Markets or Government - Which is More Efficient?

Everyone has an opinion whether certain sectors of a society should be operated by markets or by the state. There are three viewpoints. Everything should be run by the state, the market or the so called 'mixed' economy. The majority of people hold the latter viewpoint with their love/hate relationship of Capitalism. The problem I find with the mixed economy view is its inherent contradiction. Why are some aspects of society better run by State monopolies yet people with such views generally accept that markets lower costs and supply more consumer goods for us all in other segments. I may disagree with Socialists who believe all sectors of an economy should be managed by the State but at least they are consistent. The march of markets, freedom and capitalism will not stop and people will actively vote for them where it is given the correct conditions. So are markets more efficient? This point can be debated forever. I have a deeper problem with Governments and centralised monopolies.

People mistake Libertarians, Anarcho-Capitalists, Crypto-Anarchists - people who favor free markets - as believing that growth is important. In fact the contrary is true, people with such philosophic views don't care. They don't care if economies contract or if people become poorer. What they care about is that individuals are empowered to make decisions for themselves on a personal level. If people in society wish to work shorter hours or decide to do things contrary to economic growth, then that is fine. They believe when the freedom of the individual is unleashed economies will grow indefinitely and people will get richer; but this is just a by product and not a direct aim. Ironically its people who despise Capitalism and markets who worship growth. The Keynesians, the Government officials, the Socialists. They use growth as a measure of success or failure of a society or a particular policy.

To illustrate a typical debate of free choice vs state coercion lets take a software developer who decides to move job. First there is the downtime in getting up to speed with the new systems they will be working on. These are usually non-trivial so can take months to get up to speed on and this may just be a subsystem of the entire application. Then there are the associated recruitment fees as people constantly move to different companies. This costs the economy millions. There is a loss of domain knowledge when an experienced team member leaves, often leading to their successor taking more time to make changes. Then there can be issues with morale, if many people leave it can cause dejection among a company who suffers attrition. With all the above and no doubt other issues you could argue for the sake of economic efficiency that we should make people work the same job forever and remove the choice from the individual. Similar polices are enacted in Cuba, where people choose a job for life mandated by the State. 

There is however another side to all this. When people move jobs it spreads knowledge from people working with different colleagues with different experiences. These new ideas can help improve an application. People avoid becoming bored and unproductive and have the opportunity to move to what they perceive as more fruitful work.

We could argue both cases are an illustration of the superiority of free markets or Centralized coercion in the general form of a Government. In my mind its markets that are more efficient but I will be happy for someone to take the opposite view. If we just look at morality then the answer is surely markets. Only markets put the individual at the center, the State takes decisions away from the individual. For example if people want to use vetted medical drugs or "Quacks" or have medical procedures that do not comply with regulation A, B and C, then they should be free to choose; currently they can not (for the misgivings of regulation see this post as detailed it is tyranny). If we mandate services we loose out on all the unseen innovation. Who could argue against freedom? Isn't this what we all want as individuals. 

We can take a look at another example, Software Technology. Why have multiple programming languages? Why have multiple database applications? Not just dozens but hundreds. Many cover the same uses and offer no real difference thus there is a duplication in effort. Many fail, wasting time and resources. Again the other side to the coin is the failures build the successes. The competition creates better products for consumers. The multiple platforms ensures diversity and resilience. Whats more efficient or compatible with economic growth? We really shouldn't use this metric to decide, instead freedom; people should be free to do as they please. If someone wants to create their own programming language just for the fun of it then they should be free to do so, despite it not contributing to the GDP figures.

Would we think its right to mandate a dictate where people can and can't live in their country of birth? What job they could take? What food they could buy? Many Westerners may think the preceding list as absurd, but that's exactly what liberties some Governments take away from their citizens. Markets are right because they represent the freedoms of individuals to make choices for their own needs. Not because they are more efficient or contribute to increases in GDP, but because they disperse and decentralize power.

