GE Morton:
The point is that the shift from paying directly, out-of-pocket, for health care --- just as one pays for all other personal services one uses --- to third-party payers, whether insurers or government, severed the link between supply and demand. Since someone else is paying the bill the consumer no longer cares what those services cost, and does not shop for them prudently. When employers are buying the insurance the consumer does not even pay the insurance premiums. Health care appears to its consumers to be a "free good." As a result health care costs in the US have skyrocketed, at triple the rate of inflation.
So here you seem to be agreeing that there is at least a sense in which insurance and "socialism" (as I defined it earlier simply as services funded by taxation) are comparable. That sense is that they both damage the link between supply and demand. As you've said, if we're not paying for something directly, and/or we're spending from a collective pot of money, then we tend to shop less prudently.
I think this is why I observe a widespread attitude in society that making false insurance claims (and therefore "stealing" from other customers by causing their premiums to go up slightly) is somehow not as bad as more direct, personal forms of theft.
That cost spiral began after WWII and accelerated steeply after government began paying the medical bills of many people.
Here you say that the socialism (taxation to fund public services) aspect of it accelerated the cost spiral, presumably because you regard the severing of that link as more severe for socialism (as I'm calling it) than for insurance.
Yes, I agree that this is one of the problems with funding from a collective pot of money and making services free at the point of delivery. As I've said previously, I think that the competitive free-market system is a very useful tool in many circumstances because it often promotes efficiency. But not always. One of its downsides, just like Evolution, of which it is a close analogue, is that it tends not to be forward-looking. It's not always the best tool to use for solving long-term problems where individual players in the market have no immediate incentive. Often referred to as the "tragedy of the commons".
There are examples from Evolution of "bad design" due to the fact that we're not actually designed at all. For these examples, we perhaps might wish that there
was a designer who could have foreseen problems before they arose and headed them off, without the need for every individual step to be beneficial to survival. Likewise, I suggest, there are some problems in society that cannot be entirely solved by a system in which it is necessary to make a profit at every step and where those who don't do so, and who do things for the benefit of wider or long term gain, are out-competed by those who don't, and go bust.
The free market can also suffer from inefficiencies of duplication. I may be wrong about this, but talking to various American friends and colleagues about the US healthcare system leads me to believe that one of the causes of inefficiency in that system is duplication of effort. Large taxpayer funded organisations certainly do have their inefficiencies and problems (as discussed), but they do at least have economy of scale that can potentially be used.
(Similar cost spirals have occurred in college tuition costs and housing costs, which latter led to the 2008 recession, after government began paying those bills, through guaranteed student loans and Pell grants, and the "affordable housing" policies adopted in the early '90s).
That's not my understanding of the principle cause of the 2008 recession. I thought that was caused by the repackaging of mortgage debts into investment vehicles that were sold as being a lot lower risk than they really were. Fraud, essentially. (On a massive scale. So massive that the fraudsters were deemed too big to fail.)
In the UK, the principle reason for spiralling housing costs appears to simply be too few houses, a small country and a rising population. i.e. supply and demand. Plus cheap money - low interest rates. Perhaps a bit different in the US.
Also, in the UK, a large housing problem was stored up many years ago by the cheap selling off of social housing ("council housing") into the private sector.
Yes. Costs would be much lower, people would prepare themselves for those expenses, charities would receive many more donations and would become more selective and intentional regarding to whom they offered aid.
Obviously we're both speculating here about what would have happened. But it seems unlikely to me that charities would have filled the gap in healthcare provision for the poor and the elderly. So I think one consequence would probably be much bigger divisions in society. They would perhaps have been an "underclass" of people who couldn't afford healthcare and would therefore be incapacitated or killed by illnesses that are fairly easily treatable. Perhaps people dying from a ruptured appendix because they can't afford to pay for an appendectomy, that kind of thing.
But, as I say, always difficult to rewind history and ask "what if?"
Well, I think that is wishful thinking. Jawboning ("education") will not deter anyone from grabbing a free lunch if one is available.
You weren't talking about people actually grabbing free stuff. You were talking about people's beliefs - people believing that they have certain inalienable rights. I think attitudes can be affected by education.
That is certainly what it has become. As designed the US government was constitutionally restricted to exercise of a few specific powers, primarily involving the provision of public goods (as earlier defined).
My lack of knowledge of US political history may be showing again here, but presumably if this "constitutional restriction" existed originally it must still exist? What part of the US constitution changed?
It had no power to deliver free lunches to anyone or impose anyone's values on anyone else, no matter what a majority desired.
To be clear: your term "free lunch" here refers to taxpayer-funded lunches. Lunches that are free
at the point of delivery. Not
quite the same as being literally free, although we've already discussed the downsides of damaging the direct link between the payment and the lunch.
But politicians must be elected, and they soon discovered that to win elections you must pander to the demands of your constituencies. Most of those demands were for some sort of free lunch.
If you think it's a good idea to live in a democracy, I don't see how you can design that democracy to remove the danger of this happening. This problem with democracy has been recognised since Plato's parable of the ship. How do you stop politicians from taking this populist route to electoral success? Are you saying that you arrange things such that politicians are constitutionally barred from offering any options to the electorate? Wouldn't that essentially mean that you're proposing an end to democracy and a society which is, instead, dictated by an unchangeable "written in stone" constitution, and nothing else?
As more and more of those were delivered, more interest groups emerged from the woodwork to demand their turns at the trough. So those constraints on the powers of government eventually eroded away, and governments in the US, which consumed an average of 7% of GDP between 1790 and 1930, now consume 43% --- a fraction which will increase sharply as "Obamacare" is fully implemented. There is no structural barrier to prevent this spiral from continuing indefinitely.
Well, people don't necessarily have to be given what they are demanding. But, as you've said, it's tempting for politicians to do so to gain popularity and therefore power. But, as I said, the alternative seems to be a sort of tyranny of the constitution.