The failing of capitalism

July 16th, 2008 | Posted by Smithers at 10:51 am in Politics |

It seems to me that the free market is really great at providing people with what they want in the here and now.

Where the free market seems to fail is in planning for the future requirements and services that the public will need.

If fuel costs continue to rise then the public is going to desire a more developed mass transit system than we currently have in place in this country. It’s obvious that private industry is not going to invest in a mass transit system, since they have not to date. We could have a serious near term need for this system.

I think government needs to have a more active role in trying to forecast the future needs of society and in making plans to address those needs.

  1. 63 Responses to “The failing of capitalism”

  2. By pcomeau at 10:56 am on Jul 16, 2008 | ReplyReply directly to this specific comment

    can’t leave the flame war alone I see. :-)

  3. By pcomeau at 11:03 am on Jul 16, 2008 | ReplyReply directly to this specific comment

    But overall I agree.
    Goverment’s role (on the capitalist side of things), imo, should be in one of two broad areas:

    1) Support services that are too large for corproations to support. e.g. sewage, water treatmetn, roads/mass transit, health care, etc.
    This does not mean nationalizing said services (unless that is the only solution) but providing a framework that gurantees universel access, support, and regulation as needed.

    2) Supporting items that do not have obvious pay off in the short term. Mainly this refers to scientific research. It is rare a company can do pure research. I’m talking biology for the sake of biology, etc. The sort of thing that becomes the foundation of the discoveries corporations later make in areas like drugs, egineering, etc.

    That’s the brief overview at least.

  4. By Steven at 11:58 am on Jul 16, 2008 | ReplyReply directly to this specific comment

    More importantly, our medical system fails us with even the slightest peak in demand. God save us should there actually be a bio attack. The problem is actually getting worse instead of better as health care costs rise, feeding the cycle. Seems we’ve learned nothing from 9/11, with expensive knee-jerk solutions instead of real solutions.

  5. By jroosh at 12:07 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Generally speaking, if people need something, they will pay for it, which means there may be a market for it.

    The reason government has to plan and be involved in mass transit is twofold:

    1) People won’t pay what it really costs (at least not yet) especially given the fact that the per mile costs of mass transit according to many experts are not lower than efficient automobiles. As such, private industry isn’t interested because the prospects for profit are low. The result is the subsidized cluster we have now.

    2) Not unlike the water and sewer system, the barriers to entry and low likelihood of multiple, competing private mass transit systems means that government will most likely have to hold domain over mass transit or at least regulate a private monopoly (like the power company for example).

  6. By Bike Bubba at 12:32 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    One of the reasons that the “medical system” is unable to cope with a bio attack (or maybe, I sure hope not if it comes to pass) is that we have state and federal boards who must approve increases in medical school enrollment, new clinics, new hospitals, and such.

    In the same way, if we were going to, say, have escalating fuel prices, I would sure hope that the private sector would not be prevented from getting new supplies by drilling bans, excessive regulation of refineries, and nonstop approval processes for power plants.

    To draw yet another picture, my personal retirement investments are solvent into the indefinite future. Social Insecurity and Mediscare sure aren’t.

    So who exactly isn’t able to plan for the future? If you said “government,” go to the head of the class. If you said “markets,” well, let’s try again.

  7. By little d at 12:44 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    “More importantly, our medical system fails us with even the slightest peak in demand”

    Actually I don’t think this is true. Since 9/11 all medical facilities (at least in the metro area)have had to run quarterly drills related to a catostrophic event. I think we’re more prepared now then we were before. Of course there’s always room for improvement but I think the metro hospitals handled the 35W bridge collapse very well.

  8. By little d at 12:53 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    One more thought. If there was a bio attack on the metro area, most medical personel in the area would be infected rendering them useless. No amount of new providers or clinics in the area would fix this. We’d be fucked. (Except for the guy that covered his house in plastic wrap, he’d be fine)

  9. By Bike Bubba at 1:00 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    OH, and by the way, when transit was private, it was profitable. The buses were also more fuel efficient than today, believe it or not.

  10. By pcomeau at 1:14 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    when transit was private, it was profitable. The buses were also more fuel efficient than today, believe it or not.

    Citation Please.

    On bio attack. Can’t do that topic justice. Please go read http://armchairgeneralist.typepad.com/ for a good perspective and understanding as to how bio and nuclear weapons work and why they are really hard to use.

    So who exactly isn’t able to plan for the future? If you said “government,” go to the head of the class. If you said “markets,” well, let’s try again.

    Well that depends now doesn’t it. I would say markets do not plan for the future. Most are centered around short term profit gains wich does not allow or reward long term planning.

    Private companies, if run well, can do well at long term planning, for their own profit (e.g. Cargill) but that doesn not equate to planing that helps a community.

    Goverments have their good and bad sides, but can do well at long term planing. Again depends on what the topic is.

    In other words you’re creating an either/or dichotomy that I just don’t see. Goverments or bussiness. When in reality it has to be both.

    Again some things can not be run as pure, for profit ventures (e.g. sewage, water, roads, rail.)

