Buffett: Raise Taxes on ‘Coddled’ Billionaires

[Lord Zentei]

Wrong. Those people would find a way to make a larger portion of their income disappear or become non-taxable. There will be more revenue, but not on a linear 1:1 scale.

So cruel, scaring the poor little socialists like that, they so desperately want to believe that the Laffer curve is a mythical monster.

Do you believe that the United States of America isn't already over onto the 'low-tax' side of the peak on the Laffer curve?

It's pretty obvious that it is. But that's not what he or J are arguing. They're not saying that there will be less revenue. They're saying that the revenue, while greater, will not be increased on a 1:1 scale.

[Starglider]

They're not saying that there will be less revenue. They're saying that the revenue, while greater, will not be increased on a 1:1 scale.

Exactly. The use of the Laffer curve by the Reagan's administration's PR was somewhat dubious; the share of income paid by the top tax bracket increased and gross federal revenues increased faster than GDP, but wealth inequality also increased and if you adjust for demographics, social security changes and gaming of the inflation index it's debatable whether real revenues increased. It's hard to argue against the economic stimulus it provided, but then it also set in motion the trend of soaring government debt.

A clear case of being past the inflection point was the UK in the late 70s, where Labour had imposed an utterly insane 97% top income tax rate. Thatcher reduced it to 60% and revenues from the top decile of taxpayers increased by 40%. Conversely US taxation in 2003 was well below the inflection point, so the Bush tax cuts undeniably reduced federal revenue, probably by more than $200B/year. Most first world nations aren't near the point of negative returns yet*, so the important thing is just that the relationship is a curve and not a line.

* Although as I have said before globalisation and increasingly sophisticated tax avoidance have shifted the whole curve down significantly since the 1970s.

[Darth Wong]

The point is that it was wrong to act as if those who benefit from unethical conduct should be compensated when they lose it.

Health insurance companies are not morally equivalent to slavery.

I never said they were. I just pointed out that the compensation argument uses the same flawed logic in both cases, ie- that something can be deemed inviolate property just by virtue of the fact that people are making money off it. This is the problem with using analogies to demonstrate a flaw in logic: 99% of people seem to ignore the context in which the analogy is given, and point out any area (such as ethical severity) where they can find a difference.

No one is saying unethical behavior should go unpunished, but companies out there that have provided the services they have been paid to provide shouldn't be simply "put out of business" by the government with no compensation whatsoever. The incidents of wrongfully denied coverage are the exception, not the norm.

In other words, "it's wrong because I say so".

I'm just giving you the pragmatic approach to actually getting things changed. I already cited the practice of eminent domain where on occaisions when government takes private property for the public good, the owners of that property are justly compensated. Property isn't just seized and the owners told to "fuck off" simply because its in the public good. I think the parallel there is obvious.

Except that it's not property which is being taken away; it is the ability to continue a harmful business practice. There is plenty of precedent for outlawing business practices which had previously been highly profitable to their practitioners. This "parallel" is not, in fact, parallel at all.

And you still have not explained why they deserve to be compensated. You simply keep saying it as an assumption, and acting as if I will agree to it if you repeat it enough times.

I don't expect you to agree with me. But I feel that when you invest in an industry in good faith, then you should not be punished by your elected government stepping in and essentially taking your investment with no compensation whatsoever.

So it's true because you "feel" it is true?

If you work in a buisness then if the government is seeking to end that business they should have a plan in place to retrain, or otherwise assist you in finding employment in another industry.

And this is true because ... you say so?

To speak nothing of the repurcussions of doing such a thing. After all, why would someone then invest in another company with the thought that government may some day decide to step in and take that over?

I see you are now relying on historical ignorance as your central argument. Other countries have done this, without their entire financial and business communities disintegrating from fear that the government would take over all businesses. This is nothing more than a slippery slope fallacy.

Why bother trying to innovate a new product if the government can simply step in and take it from you?

