Wednesday, June 13, 2012

Crony capitalism and health care

I have a friend - a spectacularly successful business person - who once told me that "when a guy you are doing business with wants to pray with you, watch your wallet."
Now, that's funny (it turns what seems to be a good thing on its hear) and probably unfair. Here is something that is neither.
Beware of public-private partnerships. Two theoretical insights tell us to be wary of the idea that government can facilitate the success of selected private companies. One is the notion that, in the absence of a market and the price signals it provides, it is virtually impossible to know which business or technology ought to be a winner.
The second is that, as public choice theory tells us, political processes are likely to be dominated by those whose interest is in the outcome is much greater than the public as a whole. In particular, there is a danger that the regulated will "capture" the regulators.
The Wall Street Journal is telling a scary story about this in the context of the passage of President's Obama health care reform. Pharmaceutical companies came to see the passage of the new law as both a risk and an opportunity. There were things that wished to avoid, e.g., permitted the re-importation of drugs, but also things that they wanted. Expansion of government subsidies for the purchase of their products - as well as a mandate that people buy insurance that would pay for their products - would be great for business.
There is an interesting twist to the story related to concerns on the left about money in politics. Apparently one of the prices of - or inducements for - favorable treatment was the expenditure by the drug companies' trade association of $ 150 million in advertising to be coordinated with the White House to promote a "consensus" on health care reform. This puts concerns about Citizens United in perspective, no?
Did things like this happen during the Bush administration? Apparently so. Shame on that as well.
Government does best when it sticks to government work., e.g. providing genuinely public goods and, as the Wall Street Journal put it, creating a fair and free market free of the type of micromanagement that is the essence of ObamaCare. Gore too many oxes and the ranchers start to get interested.

Cross posted at Purple Wisconsin


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Anonymous said...

"Did things like this happen during the Bush administration? Apparently so. Shame on that as well. "

And typically, guys like you didn't complain much, which is why you lack credibility.