Until March 1933, these were the years of President Herbert Hoover — the man that anti-capitalists depict as a champion of non-interventionist, laissez-faire economics.
Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.
The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war.
Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.
Foreign companies and their workers were flattened by Smoot-Hawley’s steep tariff rates, and foreign governments soon retaliated with trade barriers of their own. With their ability to sell in the American market severely hampered, they curtailed their purchases of American goods. American agriculture was particularly hard hit. With a stroke of the presidential pen, farmers in this country lost nearly a third of their markets. Farm prices plummeted and tens of thousands of farmers went bankrupt. With the collapse of agriculture, rural banks failed in record numbers, dragging down hundreds of thousands of their customers.
Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP increased by about one-third.
Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”
To compound the folly of high tariffs and huge subsidies, Congress then passed and Hoover signed the Revenue Act of 1932. It doubled the income tax for most Americans; the top bracket more than doubled, going from 24 percent to 63 percent. Exemptions were lowered; the earned income credit was abolished; corporate and estate taxes were raised; new gift, gasoline, and auto taxes were imposed; and postal rates were sharply hiked.
Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.
February 14, 2016
February 11, 2016
There’s no sign of it here in Magnolia, Ark., but the boycott season is upon us, and graduates of Princeton and Bryn Mawr are demanding “justice” from Wal-Mart, which is not in the justice business but in the groceries, clothes, and car-batteries business. It is easy to scoff, but I am ready to start taking the social-justice warriors’ insipid rhetoric seriously — as soon as two things happen: First, I want to hear from the Wal-Mart-protesting riffraff a definition of “justice” that is something that does not boil down to “I Get What I Want, Irrespective of Other Concerns.”
Second, I want to turn on the radio and hear Jay-Z boasting about his new Timex.
It is remarkable that Wal-Mart, a company that makes a modest profit margin (typically between 3 percent and 3.5 percent) selling ordinary people ordinary goods at low prices, is the great hate totem for the well-heeled Left, whose best-known celebrity spokesclowns would not be caught so much as downwind from a Supercenter, while at the same time, nobody is out with placards and illiterate slogans and generally risible moral posturing in front of boutiques dealing in Rolex, Prada, Hermès, et al. It’s almost as if there is a motive at work here other than that which is stated by our big-box-bashing friends on the left and their A-list human bullhorns.
What might that be?
Kevin D. Williamson, “Who Boycotts Wal-Mart? Social-justice warriors who are too enlightened to let their poor neighbors pay lower prices”, National Review, 2014-11-30.
January 29, 2016
One of the obvious points being made, as is now traditional, concerning the great wealth of the Walton family, those inheritors of Sam Walton’s cash and stock. It’s not actually all that difficult to get people riled up about a store paying an average of $8.80 an hour (for non-supervisory staff) when the people who own the company have some $150 billion in wealth. However, that’s not actually the correct response. And insisting upon a change in public policy so that some of that wealth is paid to those workers, or that it should be taxed away in some manner, would be very much the wrong answer. For, you see, those Waltons actually deserve that $150 billion: we should be absolutely overjoyed that they have it in fact.
So, we get $250 billion a year and the Waltons, the inheritors of the man who started it all off, get $150 billion. We get more than they do: that sounds like a pretty good deal really. Except that is of course to grossly overstate what they are getting. That mountain of cash they’ve got is not an annual figure: that’s the capital value, their wealth, not the income from one year. Our benefit is what we save in one year. That value of WalMart stock is the net present value of everything that WalMart is expected to make in profits from now until eternity (although obviously we use a discount rate so that something 40 years out is given less importance than something next year). So we need to adjust our $250 billion figure in the same manner to make the two numbers comparable.
The easiest way to do that is simply to ignore discounting and to also impose a 20 year time limit. Neither assumption is correct but it’ll give us a nice rough and ready guess at the capital value to us all of those annual savings. And the answer if we do it that way is that the current value of WalMart’s existence to the rest of us is $5 trillion. That’s the number that is comparable to that $150 billion family fortune. They’re both the net present values of future income streams which does indeed make them comparable even if that value to us is calculated in a much simpler manner than the way the stock market values WalMart.
At which point it looks like we’re getting a massive bargain. We get $5 trillion and the people who made it happen only get $150 billion? Why aren’t we cheering in the streets over this rather than demonstrating in them about how awful it all is?
January 26, 2016
Why Superheroes? What is it about the Superheroic genre that makes supermovies better than modern mainstream movies?
