The trouble with the medical cartel

Not too long ago there was a dentist practicing in Orlando, Florida and his clientèle were the uninsured working poor and others. His prices were very reasonable.  People who could not pay the high prices of the regular dentists got treatment from this man. A licensed dentist turned this man in to the authorities and it was found that he did not have a license to practice dentistry so they put him in prison and left the poor without any dental care. His clients testified in his behalf at trial to no avail. The only people helped in this travesty were the other dentists who were afraid of price competition.

People sometimes wonder why medical care costs so much in the USA and is so substandard. It was not normal in times past to only see the doctor for a few minutes and be charged sky high prices for that quick look over that he gave you. Look at this chart of Physicians’ salaries in the U.S. vs. various European countries and Canada which shows that MDs in the U.S. make about $200,000, which is between 2 and 5 times as much as doctors make in other western countries. That could well be part of the problem, but how did that come to be?

For centuries all professionals have sought to cartelize their occupation which is to say they want to limit competition. The stated reason is always protecting consumers or the general public but the real reason is always to make more money using the force of the state to make people give it to them.

Medical organizations argue that only by state laws and enforcement of licenses can the public be protected from bad doctors or dentists or what have you. But in fact the public is hurt due to higher prices and being less alert to the medical professional’s reputation: after all, the state has cleared him as trustworthy. With specialists consumers are very watchful. Any doctor may legally do plastic surgery but customers look for a highly qualified, well-recommended, board-certified surgeon who specializes in the field. There is no state certificate needed to protect people there — the market rules.

In our system we have restricted the number of medical schools which means that we restrict the number of doctors. A recent study said almost 60 percent of medical school applicants were turned down. The number of hospitals and the number of beds in a hospital is severely controlled and restricted by the government.

Mark Perry wrote:

Bottom Line: One reason we might have a “health care crisis” due to rising medical costs, and the world’s highest physician salaries is that we turn away 57.3% of the applicants to medical schools. What we have is a form of a “medical cartel,: which significantly restricts the supply of physicians, and thereby gives its members monopoly power to charge above-market prices for their services.

In his classic book Capitalism and Freedom, Milton Friedman describes the American Medical Association (AMA) as the “strongest trade union in the United States” and documents the ways in which the AMA vigorously restricts competition. The Council on Medical Education and Hospitals of the AMA approves both medical schools and hospitals. By restricting the number of approved medical schools and the number of applicants to those schools, the AMA limits the supply of physicians. In the same way that OPEC was able to quadruple the price of oil in the 1970s by restricting output, the AMA has increased their fees by restricting the supply of physicians.

Restricting the supply of medical care has a long history. It started as long ago as the fourth century B.C. with the school of medicine that Hippocrates founded on the Greek island of Cos. In more modern times, England’s Royal College of Physicians which is a state-approved licensing agency has long been a medical monopoly. In 1765 an American tried to start a medical licensing agency in the colonies based on the Royal College of Physicians but it failed due to the laissez-faire beliefs prevalent at the time.

Historian Jeffrey Lionel Berlant has written that in the early part of our nation’s history: “a license amounted to little more than a honorific title.” Unlicensed medical practitioners were common at the time and in the free-market 1830s, one state after another repealed penalties that did exist against unlicensed practice so that by the mid-19th century there were virtually no government barriers to entry.

Economist Reuben A. Kessel:

“Medical schools were easy to start, easy to get into, and provided, as might be expected in a free market, a varied menu of medical training that covered the complete quality spectrum.” Many were “organized as profit-making institutions,” and some “were owned by the faculty.”

But by the middle of the 19h century the American Medical Association was formed to raise doctors’ incomes. The strategy was the establishment of state licensing boards run by medical societies. A board of examination was to sit in judgement and to restrict entry and competition. The Flexner Report of 1910 further restricted entry into the medical profession causing the closing of all remaining non-AMA approved medical schools.

We have seen increasing government intervention in medicine and the AMA has worked in concert with the government on much of the governmental intervention into medical delivery. At all points in the medical system in the US one must be AMA approved or one can not practice medicine. Medical licensure is a grant of government privilege and like all government granted privelge is harmful to the public in many ways.

Now some will no doubt say that without the AMA protecting us that the nation would be over run with medical quacks and that people would die from medical malpractice. To that I simply say that we know from history that was not the case when America had a relatively free market in medical services. It is time to let the free market provide medical services again.

