Peter Coy of Bloomberg/Businessweek is an avid fan of mandates (see his "The Case for Way More Mandates" 7/9-7/15, 2012, p. 24). That is to say he prefers forcing people to do what he thinks they should do rather than persuading them, kind of like what the USSR's rulers practiced routinely. (To mandate presupposes the capacity to impose one's will! And governments are usually powerful enough to accomplish that. It amounts to coercing others, nothing nicer!)
The major argument given for mandates such as Mr. Obama's preferred way to get people to insure their health care is that, well, by getting a lot of people to be part of the system, the cost of it all will not be as high as otherwise. And this is true for a while. If a lot of people are forced to eat at the restaurant I prefer, prices will be lower there. Higher demand for any goods or services leads to lower prices, indeed.
But this applies mainly to demand that is forthcoming voluntarily, not from having been mandated. Conscripting customers and clients may appear to be economical but only for a bit. In time people start finding ways to dodge conscription, like the military draft or the policies of dictatorships or tyrannies. All the energy devoted to such draft – i.e., mandate – dodging and its prevention goes to waste and that itself will turn out to be very costly.
What is really disturbing is that some justices of the US Supreme Court buy into this obscene way of thinking. Justice Ginsburg did recently when she wrote: "People who don't participate in this market are making it much more expensive for the people who do; that is, they will get, a good number of them will get services that they can't afford at the point where they need them, and the result is that everybody else's premiums get raised? It's not your free choice just to do something for yourself. What you do is going to affect others, affect them in a major way." In other words, if one doesn't purchase health insurance, others who want to buy some will have to pay more than they would if one did so! And as this applies to everything, we may then assume that Justice Ginsburg prefers a market in which people are forced to make purchases of goods and services she would like to be cheaper than if people made them voluntarily.
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1 comment:
This author's heart is in the right place, but his restaurant example is flawed and the opposite of the way the market operates.
If folks have to eat at the place her prefers, the operator will experience a business surge; that is correct. He may be able to purchase on more favorable terms. But with guaranteed higher volumes the incentive to reduce prices goes away due to the establishment of a quasi-monopoly (kind of like government 'services').
The competitors, to the extent they are permitted to stay in business, are the ones with the incentive to offer better service, more inventive menus and lower prices in order to remain in business.
If his favorite place chooses to misuse its market power, it can accept lower margins for a time, buoyed by volume, in order to match or exceed prices of smaller competitors and to drive them out. Then 'lost' margins will be restored via more complete monopoly.
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