The answer is threefold.
First, older mainstream movies, such as GONE WITH THE WIND and WIZARD OF OZ did not follow the modernist and postmodernist tastes which have ruined so many recent movies. Those mentally empty and morally corrupt philosophies had not yet reached mainstream popular entertainment in those days.
So the first part of the answer is not that superhero movies grew better than normal, just that mainstream movies grew worse. This happened as nonconformists of the 1960’s and 70’s became the establishment in Hollywood. Their world view, which I here have called dehumanism, when consistently portrayed, lacks sympathy, drama, purpose, point and meaning; and therefore the films that win acclaim by accurately reflecting the dehuman world-view lose the ability to tell a tale in a dramatically satisfying way. Dehumanity and drama are mutually exclusive. More of one means less of another; and it is a rare genius who can reconcile the two.
The modern movies that most obviously defy these corroded modern conventions are deliberately nostalgic homages to serial cliffhangers: STAR WARS and RAIDERS OF THE LOST ARK. These are among the bestselling movies of all time, and they transformed the industry and the audience expectations: summer blockbuster tentpole movies spring from nostalgic roots.
Second, there have always been superhero movies, such as CAPTAIN MARVEL serial cliffhangers. Not until recently has the special effects been able to match what pen and ink portrays. The amount of suspension of disbelief needed to feel a real thrill untainted with cynicism when watching some feat of derring-do portrayed with cheesy special effects is rather high, and only small children have that much imagination to spare. We grown-ups need more realistic special effects before we will believe a man can actually fly. So technical advances, not any change in the manners and morals of the people, allow superheroics to appear on the silver screen in a fashion that they once upon a time could not.
Third, and most importantly, superhero movies, like homages to serial cliffhangers, are fundamentally nostalgic, fundamentally childlike. One of the conventions of nostalgia is that the audience is not allowed to scoff or look cynical at the simplistic purity of the drama. If someone says STAR WARS is simply too blatantly black-and-white, with its orphaned farmboy hero in a white gi, and evil warlock-knight villain in a black cape, black skull mask, black Nazi helmet, and black lung disease wheezing, that someone just does not “get” the film. The purity of the theme is not a bug, it is a feature.
The superhero movie, along with the crowd of science fiction and fantasy movies, was welcomed into the movie theaters only after STAR WARS made such genre films respectable (which it did by tallying up a respectable profit).
Now, mere nostalgia is not the selling point. GONE WITH THE WIND or MEET ME IN SAINT LOUIS or CINDERELLA MAN or SEABISCUIT are all nostalgic movies, historical period pieces taking place in periods still within living memory (at the time they were made) of the older members of the audience. No, the rise of cliffhanger serial movies and superhero movies are a particular type of nostalgia: a longing not for our childhood, but instead for the stories from serials and comics of our childhood.
And this is for the most practical and obvious reason imaginable: stories from the serials and comics of our childhood were more decent, more entertaining, and, in their simplistic way, a better reflection of the Great Tale of salvation and redemption which makes all great stories great.
Childhood tales of heroes and superheroes are not tainted with deconstructive postmodernism. Tales of heroes are about salvation, saving people in the most literal sense of the word.
John C. Wright, “Supermanity and Dehumanity (Complete)”, John C. Wright’s Journal, 2014-12-13.
January 22, 2016
… the free market flourishes when everyone, most of the time, refrains from taking advantage of each other’s vulnerability.
Many people, especially college professors, are surprised by how much honesty, reciprocity, and trust exist among those who engage in business. The biggest, most successful corporations in the world, such as Google and Apple, are renown[ed] for how much they trust their employees and how much independence they give them. (There are much smaller companies that do so, too.) A very successful entrepreneur I know told me recently that the key to running a large, profitable business is to treat your employees, suppliers, and customers with respect and like responsible people. It’s just not possible always to be looking over someone’s shoulder.
When you trust people to reciprocate that trust, you’re taking a chance that they may take advantage of you. Such pessimism, however, means your relationships with other people — your suppliers, employees, and customers — will never have a chance to flourish. That’s why it goes against your long-term interests to hunker down and never leave yourself vulnerable to opportunistic behavior.
