Yes, I’ve been ignoring this blog.  I apologize.  The dereliction of duty began when I bumped up against a principle of economics:  you can’t spend more time than you actually have.  Someday the Federal Reserve folks will probably figure out how to create new time out of thin air (the result being that the time we already have will be worth less), but for now, time is still limited.

After we bought a mini-farm that requires extensive renovations, I took a full-time contract programming job at BMI to pay for them.  I also took on side programming projects that occupy part of my evenings and weekends.  With little time to spare, I elected to keep the Fat Head blog current and let this one slide for awhile.

While I’ve been out of commission, I hope those of you who are political and economics junkies have been keeping up with The Older Brother’s blog.  When it comes to nutrition science and economics, he and I are sort of like mirror images of each other:  he got me interested in economics – his number one passion — and I got him interested in nutrition science – my number one passion.

Eventually I’ll find the time to keep up on the political and economics news (which I’ve been ignoring) and resuming writing my smart-aleck posts, but in the meantime I thought I’d share an email debate I’ve been waging with one of my liberal pals from Hollywood.  (Yes, I had liberal pals in Hollywood.  The other option was to have no pals.)  He and I used to engage in spontaneous debates now and then when I still lived there, and for some reason he decided to start new rounds via email after I paid a visit in August – even though I’m pretty sure he knows the odds of convincing a 52-year-old dedicated libertarian to convert to socialism are somewhere south of zero.

I’ll post rounds of the debate over the next few weeks … maybe several weeks if he doesn’t give up.  Here’s the first one.  Names have been changed to protect the progressive.  I’ve also edited out some just-between-friends exchanges that have nothing to do with the political and economic debate.


Hey Tom!

Yesterday’s NY TIMES pointed out that since the beginning of the  recession, millions of people have lost their jobs and have therefore  lost their health insurance.

Since you seem to believe the un-insured are not a significant group, I  am wondering what your comment might be.  Do you think market forces will eventually correct this problem (without “Obamacare”)?

Or will you present that tired argument that by allowing insurance  companies to market across state lines, insurance will get magically  affordable? ..Beware that in presenting this tired argument, you will  be ignoring what happened when we allowed retail banks to cross state lines. They all merged into 5, too-big-to-fail banks!!! (Remember  First Chicago? We thought they were huge but they disappeared into Chase).

Or maybe you’re going to say, that through Tort Reform, insurance will  become magically affordable for the unemployed. The idea being that a  50-something couple, getting by on Wal-Mart jobs, will somehow be  enabled to get health insurance (because malpractice awards have been capped).

Indulge me, Tom. I’m dying to hear your answer.




Paul –

Ha, happy to indulge you.

I think health insurance should be disconnected from employment.  My car insurance has nothing to do with my employer.  Neither does my homeowner’s insurance.  The only reason health insurance became attached to employment is that FDR (being one of the biggest economic ignoramuses of all time, even according to friends and colleagues … we are, after all, talking about a guy who was a lousy student, failed miserably at his few attempts in business, and maintained his wealthy lifestyle by writing letters along the lines of:  Dear Mommy, I need more of Dad’s money.  Love, Franklin) froze wages during WWII.  Since governments can’t wave a magic wand that causes the forces of competition to simply vanish, employers competed for employees by offering free health insurance in lieu of higher wages to get around the wage freeze.

Yes, I think insurance should be sold across state lines.  You’re worried that we’ll only end up with five national insurance companies, seriously?!  As opposed to the situation many people find themselves in now, where they’re only allowed to buy a policy from the two or three companies operating in their state — policies that are juiced up with all sorts of mandates imposed by state legislators to suck up to their big contributors, thus driving up the cost?

No, of course market forces won’t correct the problem … market forces haven’t been allowed to work in that business for decades.  For market forces to work, we’d have to actually have something like a functioning market.

And how exactly will Obamacare solve the situation?  By driving up the cost of insurance policies, as it’s already done?  Yes, the prototype federal solution:  we’ll pass a gazillion laws that make a necessity far more expensive than it should be, then we’ll rush in to fix the problem we created by subsidizing the necessity.

We didn’t see double-digit inflation in health insurance until the feds got into the health-care business.  Same old story.  If you’re concerned that old people can’t afford insurance, you can think your precious government for driving up the cost.  Take a look at the industries with little or no government involvement, and prices have often gone down over time when correcting for inflation.

How was that?


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36 Responses to “I’m Baaaack … A Debate With a Leftist Pal”
  1. sal maghundi says:

    A little quick note about health care. In areas that are not covered by insurance (laser eye surgery, plastic surgery) technology has gotten better and prices have come down.

    Indeed, because for those procedures the consumers act like consumers, which pressures the producers to find ways to deliver the service at lower cost. I made that point to my leftists pal in another round, which I’ll post soon.