We should all be free to do as we please, even if that means we make bad choices. If we choose the wrong job, house, car or say things we regret; we should be grateful that we had the choice in the first place, many others don't have such freedoms. Happiness metrics are all wrong. People can have all the freedom in the world but still be unhappy at the time they are surveyed, but at another time may feel euphoric. Human beings are emotional creatures who experience happy/sad swings all the time. As Frank Sinatra said "Thats Life". He also sung "I did it my Way". That is true equality. Liberty, not State coercion. The right to live life by our own decisions. Regardless of if those decisions do not contribute to the GDP statistics.

Healthcare has to be Earned

"Always have a healthy disregard for the status quo"

Myself

Healthcare. Should it be a right or should it be earned? Ask 99% of people and they will probably state it is a right for everyone within a developed nation. I'm the one percent. I believe healthcare needs to be earned. The crisis in healthcare within developed countries has not come about from the free market or a defunct laissez faire capitalist system. It has come about from years of Big Government. There is no crisis in the software and computer industry where costs are spiralling out of control with service quality in decline. The freedom of the human spirit and mind is the most powerful weapon to combat poverty. Abundant healthcare needs to be earned.

Altruism is the status quo with Big Government as the institution that forcefully implements such principles. I used to be a believer in the "mixed economy", the current system that we are taught at school, the "right" moral system that we should abide by. Then I started asking questions and the more questions I asked the more contradictions I would unravel whereby altruism is supposedly the only way a civilised society can be run. Healthcare was one such mystery. Why do markets improve services and bring down costs over time, yet I saw the so called "free market" healthcare system in the United States do the complete opposite. Many accept such a view; that the Healthcare system in the United States is free from Government control and that Healthcare needs to provided by Government. I didn't and kept asking questions; questions that need answering are hard; accepting conventional wisdom is easy. Healthcare, just like food, needs to be earned.

Food is a similar commodity to Healthcare in that it is vital for human existence.  In the present time-frame we find ourselves in we have an abundance of food. We can all comfortably eat ourselves to an early grave should we wish. It wasn't always like this. Back in the 19th century food bills consumed a large proportion of a workers pay. In the infamous 1848 food shortages that ran throughout Europe, many including Karl Marx, concluded that Capitalist systems had run its course. Food was a right. Many Western countries thankfully did not implement collectivisation, the policy to trick people into believing abundant food can be provided by a coercive state. Instead food was to be earned. People set to work improving agricultural methods, respecting private property and allowing entrepreneurs the freedom with their minds and resources to enable abundance. Thanks to such policies and people I now enjoy a nutritional diet that a King would once have dreamed of. However in countries that believed food to be a right the complete opposite happened. Under Tsarist Russia, a backward political system, the country exported grain to Europe. Under Collectivisation, food, rather than to earned, was deemed to be a right for all of society. In Lenins famous "bread, land and peace" speech the stage was set for the inevitable food shortages that would occur. Russia could put a man in space but they couldn't provide basic staples for the majority of the population. During the 1960's Khrushchev sold of a third of Russia's Gold reserves in order to avoid mass starvation. Zimbabwe, once the bread basked or Africa, under collectivisation became a barren land of pestilence and starvation for its people. Food, it was claimed in such countries, to be right.

Do we give a people a right to a car? To a phone? To a computer? To a 40" flat screen TV? When Henry Ford set out to make a car that was affordable for the common man many in the industry said it couldn't be done and he was mad for even trying. Well we should all be thankful for the people who have a healthy disregard for the status quo. Once an object of the elite Henry Ford revolutionised the way cars were made making them affordable. Re-known for his obsession to detail he had no interest in being a CEO in the office with elaborate job titles, instead he was constantly on the assembly line looking to make things more efficient. Innovation such as the moving assembly line and asking questions of why does that man have to turn for that component it should just be there, were the hallmarks of an wealth maker. He became rich but he made us all far richer in the process and we didn't have to lift a finger. Three Quarters of Americans who are classed as living in poverty now own a car thanks to people like Henry Ford. If the Government had mandated a car is a right that would not be the case - it would still be an object for the wealthy elite. Instead a car had to be earned with hours of dedication and freedom for individuals to pursue their own selfish interests.