The incentive to treat people right by following norms of honesty and fair play is non-monetary, but it can make your business prosper. It seems that the best business owners aren’t driven primarily by profit-seeking, although they probably wouldn’t do what they’re doing without earning that profit. No, the incentives they follow often have more to do with knowing that they’ve done things the right way and so deserve all that they’ve earned. (Which is why they can get very upset when a politician says, “If you’ve got a business, you didn’t build that.”) That knowledge is something all the money in the world can’t buy.
Sandy Ikeda, “Incentives 101: Why good intentions fail and passing a law still won’t get it done”, The Freeman, 2014-11-13.
January 18, 2016
In The Guardian, Alec Luhn reports on the rise of craft brewing in the heart of vodka-swilling Russia:
It is a drizzly Monday night, but Craft rePUBlic is boisterous with the chatter of brewers and beer aficionados. Those just walking in are greeted with a half pint of Red Nelson, a saison beer made with hibiscus tea and orange peel by local brewer Alexei Sazonov, who is celebrating his birthday at the craft beer bar.
Sazonov works at Bottle Share, one of a growing number of microbreweries driving what has been dubbed the “craft revolution” here, but he created Red Nelson at home under his nickname, Big Hedgehog. Sazonov says of the major Russian beer brands, whose bland lagers dominate store shelves and taps: “They boil it quickly, ferment it quickly and sell it quickly. A microbrewer brews beer he wants to drink himself.”
Russia, of course, is known for vodka rather than beer, and a popular saying holds that “beer without vodka is throwing money to the wind”. According to the latest World Health Organisation data from 2010, 51% of alcohol consumed in Russia was spirits and only 38% was beer. This vodka culture has had deadly consequences for Russian men, whose average life expectancy of just 64 years lags behind that in European countries due mainly to heavy drinking and tobacco use.
Now a new generation of “beer geeks”, as they dub themselves, is working to change Russians’ approach to beer – and to drinking in general. With a focus on savouring the taste rather than drinking to get drunk, at least two dozen craft bars have opened in Moscow since the summer of 2014, serving Russian and foreign microbrews. They’re getting so numerous that the cultural magazine Afisha declared in August that it was “refusing to write reviews of the craft beer bars that are opening every week”.
Few expect beer to displace vodka as the national drink, especially after the government reduced the minimum price of the spirit in 2015 amid economic troubles. But there’s a long tradition of homebrewing in Russia, and the growth potential of craft beer is huge thanks to its relative affordablity; local craft brews typically sell for between 200 and 300 roubles (£2-3) a pint. Moreover, it’s easy to start a craft bar: no liquor licence is required if an establishment serves only beer, and startup costs are minimal, since a large staff, kitchen and lavish interiors aren’t typically necessary. As a result, craft bars are spreading from Moscow and St Petersburg to the regions.
A team of German economists asked subjects to play a game in which one person is the “truster”, who is given some money on each round of the game. The truster is then asked to decide how much money, if any, to pass on to an anonymous “trustee”. Any money passed gets tripled by the experimenter, at which point the “trustee” can choose how much, if any, to return to the truster. Behavioral economists use this game often, but the novel twist in this study was to reveal one piece of real, true personal information about the trustees to the trusters. In some cases, the truster learned the trustee’s level of religiosity, on a scale of 1 to 5. When trusters learned that their trustee was religious, they transferred more money. More important, the religious trustees really did transfer back more money than did the nonreligious trustees, even though they never knew anything about their trusters. The highest levels of wealth, therefore, would be created when religious people get to play a trust game with other religious people.
Even today, markets that require a very high trust to function efficiently are often dominated by religiously bound ethnic groups (such as ultra-Orthodox Jews in the diamond market) who have lower transaction and monitoring costs than their secular competitors.
Jonathan Haidt, quoted by Scott Alexander in “List Of The Passages I Highlighted In My Copy Of Jonathan Haidt’s The Righteous Mind“, Slate Star Codex, 2014-06-12.
January 12, 2016
Virginia Postrel an a movie that manages to portray an entrepreneur in a positive light:
In the movies, an entrepreneur is more likely to be a super-villain, or at the very least a mobster, than someone who builds a significant enterprise without getting anyone killed. Even the non-murderers are miserable jerks. Take Aaron Sorkin’s angry, status-obsessed Mark Zuckerberg in The Social Network or his Steve Jobs in the abysmal recent movie by that name.
So it might be a surprise to discover a big-budget, award-friendly new film telling a tale of entrepreneurial ingenuity where the protagonist is heroic and the ending is happy. Except that in this case the entrepreneur is a woman. Her gender makes self-assertion, ambition, and even a touch of ruthlessness unconventional and therefore culturally acceptable.
