On economics, human action and capitalism

Every individual is constantly making choices in the marketplace. This is what we mean by “human action.” With each decision, the consumer decides how to use his or her limited resources (and they are limited whether one is a pauper or millionaire).

You and I are constantly making choices such as: "Will I be better off if I spend my money for this television or that television?" (comparisons between similar products) while, at the same time, we are also considering, "Will I feel better off if I spend my money by paying off my credit cards and getting another latte instead of buying a new TV?"

Even though we sometimes may feel coerced into buying a product (say, fuel for our car), we are still making a free-will decision. We are asking and answering questions like: "Will I be better off putting gas in my car or taking the bus to work? Or maybe I could just hitch-hike to work. Then again, maybe I'd be better off just quitting my job and not putting gas in my car ever." Even the things we feel we must do when we'd rather be doing other things—like going to work when we'd rather be fishing—are free-will choices based on which decision we feel will make our situation better (either in the short-term or the long-term).

Capitalism does not favor the alert! Life, in general, favors the alert.

People who pay more attention when they drive, operate heavy equipment or cross the street are more likely to survive and prosper than those who do not. People who are more willing to respond as effectively as possible to changes in their environment that will affect their short-term or long-term welfare will generally be better off than the lazy, indolent, lethargic or foolish.

That's not because capitalism is opposed to such people, but because such people fail to seize opportunities for surviving and thriving when the opportunities present themselves.

As they say, “Opportunity only knocks once.” But even if it knocks a multitude of times, there will still be those who will miss it.

That is not capitalism’s fault.

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For more about what capitalism is or is not, read here.

A non-technical narrative about health care reform

Those who allege that health care prices are being skewed by the health insurance industry are correct, but that is really our (us, the insurance and health care consumers) fault.

As our culture has changed and more and more Americans have defected from taking personal responsibility, the insurance industry saw an increasing opportunity for profit. (We really can't blame the industry for wanting to make more money. I'm sure the company you work for wants to make money and I know the company I work for wants to do so.)

How it used to work

You see, when I was a kid, "medical insurance" (not "health insurance") was owned by many people (but not all) and it was used to cover what today would be known as "major medical" costs. When my parents needed to take one of their seven children to the doctor or hospital, they paid for the visit in full out of their own pocket. If they couldn't pay all at once, they made arrangements to pay it off over time—and they kept their word. And, no doubt, good-hearted doctors and hospitals offered an informal "sliding scale" of fees. Wealthy families probably paid more for services than poorer families visiting the same office or hospital for the same service.

We didn't get check-ups every year. We also didn't have a battery of tests performed with every checkup, but we all survived—as did just about everyone else in my generation.

But handling medical expenses under this "plan" meant self-denial (saving for emergencies, setting aside money and not spending it on every new titillating bauble that hit the market). Unfortunately, most of my generation didn't like that more or less austere lifestyle.

So, along came the insurance industry to "help" us out. Instead of "saving" money, this generation would buy a "product" called "health insurance" that would permit them to visit the doctor with little or no out-of-pocket expense—except for the money being taken out of their paychecks every month for the insurance. As you know, having a payroll deduction means it's money you seldom or never miss.

You also know, if you've read Human Action by Ludwig von Mises, about moral hazard. This new insurance reduced risk for us, the insured—thus making us less careful about how we spend the insurance money. This, in turn, drives the prices of insurance up, because there are more dollars chasing the supply of goods and services.

Meanwhile, access to more money flowing from the insurance industry drove doctors and hospitals to invest in new products and services to "attract" their customers more frequently—more checkups, more tests, more fancy gadgets. Do so tended to drive up the cost of health care which, in turn, drove up the cost of health insurance. Of course, the more money the insurance companies were handling, the more profits the insurance companies garnered from their financial and operational entities.

Profits everywhere went up: doctors made more money, hospitals typically made more money, the insurance companies made more money all from processes that drove the cost of health care upward in a vicious spiral. Add in the whole new field of tort law exploited by the legal community against doctors and hospitals knowing that the insurance companies would end up paying and you have one huge problem. And Congress won't address tort reform because 40 percent or more of Congress is made up of attorneys.

All of this really stems—as I said—from us (the insurance and health care consumers) who willingly engage in the purchase of "health" insurance which, in turn, created for all the participants a moral hazard—a willingness to be more careless about our spending because it seemed like the money really wasn't our own.

Health care reform?

Yes. We need it. But, we have met the enemy, and it is us.

Furthermore, ObamaCare is not the right answer. Tort reform and new approaches to insurance industry competitiveness across state lines is a very good place to start.

Thanks for listening.