If The Supreme Court Kills Obamacare, You Can Keep Your Silver Lining

Ed Kilgore, playing one my least favorite versions of What If since “Vice President Palin” was a less-than-remote possibility, guesses at how a nixing of Obamacare by the SCOTUS would affect this year’s elections:

I’d argue, however, that on the margins at least, a decision invalidating the individual mandate would change thedynamicsof the general election in ways that might prove uncomfortable to the GOP. Currently the Republicans “Repeal!” position is attractive, or at least not repellent, to a wide range of people with a wide range of concerns about ObamaCare, including those who would strongly support for more aggressive federal efforts to expand health care coverage or ban discrimination by private health insurers. If the individual mandate goes down, and with it prospective prohibitions on prexisting condition exclusions, the health care debate during the general election campaign will shift from scrutiny of ObamaCare from what, if anything, Republicans are prepared to offer. In effect, the much-dreaded and highly divisive intra-GOP debate on the “Replace” part of its “Repeal-and-Replace” agenda will be accelerated into the present tense. And at the same time, Republicans will be denied the base-energizing power of the passionate desire to repeal ObamaCare, which has become the default-drive unifying force among conservatives of every hue.

Conversely, the invalidation of a landmark Obama administration accomplishment that virtually all progressives regard as historic if not entirely satisfactory will help Democrats energize their own party base. And you cannot imagine anything more likely to make the last-resort argument about the importance of Supreme Court appointments more tangible and immediate.

NPR’s Frank James is thinking along the same lines, citing recent electoral results as proof that there might be a silver lining to a SCOTUS drop-kick:

[T]he immediate reaction to the total trashing of the law is likely to be gleeful for the right and brutal for the administration. Imagine, too, the pain of Democrats who voted for the law in 2009 and 2010 and are now former members of Congress, at least partly as a consequence.

But in the longer run, there are ways in which the striking down of the law could help the president and his party.… major hit from the high court could create a bounce-back issue for outraged Democrats in 2012 and beyond. The Democrats have done well in recent decades when they could run on popular disaffection regarding health care, particularly in 1992 and 2008. A chance to rally against the tyranny of the court, striking down popular provisions as well as unpopular, could be potent. Consider how much ground the GOP gained running against the liberal court of Chief Justice Earl Warren a generation ago, or against the Roe v. Wade abortion decision since 1973.

Ugh. Maybe. But I’ll be honest: my first, second, and maybe third response to a SCOTUS nixing of Obamacare (which, for the record, I think is inferior to a single-payer system) will be intense enervation. The idea of kinda-sorta starting from scratch, after a torturous two years of debating this specific bill — and nearly a century of striving for universal health care in one form or another — towers so unappealingly, it summons thoughts of our political system as a late-imperial revamp of No Exit.

Full disclosure: I’m a cancer survivor. I had leukemia when I was very young, and I was lucky enough to have it purged from my blood relatively quickly and without the need for x-rays or more than a few bouts of chemotherapy. I’ve had health insurance all my life, either from my parent’s or my own employer’s plan. And it’s not clear that, even if I and the rest of the country were to be flung back into the dark ages of death (financial or literal) from preexisting condition, my history with cancer would brand me with a scarlet letter of outsized risk.

In other words, I’m far from the top of the list of those with the most to fear.

Still, the mix of weariness, fatalism, despondency, and sublimated anger that I feel when I imagine being, once again, merely one stroke of bad luck away from losing health insurance perhaps semi-permanently? When I think of the millions of people who, unlike myself, would immediately be thrown curbside by a 5-4 majority unable to keep its ideological zeal in-check? This must be the way the Yippies felt during the insidious time between the ’68 DNC flame-out and Rubin’s embrace of proto-Reaganite “self-improvement.” Or maybe it’s more like how Mookie felt as he grabbed threw off the lid and grabbed that trash can with both hands.

Which brings me to the other potential consequence of a bold move by the SCOTUS that’s worrisome — what this would do to the political culture in the United States. Yes, we’ve all heard how ugly, uncivil, uncouth, and unhealthy is our politics today. But anyone with passing familiarity with American history well knows that things could be, have been, far worse. What if the SCOTUS, by striking-down Obamacare, throws a lit match into a deceptively placid but in truth frightfully deep pool of kerosene? What if whatever pretenses toward comity that linger are extinguished and American politics enters into its most explicitly Hobbesian moment since at least the 1960s, if not earlier?

Staying in that romanticized but in reality quite unpleasant (at least it seems so to me) epoch, let’s remember that undergirding all of that tumult was perhaps the most robust and prosperous economy that human civilization had theretofore seen. Americans were only then beginning to truly distrust, even loathe, their bedrock civil institutions. The climate crisis was there, of course, but it wasn’t here the way it is today. There was no looming tidal wave of debt. The country could handle such a prolonged period of in-fighting and growing pains. Wading back into those choppy waters today, however, seems to me to be a much more foolhardy undertaking.

Because of all this and more, I still don’t think the Court will do something as rash as many liberals now fear they might. As Senator Blumenthal said yesterday, these Judges must know that their power is an almost miraculously ephemeral thing. They and their posterity live on little more than sentiment; the noble lie that politics ends at 1 First Street’s first stone step. If for no other reason than not wanting to be remembered by future Justices as the ones who threw it all away, I think the conservative majority will restrain itself. This may be one of those few instances in which the human obsession with the preservation of institutional power leads to a positive outcome.

If it’s not, though, I’ll pass on the pep-talks. Maybe it’ll eventually lead to better things (at what cost is unclear); but it’ll be awful, terrible, very bad, and no good news just the same.

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404 thoughts on “If The Supreme Court Kills Obamacare, You Can Keep Your Silver Lining

  1. I’ve been struck by the government’s position.

    It’s seriously pushed more chips in the pile than SCOTUS normally likes to play with.  If they strike down the mandate and not the entire law, they’re going to be stuck striking down the pre-existing conditions and community-rating positions, I think.

    Those are the two conditions that really make the law attractive to the general public, as opposed to the specific public(s).  This goes against the assertion alluded to by some conservatives that the Obama administration doesn’t mind if the mandate goes down because that will just let them go with the Real Plan of single-payer over the next few years as insurance companies are driven out of business.  With those two other conditions going away with the mandate, that whole fantasy plan doesn’t work.

    Now, I thought that the government might take the position of trying to save those two *while* losing the mandate, but the oral arguments seemed to be an entire concession that you can’t lose one without the other two.

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    • There’s been a lot of commentary, largely but not exclusively from the libs, critical of Solicitor General Verrilli in his performance in oral arguments before the Supreme Court.

      I think there’s a big difference from those who were there live (or heard the tape) and those who read the transcript. When you hear it on audio, SG Verrilli is evasive, scattered and lacks confidence. But when you read the transcript, it doesn’t seem nearly so bad.

      The second day of oral arguments represent the possibility of a profound change in our political culture. The reality is percolating that (beyond the real or imagined failings of SG Verrilli) while the Administration, the lib legal establishment and libs in general desperately want PPACA to be Constitutional, they have no clear idea why they think it is.

      Only now is it dawning on them (and just barely at that) that the Consitution and other norms represent an actual constraint on their sphere of action and the ethical limits of their intent instead of a momentary obstacle for them to maneuver around.

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  2. Obamacare is what I would design if I wanted to destroy both the health insurance and health care industries. Let’s do it right with a system that both halves of the country can agree to and that leads to better long term results for all of us.

    Suggestions available upon request.

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      • Knowing Roger’s past prescription’s on policy, I’m guessing it comes down to removing regulations on insurance companies so they have the freedom to deny care to anybody they want for any reason they want, institute tort reform so people who have their lives ruined by malpractice can only get a pittance of money, and allow insurance companies to sell across state lines, which will essentially mean they’ll do the same thing the credit card companies did – buy a state legislature and move operations there.

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          • Do you beleive insurance companies should be allowed to deny coverage based on pre-existing conditions?

            Do you believe in caps on awards in malpractice cases>

            Do you believe insurance companies should be allowed to sell across state lines?

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            • Do you believe insurance companies should be allowed to deny coverage based on pre-existing conditions?

              This is a tricky question.  As things stand right now, yes.  Do I think they should be that way?  No.  But that requires a fundamental re-engineering of the medical insurance provisioning mechanism.

              Do you believe in caps on awards in malpractice cases?

              I believe in caps on awards in most cases.  My idea of what a “cap” is… that’s probably significantly different from what most people think a “cap” is.

              The cap should be to establish a trade-off analysis wherein malfeasance has appropriate negative incentives.  If the cap is too low, you’re creating a condition where every company has too great of an incentive to cheat.  If it is too high, you’re making it impossible to outsource the risk management and insurance disappears or becomes unaffordable.

              Do you believe insurance companies should be allowed to sell across state lines?

              This is another tricky question.  Under certain conditions, yes.

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              • I think my insurance might already be sold across state lines.
                I have Cigna through the National Employee Benefits Assoc. (NEBA) in Jacksonville.
                Say, like if I’m working in Milwaukee (at their rates), the health & welfare funds (H&W) goes to national at the end of the calendar quarter. At the end of the next quarter, it goes to my home local (in Florida), and my insurance is effective.
                That’s why I can pay $20,000 a year for health insurance, but still have lapses in coverage.

                Maybe, on some technical level, once the money is shifted around so much it comes up as in-state at the time of purchase.
                I really don’t know all the particulars.

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            • Jesse, see below. My recommendation would not allow underwriting or rating based upon pre existing conditions. It would encourage companies to offer rewards and discounts for healthy lifestyle, though they would not be forced into these, and consumers would bee free to choose companies without them.

              I would recommend consumers and industry work together to design arbitration boards to handle malpractice. This could then be offered to consumers as an option within their insurance. The consumer should be sovereign. This means they can freely choose the current liability system if they want it.

              I do not believe there should be any restrictions on competition. I agree completely with you that companies and special interest groups will try to lobby for special privilege and other various regulatory “rents”. This needs to be managed. I have ideas to limit that too.

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                • Murali, I am glad you joined in I wanted to hear more of your experience.

                  Yeah, I know, I was a leader of underwriting (and pricing) at a major American insurance company for years. Never in health insurance though.

                  I would recommend we experiment with biting the bullet and group people into age and territory cohorts and that we limit risk management via rating to areas within the control of the insured such as smoking and fitness. The ramifications of no underwriting is that companies will be penalized for experimenting with more coverage or lower deductibles, as sick people will change to these companies, destroying them for the healthier customers (driving up rates). I have some technical ideas on how to address this, but it gets beyond the scope of the blog.

                  What do they do in Singapore on underwriting?

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                  • What do they do in Singapore on underwriting?

                    A lot of the more basic catastrophic plans just compete on different coverage and different premiums. Some of the more advanced ones get you to have a medical checkup to see what conditions you have before deciding what to cover and at what rate. Once covered, though, the insurance company must pay for whatever is covered. They can’t weasel out of that. So, there isn’t any one standard AFAIK regarding what must be covered, but you know you’re covered if its in your policy. Most just cover for hospitalisation, permanent disability, death etc. Alldepends on which insurance plan from which company.

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      • Rufus,

        I believe health care reform requires three components:
        1) Routine health care — paid by consumers out of something similar to HSAs. Consumers would manage routine costs, and companies would be free to vary the product and the pricing, but rating would be limited to cohorts based upon age with discounts available for non smokers, controllable fitness programs, etc. In other words, people would be allowed to earn better rates with better controllable fitness improvement. Underwriting would not be allowed, but surcharges would be allowed to penalize people from going in and out of the insurance market. Any company would be free to enter the market and set premiums, but no company would be allowed to refuse to pay contractual obligations per Jesse.
        2). Catastrophic care — would work above the level of routine care for major medical expenses beyond that manageable with an HSA type account. This would be managed like social security, except it would have more options so people could tailor it to their personal preference. It could be deducted from wages, would be available to every American, but would have an opt out provision to respect liberty. Companies would compete for blocks of this business.
        3). Safety net / redistribution element — to help the poor, unemployed and elderly pay premiums or fund their HSA. This too could be deducted from all our wages with an opt out provision for hard core libertarian anarchists.

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              • Yeah, it was one of the rare discussions where all three groups started to kinda almost agree with each other. It is easy when no rent seeking, special interest groups are involved. Once they get involved, the army of rationalizers will work to turn us all against each other. Battle line will be drawn and sabers will begin to rattle.

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                    • Yes, things like bounded rationality, imperfect information, inelasticity of demand…such silly, silly concepts. Von Mises never needed any of that. Pox on the notion that markets aren’t perfect!

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                    • Nob and Jesse,

                      Mises and all reasonable libertarians realize that it is imperfection of knowledge that leads to why we recommend using Free Enterorise in the first place. Markets, if set up properly, are complex adaptive problem solving systems that go beyond what is possible with centralized planning. Markets (which tap and focus human ingenuity) create/invent solutions, produce them and deliver them based upon the dynamics of the system in a positive sum process that generates prosperity and solves innumerable consumer problems. This is true in health care as well as home improvement.

                      No complex adaptive system is perfect, the relevant question is which system is best. The screwed up industries are the ones with massive interference in free enterprise. If we want to improve health care it is imperative that we tap into this system. See my three recommendations above.

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                    • I’ve never even read Mises, you’re overgeneralising.

                      I may be misreading you, be you seem to be falling victim to one of the classic policy economics blunders.  The most famous is assuming markets never fail, but only slightly less well known is this: never assume that the existence of a market failure justifies any intervention you can think of.

                      I’ve actually written about healthcare before, and you will notice that while my solution leaves more room for market operations than either the ACA or the prevailing status quo before it was passed, it still leaves room the government to act.

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                    • James:
                      You’re right of course that market failure doesn’t justify intervention and it’s a point that’s worth reminding myself of every time I look into market failures writ large.

                      I’ve read your proposal and while I don’t think I commented on it at the time,  there’s a handful of things that probably bear noting.

                      1. Healthcare reform in the US will have to be as much a supply-side solution as a demand side one. That is to say, you can’t simply reform health insurance if the compensation system and the way healthcare provisioning works is still based on a quasi-cartel with a fee for service model.

                      2.  There is a scale issue involved here. In order to do a root and branch reform of an entire sector, you need something with adequate financial leverage to do the reforming of practices and culture. In the US this is clearly going to be Medicare. Simply moving to HSAs won’t help much if hospitals and doctor networks still work on a FfS model. I’m simply inclined to believe that for actual cost containment and cultural changes to happen in healthcare provisioning, before any market can exist, there needs to be a change in what draws payments.

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          • I will allow you to answer the first question. Note that the higher we set it, the less expensive catastrophe care becomes, but the more expensive the redistribution safety net support system becomes.

            The opt out woul be inclusive of people opting out altogether for whatever reason. Do note that I would make the opt out a serious decision. It has ramifications.. If a religious zealot, or libertarian wanted to opt out of the catastrophic care and redistribution system, I would expect them to sign and notarize that they assume all responsibility for their own health care from that point on. No free care for free riders that are capable of contributing. I would allow people to opt out of routine care, but they would probably wish they did not due to rating penalties.

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              • Yeah, good one. What do you recommend?

                My thought is that they naturally enter the system when they start working.

                I guess parents could opt out for themselves, but the kids would need to be covered and by the parents opting out they would be agreeing to reimburse the state up to some level when their kid needs treatment that they can’t pay for. I certainly do not support penalizing kids because their parents are anarchists or zealots. Another option is that parents could only opt out if they proved they had alternative coverage available. This goes against my libertarian senses though.

                Jay bird, care to jump in?

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                • Kids always screw everything up.

                  There are several categories, some we can do stuff for, some we can’t. That’s pretty much the first premise. If the only acceptable outcome is “absolutely everyone gets absolutely everything they need without having to wait in line”, we’re doomed from the start.

                  There’s also the issues of “how do we deal with malicious parents?”, “how do we deal with negligent parents?”, “how do we deal with stupid parents?”, and “how do we deal with poor parents? (Of those four, it seems to me that the last one is the easiest to deal with.)

                  Looking at the price spiral, it seems to me that this is a TEXTBOOK example of a health care shortage… and what’s the best way to deal with that? Well, we need more doctors and nurses and whatnot. The money being poured into “insurance” should instead be poured into “we’ll pay off your tuition if you do the following” payments. Have doctors get their tuition loans paid off if the doctors work in one of the many healthcare deserts we have in the country. Pay off all of it if they stay 5 or 6 years, maybe. Some will leave at the end of those years (at which point we go through this again), some will have roots in the community and stay.

                  If there are kids in the US who can’t see a doctor because the parents would have to get on a bus, ride for an hour or two, get to the office, wait for an hour, then go back, then we have a problem where there aren’t enough doctors 20 minutes away by bus. 10 minutes away. This can be fixed by making more doctors. Take care of much of the financial problems by offering to make tuition payments for the doctors who are willing to be 10 minutes away by bus.

                  The biggest problem that I constantly see in the health care debate is that nobody seems to give a crap about the question “does this make it easier to be a doctor?” (or “does this make it easier to be a nurse practitioner?). Because, you know what? If the answer to that question is “no”, then your program, *WHATEVER IT IS*, will *NOT* help and will probably do harm.

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        • Sorry, all HSA’s do is shift financal risk away from insurance companies to individuals, make out-of-pocket costs higher for those with chronic conditions, and reduces primary and preventative services use by low and middle-income individuals, especially those that are already sick.

          HSA’s basically redistribute the nation’s overall financial burden of health care from the budgets of chronically healthy families to those of chronically ill families, Now, they’re fine if you’re making enough money to stock money into an HSA, but as the GAO said, most HSA’s are for, “healthy consumers, but not to those who use
          maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.”

          So yeah, HSA’s are a great policy, assuming you never get sick and/or make a whole lot of money. The truth is, we should look at what works all around the world, which is highly-regulated insurance market with heavy government involvement, whether it’s subsidies, single-payer, or the like. Hell, thanks to Obama’s reforms, Medicare is growing slower than private insurance, despite being full of old people who are sick.

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          • Jesse,
            Good points all, indeed great points. The catastrophic provision and the redistribution provision counter this in two important ways. First, they work in the opposite direction, shifting benefits and premiums from the healthy to the sick and the wealthy to the poor. Second, they substantially reduce the scope of HSAs to routine expenses and care. Most importantly, the redistribution element can apply not just to paying premiums but to funding HSAs for desperate families.