The movie is Joy, starring Jennifer Lawrence as the eponymous inventor of a self-wringing “mop of the future.” Written and directed by David O. Russell (American Hustle, Silver Linings Playbook), the film declares itself: “Inspired by the true stories of daring women. One in particular.” The one is Joy Mangano, whose Miracle Mop and other household inventions made her a multimillionaire thanks to the advent of home-shopping television.
Judging from the previews that accompanied the showing I went to in Los Angeles, distributors see Joy as a chick flick with family values. The marketing is understandable. The story is female-friendly, and both Lawrence and Mangano lend themselves to women-oriented media interviews. You start with the obvious audience and build from there.
But Joy is more than a wholesome paean to girl power. It’s a portrait of entrepreneurial gumption, with a protagonist whose journey is as relevant to men as to women. On her way to fame and fortune, Joy must reawaken the creative spark dampened by her dysfunctional family, solve practical business problems of financing and distribution, confront her self-doubts, find her persuasive sales voice, and subdue adversaries who take advantage of her inexperience and trust. These aren’t uniquely female challenges.
“I think there was this studio mentality for a long time that women and girls can relate to a male hero, but boys and men can’t relate to a female hero. But that’s simply not true,” Lawrence said in a recent Glamour interview. She was talking about The Hunger Games. She could have been talking about Joy.
With a blue-collar protagonist who takes a second mortgage on her house, Joy is a quirky but unabashed affirmation of the entrepreneurial American dream, not just for Harvard dropouts with coding skills but for everyday people with bright ideas. Giving Joy a tour of his studio, QVC executive Neil Walker (Bradley Cooper) explains his philosophy with Old Hollywood examples: “David Selznick, the son of immigrants, married Jennifer Jones from Oklahoma, America’s sweetheart,” he says. “It just goes to show you that, in America, the ordinary meets the extraordinary every single day.”
January 1, 2016
Consider spicy-hot food — and consider how recent it is as a mainstream phenomenon in the U.S. In 2002 many of us cheerfully chow down on Szechuan and Thai, habaneros and rellenos, nam pla and sambal ulek. Salsa outsells ketchup. But it wasn’t always that way.
In fact it wasn’t that way until quite recently, historically speaking. I’ve enjoyed capsaicin-loaded food since I was a pre-teen boy in the late 1960s; I acquired the taste from my father, who picked it up in South America. In those days our predilection was the peculiar trait of a minority of travelers and a few immigrant populations. The progression by which spicy-hot food went from there to the U.S. mainstream makes a perfect type case of cultural assimilation, and the role and meaning that the stuff has acquired on the way is interesting too.
(Oh. And for those of you who don’t understand the appeal? It’s all about endorphin rush, like a runner’s high. Pepper-heads like me have developed a conditioned reflex whereby the burning sensation stimulates the release of opiate-like chemicals from the brainstem, inducing a euphoria not unlike a heroin buzz. Yes, this theory has been clinically verified.)
Baseline: Thirty years ago. The early 1970s. I’m a teenager, just back in the U.S. from years spent overseas. Spicy-hot food is pretty rare in American cuisine. Maybe you’d have heard of five-alarm chili if you’d lived in Texas, but chances are you’d never have actually eaten the stuff. If you’re from Louisiana, you might have put Tabasco sauce on your morning eggs. Aside from that, you wouldn’t have tasted hot peppers outside of a big-city Chinatown.
This probably evolved out of the tradition, going back at least to the late 1940s, of defining barbecue and chili as what an anthropologist would call a “men’s mystery”. Despite the existence of male professional chefs and men who can cook, most kinds of domestic cooking are indisputably a female thing — women are expected to be interested in it and expected to be good at it, and a man who acquires skill is crossing into women’s country. But for a handful of dishes culturally coded as “men’s food”, the reverse is true. Barbecue and chili top that list, and have since long before spicy-hot food went mainstream.
For people who drive pickup trucks, spicy-hot food went from being a marked minority taste to being something like a central men’s mystery in the decade after 1985. I first realized this in the early 1990s when I saw a rack of 101 hot-pepper sauces on display at a gun-and-knife show, in between the premium tobacco and the jerked meat. There’s a sight you won’t see at a flower show, or anywhere else in women’s country.