Name one innovation that health insurance companies have pioneered, apart from discovering novel ways to screw people.

All that being said, I'm not opposed to a public option in healthcare, but it has to be done right. If the government is going to nationalize the industry for the "sake of the public good" it had better have all its ducks in a row.

And by "ducks in a row", you naturally mean "do what I say".

[Alphawolf55]

In the subject of "compensation" wouldn't unemployment insurance act as their as their compensation, a sort of "severance package". I mean there are other options, for example the Government is going to need a shit ton of new workers if a public option was created, you could give priority hiring towards people previously in the health insurance industry. Though I do think there should be programs to help find new jobs and training, but that should be a program for everyone not just people of displaced industries.

[Darth Wong]

When the US government built a massive interstate highway system (with taxpayer dollars, and which requires continued maintenance with more taxpayer dollars) to encourage and facilitate the use of cars and trucks as the primary mode of transport in the name of the greater good, did they "compensate" railroad employees and shareholders who saw their entire business model shrink drastically as a result?

[Alphawolf55]

No, but I'm not arguing outright that we should give some kind of complete monetary compensation. I'm just saying wouldn't the unemployment insurance they gain from lay offs be considered the compensation? Additionally, I'm saying that there are other forms of compensation that can be partly merit based. Granted, the whole issue would be moot if we had a better safety net.

[TheHammer]

The point is that it was wrong to act as if those who benefit from unethical conduct should be compensated when they lose it.

Health insurance companies are not morally equivalent to slavery.

I never said they were. I just pointed out that the compensation argument uses the same flawed logic in both cases, ie- that something can be deemed inviolate property just by virtue of the fact that people are making money off it. This is the problem with using analogies to demonstrate a flaw in logic: 99% of people seem to ignore the context in which the analogy is given, and point out any area (such as ethical severity) where they can find a difference.

No one is saying unethical behavior should go unpunished, but companies out there that have provided the services they have been paid to provide shouldn't be simply "put out of business" by the government with no compensation whatsoever. The incidents of wrongfully denied coverage are the exception, not the norm.

In other words, "it's wrong because I say so".

Health insurance companies have provided a useful service that the government til this point has not. Clearly there are/were problems with how the industry was regulated, but again those are the exception. For the government to step in and essentially burn them to the ground with no plan for the people who work for these businesses is morally wrong.

I'm just giving you the pragmatic approach to actually getting things changed. I already cited the practice of eminent domain where on occaisions when government takes private property for the public good, the owners of that property are justly compensated. Property isn't just seized and the owners told to "fuck off" simply because its in the public good. I think the parallel there is obvious.

Except that it's not property which is being taken away; it is the ability to continue a harmful business practice. There is plenty of precedent for outlawing business practices which had previously been highly profitable to their practitioners. This "parallel" is not, in fact, parallel at all.

Harmful business practice? You act as though their entire business model was built on taking peoples money and not paying claims. There are in fact other ways for them to make a profit, such as encouraging health programs and screenings for their customers, negotiating rates with large providers to get a better deal than Joe consumer, spreading the risk amongst larger groups of people etc. The majority of claims are paid as they should be. While the government certainly should outlaw business practices that are truly harmful, such as wrongfully denied coverage, that should not extend into shutting down legitimate business with no plan in place for the people in that industry.

And you still have not explained why they deserve to be compensated. You simply keep saying it as an assumption, and acting as if I will agree to it if you repeat it enough times.

I don't expect you to agree with me. But I feel that when you invest in an industry in good faith, then you should not be punished by your elected government stepping in and essentially taking your investment with no compensation whatsoever.

So it's true because you "feel" it is true?

Isn't the idea of deciding someone "deserves" something is because you feel its true? If you are expecting some sort of mathematical formula than I really can't provide one. Determing what something is "worth", and thus what someone else "deserves" depends greatly on your own point of view. I stated mine, you stated yours. I don't really view this as some sort of "winnable" debate point.