    If you want to see where unrestrained capitalism leads, look over the history of the U.S. Rail Roads.

  11. By baba at 2:15 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    “when transit was private, it was profitable”
    Again, bullshit
    The same guy who extorted the new Twins stadium from the general public, is the same guy who let the local transit system deteriorate to the point that he came to the tax troughs begging for help for his ‘public’ facility. Twin City Lines became Metro Transit and he went on to form a banking business. Capitalism has no one to blame for it’s bad rep, other than Carl Pohlad.

  12. By monty p at 2:44 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Here is *ONE* transportion project in the Twin Cites on 494:

    http://www.dot.state.mn.us/metro/projects/i494/sch edule.html#stage2

    $137M, $628M, $120M+60M, $205M+55M, $128M

    If we are going to require mass transportation to make a profit, when are we going to see returns on the billion-plus dollars spent on 494?

  13. By Bike Bubba at 3:02 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Um, pcomeau, how on earth would you have me believe that an industry as subsidized as railroads could possibly be an example of unrestrained capitalism? Come on, now. Do you not remember that Lincoln was a railroad lawyer campaigning for subsidies for the UP/CP? Do you not remember that Leland Stanford robbed the government of tens of millions of dollars in railroad subsidies?

    http://www.lewrockwell.com/anderson/anderson132.ht ml

    Put bluntly, the example of J.P. Hill’s Great Northern Railroad shows very conclusively that railroads can be, and are, run very well by the private sector. It is the public sector (Amtrak, Conrail, and formerly the U.P.) that seems to have trouble with this, not the private sector.

    There are also profitable, private companies that sell water, waste treatment, and road usage. (ever heard of a “toll road”?)

    And yes, private transit companies were profitable. How does one know? They existed, and private companies don’t exist for long unless they turn a profit.

  14. By Bike Bubba at 3:04 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    And Pohlad? Well, when he knew that St. Paul would bail him out, what do you expect? Yes, it’s reprehensible. Yes, it’s also what you guys are explicitly saying you’d vote for.

    Take a hint. You don’t want bazillion dollar payouts to billionaires? Great. Try private enterprise.

  15. By Adam B at 3:04 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Has anybody else heard the story of GM buying up several cities’ trolley lines (including Minneapolis’s) and destroying them so that they could sell buses?

    There’s the “free” market for you. I believe they settled that case.

    jroosh is sorta close. Here are the three rationales for govt involvement:
    1. Natural monopoly or oligopoly. Sometimes economies of scale are so good that any ol’ firm can take over and screw us all. There’s no way to stop this but govt regulation or provision.

    2. Collusion, price setting, and gouging. This goes along with #1 as non-competitive behavior. Free markets only work under competition.

    3. Positive externalities, public goods. This includes education, national defense, lighthouses, highways, and many types of infrastructure. This also often overlaps with #1.

    To me, mass transit qualifies under #1 and to a lesser degree under #3. Mass transit would get a lot more profitable if we spent less on highways and parking, and gave preference to buses in street design and traffic law.

    Private firms also don’t have many of the legal tools needed to run a transit system, I think. Eminent domain seems to be kinda handy for that.

    I think public spending on stadiums is a shame. It’s usually justified under #3, but I don’t really believe the benefits are there. If anyone can point to research that says otherwise, I’d love to see it.

    Overall, I’d say firms do quite a bit better than the govt for long term planning. Although this statement sickens me:
    To draw yet another picture, my personal retirement investments are solvent into the indefinite future. Social Insecurity and Mediscare sure aren’t.
    Obviously Bike Bubba has an underdeveloped sense of how lucky he is to have a secure retirement. I’d almost say that attitude of smug arrogance is a common feature of most conservative rhetoric, the myth of the “self-made man”.

    Fact is, it only takes one or two bouts with cancer to make Social Security and Medicare very relevant. Luck plays a bigger role in our lives than conservatives care to admit, which is to me the first and worst form of hubris.

  16. By bruce at 3:18 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    The buses were also more fuel efficient than today, believe it or not.

    Citation, please. I think you may be mistating the facts on this one. Buses may have been more fuel efficient PER PASSENGER MILE in the past, but I doubt the actual fuel efficiency of a modern transit bus is lower than they were in the “glory days.” Suburban sprawl and the extension of bus lines into these lower density population areas is largely to blame for decreased fuel efficiency per passenger mile. Plus, cars and gas became more affordable to the average person after WWII, fueling suburban sprawl and creating a culture of single-occupancy vehicles.

  17. By BA at 3:30 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Adam B. Superb exposition on the subject. Dead on.

  18. By Bike Bubba at 3:41 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Here you go on bus fuel efficiency. Down since the 1970s.

    http://www.lafn.org/~dave/trans/energy/fuel-eff-20 th-1.html

    And Adam, the way Social Insecurity and Mediscare are going–completely screwed up actuarial realities–you and I won’t have them in a couple of decades if we should get cancer. Try your private investment accounts.