If the Government had introduced a policy that mobile phones during the late 1980's should be a right for everyone what would have happened? One can be sure that the innovation that occurred over the next 25 years would not have happened. Back in the 1980's mobile phones were expensive. It would have required a subsidy program, regulation and government enforcement in the industry in order to provide a phone to everyone. Freedom for the wealth creators to pursue their own interests would have been blocked as the government would have artificially supplied everyone with a phone. Thankfully we had to earn that right. Now anyone can have a phone; the old ones go free. Phones are now so sophisticated its incredible. Car navigation, language translation, bar-code scanners, sound systems, all round entertainment wherever we go.

Why is all this important for healthcare? Because I believe healthcare is no more a right than any of the above. It needs to be earned and if it is earned then healthcare becomes abundant for all including the poorest in society. So the first thing to tackle is Americas so called "Free market" healthcare system. 

Around 50% of Healthcare payments in America is spent by government due to regulations, Medicare and Medicaid; I should just stop there as even an ardent socialist will realise that this is far from a free market. Then there is licencing. This is a process to ensure a limited supply of labour is supplied to a particular field in order to drive labour rates up for doctors. That's what creates artificial supply in doctors or a specialist. In the 19th Century Doctors didn't like the fact that anyone could enter medicine so lobbied government to restrict entry - under the guise of "helping" people. In reality all it did was to skew market forces and monopolise a profession. A monopoly that also controls how medicine should be practised stifling creative thinking. In Software this doesn't happen. Anyone can code you don't even need a degree despite the fact many computer systems are critical to all our lives and complex. Its based on reputation and merit; not monopoly organisations that can control entry. People quit university and never even qualify with formal education. Bill Gates didn't even do his degree in computers yet is one of the most renown names in the field and we all trust him with the software his company creates (and by all accounts he is a very good programmer).

Regulations in Americas healthcare system is a maze. Insurance policies in America include no direct correlation on lifestyle habits, age or previous history - the government bans it. Catastrophic healthcare is not an option, instead people claim insurance for routine inspections. Its like getting insurance for your car and the government mandating that it must include an oil change, wax and clean every month and minor wear and tear on parts such as tyres. There's a reason we just insure for major car damage and pay cash for tyres and optional extras. Its a more efficient way of people looking after property. If tyres were included then there would be no incentive for people to ensure they did not "burn rubber" or to maintain their tracking which rip through tyres. Insurance would rise as a consequence quite considerably. By regulating the government stifles start-ups that cease to even exist. Just getting a new drug approved means only large companies can create such innovations with all the paperwork involved no young start-up can do this. If there are huge costs and regulations as to what can be done then such start-ups will never exist. Free markets encourage trial and error. American healthcare persecutes such behaviour. 

Insurance in some cases has to cover for example massage therapy which many individuals would see as a non essential item. There's a whole host of treatments that "must" be included in a healthcare policy. Insurance companies can not offer insurance between states due to Government regulations. Patent laws enforced by Governments drive the price of drugs up. The West in my opinion are unwittingly pursuing genocide in continents like Africa due to such restrictions (patents are another issue for discussion, immoral and against free trade). As the Government is the largest single payer in America for healthcare they have no price conscious. There are flat fees for patient treatment resulting in no innovation to drive down costs. Why do hospitals need to drive down costs when the price paid will always be the same. Employers get tax breaks for offering employers insurance as part of their employment. Its like getting your car insurance paid by your company, the price concious consumer is removed. There should be no tax break and consumers should choose as required.

As the Government pays in many medical cases people have no incentive to look after their health. When healthcare is a right and someone else is paying, why bother. New technology should be making healthcare more inexpensive and plentiful instead the complete opposite is seen. If we have a MRI scanner shouldn't such equipment diagnose people quicker and require little human intervention. Yet costs continue to go up, despite the fact that the electronics field for example where equipment becomes more sophisticated and yet the costs to the end consumer continue to plummet.