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            • Jesse,

              Upon further reflection I agree with you even more. I grant that from a libertarian perspective it is foolish to force HSAs in the voluntary, routine care market on those like yourself that do not want them. I would simply present it as an option for free market zealots like myself (surely you will grant this concession to me?)

              Thus you will get routine health care with choice, catastrophic care for all and subsidies for the poor and elderly. Are you on board yet? There is one other minor detail, but I will await your feedback before bringing it up.

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                • Yeah, just saying that Roger’s proposal is even more awesome and has the additional bonus of being presentable as a market solution. Its not a free-market solution, but it tries to make healthcare function like one with certain fairly judicious interventions. Trying to encourage market-like behaviour in the right places is a good rule of thumb to follow in crafting good policy. Also Jesse Ewiak was implying that HSAs are less equitable than the current system. They are not. A poor sick person in singapore has a better chance of surviving than a poor sick person in the US

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            • I think that’s a different argument Murali. The argument on the table, at least in this thread, is whether the PPACA is constitutional, not whether there are other better, more practical, more libertarian, etc. ways to provide healthcare. I mean, if you want to provide healthcare, just go single payer. That’s the best way to do it. But lots of people don’t like that idea. So the issue really amounts to providing health care within some somewhat arbitrary constraints like government intrusion, and ‘re’distribution of wealth, and basic rights, and all that other stuff. The argument people are making is ‘the best health care consistent with X, Y and Z’.

              For my part, I think it’s likely that conservative’s desire to ‘protect’ America from the ravages of big librul gubmint might lead to the destruction of American ‘exceptionalism’, both in terms of the economic drain resulting from unconstrained healthcare costs as well as breaking whatever’s left of the fabric of our society.

               

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                • Oh, so you’re playing the sub-thread card on me?

                  Fair enough. I guess I just don’t have a lot of patience with dream policies when the reality is a Congress comprise of … well … Congresscritters.

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              • Stillwater,

                I did offer up a suggestion that offers health care along with what I believe is X, Y and Z.

                It is universal, it would allow competition and consumer sovereignty to manage affordability, it is voluntary, it eliminates the problems with pre existing conditions, it protects the poor and elderly with redistribution, and best of all I think it includes your feedback from the discussion last summer.

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          • Derp,

            What do you recommend? My initial suggestion would be that we require them to sign a stack of notarized waivers that they do not want or expect any medical care. That is why he would have to be crazy to sign one unless he had the means or other insurance to cover himself. Either that or they will owe a lot of money to a hospital.

            The redistribution element protects the poor from having to sign waivers.

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              • Jesse,

                You can only do this by forcing them to have one.

                Which is best, to force rational adults with the means to buy coverage to do so, or to allow them to opt out of the process and live with the consequences of their actions?

                I am not treating anyone as disposable. I am treating them as rational and free.

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                •  live with the consequences of their actions

                  Lets be clear what this means.

                  I think it means letting an uninsured indigent person die in the streets.

                  If thats not what you meant, please explain what sort of “consequences” you have in mind.

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                  • That’s not what he meant.  He pretty much says he wants to cover the indigent here.

                    What he’s saying is that people have the right to opt-out of lifesaving treatment.  If you absolutely don’t want to be covered, and you don’t want to pay (not, you don’t have the means to pay but you don’t *want* to pay for insurance), you’re opted out.  If you get in a motorcycle accident and you don’t have the money or the credit to pay for your emergency care, they let you die.  No free riders.

                    I have three problems with this: it assumes a level of rationality that I think is demonstrably non-existent among at least the young certainly…  it puts first responders in the untenable position of refusing care… and finally, that’s a really tricky audit process that can result in people dying due to missing paperwork.

                    However, I agree that free-riding is a problem.

                    My alternative suggestion would be: If you want to opt-out of coverage, that’s fine.  No insurance.  If you get picked up on an emergency call, lifesaving treatment will be provided to you because of the last two of my three problems: you can’t check eligibility with enough accuracy under lifesaving treatment windows and you don’t want your first responders put in that position anyway.

                    If you can’t pay your bill, the hospital is *not* allowed to cost-transfer.  They submits the bill to the Federal Government, and they pay your bill, and the IRS garnishes your wages until you pay it off.

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                    • Patrick and Lib,
                      I am hunky dory with this idea. It allows us to be compassionate and is vastly superior by not requiring paperwork. Liberty, does this meet your objection?

                      By the way Patrick, how do you do that cool trick where you link to an earlier comment?

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                    • Per Jesse below, I give you props for diligently attempting a solution that doesn’t violate your free market theology.

                      But then I notice how as the mechanism increasingly attempts to react to real life situations, it becomes more complex with more bells and whitles and safety cogs.

                      Becoming rather like a modified free market that is massively regulated and tightly supervised by the Federal government. Instead of a mandate to buy insurance, you are free to ignore it, then are coerced by the Federal government to pay back your astronomical medical bills.

                      Such a scenario could probably work, in fact.

                      Leaving only my question of, to what end?

                      How does this make our society better than say, Canada with their single payer version?

                      Do the American people get better medical care? Not that I can see.

                      Do we get medical care cheaper? I haven’t heard that claim made.

                      It just seems like a contrived Rube Goldberg that is premised apriori on the notion that the marketplace must be maintained by any means necessary, even if it ends up being every bit as warped and distorted as what Obama is proposing.

                      On the other hand it allow foolish young libertairians to ride motorcycles without helmets, then convulse helplessly on the pavement, while we all stand around watching.

                      So there’s that.

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                    • Such a scenario could probably work, in fact.

                      Cool, glad you’re on board?

                      How does this make our society better than say, Canada with their single payer version?

                      It doesn’t, most likely.

                      Do the American people get better medical care?

                      In comparison to what we have now?  Probably.  In comparison to anybody else that has universal health care of one sort or another?  Probably not, overall.  Maybe.

                      Do we get medical care cheaper?

                      Given that the number of actual free-riders is probably small, and the cost shifting can’t occur, we get better accounting.  We don’t get medical care cheaper unless we increase the supply of doctors, that’s outside the scope of this particular solution.  One step at a time.

                      Leaving only my question of, to what end?

                      It will pass a SCOTUS challenge and actually be implemented?

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                    • 15% of medical spending goes towards waste (a lot of accountants, wading through insurance, etc…). I think we can reduce the cost of health care spending without increasing the number of doctors. it’s called single payer, you’ve heard of it?

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        • First of all, even if I disagree totally with this plan, it’s still more sane than anything coming out of the modern Republican Party. So, you’ve got that going for you.

          1) All that will lead to is two types of products. Relatively cheap or moderately-priced products for healthy people and very expensive junk products for people who have chronic conditions. Nah, I’ll keep guaranteed issue and community rating instead.

          2) As Kimmi pointed out, if the price-level of catacrosphic care is low, you’re basically creating Medicare-for-All which is fantastic in my eyes, but if it’s too high, there’s a giant donut hole where well-meaning people can save money in their HSA’s, be responsible, but still be wiped out if two-or-three moderate crises happen. Say, Timmy breaks his wrist doing a skateboard jump, Sally twists her knee at gymnastics, and Dad finds out he has a chronic medical condition. All of the sudden, in a few months, that HSA is empty and bills are still coming in. So, no, I’ll stick to the risk pool of thousands or millions in a potable group health insurance plan over the shakiness of an HSA.

          3) We’ve got Medicare and Medicaid for the elderly and the poor and as long as the ACA doesn’t get obliterated by the Supreme Court, that looks better to me than creating 20 million HSA’s for poor people.

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          • Jesse,

            Let me clarify. Point one guarantees the same policy choices and premiums for basic coverage irrespective of pre existing conditions or subsequent health. I am agreeing 100% with you that this plan has guaranteed issue and community rating. We are actually in agreement here.

            On two, I also completely 100% agree with you and Kimmi that the basic coverage level cannot be set too high. In addition I need to clarify that number three assists these families in establishing their account balance. Yes it does create a kind of Medicare for all, but it creates one where consumers are aware of prices and have incentives to manage their health and the costs. If we just create a system of unlimited care for all paid by a third party the system will spiral out of control on expenses and lead to a socialized, rationed product.

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            • I question that- the notion that if we give away medical care for free, people will overuse it.

              What if you woke up tomorrow and medical care were free, paid for by a benevolent space alien.

              What medical procedure would you rush out and get?

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              • I think that it’s possible that this could be a problem at some point, but there is a practical limiter already in place.

                I have to wait 4 weeks to see a hand and wrist specialist.  The limiter is not the money.  The limiter is the availability of the doctor.

                That’s already a big enough limiter that “free care” isn’t going to open any floodgates.  If you don’t have a legitimate need, you’re not going to just arbitrarily sign yourself up for 100 specialist appointments because you can’t fill up your calendar that far in advance.

                However, if we took Jaybird’s advice and started subsidizing medical training (something I’m a big fan of myself), we’d have to make sure that 10 years from now we’re not producing doctors at a rate that’s so high that we’re cutting down that time limiter to the point where “free” actually does encourage overconsumption.

                I think there’s a big time window, there, though.  The big problem will be about 25 years from now when the boomers die off.

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                • There’s a lot of discretion at the margin. Tests that have a low probability of turning up anything serious. Expensive procedures that probably won’t work and won’t make much of a difference even if they do work. Life support for the terminally ill.

                  What I’d like to see is an insurance model where an independent auditor publishes QALY estimates for different treatments, and insurance plans have different premiums based on cost per QALY. If a procedure has a better cost per QALY ratio than your plan’s threshold, then it’s covered, otherwise not. Government plans and discount private plans would have low thresholds, and as you paid more your ratio would go up. If you get insurance from the government, or from work or whatever, you can buy extra insurance on top to raise your threshold.

                  I think this makes a lot more sense than the buffet type plans which some free-market types propose (“I want coverage for heart disease and brain cancer, but not for lung cancer or liver cancer”). That sort of thing just shuffles costs around, and leaves you vulnerable to getting a disease you didn’t plan on because you didn’t have the risk factors.

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                  • Mr. Berg, what you describe is pretty much Britain’s NICE system, years of quality life vs. cost of treatment.

                    http://www.guardian.co.uk/society/2010/aug/24/avastin-too-expensive-for-patients

                    Of course in a socialized system, one size fits all.  It’s only fair.

                    However, taking a look at the other systems that people have spoken of approvingly here, I notice that 2-tier systems are pretty much unavoidable.  Costa Rica has cheap private medical procedures for those who can afford them, but the proles have waiting lists.  Upwards of 25% of Singaporeans appear to pay out of pocket [if I read the prev link right].   The Queen of England does not queue up at the NHS.

                     

                    And in a way—stick with me here—if there’s a natural right to self-defense, then it’s unjust to prevent people from buying “Cadillac” health plans such as you describe above, where the

                    years of quality life [divided by] cost of treatment

                    quotient is more generous.  What is “fair” isn’t necessarily just.

                    [There’s a problem with setting such scientific standards, BTW—a treatment might be marginally effective for 70% of people, but very effective for 30%.  It’s hard to dial the quotient in because unlike abstract egalitarian socio-political schemes, where it comes to actual human beings, one size does not fit all.]

                     

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              • I wouldn’t mind having a full head of hair again. Maybe the RK so I could get rid of my glasses. Could they increase hormone production to raise my metabolism? Also, the doctor told me that my midsection is retaining fat. Could they help with that at all?

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              • Liberty,

                I am assuming you are being facetious here. The point is not so much that I would get unnecessary treatment, though some probably would, it I that I would have no incentive to manage the cost of the treatment. If I have no incentive to manage the cost, and those supplying the service have every incentive to increase the cost ( profit) then the problem is absolutely guaranteed to spiral out of control. I am pretty sure you agree with me on this.

                I believe third party payments are destroying the cost effectiveness of the industry. Under my 2nd suggestion, the part on catastrophic care, this would be centrally managed with cost controls and is thus the weakest part of the solution from a free market standpoint.

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                • How does one “manage the cost” of one’s medical care?

                  No snark, I really have no idea how anyone would do that. As others have pointed out, no one is knowledgeable about their medical care, and no one can act rationally in medical situations anyway.

                  Again, it is your premise that I object to- that medical care is no different than a consumer good, and reacts well to the same market forces. I have never seen anything that would lead me to share that conclusion.

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                  • Liberty,

                    The reason I keep pushing for free markets is not quasi religious. It is because it is a complex adaptive system that is smarter at solving problems and delivering them efficiently than is coordinated control. I am just trying to use the best system at our disposal to create solutions and manage costs. That is all Free Enterprise is. It is a problem solving algorithm for a special domain of problems.

                    In a free market, routine care hospitals and physicians would list their prices, consumer advocacy agencies could score and publish competing customer satisfaction results, complaints and malpractice claims would be published. We would choose between various prescriptions with advice from our chosen doctors or nurses.

                    I have an HSA today, and do shop around somewhat. Often I ask my physician for advice before deciding. Today the market is totally opaque though, with massive cross subsidies occurring under the table. The market is misfiring.

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                    • Roger, myd entist shops around FOR me. she was chosen based on how nice she was, by the way (less on competency).

                      “ordinary root canal” means “normal specialist”

                      “oh-shit-your-face, fucking cellulitis and abcess” means “best in the damn city.”

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                  • ,

                    How does one “manage the cost” of one’s medical care?

                    Granted that one cannot exercise full control over one’s medical care, there are still many things a person can do to manage one’s care to a considerable extent.

                    First, don’t see a doctor when it isn’t necessary and don’t ask for treatments that aren’t necessary.  I’ve known people who go to the doctor each time they get a cold, even though they know the doctor can’t do anything for rhinovirus.  There’s also a trend among well educated upper middle class parents to demand their doctors prescribe prophylactic antibiotics for their children.

                    Second, live healthily.  Exercise regularly, eat wisely, don’t take foolish risks.  (I’m not playing moralist here–I frequently violate each of these prescriptions; but there’s no doubt that following them will help you manage your health care).

                    Third, find a doctor who you can communicate with.  I’ve been quite fortunate with my last two primary care physicians in that I’ve lucked into doctors I can really communicate with, but if I hadn’t, I would have made the effort to do so.  If your doctor doesn’t listen and doesn’t answer questions in a way you really understand, make the effort to find a new one. Yes, that’s easier in some locales than in others–no advice is one size fits all and unfortunately exceptions don’t invalidate a good principle.

                    Most of all, don’t think you’re helpless in the face of a vast monolithic impersonal machine.  Take responsibility and pay attention to what’s going on in your health and your health care.

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                    • But don’t stint on preventive/diagnostic care.  Have regular checkups.  If you’re in a high-risk group for X, get tested for it as indicated.  It will be much cheaper (as well as easier to treat) if it’s caught early.   The real issue with health care isn’t that poor and working-class people can’t afford triple-bypasses; it’s that they can’t afford primary care physicians to build relationships with.

                       

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                    • Oh, and the very best way to manage costs is to have insurance, no matter how crappy the policy.  When I compare the PPO price I pay to list price, I wonder how anyone without insurance can afford to get the sniffles.  Vimes’s motherfishing gold-plated, diamond-studded boots.

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                • I take it from previous statements that you don’t like the market-based approach that Obamacare is going for?? Or is it just that you’re unfamiliar with it, and thus can’t comment on the PROPOSED alternatives to pay-for-service?

                  It may simply be that you’re trying to fix a problem that the corps already think they’re fixing…

                  (sorry if this sounds mean, am just typin’ quick like)

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                • Liberty, Kimmi, Jesse, Patrick and Murali,

                  We would all really benefit by taking Murali’s recommendation and reviewing the experience in Singapore and South Africa. If our goals are affordable, comprehensive health care with a strong social safety nets, they offer great models. They differ, but have some things in common and put to rest the theory that people cannot influence cost containment on non emergency services.

                  South Africa: http://www.ncpa.org/pub/st234

                  Singapore: http://www.ncpa.org/pub/st203

                  Let’s get beyond political bickering and get behind something that is morally and economically superior in every way to our current cluster freaked system.

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                  • Not to put too fine a point on it, but SIngapore’s system (I haven’t done enough research into SA’s system) is based on an extremely powerful bureaucratic system focused on the Ministry of Health that does a LOT of intervention on the supply-end of medical services to maintain cost savings. They do all sorts of market interventions just not visible on the consumer end. It’s worth noting that about half of the hospitals in Singapore are government operated, and of those walk-in emergency services are provided mostly at those institutions.

                    The demand-end changes that you’re proposing are only part of the situation, and unfortunately won’t fix anything on their own.

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                    • Hi Nob,

                      Perhaps we are not seeing eye to eye on supply side. On the supply side I agree with Jaybird on addressing barriers to the supply of professionals in the industry. I would also address supply of pharmaceuticals and patents ( though I have not discussed this here). Most importantly, my catastrophic care, which is the majority of expenses in health care, assumes similar interventions. As much as I hate to admit it, I think we are better off partially socializing this aspect of health care. Oh sure, I add a few choices and options into the system, but truth is the government will end up rationing care.

                      In other words, I suspect we agree more than you might think.

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                    • Singapore’s health system seems fairly byzantine, compulsory health savings accounts being the most interesting angle.

                      http://en.wikipedia.org/wiki/Healthcare_in_Singapore

                      Approximately 70-80% of Singaporeans obtain their medical care within the public health system. 

                      Which puts a healthy chunk of the population outside it.

                      The means testing is rather intrusive, and if you have no monthly income, the %age the government picks up is pegged to the value of your home.  Permanent residents [as opposed to citizens] are also subsidized less.

                      http://www.watsonwyatt.com/europe/pubs/healthcare/render2.asp?ID=13850

                      So how does Singapore achieve such impressive results?

                      The key to Singapore’s efficient health care system is the emphasis on the individual to assume responsibility towards their own health and, importantly, their own health expenditure. The result is a system that is predominantly funded by private rather than public expenditure. For example, in 2002, private health expenditure in Singapore (that is, financed by individuals or employers on behalf of individuals) amounted to almost 67 per cent of total health expenditure with the remaining 33 per cent financed by the Government from tax revenue. As shown in Figure 2, this is not the norm for most developed countries (the US aside), where health financing is predominantly from public expenditure.

