Category Archives: Capitalism

NPR, Robot Guy, and Econ 101

I heard a story on NPR this morning about small wagon sized robots that may soon deliver takeout food in Washington D.C.  It’s already being tried out in town.  Once up and running it is said to be able to pick up and deliver food in a two mile radius.  It uses the coordinates provided by the purchaser via a smart phone to identify the location for the delivery.  Very cool if it all works out.

What wasn’t so cool was a question asked by the reporter which revealed her ignorance of economics and worse, the answer given by the interviewee (robot guy).  The reporter asked whether the robot will eliminate jobs.  The robot guy’s response was “absolutely not”.

Huh?  How can something so obvious be beyond the grasp of such really smart people?  Why doesn’t the reporter know instinctively that if the robot works as planned and does so more inexpensively than hiring human labor it will end up doing the designated work rather than humans?  And why would the robot guy be so positive that somehow, this labor saving device, designed for the very purpose of saving human labor, will not save human labor?

Because we think, humans have been discovering and inventing ways of doing less work since the beginning of humanhood.  Domesticating horses reduced by orders of magnitude the time and human labor it took to move people and materials from one place to another.  Locomotives, motor vehicles and airplanes again did the same.  The first shovels reduced by orders of magnitude the time and human labor it took to dig a hole.  Motorized digging equipment again did the same.  Wash boards reduced by orders of magnitude the time and human labor it took to wash clothes.  Electric washing machines again did the same.  Each time a labor saving technique or device is created, guess what it does?  It saves labor. 

This robot was invented for the very purpose of eliminating labor.  Right now, some human, either the purchaser or the seller or an independent delivery service has to transport food purchased at a restaurant for take out to the place where it is to be consumed.  The purpose of the delivery robot is to eliminate that human labor.  The reporter should have known the answer to her question before she asked it.  Unless the robot is only to be utilized on behalf of purchasers who, but for access to the robot, would have left their house, driven to the restaurant, picked up the food and returned home with it, jobs will necessarily be eliminated.  And if the robot is so relatively inexpensive that purchasers choose to use it rather than other human oriented delivery services, what will happen to those delivery service jobs?

If the robot works as expected and is cost effective, i.e., cheaper than the alternatives, it will thrive and the alternatives will not.  This is the nature of a free economy and the nature of creative destruction.  It’s quite simple, even elementary.  The troubling thing is that it apparently isn’t understood by two people who are sufficiently intelligent and well educated to be an NPR reporter and a robot guy.

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Our Other Dying “Constitution”

A short time ago, I wrote a blog concerning the death of our founding document, the Constitution.  The point of that blog is that the incremental moves by our Supreme Court away from any devotion to the actual text and the original meaning and intent of our Constitution are rendering it of little meaning or value in politics and in jurisprudence.  As a result, I postulated that the American people may not be willing to abide the Supreme Court as our final arbiter of what the Constitution says and means for much longer.  The Supreme Court is an undemocratic institution.  If it isn’t going to abide by the Constitution, why would we agree to abide by its rulings?

In this blog, I’m addressing a different “constitution”.  Merriam-Webster defines “constitution”  in part as follows: “the structure, composition, physical makeup, or nature of something”.  The point of this article is to demonstrate the manner in which the nature of the American people is changing to the point of non-recognition when compared to what it once was.

To begin, we need to consider what our nature as a people once was.   After our founding on principles of limited government, popular sovereignty, individual liberty and personal responsibility, people from all over the world came here for the opportunity that exists only in liberty.  They did not have perfect lives here.  They struggled.  They suffered.  They faced injustices.  But over time they prevailed and created for themselves a society like no other.  They assimilated.  Their assimilation was not only by language or custom.  Their assimilation was by creed—a  creed reflective of our founding principles of individualism and individual liberty and responsibility.  Relatively quickly, hostilities between and among immigrants from different areas of the world abated as fear, prejudice and misunderstanding were replaced by familiarity and a common language.  Through time, they ultimately understood that they had far more in common with each other than not.  Despite the fact that they spoke with different accents and worshipped in different ways, they shared the same essential creed which is what compelled them to America in the first place.  A prevailing respect and adherence to our creed continued to set the table in America for much of the best a human life can achieve.

