Perspectives: Mission: Unpossible

Being Libertarian Perspectives serves as a weekly, multi-perspective opinion and analysis piece by members of Being Libertarian’s writing team. Every week the panel, comprised of randomly selected writers, will answer a question based on current events or libertarian philosophy. Managing Editor Dillon Eliassen will moderate and facilitate the discussion.

Dillon Eliassen: Good morning, Being Libertarians. Economic regulations and the administrative state are some of the greatest threats to American liberty. For years, Congress has passed laws that leave open to the Executive Branch how to interpret and execute legislation which allows government agencies wide latitude in coercing the behavior of businesses, citizens and civil institutions both private and public. Your mission, should you choose to accept it, is to identify which regulation is in most need of repeal and why. As always, if any of you are caught or killed, the Editor will disavow any knowledge of your actions. This Perspectives will self-destruct in 5 seconds. Good luck!

Alon Ganon: The Telecommunications Act of 1933 (or was it 1934). It is one of the major reasons cellular service and many other wireless communications in the USA are lagging. The USA has to authorize spectrum sales and only doles out small chunks at a time. It gave rise to a lot of the obscene power the FCC has these days. Net Neutrality is another I would like to see gone. Even the Chairman Emeritus of MIT media lab doesn’t like it. The fact is not all data is equal. Most of those arguing for Net Neutrality have little to no experience in the realm of network administration. But, in general, I dislike the FCC; they are a huge reason American telecommunications lag.

Jacob Linker: The Sarbanes-Oxley Act of 2002. The Bush administration enforced it so heavily that the 2006 house takeover strategy partly involved Nancy Pelosi going after the administration for competition-killing enforcement of regulation.

Nima Mahdjour: CO2 emission limits.

John Engle: The FDA is quite likely, in a long term impacts sense, the agency most responsible for a reduced quality of life compared to what we could have. The process is so grindingly slow and costly that countless promising drugs never get to be tested on a big enough population sample to even be judged accurately. The fact that there are companies like Dynavax, which, full disclosure, my company has a long position in, which can have more than $100 million in cash and still have a doubtful future thanks to the whims of a deeply flawed approval process is absolutely maddening. Even though they are just as technologically advanced as us, for some reason we won’t take the EU drug agency’s word for most things either. All this has done is radically slow down, and make drastically more costly, the process of getting new and innovative treatments to market. That has a real human cost that is very hard to quantify in terms of lives, though it definitely does cost many.  But even in purely financial terms, think how much is spent by consumers and government on healthcare. It continues to eat up more and more western countries’ spending power. Perhaps the most amazing thing is how the Left react to all this. They wonder why drugs are so expensive and lash out at the power of the Big Pharma companies while at the same time lauding the ever expanding reach of the regulatory state. They fail to grasp that it is the State that has created those Pharma behemoths because they are the only ones with the cash reserves and lobbying reach to actually get anywhere.

Nima: According to studies, the FDA is responsible for 80% of medication costs.

John: Probably so. But even those costs are hard to really quantify because the whole cost structure of the industry is based around a gigantic regulatory machine.

TJ Eckert: Making the FDA approval optional for drugs is a great starting point. You could throw in that if it’s not FDA approved it needs to say so on the bottle to “protect” consumers, if you feel like pandering.

Jacob: That seems like an easy compromise. The FDA should test for harm, rather than efficacy.

TJ: True. Allowing products that have been approved in other certain countries a more lenient approval process could also help.

John: Having some oversight is probably a decent idea. In a world of very imperfect information, like consumers facing biotechnology and complex pharmaceuticals, a total lack of curated information could yield some perverse results. Drug law harmonization is one of the things trade deals have been trying to strike. It’s one of the worries about the protectionist surge.

Jacob: The downside to those deals is drug law harmonization includes patent harmonization. The US pushed hard for a long patent term, like longer than existing laws in the US.

John: There are good things in patent harmonization though, even if they are longer term, because once they are harmonized and governed by rules, then you can start to push at the edges to make them gradually less onerous. There are always trade offs in any deal struck between parties with divergent interests and interest groups. But that, I would argue anyway, is one of the reasons the multilateral system chipping away at trade boundaries has been pretty good from a libertarian perspective. The perfect is the enemy of the good, or so they say.

Jacob: I was pro-TPP, but I don’t think the patent extension was even good. If Vietnamese folks rip off pharma companies in the US that have already recouped their R&D, g-d bless them.