  2. Paul L in MA says:

    (This is NOT the same “Paul” as in the post.)

    Welcome back to blogging, Tom.

    Oh the irrationalities of health “insurance” in this country…

    Your explanation about the Roosevelt years isn’t complete: why did that wartime economic distortion persist long after the wage controls were ended?

    The problem as I understand it was that Congress tried to treat employer-provided insurance benefits as imputed income to the employees and therefore taxable, but that proved so unpopular, they ended up doing the opposite thing, letting employers just expense the cost of the employee benefit.

    But NO such break for individually purchased insurance: thus discriminatory taxation that distorts buying decisions. Bad bad bad. And no concerted movement ever happened to fix the tax code.

    “Insurance” (the misnomer for “all medicine, even the routine, paid for by subscription,” but that’s ANOTHER whole post) when purchased through employment, is tax-advantaged. Not so individually purchased insurance.

    THAT is why it is simply “the way” in America to be insured through the employer — NOT anything inherent in the special economics of medicine.

    This is something EVERYONE in America ought to understand! But only a few nerds like us DO get it!!

    Whether the tax effect is widely understood or not (and I think, not), the response to the changed incentives is very real: people generally don’t get individual insurance because they just couldn’t get equivalent insurance with the increase in AFTER-TAX wages that would result from waiving of the employer benefit, even if they tried.

    (Of course the employer WOULD pay you more wage, WILLINGLY, if you were free to waive a benefit, Hollywood Paul you ninny. The premium paid by them on your behalf is ALREADY part of the cost to them of employing you that they are willingly paying: whether they paid you directly or the insurer would be indifferent to them. Are you really that thick? Sheesh.)

    McCain said (but not clearly enough) in ’08 that individually purchased insurance ought to get similar tax benefit. I agree that the relative disadvantage should be eliminated.

    But I think the bias should always be toward simpler, not more complicated taxation systems that do not suffer from too many of the well-intentioned deductions that actually fail to help the intended people. Tax exemptions for THESE purchases, but not THOSE, do not actually make THESE purchases more affordable: they just cause a price escalation.

    If only (hope against hope) Cain and Perry and the rest all race to outdo each other for the best radical income tax simplification, individual AND corporate, and whoever wins, sticks to it and delivers. That would incidentally solve this problem, besides the other benefits.

    Sorry to ramble so much, but this only scratches the surface of the irrationalities of American health financing… and *I* live in the land of ROMNEYCARE, grrr…

    All good points. If health insurance is going to be deductible, it should be deductible, period, no distinguishing between company-provided insurance or individual insurance.

    • Paul L in MA says:

      I actually favor the view that it should NOT be deductible by anybody — and affordability of medical care would not actually get any worse — but I would admit that is a harder political sell.

      Making things tax-deductible does tend to raise the prices people are willing to pay. I don’t oppose keeping the deduction if it would apply to everybody, not just employer-provided plans.

    • David says:

      Excellent post Tom & excellent points MA Paul. Please ramble on. I’d rather get the higher wage and shop for my own insurance from multiple companies from all over the country that are competing for my business. Bet I could find a better more affordable policy than what my employer would settle for with with the limited choices available. Also bet I could use the savings in premiums to invest in my own non government sponsored self researched self directed retirement plan using my extra income from my fair flat taxed wage as well.

      More rambling to come. I just haven’t gathered up the emails and posted yet.

  3. Paul L in MA says:

    Another, quicker note on a different matter…

    I read (I forget where, maybe it was in Amity Shlaes’ book _The Forgotten Man_) that Canada had NO bank failures during the Great Depression. An explanation for that is that Canada did not have laws limiting banks to doing business in single provinces. Whereas in America, when the banks could not geographically diversify the businesses to which they lent across the whole country, that made them more vulnerable to multiple defaults when local business conditions went bad.

    Can anyone here help my recollection? This is ANOTHER point to make against Hollywood Paul.

    You don’t want your home insurer insuring only the houses in the same river bottom as your own house: your ruin will be the insurer’s ruin and you will never collect a claim. You WANT a big, geographically diversified insurer. (Or, a big re-insurer that insures little insurers.) Similar principle. Big is NOT always bad.

    I read The Forgotten Man and two other books on the Depression, and I remember that explanation appearing in at least one of them, maybe two.

  4. Sennin says:

    When I was growing up in the late ’40s & 50s, we had no health insurance. Healthcare was simple and (relatively) inexpensive. You went to the doctor for treatment / advice and you paid the doctor. It was affordable.

    I have not had insurance for the past 7 years, but I do have a family physician who gives DEEP discounts for cash. I get good medical care for the family that is still affordable. Not having to deal with “The Government” and insurers seems to reduce the skyrocketing expense of medicine back to the point where it was in times long past.