    Yes, sometimes private businesses concentrate on quarterly results at the expense of the long term. That said, it’s nothing in comparison with a prostitute’s–I mean politician’s–drive to be re-elected. You want short term thinking? Let’s talk about a politician who knows that he’s simply got to convince the voters for a few months every two or four years.

    That’s why government does so poorly at long term planning. Nobody in government loses their shirt, or even their pension, if they lose billions or even trillions of taxpayer dollars. You can’t say that about any business.

  19. By little d at 3:45 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    “Let’s talk about a politician who knows that he’s simply got to convince the voters for a few months every two or four years.”

    Like when Mccain wanted to do away with the gas tax for the summer driving months?

  20. By bruce at 3:55 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Bike Bubba,
    As is suspected, even your source is talking about efficiency in terms of passenger-miles per gallon, not actual miles per gallon:

    Today, the urban city buses do little better than the automobile in energy-efficiency, but the intercity buses are the most energy-efficient mode of travel and get over 125 pass-mi/gallon. See [25] and [TEDB] and [30]. While intercity buses have seemingly somewhat improved in energy-efficiency during the 20th century, urban buses have become significantly worse starting about 1970. Part of the reason may be subsidy, which permits urban buses to continue operating even when they have few passengers. The intercity buses are not subsidized and must maintain high passenger loads (resulting in high energy-efficiency) in order to survive.

  21. By Bike Bubba at 3:58 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Little D:

    YES. It’s an incredibly bad idea to change the rules in the middle of the game, as anyone who’s ever played knows.

  22. By bruce at 4:02 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    … to follow up, I acknowledge that to be efficient, transit needs population density. But, as resources (not just oil) become more scare, transit will likely become more viable and efficient.

    It also could be said with some degree of certainty that if private enterprise provided transit, only intercity lines would be in operation unless subsidies continued.

    Just keep in mind that travel in a single-occupancy vehicle is also highly subsidized, particularly in terms of the cost of road construction.

  23. By pcomeau at 4:11 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Wow bubba you just bolstered bruces’ point.
    The article you link to dicsusses efficiency in passenger/mile terms. And in fact points out the more modern data includes commuting lines that were once considered inter-city bussing (e.g. Greyhound.) Changing the average efficiciency as bruce suggests.

    So wich difinition of fuel efficiency are you using for clarifcation. per-passenger or mpg.

  24. By bruce at 4:22 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    One point not likely considered in the efficiency equation is the decrease in transportation efficiency that would occur due to increased congestion if urban transit were eliminated. Every car replaced by urban transit during rush hour incrementally reduces congestion, thereby increasing the overall efficiency of the whole transportation system.

    More than likely the efficiency stats have changed for the better for urban transit lately with the high cost of fuel. Ridership is up.

  25. By Bike Bubba at 4:38 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Yup, I backed up a portion of Bruce’s point. Now keep in mind that the same source refutes the claim that the government ought to be in transit. More or less, they’re saying that due to subsidies, urban transit burns more fuel than if you bought each rider a reasonably fuel efficient car.

    Oh, did government fail to calculate the effects of running the buses empty 3/4 of the time, but Greyhound did not? Really? Now who has the better long term sustainability, Greyhound or urban transit planners?

    (here’s how most transit is mostly empty 3/4 of the time; wrong way buses in rush hour, and off peak buses, are usually pretty empty….you lose your efficiencies of scale pretty quickly that way)

  26. By Baba at 8:43 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    “You don’t want bazillion dollar payouts to billionaires? Great. Try private enterprise.”
    I think the amount was around 1.5-2 mil, which was a ton in ‘55, and that is exactly what we did; paid it out to a private enterprise. It wasn’t making a profit for Pohlad, so he let it fail and then asked for a handout to fix it. He used exactly the same tactics with the stadium; “how can I make a profit with (switch underpaid players and the Metrodome with buses), when I have this crap to work with.”

  27. By Buckeye Rider at 8:49 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    That’s why government does so poorly at long term planning. Nobody in government loses their shirt, or even their pension, if they lose billions or even trillions of taxpayer dollars. You can’t say that about any business.

    Huh? Never heard of golden parachutes?

  28. By Bruce at 9:37 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    The express commuter route I used to ride to from the northern ‘burbs to St. Paul was at worst 1/2 empty due to return trips. But empty return trips were minimized because the route was subcontracted to a private bus company located northern ‘burbs and they also used this company for a regular route during the day so most of the buses used for commuters in the afternoon would be downtown already. The trips with riders were almost always full or nearly full, and often had people standing in the aisles. That was two years ago. I’ll be they’re even more crowded now.

    More or less, they’re saying that due to subsidies, urban transit burns more fuel than if you bought each rider a reasonably fuel efficient car.

    So are you saying government should subsidize Priuses for all? That’s what it sounds like you’re saying. I know it’s not what you meant, but the white paper you cited doesn’t really consider capital expenditures in the fuel-efficiency equation with respect to everyone buying fuel-efficient cars. Priuses aren’t cheap. You could probably only buy 10 of them for the price of a transit bus. So while they may end up being more fuel efficient, the return on investment to make up the difference on the initial expenditure would pretty much wipe out any economic benefit from people driving alone in a Prius instead of riding a bus.