Gerard Casey against the state

David Gordon at the Mises Institute introduced me to a new philosopher recently by doing a book review on an Irish philosopher named Gerard Casey.

Gerard Casey is a distinguished Irish philosopher who has written a book to present his case for Libertarian Anarchy which is also the title of his new book (not yet available as a e-book). Mr. Casey considers the state a criminal organization on its face just as Murray Rothbard did.  The state by its very nature violates essential human rights.

Casey’s attitude towards the state:

States are criminal organizations. All states, not just the obviously totalitarian or repressive ones.… I intend this statement to be understood literally and not as some form of rhetorical exaggeration. The argument is simple. Theft, robbery, kidnapping and murder are all crimes. Those who engage in such activities, whether on their own behalf or on behalf of others are, by definition, criminals. In taxing the people of a country, the state engages in an activity that is morally equivalent to theft or robbery; in putting some people in prison, especially those who are convicted of so-called victimless crimes or when it drafts people into the armed services, the state is guilty of kidnapping or false imprisonment; in engaging in wars that are other than purely defensive, or, even if defensive, when the means of defence employed are disproportionate and indiscriminate, the state is guilty of manslaughter or murder.

But why do the vast majority of people not see this? Why do people still see lawlessness of the state as an aberration? If only we could get rid of the few bad apples! Mr. Casey answers thusly:

In order for the state to function, the mass of the people has to believe in its legitimacy. To that end, the state employs a class of professional apologists and controls the means of propaganda, often through dominance of the education system.… We are brought up to believe in the legitimacy of the state: our state-sponsored education confirms us in this belief and nothing appears to count against it.

Not only the education system, of course, but the press and all the other opinion makers of society work to keep the masses believing in the legitimacy of the state. We live in a veritable cesspool of propaganda that glorifies the state and tells us that all blessing flow from its kindness and mercy. And people really believe that codswallop!

Does the state protect our rights? Of course not, it violates our rights at every turn just as one would expect out of a criminal gang writ large. But what rights does Mr. Casey claim we have? He writes:

There is something startlingly obvious about the non-aggression principle … we are taught as children not to hit other children and not to take what belongs to them … we do not perhaps normally think of ourselves as something that can be owned but the libertarian self-ownership claim is, at the very least, a rejection of the idea that anyone else owns us.

This is a straight Murray Rothbard viewpoint. We start with the non-aggression principle and then say we own ourselves. Self ownership is the springboard of the natural rights view of our human condition.

Who in the world is this Irish philosopher? Gerard Casey is Associate Professor of Philosophy at University College Dublin, Ireland, Adjunct Professor at the Maryvale Institute, Birmingham, UK, and Adjunct Scholar at the Ludwig von Mises Institute, Alabama, USA. His webpage is here. He is associalted with the Mises Institute and in Volume 15 in the Major Conservative and Libertarian Thinkers series he wrote on Murray Rothbard. So we have another in a long line of thinkers from around the globe who have been influenced by the Rothbardian branch of libertarian anarchy.

With men like Gerard Casey we have hope that libertarian political philosophers will be able to make headway in the battle against the state.

That Business Cycle thing

Normally we see some businesses succeeding and others failing. Some growing, some shrinking, and some staying about the same. We see laborers leave one firm and move to another. We see whole industries rise while others decline. This is what a free market economy looks like as resources find their way to the most productive use. It is unusual for layoffs and business failures to occur in clusters and when it does happen we look for an explanation of this “business slowdown” or “business cycle”. Theories of the business cycle are legion and they come into fashion and go out of fashion as facts defeat the theory. But one explanation has stood the test of time. It was first advanced in Ludwig von Mises’s masterwork, The Theory of Money and Credit. Elaborations on Mises work has culminated in the Austrian theory of the trade cycle.

The idea is that there is a profound effect caused by interest rates on investment decisions. In a  laissez-faire free market, interest rates are determined by the supply of credit (a mirror of the savings rate) and the willingness to takes risks in the market (a mirror of the return on capital). The central bank will throw this market regulating mechanism out of whack by manipulation of the interest rates and the increase in the money supply.

When the Fed creates money and feeds artificial credit into the economy by lowering interest rates it does spur investments but often these investments are those that would not have been attractive under normal market conditions. They are unwise and only look good due to central bank manipulations. Sooner or later the central bank will be forced to apply the brakes to the flood of new money and credit and the boom created will crash into a panic (also called recession or depression).