The packaging and marketing of hot sauces tells the same story. From the top-shelf varieties like Melinda’s XXX (my favorite!) to novelty items like “Scorned Woman” and “Hot Buns”, much of the imagery is cheeky sexiness clearly designed to appeal to men.
Nor is it hard to understand why the association got made in the first place. It’s considered masculine to enjoy physical risk, even mostly trivial physical risks like burning yourself on a sauce hotter than you can handle. Men who like hot peppers swap capsaicin-zap stories; I myself am perhaps unreasonably proud of having outlasted a tableful of Mexican college students one night in Monterrey, watching them fall out one by one as a plate of sauteed habaneros was passed repeatedly around the table.
There’s a sneaky element of female complicity in all this. Women chuckle at our capsaicin-zap stories the same way they laugh at other forms of laddish posturing, but then (as my wife eloquently puts it) “What good is a man if you rip off his balls?” They leave us capsaicin and barbecue and other men’s mysteries because they instinctively grok that a certain amount of testosterone-driven male-primate behavior is essential for the health of Y-chromosome types — and best it should be over something harmless.
Eric S. Raymond, “The capsaicinization of American food”, Armed and Dangerous, 2002-11-02.
December 28, 2015
Some thoughts from Dave’s Insight on Alberta’s attempt to signal their new-found carbon virtues:
First, let me set the premise. When giving seminars on Tax and/or Profits, I like to ask the question. What is a word for a Company that does not pass all its expenses, including its taxes on to its customers? The answer of course is bankrupt. Maybe not immediately, but eventually. Something I always ask when dealing with businesses, non-profits and governments when they are talking about spending is: Where is the money going to come from? Well, where is the money going to come from?
The NDP government may claim that it will only be three or four hundred dollars per person, sorry, per family. But let’s cut to the chase. In almost the same breath they claim it will raise 3-4 billion dollars per year revenue for the provincial government. Possibly double that in a few years. So where is this coming from? At the end of the day, one way or another it has to come from our pockets. While at first you might think that we export so we can export the tax. However, our exports have to compete with all the other available sources of supply, so we cannot export the tax. If we could, we would still be charging over $100 per barrel for oil, but we cannot. That leads me back to: Where is this 3 to 4 Billion dollars per year (more later) to come from?
Well, there is really only one answer; it might be somewhat invisible, but we Albertan’s will have to pay it, and that my friend works out to about $1,000 per person per year, or $4,000 per family of four. And if it brings in $8 billion in a few years, that is over $8,000 per family of four per year. We will pay it in the form of higher transportation costs (both public and private); higher heating costs and to a lesser extend in the cost of everything we buy from groceries to toys. Of course some will pay more and some less, but to be clear, this will hurt the poorest the most.
H/T to Small Dead Animals for the link.
December 24, 2015
Ayn Rand, the poet-theorist of capitalism, had a clever Lucy-like line about the “commercialization of Christmas”: she said it was the best thing about Christmas. “The gift-buying … stimulates an enormous outpouring of ingenuity in the creation of products devoted to a single purpose: to give men pleasure,” she said in 1976. “And the street decorations put up by department stores … provide the city with a spectacular display which only ‘commercial greed’ could afford to give us.”
Rand saw exchange as the ideal model for all human relationships. Sometimes the free-marketeers who have borrowed her style and her ideas are accused of heartlessness for this attitude. Things like holidays and families, they say, should be shielded from the supposedly brutalizing effects of mere trade. What one notices about these arguments is that they smuggle in the notions of exchange and mutual advantage by the back door: everyone benefits selfishly from having havens from selfishness.
What one notices about the people who make these arguments, on the other hand, is that they have an excuse for not being attuned to giving as much as they get in personal relationships or social environments. If you’re exchange- or trade-minded, you will usually be asking yourself whether you’re paying your parents back well for raising you, doing right by your friends, being a good guest when hospitality is extended, observing implied social contracts correctly.
As Rand said, there is a Christmas ideal of “goodwill toward men” that is connected with all these things, and not exclusive to Christianity. The gift-giving part of Christmas, the part where silly mammals rummage in the marketplace trying to please and surprise one another by selecting shiny material objects, has swallowed the part in which we celebrate rescue from hell. It’s a good thing, Charlie Brown. Or a very entertaining sort of racket, at any rate.
Colby Cosh, “Good grief! The commercialism of Christmas isn’t so bad”, Maclean’s, 2014-12-25.