Sadly, our creed has suffered through various mechanisms over time.  Intentional political manipulation at the hands of those who have sought to defeat and replace it has done its damage.  Such people have worked for generations to persuade our citizenry that the positive changes and attributes of individualism and free market capitalism are either inadequate or occur at too slow a pace.  As a result, we’ve seen our society incrementally yield freedom and liberty to governmental authority in exchange for promises that rarely materialize.  We’ve seen our creed diminished as such people have worked to drive wedges between “segments” or “classes” of society in order to marshal power for themselves.  Such “segments” or “classes” are created, supported and magnified by such people.  Such “segments” or “classes” would not even exist if our creed were still as strong.

Our creed has suffered at our own hand as well, through atrophy and inattention, as our focus has tended more toward leisure and personal satisfaction.  Our material successes seem to have bred complacency.  The cost of our loss of focus has been a knowledgeable and wary citizenry, capable of understanding that the benefits of liberty are necessarily accompanied by burdens of obligation and inconvenience necessary to maintain that liberty.  We’ve been too easily convinced that we can avoid those burdens by turning responsibility (and thus, power) over to our elected officials and appointed judges.

Finally, the way in which our government has been structurally altered has emplaced real and psychological obstacles to meaningful individual civic involvement.  As a result, the nature of the subset of Americans who are still wedded to our original creed is even at risk of changing.  Centralization of everything from healthcare to public education to speed limits on local highways slowly engenders a defeatist attitude in the mind of the civically interested individual.  Her political voice, once easily heard on a local or even state level, has become a mere whisper, taking a back seat to the special interests groups and cronies who have the financial wherewithal to amplify their voices loud enough to be heard in Washington.  The ever growing and seemingly all powerful regulatory and administrative state is even worse, often leaving individuals with feelings of helplessness and inevitability.

All of these factors are diluting our creed, whether intentionally, by manipulation and propaganda, inadvertently, by our own sloth or lost sense of priority, or by virtue of the perceived immovability of our huge, centralized government.  These factors can be seen at work in any and all areas of society and in all our institutions.  To provide just a few examples:

Education:  In our early years, education was primarily the responsibility of parents.  They sought for their children a classical education which included instruction in the enlightenment.  Children were taught the value of individual liberty and they came to understand and appreciate the greatness and uniqueness of their popular sovereignty.  In more recent years, we’ve yielded our education to “experts” who do not appreciate the importance of teaching our founding history and our founding principles in the context of other governmental and economic systems. Accordingly, when enemies of our creed seek to discredit it, they appeal to minds which have not been prepared to understand and appreciate liberty and free market capitalism.  Moreover, whenever educators themselves oppose our creed, they are perfectly positioned to work to defeat it. When that happens, public education itself becomes a tool in the hands of those affirmatively seeking to change our nature as a people.  Finally, as the authority for local education has moved from cities and counties to state capitals and from state capitals to Washington, our ability to affect meaningful change or even be heard on issues bearing directly on our own children has been diminished.

Entitlement/Dependency:  In our early years, there was little or no notion that society owed anyone anything, other than the protection of the laws.  As the country became materially more prosperous, the idea of a “safety net” garnered favor, particularly when the country faced hard times.  So averse to welfare were the American people that FDR needed to fool them into accepting social security. He did so by packaging it as a retirement savings program into which everyone pays and from which everyone would benefit.  But the amount an individual paid in often had little or no direct relationship to the amount paid out.  Social Security benefits have always been tied directly to longevity, which has nothing to do with the amount an individual paid in.  It was never a true savings vehicle, but a device for transferring wealth.  In modern times, we see that society as a whole is less reticent to entitlements and wealth redistribution schemes.  Wealth redistribution is accomplished through payroll taxes, income taxes, state taxes, our new national healthcare system, forced wages, volumes of regulations and cronyism.  The malevolent forces working against our creed make matters worse by their efforts to divide us as a people.  They instill a sense of victimization and entitlement in subgroups.  This tactic has the intended effect of pitting subgroups against each other, making it more difficult to see us all as a common people with a common creed.  Further, because the citizenry is no longer sufficiently educated to appreciate our founding principles, we are less likely to rally against all these redistributive schemes. Finally, the ubiquity of wealth redistribution which now infiltrates so many aspects of society renders many unsure of their personal interests.  So many receive benefits of one form or another that it is not always clear who are the net winners and who are the net losers in the redistribution game.  What has resulted is a society on autopilot, all too often acquiescing to whatever tweaks and modifications are made to our vast and encompassing redistributive system.