    So, this begs the question, with the possible exception of catastrophic emergencies, why do we need insurers?

    We don’t. My policy covers us for disasters. If I break a leg or develop cancer, I’m covered. For routine care, I pay for it, just like I pay for gas, tuneups and oil changes on my car.

  5. Paul Eilers says:

    (Yet another Paul)

    You start writing on your political blog again, and all the Paul’s come out of the woodwork!

    I’m looking forward to reading the rest of this series. Hope your Hollywood friend is game.

    Another Paul

    He’s game. The debate is ongoing; I just need to set aside time to retrieve more emails, edit out the personal stuff (we are friends, believe it or not, and there’s chit-chat in them) and post them.

  6. Paul L in MA says:

    Sal —

    I took my poor cat to the veterinary hospital for a procedure today :-( But he’s doing all right.

    I got a detailed bill estimating costs BEFORE I committed to the procedures. Price transparency! Imagine that. So here is a third area of consumer-oriented medicine.

    (I believe dentistry, too, is often un-insured and therefore not so crazily price-escalated as other medicine.)

    I have heard rumors that Canadians who urgently need x-rays and other diagnostics have gone to veterinary clinics for them to end-run the killing delays of the renowned Canadian government run human-medical utopia.

    It must be harder to be a vet than a human doctor. Multiple species to learn, and uncooperative, uncomprehending patients who growl at you, and whom you can’t ask just to point to the hurt.

    Exactly. When I decided to have an elective procedure to assure myself I wouldn’t father any more children, the first thing the doctors’ offices I called brought up was price.

  7. TonyNZ says:

    Just out of curiosity, what is medical insurance worth in the USA?

    In New Zealand we have a pretty good public/private healthcare split. If you have no insurance/money you get treated in the public system. Insured or with plenty of money, go private and get a shorter wait and generally better standard of care.

    For about NZ$1500 (US$1200) our family is insured (couple and baby) and it covers pretty much everything except GP visits. For the ease and quality it is a no brainer for me, and not, in my opinion, too expensive.

    Yes, this is on taxed income and yes, this has GST tax included (like VAT) and yes, it saves the public healthcare system money because I’m not using it. Short of it is, the tax situation irks me but for the cost it is very worth it and best of all, I’m free to choose to pay it.

    Insurance in the U.S. is all over the place. Some states pile on a gazillion mandates (including life-or-death treatments for things like hair loss or the inability to become pregnant) which drives up the cost. Our policy costs me $329 per month for a family of four. It’s structured so that we pay routine expenses ourselves, but our liability for a calendar year tops out at around $6,000.

    • Gerard Millar says:

      My Apologies for coming in so late in the piece :) …..

      To quote Tom “And how exactly will Obamacare solve the situation? By driving up the cost of insurance policies, as it’s already done?”…. how does a public health system drive up cost of private insurance…. im not implying tone in this question either… just asking.

      In Australia my wife pays $60…. and with a Union health care I can get it for $140 for a family. I think I might get it for superior health care but dont have to as I pay alot of tax and get the government to look after me.

      Tony, I think your a common poster here? I noticed the ‘NZ’ at the end of your name before – Like us You had another a 3rd way Labor Government bring in economic reform in 1980s? Im interested to know your view on this. Your a fan of public/private mix but unlike Austrlaia you didn’t keep one public sector media outlet, nor did you keep your public utilities govenment controlled. My Left of centre Kiwi parents think this was a mistake – Im interested to know your thoughts on this. Sorry to deflect this discussion.

  8. Milton says:

    The issue with health insurance (IMO) is that we are playing a game that cannot possibly end any other way. “Health insurance” is designed to provide a discount on every possible medical intervention. When you go for a check-up, it’s discounted. When you go in for treatment, it’s discounted. When you need medicine, it’s discounted. Glasses? Dental fillings? Discounted.

    You cannot magically make the cost of something less than it actually is. In order to support our current health insurance structure (and health coverage elsewhere, particularly nationalized systems) we have to make numerous compromises. We pay extraordinarily high premiums for health insurance. Go ahead, consider what you pay each month for health insurance and then try and find out how much you would get for cancer treatment. Then compare that to what you pay to insure your home and how much you’d get if it was destroyed by fire. Heck, compare your rates and payouts for life insurance… and that one’s GUARANTEED to pay out at some point!

    We also wind up having to ration or exclude certain types of care, or wrap it up in so many exemptions and rules that it’s very difficult to get them covered when you need it. It’s a very simple economic truth, which has nothing to do with compassion or wanting people to die: if you price a good or service below what it costs to provide, you have to make concessions somewhere. And based on what we’ve seen around the world, health care quickly grows large enough to swallow up more than we can possibly afford to pay, as individuals and as nations.