December 23, 2015
William Harwood reports for CBS News:
Making its first flight since a catastrophic launch failure last June, an upgraded, more powerful SpaceX Falcon 9 rocket roared to life and shot into space Monday, boosting 11 small Orbcomm data relay satellites into orbit in a major milestone for the California rocket builder.
In a significant space “first,” the Falcon 9’s first stage fell back into the atmosphere and pulled off a powered landing at the Cape Canaveral Air Force Station, settling to a smooth tail-first touchdown in a convincing demonstration of reusability, a key requirement for lowering commercial launch costs.
In a scene resembling a launch video running in reverse, the booster quickly dropped out of a cloudy sky atop a jet of flame from one of its Merlin 1D engines, heralded by twin sonic booms that rumbled across Florida’s Space Coast. Cheers erupted in company headquarters in Hawthorne, California, as the stage settled to a smooth touchdown.
In another first, the Falcon 9 used colder, denser-than-usual liquid oxygen and kerosene propellants, a significant upgrade allowing the booster’s nine first-stage engines to generate more power, increasing their combined liftoff thrust from 1.3 million pounds to 1.5 million, or 170,000 pounds of thrust per engine.
The launch, first-stage landing and satellite deployments all appeared to proceed without a hitch, a welcome success for a company returning to flight after a disheartening failure.
“Everything we’ve seen thus far in the mission appears to be perfect,” SpaceX founder Elon Musk said in a conference call with journalists. “The satellites were deployed right on target and the Falcon 9 booster came back and landed. Looks like almost dead center on the landing pad. … As far as we can see right now, it was absolutely perfect. We could not have asked for a better mission.”
December 20, 2015
December 16, 2015
At Mother Jones, Kevin Drum links to an article that explicitly shows the cost of having monopoly providers in healthcare:
Regular readers of this blog should know that when it comes to the price of hospital care, it’s competition that matters, not insurance companies. In areas with only a single hospital, insurance companies have no leverage and have to accept whatever price the hospital charges. If there are lots of hospitals, they have to compete with each other to earn the insurance company’s business.
But in case you’re still skeptical, a team of researchers has analyzed a huge database of health care claims in the US to check this out. They found enormous regional variation in hospital costs for the same procedure, and one of the biggest drivers of this variation was competition:
Hospital market structure stands out as one of the most important factors associated with higher prices, even after controlling for costs and clinical quality. We find that hospitals located in monopoly markets have prices that are about 15.3 percent higher than hospitals located in markets with four or more providers. This result is robust across multiple measures of market structure and is consistent in states where the HCCI data contributors (and/or Blue Cross Blue Shield insurers) have high and low coverage rates.
Henry Miller on the Faustian bargain Chipotle willingly made and is now paying for:
Chipotle, the once-popular Mexican restaurant chain, is experiencing a well-deserved downward spiral.
The company found it could pass off a fast-food menu stacked with high-calorie, sodium-rich options as higher quality and more nutritious because the meals were made with locally grown, genetic engineering-free ingredients. And to set the tone for the kind of New Age-y image the company wanted, Chipotle adopted slogans like, “We source from farms rather than factories” and, “With every burrito we roll or bowl we fill, we’re working to cultivate a better world.”
The rest of the company wasn’t as swift as the marketing department, however. Last week, about 140 people, all but a handful Boston College students, were recovering from a nasty bout of norovirus-caused gastroenteritis, a foodborne illness apparently contracted while eating Chipotle’s “responsibly raised” meats and largely organic produce.
And they’re not alone. The Centers for Disease Control and Prevention has been tracking another, unrelated Chipotle food poisoning outbreak in California, Illinois, Maryland, Minnesota, New York, Ohio, Oregon, Pennsylvania and Washington, in which victims have been as young as one year and as old as 94. Using whole genome sequencing, CDC investigators identified the DNA fingerprint of the bacterial culprit in that outbreak as E. coli strain STEC O26, which was found in all of the sickened customers tested.
Outbreaks of food poisoning have become something of a Chipotle trademark; the recent ones are the fourth and fifth this year, one of which was not disclosed to the public. A particularly worrisome aspect of the company’s serial deficiencies is that there have been at least three unrelated pathogens in the outbreaks – Salmonella and E. coli bacteria and norovirus. In other words, there has been more than a single glitch; suppliers and employees have found a variety of ways to contaminate what Chipotle cavalierly sells (at premium prices) to its customers.