    The white paper also discounts the potential for transit to be more fuel efficient. As oil and other resources become more scarce, ridership will continue to increase (not everyone will be able to afford a Prius). In addition, I think you’ll see more people moving closer to where they work potentially making commuting by transit more efficient and viable by eliminating the long dead-head commuter runs.

    I’ve now seen two libertarian “studies” that attempt to address fuel-efficiency and transit in an effort to show why transit should not be subsidized, but neither study really considers the big picture. They pick and choose their facts and examples carefully to promote their case without really discussing the whole picture with all of the pros and cons laid out. Fuel efficiency is only one of the issues at hand.

    In the end, though, I do agree transit isn’t necessarily the best solution. Living walking or biking distance from work is probably a better solution. I’m fortunate in that regard. In September my workplace will be moving from a location 4 miles away to a location one and a half miles from my house. Nevertheless, I will continue to be a transit advocate. I don’t want to live in the concrete jungle it would take to expand our highways enough to eliminate congestion even if everyone did buy a Prius.

  29. By Adam B at 10:53 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Nobody in government loses their shirt, or even their pension, if they lose billions or even trillions of taxpayer dollars. You can’t say that about any business.

    I second Buckeye Rider–I could say that about lots of businesses. Most if not all executives who lose millions of dollars still remain in the top 1000th of the wealth distribution.

    In fact, I can’t think of any execs who’ve lost their shirts. Which leads me to wonder if you know what it really means to lose one’s shirt.

    It bears repeating because I think it’s true:
    Conservatives consistently underestimate the level of unjust suffering in the world because they assume everyone is as lucky as they are, or they negate the role that luck and others’ help has played in their lives.

    Am I wrong on that? Are there conservatives who are both humble and conservative?

  30. By Smithers at 11:08 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    Are there conservatives who are both humble and conservative?

    Rush Limbaugh?

  31. By Bruce at 11:36 pm on Jul 16, 2008 | ReplyReply directly to this specific comment

    It bears repeating because I think it’s true:
    Conservatives consistently underestimate the level of unjust suffering in the world because they assume everyone is as lucky as they are, or they negate the role that luck and others’ help has played in their lives.

    …”others’ help” includes the public subsidies from which they benefitted, either directly or indirectly.

    Well said, Adam.

  32. By pcomeau at 7:08 am on Jul 17, 2008 | ReplyReply directly to this specific comment

    Thank you smithers I needed a spit take this morning.

    Oh and I second what Adam B said. We are long past being the nation where one could pull themselves up through the economic ladder. Sadly we continue to advertise that dream.

  33. By skibby at 9:22 am on Jul 17, 2008 | ReplyReply directly to this specific comment

    The guy who started Facebook, he was born rich?

  34. By pcomeau at 10:12 am on Jul 17, 2008 | ReplyReply directly to this specific comment

    skibby:
    Dobbs Ferry, where Zuckerman grew up, median income (2000 census, via wikipedia) was “…median income for a household in the village was $70,333, and the median income for a family was $93,127.”

    You’re call on the rich or not. By the time he was a senior in highschool Zuckerman was being recruited by Microsoft and decided to go to Harvard for university (instead of MS.)

    Again, your call as to his family’s income level at the time. That’s all the data I was able to dig up.

  35. By Adam B at 1:02 pm on Jul 17, 2008 | ReplyReply directly to this specific comment

    Skibby:
    According to wikipedia Zuckerberg went to Exeter for high school, which with Andover is one of the two fortresses of the American elite.

    Whether he personally grew up wealthy, he’s certainly had some dumb luck in life.

  36. By skibby at 1:15 pm on Jul 17, 2008 | ReplyReply directly to this specific comment

    So it’s still possible to have dumb luck, that’s all I need…

  37. By pcomeau at 7:33 am on Jul 18, 2008 | ReplyReply directly to this specific comment

    on the medical front… with state based insurance I wouldn’t have to worry about announcements like in the Strib today (7/18 - business section)
    “Fairview could leave Blue Cross network.”

    If no agreement is reached clinics would drop out of system by 8/23 and hospitals by 10/28.

    Yup… gotta love our system. I could loose my cardiologist of the last 4 years (who knows my history) cause there ain’t no way I could afford the out of network cost.

    Yup… Gov is evil. Capitalism is the only way to go. I’m sure the appropriate people will explain to me, with many a citation, as to how Fed and State gov are to blame for this one.

  38. By Bike Bubba at 12:52 pm on Jul 21, 2008 | ReplyReply directly to this specific comment

    While not every executive of a failing company loses his shirt, their compensation IS linked to profitability and stock price. You simply cannot say the same about those in government. The quality of decision-making correlates to this very well.

  39. By checkbook at 1:08 pm on Jul 21, 2008 | ReplyReply directly to this specific comment

    While not every executive of a failing company loses his shirt, their compensation IS linked to profitability and stock price.

