Steve Horwitz and I assess Jane Smiley’s discussion of economists and economics. Passages on economists, rationality, and moral philosophy:
We assume people are “rational,” but we don’t mean they are omniscient or wise or even quick learners. We mean people want to make themselves as well-off as possible; people try to shape the world according to their values, whatever those may be. Free-market economists also assume that people are ignorant, and we show that markets teach them how to use resources wisely.
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Some notable exceptions notwithstanding, it is–as Smiley writes–”human nature to cheat, monopolize and buy off others.” But we see this as a reason to distrust politics rather than markets. Political incentives exacerbate knavery. Centralizing power in the hands of the state, which is Smiley’s implied alternative to free markets, will not make things better. It will put more power in the hands of the sorts of people Smiley fears.
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Murray Rothbard once said that “it is no crime to be ignorant of economics,” but that it is “totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” It is tempting, therefore, to dismiss Smiley’s article as little more than sound and fury. Yet it does signify something profound and troubling: economists’ failure to communicate the essential insights of our discipline. Jane Smiley’s contemptuous and uninformed dismissal shows that we really need to redouble our efforts.
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It may just be me, but it appears to me the main contributors to this blog seem to be reading the Huffington Post a lot lately. I’d like to congratulate them for being able to to that. Personally, I couldn’t make it through the first few paragraphs of the cited article before deciding that continued reading was a giant waste of time.
Smiley’s rant is typical of English teachers that I have known. One of my sisters-in-law taught English and literature for 30 years. The author of “Teaching Lolita in Tehran†provides a good example of the arrogance of literature teachers. For them, literature is not about learning how to write well. It’s a religion. Literature is the universe breaking through the work of the artist to give us direction and insight. Literature is the only subject worth studying, except maybe a cure for breast cancer and aids.
This superiority over all other subject goes especially for economics. The only thing you need to know about economics is what Marx wrote; everything else is a complete waste of time. Everything people need to know about economics they learned in kindergarten: everyone cheats, steals, and bullies others and the only one capable of restoring order is the teacher.
The literary approach to economics that Austrians pursue might appeal to English teachers if they weren’t so arrogant as to make any future learning impossible for them.
Blah blah blah. You all ignore all the shortcomings of the free market. The market itself does not “fail” but certain needs that have to be met are often subject to localized “market failures”, especially when externalities come into play. For example, curing me of swine flu also benefits my neighbors, while not curing me puts them at risk. These factors are not brought into the cost/benfit analysis of the insurance company.
Fun fact: an insurance company that gave care to everyone who needed it would go out of business due to competition from the ones that cheat.
lionheart: “an insurance company that gave care to everyone who needed it would go out of business.”
An insurance company that gave free care to people would not be an insurance company; it would be a charity. Free markets make room for charities in that people are free to give to those charities that are doing the work the donors like.
But that brings up an important point about health care: people don’t want insurance; they want charity but they don’t want it to be called charity.
Then why do other countries do pay less and get more? They realize that healthcare is a place that taxes should be spent, and they measure the benefit by having healthy citizens, all without using healthcare to make a FINANCIAL PROFIT. Which is an obvious shortcoming of the free market.
Fun fact: commie pinko CUBA has a LOWER infant mortality rate than the US. that should tell you all you need to know about how fucked our system is currently.
And at NO point did I say FREE care. I just said “care”. As in when someone who payed their premiums got sick or injured, the insurance company would pay out on their policy. No dropping them, and if we’re nice, no excluding people for pre-existing conditions.
Insurance. NOT charity. Good God.
Wait, we don’t have companies that do that, because the ones that drop peoples’ coverage drove them out of the market.
Fun facts: [...] in the United States if an infant is born weighing only 400 grams and not breathing, a doctor will likely spend lot of time and money trying to revive that infant. If the infant does not survive — and the mortality rate for such infants is in excess of 50 percent — that sequence of events will be recorded as a live birth and then a death.
In many countries, however, (including many European countries) such severe medical intervention would not be attempted and, moreover, regardless of whether or not it was, this would be recorded as a fetal death rather than a live birth. That unfortunate infant would never show up in infant mortality statistics.
This is clearly what is happening in Cuba. In the United States about 1.3 percent of all live births are very low birth weight — less than 1,500 grams. In Cuba, on the other hand, only about 0.4 percent of all births are less than 1,500 grams. This is despite the fact that the United States and Cuba have very similar low birth rates (births where the infant weighs less than 2500g). The United States actually has a much better low birth rate than Cuba if you control for multiple births — i.e. the growing number of multiple births in the United States due to technological interventions has resulted in a marked increase in the number of births under 2,500 g.