    If we treated health insurance like an actual INSURANCE, and if we priced normal health care at a fair market rate, I think we’d be in far better shape. Most of us could easily afford typical medical care, which would go down in cost as the pricing structure was simplified and clarified. Subsidizing health care for the poor would be easier and more cost-effective for the same reason. And health insurance would be much more affordable and cover far more than it does now, since it would only be used for emergency care. But we’ve convinced ourselves that treating medical care like any other good or service is cruel or inhumane, and so we try to socialize it, which has the inevitable outcome: we provide less service, we provide it less efficiently, it costs much more… but leftists get to feel good about themselves.

    I guess that makes it all worthwhile…

    A lesson I learned from Thomas Sowell: all economic systems ration resources, because resources are always limited.

    • Paul L in MA says:

      Yes. I believe T.S. wrote that the first principle of economics is scarcity and the first principle of politics is denial of it.

    • Paul L in MA says:

      Your point about comparing premiums to payouts in cases of home insurance versus medical is, I think, to show that home insurance is a bargain whereas medical is not?

      (You should mathematically expect to “lose” money on home insurance to the insurer’s costs and fair profits if you pay it for the whole average lifetime of a house with no disasters, but YOU generally don’t live so long.)

      True “insurance” is this:

      SUBSIDY OF THE UNLUCKY FEW (who suffer expensive, unforeseen events), BY THE LUCKY MANY (who do not)

      which is furthermore:

      WILLINGLY PAID FOR by the lucky many, BECAUSE PAYMENT HAPPENS BEFORE one knows which group one ends up in.

      That describes homeowner’s and auto collision insurance. You buy it, and don’t want to be without it, yet hope never to use it. It sounds paradoxical but isn’t hard to understand. And if the insurer pays to rebuild my burnt house, my thanks should go not just to them but to the other policy holders who REALLY made it possible. The insurer is only a broker, letting us policyholders cooperate without knowing each other, and is not a Scrooge McDuck giving largesse.

      But when American medical “insurance” covers not just broken legs and bust appendixes, but ROUTINE and certain ELECTIVE care too — like infertility treatment, say, don’t give me sob stories but that is ELECTIVE and not INSURABLE in the proper sense — then it is (in part):


      which doesn’t really make sense, EXCEPT FOR THE MIDDLEMEN, and which is


      (which law can force on employers, making hiring expensive, and causing fewer hires than might otherwise happen) and which really means:


      which means


      which leads to


      and clamor to get government to “do something” about it.

      Why do so many put up with this status quo, or don’t, but think it is “free-market failure”? I’ve written enough for now, I’ll let you all figure that out.

      • TonyNZ says:

        That’s about as clearly put as I’ve ever seen it.

        • Paul L in MA says:

          I hope you don’t mean that sarcastically. I tried. But something about this just resists popular understanding.

          • TonyNZ says:

            Certainly don’t mean it sarcastically. It is somewhat along the lines of the high cost of free article Tom did a while back.

            We are 3 weeks off an election today and this is really something I wish people would get. I thought your subsidy of the over-consumer by the under-consumer, therefore everyone rushes to be the over-consumer thing was a good way of putting it.

          • Paul L in MA says:

            You’re welcome then, Tony.

            Oh sure: even if they aren’t deep enough think in the terms I articulated, ordinary folks still understand getting “their money’s worth.”

            Or, no: they may not get it that the benefit is in fact “their money,” they may think it’s a gift, in a parallel non-economic medical economy, but still they understand “milking” a “free”-seeming thing.

          • Paul L in MA says:

            Tony, I am only a more recent fan of Mr. Naughton. Thanks for the link. Tom illustrates with (gallows) humor and anecdote what I only stuffily (or pithily?) said with abstract generalities.

            In the case of Tom’s gran’s Medicare… well, there is a widespread notion that Medicare and Social Security are things one “pays into” when young and vigorous and therefore “deserves” when older.

            And there is some sort of justice in that. Formerly young people who suffered confiscation of wages for their own supposed good for decades deserve restitution from that same rapacious government. But we usually don’t say it that tactlessly.

            Rick Perry had the tactlessness to suggest that we stop the confiscation from those now young. Unfortunately he didn’t have enough tactlessness to stick to his guns when challenged on that point.

            I think the young are politically apathetic or sentimental and not savvy enough to organize for their own selfish interest, in a way that the old with their AARP are. And I, in between, just helplessly cluck my tongue at the spectacle.

            But now I am wandering to a slightly different topic.

      • Milton says:

        Paul: “Your point about comparing premiums to payouts in cases of home insurance versus medical is, I think, to show that home insurance is a bargain whereas medical is not?”