    Name two.

    If you can’t, maybe you can provide a few examples of exectutives who’s salaries/bonuses/compensation packages have taken a hit that is congruent to losses they may have presided over.

  40. By pcomeau at 5:14 pm on Jul 21, 2008 | ReplyReply directly to this specific comment

    While not every executive of a failing company loses his shirt, their compensation IS linked to profitability and stock price.

    Actually exec compensation is linked to a variety of factors, not just profitability. Growth factors do not always equal profits (e.g. going from national to international might create short term loss, with long term profits, but the exec will get the bonus for the short term success.)

    Also, with rare exception, the exec’s base compensation (normal salary) is not tied to profitability. Year end bonuses normally will be, in the form of stock options, etc.

    Finally the infamous “golden parachute” which guarantees the exec will get money not matter what, also ensures they will not be really punished.

    As for comparing to a gov position… not the same. The motivations, rewards, etc. are very different. Just like there are bad execs, there are good people in government. So I really don’t accept you black and white position on the matter.

    Separate matter:
    So again… is the BC/BS vs. Fairview a failing of government or the for profit healthcare system?

  41. By Bike Bubba at 12:56 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    Checkbook, pcomeau; if you want an example of someone who’s gone belly up as a result of poor business decisions, what about Donald Trump, who’s declared bankruptcy twice? Or any number of celebrities who invest in any number of get-rich schemes? Remember Kareem Abdul-Jabbar abruptly switching from Converse to “LA Gear”? Reason was…he was broke.

    Executives tend not to do so as much–like most of us, they put aside money in financial instruments not linked to their primary business. That noted, can we seriously claim that the executives of a company whose profitability and stock price are sliding are not taking a financial hit? That, say, the executives at GM aren’t taking a big hit from that company’s lack of profitability and stock slide? That, say, Seagate execs didn’t take a hit with no bonuses last year, and a sliding stock price that erased the value of their recent stock options?

    And your cardiologist, pcomeau? Well, consider the implications of Medicare, Medicaid, MNCare, employer paid healthcare, and HMOs, all created by governent. A huge portion of obese, sedentary smokers know that they pay the same for health insurance whether they shape up or not. Think that might move the demand curve a bit? Do ya think that if they had to pay a bigger share of the costs, they might be more likely to ditch the coffin nails, eat a salad, and take a walk?

  42. By pcomeau at 2:04 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    on exec pay:
    Bonus and stock options are payed above and beyond base salary. A bonus is not something one should count on getting. Stock options are usually ways to ensure an executive’s loyalty to the company. He’ll want to make sure the company does well on the market to make sure he can realize gains in the future.

    But neither really affects an execs bottom line in the negative. If their base salary is not cut (and it rarely is) there is no loss. Just loss of potential profit (which, if they’re so smart, they don’t include when creating a budget. kKnda like realized vs. unrealized gains.)

    On the health front:
    What implications? We’re talking simple negotiations between two companies. If they don’t reach a deal I pay for it. I loose my doctor and have to find a new one, most likely doubling my drive time to go see them.

    Yes my employer covers part of my insurance, but again that has nothing to do with the BC/BS vs Fairview issue.

    So please explain your reasoning… I’m not a smoker. My need for a cardiologist stems from a childhood birth defect. The defect itself based on random happenstance (e.g. nothing the mother does or doesn’t do causes it. Just pure chance.) So I don’t know where the smokers tangent is coming from. Let alone talking existing programs vs. creating something new that could help people.

  43. By Bike Bubba at 2:40 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    pcomeau, it doesn’t matter what YOUR heart disease comes from in this matter. Rather, it matters why your provider thinks they can charge more than Blue Cross is willing to pay.

    One bit part of this is that there are millions of people who have “earned” their heart disease through obesity and smoking, but will never receive the bill for the cost of their treatment.

    Along those lines, financial incentives work. Just ask someone whose job is to sell Hummers in an age of $4/gallon gasoline. Chevy just cut truck production by about half, as did Toyota and Ford.

    Government intervention (things I’ve listed and more) prevent the patient from seeing the bill, and hence the price of care is inflated by demand that otherwise wouldn’t be there.

  44. By Bike Bubba at 2:42 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    And yes, a bonus is not a guarantee, but if you want to keep people thinking about the interests of the business, you’re insane not to give them a cut of the profits, no? If a cut of the profits is a positive incentive, a cut of no profits is the same thing.

    Yes, it’s hard for ordinary earners like myself to understand how someone would have “need” with a million dollar salary, but reality is that it works.

  45. By checkbook at 3:44 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    Government intervention (things I’ve listed and more) prevent the patient from seeing the bill, and hence the price of care is inflated by demand that otherwise wouldn’t be there.

    Incorrect. As mentioned before (by pcomeau?), insurance companies send patients a “non-bill” itemizing what was paid for, what is the patient’s responsibility (if any) and what the price agreed to pay in total was.