If you work in a buisness then if the government is seeking to end that business they should have a plan in place to retrain, or otherwise assist you in finding employment in another industry.

And this is true because ... you say so?

Its a moral question. So yeah, I guess its true because I say so. This is another one of those that falls along what you feel people "deserve".

To speak nothing of the repurcussions of doing such a thing. After all, why would someone then invest in another company with the thought that government may some day decide to step in and take that over?

I see you are now relying on historical ignorance as your central argument. Other countries have done this, without their entire financial and business communities disintegrating from fear that the government would take over all businesses. This is nothing more than a slippery slope fallacy.

This is a slippery slope with potential. It doesn't have to make logical sense for investmentsheep to get panicky and start to pull back from investment. We already see it happen every day depending on which way the wind is blowing. A next big target would be banks, then utility companies. They make sense for government control right? After all, without profit motive then the government could provide those services better than private companies could. That's something that could easily be sold by the right wing and discourage people from investing in those fields.

Why bother trying to innovate a new product if the government can simply step in and take it from you?

Name one innovation that health insurance companies have pioneered, apart from discovering novel ways to screw people.

I wasn't speaking specifically about insurance companies, rather about the precedent that government will take over an industry with no compensation being a discouragement to people investing time, money, and energy into creating new products.

All that being said, I'm not opposed to a public option in healthcare, but it has to be done right. If the government is going to nationalize the industry for the "sake of the public good" it had better have all its ducks in a row.

And by "ducks in a row", you naturally mean "do what I say".

No, I natrually mean that they need a clear plan in place that will be acceptable to the electorate. The reason so many people were swayed by Repulican propoganda during the HCR debates was because details were seriously lacking. When questions aren't clearly answered it leads to a lack of confidence in the overall plan.

[Vendetta]

Health insurance companies have provided a useful service that the government til this point has not. Clearly there are/were problems with how the industry was regulated, but again those are the exception. For the government to step in and essentially burn them to the ground with no plan for the people who work for these businesses is morally wrong.

The service that health insurance companies provide is paying for healthcare. It is not providing employment.

The government's moral duty, should it choose to step in and replace healthcare insurance, is to pay for healthcare. It has no moral duty to former health insurance employees beyond paying for their healthcare. They have become redundant, their employers will need to provide them statutory redundancy packages.

[Simon_Jester]

And, frankly, the government would be looking to hire large numbers of people with experience in handling health insurance. It's not a one for one thing, but the net effect is greatly reduced because of that.

Put it this way, Hammer: does the US employ that many fewer people responsible for the funding and logistics of health care per capita than, say, a single-payer country like Britain?

If not, there is no net loss of jobs, and people with existing experience in the health insurance industry would be ideally placed to join a hypothetical American NHS-equivalent. All would be well.

If the gap is small, then it won't matter much, very few people would be put out of work without a new job prospect immediately opening in front of them, and ultimately the effects would be largely unimportant on the scale of the national economy.

On top of this, there will be other benefits to society- shifting the burden of health insurance costs off individuals and employers might create more job opportunities in other industries.


That said, it shouldn't surprise anyone that no one during the health insurance debate in the US has said "fuck health insurance employees, let them starve." There's no benefit to that, rhetorically, because there aren't (yet?) that many Americans who deeply resent health insurance company employees.

[Starglider]

Put it this way, Hammer: does the US employ that many fewer people responsible for the funding and logistics of health care per capita than, say, a single-payer country like Britain?

If not, there is no net loss of jobs, and people with existing experience in the health insurance industry would be ideally placed to join a hypothetical American NHS-equivalent. All would be well.

What? Surely you mean 'that many more' and yes, the US does have a lot more people doing administration work than the UK or any other nation with single-payer healthcare. It has legions of people who are specifically employed to find reasons to deny coverage, not something that exists in a nationalised system; these people can and should be removed from healthcare altogether. It also has marketing and sales costs for individual insurance. This is one of the (many) reasons why US healthcare costs so much more.