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            • Roger,

              Okay, here’s about where I stand with your plan…

              Catastrophic health care has gotta start at around the $5000 range. That’s about the Maximum I pay for ExtraShinyGood healthcare (top twenty health care for hospital employees) — counting the basic coverage as well. Please bear in mind that you have less than $1000 clearance in 2/3rds of American’s bank accounts. If you make basic care cost more than they’re already paying, they take it out of their houses (umm, lotta people underwater) or their retirement (also not something I wanna do lightly…). But… hell, let’s be generous, and say that catastrophic health care should start at around the $10,000 range (cumulative, over the course of the year).

              Okay, so where does that leave us?

              $5000 is the cost of a diagnosis of “ankle is not broken.” I’d wager a “not broken wrist” is a bit more expensive (more delicate bones).

              We aren’t talking “car accident” levels… we’re talking what a lot of folks would call “normal care.” Gotta show up at your doctor once a month for allergy shots to avoid going to the hospital? Guess what? That’s catastrophic care (and a hell of a lot cheaper than winding up in the hospital!)

              Now, I guess you could go and say… “Wait, you’re too poor to actually afford it…” … but… I’m not at the poverty line. I’m not at 1.5 times the poverty line. How much above the poverty line do you gotta get before you’re willing to say “My Scheme is NUTS!”??

              Seems like you’ve got a few choices:

              1) Run the numbers, show me that our current legal system will allow someone to amass $20,000 in debt and to not need to declare bankruptcy because of it. (bear in mind that health care currently causes most bankruptcy, and that it’s often despite having insurance). [and then say “that’s the price i wanna set”]

              2) Say, “yes, by golly, that’s what I meant!” In which case, I’m going to have a “serious talk” with you about why catastrophic insurance companies want to incentivize you heading to the doctor before your feet need to be amputated (or you collapse because of low blood sugar). *cat’s grin*

              3) Say, “yeah, I meant it to be that progressive” and say “10% of people gotta pay for it by themselves, or it’s a no go for me.” [fwiw, i think 10% of people could pull off a $20000 deductible for health insurance]

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              • Hi Kimmi,

                My response to these great questions is pretty straight forward…

                First, I would be fine with consumers choosing whatever deductible and copay they would like for the voluntary routine care portion. This would allow them to tailor trade offs in premium size and out of pocket. I am even fine with them choosing no HSA at all. There premiums will be higher, but still WAY lower than current comprehensive health care.

                The shift point from routine care to catastrophic care does not have to be too low, as the consumer only pays deductible and copy, which he chooses.

                Note, the redistribution market does need to have HSAs. But remember there are two types of subsidies. Not only do we pay their premium at 100% , we can also contribute to their savings account. The objective is to get their skin in the game. They would manage their account balance because it becomes theirs. The redistribution and catastrophe portions are deductible from all our wages like Medicare and SS today. They are in effect insurance plans, as any of us can be unemployed or old.

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                  • Want to sound like a wingnut, folks?   Say “Free <HealthCareAnything>.”   The fact that it’s not free, that it’s subsidised, that it saves the nation money because women aren’t having unwanted babies, all that is discarded by the wingnut.

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                    • That overlooks the central libertarian argument here, Blaise, the freedom to enter into mutually agreeable contracts, in this case without subsidized [have it your way] contraception. The locution “free country” definitely reinforces the absurdity of this Obamacare mandate, as it speaks of anything but a free country.

                      And what’s with this “wing-nut” business, Blaise?  You used to play fair and square.

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                    • Blaise,

                      I cannot imagine anyone disagreeing that we should have a choice on whether we want to include contraception or not in our plan, right? Seems like a valid choice, and if it saves money in the process, you would indeed have to be a zealot to reject it.

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                    • The central Libertarian argument has already run off the rails and now lies on its side in a cloud of smoke and flaming cinders like an old steam locomotive run off the rails.   Give up on it already.   The Libertarian view of the Free Market is simply a mirror image of the Marxian Utopia.

                      The Libertarian concept of Freedom is completely asinine.   It has no bearing on real markets, for none of you, not one, has the foggiest conception of how either Markets or Society are defined or how either actually work.   You’re like so many fish denying the existence of water.   No matter how many times I tell you lot the optimal model for insurance is one which maximally increases the pool of lives, here come these doctrinaire idiots like the monks from Holy Grail with this Free Market bullshit.   Swear to God, talking to the lot of you is exactly like all those Marxists of yore and they didn’t have a clue, either.

                      Anyone who says Free Healthcare is an idiot, Tom.   It’s not free.   And thank you for using the word subsidised.   See?  now you don’t sound like a wingnut.

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                    • Blaise,

                      I thought the fish and water line was mine.

                      Although I agree in a way that nobody fully understands a complex adaptive system as sophisticated as free markets, I did offer my explanation as a counter to yours last week. Here it is again. Feel free to tell me where I am wrong…

                      I am not sure I agreed with anything in your initial resolution, so let me start from scratch. My definition of Free Enterprise (FE):

                      FE pertains to a particular domain of human interaction. Broadly, to cooperative problem solving on the production and exchange of scarce resources.

                      Based upon human nature and cultural evolution, groups of humans have discovered various conventions which allow us to interact in ways which create a complex adaptive problem solving system to meet our various needs. The first convention is often referred to as liberty or its inverse, non-coercion. Specifically this relates to the concept that adults have freedom to do whatever they like in the domain as long as it does not directly harm another. Harm is roughly defined as physical force, threats, theft, murder, rape, fraud and deception. It does not apply to opportunistic harm, or lost opportunity or status based upon the actions of another. Economic liberty means we are free to produce whatever we want, to make voluntary agreements with whomever also voluntarily agrees, to exchange with whomever also agrees.

                      The next essential element is the definition of property “rights”. These are conventions that determine who owns what. The evolved conventions in FE are that we own ourselves and our efforts. In addition there are agreed upon conventions on claiming ownership of property and on rules for exchange of property. Other conventions and evolved institutions such as money and contracts further lubricates the system.

                      With these basic conventions of property and liberty, humans can constructively solve problems for themselves and others. Indeed, it becomes easier to solve problems for oneself by specializing in the solving of problems for others. This ties us all together in a complex competitive cooperative system of limitless potential. Adults specialize in areas of comparative advantage and exchange their specialized efforts for the efforts or property of others.

                      Humans are brilliant problem solving systems. As such, all able bodied adults can contribute to and participate in the domain. Basically they offer in their efforts and receive the efforts and property of others.

                      The rules of FE basically lead to a positive sum system that creates and builds solutions to human problems. Everyone works to produce things of value and or to exchange things of less value for something with more value. As long as liberty and property rights are observed, people can only engage in win win interactions. All involved parties have to agree to the interaction, meaning that it is superior to their alternatives. Some specialize in production, some voluntarily hire others, some specialize in investments, etc. The patterns of positive sum interaction multiply and build upon each other almost limitlessly. Every involved person gains in virtually every action and interaction. The system becomes one of trillions upon trillions of cumulative positive sum interactions. It is the source of modern prosperity.

                      Note also that the rules prohibit stopping someone from doing something. This means they are free to compete with you to solve other’s problems better than you. Indeed everyone is encouraged to creatively and competitively solve more problems better than anyone else ever has. Thus the system becomes an engine for problem solving. It becomes a complex adaptive learning system of positive sum solutions.

                      I have already gone too long, and there are a lot of issues that I am skipping (such as externalities) but the basic points are that FE is a system of rules or conventions, and it is a creative system that allows humans to compete and cooperate in the advancement and prosperity of themselves and others.

                      Other domains exist, such as science, the care of those unable to care for themselves, and sports which operate under totally different rules. It is a mistake to apply FE domain rules outside of the domain.

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                    • “Subsidized by someone else” = free for me, Blaise, for all practical purposes.  Sophistically, you’re correct, that I’m paying a small part of the cost myself in my premiums.  But this doesn’t address the issue of the freedom to enter into mutually agreeable contracts without state interference.

                      If you want to institute new rules for pejoratives like “wingnuts,” well, I was going to return fire from now on, but you know what, my heart just isn’t in it.  It’s difficult enough to get to the ideas without adding to the noise.  So do what you must, brother, but only those who already agree with you see that sort of talk as acceptable in a league of gentlepersons.

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                    • FE pertains to a particular domain of human interaction. Broadly, to cooperative problem solving on the production and exchange of scarce resources.

                      Here’s how human interaction really works.  Someone specializes, forms alliances with his suppliers and develops a vertical market. He then colludes with his competitors, they fix the prices, raise the barriers to entry and monopoly inevitably results.

                      Based upon human nature and cultural evolution, groups of humans have discovered various conventions which allow us to interact in ways which create a complex adaptive problem solving system to meet our various needs.

                      Wrong.  First groups of humans need a working marketplace.  That marketplace is a neutral ground with a master of the market, who makes sure people don’t get sold sawdust in the flour and that the grocer’s thumb stays off the balance.

                      The first convention is often referred to as liberty or its inverse, non-coercion.

                      Once again, you’re as wrong as the Marxists.  Men will attempt to cheat their fellow man and only some coercive force can prohibit them.   For this reason, forgers were always put to death.   All that simplistic hooey about Freedom and Harm and that childish crap, nonsense all of it.   If the Libertarian were serious about either Force or Fraud, and they have proven they aren’t, they would quit babbling about how the Individual can stop either in any of their manifest forms.

                      Economic liberty means we are free to produce whatever we want, to make voluntary agreements with whomever also voluntarily agrees, to exchange with whomever also agrees.

                      Wrong again.  Economic liberty is tightly confined.   We must either barter or pay coin of the realm for goods and services.   I put that in bold, just to keep you on track here:  no law, no regulations, no banks, no trade.   You say this is all so complex, waving your hands about.   That is either ignorance or lies and I shall choose ignorance, out of courtesy.   Only when economies are subject to regulation, in the town squares where law enforcement obliges the merchants to deal justly do markets even begin to appear.

                      The next essential element is the definition of property “rights”. These are conventions that determine who owns what. The evolved conventions in FE are that we own ourselves and our efforts.

                      Once again, a stupid simplicissime.  Your rights are not embodied in your property but in the society which will side with you in some rights dispute.

                      In addition there are agreed upon conventions on claiming ownership of property and on rules for exchange of property. Other conventions and evolved institutions such as money and contracts further lubricates the system.

                      Money?   You didn’t make that money, it was printed at the Bureau of Engraving and Printing.   You Libertarians simply do not understand the first thing about money, its valuation, its provenance or quite literally anything about money or more specifically the markets for money.

                      With these basic conventions of property and liberty, humans can constructively solve problems for themselves and others. Indeed, it becomes easier to solve problems for oneself by specializing in the solving of problems for others.

                      It helps if you can, as I have already pointed out, collude with your fellow merchants and create a monopoly.

                      This ties us all together in a complex competitive cooperative system of limitless potential. Adults specialize in areas of comparative advantage and exchange their specialized efforts for the efforts or property of others.

                      They manifestly do not.  Buyers do not reveal the price they paid for their goods.  Do you think merchants and market makers are stupid, that they do not consider the open market their enemy and seek to avoid reducing their wares to commodities?   How little you understand of reality.

                      Humans are brilliant problem solving systems. As such, all able bodied adults can contribute to and participate in the domain. Basically they offer in their efforts and receive the efforts and property of others.

                      Humans are in the business of creating, not solving problems.   Nobody considers himself a contributor but instead, considers himself an extractor.   Christ, you are all so many Marxists, without any of its redeeming features.   You simply do not grasp the concept that the group is more powerful than the individual.  Like the Marxists, you hope the State will wither away. And like the Marxists, you do not understand the consequences of what you want: inevitably the death of markets. This is why you are forever doomed to political and philosophical oblivion.

                       

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                    • Blaise,

                      Thanks for the reply.

                      R: Free enterprise (FE) pertains to a particular domain of human interaction. Broadly, to cooperative problem solving on the production and exchange of scarce resources.

                      B: Here’s how human interaction really works.  Someone specializes, forms alliances with his suppliers and develops a vertical market

                      We Agree on the specialization part, the key is what are they specializing in?  They specialize on solving problems for others.  They create something, produce something or deliver something. Don’t know why you emphasize vertical.

                      R: Based upon human nature and cultural evolution, groups of humans have discovered various conventions which allow us to interact in ways which create a complex adaptive problem solving system to meet our various needs.

                      B: Wrong.  First groups of humans need a working marketplace.  That marketplace is a neutral ground with a master of the market, who makes sure people don’t get sold sawdust in the flour and that the grocer’s thumb stays off the balance.

                      You don’t need a top down managed market for reciprocity or exchange, although one certainly can be centrally created.  Would you like references to prove the point, or are facts irrelevant here?

                      People naturally exchange and trade things and have for as long as modern humans existed. Obviously there is always a risk of cheating or coercion.  One solution to this is to only trade with those you trust. Markets emerged spontaneously through cautious human interaction among trusted people via basic game theory principles. As exchanges expanded, we devised various institutions and protocols to facilitate exchange and manage trust. One such institutional solution is indeed a cop or government figure to ensure no cheating. I just read an interesting article on how these roles were created in the “wild west” during the pre state days of the 19th century. Yes, there were markets in the west prior to the creation of a “master of the market.”

                      R: The first convention is often referred to as liberty or its inverse, non-coercion.

                      B: Once again, you’re as wrong as the Marxists.  Men will attempt to cheat their fellow man and only some coercive force can prohibit them.   For this reason, forgers were always put to death.   All that simplistic hooey about Freedom and Harm and that childish crap, nonsense all of it.   If the Libertarian were serious about either Force or Fraud, and they have proven they aren’t, they would quit babbling about how the Individual can stop either in any of their manifest forms.

                      You are missing my point and arguing with yourself. Human interaction based upon coercive force is of course commonplace.  It is not the domain of free markets. The role of coercion in markets is to only allow coercion to suppress coercion. The threat of retaliatory coercion is to discourage coercion and fraud. I am totally serious on the suppression of force and fraud. Free markets cannot work well unless these problems are managed or suppressed.

                      There are also lots of non coercive ways to suppress force and fraud. In a market system one effective sanction is actually to no longer voluntarily exchange with the cheat. This cuts them out of the positive sum game. No libertarian believe fraud and cheating are minor problems. These are serious concerns that require institutional solutions, such as reputations, brands, credit reports, courts and cops. Death is not the only penalty.

                      R: Economic liberty means we are free to produce whatever we want, to make voluntary agreements with whomever also voluntarily agrees, to exchange with whomever also agrees.

                      B: Wrong again.  Economic liberty is tightly confined.   We must either barter or pay coin of the realm for goods and services.   I put that in bold, just to keep you on track here:  no law, no regulations, no banks, no trade.   You say this is all so complex, waving your hands about.   That is either ignorance or lies and I shall choose ignorance, out of courtesy.   Only when economies are subject to regulation, in the town squares where law enforcement obliges the merchants to deal justly do markets even begin to appear.

                      Again, you are responding in a manner which is both factually incorrect and which misses the point.  I am defining my term economic freedom. I would agree that a regulatory state can be the enforcement mechanism of the above freedom. That said, the literature on markets preceding regulation and law enforcement is overwhelming.

                      R: The next essential element is the definition of property “rights”. These are conventions that determine who owns what. The evolved conventions in FE are that we own ourselves and our efforts.

                      B: Once again, a stupid simplicissime.  Your rights are not embodied in your property but in the society which will side with you in some rights dispute.

                      I don’t think we are disagreeing here. I am calling them conventions. These are indeed social or shared conventions. There is extensive evidence that the core of some of these  some conventions are evolved and common in many birds and mammals. I certainly agree that they are not embodied in property in some mystical manner.

                      R: In addition there are agreed upon conventions on claiming ownership of property and on rules for exchange of property. Other conventions and evolved institutions such as money and contracts further lubricates the system.

                      B: Money?   You didn’t make that money, it was printed at the Bureau of Engraving and Printing.   You Libertarians simply do not understand the first thing about money, its valuation, its provenance or quite literally anything about money or more specifically the markets for money.

                      No, actually there has been something similar to money prior to the creation of the department of treasury.  There is extensive literature on the topic. In prisons they’ve often used cigarettes. Other cultures have used shells, beads, commodities, etc. Markets preceded coins, which were invented in Lydia around the 6th C BC if memory serves.

                      R: With these basic conventions of property and liberty, humans can constructively solve problems for themselves and others. Indeed, it becomes easier to solve problems for oneself by specializing in the solving of problems for others.

                      B: It helps if you can, as I have already pointed out, collude with your fellow merchants and create a monopoly.

                      Monopolies are indeed what most producers want. No libertarian disputes this. The point is that consumers are wise to reject this, as are competitors who are attracted by monopoly profits and opportunities. Monopolies can be maintained in most circumstances only with coercion. Thus free markets do require a rule system to limit coercion and entrance barriers. At first this can be via voluntary interaction, but as the market grows and becomes institutionalized, usually cops are created as specialists to address this threat.

                      R: This ties us all together in a complex competitive cooperative system of limitless potential. Adults specialize in areas of comparative advantage and exchange their specialized efforts for the efforts or property of others.

                      B: They manifestly do not.  Buyers do not reveal the price they paid for their goods.  Do you think merchants and market makers are stupid, that they do not consider the open market their enemy and seek to avoid reducing their wares to commodities?   How little you understand of reality.

                      I did not say they reveal their prices, nor should consumers care. Nor did I say they wanted to reduce their goods to commodity. Why are you assuming I would say this? Of course producers are threatened by open markets. This is economics 101. That is why they seek coercive monopolies.

                      R: Humans are brilliant problem solving systems. As such, all able bodied adults can contribute to and participate in the domain. Basically they offer in their efforts and receive the efforts and property of others.

                      B: Humans are in the business of creating, not solving problems.   Nobody considers himself a contributor but instead, considers himself an extractor.   Christ, you are all so many Marxists, without any of it redeeming features.   You simply do not grasp the concept that the group is more powerful than the individual.   This is why you are forever doomed to political and philosophical oblivion

                      You really, truly view yourself as a human parasite? As an extractor? Wow. i am not sure if you are even being serious now. I am sure you have contributed to others via your productive efforts within the market.