    Moreover, you are grossly oversimplifying the situation. A person’s need to visit a medical practitioner is not comprable to a person’s want of a consumer product. More importantly, your suggestion necessarily cuts the poor out of the equation when it comes to who will have access to medical care. Does a heart by-pass cost what it does because of “inflated demand” alone? No. I’m certain there is a basic price for the cost of the doctors, needed equipment and procedure itself ; and I’m equally certain that it isn’t something the average american (much less poor american) can afford out of pocket. I’ll be the 2nd or 3rd person here to quote Plan B: “Conservatives consistently underestimate the level of unjust suffering in the world because they assume everyone is as lucky as they are, or they negate the role that luck and others’ help has played in their lives.”

    Bubba, why do you feel that those less fortunate deserve lesser or no medical care at all?

  46. By checkbook at 3:49 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    And yes, a bonus is not a guarantee, but if you want to keep people thinking about the interests of the business, you’re insane not to give them a cut of the profits, no? If a cut of the profits is a positive incentive, a cut of no profits is the same thing.

    Yes, it’s hard for ordinary earners like myself to understand how someone would have “need” with a million dollar salary, but reality is that it works.

    What works?? What does this even have to do with the question of whether executives “loose their shirts” (your words) when the companies they steer don’t perform? Nada, I’m not sorry to say. Please, please, please try to stay on topic. Re: Seagate specifically… the latest data I was able to dig up regarding top execs’ base annual salaries was something in the neighborhood of over 2.25 million shared among the top three executive officers (the CEO pulling in about a mil). Even without the bonuses, explain to me how this constitutes loosing one’s shirt.

  47. By pcomeau at 5:05 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    Incorrect. As mentioned before (by pcomeau?), insurance companies send patients a “non-bill” itemizing what was paid for, what is the patient’s responsibility (if any) and what the price agreed to pay in total was.

    Correct in the industry this is known as an Explanation of Benefits or simply EOB.

    Fairly standard procedure now a days, actually standard since at leas ‘98 (wife used to work in Fairview’s billing dept. back then.)

  48. By Bike Bubba at 5:11 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    Checkbook, you are aware that I’m primarily referring to paying the bill, right, and that there is no evidence that the very prosperous quit working when they arrive at a certain threshold, right?

    Reality is that no matter what level of income one attains, more or less will influence behavior. And hey–I’ve given you some examples of people who literally have gone broke due to bad business decisions. It’s a reality that government workers generally don’t face. Rather, they get their pensions no matter what.

    It affects the quality of their decisions, too.

  49. By jkruse at 5:41 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    I’ve given you some examples of people who literally have gone broke due to bad business decisions.

    Donald Trump’s business filed for bankruptcy.

    I never saw him driving a ‘79 Pinto.

  50. By checkbook at 7:16 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    And hey–I’ve given you some examples of people who literally have gone broke due to bad business decisions.

    Oh, you mean Kareem Abdul Jabar and Donald Trump? These are not examples of corporate executives, bubba. An ex-basketball star who mismanaged his finances and an ego-maniacal entrepreneur are not what we’re talking about. So, sorry, you didn’t. You can definitely try again though!

    My grandfather (who worked for GM most of his life after emigrating to the states) has seen his pension disappear the last couple of years (as in terminated). Tell him that an executive’s million-dollar base salary is something to scoff at cause there’s no bonus attached to it *this year* and see if he doesn’t smack you. That, buckaroo, is called loosing one’s shirt. Is there anyone in GM’s executive circle who has zero dollars of any sort of income as a result of their financial troubles? Yes, it’s a slap on the wrist/”bad job!” to not get that bonus at the end of the fiscal year as an exec, but who’s arguing that? We’re arguing that it doesn’t constitute loosing one’s shirt. Missing the point is turning into your MO.

    Checkbook, you are aware that I’m primarily referring to paying the bill, right[?]”

    Your statement implies that patients don’t pay attention to costs of care because they don’t have to pay the bill themselves, and thus seek treatment willy-nilly for whatever reason, and that this, in turn, creates unnecessary demand driving up medical costs. Are YOU aware that this is all occurring in your “free market” health care system? Anyway, if you have issue with this false demand for medical treatment you need look no further than the pharmaceutical industry for their efforts in drug marketing. Drug mfg’s market the living crap out of their products, telling people they need X drug for X sickness: “if you have trouble sleeping/walking/breathing/eating/shitting/et al. go talk to your doctor about (our product) today!” Talk about artificially created demand. And if there are that many more people (than there ought to be, as you imply) who are using a good (medical treatment for a given illness, say for one’s heart) then shouldn’t the insurers be able to negotiate better pricing — you know, volume discount, what they are supposed to be doing? Now I hear you typing already… this is exactly what BC/BS is doing walking away from Fairview cause Fairview still feel the prices are too darn high. But we’re not talking about a car-purchase here, are we? We’re talking about a human being’s life and quality thereof. Should it not be treated with a bit more reverence? (after all, you are vociferously anti-choice, aren’t you?) This begs the question: whose interests are most important here? The patient’s? The insurance companies? The underlying theme of this debate for me is that I don’t want the cheapest medical service, I want the best medical service. If I’m happy with my doctor and have a relationship, who is my insurer to decide for me that it’s too expensive? Expense should have nothing to do with it; only quality of care. And if I find a doctor who I feel provides the best quality of care out there, I want to be able to see this doctor.

    pcomeau, it doesn’t matter what YOUR heart disease comes from in this matter. Rather, it matters why your provider thinks they can charge more than Blue Cross is willing to pay.