The Austrian theory of the business cycle emerges straightforwardly from a simple comparison of savings-induced growth, which is sustainable, with a credit-induced boom, which is not. An increase in saving by individuals and a credit expansion orchestrated by the central bank set into motion market processes whose initial allocational effects on the economy’s capital structure are similar. But the ultimate consequences of the two processes stand in stark contrast: Saving gets us genuine growth; credit expansion gets us boom and bust. ~ Roger W. Garrison

This theory is strongly supported by data from example after example. Consider the dot.com bubble:

The dot come runup coincided with a money supply runup, beginning in 1995. The money supply (the Fed’s MZM) slightly flattened in 1996 and the begin zooming again in 1997, peaking at a 15% increase in January of 1999. The rate of increase began to fall precipitously thereafter, triggering a much needed sell-off. The money supply as measured by MZM began at $3.2 trillion in 1997 and sits at $4.7 trillion today. Clearly, the judgments of investors and entrepreneurs were being distorted by massive injections of money and credit. (Lew Rockwell)

With our present economic woes in 2012, conventional wisdom says that the US Fed should continue to flood the economy with money and credit even though it was precisely this path that created the problems to begin with. The Fed has been unable to correct the economic woes of the country by its dramatic interventions as there is no lasting good effect on the markets of the Fed’s “pumping”. There are ways to help make recessions easier to endure like cutting taxes or getting rid of regulations that hinder investment. The purpose of these efforts is to unshackle entrepreneurship and permit the market to function freely. But the bad investments of the boom years will have to be liquidated and that is painful. Painful but necessary.

This theory of the business cycle that von Mises, Friedrich Hayek and the Austrian School of Economics has given to the world shows us that the government is the biggest impediment to a thriving economy and should never be looked to for economic help. The government is the enemy of prosperity as well as the enemy of liberty. Government interventions into the market keep the masses from being prosperous and well off. The Fed, regulations, incentives, corporate welfare and other government interference is the root of our problems with the economy. We must find a way to get the government out of things they can not handle. (which is everything of course)

Puppycide: Cop shoots Golden Retriever puppy six times.

I don’t normally write about “puppycide” but these sorts of stories crop up on a continuing basis so I’ll write about it this one time. There seems to be a nationwide epidemic among the cowardly cops to shoot any family dog or puppy that is anywhere near them: it seems to be standard operating procedure. I got 15,000 hits with google on the word “puppycide”.

In St. Louis yesterday we see yet another story where neighbor witness say cops shot a puppy even though the dog was never a threat. Story from St. Louis WNEM:

ST. LOUIS, MI (WNEM) –

A local family is still shocked after what happened to their beloved pet. They say their dog was shot and killed at the hands of a police officer.

The shooting happened Saturday in St. Louis, Mich., in Gratiot County.

Lori Walmsley, a neighbor of the family who lost their pet, says she saw the incident.

Walmsley says she was outside playing with her own dog when her neighbor’s golden retriever, Scout, ran over into her yard. She says she called the dog over to play, which Scout did, and then Scout ran back over back into his own yard. That’s when Walmsley says a police officer showed up.

Walmsley said the officer asked if the was dog hers.  She said “no,” but told the officer Scout wasn’t dangerous. She says the officer tried to catch the dog, who apparently didn’t want to be caught. The dog tried to run away and when cornered by the officer, let out a little growl. Walmsley says she couldn’t believe what happened next.

“I heard ‘pop pop pop pop pop,’ and I thought, ‘what is going on,’ and I [saw] the St. Louis Police Department standing over my dog,” said Scout’s owner.

“He just started shooting him, he just kept shooting him in the head,” said Walmsley. “I said, ‘What are you doing? He’s just a puppy!'”

The dog was taken to the vet were it later died.

The witness says the officer wasn’t provoked and she doesn’t feel his reaction was warranted. Scout’s owners were inside their house during the incident.

We have a nationwide epidemic of cops killing family dogs when they don’t need to. Many are asking why. New York criminal defense lawyer Scott Greenfield thinks it’s mostly a direct result of training:

Cops kill dogs because of the First Rule of Policing, make it home for dinner. If a dog is perceived as a potential threat to the officer’s safety, no matter how slight, the cop will shoot the dog dead. It’s not that he wanted to kill another dog, but that there was no way, none, that he was going to suffer a scratch, no less a vicious bite.

But when someone asked Radley Balko (libertarian blogger who is an expert on puppycide) why cops seem to shoot so many dogs he responded “because they can” and that there are no consequences.

