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Filling in the gaps in the free market system

Posted by Chance on June 29, 2009

Grocery stores are an example, for the most part, of the free-market system at work.  If I want to shop for groceries, I have the choice of Wal-mart, King Sooper’s, Safeway, Target (the Super ones), or Albertsons.  In my 8 or 9 years of grocery shopping, food costs have not gone out of control.  They have increased, but they seem to follow inflation somewhat.  I don’t know the stats, but that’s my experience.  I think most people agree that they would rather have private grocery stores provide food as opposed to a central government office.  Long food lines as seen in the Soviet Union show the results of a planned economy.

However, even if the free market provides lower prices and more options, there will still be some people who simply can’t afford food.  However, there are programs to address this, such as WIC and food stamps.  In a way, this can be seen as a compromise or best of both worlds; the free-market system is allowed to work to produce low prices and high quality, but certain programs are in place to ensure that people get to eat.  I’m not saying the current system is perfect; people still have it rough, but there is not a large amount of the population starving.

What we don’t do is totally revamp the way grocery stores are operated and have the government run them so that everyone can eat.  However, this is what we want to do with health care.  Now, I can understand why we treat health care differently.  Health insurance premiums have been sky-rocketing for some time.  However, the medical and insurance companies are already some of the most regulated industries in the country, so it seems unfair to blame failures on the free market when that particular part of the market is not that free.

Now, I know many liberals will think this is a convenient argument, “if only the market were more free, then everything would be alright.”  But so is the argument “if only government would do more, if only there was more funding.”  So what do we do?  Well, let’s look at the pattern of other industries and other government departments.  For instance, with public schools, we spend more and more per pupil, yet see diminishing returns.  Meanwhile, people are gobbling up the chance at Charter Schools, schools that are still publicly funded yet offer parents some choice, mimicing the market to some extent.  The service, even at Wal-Mart, is far superior to the DMV.  I’ve never spent an hour at Wal-Mart waiting in line.  If I don’t like my experience at Wal-Mart, I can go somewhere else.  Wal-Mart is open on weekends.  The DMV, on the other hand, has no motivation to help me out.  Sometimes they are only open four days in the week; why stay open five, am I going to go to another DMV?  Other areas of technology have brought us rapidly improving products at dramatically lower prices; your iPod has much more hard drive space than many earlier computers the size of your bedroom.

My point is, in many areas of the free market, we see improving quality at lower prices (there are exceptions, such as oil, but a limited good will have a high price in any system).  The ones that are heavily regulated and/or funded, such as our school system and health care, we see higher and higher prices for diminishing returns.   Furthermore, the lowest employee at the DMV holds way more power over my life than anyone I will meet at the grocery store.


10 Responses to “Filling in the gaps in the free market system”

  1. Randy said

    Good information and good analogy.

  2. dolphin said

    What if you COULD go to another DMV? Would it bother you that the government owned one of your options?

    I completely get the free market argument, but what I don’t get is why letting the government compete in the free market necessarily a bad idea. My understanding of the Obama healthcare plan is that it would encourage businesses to offer private health insurance to their employees while offering a government-run option for those who do not have the option available through work and can’t afford the outrageous rates private healthcare offers to private citizens. In other words, for most of us, nothing would change at all. For the rest of the population, they’d have one more option and arguably (based on free market principles) would see rates fall on their other options to meet the competition of the new guy.

  3. Chance said

    For one, Congress has talked about taxing private health benefits to fund the government alternative, so it makes the private alternatives less attractive. It’s an unfair competitive advantage.
    Furthermore, as with the schooling system, people have to still pay their taxes for public schooling, even if they want to send their kids to private schools. It would be the same for health care; people would pay for their private insurance premiums while still contributing their portion to the government funded insurance. And the point isn’t “do away with public schools” the point is, it’s not like people who have private insurance already will not experience any negative effects. I still support health care for those who can’t support it, but I don’t know if doing it through insurance is the way to go.

    And the problem is not just simply providing another option. From my understanding – correct me if I’m wrong, like Massachusetts, there will be some type of coercion involved, such as forcing people to buy insurance of forcing employers to provide insurance. Some people may be fine with that, but that isn’t free market principles.

    I’d like to study the Massachusetts plan and see how it’s working out.

  4. dolphin said

    I honestly haven’t followed it all that closely lately (I’ve had other things on my plate) so I’m basing my views largely on what I recall from the plans put forth during the election cycle. What I thought the plan proposed by Obama (which I’m sure has been changed a fair bit by congress at this point) was not to tax private healthcare benefits (I believe that was part of McCain’s plan), but rather to offer tax incentives to businesses who provided private insurance to their employees (the nicer way to say that they planned to tax businesses that DIDN’T offer health insurance plans to their employees). Therefore, those businesses who offered their employees health insurance on their own wouldn’t be charged for it, but those who refused would be the ones paying through taxes for the government-based insurance. So effectively, ALL businesses with X employees would be paying for health insurance one way or another.

    I know for a fact that the original Obama plan did not involve coercion of individuals. That was one of the major defining differences between his plan and Hillary’s.

    • dolphin said

      To be fair, I do realize the plan put forth during the election cycle could be far different than the plan before Congress. The plan Obama put forth in the election cycle, I (as someone cautious about government-run healthcare) didn’t have huge problems with. If it’s completely different now, I might not feel the same way. Either way, at this point, I’m not writing my congressmen about it one way or the other.

    • Chance said

      Also, I just found this,

      • dolphin said

        I’m not sure I can take an article by John Wallace all that seriously. Especially when it includes several factual errors and at least one obvious but important omission.

      • Chance said

        what’s the omission?

      • dolphin said

        Well, the one I was referring to is that his excerpt starts with “Except as provided above…” (or something like that, I didn’t click back through). Yet he doesn’t offer what was provided above. Since the article is a hit piece, it’s pretty likely that if it didn’t hurt his argument, he’d have almost certainly included it.

        That’s the problem with using OpEd’s as news. Generally speaking, they start with the message they want to present, then find “evidence” to back it ignoring anything that refutes it. It’s kinda like the whole intelligent design thing. You’re supposed to start with the evidence and reach a conclusion, not the other way around.

  5. Chance said

    I haven’t found anything else definitive on private insurance being illegal, but Kat has a link to the PDF of the bill and maybe I’ll read it if I have some time.
    Ultimately, to answer your first question, and I may be repeating myself somewhat, is the gov’t care would have an unfair advantage. It will be cheaper than the private alternatives, but only artificially so. So, more and more people would be going to this public option, but it’s not really cheaper. The reason I say so is that, for some reason, people expect us to believe that government is good at containing costs, but we don’t see that in the history of public programs; we just don’t see that efficiency.

    But let’s say that government does supply their own public option that ISN’T government funded. If there was something the gov’t could offer in the marketplace, wouldn’t it already be offered by a private alternative. Does the gov’t have some secret recipe that no private company has? Even if it was non-profit, I think inefficiencies would far outweigh lack of a profit margin.

    One thing to note is it’s not like insurance companies have flexibility in what they offer. Let’s say the gov’t tells me I need to buy a car with GPS, rear-view camera, and run-flat tires. Well, that sucks because I would really prefer a cheaper car, those things aren’t worth the extra cost. Not only that but I couldn’t drive across state lines to go to the dealership that is a bit cheaper than what I have in Colorado. Why I bring this up is it does limit competitive features that work very well in the market: the tradeoff between cost and features. You know, the things that allow people to buy a basic computer at Wal-Mart, providing access to the lower classes.

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