                      The point of free markets is solving problems for consumers in return for something of value for the producer. When I designed products I tried to create superior products that solved consumer needs. People bought them voluntarily. I was not an extractor of value.  I enriched people’s lives a little bit in exchange for a modest salary. I feel great about what I did, and I never tried to cheat or harm anyone. The waitress at a restaurant, the plumber, the designer of video games and the truck driver all similarly are engaged in solving problems for others in exchange for value to themselves. Free enterprise is a positive sum, value creating, problem solving system.

                      And of course I grasp that the group is more powerful than the individual. This was Mises’ central insight. The power of specialization, economies of scale and comparative advantage possible within a system of liberty and property lead to prosperity impossible alone.

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                    • Admittedly I didn’t read the entirety of Roger’s long comment ;), but I want to add a couple of supportive claims.

                      Blaise is right that people will try to cheat each other, but his conclusion from that is over-determined and unsophisticated.

                      1. Native Americans in pre-Columbian North America had extensive trading networks that reached from the coasts deep into the interior. There was no top-down power enforcing non-cheating, but the participants in this wholly voluntary network found the exchanges mutually beneficial.

                      2. Game theorists have closely examined the issue of cooperation vs. defection, particularly–although not exclusively–using the prisoner’s dilemma. They have found readily identifiable conditions that promote one or the other behavior.  While defection is the dominating alternative in any individual interaction, in the case of iterated interactions without a pre-determined final interaction cooperation is the rational strategic choice, because Adam’s defection in round X will lead to retaliatory defection by Bob in round X+1, destroying whatever gain Adam made by defecting in that prior round. This has been shown in a multitude of studies, from purely mathematical formal analyses to computer simulations to laboratory studies–it is perhaps the single most definitive finding in the social sciences. What it demonstrates is that cooperative exchange can arise spontaneously. (The single best reading on this is Robert Axelrod’s The Evolution of Cooperation.)

                      Blaise’s critique implicitly assumes we’re all idiotic consumers who can always be cheated.  Apparently we’re all so dumb that we won’t selectively favor honest suppliers with our repeat business over dishonest suppliers.  So when I get food poisoning from a restaurant, I continue to go back there, regardless of how often I get sick, instead of selectively favoring the restaurants that don’t make me ill.  When one mechanic cheats me and another doesn’t, I don’t bother to distinguish between them and give my repeat business to the trustworthy one.

                      The great irony here is that taking Blaise at face value I’d have to assume he cheats his customers all the time. In fact I don’t believe that. I can’t exactly say what it is about him that strikes me this way, but just from his general tone and style I get the impression that he’s a damned honest software contractor…and that it’s not just because of top-down regulations that he is so.

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                    • Again, Roger, many thanks for a reasoned reply.

                      We Agree on the specialization part, the key is what are they specializing in?  They specialize on solving problems for others.  They create something, produce something or deliver something. Don’t know why you emphasize vertical.

                      The efficiency which drives Capitalism has long since dispensed with this notion of Solving Problems.   You must think larger than a hardware store or a grocery or a cobbler’s shop, where the customer has a problem which can be solved with a bolt and washer or a head of lettuce or a new set of heels on a pair of favourite shoes.

                      Capitalism is about creating needs where none existed before.   You’re looking at markets on the downhill slide, already well within the sedimentary phases where  commoditisation has provided some measure of competitiveness.   That’s not where real money is made:  by the time a product or technology is in its commodity phase, margins are thin and competition has entered the picture.

                      You don’t need a top down managed market for reciprocity or exchange, although one certainly can be centrally created.  Would you like references to prove the point, or are facts irrelevant here?

                      Yes, such proof is required.   No working market ever emerged without external regulation, no matter how much internal regulation was applied.   Both are necessary, especially in risk markets.

                      People naturally exchange and trade things and have for as long as modern humans existed. Obviously there is always a risk of cheating or coercion.  One solution to this is to only trade with those you trust.

                      Naturally?   What is this, some recapitulation of Rousseau and the Utopians?  Markets are unnatural in extremis.   They must be highly regulated to efficiently serve arbitrary actors.

                      This idea that we should only trade with those we trust…. once again, the shrill voice of Marxian Idealism is heard throughout the land.   Every gasoline pump and grocer’s scales bears a sticker from a regulatory agency.  Nor have markets ever emerged spontaneously:  you cannot point to one such instance.   The city-state emerged to serve the need for markets.  Less idealism and more pragmatism, please.

                      You are missing my point and arguing with yourself. Human interaction based upon coercive force is of course commonplace.  It is not the domain of free markets. The role of coercion in markets is to only allow coercion to suppress coercion.

                      If the Libertarians were serious about their Free Markets, they would in fact sound very much like Progressive Liberals.   They don’t.  How do you propose to deal with Force and Fraud?   Go back to the market after I’ve been sold a pound of flour full of weevils and shoot the clerk?   Your Free Market is utter folly.   It has never existed.  Mankind would not tolerate it.

                      The Libertarians are not serious about either Force or Fraud.   They weep over the problem and that’s all they’ll ever do.  Like the Marxists, all the Libertarians ever do when the reality of human nature is pointed out to them, they say the system hasn’t been properly implemented and the problems would go away if it were.   Tap dancing around the problem of monopoly creation and price fixing and melamine in the milk… when I see a Libertarian back regulation, there will be two moons in the sky.

                      Shells?   Beads?  Cigarettes?   These might once have been substitutes for money but they were immediately replaced when meaningful fiat money was put on offer.   The Libertarians’ hatred of the Federal Reserve system shows their true nature:  you are economic Taliban, intent upon returning the world to a glorious past which never was and never could be.

                      Mises never backed the group.  “All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts.”   Let’s not have any of this crap about what Ludwig von Mises believed about collective action.  Mises was a great hater of the trade union:

                      “No social co-operation under the division of labour is possible when some people or unions of people are granted the right to prevent by violence and the threat of violence other people from working. When enforced by violence, a strike in vital branches of production or a general strike are tantamount to a revolutionary destruction of society.s pointless without direction.”

                      In summary, the Libertarian, when pushed to it, will admit to problems the Liberals point out to him.   The Libertarian solution will never admit to collective action.

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                    • James, I just wanted you to know that your comment didn’t fall on deaf ears. I’m going to get the book.

                      Still, I’m curious what conclusions can be drawn from it at the level of the current discussion, since even if iterations of the Prisoner’s Dilemma may lead to cooperative action, it’s also possible it may not. (Or am I wrong to think so?) And I think the issue here, from a liberal’s pov, is whether the iterated prisoner’s dilemma still permits, or even gives rise to, incentives to reject cooperative mutually beneficial actions (as Roger has defined them) in favor of intrusions into markets for purely self-interested reasons. That is, even if we run the iterated prisoner’s dilemma, do we necessarily arrive at stable, decentralized, spontaneously cooperative exchanges, or do we get the possibility (inevitablility?) that some actors will try to create a stable advantage over other participants by using extra-market forces?

                       

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                    • The Libertarian solution will never admit to collective action.

                      Blaise, it would behoove you to actually know what you’re talking about before you make such categorical statements.

                      First, the set of solutions to collective action problems does not consist only of top-down mandated solutions, but also includes bottom-up voluntary solutions. There’s a universe of literature on such solutions and the ways in which they are often superior to top-down solutions (primarily because they often can take advantage of local knowledge and cultural understandings in ways that top-down solutions often cannot).

                      Second, most libertarians are not–as Roger is trying to point out to you–absolute anarchists, so in cases where a solution to the collective action problem really is necessary and a bottom-up solution cannot be achieved, most libertarians will agree to a top-down solution.  As the most straightforward example, most libertarians see the state as being legitimate at least for collective defense purposes.

                      It’s always interesting to debate liberarianism with people who actually understand it, but it’s a perpetual drag to keep trying to explain it to people who think their comic-book version sense of libertarianism is actually a complete and accurate understanding.

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                    • ,

                      If the Libertarians were serious about their Free Markets, they would in fact sound very much like Progressive Liberals.   They don’t.  How do you propose to deal with Force and Fraud?

                      Blaise, this definitively demonstrates that you know less than nothing about libertarianism.  Seriously, I’m not sure you could have come up with anything that more obviously demonstrates that you simply don’t know what you’re talking about at all.k

                      Libertarians believe force and fraud will be less common in markets than you do–ok, perhaps they’re empirically wrong about the frequency, but they do agree that it will happen sometimes. So what do they propose as the solution when it does happen?

                      Goverment, you ninny. If you aren’t even familiar with libertarians’ general acceptance of the night watchman state, then you don’t know the first thing about libertarianism.

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                    • Hi Blaise, 

                      I value the chance to learn and clarify my views with you. I really do want to understand where the root of our disagreement lies. 

                      To make the discussion more manageable, I will divide it into bite size chunks. 

                      I do not disagree with you on the creative nature of free enterprise and assure you this is not how I view markets. As someone who made a living identifying unmet consumer needs and creating innovative solutions to address this, I most assuredly see this as key to profits.  But that is what I mean by problem solving.  In this case it is creating something new. The dynamic of free enterprise drives a process of continuous exploration in how to solve new problems as well as solve old problems better. 

                      Companies compete non coercively to cooperate better with consumers in solving their problems.

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                    • Blaise, it would behoove you to actually know what you’re talking about before you make such categorical statements.

                      It would behove you to stay out of this conversation if you’re not ready to at least go as far as Roger and make some effort to address the issues I’ve raised.

                      First, the set of solutions to collective action problems does not consist only of top-down mandated solutions, but also includes bottom-up voluntary solutions. There’s a universe of literature on such solutions and the ways in which they are often superior to top-down solutions (primarily because they often can take advantage of local knowledge and cultural understandings in ways that top-down solutions often cannot).

                      Then put forward some evidence.   The Libertarians have hardly proven themselves reasonable about necessary regulation such as the SEC, the Federal Reserve, CFTC and every other regulatory body.   Denial is not rebuttal.

                      Second, most libertarians are not–as Roger is trying to point out to you–absolute anarchists, so in cases where a solution to the collective action problem really is necessary and a bottom-up solution cannot be achieved, most libertarians will agree to a top-down solution. 

                      I have already said Libertarians acknowledge the problem.   They just don’t have a solution.

                      As the most straightforward example, most libertarians see the state as being legitimate at least for collective defense purposes.

                      But not for economic regulation.

                      It’s always interesting to debate liberarianism with people who actually understand it, but it’s a perpetual drag to keep trying to explain it to people who think their comic-book version sense of libertarianism is actually a complete and accurate understanding.

                      Oh bullshit.  The discussion always gets to this point every time I’ve tried to get to any understanding of what Libertarians believe.

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                    • Blaise,

                      Bite two…

                      By natural I am referring to the evolved propensity to reciprocate and trade. I would add that we also have evolved dispositions on property ownership.  This is well documented in anthropology and with children. My point is that the social conventions of free enterprise are built up on these inborn human propensities. Matt Riddley has some interesting chapters on this in his Rational Optimist book. Yes markets are unnatural, complex, cultural systems built up over base of natural propensities to truck, barter and trade. I have no common ground with either Rousseau or the various utopians

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                    • ,

                      I think you’ll enjoy the book.  The chapter on reciprocal cooperation in trench warfare in WWI is, from a generalist’s perspective, most fascinating.

                      I’m curious what conclusions can be drawn from it at the level of the current discussion, since even if iterations of the Prisoner’s Dilemma may lead to cooperative action, it’s also possible it may not. (Or am I wrong to think so?)

                      No, you’re not wrong. Think of the Hatfields and the McCoys–a cycle of mutual defection can develop, and can be extremely hard to break out of. The lesson is not that cooperation always will develop, but that we can be assured that cycles of mutual defection will not always develop, and that in fact cycles of mutual cooperation are generally more likely, given repeated interactions with the same persons, the ability to recognize defection, and the ability to exit out of non-cooperative relationships. And this (usually) positive outcome is driven by individual self-interest–after all, who has any self-interest in letting themselves get taken advantage of repeatedly?

                      But, no, it’s not a claim that anarchy will be perfectly peaceful.  Because defection still dominates in one-time interactions, there’s room to prosper by being a roving defector–that is, if you can operate in a market where you don’t need to rely on repeat customers, you may be able to prosper from screwing people over.  E.g., folks who drive around during the summer offering to paint houses, using cheap paint, then moving on to a new community where their reputation hasn’t preceded them. From what little I understand, this may be the structure that underlies the reported prevalence of unscrupulous repair/renovation contractors in big cities.

                      There are anarchic solutions (or at least semi-solutions) to these problems. One is, don’t trust strangers, or at least don’t trust them with much, until they’ve proven their reliability (and effectively aren’t strangers anymore).  Another is sources like Angie’s List, TripAdvisor, UrbanSpoon, etc., to find what customers who do have experience with a particular supplier have to say. But that’s not to say authoritative (government) responses are never legitimate.

                      And I think the issue here, from a liberal’s pov, is whether the iterated prisoner’s dilemma still permits, or even gives rise to, incentives to reject cooperative mutually beneficial actions (as Roger has defined them) in favor of intrusions into markets for purely self-interested reasons. …the possibility (inevitablility?) that some actors will try to create a stable advantage over other participants by using extra-market forces?

                      Oh, hell, yeah! If the anarchic system doesn’t allow you to profitably defect on others, you can certainly try to set up a system that enables you to defect profitably. In game theoretic terms, if the payoff structure of the game isn’t to your liking, you can always try to change the game.  That doesn’t undermine the social value of the original game, though. It just means that it can’t determine everyone’s ultimate preferences and choices.

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                    • Blaise,

                      Bite three is on trust and fraud….

                      As James mentions we are hitting on two themes. One is the cultural evolutionary, bottoms up formation of markets. They did not spring forth from some bureaucrat or Solon’s mind. They aggregated up from individual interactions supported by various good ideas that were later adopted as institutional solutions or protocols. Yes the bureaucrats and Solons contributed ideas as well. It developed up though via trial and error and a process which can be described as cultural evolution. 

                      I am not arguing that just because they evolved bottoms up over the millennia that they must remain anarchist. One solution that we discovered is indeed the role of cops that specialize in policing the system. Another is courts. Another is regulatory agencies that establish common weights and measures and labels. 

                      I think food labels and various stickers are awesome ideas. I think central rules and enforcement agencies against cheating and fraud are awesome ideas. Why do you assume we don’t?

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                    • BP, here’s my take on it. You’re looking at systems and identifying the areas where governmental intrusions are necessary. And you’re basing this claim, for the most part, on empirical evidence. Roger and James are looking at systems from another perspective: in what ways is the exercise of mutually beneficial exchanges sufficient to sustain economic systems. And they base this on empirical evidence as well as a normative ideal (one which you share, btw). At the end of it, you both may end up agreeing on the exact same set of regulations and permissions, but you’ve arrived at in different ways.

                      The libertarian is looking at regulation as having to meet a necessary condition to have merit; the liberal is looking at looking at deregulation as having to meet a necessary condition. So, the difference between the two views, and the dispute you’re having with Roger in this thread, reduces to – at least, so it seems to me – where the burden of proof is placed.

                       

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                    • ,

                      You don’t really want to go there, because I guarandamntee you I know considerably more about this than you do.  Something called dissertation research, professional interest, and all that jazz.  Your understandings are very simplistic, on the order of the average person who’s heard a thing or two about subject X, but hasn’t really studied it.  And yet you want to write as though you are really competently authoritative.  Your arrogance is way out ahead of your knowledge-base here.

                      It would behove you to stay out of this conversation if you’re not ready to at least go as far as Roger and make some effort to address the issues I’ve raised.

                      I have, in fact, but I’ll offer a reciprocal “fuck you.” It would behoove you not to tell me to stay out of the conversation if you’re not ready to understand how I have in fact addressed some of the issues you’ve raised.

                      [JH] First, the set of solutions to collective action problems does not consist only of top-down mandated solutions, but also includes bottom-up voluntary solutions. There’s a universe of literature on such solutions and the ways in which they are often superior to top-down solutions (primarily because they often can take advantage of local knowledge and cultural understandings in ways that top-down solutions often cannot).

                      [BP] Then put forward some evidence.   The Libertarians have hardly proven themselves reasonable about necessary regulation such as the SEC, the Federal Reserve, CFTC and every other regulatory body.   Denial is not rebuttal.

                      It turns out there’s a whole world beyond the SEC, etc.  Try reading some of the work of Elinor Ostrom and Jimmy Walker. If I started linking I’d send this blog into moderation before I could even touch a tenth of the relevant literature.  There are examples of locally organized fishing cooperatives, grazing land cooperatives, collectively managed irrigation systems, and collectively managed forests, that have successfully sustained the participants livelihoods and the health of the resource for hundreds of years…in many cases right up until a government came in and established new rules that broke down the old system and resulted in the quick over-use of the resource.  E.g., in Spain, fishing cooperatives (cofradias) have sustainably fished well-defined fisheries for centuries, but now EU rules are opening up those fisheries to industrial scale fishing that is going to destroy the local livelihoods and destroy the sustainibility of their fisheries.

                      You continually play a cheap game with your examples.  You say, “if libertarians can’t show how this particular example can work without government, then libertarianism is useless.” That’s wholly illogical, as you are trying to make a specific example a general proof. You’ll find damn few libertarians, and none here at the League, in my experience, who will say that government is never necessary–and yet you keep pretending that’s the claim.  Quit being so dishonest. Certainly feel free to talk about libertarianism’s limits, which is really the topic I find most interesting, but to pretend a particular limit on a system is a disproof of the whole system is incredibly sloppy thinking.

                      [JH] Second, most libertarians are not–as Roger is trying to point out to you–absolute anarchists, so in cases where a solution to the collective action problem really is necessary and a bottom-up solution cannot be achieved, most libertarians will agree to a top-down solution. 

                      [BP] I have already said Libertarians acknowledge the problem.   They just don’t have a solution.

                      Again, that’s because you’re not paying attention.  You’re too eager to tell libertarians what their beliefs are, rather than let them tell you what they believe. If a libertarian accepts a top-down solution in a particular case, then that’s the solution. You want to say that lack of a purely voluntary solution in each and every case means libertarians don’t have a solution, but that’s putting your requirements on libertarianism, not libertarians’ requirements.  Our approach is, “voluntary bottom-up solutions whenever possible, and top-down mandatory solutions only when necessary.” So when a top-down solution is in fact necessary, it is the libertarians’ solution.

                      You saying it’s not a libertarian solution doesn’t make it so. If you want to judge us by false standards–if you want to say that we must engage in a foolish consistency or we have utterly failed–then you’re only going to reveal how deeply fundamentally ignorant you are about libertarian thought.

