This article appeared in Bloomberg.com and described the rebuilding effort in New Zealand after the earthquake, specifically in Christchurch. What struck me is the assertion that the demolition and reconstruction of infrastructure, buildings, and homes would give an economic boost to their economy. That came from a J.P. Morgan Chase economist so I am shocked, but maybe I should not be. Such thinking has become common wisdom among Keynesian economists.
Frederic Bastiat used the example of a broken window to examine the economic consequences of destruction. Keynesians would say that a broken window created work for the glass company and also demand for more plate glass. Austrian school economists look at the big picture and see a net loss of wealth, even if some wealth is redistributed. The same reasoning can be applied to war, where thousands of workers are employed to build arms and munitions. This Wikipedia article has Bastiat’s parable and a discussion of the subject.
If I were asked what one single author one should read for fundamental insights into government and economics, I would probably say Frederic Bastiat. His treatise on government is The Law published in 1850. I highly recommend it. As a teaser of what this man has to say, I have attached some quotes.
Each of us has a natural right, from God, to defend his person, his liberty, and his property.
Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone.
Taxes must, in the end, fall upon the consumer.
We cannot but be astonished at the ease with which men resign themselves to ignorance about what is most important for them to know; and we may be certain that they are determined to remain invincibly ignorant if they once come to consider it as axiomatic that there are no absolute principles.
The state tends to expand in proportion to its means of existence and to live beyond its means, and these are, in the last analysis, nothing but the substance of the people. Woe to the people that cannot limit the sphere of action of the state! Freedom, private enterprise, wealth, happiness, independence, personal dignity, all vanish.
Legal plunder can be committed in an infinite number of ways; hence, there are an infinite number of plans for organizing it: tariffs, protection, bonuses, subsidies, incentives, the progressive income tax, free education, the right to employment, the right to profit, the right to wages, the right to relief, the right to the tools of production, interest free credit, etc., etc. And in the aggregate of all these plans, in respect to what they have in common, legal plunder, that goes under the name of socialism.
But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.
Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.
There is in all of us a strong disposition to believe that anything lawful is also legitimate. This belief is so widespread that many persons have erroneously held that things are “just” because the law makes them so.
Frederic Bastiat was a French economist and philosopher who lived during the first half of the 19th century. In this essay he examines a common economic assumption with his characteristic insight and logic.
For myself, to see the govt. health insurance bill face death in the Senate is a pleasant prospect. It was puzzling to see such a complicated issue being hustled through congress with little debate or deliberation on a bill that numbered over 1000 pages, which our representatives and senators could not possibly have understood. What was so urgent?
The premise of the health care bill was that medical care for everyone is a right. There we have a problem. If medical care is a right, then certainly food is also a right, and how about shelter. Where is the legislation to provide me with basic groceries and pay my mortgage or rent? Medical care is not a right; it is a commodity like so many other things that we need and find a way to purchase, if we so choose. I purchase my own insurance without benefit of an employer’s contribution, and I find the monthly bill intimidating. This last year the premiums went up by more that 20%!
So is the solution to pass a law and force insurance companies and individuals into some kind of straight jacket, the object being to provide everyone with medical treatment at a lower cost? As with everything in this world, there is NO free lunch. If the patient or the insurance company does not pay the cost, then under a govt. insurance plan the govt. would pay some part. However, the govt. has no money of its own. Whatever it pays toward medical treatment, it must take from the taxpayers. Politicians love to promote the idea that what the govt. pays for is free. As Frederic Bastiat, that lover of liberty, said, “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” I won’t even go into the argument that we should tax the rich to pay for this scheme.
As a practical example of how this kind of govt. medical insurance system works, look at the U.K. which has had socialized medicine since 1948. Neglecting the cost and taxation aspects, let’s consider the medical treatment. A patient who needs elective surgery can expect to wait for months for treatment. Even cancer surgery can require a wait of 60 days for more. The patient-doctor relationship is degraded and doctors are basically nothing more that civil service employees. Would you want your medical treatment run by the U.S. Post Office?
Yes, I agree that medical treatment is very expensive and growing moreso every year. A large part of the problem may be our third party payer system, where the individual expects his medical treatment to be paid by his insurance co. with little or no money out of his pocket. Of course, this makes the insurance premiums just medical treatment paid for on the installment plan. Having had some experience with the medical billing system through my wife’s work, I know that doctors expend a great deal of time and effort to finally get some payment from the insurance companies and/or the patient. From personal knowledge, at one particular clinic the doctor would give a 40% discount for cash pay. I have heard that doctors and hospitals collect about 36% of what they bill, and tend to believe it is true. The difficulty of medical collections must account for some of the high cost of medical care.
Some would argue that there are many who cannot afford medical treatment and therefore must do without. It is worth some consideration. I believe that free or reduced cost treatment is available for those in serious need. Most larger cities and counties have facilities for charity treatment and doctors who will provide care for the indigent.
What is the solution to this dilemma? I don’t know. But I do know that I want to maintain my automomy about what doctors I see and what treatments I choose. I want to keep the govt. out of this whole process. And certainly, I don’t have any right to force you and millions of other people to pay for my medical treatment.
