Ducks and Economics

I caught this discussion of rights over at Pileus. The writer is James Otteson:

By contrast, granting people a right to health care means imposing positive duties on some for the benefit of others. That is precisely the sort of liberty-impinging exploitation that the Declaration meant to rule out. Congressional action declaring it legal does not change its essential character, just as the legality of slavery at one time in this country did not alter its essential character. Using some for the benefit of others has an intrinsic moral repugnance that is not erased by congressional action or by closing our eyes to the actual source of or the full costs of the proposed benefits.

Take one other case. A measure in the recently passed ObamaCare bill prohibits private companies from offering federally guaranteed student loans, leaving the federal government itself as the only lender. Part of the rationale for this is that people have a “right” to education that should, therefore, be guaranteed and provided by the government.

I want to talk about the second case first. While I agree nominally with Otteson’s discussion of ‘rights’ here in the positive and normative sense, I think that the scenario has more to offer. Specifically: why do private companies have the right to offer federally-guaranteed loans? The federal government as an entity who chooses to act in a market for loans is not obligated to commit to any stipulation regarding who can offer loans backed with their money. Sure you can criticize the rationale that people have a right to an education, but the rationale is a different thing from the policy itself.

The rights discussion on healthcare is far more compelling of an argument. But I don’t evaluate these policies in a vaccuum. I think if we are intellectually honest then we admit that for a long time these sensible libertarian ideas have been lip candy for the right wing, who uses the discussion on rights as a way to distract from larger inequities that their policies perpetuate (for instance, opposition to same sex marriages). So yes, Otteson is correct in a world where there is an equal playing field. But in this world the content of the message is a tool, whether for good or for bad, and there are many different playing fields, dominated by many different players.

Healthcare in particular is too broad of a topic to make these simple generalizations about. How do libertarians respond to the many instances where someone’s insurance coverage is revoked right after they fall sick and begin making claims? The obvious answer is that there should be some kind of perfect third party to facilitate arbitration. Libertarians think that the market is that perfect third party. But while that theory is true in theory, in practice markets are subject to constraints that make them vastly more imperfect mechanisms.

Extend my counter-example. I have insurance, I get cancer, my insurance company cancels my coverage as a pre-existing condition…and there is no good market actor to redress this dispute because no one has an incentive to. At every step of the way, I, the consumer, am hobbled by the asymmetries of power and information that exist. To fight this claim, I have to find a lawyer (a costly process) who has to navigate a costly process for resolution of my complaint. By its nature, this system acts as if it were bound by the laws of inertia. In a nutshell, the structure is one that is biased towards the status quo.

Here I want to step back and make an argument about something we don’t talk enough about. That thing is common pool resources. A good example of a common pool resource might be a fishing ground. No particular person can own the sea where the fish are, nor can they own the fish prior to catch. In this world you’d expect the tragedy of the commons; everyone overfishes to maximize their short term profits. But of course this is absurd. In real life, you find that people tend to set up formal or informal governance mechanisms to allocate the fishery resources to optimize its production over time.

I think of healthcare in a sense as mechanism to optimize the most important common pool resource we have: ourselves. Think about it this way. A government’s function is to provide those goods and services that the private sector cannot. There are disagreements on where the line lies but generally, providing for the public safety is one of them. In this regard we have a national defense program that is the third largest line on the budget. We spend between 38-44% of tax revenues on national defense. To this day, I cannot recall a single conservative I know who says we need to cut military spending (I’m sure they exist, but they don’t get the headlines). No one is giving the President credit for what might be one of the more significant and unprecedented events in Presidential history: cutting defense spending in the last budget.

But ultimately, our most meaningful resource is not our guns or nuclear weapons or aircraft carriers. Our most important resource is our people. In a world where so many people are hobbled by a market structure that maximizes producer surplus at the expense of consumer surplus, I think there is a strong argument for the government to provide healthcare.

I agree with many people who say the bill that actually passed is badly written and contains too much, etc, etc. But let’s be honest and say that the world does not admit of the easy solutions that follow from a naive interpretation of classical liberal/libertarian thinking.