John: That was definitely not a particularly strong part of it. But TPP, to continue our tangent, was about more than just the incremental improvements on some aspects of trade. It was about creating a negotiating framework for future rounds of talks that would be built on principles of openness and freer trade. It’s absence will be felt as China builds its own competing framework of commerce in the region, with its highly illiberal self at the center of it.

Baland Rabayah: According to all liberals and conservatives, we have healthcare crises due to one thing or another. Murray Rothbard summed up why we have an extremely expensive healthcare system:

“Our very real medical crisis has been the product of massive government intervention, state and federal, throughout the century; in particular, an artificial boosting of demand coupled with an artificial restriction of supply. The result has been accelerating high prices and deterioration of patient care. And next, socialized medicine could easily bring us to the vaunted medical status of the Soviet Union: everyone has the right to free medical care, but there is, in effect, no medicine and no care.”

Essentially, we overlook the reasons on why we have an artificial restriction of supply and an artificial increase in demand. Below is a basic overview on why we have these two phenomena’s increasing the price of healthcare.

The first major restriction on the supply of healthcare was when the American Medical Association obtained the monopoly rights on controlling the quality of healthcare, and the issuance of licenses towards healthcare professionals in 1910. This essentially removes the choice from consumers of healthcare. Milton Friedman explained this monopolistic characteristic, “It is clear that licensure is the key to the medical profession’s ability to restrict the number of physicians who practice medicine. It is also the key to its ability to restrict technological and organizational changes in the way medicine is conducted.”

The Calvin Coolidge administration started allowing the patenting of drugs in 1925, which further increased the artificial restriction on supply. Although I generally support the patenting of private property, within the history of US healthcare, prior to 1925, no such system was noticed or recorded for medicine.

Next came the 1972 requirements for the federal approval to construct healthcare institutions. This restricts locations on where healthcare can be performed, and further increases costs, which due to the nature of healthcare being inelastic, theses costs are passed on towards the consumers.

Finally, in a basic overview, the last restriction of supply is the 1984 Drug Price Competition and Patent Term Restoration Act. This essentially allows for patents for drugs to further increase over 20 years (hence further restricting the availability of substitute drugs on the market, i.e importing a drug with similar characteristics is forbidden in US law due to non-approval by the FDA, and technical violation of patents).

Now let’s talk about the artificial increase in demand: In 1943, the US federal government decided that it should exempt from taxes employer-insurance coverages given towards employees. Now, one may say that this would have no effect on the healthcare market, however, due to the fact that in 1943, the United States was in the middle of one of the biggest wars in human history! Essentially, due to labor being extremely scarce due to maximum wage laws, employers used insurance coverage in order to attract those who are not at war to work at their firms, which in 1951, became part of the official IRO code.

In 1946, the US federal government passed the Hospital Survey and Construction Act, which essentially subsidized certain medical institutions over others, thus choosing “winners over losers,” which over the long run would only favor the institutions that receive subsidiaries compared to those which do not, and increase the amount of demand towards healthcare.

In 1965, the US government passed Medicaid and Medicare which subsidizes the cost of healthcare towards the elderly and others. This of course is one of the main reasons for the disastrous artificial increase in demand for healthcare. In 2003, Medicare took one step forward, and further subsidized the cost of healthcare by subsidizing the cost of drugs for the elderly.

The only way to fix such a system is to remove the systematic barriers towards entrepreneurs which wish to introduce new medical goods/services will heal the wounds caused by artificial restrictions, while at the same-time, the subsidization of healthcare should also be removed as this removes the artificial increases in demand for healthcare services. Allowing for actual market price mechanisms to operate without interference will essentially allow for entrepreneurs to take the right entrepreneurial actions towards allocating and reallocating resources in the most efficient manner possible, as prices are a form of information on past preferences which may be used to predict future preferences of consumers and end users of healthcare. Below is a simple reference chart towards the artificial restrictions in supply and artificial increases in demand.

This post was written by Dillon Eliassen.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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Dillon Eliassen is the Managing Editor of Being Libertarian. Dillon works in the sales department of a privately owned small company. He holds a BA in Journalism & Creative Writing from Lyndon State College, and needs only to complete his thesis for his Master’s of English from Montclair State University (something which his accomplished and beautiful wife, Alice, is continually pestering him about). He is the author of The Apathetic, available at Amazon.com. He is a self-described Thoreauvian Minarchist.

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