        Nope. My point is the one you made in the rest of your post. I was about to spend a few paragraphs elaborating on the point, but you covered it quite well in your reply.

        Health insurance is not insurance, IMO. It’s an exercise in remarkably short-sighted thinking, that only exists because gullible people can be made to feel guilty for preferring an alternative that works far better.

  9. TonyNZ says:

    Great to see the bog up and running again, by the way.

    I do find it interesting that, Tom’s family pays essentially five times what my family pays here for health insurance. Yes, there is one more child and Tom and Chareva are somewhat older than ourselves but that doesn’t justify that much more expense.

    So our not-free-but-closer-to-free-market-than-in-the-states health insurance is wildly cheaper than Tom’s. Tell me again how deregulation is going to make costs skyrocket?

    Are you still trying to talk me into moving to New Zealand? Because if I hadn’t just bought land in Tennessee, I’d have to consider it.

  10. First, the nanny-staters insist on employers paying for for health insurance. Then they are shocked, shocked, at the outcomes when people lose their jobs and health insurance coverage at the same time.

    Obviously, we need a massive educational initiative to explain to employers why — they day after they’ve hired a new employee — they are now supposed to care more about seeing to that employee’s health care needs than the employee is.

    @Paul L — there were stories several years ago of Canadians going to vets and paying cash to get an immediate MRI instead of waiting on the queue for six months to find out if, say, that funny lump was a problem. (It’s the same equipment — they don’t make a Kitty MRI and a People MRI.)

    Once this got published it caused acute embarrassment to the govt run utopian system and they immediately addressed the problem. They made it illegal for vets to provide MRI’s for people. Problem solved.


    Heck, we should make it illegal for anyone to treat anyone. Health-care costs would plummet.

    • Paul L in MA says:

      Hello Jerry, I like your blog too. Who is the fourth gentleman from the left on the banner? I can identify the other faces.

      Doesn’t everybody get it that your benefits are part of your real, total pay, and therefore a deduction from your employer’s top line, which is limited by business realities? (If your employer isn’t government.) Not an additional gift, besides wage, that you get or don’t get because of a few rich guys’ good or ill will?

      Why does the distinction between employer-paid and employee-paid portions of health insurance, that NJ and WI state employees were so worked up about, matter? No seriously, WHY?? I am not being rhetorical. It seems clear to me it should not matter. What am I missing?

      (Is it the partial loss of tax exemption? Or is it that a nondeclining salary PLUS benefit means a guarantee that employer eats all of the inflation in that benefit, and that guarantee just had to collapse?)

      But as regards mandates to private employers, I must say that it almost SEEMS to be a clever and far-sighted piece of blame-deflection on the part of politicians, to shift the burden of their questionable redistributionist projects off the books of government and onto the private sector.

      Seems. Likely isn’t.

      I guess some people are easily fooled. I’ve talked to people who still believe the fiction that their employers are paying half of their social security.

      Forgot to answer your first question: that’s Adam Smith, author “The Wealth of Nations.”

      • Paul L in MA says:

        Adam Smith, so it is. Before, I could only recognize the more famous profile drawings. You know, the ones that make his shnozz look really big. I didn’t think to google-search his images because I thought that was NOT him.

        I made the rewarding slog through _The Wealth of Nations_ last year in summer. The first few chapters at least should be required high-school reading.

        One great lesson from him is that lobbying is nothing new! He explained in 1776 so many examples of various manufacturing special-interests of his day, getting special protective legislation passed by Parliament, justified for supposed public good by various bogus arguments, but really only serving a certain private good at the expense of the consuming public. He even says that holding the North American colonies (the scene of “the recent disturbances”) were a boondoggle for the nation of Great Britain, enriching only some protected trade monopolists.

        So that book teaches you that to favor truly “free-market”policies is not to be “pro-business.” Not at all synonymous.

        I’ve tried (without success, of course) to convince my leftist pal that I’m pro-freedom, not pro-business. Plenty of businesses happily support restrictions on freedom if it’s to their benefit.

      • Well, I’m quite impressed that you can ID the rest of the gang on my blog!

        The inability for the average shlub to grasp the concept you reference — “tax incidence” — is completely understood and used to great advantage by politicians.

        You can explain to people that when the government taxes corporations, the simply build that (plus a bit to preserve their profit margin) into the cost of their products.

        They’ll shake their heads up and down which seems to indicate that they understand. But when they find out the grocer is making more money than they are, they scream to “tax the rich!” Then they get even madder when the cost of their milk goes up. And of course blame it on the greedy grocer. Oy.

        That’s why you can read that Bank of America got huge bailouts, with maybe just muddled confusion on the part of the man on the street. The top brass gets massive bonuses — not for making money, actually, but for foisting their losses onto us. Grumbling, but no real reaction. Then, it turns out the FDIC is now backstopping their massive derivative gambles they moved from their Merrill division into the banking side (that shoe should be dropping soon). Clueless.