                      [JH] As the most straightforward example, most libertarians see the state as being legitimate at least for collective defense purposes.

                      [BP] But not for economic regulation.

                      True, in most cases, but not all cases. Your simply deadwrong–in fact I’ll say stupidly wrong–if you think libertarians don’t believe in regulation of fraud. There’s a strong strain of caveat emptor, to be sure, but it’s not absolute, and–to return to the night watchman state–most libertarians believe in laws against fraud.  Now as a matter of fact, most of the regulations you advocate seem to me (although I could be mistaken, I recognize) about preventing fraud. In principle there’s not that much of a gap between you and libertarians there.  There may very well be a gap in the analysis of whether and what kind of regulation is required in a specific case, and there we can have reasonable debate if you’re willing to be reasonable.  That is, if you’d stop telling libertarians, “you don’t ever believe in any regulation at any time,”–which is a stupidly false claim–and say, “here’s why a voluntary solution won’t suffice in the particular case,” then you could actually have a non-belligerent discussion with libertarians, and you might even be able to persuade some of them.  But as long as you begin with demonstrably false claims about what they believe, libertarians have no reason to take you seriously–you not only haven’t demonstrated your bona fides up front, you’ve demonstrated that in important ways you don’t know your ass from your elbow.

                      Oh bullshit.  The discussion always gets to this point every time I’ve tried to get to any understanding of what Libertarians believe.

                      Try asking us what we believe instead of beginning by telling us what you believe. It makes a world of difference. If you begin by acting like an ass, you can hardly justify being frustrated that people respond to you as though you’re an ass.  In other words, try on some fucking intellectual humility once upon a time.  You don’t actually know everything, and one thing you just don’t really know is what libertarians believe.  I know this because you repeatedly make statements about libertarianism that every libertarian who responds to you rejects!

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                    • And under the light of the double moons….

                      How can things that preceded money and coins be substitutes for money?

                      But again you seem to think I am against central currency and the Fed. I am not. If you want to argue with Ron Paul please email him. I think a common currency of the realm is a great idea. Much better than beads or shells or sacks of wheat. Money and the Federal Reserve are institutional solutions to enable free markets.

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                    • Inventors make technology but they seldom operate in a vacuum.  Corporations make money, not as individuals, but as groups.   He who invents a better mousetrap will not have people beating a path to his door.   He will hire in salesmen to beat a path to the marketplace, people who will convince others to stock his wares.

                      There is no inborn propensity to reciprocate.  That’s Marxist talk, the worst sort of idle fantasy.  You know better.  Until someone is convinced he needs something, for any reason at all, the inventor invents in vain.

                      The marketplace is not a bottom-up proposition.  Do you know the Taliban in Afghanistan’s primary tactic where the government has occupied a town is to close down the marketplace?   The marketplace is the linchpin of every society.  Marketplaces require money and security both.

                      Dragging Solon into this debate has doomed your argument entirely, for Solon was a fine economist, reforming the markets of Athens, encouraging merchants to settle in Athens.   He dragged Athens out of a dismal backwater, making of it a great regional power by top-down tactics.  There was no trial and error phase:  the great powers of the area were already coining money and creating marketplaces.   Solon was merely playing catch-up.

                      Roger, the Libertarians are all over the map on regulation and the mandate for such regulation.   Because the Libertarians have so consistently and stupidly opposed any top-down solutions, proposing voluntary substitutes in their stead, I must conclude the Libertarians are really just the mirror image of the Marxists.  For Marx was no enemy of capitalism, he understood it rather well.  It was his idiotic belief that man would operate in his own best interests which doomed him and his followers.

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                    • ,

                      So, the difference between the two views, and the dispute you’re having with Roger in this thread, reduces to – at least, so it seems to me – where the burden of proof is placed.

                      At first glance, at least, I think that’s a good point.  And it’s obviously legitimate for people to disagree on that issue.

                      And of course that suggests that the most effective way to argue is to adopt–purely for the sake of argument–the other’s assumption about the burden of proof, and to show (if possible) how from their perspective your own preferred outcome is logically suggested. (Not claiming I always, or even frequently, manage that, of course.)

                       

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                    • And on to the power of groups…

                      To the extent that Mises and I disagree with trade unions it is that we believe they can only influence above market rates via coercive monopoly. I laid my case out really clearly on this last month, and honestly found those that dissented with me universally backed down. They either retreated for the hills or got bored of me. Maybe both.

                      In other words, we believe coercive monopolies are wrong and do more harm than good, so we reject them. I have clearly expressed my desire in keeping an open mind on the topic though. Any other liberals care to enter in on this topic again? Btw James is more on your side of the argument than mine in this case, I believe.

                      I did not say though that Mises was a fan of collective action or unions. Of course only individuals think. The point of Human Action — Mises’ tome on free enterprise — is about the power of human cooperation. Indeed Human Cooperation was his alternative name for the book. Libertarians believe in the power of what I call constructive, competitive cooperation. Free enterprise and science are two separate domains of constructive, competitive cooperation.

                      Libertarians are not fans of coercive cooperation or competition. We are strong advocates of voluntary cooperation and constructive competition.

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                    • ,

                      Btw James is more on your side of the argument than mine in this case, I believe.

                      Somewhere in the middle, I believe. My ideal world stands on your side, but I think I am somewhat more pessimistic about the ideal conditions being met than you are, so I’m inclined toward granting legitimacy to a rather larger degree of regulation than are you (although I think we are in agreement on viewing proposals on a case-by-case basis?).

                      Libertarians are not fans of coercive cooperation or competition. We are strong advocates of voluntary cooperation and constructive competition.

                      May I add the caveat that “not being a fan of,” doesn’t mean, “always, inevitably, and absolutely opposed to.” That’s where I think Blaise keeps going wrong in his claims about libertarianism–he mistakes deep skepticism for absolute and invariable opposition.  It’s a common misunderstanding of libertarianism (and there are some libertarians who take the absolute and invariable stance, I suppose), but to me it is one of those signals that reveals a fundamental misunderstanding. Rather like Howard Dean stating that Job is a book in the New Testament revealed his fundamental lack of knowledge about the Bible.

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                    • @Stillwater:  I see a continuum of regulation, forming a parabola in the first quadrant.   I posit two Zeroes on the X axis.   The first is a command economy, where marketplaces disappear.  The second is a libertarian paradise, an oligopoly where economic power has replaced the rule of law.

                      At the zenith of this parabola, markets are both internally and externally regulated.   These Night Watchmen need to be awake during market hours.

                      As for you, Hanley, I live and breathe in the real marketplaces.  Billions of dollars flow through my code every day.   Dissertation research is all fine and good, as far as it goes.

                      Those who can, do.   Those that can’t, write papers.  Do not merely drop names on me.  Make your point, if you can.  All that paper writing has not produced a worthy debater in you.

                      The ancient fishing cooperatives so depleted the stocks of codfish that government regulation and treaties were required.   Even now, overfishing is a huge problem.  The Roman aqueducts fell into ruin without central authority.  The Aztecs and Maya once practiced irrigation on a massive scale:  with the downfall of their empires and central authority, it all came to a dead end and the hugely destructive paradigm of slash-and-burn began again.  Once again, you can live in your libertarian paradise if you’d like.  It’s a dead end, a zero on the X axis.

                      I have previously said Libertarians, like Marxists, are all over the map.  Do not now take umbrage if I take Ron Paul or Mises or Alan Greenspan or the Libertarian Party Platform as descriptive of your views, for I have read them.  I have been studying it for over a year and will not be schoolmarmed by a collection of doctrinaires.   Be not merely good, be good for something.

                      I have a long history of disputing with Marxists, going back many decades.   I find in the Libertarians every one of their rhetorical deficiencies.  You may not have it both ways:  when I point out these deficiencies, you are either individuals, with your own beliefs, or you are Libertarians, for thus you would style yourselves.

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                    • And finally,

                      Blaise writes: “Yes, such proof is required.   No working market ever emerged without external regulation, no matter how much internal regulation was applied.   Both are necessary… ”

                      Let me limit my response to articles that I have read this week on the topic.

                      The first is on markets that emerged in the frontier territories during the 19C American west.
                      Here is the link…

                      http://mises.org/journals/jls/3_1/3_1_2.pdf

                      I am not espousing their opinions on libertarianisms, just citing them for evidence on how markets and regulation formed from the bottom up.

                      The next one is from a fascinating paper on Euvoluntary Exchange and Rawls. In it the author explains how markets spontaneously emerged in German POW camps. See page 16.

                      http://michaelmunger.com/euvoldiff.pdf

                      Finally, your take on Solon actually makes my point as per Wikipedia, though he was a real person, our knowledge of his works “only survive in fragments. They appear to feature interpolations by later authors and it is possible that fragments have been wrongly attributed to him…. Ancient authors such as Herodotus and Plutarch are the main source of information, yet they wrote about Solon long after his death, at a time when history was by no means an academic discipline. Fourth century orators, such as Aeschines, tended to attribute to Solon all the laws of their time…. For some scholars, our “knowledge” of Solon and his times is largely a fictive construct…”

                      In other words, Solon is a real person who is was subsequently used as a fiction to attribute the various evolved cultural institutions of his era. In your defense though, this is a contentious issue. Again though, neither James nor I deny the possibility of top down influence in free markets. We just point out the widespread yet under appreciated nature of bottoms up forces.

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                    • The second is a libertarian paradise, an oligopoly where economic power has replaced the rule of law.

                      Again, Blaise, you demonstrate your ignorance about libertarianism (I prefer to think it’s ignorance, rather than the alternative, dishonesty). You may fairly argue that the libertarian world would in fact result in an oligopoly, but you can’t fairly argue that this result would be the libertarian paradise.

                      As for you, Hanley, I live and breathe in the real marketplaces.  Billions of dollars flow through my code every day.   Dissertation research is all fine and good, as far as it goes.

                      Yes, Blaise, only you live in the real world. What hubris!  All I do is make daily decisions about where to buy food for my children, which doctor to take them to, what mechanic to take my car to, which heating/AC/plumbing guy to call, which insurance company to purchase policies from, which internet service provider and phone company to sign a contract with, which outfitter to use when I go canoeing in the north country, which bookseller to make my purchases from, etc. etc.  Are those not real marketplaces?  There’s not a person participating in the League who doesn’t live and breathe in real marketplaces.

                      Additionally, I spend a considerable time studying the professional economics literature, which rigorously studies real marketplaces, rather than only viewing them only casually and intuitively, as most people, do.  Oh, sure, you’ll likely reject them because they never traded on the futures market, and they don’t write code for transactions…because nothing anybody else studies or does could possibly provide any insight into the world, only what Blaise P. does has any intellectual value. But out here in the world outside your arrogantly self-centered mindspace there’s a lot of sources of knowledge about these things, and some of us make a real effort to learn from others, not having the hubris to think only our own personal experiences matter. I don’t know everything, nor do I pretend to, but I do try to keep up with the research.

                      The ancient fishing cooperatives so depleted the stocks of codfish that government regulation and treaties were required.

                      You are dead wrong in the case that I am talking about.  The Spanish fishing cooperatives have continued strong into the modern day, and it is EU regulations that are threatening the commons.  In Switzerland there are cooperative grazing lands that have been maintained since the 1300s and communal irrigation systems in Spain that have been maintained since the 1400s.*  You want real world experience? That’s 6 and 7 centuries of evidence undermining your claims.

                      And let me go back to iterated games again, which you seem to think exist only in the laboratory. I’ve got a simple question or two for you.  Do you repeatedly patronize or do business with someone who has cheated you? When you do business with someone who has treated you fairly, are you more likely to do business with them again?

                      It’s a simple question–as simple as the one you repeatedly asked another Leaguer the other day, but couldn’t get him to answer.

                      _________________
                      Ostrom. Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press. p. 6

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                    • I have the cure for Elinor Ostrom’s idealism about the tragedy of the commons:  the dynamics of well-digging, something I’ve done in several places with my own money.

                      Here are the dynamics of the equation:

                      Two factors limit the production of cattle:  grazing and water.  Combine these two with the distance cattle can travel from water to grazing areas.   We thus arrive at a radius, centred on the well.

                      Varying as the square of distance along that radius, we can determine how much grazing is possible.  As we approach the well itself, dust and mud take over completely.   At the end of the daily cattle commute, we come to the optimal grazing.   Beyond that radius, grazing is a practical impossibility.  Overload that dynamical equation with too many cattle and the grazing area cannot regrow fast enough to sustain the cattle.

                      When we put in a well, the village chief and his elders demanded control of access to that well, for these excellent reasons, in accordance with Ostrom’s points about the commons.   If a commons is regulated, it isn’t a commons anymore.   Someone has to have control of it, enough control to say “you can graze, the others can’t”.  It’s not a bottom-up proposition any more than the King’s Forest was a commons.

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                    • I have the cure for Elinor Ostrom’s idealism about the tragedy of the commons: the dynamics of well-digging,

                      Idealism?  Why in the world do you insist on going to such lengths to promote your ignorance? Idealism is the last word that would be applied to Ostrom’s work by anyone with even the remotest passing familiarity with it. You, obviously, know nothing of her work, haven’t bothered to read it, and can’t be bothered to read it.  Even though she is considered the world’s leading expert–bar none–on commons problems, you think you’re competent to simply dismiss her work despite having no familiarity with it.  Why not just wear a blinking neon sign that says, “Ignoramus and proud of it?”

                      When we put in a well, the village chief and his elders demanded control of access to that well, for these excellent reasons, in accordance with Ostrom’s points about the commons. 

                      Yeah, that can happen, but it doesn’t invariably happen. Read her book–that is, read any of the several award winning books on the research that earned her a Nobel prize–and you’ll see that it’s not all as simplistic as you think.

                      If a commons is regulated, it isn’t a commons anymore.   Someone has to have control of it, enough control to say “you can graze, the others can’t”.  It’s not a bottom-up proposition any more than the King’s Forest was a commons.

                      Wrong. Technically wrong. First, the commons can be governed bottom up. That’s what Ostrom’s work is about. And it’s not just her work–she has research associates literally all around the world, on every continent, who have repeatedly provided examples of bottom up governance of commons. Hell, I’ve provided three examples for you already–Spanish cofradias, irrigation systems, and Swiss grazing commons. Almost nothing could be more flatly empirically false than to claim that successful bottom up management of commons isn’t possible, given that the very thing has been repeatedly demonstrated in the real world.

                      Second, regulating the commons does not mean it’s not a commons anymore.  There’s a technical definition for common pool resources: Exclusion of users is difficult and subtractibility of value (the units of the resource I use are not available to you to use) is high. Neither of those disappear in a regulated commons; subtractibility remains, and exclusion of defectors is managed on an on-going basis, but remains an ever-present difficulty, and the presence of defectors remains an ever-present risk.

                      Look, if there’s any one area where I can flatter myself I have some kind of expertise, it’s precisely this stuff.  And I don’t really like simply pulling rank and saying, “I am omnisciently godlike and know better than you.”  If someone, like Stillwater did, asked a serious question I’d respond in a nice and thoughtful way.  But when you start talking down to me about something I know one hell of a lot better than you, then I don’t think you’ve earned that, and I’m more than willing to return nastiness for nastiness.  But on this issue you truly are seriously out of your depth.  And there’s not a damn thing wrong with that, since nobody’s an expertise on everything.  But there is something definitely wrong with pretending to superior knowledge in an area to which you haven’t devoted any serious study at all.

                      Hell, I’d be happy to provide you with a syllabus of readings on cooperative behavior in game theory and on common pool resources.  You’d have no trouble devouring it, and within two weeks you’d know more than 95% of educated folks about this stuff.  But right now, you simply don’t know it.  At all. (Then again, that never seems to stop you–weren’t you the guy who told our resident physicist that he didn’t know enough physics?)

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                    • You do not make decisions about where you buy food.  Your options are limited to the available sources and I dare say you don’t live out of your garden.  Your choice of doctors only betrays your inability to treat yourself:  you are completely at their mercy and the limits of their competence.  As for the rest of the specialists in your little list, hopefully a few regulatory laws apply to them or you will get corn oil poured into your crankcase and the coolant tank of your air conditioner.

                      As for your choice of books, any fathead can write an economics textbook.   Some of us find the real marketplaces are not congruent with the conclusions of the fatheads with their notions of voluntary compliance.  My conclusions are based on the facts at hand, the palpable failures of markets to regulate themselves, the trusting idiots who followed the nostrums of those fatheads and deregulated marketplaces.

                      But it wasn’t always so.  For about a year, I worked for an interesting character who would take advantage of investor stupidity.  Here is how he worked the angle.

                      He would approach an investor, take apart his trade book, looking at where that investor had made and lost money.   Working backward from those profits and losses, he would overlay those trades onto the historical data and look for “reasons” why the profitable trades worked and the losing trades didn’t.   It was all a fallacious pantload of post hoc ergo propter hoc, but never mind all that.   Here’s where it got interesting.

                      He would then construct trading models, well, more properly he’d have me construct the models which could duplicate the successful trades and avoid the losing trades.   Not hard, really.   Of course, they had no predictive value but they did approach something resembling the investor’s strategy.   Curiously, some of them worked!   But we both know these models were utterly fallacious.

                      I have already pointed out in previous comments how a working cooperative can be maintained through the application of dynamical equations determining carrying capacity.   The commons as envisioned by the Libertarians does not exist:  as varies risk, so must vary regulation.  The Spanish fishing fleet is horribly inefficent and will not abide by even sensible regulations.

                      http://www.guardian.co.uk/environment/2012/jan/05/spanish-government-derail-eu-fishing-reform

                      I do business with untrustworthy scoundrels all the time:  I repeat myself I engineer schemes to routinely avoid paying health care claims.  I really only care if I get paid.  I submit my invoice, they pay it, if they don’t then I have to pull up stakes.  But not until.

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                    • “In summary, the Libertarian, when pushed to it, will admit to problems the Liberals point out to him.”

                      When pushed to it, Libertarians will also admit to problems such as “unintended consequences”, “boomerang effects”, “iatrogenic diseases”, and “perverse incentives”. This tends to distinguish them further from Liberals.

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                    • The idealism enters the picture when Ostrom contends resource management does not conform to a common model.   Every such model can be subsumed into a dynamical equation in accordance with the Gibbs Laws of thermodynamics.

