Posts Tagged ‘free markets’

The Knowledge Illusion: Why We Never Think Alone (Unabridged) 2

July 2, 2017

If you have not read the immediately preceding post, please scroll down and read it. The immediate post presents HM’s thoughts about how the need to use knowledge from fellow humans fails. A good example of this can be found in the current debates about the Affordable Care Act and its replacement. Although the Affordable Care Act is flawed, information from fellow humans who have successfully dealt with this problem is being ignored.

The United States has the most expensive healthcare costs in the world, but results characteristic of a third world country. And it is the only advanced country that does not have a single payer system in which the single payer is the government. This progression did not happen all at once. It began in England after WW II and variants of it were gradually adopted over time by advanced countries with the notable exception of the United States.

How can this be explained? It can be explained most simply in one word, “beliefs.” In this case, the belief in free markets. Free markets are good, but what is frequently forgotten is that free markets do not remain free, they are manipulated and require government intervention to disrupt the development of monopolies. Moreover, free markets are not universally applicable. Economists have effectively argued that free markets are not appropriate for medical care.

However, even if one believed in the viability of free markets for medical care, how can they ignore the success of single payer systems in the developed world? The problem is that beliefs stymy new and creative thinking and using knowledge from knowledgeable people. New beliefs require thinking and thinking requires mental effort, which many people find uncomfortable.

Then there is the faux “Fair and Balanced” news. When the Affordable Care Act was being proposed, “Fair and Balanced” news featured an English Woman who had a complaint about a surgical procedure she had undergone. This woman was livid about this presentation on “Fair and Balanced” news. Although she had complaints about this one procedure, she was highly enthusiastic about the national health system in Britain. Moreover, none of the countries who have adopted a single payer system in which the single payer is the government have abandoned these programs. It should be noted that in the United States Medicare is a single payer system that works quite well. However, Medicare covers only a certain percentage of costs, so supplemental insurance is prudent.

So beliefs can thwart change and innovation. But not all beliefs are necessarily bad. Consider religion, particularly religions for which the medical suffering of fellow human beings is important. One would think that in the United States where such religious beliefs are widespread, medical care would be among the best, not the worst. What apparently happens here is compartmentalization. These religious beliefs are thwarted by beliefs about government and the supremacy of market forces. The result of this compartmentalization is that the health and finances of fellow citizens suffer.

© Douglas Griffith and, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and with appropriate and specific direction to the original content.

Politics Needs Science

January 22, 2017

The article in the 21 January 2017 issue of the Washington Post by Sarah Kaplan titled “New group encourages scientists to enter politics” was good news.  STEM the Divide is a group that will push to have more scientists involved in politics.  This initiative was set up by the political action committee 314 Action.  The goal  is to connect people with backgrounds in science, technology, engineering and math to the expertise and money needed to run a successful campaign.   The article stated that scientists who have been interested in getting into politics were rarely encouraged and sometimes discouraged.

Shaughnessy Naughton  is the founder of this organization.  When asked whether this raised a risk of politicizing science—framing scientific questions as ideological questions, rather than matters of fact—Naughton argued that that ship has already sailed.  Her  response follows:  “People might think that science is above politics, as it should be, but increasingly we see that politics is not above bringing itself into science.  At a certain point, there’s diminishing returns to not getting involved.”  HM would change “diminishing returns” to “serious existential dangers.”

Moreover, the question she was posed, “framing scientific questions as ideological issues, rather than as matters of fact,” betrays the erroneous concept that science is simply a bunch of facts.  Science can be an ideology, an ideology that should provide the basis for governing.  Science is not a monolithic entity, but rather a set of methodologies devoted to arriving at truth in the various disciplines.  This truth is arrived at by reasoning and data.  Moreover, it is fluid in that as circumstances or facts change, truth is corrected or refined.  Science provides the basis for our standard of living, and it can be argued that social problems are due to the failure to apply scientific approaches to social problems.

A good example of this is medical care in the United States.  Medical care in the United States is the most expensive in the world, with results suitable for a third world country.  All other advanced countries provide superior medical care for all their citizens at a fraction of the costs in the United States.  The Affordable Care Act was the best that could be done given the political environment.  One party wants either to exclude the federal government entirely or severely limit its participation due to ideology.  They use fear, lies, and misinformation to destroy attempts to bring the United States into line with the truly advanced countries of the world.

A good question is why this is the case.  The general argument is against big government.  Any argument about the size of government without considering the question of  what the government can best do versus what private industry can best do is moronic.  Yet it is repeated ad nauseum.

People say that they are followers of Reaganism with great pride.  Ronald Reagan is also regarded as a great communicator, which he was.  But what is overlooked is the reason his ideas were so easy to communicate is that they were so simple.  Reagan demanded that his staff provide brief descriptions of the issues so he could formulate brief descriptions of his policy.

The problem is that simple ideas do not adequately solve complex problems. For example, people will say that they believe in free markets.  One would be hard pressed to find many economists who do not believe in free markets, but they also realize that free markets do not remain free for long.  They are manipulated and monopolies emerge.  The manipulations achieve a variety of ends, one being the financial collapse of 2008.

Moreover, there are always complaints about the excessive regulations that come from big government.  Just think back over time and consider what life would be like without government regulations.  How long would the work week be?  What would salaries be without the minimum wage?  If these are exclusively left to “market forces” they would leave the majority of people in misery.  Were it not for unions, it is quite likely that Marx’s prediction of the revolution of the proletariat would have occurred.  But Marx’s analysis was superficial and did not consider the possibility of workers organizing to achieve a decent wage and working conditions.

Government regulations have also goaded businesses into actions that benefited them.  Gas mileage standards is an example.  And God protect us from what the atmosphere would be like absent government regulations.  One of the costs that decreased the competitiveness of the US Auto Industry in the international market, were the costs of medical insurance.  Had medical insurance been provided by the government, the industry would have been more competitive.  Their ideology acted against their business interests.

One of the most disturbing actions that Trump has promised to undertake is the dismantling of financial regulations taken to prevent another market collapse.  It should be obvious by now that the financial industry does not self regulate.  Smart manipulators cash in, while everyone else in the country and the country itself collapses.

The argument here is not that business is evil and government is good.  There are ample examples of government being a monster.  The reality is that the individual citizen stands between two giants, business and government.  Either one can step on and crush the individual citizen.  The citizen needs to be watchful of both and play each against the other to get the best result.

How should this be done?  By employing science, conducting research, and analyzing data to decide what policies are, and who should do what.  This does not guarantee a good result, but science is self correcting.  So when something does not work, the reason why it didn’t work will be studied, and new approaches will be developed and evaluated.

The fundamental problem is with the individual voter.  Thee is ample evidence that voters do not vote in their own interest.  See the healthy memory blog post, “The Low Information Electorate.” It is also true that voters are governed by their emotions rather than carefully considered opinions.  Previous posts have argued that decisions of most people are governed by their guts, which are System 1 processes.  That certainly is the best explanation of the results of the 2016 presidential election.  People need to invoke their System 2 processes.   System 2 processes require cognitive effort.  The vernacular term for them is thinking.  Entering “System 1” or “System 2” or “Kahneman” into the healthymemory blog search block should yield ample posts on this topic.

© Douglas Griffith and, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and with appropriate and specific direction to the original content.