize that, when phrased in this way, nobody knows how to solve this problem. Hence the many experiments, all of which have been deemed less than satisfactory.

I don’t know whether this problem has a solution. If it does, I think it requires us to find mechanisms whereby third-party payment is made to the patient, B, who in turn pays A, supplemented with any co-payment from B for services. Hence, from the moment B seeks services from A both know who is going to be paying A for what is delivered. A and B each has need for what the other brings to the table, and this structure carries the potential for nurturing the relationship between A and B. B is empowered to become better informed about the services recommended by various A’s that he might choose among, and the A’s might find it particularly important to build good reputations with B’s.

Mr. Smith, the 2002 Nobel Laureate in economics, is a professor at Chapman University.

via Vernon L. Smith: The ABC Dilemma of Health Reform – WSJ.com.

Subject:  In response to “The ABC Dilemma of Health Reform”

Leave it to the intellectual to turn the simple into the complex. Mr. Smith, a Nobel Laureate, says “I don’t know whether this problem has a solution.” Is he serious? Any economist knows the disaster that ensues when price signals are not available to the purchaser.

The entire system can be fixed by addressing third party payer in respects to the purchase of medical services and the purchases of the insurance. Instead of further incentivizing the distortion of the market via the tax code’s promotion of employer purchasing of insurance, we should incentivize the individual. When the individual purchases his own insurance, he’ll make better puchasing decisions, such as buying a catastrophic plan instead of a plan that covers everything down to teeth cleaning. The individual will also make better purchasing decisions when the doctor tries billing him $10 for a band-aid.

When the accumulative effect of millions of these first party payer transaction kick in, you will see prices come back in line with the rest of the market. You will see entrepreneurs battling it out for the consumers dollar.

Sincerely,

Jason Vanzin

Guys, here’s a great video on the free market. Pay particular attention to who the immoral actors were in the mortgage crisis.