                      I will consider the source when accused of being an Ignoramus.  I work from the facts and derive trends from them, seeking optimality, not the other way around, except as outlined in my previous comment, with the explanation of what that is so.  I find all other approaches to be mere predictions of the past.

                      A regulated commons is no longer a commons.   End of story.   As for games theory, I will not be lectured on how rules are derived by someone who seriously believes markets are organized from the ground up.   I might as well stop believing in the law of gravity.  I have never heard such a stupid thing in all my life.

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                    • Blaise and all,

                      I’ve never published any papers. I have however designed real world financial products for much of my prior career. I am now retired.

                      These products had to survive in the real world. And never did I seek to cheat or defraud anyone, nor coercively force anyone to buy the product or coerce competitors out of the market. Nor would I have done so.

                      Blaise, it almost sounds like you were involved in defrauding people and are rationalizing it now as something we all do. Not that I am accusing you of this, it’s just what you appear to have just written. sorry if I misread it.

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                    • When pushed to it, Libertarians will also admit to problems such as

                      “unintended consequences”  Ah, there’s a fine excuse.  Deregulation didn’t set the banks up to become hugely and secretly interdependent, creating the Too Big to Fail problem.

                      “boomerang effects”   Excellent.  We all understand predicted disasters never come true, especially when they’ve only happened a dozen times before.

                      “iatrogenic diseases”  Those wicked old regulators, always tryin’ to keep a good man down.

                      “perverse incentives”   Yes, perversity is its own reward, especially rewarding when it’s coated in a nice chocolatey layer of glossy marketing brochures so the muppets won’t know they’re just about to ingest a chihuahua turd specially prepared for their consumption and the trader’s enrichment.

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                    • This will be my last response, because this has become mind-numbingly stupid.

                      You do not make decisions about where you buy food.  Your options are limited to the available sources and I dare say you don’t live out of your garden.

                      The whole world is a condition of us being limited to available sources, and yet we make decisions each day as we choose among them.  To deny that choosing between available alternatives is making choices is to abuse language and logic beyond what any reasonable person can bear.

                      I can choose McDonalds over the locally owned cafe, or I can do the reverse.  It depends on which one gives me the greatest value. I can choose to buy my vegetables at my local mass market grocery store, or I can find a local co-op that sells only politically correct organics produce.  Or I can buy from the local farmer’s market.  Or if I want to put in the effort, I can make my own garden.  I can buy my pork chops from the grocery store, or I can go to the great little meat locker out in the country, or I could join my friend who invests in co-ownership of a hog each year, and receives his share–already butchered–in the fall.  These are real choices, real decisions, and it’s mind-boggling that someone would try to pretend they’re not.

                      Your choice of doctors only betrays your inability to treat yourself:  you are completely at their mercy and the limits of their competence.

                      My choice of mechanics also betrays my inability to repair my own car. In fact my choice of auto manufacturers only betrays my inability to build my own car from scratch–mining the ore and smelting the metal, drilling for oil (making my own tools to do so!) and refining it into plastics, etc.  But what does that mean? All it means is that markets develop to meet our needs for things we can’t, or would prefer not to, do for ourselves.  So your argument here works out to a claim that the existence of markets proves we don’t have choice?  Now we’re in wingnut territory.  And of course I’m at the mercy of my doctor’s competence–that’s precisely why I make a careful choice about my doctor, and would not stick with an incompetent one as soon as I learned s/he was incompetent.  Not having that information up-front is irrelevant–choice and decision-making is all about how we respond to the information we do have (there’s a whole decision-making literature, too).

                      As for the rest of the specialists in your little list, hopefully a few regulatory laws apply to them or you will get corn oil poured into your crankcase and the coolant tank of your air conditioner.

                      Really, Blaise?  What advantage would my mechanic gain from pouring corn oil in my crankcase?  I’m sincerely curious.  Because this guy wants my repeat business, and he wants me to tell other people good things about him, rather than me telling other people how bad he is. We’re talking about a guy who loaned my wife his own car while he was making a major repair on our car and I was working in another town 400 miles away. That guy is going to pour cornoil in my crankcase unless there’s a law against it?

                      As for your choice of books, any fathead can write an economics textbook.   Some of us find the real marketplaces are not congruent with the conclusions of the fatheads with their notions of voluntary compliance.  My conclusions are based on the facts at hand, the palpable failures of markets to regulate themselves, the trusting idiots who followed the nostrums of those fatheads and deregulated marketplaces.

                      I always love a little bit of anti-intellectualism.  If you’d bother to read some economics texts, you’d recognize that you mischaracterized approximately 98% of them.

                      HBut it wasn’t always so.  For about a year, I worked for an interesting character who would take advantage of investor stupidity. …..He would then construct trading models [with] no predictive value ….

                      Yes, there’s a literature on that, too.  If you haven’t read it, you might find A Random Walk Down Wall Street interesting.  It’s quite critical of such models.  So what have you shown here? Not all markets are perfect.  Congrats, you’ve just demonstrated something that 99.9% of economists already know, and something that most libertarians also agree to. That’s a big yawn, but it’s apparently very exciting to you.

                      The commons as envisioned by the Libertarians does not exist:  as varies risk, so must vary regulation.  The Spanish fishing fleet is horribly inefficent and will not abide by even sensible regulations,

                      Again, you don’t actually know what libertarians think, so quit pretending you do.  Regulation does not mean only top-down, as you seem to think.  The commons as envisioned by libertarians is a commons that is managed bottom-up, if and when possible. I’ve already demonstrated that in some cases it’s possible–700 years of evidence, eh?  You’ve produced nothing to counter that except your personal experience.

                      http://www.guardian.co.uk/environment/2012/jan/05/spanish-government-derail-eu-fishing-reform

                      You might want to read your own source more carefully. To wit: “Discards are a perverse result of the current EU fishing policy:”  Not traditional cofradia fishing policy, but the new top-down EU policy.

                      I do business with untrustworthy scoundrels all the time:  I repeat myself I engineer schemes to routinely avoid paying health care claims.

                      Mmmhmm, health care market. That’s a fucked up one, given that the purchasers most often aren’t the users.  So the ones who get screwed aren’t the ones who get to make the purchase decisions, so they can’t effectively respond.  Of course that’s not the structure that would have developed in the absence of some bad government regulations that created perverse incentives to link health insurance to employment, so it’s not exactly a strong argument for your position.

                      I really only care if I get paid.  I submit my invoice, they pay it, if they don’t then I have to pull up stakes.  But not until.

                      And there we go, you demonstrate my point by your own behavior.  Of course you don’t pull up stakes before they don’t pay.  All the research on the iterated prisoner’s dilemma perfectly supports the idea that you don’t leave an iterated series as long as the other side is cooperating, but only after the other side defects. Your behavior is demonstrated to be rational by formal theory, computer simulation, and laboratory experiments.  It’s also precisely what Adam Smith suggested happens in a market.

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                    • The idealism enters the picture when Ostrom contends resource management does not conform to a common model.   Every such model can be subsumed into a dynamical equation in accordance with the Gibbs Laws of thermodynamics.

                      No, it can’t.

                      Or rather, it can, and it will work predictably well as long as whatever model you’re using continues to act like a closed system.  Which most open systems do, for some delta of time.

                      The issue is what happens when the delta of time gets larger.  It doesn’t even need to get arbitrarily large, just sufficiently large.  And then the model blows apart and fails.

                      You probably should read Ostrom, Blaise.

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                    • I’ve never published any papers. I have however designed real world financial products for much of my prior career. I am now retired.

                      These products had to survive in the real world. And never did I seek to cheat or defraud anyone, nor coercively force anyone to buy the product or coerce competitors out of the market. Nor would I have done so.

                      I’m sure you’re an honest man.   You’re an equally honest debater.   Your honesty or intentions are not up for debate.   Nor, I hope, are mine.   I never defrauded anyone.   I should let you know I quit working for this creep, resigned on principle, refused to be party to any more of his quackery.   There’s an awful lot of it in AI these days, pat answers in search of complicated questions.   I call these guys Astrologers.   I won’t do any more government consulting, especially not defence contracting.   Lots of lying going on in that part of the consulting sea.

                      I’ve grown intensely angry with my long involvement with the health care and insurance industries.  I’ve done things, as Roy Batty said, questionable things.   Not proud of it, and I’m hoping a bit of honesty on this front will make me look less like a pollyanna and more like someone who knows why this stuff is wrong and why more regulation is necessary.

                      The design of financial products, especially unregulated synthetic risk instruments, concerns me greatly.  I believe they concern you, too.

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                    • All,

                      I have been tempted to write two front page submissions for the LoOG. They both deal with the differences in world views between libertarians and progressives. The first deals with the perception that the world can be positive sum as opposed to zero sum. Libertarians see how value can be created in a positive sum process, where progressives tend to see everything through the lens of win lose. These lead to totally different outlooks.

                      The second is what I call The Big Kahuna myth. This one is that progressives (and many conservatives) see complex systems as the necessary product of top down, rational design. Libertarians acknowledge the possibility of top down, but also recognize the possibility, and often have a preference for, bottoms up design. Again this leads to different world views and outlooks.

                      I think Blaise just hit the Zero Sum and Big Kahuna myths in a single comment.

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                    • The idealism enters the picture when Ostrom contends resource management does not conform to a common model.   Every such model can be subsumed into a dynamical equation in accordance with the Gibbs Laws of thermodynamics.

                      Each system has distinct sets of rules, which vary from place to place. Rules must conform to local cultural understandings or they will be rejected. This doesn’t mean any of those rule-sets violate the Gibbs Law–obviously they couldn’t.  But if you think there is a single uniform set of rules that conform to that constraint, then you’re operating from theory, not from facts as you like to claim.  A major effort of Ostrom and her colleagues has been to find commonalities among disparate sets of rules, to find out which conditions must be satisfied to make bottom-up CPR management systems work.  It’s absolutely not a case of anything goes.  But those conditions can be satisfied by differently structured rules, within bounds.  E.g., there is commonality, and the major research effort is to specify that commonality so that we can do a better job of designing CPR management systems.  But the common model contains a vast range of individual variations.  Those are the facts, as determined through observations from a much larger set of CPR management systems than either you or I have observed.

                      A regulated commons is no longer a commons.  

                      You can’t change technical definitions by fiat.  This is like saying an accelerator with a governor is no longer an accelerator.

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                    • Write them, Roger, if you’re willing to take the heat.

                      My two cents of input is this. In talking about whether markets are created from the bottom up or top down, there is some of both going on. Obviously top-down rules are an effort to shape markets.  But note that regulations–the top down aspect–are always reactions to what is happening from the bottom-up.  And each regulation creates a new set of bottom-up responses that continually shape and re-shape markets.

                      For my part, I wonder what top-down power Blaise thinks created the markets that brought high value sea shells from the coast to the mountains in pre-Columbian America.  And what top-down power created the market for running shoes, that I have stupidly thought was created by the ingenuity–technical and business–of a coach and his athlete out in Oregon.

                      What top-down power makes a market in fast food?  That is, who decides that we will all want fast food and ordains that someone will supply it to us?  Or is it just that the top-down power moves in after the market develops and puts some constraints on it (some good, some bad)?

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                    • Wrong.  Gibbs’ Laws consider the transients from an equilibrium over time, including every effect of entropy.

                      And don’t fucking condescend to me:  I’ve read Ostrom, her principles have guided every sensible improvement scheme for many decades.  She’s standard reading in nonprofit circles.

                      I don’t dig wells and put in solar panels for the good of my health.   I do such things where I can demonstrate a payoff to my donors, considering the consequences and what will come of these schemes once the Do-Gooders have left the scene.   Someone has to own this stuff, someone has to maintain it and put the distilled water in the batteries and clean off the solar panels and rinse out the filters on the well head and believe in that system.   Without that buy-in, it’s not worth doing.

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                    • My two cents of input is this. In talking about whether markets are created from the bottom up or top down, there is some of both going on. Obviously top-down rules are an effort to shape markets.  But note that regulations–the top down aspect–are always reactions to what is happening from the bottom-up.  And each regulation creates a new set of bottom-up responses that continually shape and re-shape markets.

                      Well, yes, all true as far as it goes.   But marketplaces are created by market makers, entities such as CME or NYMEX, fora for a regulated market in risk.  They don’t just emerge full-grown from the brow of Zeus.   Sure, there’s lots of pushback from the bottom, but the rules are made by the market makers themselves, for it is their needs most clearly served.

                      For my part, I wonder what top-down power Blaise thinks created the markets that brought high value sea shells from the coast to the mountains in pre-Columbian America. 

                      Perceived value.   Why don’t we have a market in shells now?   I suppose we do, a few collectors.

                      And what top-down power created the market for running shoes, that I have stupidly thought was created by the ingenuity–technical and business–of a coach and his athlete out in Oregon.

                      Again, perceived value.  How many people actually run in those running shoes?   SUVs, tablets, hell, I’m old enough when carrying a ten-banger calculator was a status symbol.

                      What top-down power makes a market in fast food?  That is, who decides that we will all want fast food and ordains that someone will supply it to us?  Or is it just that the top-down power moves in after the market develops and puts some constraints on it (some good, some bad)?

                      Again, perceived value.   Cheap, greasy snack food, the street vendors selling churrascos plied the streets of Rome and Athens they do today.  Do you know most Roman dwellings didn’t have kitchens?   Fire hazards.

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                    • Wrong.  Gibbs’ Laws consider the transients from an equilibrium over time, including every effect of entropy.

                      And that means the real-world differences in CPR management structures don’t exist? Or what?  Seriously, just how in the world does this contradict anything I said?

                      don’t condescend to me

                      Oh, get over yourself. You condescend to everybody so you can damn well suck it up when people condescend to you. Hell, you’ve been nothing but condescending on this thread, so you’ve got no grounds for whining.

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                    • And that means the real-world differences in CPR management structures don’t exist? Or what?  Seriously, just how in the world does this contradict anything I said?

                      If you want to maintain a CPR resource, it must be managed in accordance with some equations of equilibrium.  There are no other viable constructs.   End of story.

                      Oh, get over yourself. You condescend to everybody so you can damn well suck it up when people condescend to you. Hell, you’ve been nothing but condescending on this thread, so you’ve got no grounds for whining.

                      I will not be told to read Elinor Ostrom.  I have.  I find it all quite interesting but completely untenable in the context of changing or improving anything.   For without some effective management schemes, unsupplied by Ostrom or anyone else who goes in for that hooey, the whole thing goes tits-up, for my well-drilling has made serious changes to the communities where I put them in.  In short,  a resource in demand requires a regulator to dispense access to that resource.   No two ways about it, such structures are always top down.

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                    • If you want to maintain a CPR resource, it must be managed in accordance with some equations of equilibrium.  There are no other viable constructs.   End of story.

                      Nobody argued differently.  The fact that there are different specific rules that can satisfy the common requirements doesn’t one of those systems is not in equilibrium.  We’re talking about exactly the same thing, but you seem to think that only you understand the necessity of equilibrium in the system.  But if you think that it requires identical rules across each CPR to create equilibrium then you are clearly operating out of (bad) theory and not on facts.  Ostrom presents the facts–how system A in Peru has managed for hundreds of years with a particular set of rules, and how system B in China has managed for hundreds of years with a different set of rules, but how certain management requirements are met by those different approaches.

                      Again, we’re talking about systems that have been sustained across many generations, in some cases for hundreds of years.  And the particularized rules are different.  If you deny that different rule sets can work, you’re denying reality. (But of course nobody is arguing that just any set of rules can work.)

                      For without some effective management schemes, unsupplied by Ostrom or anyone else who goes in for that hooey, the whole thing goes tits-up,

                      Eh, yeah, that’s exactly what Ostrom would say (although I can’t quite imagine her saying “tts up”).  You’re reiterating the primary assumption of her research, which then goes on to demonstrate what type of management systems work and what kind don’t.

                      for my well-drilling has made serious changes to the communities where I put them in.

                      Which is cool, seriously.

                      In short,  a resource in demand requires a regulator to dispense access to that resource.  

                      Yes, nobody is disagreeing with that, only about what the nature of that regulator can or must be.

                      No two ways about it, such structures are always top down.

                      The empirical evidence demonstrates that you are wrong. You keep making a claim that is absolutely and irrefutably rebutted by the real world empirical evidence, including the examples I’ve already given you. You can wave your hands at them, but you can’t make a 700 year old grazing co-operative disappear.

                      Heck, my wife and I were part of a child-care co-op (satisfyingly, in the year I was studying with Ostrom). It began in the ’60s, idealized by hippy-dippy types, but is now a 40-year old childcare center, totally managed by the participants, from the selection of new members to setting of fees, to creation of rules and overseeing of the students we employed to assist us.  My wife and I also own some property in Montana that has a property owner’s association to manage the common area and make collective decisions about management of roads, weed control, etc. The thing was originally organized top-down by a real estate company, until they sold off all the lots; now it’s bottom-up.  We elect a president, etc., etc., but they are simply the chief organizers, and have almost no independent authority beyond bringing proposals to the membership for a vote.  You might also consider agricultural co-ops. Or the cooperative societies of the Hutterites.

                      In short, your emphatic claim is emphatically rebutted by the empirical evidence.

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                    • All CPR resources have common characteristics:   they are finite, or regrow at a finite rate.   Someone harvests them, at which point they become private property.   Someone manages them on behalf of all such harvesters or they will quickly be exhausted.   It doesn’t matter which CPR we’re discussing, they all obey the same dynamics.

                      Elinor Ostrom believes neither the state nor the market can effectively regulate a CPR.   Fricking Page 1 of Governing the Commons.

                      This is wrong.  Who shall punish the violator, if not the State?  The Texas Regulators, riding down these scofflaws?   Did I say scofflaws?   Which laws would be broken under a bottom-up regulatory scheme?   Oh, that’s right, we wouldn’t have any laws, just customs.  Maybe we could just shun someone, like the Amish.

                      All rules require enforcement or they are moot. Even in the case of your property owners’ association, how would you go about getting someone to tow that dead car off his front lawn?   Riddle me that.  Aren’t the Libertarians all about contract enforcement?   Who will enforce them, if not the State?

