Right Thinking From The Left Coast
Reality is merely an illusion, albeit a very persistent one. - Albert Einstein

Monday, November 22, 2010

Wisdom from the Left

In keeping with Radley Balko’s theory that libertarianism sort of happens to you, I present this remarkable editorial from last week’s WaPo:

As a Democrat whose politics are undeniably liberal on social issues, I lamented the outcome of the midterm elections. But as an entrepreneur with two software start-ups under my belt, I couldn’t help but celebrate - and more than a little. As the fall campaigns wore on, I had found myself listening closely to the Tea Party, nursing the hope that its message would push both major parties to change the way they do business.

To understand my motivation, pick up the November issue of Washingtonian magazine. The annual Salary Survey notes on Page 81 that top trade association leaders (industry lobbyists) make multimillion-dollar salaries to “keep tabs on what the federal government was doing or might do.”

These outsize earnings are symptomatic of a disease that is slowly killing the American economy. We are creating so much regulation - over tax policy, health care, financial activity - that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.

Many of our financial problems over the last decade are rooted in this grim truth.  Enron, for example, was crap with actual energy.  But they were fantastic at manipulating the rules of California’s “deregulation” to make themselves rich.  Our entire financial sector has become defined by people finding ways around the rules and through the system.  As a result, instead of straight lines, our financial system was more like a cat’s cradle.  So when one sector collapsed, it took others with it.  Thus overbuilding in Florida destroyed the 403b of some poor teacher in Iowa.

Panner goes on to site healthcare reform, finance reform and the tax code as three specific examples of stifling innovation.  I’ve hammered all three but healthcare, at the moment, is simply the gift that keeps on giving.  Check out this recent story about how the reform bill is having ... gasp! ... unintended consequences:

When Congress passed the health care law, it envisioned doctors and hospitals joining forces, coordinating care and holding down costs, with the prospect of earning government bonuses for controlling costs.

Now, eight months into the new law there is a growing frenzy of mergers involving hospitals, clinics and doctor groups eager to share costs and savings, and cash in on the incentives. They, in turn, have deployed a small army of lawyers and lobbyists trying to persuade the Obama administration to relax or waive a body of older laws intended to thwart health care monopolies, and to protect against shoddy care and fraudulent billing of patients or Medicare.

Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve — by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses.

Notice the running theme—health care providers are innovating on ways to profit under the new law, not ways to provide better healthcare.  This is what always happens when the heavy arm of the fed comes in.

Panner doesn’t mention it, but EPA has been a problem as well:

In this case, EPA is forcing people to pour money into corn-based ethanol, something that is actually bad for the environment.  That’s money that could be going to real energy-saving innovation.  The opportunity costs alone—never mind the regulatory cost—is staggering.

At some point, the Left is going to have to realize that we can’t save the world this way.  This is particularly true of the environment: you can’t create “green jobs” with top-down management and a regulatory structure that makes it more profitable to play at politics than science.

There are some voices of sense out there.  I don’t know what Philip Howard’s (author of “The Death of Common Sense") political leanings are, but his writing always feels progressive. He’s spent twenty years pointing out that hyper-regulation destroys efforts to improve society.  Matt Yglesias has recently been blogging about stupid licensing regulations (and getting hell for it from his readers).  But it’s going to take more people experiencing the frustration of entrepreneurship to realize just how badly we’ve gone wrong.

Posted by Hal_10000 on 11/22/10 at 08:03 AM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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