Because they can rings most true. Because the police are uniformed thugs enforcing the will of the ruling masters. Thugs who think they are above the law. If you read about psychopathy (also known as sociopathy) psychopaths are people who have never felt an ounce of sympathy for another human being. What better job for these sickos than being a cop? As children psychopaths often have enjoyed cruelty to animals.

Psychologists estimate that one percent of the people in the U.S. are psychopaths, and it’s not hard to imagine that many of them become police officers. Folks, the police are not your friend. They are the face of the Empire domestically.

Full Employment Plan

Both Obama and Romney are saying that as our next president they would improve the American economy. Neither is saying he would bring us full employment, so I thought that I might explore a little plan to aid the next president just in case he wants one — and reads this. But the plan is mainly what to stop doing rather than some grand program so it will fall on death ears no doubt.

I have been told that one can read any account of economic history from the late Middle Ages up through the 19th century and you will find no evidence of the existence of unemployment. There just was not any unemployment for the able bodied men and women who wanted to work. Long-term unemployment is caused by the interventions of the modern nation-State.

The “humanitarians” claim that it is better that people be unemployed rather than being “exploited” at low wages. In a laissez-faire market there in no “exploitation”. People are hired and are paid for what they produce for the employer. Once upon a time many teenage boys in America pumped gas at a service station for their spending money as a first job. They learned many things besides just having a job. But the State caused the retailers to stop full service gas due to minimum wage laws plus child labor laws. Are teenage boys better off unemployed? If someone says that $10 per hour is exploitation should we create even more unemployment by raising the minimum legal wage to $20?

In a market-based labor contract where both parties agree to the terms of employment there is no exploitation. Exploitation is simply violence or threat of violence implied in the negotiation of anything affecting the life of a worker or employer. Many would rather be in the workforce than to sit at home doing nothing productive. Some might even rather pay the employer to have a job if they see it as an internship.

There are many governmental interventions into the market that cause unemployment. Government erects barriers to gainful employment that has given us the notion that “full employment” is over 7 percent! Lew Rockwell once provided a partial list of barriers to employment in modern America:

  • The high minimum wage that knocks out the first several rungs from the bottom of the ladder;
  • The high payroll tax that robs employees and employers of resources;
  • The laws that threaten firms with lawsuits should the employee be fired;
  • The laws that established myriad conditions for hiring beyond the market-based condition that matters: can he or she get the job done?;
  • The unemployment subsidy in the form of phony insurance that pays people not to work;
  • The high cost of business start-ups in the form of taxes and mandates;
  • The mandated benefits that employers are forced to cough up for every new employee under certain conditions;
  • The withholding tax that prevents employers and employees from making their own deals;
  • The age restrictions that treat everyone under the age of 16 as useless;
  • The social security and income taxes that together devour nearly half of contract income;
  • The labor union laws that permit thugs to loot a firm and keep out workers who would love a chance to offer their wares for less.

That list is not a full list of barriers to real full employment, but it does list most of the worst interventions by government into the market. If you want to see America with an population that is fully employed, then the elimination of the above barriers to employment would do the trick. How hard would it be? No constitutional amendments would be necessary; only the repeal of certain laws. Congress could do it in a week if they were not so economically ignorant.

We could see a vastly improved America within six months. Will we? Doubtful.

A crony-capitalism example from the Jimmy Carter days

There is a great mystery about corporations and regulations that confounds a lot of people. I’ll try to illustrate the mystery with a historical example from my youth.

In the days when Jimmy Carter was president he was bleating about the energy crisis and the skyrocketing cost of a gallon of gas. President Carter promised to punish big oil with a “windfall profits tax.” This promised tax was good politics and one could be forgiven for thinking that the people had won and “big oil” had lost on that day when he signed the tax into law. The mystery of corporate action is that the lobbyists for the largest oil companies had all spread around cash and influence to get the bill passed. Passed! What in the world? Why would they want extra costs added on to the price of their product?

But since there was no windfall-profits tax in Saudi Arabia, or other middle eastern oil producing countries, the extra costs only applied to the oil in the USA which at that time was mainly being pumped by the small independent firms. Surprise! The tax punished the smaller independents who were selling nearly 100 percent domestic oil and aided the major “big oil” firms that sold a major portion of their sales in foreign oil by giving them a huge price advantage.