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                    • I see a continuum of regulation, forming a parabola in the first quadrant.   I posit two Zeroes on the X axis.   The first is a command economy, where marketplaces disappear.  The second is a libertarian paradise, an oligopoly where economic power has replaced the rule of law.

                      And I see an added dimension, a z-axis representing the degree to which regulators are captured by small and organized interests.  In this instance, the zenith of your parabola is merely a local maximum, and decreasing regulation, although it may move us away from the apex of your literally two-dimensional model, in fact gets us closer to the global maximum of the 3-D solid representation of economic desirability.

                      Of course, even my improved model avails itself of a highly-suspect linear relationship between regulatory capture and economic desirability.  But it was Hayek, not Keynes, who pointed out this intrinsic failure of Chicago-style economics.

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                    • And I see an added dimension, a z-axis representing the degree to which regulators are captured by small and organized interests.  In this instance, the zenith of your parabola is merely a local maximum, and decreasing regulation, although it may move us away from the apex of your literally two-dimensional model, in fact gets us closer to the global maximum of the 3-D solid representation of economic desirability.

                      The Y axis is regulation and its enforcement:  I’ve already established an unenforced or selectively enforced law is moot.   Your capture phenomenon only represents some point along that parabola, pushed off the zenith by some capture mechanism, the net effect of which is a reduction in regulation.

                      Of course, even my improved model avails itself of a highly-suspect linear relationship between regulatory capture and economic desirability.  But it was Hayek, not Keynes, who pointed out this intrinsic failure of Chicago-style economics.

                      I’m not sure what Hayek’s critique of the Chicago School has to do with this parabola, beyond the obvious placement of a Straw Man Keynes on the Statist Zero and an equally ridiculous Hayek on the Libertarian Zero.   Neither man can be reduced to such caricatures by anyone seriously discussing the problem.  Hayek deplored the Statist Zero, yes he did, and rightly so.   But Keynes has come in for a great deal of simplistic slagging from people, well, let me rephrase that, we must make a difference between Keynes, a man of his time, and what has been made of Keynes in the mean time.

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                    • If the y-axis is regulation AND enforcement, then you’re already not dealing with a very clean model, and it would be very unlikely that my model’s added distinction wouldn’t more accurately represent the phenomenon in question.  But any apparent outlying specks on the graph paper are best explained by the fact that we’re just masturbating at this point.

                      I hope you don’t take me for one of these freeper dipshits who hears “Keynes” and thinks “Stalin’s five-year-plans.”  I brought up Hayek because he’d be deeply skeptical of your graph to begin with. I also wanted to reiterate that Keynesianism has broadly accepted the validity of neoclassical methodology, and is a favorite tool neoliberal financial oligarchs.

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                    • All CPR resources have common characteristics:   they are finite, or regrow at a finite rate.

                      Yeah, but essentially all–or very nearly all–resources are finite, so that’s not actually a very good definition.  More critical to the definition are the two characteristics I mentioned above, high subtractibility of value (the units you use I can’t use) and difficulty of exclusion.  In fact those two dimensions, level of subtractibility (high/low) and ease/difficulty of exclusion of people from the resource define the four essential types of goods: private, public, toll, and common pool.  Which isn’t to say the finitude/finite regrowth rate isn’t important–if that wasn’t a constraint then the high subtractibility and difficulty of exclusion wouldn’t matter.

                      Someone harvests them, at which point they become private property.  

                      Ostrom would be very quick to note that we have to distinguish between the stock and the flow (of units of that stock).  The flow gets privatized, the stock does not.  Although in many cases one available solution to the CPR is to privatize it, a solution that’s available when exclusion becomes easier.  E.g., when barbed wire made it possible to inexpensively enclose grazing land in the western U.S., transforming a CPR into a private good by changing the technical nature of it (that is, by switching exclusion from difficult to easy).  But still, when we’re talking about a true CPR, the stock is what remains to replenish the flow, and only the units in the flow get privatized (and then they can only be privatized because of their high subtractibility, which distinguishes CPRs from purely public goods, like national defense, in which my use of it does not subtract from your use of it, or toll goods, like bridges or movie theaters, where my use does not diminish yours, up to the point at which crowding occurs).

                      Someone manages them on behalf of all such harvesters or they will quickly be exhausted.   It doesn’t matter which CPR we’re discussing, they all obey the same dynamics.

                      Elinor Ostrom believes neither the state nor the market can effectively regulate a CPR.   Fricking Page 1 of Governing the Commons.

                      Dude, show me where I used the term “market” in relation to the commons! I’m repeatedly talking about bottom-up rather than top-down organization. Ostrom’s absolutely right, so what she focuses on is neither the market nor the state, but self-governing organizations. Here’s a quote from Ostrom’s colleague, Michael McGinnis.

                      Governance does need not be restricted to the activities of formal organizations designed as part of a “government” [with] authorities having “power over” subjects or citizens, but instead can be realized in the form of citizens jointly exerting “power with” others, as they jointly endeavor to solve common problems or realize shared goals.[i]

                      E.g., bottom up, voluntary organizations. And that bit about government not managing them well? Yes, that’s her critique of your favored top-down approach.
                      Let me tip my hand here.  I know Lin Ostrom. As in I’m on a first name basis with her, had a post-doc fellowship at her research institute (http://www.indiana.edu/~workshop/people/priorvisitors.php), and my wife worked for her during that year. I attended her seminars, was lead author for a chapter in one of her books, have had numerous conversations with her, formal, informal, small group, large group, and have been to her house. As in I know the whole trajectory of her career, from her husband Vince Ostrom’s early work with Charles Tiebout (if you know Tiebout sorting models you know what I mean) and his work on water systems in California, to her groundbreaking studies on consolidation in metropolitan police forces, to her groundbreaking and Nobel winning research in institutional analysis and design.   As in her approach is the dominant foundation of my own thought as a political scientist.
                      I’m more than happy to discuss it, but if you think you’re going to teach me about it, you’ve got a long road of prepping ahead of you.

                      This is wrong.  Who shall punish the violator, if not the State? 

                      Stop claiming you’ve read her work. You haven’t, or you wouldn’t be asking that question. Here’s an example, from a collective irrigation system for terrace farming (rice paddies). Everyone in the community takes their turn managing the system, shunting water to and from the different individually owned plots.  I’m a jerk, and I skip my turn to sleep in, or I allocate too much water to myself.  This is noticed (monitoring is one of those absolutely critical conditions that must be met), and you, in your turn managing the system, don’t allocate to me the water I’m allowed.  Others do so also, until I am suitably chastened.  There is no state involvement.  Here’s another example, from the Spanish cofradias (which I learned about from a Spanish grad student at Ostrom’s institute). The fishermen ensure nobody takes more than their fair share of the catch (which would risk overfishing of the resource) by meeting early in the morning at the docks and then again in the evening. If y’all come in the morning and I’m already gone, or if I come in later than everyone else in the evening, y’all assume I’m catching too many fish. And meeting at the same time allows everyone to observer everyone’s catch, as well as their equipment.  What’s the punishment for defectors? Social ostracization, which in small closely knit communities, can be damned effective.

                      Seriously, if you’d actually read Ostrom you’d know this.  Now unfortunately this stuff doesn’t scale up real far, so when we’re talking about global commons, or even very large local commons, like, say Lake Michigan, these solutions will tend to fail. They’re not a panacea, and won’t resolve all commons problems.  But they exist in innumerable examples, so the claim that solutions have to be top down is refuted by an overwhelming amount of examples.

                      Which laws would be broken under a bottom-up regulatory scheme?   Oh, that’s right, we wouldn’t have any laws, just customs. 

                      Again, you obviously haven’t actually read Ostrom in any depth or breadth at all.  She talks about institutions all the time, and explains repeatedly the very real constraining power of customs. I think this aspect of her work is so important that it’s lecture number one in my American Gov’t class each term–the importance of institutions, including custom as well as law.  For example, there’s no federal law requiring states to allocate their congressmen by district. Sure, each state has its own law about that, but those could easily be changed if the custom wasn’t so damn strong that most people think of that as “the American way.”

                      Maybe we could just shun someone, like the Amish.

                      Or like the cofradias. Yes, in the right institutional settings, it works damn well.

                      All rules require enforcement or they are moot.

                      Yes, that’s one of Ostrom’s principles in her “Grammar of Institutions.”  But you’re implying that the enforcement has to be by a Leviathan, and Ostrom would kindly (much more kindly than me; she’s tremendously nice) disagree.

                      Even in the case of your property owners’ association, how would you go about getting someone to tow that dead car off his front lawn?   Riddle me that.  Aren’t the Libertarians all about contract enforcement?   Who will enforce them, if not the State?

                      Well, since this is ranchette’s in Montana, I’m not sure front lawns are relevant, but sure, that’s a fair question.  If I don’t ensure the noxious weeds are eliminated from my property the elected officials can dun me the cost of weed removal. But that’s not a rule that was put in place by a top-down authority–it was proposed by the elected officials and approved in a referendum.  OK, so what if I don’t pay?  Then, and only then, might they bring in the power of the state.  Sure, it’s there, and it’s not irrelevant, but in the 20 years or so this organization’s been in existence there’s been no need for that recourse. Now in our case that ultimate recourse is there just because that’s how our system is designed.  But in many of these other systems, that recourse is not there…and yet those systems continue to work fine. In fact for many of them the biggest issue with the state has been keeping it from interfering with their long-standing functional organizations on the misguided theory that what has been working for generations can’t possibly work.

                      If anyone’s interested in a fairly simple explanation of this stuff, here’s a short essay I wrote for my environmental politics students (the doc titled “Common Pool Resources and Environmental Problems”). It’s straightforward Ostrom stuff.


                      [i]. McGinnis, Michael D. 2010. “An Introduction to IAD and the Language of the Ostrom Workshiop: A Simple Guide to a Complex Framework for the Analysis of Institutions and their Development.” Manuscript prepared for the comment by participants in the Institutional Analysis and Development Symposium, University of Colorado, Denver, April 9-10, 2010. http://php.indiana.edu/~mcginnis/iad_guid.pdf.  Accessed September 29, 2010. [Unfortunately, this page is no longer accessible, but I have it cited in one of my writings.]

                       

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                    • If the y-axis is regulation AND enforcement, then you’re already not dealing with a very clean model

                      Amen. That’s a conflation of two related but very separable things, whose correlation is often fairly weak.

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                    • Blaise,

                      Respectfully jumping back in, I think you take your keen insights and apply them too broadly. You are right in many ways about market research. Consumers usually have absolutely no clue what problems they want solved. Good market research involves digging in to what consumers value, even though they cannot even begin to articulate or picture it. From the insights you creatively try to fashion various “solutions” and feed it back to them. Most have absolutely zero potential. Some concepts and products take off.

                      But this is not a top down process. It is an explorative process. It is more like trying to find feedback loops that work. You try thousands of concepts and whittle it down to those that meet everyone’s needs, the consumers, the various special interests in the company, the stockholders, etc. You search for that narrow window of products where all major involved parties gain.

                      ” All these nostrums about responding to your clients’ needs?   Hogwash.  They don’t know what they need and they want you to tell them. ”

                      But the point is that you cannot just tell them what you want either. I wanted to sell all kinds of good products, but found there was a very, very narrow range of what they would actually buy. Yes, my team led the development process, but we always knew and respected that it was Consumer Driven Innovation. The consumer was always sovereign, and though we directed the process, we always knew who decided whether it succeeded or failed.

                      There is another way that the system is decentralized though. That is that in any industry without entrance barriers, there are many companies exploring the space of what the sovereign consumer will buy. In other words, we are competing to solve consumer needs, and it isn’t even enough to meet the customers need. We need to meet it better than every competitor.

                      Coke and Pepsi are corporate juggernauts, but the competitive dynamic within the beverage industry is still decentralized.

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                  • Perceived value.  

                    Exactly, Blaise.  Gold star for you. (Oh, yeah, I can double down on the condescending, as long as you want to impose a double standard on that.)

                    Now for what “perceived value” means.  All perceptions are subjective, so we’re right back to subjective value, which is bottom up.  So there was no top-down making of the pre-Columbian market in shells, and no top-down making of the market in running shoes.  Someone made an offer of a good, and someone else either accepted or rejected, and hence a market was created or was not.

                    Have you ever done market research? It’s a multi-billion dollar business in trying to figure out what the hell consumers will actually be willing to buy.  And still most new product launches fail.

                    So, “top down” market creators?  Sure, in the specific markets you’re talking about.  But perhaps you might lift your head from your coding long enough to notice that there’s no NYMEX in running shoes, or jewelry, or flower arrangements, or kitchen utensils, or the vast majority of market sectors in which we participate in.  Sure, I’ll listen to you explain NYMEX to me–I’ve got every reason to think you may understand it better than I.  An in return–as a reciprocal exchange–I’ll explain to you the market in socks and underwear.

                    (Gee, condescension is particularly fun when you know it’s going to irritate an inveterate condescender!  Now, can we cut out the bullshit?)

                     

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                    • Where’s the market for shells today?   Or the market for platform shoes, quite the rage for a while.  Maybe they’ll make a comeback.   My old man said never throw out a tie, it will always come back in fashion in a few years.

                      Though running shoes aren’t traded on NYMEX, you can enter the options market on Nike stock.   I shouldn’t have to tell you such things.   Am I condescending to you?

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                    • Blaise,

                      You haven’t told me anything in this comment.  So that particular market for shells disappeared with the disappearance of the culture that created it?  So fishing what?  Gee, and people no longer buy platform shoes?  They also aren’t clamoring for leisure suits and pet rocks, but if anything that just demonstrates my point about how bottom-up those markets are–customers stopped wanting those things so suppliers aren’t stepping up to offer them.  But who knows, maybe they’ll make a comeback. We can’t predict those things, which is a key point in understanding markets.

                      Of course you can enter the options market on Nike stock?  So?  In fact you didn’t need to tell me that, but more importantly, it doesn’t actually demonstrate that my point is wrong.  Yes, some authoritative figure needs to set up that market, but if there wasn’t bottom-up demand for it, either nobody would bother to meet that demand or whoever did would fail.

                      The top-down only creates an institutional setting for people to engage in market activities, it doesn’t create the actual market, which is the interplay of supply and demand. There’s a subtle distinction there that I think you fail to recognize.

                      Condescend away, boyo, if that’s how you want to play that game.  I’m up to the challenge.

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                    • Hanley, you need more market psychology in your scheme of things.   Think birds of paradise:  a beautiful bird hanging upside down from a tree branch, his wings spread, screaming.  The drab females sit impassively, watching the males display.   They choose the prettiest screecher.

                      That’s the buying public.  The market isn’t shells or platform shoes.   It’s status and a host of other intangibles, hopefully culminating in some furtive assignation with a willin’ female or male or whatever cet obscur objet du désir happens to be.

                      The market for shells didn’t disappear with those cultures.  Once those tricksy Frenchmen appeared with bags full of glass beads, the fashions changed.   Back in England, the Hudson’s Bay company started producing the now-famous point blanket for the beaver trade.   Beaver pelts?   Once beaver hats went out of fashion, so did the beaver trade.

                      Every year, fashion week descends upon Paris and New York.   The buyers arrive, the tents go up and the stylists and fitters and make-up artistes furiously apply war paint to the models.   The music starts, the fashions make their way down the runway.   Within a few months, those colours and fabrics and styles will begin to influence clothing lines all over the world.   Oh, you might not see Gaultier’s influence directly, but it’s everywhere.  If you don’t see it, you’re not looking.

                      It’s top down in fashion.   It’s top down in every other decision made by the buying public.   Marketing research is mostly crap.  Want to make people buy your shit?  Work on your company, make your company better.   All these nostrums about responding to your clients’ needs?   Hogwash.  They don’t know what they need and they want you to tell them.   Go to the accountants and the salespeople and the returns department, they know what makes a company profitable and unprofitable.   The rest of the company has some vague ideas about what goes on, those groups actually book and make the money and deal with the rest of the company’s failures.

                      Even where things appear to be bottom-up, case in point, open source software, it’s top-down.  Linus Torvalds is Linux.  He controls the kernel.   Even Google in all its majestic power is now bringing Starship Android into orbit around Planet Penguin again.  Having forked Linux for a while, Google now see the wisdom of getting back on the road of righteousness.

                      Supply and demand, my ass.   You create the demand, then supply the need you’ve just created.   That, dude, is the route to riches.   Go with the Focus Group approach and your stuff will end up in the bargain bin.  Nothing worth doing in life is the product of consensus.  It’s just a polite way of saying Groupthink.

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                    • Supply and demand, my ass.   You create the demand, then supply the need you’ve just created.

                      Yes, very shallow people think that’s true.  But you’ve leaped over the whole problem, which is how do you create demand?  You think people can just snap their fingers and suddenly people will demand what they want?  That’s idiocy.  Some people are obviously better at figuring out what will appeal to people than are others, but they still have to figure out what will appeal to people–the designer can’t make people find it appealing just because he wants them to.  And that’s why the majority of all product launches fail, not because they followed the focus group approach, but because it’s always and forever a goddam crap shoot in trying to predict what will grab the public’s fancy.

                      I don’t think you understand much about marketing.  Hell, when a beer company (I believe it was Miller) has a $400 million ad campaign and their market share doesn’t rise a bit, it’s pretty damn clear that shaping consumer demand isn’t as simple a command and control operation as you want to pretend.

                      And you’ve forgotten that while it may not be hard to persuade someone to try a product once, nothing will make them repeat customers unless they actually like it. And the most successful businesses aren’t built on one-off purchases, but on repeat customers.  You can’t market mass numbers of people into repeatedly buying a product they actually don’t like.

                      Your arguments are getting weaker and weaker.  It’s clear that working in the futures market and writing code for the health insurance industry doesn’t necessarily lead to a real understanding of the functioning of markets, and certainly not of economics in general (which, of course, isn’t just about markets).

                      I’m bored now.  You can’t even imagine how many times I’ve had this conversation with college sophomores who’ve discovered the shocking truth that businesses are trying to influence their preferences…zomygod!  And consumers are being totally manipulated into buying things they don’t need or really want!  Not them, of course. They understand the game, but others. Yeah, everyone else is an unwitting tool being manipulated by unscrupulous businessmen, but not you and the sophomores…you’re so much more perceptive and smart than everyone else.  Fuckin’ hubris and arrogance, and a really nasty level of condescension toward people whose lives, interests, and desires you don’t know shit about.  That’s what really irritates me.