If the gap is small, then it won't matter much, very few people would be put out of work without a new job prospect immediately opening in front of them, and ultimately the effects would be largely unimportant on the scale of the national economy.

Nationalised healthcare should actually reduce the staffing levels needed for healthcare as a whole, because cheap preventative care will reduce the amount of people who get badly ill and end up in emergency rooms. It will also mean less people medically unable to work and hence a higher labor participation rate. Focusing on the short term 'oh no more unemployed people' is nonsensical when the benefits are so huge.

[Stark]

Even in countries like Australia, with a mix of public and private healthcare (an extremely inefficient one, due to the massive corruption and mismanagement in health departments) costs must be lower as law prevents insurers from refusing coverage to anyone while universal healthcare works to reduce total demand on private insurance. The US system is like the perfect combination of government mismanagement and corporate profiteering; the literal worst of both worlds.

[Flagg]

When the US government built a massive interstate highway system (with taxpayer dollars, and which requires continued maintenance with more taxpayer dollars) to encourage and facilitate the use of cars and trucks as the primary mode of transport in the name of the greater good, did they "compensate" railroad employees and shareholders who saw their entire business model shrink drastically as a result?

IIRC they subsidize AMTRACK.

[Simon_Jester]

What? Surely you mean 'that many more' and yes, the US does have a lot more people doing administration work than the UK or any other nation with single-payer healthcare. It has legions of people who are specifically employed to find reasons to deny coverage, not something that exists in a nationalised system; these people can and should be removed from healthcare altogether. It also has marketing and sales costs for individual insurance. This is one of the (many) reasons why US healthcare costs so much more.

Yes- but if 50% of the people working for the insurance firms are actually necessary to the administration of the health care system, for example, it reduces the jobs impact by half.

Focusing on the short term 'oh no more unemployed people' is nonsensical when the benefits are so huge.

Agreed- I was trying to get at the knock-on effects in the next to last paragraph.

When the US government built a massive interstate highway system (with taxpayer dollars, and which requires continued maintenance with more taxpayer dollars) to encourage and facilitate the use of cars and trucks as the primary mode of transport in the name of the greater good, did they "compensate" railroad employees and shareholders who saw their entire business model shrink drastically as a result?

IIRC they subsidize AMTRACK.

Amtrak- yes, they started subsidizing that when they realized that passenger rail in the US was about to go out of business entirely, and decided that it wasn't desirable for that to happen. Not just because of the jobs, but because it's a mode of transportation that has some useful things going for it.

Although what was really endangering passenger rail was the airlines more than the interstates, I think.

[wautd]

Investment risk is one thing, but the notion of an elected government stepping in and essentially seizing an industry is something else entirely. If it is to be done, there should be some sort of compensation.

Anyway, the Daily Show still wins.

That was great, and nice to see that there's still some opposition from the Left in American politics (albeit mostly coming from a comedy show).

[Lord Zentei]

That was great, and nice to see that there's still some opposition from the Left in American politics (albeit mostly coming from a comedy show).

I couldn't watch those Fox news clips without fuming, and that destroyed the humour.

There is no "left" in the USA. There's the center-right and the far right. I identify with the former.

[Eleas]

That was great, and nice to see that there's still some opposition from the Left in American politics (albeit mostly coming from a comedy show).

In the olden times a despot might keep a jester around. He was entitled to say things nobody else would dare voice, and you could listen to him as much as you wanted as long as you remembered to laugh.

[TheHammer]

And, frankly, the government would be looking to hire large numbers of people with experience in handling health insurance. It's not a one for one thing, but the net effect is greatly reduced because of that.

Put it this way, Hammer: does the US employ that many fewer people responsible for the funding and logistics of health care per capita than, say, a single-payer country like Britain?

If not, there is no net loss of jobs, and people with existing experience in the health insurance industry would be ideally placed to join a hypothetical American NHS-equivalent. All would be well.