    One should also ask why is it that Blue Cross feels they need not pay the fair market value of a given medical service? Perhaps more importantly, how does this argument of yours reconcile with your arguments elsewhere on this blog regarding let-the-free-markets-roll-sans-regulation. Do you want someone to regulate what providers are able to charge for various procedures/services? Sounds here like yes, but that goes against what you’ve said elsewhere. I’m confused!

  51. By pcomeau at 8:58 pm on Jul 22, 2008 | ReplyReply directly to this specific comment

    checkbook

    I’ve come to the conclusion we’re entering a tautology with Bubba.
    Gov interference is bad.
    Gov non-interference is bad.

    So… what then?
    Corporate subsidized health care is bad (even though its a benefit, to encourage me to work at company a, b, or c. Bubba forgets, imo, that healthcare subsidized by your workplace is not required and not everybody gets it.)

    And I’m not even going to get into national vs. regional health insurance (e.g. my company is national, hence use of BC/BS. Cheaper then using multiple regionals like Medica.)

    So in short… all I can glean from Bubba’s point is.. I should quit my job and find one with the health insurance I need. Regardless of the other ramifications.

    Next up… best cardboard box for inclement weather.

  52. By Bike Bubba at 12:12 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    Y’all, it’s hard for me to believe that you know full well that the price of food, gas, or bicycle components will influence what and how much you purchase, and the wages you earn influence what job you’ll take, but you absolutely refuse to apply these same basic economic principles to medicine.

    Separate a man from the consequences of his health decisions, as HMOs/employer paid healthcare/Medicare/Medicaid/MNCare do, and what do you expect to happen to demand? It goes up, right?

    Now, separate a man’s compensation from the results of his work, as all bureaucracies do, and what do you think happens to the quality of his work? If you said “Amtrak!”, go to the head of the class.

    Is this really so complicated to you? Yes, those government programs appear to be a benefit, since you haven’t seen anything different. The reality, though, is that prior to government involvement, the price of medicine was a lot lower. Here, for example, is an accounting of a live birth in 1941.

    http://www.lewrockwell.com/rozeff/rozeff112.html

    In the same way, the bills for my birth (1969) and my brother’s (1971) are about $1000 then, or about $6000 today.

    Real bills for a C section birth today are about four to five times that amount. Yes, you get more care in some ways, but that much? This is what you get when you let government into the mix.

  53. By T3 at 2:05 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    that article is stupid. look at the advancements in medicine since then. i’d say after adjusting for the valuation of the dollar, you got what you paid for in ‘41. which was a dood standing there and supervising that all goes according to plan. is healthcare more expensive today? yes. is healthcare better? yes. there is more technology at our disposal. more testing. as a result less babies and mothers die. that’s the price we pay for advancement as a civilization.

  54. By checkbook at 2:43 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    The link to some fossil’s cost of birth is amusing and all but really nothing more than an anecdote akin to “when I was your age, I walked to school in the snow for 13 miles barefoot!” You’re really comparing medical care in the 40’s with today’s with the intent of remeniscing about the good ol’ days?? For starters, the infant mortality rate has come down tremendously since the 40’s. Check out this link comparing 1950 to as recently as 2003, generally a quarter if not more of what they were then:

    http://www.infoplease.com/ipa/A0779935.html

    Or how about the change in death (per 100,000) in the US alone for things like TB (45.9 in 1940 vs .2 in 2005). Get real, man.

    As for the bit of evidence you supply:

    In the same way, the bills for my birth (1969) and my brother’s (1971) are about $1000 then, or about $6000 today.

    Accounting for inflation, that actually wouldn’t be too far off; from a purchasing power calculator I found on the web: “$5654.27 in the year 2007 has the same “purchase power” as $1000 in the year 1969.” (they only went to ‘07, as you can see). So, what’s your argument again?

    And please STOP speculating about the quality of work of gov employees. This is an unsubstantiated opinion of yours; you need to stop stating it as a matter-of-fact. While you’re at it, leave out the hints at Amtrak and the like as well — merely bringing them up does not bolster your claims. It is as if I said “birds are capable of flight” to support my arguments on these topics. Yea, birds can fly. So what?

  55. By Bike Bubba at 3:27 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    No speculation at all here. Anyone who interacts with the TSA, IRS, Amtrak, or other federal agencies knows what pay by seniority instead of pay by performance yields.

    Now, let’s try telling the guys who are selected to work at that clinic in Rochester that they’re going to get the same pay as the guy in Waconia. What happens to their initiative to put in the extra hours to learn to provide the best care?

