
Nobel economist takes aim at rent-seeking banking and healthcare industries - 6stringmerc
http://www.marketwatch.com/story/nobel-economist-takes-aim-at-rent-seeking-banking-and-healthcare-industries-2017-03-06?siteid=rss
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miraj
earlier discussion on HN with link to his interview on The Atlantic:

[https://news.ycombinator.com/item?id=13829793](https://news.ycombinator.com/item?id=13829793)

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AnthonyMouse
That isn't the same article, it's just the same economist.

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miraj
i did not say it is the same article. but if you read it, the Atlantic
article/interview is more substantial than the Marketwatch article; and the
topics are exactly same. also there already is a good discussion going on the
other thread.

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legitster
Why are there no national healthcare brands? Why are there no "budget"
healthcare brands? Why does not a single goddamn hospital know how much a
glass of orange juice costs? Where are the Walmarts, the Costcos, the Trader
Joes of the healthcare industry? Why aren't we complaining about how Big Box
hospitals are super inferior and bragging about the extra buck we spend to
treat ourselves to an organic mom and pop MRI?

Is there any other industry like this? It's 16% of our economy and it doesn't
seem like a single flicker of free market is left in it.

~~~
grandalf
This is a great question. My understanding of it is as follows:

There are legal requirements that force doctors and hospitals to offer only
the state of the art care. A doctor who fails to do this can be sued for
malpractice.

Imagine if a homeless person entered the ER and based on his perceived ability
to pay doctors tried only $1K worth of interventions before giving up. This
would be viewed as inhumane.

Most healthcare is paid for via health "insurance" which is heavily regulated.
Via medicaid and medicare, the Federal government establishes baseline market
prices for different services. This is done with a broad, public health
perspective in mind, with the idea that the market for preventative care
(largely primary care) should be larger than it would otherwise be, because
treatments are generally much more cost-effective when problems are identified
sooner and treatments initiated sooner.

It's important to note that the free market would not likely offer highly
skilled primary care docs for most people, since the price would be
prohibitive. Instead most people would see a less-trained person such as a
nurse (or an NP or PA). This already happens today, but the liability loophole
is solved by a process where the MD signs off on medical decision making.

When it comes to primary care, it's important to point out that the body is
largely self-healing and many illnesses simply go away with no treatment.
Often, treatment outcomes do no better than a placebo.

Due to this reality, the free market would lower the caliber of care available
to most people who are not extremely ill, and without constraints on who may
practice medicine we'd see all sorts of alternative therapies and unscientific
therapeutic approaches elevated to the same status as those that are
scientifically backed. The market would have no way of discerning the placebo
effect from actual measurable effects (and it perhaps shouldn't matter).

For seriously ill patients, the quality of doctors matters immensely, but a
free market system would certainly reduce the availability of highly competent
practitioners, since those who need treatment for serious illnesses are not
always able to pay for them, and few people anticipate needing them, so
insurance premiums would increase due to lack of demand and a smaller,
adversely selected risk pool.

In addition, for seriously ill patients in the US, a great deal of money is
spent on end of life that has no public health benefit. We overpay for
healthcare largely for the privilege of having our loved ones put through
extreme end-of-life measures just in case another year of life can be
obtained. France and Canada do not do this, and their cultural approach to end
of life is better in tune with the probabilistic outcome of end of life
interventions.

Put another way, in the US we consider it a greatly important volitional act
to have every possible measure undertaken to keep us alive. Insurers cannot
offer a lower tier plan that (say) mimics France's approach because of
liability concerns.

It's not possible to imagine a free market for end of life care without a
stance on the liability landscape for care that is anything less than the most
aggressive (and costly) intervention currently known.

So what do we get in exchange for this convoluted system? Our doctors are
selected out of a highly competitive group of motivated students and trained
extensively. Most are overqualified for the vast majority of the work they do,
but patients prefer the Cadillac doctor over the one who may seem only
marginally qualified.

Thus we revere doctors and treatment seeks both a cure and a sanctioned course
of action from a figure holding social authority. This phenomenon offers a
fascinating look into the psycho-social aspect of illness and the need that
patients have for validation of their plight from an authority figure. Just as
a doctor's note is an excuse for missing work, a doctor's expert opinion
offers validation for the sick in a society that prizes youth and vigor.

So we pay a premium both for the extra (usually unnecessary) training and also
for authority. We get (in a sense) both a treatment and a blessing.

It is a uniquely American phenomenon, I believe. The hope that we feel when a
