Re: ECON: Rebuke my TA!

Michael Lorrey (
Mon, 27 Oct 1997 20:49:55 -0500

Geoff Smith wrote:
> Hello Extropians,
> In an e-mail conversation with my micro-economics teaching assistant, we
> got onto the subject of the inefficiencies of government as a monopolistic
> firm. I am in no way experienced enough to have a sufficiently informed
> debate on this topic-- could someone more learned please help me poke some
> holes in his argument(although some points of his are very convincing).
> Especially, how do I argue against his statement that public healthcare is
> 40% cheaper than private!?!

Here are some arguments:

1) The Canadian health care system averages 40% cheaper than private
health care in the US because a) private health care coverage is taxable
income here in the US b) Canadians fix prices below market demand
levels, thus putting ceilings on the earning abilities of doctors to
earn market rates and c) the most high cost health services in Canada
are highly restricted and rationed, far more than is rational, which is
basically meant to force people to go to the US to have procedures done.
The Canadian claims of 40% do not factor in this externalized cost. If
they did, they would be much closer to US rates. Also, d) tort laws here
in the US encourage excess consuption of health care services merely to
rack up bills to influence liability awards by juries, and to inflate
the costs of malpractice insurance here as opposed to Canadian
malpractice rates.

You will notice that none of these factors has anything to do with the
actual cost of goods and services, just with the various ways in which
governments pass laws that manipulate the market.

The Canadian practice of externalizing high cost health care procedures
is very similar to the way in which private companies are encouraged by
tax law and the weak state of civil law (as remedy) to externalize costs
with regard to pollution and education. If businesses actually had to
pay for the costs of education of the workforce and the cost of
pollution (or elimination of same), we would see corporations become
mini-socialist governments in effect, while workers could pick and
choose which corps to trade goods and services with.

The liberal claims that pollution control is a public good only
government can provide is highly specious, since it was government that
originally ruled that corporations were free to pollute in ways harmful
to the property of others because of the positive economic public good
industrial development provided (i.e. tax dollars in politicians
pockets, politicians who appointed judges). Unrestrained pollution is an
effect of government mercantilism, not the market.

You'll notice that the largest and most effective penalties against
corporations that pollute are civil actions, not government fines, and
that the most effective environmental regulations passed in the last 30
years were those that aided private citizens in pursuing civil actions
against polluters. You'll also notice that the worst environmental
disasters and general environmental degradation happen under
monopolistic governments, like the Soviet Union, Eastern Europe, China,
etc. Contrary to popular opinion, the US currently has among the highest
environmental quality of any developed or developing nation.

			Michael Lorrey
------------------------------------------------------------	Inventor of the Lorrey Drive
MikeySoft: Graphic Design/Animation/Publishing/Engineering
How many fnords did you see before breakfast today?