        But move that the 25 cents per debit card transaction that has been hidden in the price you pay for that quarter pounder, and instead charge you the same five bucks a month on your bank statement where you can see it — OUTRAGE! Boycotts. Congressional speeches.

        We’re freaking doomed.


        • Paul L in MA says:

          Of course I recognize the rest, Jerry!

          And of course that’s, um, Keynes there, yeah, right in between Krugman and Engels, with Jean-Baptise Colbert looking benevolently on — the great man who inspired the very term, “Laissez-faire!” (Please!!)

  11. Speaking of Canadians, you ought to put up the Professor Woodbury Chronicles some day.

    Oh, man … fond memories. I’ll do that sometime.

  12. Robyne says:

    So much of the rest of the world are perplexed by this debate…

    Get public funded healthcare already!

    It works, Australia has publicly funded healthcare which is paid for by a tax once your income reaches a certain level.

    In return we have free healthcare for those on low income, subsidised health care for those earning more and subsidised medication for all.

    The ironic thing is, our healthcare system costs about 50% less per capita than in the USA, and our life expectancy is greater.

    It seems that free markets can lead to greed and poor outcomes!

    And you know what…we don’t mind paying for medicare – we like to take care of our sick and needy…

    We really can’t see what the problem is!

    The problem is that our current Medicare system is driving us broke, there are trillions in upcoming unfunded liabilities, and we have goofs who think the answer is enroll the entire population in the system that’s already threatening to bankrupt us.

    We don’t have anything resembling a free market in health insurance and haven’t for decades. Our health care costs began skyrocketing after Medicare was instituted and made health care appear “free” to millions of people.

    • Robyne says:


      This is why I like you! You can summarise well!

      You would probably not believe the amount of US news we get in Australia. I admit a bit of my frustration above was being sick of hearing it! I don’t really understand your electoral system either, and why the campaigning seems to take 2 years, and then there is a break for one year and then it starts again! We get that on the news as well – maybe you could explain that to me in two sentences?

      I guess from the perspective of the GFC fallout it may not make sense for more money to be spent…but I wonder how the unemployed and others in crisis are doing for healthcare?

      take care

      Our election cycles are looong — I don’t care for it myself, but that’s how the system developed. The advantage, if there is one, is that we get a long look at our candidates, so the flash-in-the-pan effect rarely takes place.

      As far as healthcare for the unemployed, it depends. Some qualify for Medicaid, the federal government program. Some are in states with similar state programs. Some are allowed to keep their employer’s policy even after losing their jobs. Others go to emergency rooms, which are required by law to treat them, regardless of ability to pay. That’s actually one of the ongoing controversies in the U.S., because we have illegal aliens come over from Mexico to visit U.S. emergency rooms, driving up our healthcare costs.

      • Robyne says:


        And this is the article that prompted me to come back and see if you had replied:

        I think the article may have been in response to Obama’s visit, but it has some statistics on healthcare comparisons between the US and Australia. (Yeah I know – Lies, Damn Lies and Statistics!)

        Interesting statistics, but again, if you read them carefully you’ll see they have little to do with the actual quality of health care. We have a lot of sick people because we have a lot of people consuming awful diets, which has nothing to with with the healthcare system. Same goes for the figure in the article on violent deaths.

        I don’t know how Australia counts infant mortality, but I know many countries don’t count the death of a preemie as an infant death. They count it as a non-birth. My wife was born 2 1/2 months premature and came within a hair of dying. Had she died, the U.S. would have counted that as an infant death, whereas many other countries wouldn’t.

        But as I said before, when we have a high rate of teenagers on welfare becoming pregnant and then pretty much pretending they’re not all the way up until the birth, we’re going to have a higher infant death rate. But if my wife had a problem delivery, there’s nowhere on earth I’d rather she get treatment than here. Our emergency care is ranked #1 in the world with good reason.

  13. Paul L in MA says:


    Greater life expectancy? Really?

    The argument in this excellent book by Arnold Kling is that in America, we actually pay a lot for the diminishing returns of premium medicine.

    In other words — when deciding whether it’s worth finding ways, however expensive, to extend lives a little bit more, rather than just giving palliative care to the dying — we are allocating our resources to defy death longer.

    THIS accounts for a large part of that disparity of per-capita GDP spent on medicine. And it brings results.

    This country is the medical R&D wing for the rest of the world. New technologies get tried and tested, and, yes, patent-protected for a time, here before prices fall to within the reach of other countries.

    And life expectancy is GREATER in America, for those who do have the misfortune to get certain cancers or AIDS or other life-threatening diseases. If you must get cancer somewhere, get it here.