surgeon agrees to do a risky surgery on our 90 year old family member is the
same hope that we feel when spending our last quarter in a slot machine or
risking everything to do an unlikely startup.

What does this sort of uniquely American healthcare look like in a totally
free market system? I'm not sure. But I think it would more closely resemble a
casino or a church. There would be _more_ emphasis on hope, more emphasis upon
meaning, more emphasis upon the authority figure aspect of healers of all
kinds (not just trained physicians).

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frgtpsswrdlame
In terms of rent-seeking watch out for Donald Trump's proposal on
infrastructure spending. A massive tax break for private building and
ownership of toll roads is the epitome of corporate welfare to rent-seekers.

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zhemao
Hasn't he moved away from that plan? I thought the spending plan was now to
fund repairs on existing roads.

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frgtpsswrdlame
Well there hasn't been too much discussion about it as of late because of
problems with the republican congress and DJT's notorious ambiguity. I did
find this though:

>White House spokesman Sean Spicer said "strong public-private partnerships"
would be key to rebuilding the nation's roads, bridges and airports.
"Infrastructure used to be a point of American pride, but now an overbearing,
ineffective regulatory system can keep projects in limbo for years," Spicer
said. "The government has wasted too much of the taxpayers' money on
inefficient and misguided projects." The White House sees infrastructure as a
potential large job creator but officials have said the federal government
cannot shoulder the entire burden. The administration is looking at toll
roads, tax credits and other ways to spur private investment. Major real
estate and private equity executives attended the meeting, including developer
Richard LeFrak, Vornado Realty Trust Chief Executive Officer Steve Roth, and
Apollo Global Management co-founder Josh Harris, the White House said.

[http://www.reuters.com/article/us-usa-trump-
infrastructure-m...](http://www.reuters.com/article/us-usa-trump-
infrastructure-musk-idUSKBN16F1JI)

That would lead me to believe tax breaks for toll roads is still on the table.

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FreedomToCreate
The idea of rent seeking is becoming very popular and the best place to see it
is Silicon Valley. Everything is becoming subscription based and housing is
pretty much out of reach for everybody. Only way to afford anything is to rent
it. Things my parent owned by the time they were 26 I have no choice to rent,
since I couldn't even imagine right now buying them (even though I make 3x
what they were making at the same age). For example I rent a house with
friends ($5000 a month spilt by 4), a parking sport ($200), and lease a car
($200). I don't own any music or movies (Netflix and Spotify). Its a
convenient way to live in terms of flexibility but you never feel like these
things are yours and that leaves this sense of detachment. At any time these
things could be taken away and you would have nothing. I grew up in the
country and have the ultimate goal of buying myself land where I can build a
house and workshop.

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mljoe
Rent seeking is a transaction where the rent seeker accumulates money without
contributing to the overall wealth of a society, basically getting paid
without labor effort, offering a product or otherwise advancing innovation or
the human condition in some way.

Land rent is the original example of rent seeking. SV rents would probably
qualify, since the cost of rent in SV is more connected to the land and
location, as well as the regulations on that land, versus the improvements on
the property. Maybe $4000/mo of your rent is based on "rent-seeking" and
$1000/mo is based on the property itself.

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ScottBurson
Right. As Henry George pointed out over a century ago [0], the increase in
property values in urban areas as their populations grow is mostly caused not
by investments made by the property owners, but simply by the network effects
of having more people living in the area. So the ability of property owners,
under the commonly used taxation schemes, to benefit from those network
effects presents a golden opportunity for rent-seeking.

Looking for example at Silicon Valley, it's easy to see that rental property
owners are sucking large amounts of wealth out of the region. It's not just
rental property, though. Anyone who bought a house prior to the recent run-up
in prices, and then sold it for a large gain, is effectively also removing
wealth from the area, in the form of the mortgage payments the new owner has
to pay.

George argues that wealth that is collectively created should be collectively
enjoyed, and that the best way to make that happen is through a Land Value Tax
(LVT) -- that taxes only the _unimproved_ value of land, not that of any
structures that may be built on it.

[0]
[http://www.henrygeorge.org/pcontents.htm](http://www.henrygeorge.org/pcontents.htm)

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NoGravitas
It's interesting to see a right-libertarian argument in favor of a single-
payer healthcare system. Single-payer would also support entrepreneurship by
decoupling healthcare from employment.

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hoodwink
Just a reminder that Nobel Prize in Economics is actually the Sveriges
Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