While many people would no doubt find government employment, the assumption will be that a significant number of people would lose there jobs. I personally don't have a problem with healthcare moving from the current model to government operated, but I don't think the people who have been working for these industries and the people who invested in companies in those industries should be told to "get fucked" in the process.

If the gap is small, then it won't matter much, very few people would be put out of work without a new job prospect immediately opening in front of them, and ultimately the effects would be largely unimportant on the scale of the national economy.

On top of this, there will be other benefits to society- shifting the burden of health insurance costs off individuals and employers might create more job opportunities in other industries.

If the government is ready to step in with a plan for retraining or relocating employees who lost their jobs because of a government takeover then I think you'd hear less griping. For the investors, a one time buy out of healthcare companies, sort of an eminent domain seizure, would also greatly answer the questions of a lot of critics.

The long term benefits of nationalizing would likely outweigh the short term pain. However, what I'm saying is that with proper planning the short term pain doesn't have to be as bad. Basically, I don't accept the premise that the only two solutions to this are to "let Insurance companies run rampant" or "fuck em".

[Darth Wong]

Health insurance companies have provided a useful service that the government til this point has not. Clearly there are/were problems with how the industry was regulated, but again those are the exception. For the government to step in and essentially burn them to the ground with no plan for the people who work for these businesses is morally wrong.

I love the way you massively misrepresent my position without a trace of shame. The fact is that the public option would not be outlawing private insurance companies, nor would it be "burning them to the ground". All a public option would do is create a government-run competitor. That's not morally wrong; that's morally necessary.

Harmful business practice? You act as though their entire business model was built on taking peoples money and not paying claims. There are in fact other ways for them to make a profit, such as encouraging health programs and screenings for their customers, negotiating rates with large providers to get a better deal than Joe consumer, spreading the risk amongst larger groups of people etc. The majority of claims are paid as they should be. While the government certainly should outlaw business practices that are truly harmful, such as wrongfully denied coverage, that should not extend into shutting down legitimate business with no plan in place for the people in that industry.

Their entire business model is built on taking in MORE money than they pay out in claims, and they hire entire teams of specialists in order to ensure that this happens. The fact that the pain gets focused on a small minority of customers rather than being evenly spread around to their entire customer base is irrelevant.

Isn't the idea of deciding someone "deserves" something is because you feel its true? If you are expecting some sort of mathematical formula than I really can't provide one. Determing what something is "worth", and thus what someone else "deserves" depends greatly on your own point of view. I stated mine, you stated yours. I don't really view this as some sort of "winnable" debate point.

It's "winnable" in the sense that you cannot explain what particular ethical concept this is based on, other than itself.

And this is true because ... you say so?

Its a moral question. So yeah, I guess its true because I say so. This is another one of those that falls along what you feel people "deserve".

If you're going to force the taxpayers to pay money to a bunch of insurance companies, you had damned well better have a good reason, and "because I say so" is not a good reason.

This is a slippery slope with potential.

No it isn't.

It doesn't have to make logical sense for investmentsheep to get panicky and start to pull back from investment. We already see it happen every day depending on which way the wind is blowing. A next big target would be banks, then utility companies. They make sense for government control right? After all, without profit motive then the government could provide those services better than private companies could. That's something that could easily be sold by the right wing and discourage people from investing in those fields.

You can't justify a slippery slope fallacy by saying that investors might buy into it. It's still a fallacy, regardless of whether FOXNews or IBD would try to promote it.

I wasn't speaking specifically about insurance companies, rather about the precedent that government will take over an industry with no compensation being a discouragement to people investing time, money, and energy into creating new products.

More of your slippery slope fallacy.

No, I natrually mean that they need a clear plan in place that will be acceptable to the electorate. The reason so many people were swayed by Repulican propoganda during the HCR debates was because details were seriously lacking. When questions aren't clearly answered it leads to a lack of confidence in the overall plan.