    Yeah, it goes down a little bit, doesn’t it?

    Now, let’s consider what people put on their travel expense reports vs. what they eat when they’re paying the bill. Looks a little different, doesn’t it? Looks like they’re having a few more drinks, eating more steak, and so on when it’s on the company dime, doesn’t it?

    Now why the heck would we want to effectively put all medical care on a company expense report? See the problem?

    And the new devices in obstetrics? Not the issue, really, since the bill comes as pay for service. The point here is that for basic birth with no complications, the price is up about tenfold.

    (and those deaths in 1941? Think it might have something to do with the fact that penicillin wasn’t readily available yet, and the moms had been raised on Depression era diets? yeah, I do too…and those aren’t the big hitters in medical costs by any stretch of the imagination)

  56. By T3 at 3:44 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    oh bubba, it must hurt to be so wrong all the time.

    don’t go back to ‘41. go back to 35 years. when moms gave birth in rooms with 5 other mothers and were given a little ether – just to take the edge off, you know.

    you really think there has been no improvements in the child birthing experience? I’ll throw the technology aside.

    it’s simply more bang for the buck. and more likely that if things go badly — you won’t be burying your baby in a pine box.

    compare your mother’s child birth stories to a mom today. 6 grand when you factor inflation is a bargin.

    p.s. this argument is stoopid anyway since you are nickle and diming the birth of a CHILD! i’d pay 3 times that for my 3 kids and feel that it was worth every penny.

  57. By checkbook at 4:21 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    Now, let’s try telling the guys who are selected to work at that clinic in Rochester that they’re going to get the same pay as the guy in Waconia. What happens to their initiative to put in the extra hours to learn to provide the best care?

    You simple, simple man… allow me to relay an anecdote of my own (but with context): a friend of mine spent the last 10 years of her life in pre-med undergrad and is now a resident at Mayo. She gets paid the same as most any other resident anywhere. Why did she choose Mayo? Why did she choose medicine to begin with? Cause it’s important to her to help fellow human beings as best she can with the best training available. So no, her inscentive doesn’t go down (or up, for that matter) because of anything remotely pertaining to financial inscentive. Her inscentive was there well before applying to Mayo for residency and is far beyond the the scope of black and white salary; it’s the sort of inscentive that, sadly, you seem to know nothing about. Human behavior is not motivated solely by black and white triggers. Yes, there are folks (doctors included) whose primary motivation is the cheddar. It’s too bad — they are lame in the most true sense of the word — but you simply can not generalize and extrapolate that to an entire group of people. Again, get real.

    Now, let’s consider what people put on their travel expense reports vs. what they eat when they’re paying the bill. Looks a little different, doesn’t it? Looks like they’re having a few more drinks, eating more steak, and so on when it’s on the company dime, doesn’t it?

    Well, I can speak for myself and I do not. Too bad for your employer, I guess. Still, I don’t see how this has anything to do with what medical system we should persue in the US.

    As for your BS about penecillin (and leaving aside the fact you offer nothing to back up your claims of what was or wasn’t available to birthing mothers), do yourself a favor and swing on over to wikipedia; the submission for penecillin bears a caption under one of the photos that states “Penicillin was being mass-produced in 1944.” Again, you speak to things about which you do not know. It is really fruitless to argue with you as it goes nowhere fast.

    checkbook - I’ve come to the conclusion we’re entering a tautology with Bubba.

    Agreed. I’m done.

  58. By jkruse at 4:46 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    Since you brought it up, an crucial component of the Mayo model of care is that all physicians in a given specialty are paid the same salary, regardless of patient or procedure volumes. Those salaries are typical of large medical practices.

    Your assumption that people choose to work at Mayo primarily because of financial consideration is incorrect, and frankly, a bit sad.

  59. By T3 at 4:57 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    it was clear to me he was saying she chose to work there because she is driven by things other than money. re-read it.

  60. By T3 at 5:00 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    my bad — which comment where you refering too?

  61. By little d at 5:00 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    Bubba’s funny and I can’t believe you guys are falling for him. He’s just pulling at you and you’re falling for it. I mean you can’t honestly believe this guy believs the stuff he’s writing do you?

  62. By checkbook at 5:09 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    Bubba’s funny and I can’t believe you guys are falling for him. He’s just pulling at you and you’re falling for it. I mean you can’t honestly believe this guy believs the stuff he’s writing do you?

    I’d like to think not but then again our resident tool in office got re-elected in ‘04. I didn’t believe that was possible either. Still, you are correct.

  63. By jkruse at 5:31 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    my bad — which comment where you referring too?

    I guess it wasn’t clear I was replying to Bubba, whom I don’t find particularly funny.

  64. By pcomeau at 6:54 pm on Jul 23, 2008 | ReplyReply directly to this specific comment

    little d - until I find out otherwise, I take bubba’s words as his real opinion. I’ve sadly met many people in real life (most recently right wing dba I worked with) who do hold such opinions.

    But It would be nice if you’re right.

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