                       

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                • Okay, Roger. Let me ask some targeted questions, then:

                  1) Should an “Is my ankle broken” routine diagnostic be considered “routine care”?

                  2) Is $5000 a “too small” threshhold for “go to your insurance”?

                  3) How often do you want the catastrophic plans to get tapped? (asking this because it helps set the basis…)

                  4) I assume that for any “reasonable” medical problem, people have to make up the difference between what their hsa has (aka regular and expected bills…) and where the insurance kicks in. It works like a deductible.

                  5) Can we all agree that needing to take out a second mortgage for a broken ankle is probably a bad thing, in a “this is bad for our economy and Americans” sort of way?

                  6) If we set the catastrophic insurance at $5000, and that means a usage rate of 1 in 5 years, we’re actually assessing people approximately $16,000 over the course of twenty years (taking that $1000 is a reasonable HSA amount for routine care)… is that reasonable??

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                  • Hi kimmi,

                    I think you missed a few of my earlier comments considering the volume of posts accumulating here.

                    I am fine with the voluntary part of the routine care market having whatever deductible the consumer wants. The choice is theirs. I like high deductible policies, but value your preference for comprehensive care with a low deductible.

                    I believe this addresses all your concerns on HSAs for routine care.

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          • Except we have something that does work. It’s called Medicare and Medicaid. It’s cheaper, gets better outcomes, and is growing more slowly than private insurance is. Why make poor people have a middleman in the form of an HSA instead of just directly paying for their care?

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              • I can think of an immediate explanation for that without trying very hard.  Which the author actually acknowledges in the article.  And follows up with multiple other articles, such as this one.

                Huge bonus for writing sanely about the science, I’ll totally give him that.

                However, if chronic underfunding of Medicaid is producing suboptimal results, it’s not entirely clear why he thinks scrapping Medicaid and replacing it with direct cash assistance is an improvement over actually funding MedicaidThis post is an attempt, but it’s more of an argument against a particular policy that is attempting to cover the cap than a rigorous refutation of the possibility of funding Medicaid properly.

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                • Yup. Of course simply saying tomorrow, “OK, everyone can get Medicare for this premium amount” would be a disaster. But, a full on reform of Medicare to get it ready for Medicare-for-All is possible. And a lot less pie-in-the-sky than the dreamworld where sick people are rational actors as they search on Amazon.com to compare prices on heart valves.

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                • Scott, I would think fraud is part of the cost of doing business.  The solution is not to do business, but that’s no answer.

                  Here was my laugh of the day, from the Forbes essay:

                  While these facts hardly disqualify Gruber from researching the issue of clinical outcomes for Medicaid patients, it’s fair to say that a literature survey that consists of four outcome studies, three of which were penned by the future architect of a massive expansion of Medicaid, is not necessarily representative of the broader literature on Medicaid and clinical outcomes.

                  Looking at both sides of the same side.

                  Honorable mention:

                  “This is why the conversation about Medicaid is so frustrating. First critics deny Medicaid the funds it needs. Then they blame Medicaid when it doesn’t perform up to standards. Then they suggest replacing the program with a more “flexible” or private alternative that won’t actually improve access overall and might even limit it further.”—Jonathan Cohn, LiberalPerson

                  Well, duh.  “Funding Medicaid [or any freebie] properly” is always the riff.

                  But as Avik Roy points out:

                  It would seem that this cohort assumes that there is an unlimited supply of rich people’s money that we can tax, in order to spend money on favored programs like Medicaid. However, as Margaret Thatcher once put it, “The problem with socialism is that eventually you run out of other people’s money.”

                   

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          • Roger, uncompensated care provided in America currently adds up to only $40.7 billion annually or about 3 percent of our total health care spending, according to Reason Hit & Run.

            http://reason.com/blog/2012/03/29/some-questions-on-obamacares-compassion

            If true, the problem is Obama & the statists changing the entire structure for what amounts to $40B, which could be got elsewhere [if already not being accounted for via writeoffs, grants, etc.].

            As Justice Kennedy said the other day:

            JUSTICE KENNEDY: But the reason, the reason this is concerning, is because it requires the individual to do an affirmative act. In the law of torts our tradition, our law, has been that you don’t have the duty to rescue someone if that person is in danger. The blind man is walking in front of a car and you do not have a duty to stop him absent some relation between you. And there is some severe moral criticisms of that rule, but that’s generally the rule.

            And here the government is saying that the Federal Government has a duty to tell the individual citizen that it must act, and that is different from what we have in previous cases and that changes the relationship of the Federal Government to the individual in the very fundamental way.

            And that’s what’s going on here, not the wonkage of how to get health care to the needy.

            And hopefully, this means Justice Kennedy is going to vote against changing the relationship between the individual and government.  It’s been alleged he’s first and foremost a libertarian, and this goes to the heart of libertarianism.

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            • Tom,
              I agree completely, that is why my first comment is that Obamacare is what I would pass if I wanted to destroy health insurance and health care. I hope they do throw it out.

              I do believe the market for health care in this country is FUBAR. Obamacare would make it More FUBAR. I believe we need to begin experimenting with better systems that lead to more competition, more liberty and more choice and more accountability for cost containment.

              What would you recommend?

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              • I like state solutions.  I for one have been fine with Romneycare from the first, under federalism.  The liberal state of Massachusetts wanted something socialized, Romney gave it to them.  Consensus, good governance.  If it works, keep it; if it doesn’t, mend it or end it, buyer’s choice.

                I dunno if I’d have been in favor of it for my own state.  But I don’t want it for the nat’l gov’t and I read enough of the 2700 pages of Obamacare to know that the Sec of HHS was being given far too much power and discretion.  It is bad law.

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                    • Why is a mandate from officials I largely have no hand in electing full of more liberty (a state legislature) any different from a mandate from federal officials (national legislature)?

                      But to turn it around, why should a citizen of the United States be denied certain benefits of a basic function (health care) because they happen to have the bad luck to live in a crappy state?

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                    • Costa Rica has a 2-tier system, no surprise.  CS Monitor:

                       

                      Lower labor costs and fewer malpractice suits keep the prices down here. In Costa Rica’s private system, a teeth-cleaning might run $40 and a general check-up costs $50.

                      Medical bargains

                      More extensive surgeries? A facelift averages $2,800 to $3,200 in Costa Rica, compared to $7,000 to $9,000 in the United States. A knee replacement may cost $11,000 in Costa Rica, but can be as much as $45,000 in the United States.

                      But there’s another arm of the country’s medical system – the public system – which is relied upon by a majority of the population. While celebrated by Costa Ricans for “universal access,” it’s often criticized for long wait times and delays in treatment.

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                    • Tom and Jesse,

                      I figure that after we screw up health care here, that I will just handle emergencies here and go to Costa Rica for affordable care. Plane fare becomes irrelevant compared to the savings. A lot of my relatives in San Diego go to Tiajuana for dental and Rx.

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                    • why should a citizen of the United States be denied certain benefits of a basic function… because they happen to have the bad luck to live in a crappy state?

                      Apparently, you have no idea of how far that extends.
                      Effectively, federal law extends to the line of sight of a federal judge.
                      On the other side of the wall from him, there is no federal law.

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                    • Jesse:

                      The fed gov is a gov limited by the US constitution while the states are limited by their constitutions.  The difference is that the fed gov is more limited in its authority than state govs are. This is basic civics 101 which some liberals have a hard time grasping.

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                    • I wish I had a nickel for every time someone hauls out that old shibboleth about Constitution and Civics Class, with no more understanding of what legal precedent means in that context than the man in the moon.   I’d be a fucking millionaire.

                      Read Wickard v Filburn.   Not only can the government tell you to buy insurance, it can regulate production and consumption both.   All this sea lawyering about the Constitution, you’d think SCOTUS had never ruled on this sort of thing before.

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                    • Blaise:

                      If only you knew as much about law as you claim to know in so many other areas you might actually be a millionaire.  I read Wickard back in my first year con law class.  Wickard was penalized for growing wheat whereas as Obama care wants to penalize you for not doing something ( buying insurance).  there is It is a big difference b/t action and inaction.  There is also the BS argument about healthcare being so unique that the fed gov can do whatever it wants, blah blah, blah.  If the gov’t can force you to buy insurance then why can’t they force you to buy tofu or a gym membership, as surely these actions make you more healthy?

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                    • Scott, I write AI for health care claims processing.  I know more about the financial side of health care than is good for anyone.    As for what I’m worth, I’ll tell you straight up, I am not a poor man. HIPAA shows the government can regulate health care.

                      It is the sovereign rule of Internet debate that he who resorts to ad-hom in lieu of any facts to rebut his opponent has lost. If you had been awake in law class, you’d have brought up Lopez instead of yapping like some demented Chihuahua dog.

                       

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                    • “Read Wickard v Filburn. Not only can the government tell you to buy insurance, it can regulate production and consumption both. All this sea lawyering about the Constitution, you’d think SCOTUS had never ruled on this sort of thing before.”

                      Wickard is crap and everybody knows it. SCOTUS can deadletter a precedent without explicitly reversing it and for reasons of institutional politics usually does. There’s a good chance that will happen to Wickard here. It’s win-win-win if it does.

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                • Tom,

                  I prefer state solutions as well. That way we could try try more variations, learn from them, benchmark them to each other and tailor them to local values and needs. If I start with that though, the liberals tune us out before we even get started.

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                  • And I have the funny idea that you shouldn’t lose regulatory protections when it comes to your health because you get transferred from Kentucky to Alabama. There should be, at the very least, a basic level of benefits all insurance has to provide. If a state wants to mandate more, fine. But, there shouldn’t be a race to the bottom.

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                    • Jesse, it’s given that there’s going to be holes in any system.

                      There will be holes in a federal system, the big drawback is that they apply everywhere.  If the feds don’t cover your Extremely Rare Syndrome, you’re totally SOL.  There will be holes in different state systems, and there will be holes moving from one state to another.  This will affect those people in those states, proportionately, and those people who are mobile.

                      Whether this is worse or better is a very big “depends“.  I would contest that in this particular case, Roger and Tom have something going for their side: you’ll be able to compare one system to another.

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                    • Jesse,
                      Doesn’t the race to the bottom phrase imply net benefits? In other words isn’t it kind of begging the question?

                      Seriously, the point of state experimentation is that we do not know the ramifications in terms of costs and benefits and complex secondary effects of big systemic changes like this. How do we know we didn’t set the minimum benefits too high and that we collectively regret the cost of the initiative?

                      If a state sets benefits too low, don’t you think they will realize that according to their values and adjust? Won’t the other states act as a shining beacon?

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                    • Patrick/Roger : Again, I believe that as citizens of the United States, you deserve that when you buy health care, there’s a basic bundle of benefits that will be included in that insurance, no matter where you live.

                      I realize that’s statist and all, but oh well. There are basic minimim standards for all sorts of things, like the food you eat and the water you drink that are set at the federal level. I see no reason why health insurance can’t be another one of those things.

                      Because at this point, if all we are is 50 mini-nations who happen to have a common defense force and the same flag, then I say, let’s have a divorce. I’d rather my tax money go to people within my state if we aren’t actually helping each other as a nation.

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                  • I’m used to being shouted down, Roger.  You write for the occasional correspondent of good faith, and for those who are here to learn, not litigate.

                    And occasionally, in a few weeks, you see something you said turn up in the most unlikely of mouths.  ;-)  So it goes.

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            • I don’t think it’s a particularly ridiculous question.  But I don’t think it’s the topic at hand.

              If you want to ask how we implement things, about 90% of the conversations on the blog would disappear, since the odds of us ever implementing anything are very low.

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              • Well, things only become the topic at hand when someone puts them on the table, right?  I’m here too.

                And in a lot of cases, I’d agree that all that matters here is our druthers.  But the context here is the very specific one of a preference to reject a very real, concrete, specific reform in favor of… maybe just being satisfied with settling amongst ourselves what we’d like to see happen in an ideal world – or maybe not.  In that context, for me part of the topic at hand is well to be to make explicit which of those is going on.  And what I think counts.

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                • I get the enemy of the good argument, Michael.

                  It just seems to me that all of the bad consequences of this are rolled up and delivered to 2030.  Which, coincidentally, will be right about when I hope to start thinking about having disposable income again.

                  In any event, I don’t think the mandate is going to stand whether or not it is a good idea.

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      • Well, I’ll dig the Blue phone out from under my bed and call Obama on the hotline. Then Roger will light a fire in his backyard and send smoke signals to the Affiliated-Unaffiliated-Disestablished-Established-Fourth-Reconstituted-Allied-Libertarian tribes. Then the two of us will use the clarity of  the proposed solution to force TVD and Koz into digging the Red Phone out of the back of the liquor cabinet at the Club and call Boehner and Cantor on the party line. There’ll be a quick vetting and then the alternative HCR legislation will fly through the houses and be signed by all the party leaders with much pomp and celebration; while the far left and right partisans and the anarchists all hurtle themselves into the sea in despair (or pique). After that I shall leap astride my platinum Pegasus (his name is Archimedes) and we shall have a leisurely flap up to the Mare Imbrium where I shall enjoy an amicable Thursday evening tea with the Empress of the Moon (she’s sweet on me).

        But seriously, why not chat about what ideal solutions to the healthcare concerns in the comment threads? I checked out back of the League and the barrels of internet ink are still full; there’s plenty of room and it’s not like the GOP is offering any alternative proposals.

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        • Mr. North, it was bad law from the first, cutting out the GOP then wheeling & dealing the Dems, then passing it only through the back door of “reconciliation” after Ben Nelson turned against it and Scott Brown took Teddy Kennedy’s seat.  Throw it out and start over, fresh & clean.

          _________________

          CHIEF JUSTICE ROBERTS: The reality of the passage — I mean, this was a piece of legislation which, there was — had to be a concerted effort to gather enough votes so that it could be passed. And I suspect with a lot of these miscellaneous provisions that Justice Breyer was talking about, that was the price of the vote. Put in the Indian health care provision and I will vote for the other 2700 pages. Put in the Black Lung provision, and I’ll go along with it. That’s why all — many of these provisions, I think, were put in, not because they were unobjectionable. So presumably what Congress would have done is they wouldn’t have been able to put together, cobble together the votes to get it through.

          _________________________

          And likely most importantly:

          JUSTICE KENNEDY: When you say judicial restraint, you are echoing the earlier premise that it increases the judicial power if the judiciary strikes down other provisions of the Act. I suggest to you it might be quite the opposite. We would be exercising the judicial power if one Act was — one provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended. By reason of this Court, we would have a new regime that Congress did not provide for, did not consider. That, it seems to me, can be argued at least to be a more extreme exercise of judicial power than to strike -­ than striking the whole. . . . I just don’t accept the premise.

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          •  …it was bad law from the first, cutting out the GOP then wheeling & dealing the Dems, then passing it only through the back door of “reconciliation” after Ben Nelson turned against it and Scott Brown took Teddy Kennedy’s seat.

            What a convenient sense of history.

            The Republicans made it clear that they would not participate, and intense pressure was placed by Republican leadership (including the threat of loss of committee seats and of primary challenges) to prevent the Republican New England Moderates from taking part of good faith negotiations on the bill.

            And–for those whose history is a little weak–the bill was passed with 60 votes.    Some “tweaks” (mostly related to financing) were made under reconcilliation, but the bill was already law.

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            • That’s not exactly how it went down, sir. The “reconciliation” bill wasn’t one—because of the loss of the Nelson and Kennedy votes, they were stuck with the original Senate bill, which was never intended to be the final one.

              But it doesn’t matter now anyway.  Either the law sticks or it’s bye-bye.  Move on, as they say.

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                • No, you’ve ignored the facts and tried to shout them down.  And “we” is creepy, Elias.  Stand on your own two feet.  You have never acknowledged why the election of Scott Brown was significant, or the defection of Ben Nelson after the Cornhusker Kickback fiasco.  ‘Tis you who ignore the facts, no matter how often you and “yours” try to bury them.

                   

                  And now it’s moot if the Supreme Court tosses this whole misbegotten mess.  And moot even if they don’t, really.

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                    • I don’t see the perfect solution as the aim.
                      I think if we could get the part done that everyone agrees about and get that going, we could work out the other details later.
                      In the meantime, it would provide a data set to work from.

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                    • The problem is quite frankly, there is no big parts that “everybody” agrees about. Because there are divergent opinions in the world and we all can’t throw out parts of what we want to make a nice muddle in the middle because for everybody, there’s certain no-go lines we can’t cross. I’m against full-stop Roger’s plan he put above. I’m sure he’s against full-stop my ideas.

                      I’m sure there are little things we agree on, but the truth is, me and Roger disagree on stuff. That’s fine. That’s why we have elections.

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        • There’s no reason not to talk about it.  No reason at all.  There’s also no reason not to be clear with ourselves whether it’s any more than idle talk; whether we intend to do any of the things necessary to make it more than idle talk; whether we will even commit to wanting what we eventually alight upon to really become policy.  And please don’t infer that I am saying I think I know what these answers are from my not saying that I do the way you inferred that by asking what we’re going to do about this I was saying we shouldn’t be having the conversation.

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  3. “When I think of the millions of people who, unlike myself, would immediately be thrown curbside by a 5-4 majority unable to keep its ideological zeal in-check…”

    Okay so let me get this straight.

    Anyone who thinks that PPACA is not going to accomplish its stated goal of ensuring that everyone has access to healthcare hates you personally and thinks that you should die.

    If the Supreme Court rules that requiring citizens to purchase products from private providers is an un-Constitutional extension of Congressional power, it’s because Republicans hate you personally and think that you should die.

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    • Fact: the conservative movement and the Republican party have done essentially none of the work necessary to pass a health care plan that would cover every American.  They basically have no interest in the concept.  I don’t know if that’s equivalent to hating Elias personally and thinking he should die; but it does betray a certain indifference to the fact that those without insurance live crappier lives.

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      • That is so unfair Dan. Conservatives at think tanks and many prominent R pols pushed the most evil part of the PPACA, the mandate, for a couple decades up until 2009. They clearly thought they had a good idea and advocated for it.

        At least until O was for it and it had a chance of being passed.

        The rest of the R voter base was kind enough to not pay any attention to the issue or what many of the people they voted for were pushing.

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