The stupidity and ignorance of the electorate is not relevant to the question of whether it is immoral. You are attempting to conjoin two separate issues. Moreover, you seem to have completely forgotten my original point, which was to say that the American people have obviously been completely co-opted by corporatist rhetoric. This latest argument of yours only agrees with that initial statement.

While many people would no doubt find government employment, the assumption will be that a significant number of people would lose there jobs. I personally don't have a problem with healthcare moving from the current model to government operated, but I don't think the people who have been working for these industries and the people who invested in companies in those industries should be told to "get fucked" in the process.

You are harping far too much on that choice of words. The phrase "get fucked" in this contexgt means "we shouldn't have to give them money to compensate them for having a non-profit competitor", whereas you're trying to make it appear as if they are actually being maliciously and directly harmed.

If the government is ready to step in with a plan for retraining or relocating employees who lost their jobs because of a government takeover then I think you'd hear less griping. For the investors, a one time buy out of healthcare companies, sort of an eminent domain seizure, would also greatly answer the questions of a lot of critics.

How is competition the same as "takeover"?

The long term benefits of nationalizing would likely outweigh the short term pain. However, what I'm saying is that with proper planning the short term pain doesn't have to be as bad. Basically, I don't accept the premise that the only two solutions to this are to "let Insurance companies run rampant" or "fuck em".

And yet you are trying to distort the argument into precisely this false dichotomy. The fact is that the appearance of a government-run competitor would not cause instant overnight demolition of the entire insurance industry. Any shift would take time.

At the end of the day, you're doing precisely as I described earlier: asking for corporations to be coddled. You're just manufacturing reasons to give them taxpayer money, making excuses for their behaviour, exaggerating the nature of the change, etc.

[Winston Blake]

First let me say that I am not trying to engage with you, TheHammer, and I don't blame you if you don't respond. I don't expect you to argue against multiple people at the same time. I just think the point I make below could clarify this issue and help bring the argument to a close.

Health insurance companies have provided a useful service that the government til this point has not. Clearly there are/were problems with how the industry was regulated, but again those are the exception. For the government to step in and essentially burn them to the ground with no plan for the people who work for these businesses is morally wrong.

I love the way you massively misrepresent my position without a trace of shame. The fact is that the public option would not be outlawing private insurance companies, nor would it be "burning them to the ground". All a public option would do is create a government-run competitor. That's not morally wrong; that's morally necessary.

Further, even if it did 'burn them to the ground' via competition, this may actually be less morally repugnant than the scenario of one private company outcompeting a bunch of other companies. A CEO may consciously make the decision to compete in a market, undercut the competition, and put all those other companies out of business, or force them to downsize. I.e. a deliberate destruction of the livelihoods of perhaps tens of thousands of people. Is such a CEO obligated to provide 'compensation' to those people? And to all the shareholders? Is such a CEO responsible for 'destroying the industry'? Such actions are culpability-free in our society, despite this scenario being vastly more severe than the 'public healthcare option'.

OK, so the government is a different kind of entity to a corporation, but my point is this: to cause such a result motivated by a desire for personal profit and wealth carries no obligation or culpability; yet to cause such a result motivated by a desire to help people and relieve suffering 'feels wrong' to TheHammer (and presumably to many Americans and American politicians). Isn't this incredibly inconsistent? A government exists to maximise the prosperity and minimise the suffering of the population it represents. Concentrating on the former to the exclusion of the latter is a tragically unbalanced attitude.

[PainRack]

Nationalised healthcare should actually reduce the staffing levels needed for healthcare as a whole, because cheap preventative care will reduce the amount of people who get badly ill and end up in emergency rooms. It will also mean less people medically unable to work and hence a higher labor participation rate. Focusing on the short term 'oh no more unemployed people' is nonsensical when the benefits are so huge.

Nitpick: Preventive care doesn't happen automatically if you nationalise healthcare.