It is odd if both Cuba and the U.S. have similar birth weight distributions that the U.S. has more than 3 times the number of births under 1,500g, unless there is a marked discrepancy in the way that very low birth weight births are recorded. Cuba probably does much the same thing that many other countries do and does not register births under 1000g. In fact, this is precisely what the World Health Organization itself recommends that for official record keeping purposes, only live births of greater than 1,000g should be included.
The result is that the statistics make it appear as if Cuba’s infant mortality rate is significantly better than the United States’, but in fact what is really being measured in this difference is that the United States takes far more serious (and expensive) interventions among extremely low birth weight and extremely premature infants than Cuba (or much of the rest of the world for that matter) does.
And I didn’t even research “voluntary” abortions to meet live birth quotas because I am nice like that =)
Blah, blah, blah. How do you know they pay less and get more? Admittedly, part of the problem with the U.S. system is how mixed up it is.
But like anything else, the private market, when allowed to, can do a better and more efficient job of providing services than the public sector can. Why? Well, you realize that health care services have to be paid for. So why do you think that paying taxes to a bureaucracy so they can implement some health care or health insurance plan is going to be more efficient and more cost-effective than if you were paying health care providers directly? Innovation doesn’t come by legislative fiat or bureaucratic order, but because entrepreneurs are looking for opportunities and niches that aren’t currenlty being served, and trying to serve them. Externalities? Entrepreneurs look for ways to internalize and realize profit on them, too. Plus, just because there’s a positive externality for someone else, that doesn’t mean that there’s necessarily a problem, especially if it’s not going to change the behavior of those who are paying for it. You have to judge externalities carefully to fully understand them.
And really, people are so confused about what insurance is and how it works, it’s no wonder they expect insurance companies to act like charities.
For example, curing me of swine flu also benefits my neighbors, while not curing me puts them at risk. These factors are not brought into the cost/benefit analysis of the insurance company.
What does curing yourself of the flu have to do with an insurance company’s cost/benefit analysis? Are you implying it would make sense for an insurance company to actively get you cured so that your neighbors don’t get sick? Why would they do that? The problem with your example is that it begs the question, since you already assuming the resonsability of an insurance company is to provide you with health (period.)
Fun fact: an insurance company that gave care to everyone who needed it would go out of business due to competition from the ones that cheat.
How would they cheat?
Fun fact: an insurance company that gave care to everyone who needed it would go out of business due to competition from the ones that cheat.
Not if they charged enough for it, but then, that’s exactly what the government likes to prevent through legislation.
Lionheart:
Fun fact: commie pinko CUBA has a LOWER infant mortality rate than the US.
This is not true – the Cuban government under reports their infant mortality statistics by not reporting live child births until they’re 6 months old, assuring a totally biased statistic. This fact has been documented many times by Cuban doctors that either defected or were interviewed in Cuba, at great risk to them.
The US reports all live child births including prematures, which account for the seemingly higher infant mortality rate – in other words, the infant mortality reporting of the US is more honest than that of other countries, especially Cuba.
lionheart: “Then why do other countries do pay less and get more?”
They fix the wages of doctors and the prices of procedures and medicine. Besides, there is no data that suggests they get more for less. They often get less for less.
lionheart: “Which is an obvious shortcoming of the free market.”
You’re very confused if you think we have a free market in healthcare in the US. Our system is just as controlled and socialist as the European systems, just less rational.
lyingheart: “And at NO point did I say FREE care.”
You wrote: “an insurance company that gave care to everyone who needed it would go out of business.” The word “gave” implies free as does the rest of the sentence.
lionheart: “Then why do other countries do pay less and get more?”
If this were true, why would anybody pay to come to this country and pay to get medical treatment that they could get for free in the UK or France, or somewhere else?
Are you saying that the Saudi Royal Family members have “Democrat Congress Syndrome” – a compulsive urge to spend more money to purchase less or lower quality?
Thank you all for the comments. This actually raises a very interesting empirical issue. To the best of my knowledge, no one has good data adjusted for differences in definition of infant mortality. Moreover, I would be interested in seeing empirical work on how much of the difference in US and (say) Cuban infant mortality is explained by differences in abortion rates. I heard frequent Lewrockwell.com contributor Humberto Fontova point out once that the abortion rate in Cuba is about 3x that in the United States, and it stands to reason that the babies with the highest probability of being aborted are also those with the highest probability of serious health problems. If anyone knows whether this has been investigated in detail, I would be very interested in seeing the analysis: cardena-at-rhodes-dot-edu.
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