Thursday, February 26, 2009

Controlling Human Activity

Passing laws is not the best way to govern human activity. Leave people alone to do their will as long as they don’t cause each other harm. This is freedom, USA style. In human affairs, one must always beware when trying to get others to do one’s will. Too often the result is the reverse of what had been hoped. The attempt to make medical treatment more widely available backfires more often than not. The reason is that coercion of doctors and suppliers is a disincentive, so if they can find an activity without the disincentive, they will pursue the alternate activity. More doctors, nurses and pharmaceutical manufacturers will be enticed into serving the health care industry by good pay, good working conditions, and freedom from threats. If these conditions are not met, then the parties involved may opt for another line of work or early retirement. If government regulations force insurers to provide services under conditions where the insurer is no longer being paid an adequate amount, then the insurer might reduce his payment to doctors and nurses, or alternately, the insurer may simply refuse to provide some kinds of coverage or quit a market altogether. I have seen big shifts in coverage. I have had insurers switched on me eight times in twenty years. I have seen doctors go from being well paid to being poorly paid, or forced to work 70 hours per week to maintain an affluent life style. When I was working in Cuernavaca, Mexico in 1995, often I would buy anchovies, crackers, etc. from a little hole-in-the-wall store down the street. The fellow who ran it was a man about 50 years old. He confided to me one day that he was a doctor. I asked him why he no longer practiced. He said working conditions were too tough for the pay, “Ya no aguantaba,” – too many patients, excessive work hours, too many heavy-handed bureaucrats.

Mexico prides itself on having laws that prohibit the cutting of trees. Because of this, no one in his right mind dares plant a tree on his land lest some day he be prohibited from removing it. Even when a sprout is seen, it is removed. Result: fewer trees planted, fewer trees all around.

The state of California wants more, cleaner and cheaper power. Their efforts are backfiring. Investment money that wanted to enter California in 1999 for construction of power plants has found other places to go now that power generators are subject to witch hunts. Put yourself in the shoes of a retiree sitting in his broker’s office. He knows that investment in power companies has traditionally been a secure investment: steady growth, well-established business. He tells his broker, “I want to shift some of my holdings in Wal-Mart to two or three major power producers, but I don’t want any power producers having a big stake in California.”

Get it? The investment is not going to California – yet California is precisely where the money is needed.

It was Adam Smith who set the path prior to the 1966 Revolution. Prior to that event, this country was run anonymously by millions of businessmen. This country was guided by the “invisible hand” of each of us seeking his/her greatest return on a combination of talent and effort.

Is it pure coincidence that the most prosperous countries (or commonwealths) in the world adopted in some form Adam Smith’s vision? These countries are: Australia, Canada, Great Britain, New Zealand, and United States. Is it pure coincidence that countries who originally embraced Adam Smith’s vision, Chile and Argentina, went from prosperity to poverty after dismissing Adam Smith’s ideas?

Marxists have no use for the general study of economics. Their own economic theory is considered to be the one, true view of the world, so no further study is needed. Marxism is a dogma. They believe free-market economics is immoral. Alarmingly, the Marxist view is quite popular these days. It is becoming more popular in the USA day by day.

Full blown Marxism has been practiced in Russia, Eastern Europe, China, Cambodia, Cuba and a few other places. Light Marxism has been practiced in many parts of the world including Western Europe, India, Latin America and Africa for many years. These later regions do not think of themselves as “light” Marxists, or “partial” Marxists. They think of themselves as anti-capitalist. For the most part they think Adam Smith was a babbling idiot or madman. In their mind an economy cannot operate without someone from on high pulling levers and guiding it.

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