The “windfall profits” tax along with price and allocation regulations of the DOE killed off the small independent oil firm and then the big oil companies were able to buy up domestic capacity at fire sale prices. If that were not enough, the next administration repealed the tax and the regulations which made the domestic oil much more valuable to the oil companies again. The big windfall of the whole drama was the takeover of the independent firm by the large firms which was made possible by the tax. This adventure in punitive taxing made tons of money for “big oil”.  This example is just another data point showing that the government’s tools of inflation, taxation, and regulation are used to transfer wealth from the people to the government and its cronies.

Any time a tremendous amount of money is at stake you can bet that there will be a lot of lobbyists clustering around DC trying to get their firms in on the graft and corruption.  There is never any deregulation, only re-regulation where the regulations that favor one group get changed to favor another group.

The devil is in the details they say; and the devil is in the regulations that the departments write after the laws are passed. To have a law favorable to your firm is very important and a lot of money is tossed around to make sure of that; but, it is also important to have a hand in writing the regulations themselves. The bigger, more favored firms have the advantage when it comes to getting special treatment from the government.

This is an example of why our system is often called “crony-capitalism”.

Ron Paul, the Fed, and special privileges for the favored

There is a Ron Paul article at the Mises Institute on the origins of the Fed. I highly recommend following the provided link to read the full article. It is full of historical information.

Here’s how we got saddled with this monstrosity: In the early 1900s — during the so-called Progressive Era — the US government began a radical program of intervention into the economy. Pundits hailed this as fostering a new “spirit of cooperation” between business and government. In fact, the new system was a precursor of socialism and fascism.

Government-business cooperation took several forms, all of which conferred special privileges on favored firms, insulating them from the competition of the free market. Individual businesses and whole industries lobbied and bribed government officials for laws that benefited them at the expense of the consumer, and the whole operation was sold to the public as antimonopoly measures. This illegitimate and unconstitutional process happened time and time again, and government intervention became a permanent part of manufacturing, railroads, agriculture, and many other industries in the United States.

This was the era when the US free market received a beating, and, for lovers of liberty, its effect was much worse than the New Deal’s. ~ Ron Paul

If you have a real free market then opportunity is granted to all and privilege to none. We call this situation laissez-faire or market anarchy. (among other terms) Under laissez-faire we see laws applied equally to all without any respect to one’s station in life. All businesses are accountable to the consumers because the have to please the consumer or go out of business.

But in the late 1800’s the “progressives” agitated for a system of government intervention where industries where no longer accountable to the needs of the people. Many progressives thought they were helping “the little guy” no doubt, but in fact they were giving large business guaranteed profits and privileged status.

In the banking industry there was a full gold standard and near free banking in the years before the War Between the States. By the beginning of 1900’s this had been replaced with National Banking System (NBS) which Ron Paul (and others) have called a halfway point between free banking and a central bank.

Chiefly responsible for passing the National Banking Act of 1863 was Ohio investment banker Jay Cooke, who gained a government-granted monopoly on public debt underwriting. His success in the bond business gained him enormous influence with the Republican administrations during the Civil War and after, and especially with Salmon Chase, secretary of the Treasury, from Ohio, and Senator John Sherman from Ohio. Together they were able to push through Congress and past the public the National Banking Acts, all of which would benefit banking tremendously. Fractional-reserve banking was guaranteed by the government at 15 and 25 percent reserves. A 10 percent annual tax on state bank note issues was required, to force state banks into the NBS. Legal tender status was imposed on the national-bank notes. ~ Ron Paul

It turns out that there was control by the central government of the banking industry for decades leading up to the establishment of the Fed. Government interventions caused panics over and over. The Banksters and the government used the problems caused by the NBS to ram though the monstrosity that we know as the Fed. The reason for the Fed is simple — the Federal Reserve exists to give a special privilege to the banking industry and other knowledgeable insiders. The banks have profited greatly over the generations from this special privilege and have taken about greatly diluted the value of the US dollar.

As the Fed increases the money supply it makes existing dollars worth less and prices rise. But this does not happen instantaneously. There is a price lag that favors (guess who) the bankers and the insiders. The elite profit at the expense of the poor sods on the outside. Too bad, so sad, say the bankers.

The Fed has given the nation Depressions, Recessions, and Panics. (different names for the same thing) The Fed has given us onerous inflation. For what? To enrich the already mega-wealthy bankers, politicians, and other insiders. The favored elite in our system sucks the life blood out of the masses.