With all the Regulation this stifles entrepreneurial doctors. If the Government has fixed prices and fixed rules on what they can do then how can your doctor challenge the status quo? How can they as experts use their judgement to make things more efficient? Many entrepreneurs in software were derided as nuts and went against what was convention in their selective field. Steve Jobs, Bill Gates, Larry Page and Sergy Brin. As IBM once said to Bill Gates "All the money will be in the computers; not the software", or when Steve Jobs and Wozniak created Apple, computer executives used to quip "What would an ordinary person want with a computer?". When the google co-founders decided that they would index the Internet that was growing at an exponential rate and offer the service for free many said, "How will this be sustainable and possible?". Healthcare in its current inception does not have the conditions in place for a Steve Jobs doctor. Entrepreneurs when allowed full freedom drag humanity towards prosperity and always start as a minority having a healthy disregard for the status quo.

Healthcare has been heavily Government regulated throughout he 20th Century so it is impossible to say what healthcare would look like under a free market. However one interesting area is Laser Eye surgery which has had very little regulation and government involvement. Once the preserve of the rich it has now become affordable for the common person. Prices have fallen and the quality has improved. This is despite the ever increasing sophistication in tooling. They can even do it with robotics and computing with no human intervention. So when economists such as Paul Krugman claim rising Healthcare costs are the result of every increasing technology think again. When a free market is at work; this brings down the costs. They don't go up.

Since the "Peoples Revolution" in Cuba, Castro and his followers declared healthcare was a right for all. Healthcare would be provided by the state for "free". Cubans now have this so called utopian system of free healthcare whereby people can no longer even obtain paracetamol that cost pennies here in the West. Many cases are reported of patients being neglected with woeful practices. Ambulances are in the form of people using wheel barrows to take their loved ones to hospital due to shortages of transportation. Some of the photos can be accessed online as many Cubans have had enough of Western tourists telling them of their utopian healthcare systems. The locals know the reality. The services they get aren't the special tourist built facilities Michael Moore viewed. His video actually worried Cuban officials so much they believed there would be uproar with people demanding such facilities for themselves. Cuba is so poor they export their Doctors to other nations, not from some altruist principle but to line the pockets of Castro and his cronies, another way the administration tries to gain hard currency. Contracting their principles like all good Socialists; they make a profit.

In the UK we have the National Health Service where healthcare is a right. Instead of insurance companies refusing treatments its the Government. Private Insurance will see you in days; with the NHS its months or years. As we have all the same market limitations as the United States we again have the problems of rising costs and declining customer service. There's many defences made for the NHS. Some say it was deprived from funding during Thatcherism, despite the fact Thatcher spent more on Health in real terms than Labour leaders such as Harold Wilson (rising 32% in real terms during the 1980's). More money is always pushed as a solution but it never works and never will (healthcare continues to rise as a percentage of GDP). Economic freedom is required. Scaremongering keeps everyone in line with current mainstream wisdom; fear tactics tell people they would be far worse under a free market, citing the so called free market healthcare system in the United States. The NHS is propped up by the free market due to the productive wealth of other freer areas of the economy that pay taxes and create long term prosperity which helps pay for the ever rising costs. 

When I was a teenager during the 1990's if someone had said to me one day that I will have access to unlimited email, have endless Video and Music content for free, be able to upload an unlimited number of photos and have a 42" screen Television I would have said what planet are you on. Humanity earned these services we didn't have someone say we needed them they just came about through hard work and the freedom given to free market capitalism. People pursing their own interests is the most powerful tool to solve poverty. It used to be when you couldn't have three square meals a day you were poor. Then when that became implausible they said if you didn't have a Television you were poor. Then a computer. Then a phone. Healthcare needs to take a look at history. If you want to solve the current lack of quality healthcare for all then don't state it as a human right or need. Healthcare needs to be earned and with it will come abundance. The unfettered free market can only solve such such a difficult issue.

Freedom to Create and Prosper

The second part of our educational task - imaging how a market-run world would function - is much more difficult. Murray Rothbard once remarked that if the government were the only producer of shoes, most people would be unable to imagine how the market could possibly produce them. How could the market accommodate all sizes? Wouldn't it be wasteful to produce styles for every taste? What about fraudulent shoes and poor quality producers? And shoes are arguably too important a good to turn over to the vicissitudes of market anarchy.