    I am far from contented with the nutty and mostly unfree market we have here, but… the golden goose of innovation would be slaughtered if government presumed to allocate services for us and to remove the “evils” of profit motive entirely.

    And richer people may benefit from today’s highest tech before it becomes cheap enough for most of us. Yeah, that sounds “unfair,” but what would stink worse is to remove the incentive ever to save and extend ANY lives.

    Another factor in our high medical costs is our high rate of type 2 diabetes, which certainly wasn’t caused by lack of a government healthcare system. If anything, our government contributed to the problem through lousy dietary advice.

    • Robyne says:

      Hi Paul,

      Re life expectancy I was just quoting wiki

      who in turn get there figures from the UN.

      Obviously this is overall life expectancy – a rather simple illustration that our overall health system must work to some extent.

      And yes, I see your point in regard to R&D, although maybe a little US centric. Other countries do great research as well – in Australia R&D is a corporate tax break. Just for example :

      I’m a full-time student at the moment, having gone back to uni as a mature student (I like to say immature!), I survive just on Austudy (a government support payment), rent assistance and part-time work. I can tell you though that if I didnt have access to free medical treatment this would be impossible. I feel very lucky, that I can do this at this stage in life and cannot wait until Im a tax payer again (ie on graduation).

      I also wonder at the medical innovations those companies make for the wealthy and wonder what is being left behind? Does it mean they are treating diseases of wealth – which may largely be down to diet? Instead of innovations into areas which may not pay quite so well.

      Oh its involved…

      thank you for your considered reply,



      You’re actually responding to Paul on some points, but to answer your last question, innovations are of course driven by the profit motive. But there’s nothing wrong with that. The wealthy are usually the first market for innovations (this may not be strictly true in medicine), and their dollars provide the funds for development to continue, which eventually leads to better products at lower prices. The first home VCR was developed for one customer — Hugh Hefner, founder of Playboy — for the purchase price of $250,000. The next generation of VCRs cost several thousand dollars, then they were around a thousand, and eventually of course you could pick them up at Wal-Mart for $75.

      The well-to-do in this country paid up to $10,000 for vision-correction surgery when it was first developed. Now you can get your vision corrected for around $1,000.

      It’s fine for a government to encourage R&D with tax breaks, but the R&D won’t happen without the prospect of a return on investment. Some years ago, I worked on a software system for a pharmaceutical company that is developing cutting-edge cancer treatments. They were throwing a big party because, after 12 years of existence, they finally turned their first profit. So who kept the ball rolling for 12 years? Investors, of course. Now imagine if the U.S., like many other countries, limited pharmaceutical companies to a 2% profit. What idiot would invest in a company that was only allowed by law to make a tiny profit? So the drug makers earn their profits in the U.S., then ship drugs to other countries that barely allow a profit. Those countries are benefiting from the profits (and higher prices) allowed in the U.S. Take away the U.S. profits, the drugs wouldn’t be developed.

    • Paul L in MA says:


      I don’t dispute the life expectancy figures you found, but you must be cautious about interpretations. Are you sure quality of medical care accounts for all of it?

      Or does opportunity-rich America attract many more poor immigrants who depress the figures?

      Or does America have more violent crime? (Nothing for us to boast about, surely.)

      Or (as Tom would think) do more of us in America have stupid lifestyles?

      If too many of us get obese, with all of its consequences for health, do you think that is the result of BAD medicine? Or too little good medicine? Or for reasons that have nothing to do with our doctors? (But Andreas Eenfeldt convinces me that we don’t have the monopoly on bad dietary theories.)

      Or … ? Use your imagination. It may not be hard to invent other hypotheses.

      Also note that “Life expectancy” per se is not meaningful: the table is for life expectancy AT BIRTH. One can speak too of life expectancy at forty: among those who do survive so long, how much longer do they survive? (For instance I suspect violent death might be more common among young males: would life expectancy at forty be more equal between our countries?)

      Likewise I alluded to life expectancy after diagnosis of certain diseases. That is evidence of SUPERIOR medicine here. There is no contradiction in America scoring better there — while still, as in the article you linked to, having greater incidence and even greater total mortality rates from these diseases, which is our misfortune.

      And Tom explains, as I hope I did too, why drug companies and others reap their profits during the terms of patent in this largest of industrialized populations, but then export at lower prices. The cost of manufacturing a drug may be low but the cost of discovery has to be recouped (and also the cost of other FAILED projects of the same companies), or else the motivation to innovate disappears.

      (And I meant no disparagement to the ingenuity of other countries, but simply as a matter of populations, you would expect American to have a greater share of the innovations in the industrialized world than other comparably wealthy countries. But eventually all countries share the benefits.)