Sorry, its just a point that annoys my senses at time. It automatically assumes that preventive care doesn't happen because people need to pay for it. Even if you do remove the cost of going for preventive care, it doesn't mean that the facillities, slots or even physical access is going to pop up automatically to accomodate the need.

[Faqa]

Indeed, a problem out here in the socialised healthcare system is that it just pushes a lot of the scarcity elsewhere - instead of paying for treatment with money, you're paying with connections to jump the months-long line.

That said if you wait the months in that line, you will be treated. And that security makes the system worth it. But it doesn't make the scarcity of medical resources go away.

[Darth Wong]

Why do people insist on buying into this notion that socialized health care has a greater problem with scarcity of resources than privatized health care?

The NEJM study showed pretty clearly that US-style health care is actually far less efficient, so if both systems were spending the same amount of money to cover the same number of people, the socialized system should have less scarcity and shorter waiting times.

The only reason the US system can generate short wait times is that it spends twice as much as other countries per capita, and doesn't even cover everyone, which means it spends more than twice as much money per "customer".

[Surlethe]

Remember: the free market* removes resource scarcity. That's why people in Canada and the UK and France have waiting lines, but in the US we don't.

*Not that the US health care market could reasonably be considered reasonably free from government intervention, let alone "free."

(Comment on the Laffer Curve, from discussion earlier this page/last page: the Laffer Curve is concave down. That's why when you raise or lower taxes, revenues are always below static projections. Noting this well-established economic observation is very different from the right-wing Laffer Curve ideology, which holds that the Laffer Curve is downward-sloping.)

[Zaune]

Why do people insist on buying into this notion that socialized health care has a greater problem with scarcity of resources than privatized health care?

I don't think it's scarcity of resources as such, more that there's a more uniform distribution of them. For people who can afford comprehensive insurance cover and whatever co-payment without wincing, who I dare say are becoming a minority these days, there's absolutely no scarcity whatsoever; the hospital can turn away anyone who can't pay up unless they're in imminent danger of dropping dead, which undoubtedly cuts down waiting periods considerably.

[Lord Zentei]

@Surlethe
Nitpick: the free market removes shortages which is defined as the difference between the amount of a good people willing to pay for at a given price minus the amount people are willing to sell at a given price. Scarcity is the reality that resources are not infinite, or at least that there's a difference between the amount people might conceivably want and the amount they can actually get. Nothing can remove scarcity other than, perhaps, both zero-cost production and distribution combined with zero entry costs and zero transaction costs.

I agree with the comment on the healthcare market in the US probably not being a free market. Privatization is not enough to ensure that.



But economic efficiency is a concept that is often misused by both critics and supporters of the market approach to resource distribution. It is meant to optimize an economy in terms of production costs, NOT in terms of market price (although the market price of inputs and outputs is the driving mechanism). One measure of economic efficiency is Pareto-efficiency - i.e. that it is not possible to make anyone better off without reducing someone else's welfare. In particular, economic efficiency implies that the market optimizes the total benefit, i.e. the sum of all consumer benefit PLUS the sum of all producer's profit. The consumer benefit is defined as the difference between the maximum price the consumer is willing to pay and the price he has to pay, just as producer's profit is the difference between the selling price and the production costs. Of course, not all markets reach this ideal due to sundry factors such as imperfect information and government interventions (not all of which are made for the benefit of the consumer). The American healthcare system with all its complexities is very likely such a market.

It might be no less illuminating to point out what economic efficiency is not. Economic efficiency does NOT imply any of the following:

• That there's always a minimum service provided to all consumers.
• That the average consumer (as opposed to the economy overall) gets the most bang for the buck, i.e. that the function (Consumer Benefit / Market Price) is maximized.
• That the structure of the distribution system the consumer faces is as simple and streamlined as possible.

I haven't read the NEMJ study, but I suspect that they're using the term "efficiency" in one or more of the three ways I mentioned above, as opposed to using economic efficiency.