Published in a recent Article by Llewellyn Rockwell

Most intellectuals claim they have all the answers to so called 'market failures'. Llewellyn Rockwell debunks this belief with a wonderfully written article (link above) which I recommend to read. Larry Page, one of Googles co-founders is quoted as saying, "Always have a healthy disregard for the impossible", which I think sums up human ingenuity throughout history and the spirit of the Entrepreneur. Government Officials meanwhile will promise you the world, but later declare its impossible to deliver on its prior commitments. Central planners and the selfish 'ethical' do-gooders will tell you because of 'market failures' they need to intervene in peoples lives, stealing societies resources. As always, they lack imagination and keep the public believing they can deliver what a free market can't.

The Technology sector is one of the few areas in the global economy with very little Government interference. The prime reason is its recent appearance. When Big Welfare was hatched, computers were the preserve of Governments and large companies; as a percentage of GDP the industry was insignificant. Yet in a short time-frame, technology is now embedded into all of our lives. Only 15 years ago I remember using slow dial up connections, paying for low storage email accounts with minimal content existing in the web.

Since then the range of services that are offered for free has been phenomenal. Ideas and concepts that were deemed 'impossible' back in the past are now a reality. No one could have envisaged the progress that has been made. Multi-language translation, navigation systems in phones, films and music on demand, self driving cars, global consumer marketplaces, computers for $25 (less than a pair of shoes) and many other innovations. The list is endless. One of the most important points I want to make is the cost. Its all either free (paid either through advertising or premium users) or next to nothing. This always benefits the poorest members of society. 

Its tragic that many other sectors are crowded out by Government control. I could pick a number. For sake of example the progress of healthcare has dramatically being curtailed by the socialisation of medicine. We can not speculate what innovations would have occurred if it was run by the free market, but like the technology sector the poorest members of society would have been the main beneficiaries, not the rich. The rich can always afford the best possible healthcare. Costs are so high because of Government intervention.

The great myth is that America has free market healthcare, the reality of course if not the case. Medicare and Medicaid are a form of socialised healthcare, similar to the NHS in Britain, regulations on insurance companies such as no age discrimination or the mandatory cover of doctor checkups, tax breaks for companies offering third party insurance as part of an employees employment contract, Medical organisations that prevent entry thus raising wages and prices; the list goes beyond this and is worthy of another post to do the topic justice. Its sufficient to say socialised medicine is falsely proclaimed by 'liberals' to help the poor, when in fact it is doing the complete opposite. Heathcare is rationed, sometimes available to a lucky few. Spending is out of control and can only be solved by the creativity of a free market, not Politicians.

I, like any other author, can not speculate on what the free market may have done more efficiently. However a common fallacy used to excuse escalating costs in healthcare is the equipment used has become increasingly sophisticated, thus one of the reasons behind rising costs. I pick this example as in contrast the technology sectors equipment has become increasingly sophisticated, yet the cost has at the same time come down dramatically, benefiting the poor. When I got a PC in the nineties very few people had them, due to cost. Now everyone who wants one has a personal computer. In free markets tools always get more sophisticated. In agriculture we use sophisticated machinery that costs tens of thousands of dollars (compared to a primitive plough) yet such nations live in massive calorie surpluses. Its the lack of Regulations, Interference, Selective Monopolisation that enable this to occur.

The fact the equipment has become more sophisticated means costs should have come down. X-rays, CT Scans; such equipment is not cheap but it provides rapid diagnosis, freeing up humans to perform other functions. There is no need for specialists to agonise over such medical issues, the machines do that for them in a matter of seconds. All they have to do is fix the issue. Costs go up in healthcare due to Government interference; a classic case of Socialism impoverishing us all, but in-particular the poor. By not allowing prices, freedom and consumer sovereignty to do their job, the poorest among society are the hardest hit.

There is no reason why we need a Government full stop. All goods can be provided efficiently when we allow people the freedom to run such services. Governments however don't want people to use their imaginations and want us to believe free markets can't provide services they have monopolised and interfered in for decades. The quotation above provides such an example that we need not use our imagination for, yet if provided by the Government many could not imagine how a free market could provide such goods. Free markets are smart and creative. Governments are not.