Media:  In our early years, the press understood its role as a government watchdog on behalf of the people.  It worked to safeguard our liberties and alert us to threats of government overreach.  Over time, many in the media became enemies of our original creed and came to the belief that it should be defeated in favor of an egalitarian and redistributive mechanism.  As a result, most of what we get from our national press is, at best, reported in terms which exemplify an acquiescence to the current big government paradigm and an expectation that it will continue.  At worst, it exhibits an affirmative effort to diminish and discredit the founding principles, capitalism, and individual liberty in favor of an even bigger national government with more control over every aspect of our lives.  Finally, too many of us care little about issues of civic importance preferring leisure, or even work, to time spent becoming informed or active with respect to matters of civic importance. Exacerbating this problem, many are overwhelmed and resigned to the belief that there is little they can do. As such, they lose interest in following civic issues, have little interest in current events and few expectations of the press.

In these examples, we see three forces working in concert and effectively reshaping the very nature of the American people.  Malevolent forces undermine it.  Complacency causes it to atrophy.  The centralization and scope of government causes it to become dispirited. The forces changing our nature are much stronger and more effective working together than any one of them would be working alone and there is no sign of any of them reversing course.  As such, it’s difficult to envision us readopting our original creed unless those who still stand for that creed redouble their efforts to persuade the American people as a whole back to our founding principles.

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Engineering False Pricing Pressures In Healthcare

I recently heard a representative of a non-profit organization committed to stemming the rising cost of healthcare interviewed on a local public radio program.  She said that her organization has launched a state wide program which is patterned after a national initiative implemented by the American Board of Internal Medicine Foundation.  The goal of the program is to ensure that health care providers are providing necessary treatments and therapies efficiently and only as actually needed.  During the interview, she gave an example of the type of activity and interaction the program is designed to achieve.  Paraphrasing, she said that “if a doctor orders a test or some treatment, we want the patient to inquire whether this is really the best thing to do or should I just wait to see if it gets better on its own”.  Because her comment was “off the cuff” and not well measured, we should not take it literally.  I don’t imagine the primary focus of this program is to induce patients to question their doctor’s judgment with respect to every test or therapy the physician might prescribe.

What is interesting isn’t the program or its specific focus but the underlying truth her comments reveal.  Because our healthcare is generally paid for by employer or government provided “insurance”, the end users (the patients) have had little incentive to monitor the price of medical care.  As a result, the role of prices in determining demand is muted.  The consumer of healthcare is not as directly interested in the price of his treatment because he does not directly pay it.  In a free market, higher prices result in lower demand which in turn keeps prices in check.  When the healthcare consumer doesn’t pay for the healthcare he receives, his demand is not nearly as affected by increasing prices.  As prices go up, his demand does not decrease as it normally would.

The program discussed by the representative of the local non-profit apparently seeks to redress the problem by artificially inducing consumers to act as though they have the same interest in health care pricing as they would if they paid for it directly.  It is hoped that sufficient numbers of patients can be coached to act like paying consumers so as to reintroduce the effect of diminishing demand into the economic equation.  Though this is no doubt a well intentioned effort, it ignores human nature and history.  We know from the communist experiment that individuals cannot be prodded en masse to act in the “best interest of the collective”, at least not for long.  Ultimately, the vast majority of individuals are rational economic actors, which means that they act in accord with their own perceived best interests.  For this reason, the percentage of people who can ever be expected to pressure their doctors about the real need for suggested therapies pales in comparison to the number of individuals who will do so when they are actually responsible to pay for the therapy out of their own pockets.  Even at that, the few who are initially willing to question their doctors in this fashion will lose the initiative to do so going forward.

Try as we have, mankind has not been able to efficiently plan a route around human nature.  Government restraint and coercion gives rise to unintended consequences.  In this case restraint and coercion in the form of redistributing and regulating health care gives rise to the unintended consequence of inflexible demand for healthcare which in turn gives rise to higher and higher prices.  Asking and expecting the citizenry to act in contradiction to their nature is not the answer to the problem.  The answer to the problem is a return to the free market, the natural state of society in which human nature flourishes.

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