      The figures I saw some time back stated that about 1 in 100 of the drugs that enter the research phase end up on the market. Of those that go all the way to market, the development and clinical trials costs are around $800 million.

      • Paul L in MA says:

        Somebody explained to me that in some technologies like software, the giants don’t like to innovate, they prefer to acquire little innovative companies after Darwinism eliminates the failures. So, the venture capitalists for the little failures eat the losses, the giants don’t have to.

        But if you need nearly 1B just to develop one successful drug, then perhaps the capital requirements are just prohibitive for the midgets in this industry?

        The company I referred to was small by industry standards, but had managed to attract enough investors to fund their operation. It’s a sink-or-swim business for the smaller drug makers. They come up with a winner and get very rich, or they die off. I invested in two other small pharmaceutical companies (fortunately not much) that were attempting to develop next-generation cancer drugs. Both tanked.

    • Paul L in MA says:


      But now for some on-the-other-hands…

      While the capitalist engine might deliver us new wonders of diagnostic technology and surgical technique and trauma treatment, where the benefits of these medical interventions are more immediately evident — yet, maybe there is something inherently problematic in the economics of drug discovery.

      It’s easy to prove that a certain method of fixing a hip fracture is not a superstition. It’s hard to prove that a certain way of eating or medicating for the long term for disease prevention is not a superstition.

      Your busy clinician might not be better than you at distinguishing the superstitions. He might be just as complacent as you just to trust authoritative sounding rumor about what works. He might be an excellent technician of health but not a scientist of lifestyle.

      If you read Tom’s other blog and other like-minded folks, you will get the very definite idea that Big Pharma can indeed corrupt medicine in this country. There is a push to define abnormality down for cholesterol levels, and get ever younger folks with above-average cholesterol to take statins, just to treat a symptom, not a disease — and not a strongly predictive symptom at that.

      Statins are a cash-cow for the companies because of a misplaced fear of cholesterol, which the drug makers have every interest to perpetuate. They are harsh medicines with side effects on the liver and muscles and brain and mind, a remedy often worse than the nonexistent disease.

      The science of the lifetime effects of a diet or drug or supplement habit is just inherently difficult and expensive. If indeed it’s better nutrition we need as a preventative, if mere vitamin or mineral deficiencies are at fault, or if there are unpatentable herbals that are really efficacious — still it’s understandable that commercial interest to do the expensive science to prove the benefit, will be lacking. That’s the Kilmer McCully story.

      Consumer preference, which normally would drive the suppliers of the economically inefficient alternative to extinction, won’t work when consumers can’t plainly see the benefits of their choices over the decades, with so many doubtful confounding factors that might have made them ultimately well or sick in their age.

      Sometimes basic research with uncertain or nil prospects of profit may just have to rely on the patronage of government, if not of really big corporations. But government is corruptible too. By the ambitions of overbearing do-gooders, yes, but also by private interests? Yes, too, definitely. Many of us would therefore rather have government neutrality on most matters of consumers’ choice. And that means no subsidies.


      I don’t want to be an anti-capitalist crank and make profit a dirty word and put my faith in government to get the science right and compel the allocation of our resources for our own good.

      But neither do I have blind faith that self-interest of competing companies will always serve the consuming public well, in a happy, harmonious Smithian way. Not where it is really darned difficult for us to know what really serves the interests of us consumers.

      And neither do I want to be so suspicious of all authorities that I lapse into mysticism and anti-intellectualism and sneer at all of the “establishment” and embrace quackeries like homeopathy. The existence of bad or corrupted science is not proof that every challenging speculative idea that doesn’t serve the same commercial interests is correct.

      I want better science to drive out bad science but it may not come in time while I have to live and eat. So I have to commit pragmatically to SOME theory of what serves my own health in an imperfectly scientific way. And you should be free to commit to your personal theory too, even if it does include homeopathy.

      I don’t feel hostile to laws restraining misleading advertising claims and requiring ingredient disclosures — perhaps some libertarian purists would argue with me — and even the outlawing of provably poisonous things, but I would otherwise not have government deciding for us what really works for health when it is so doubtful.

      Unresolved dilemmas? Sure. I don’t have a simple answer.

  14. Otis says:

    “Someday the Federal Reserve folks will probably figure out how to create new time out of thin air (the result being that the time we already have will be worth less), but for now, time is still limited.”

    Not at all relevant to the rest of the post, but the recent movie “In Time” kinda shows that. The movie is about time being used as currency, so the poor people who rarely have more than twenty-four hours left (they get daily paychecks to boost them through another day) are constantly running about, doing as much as possible, while the rich move slowly and seem to do nothing. A rich girl comments, “We can live forever, but we never seem to be alive.”

    It’s a mediocore movie, but it sparks some ideas.

    Again, this has nothing to

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