More and more, I have come to believe that state regulation of anything not only destroys liberty but also is essentially irrational for those on the receiving end, which is frequently most of us and very often many of us. Somebody always stands to gain, but the costs they impose on others are much larger.
Irrationality is not easy to define, but if a group of people or a society consistently choose ways to accomplish goals that do not accomplish the purposes efficiently or effectively, and if they continually spurn available methods that would, they are acting irrationally.
If a method is available and has been used in the past that works, I do not believe that we can attribute failure to use it and instead using a grossly ineffective method, to stupidity or ignorance. I believe that the explanation lies elsewhere — within a societal arrangement, within the system that has been set up. An organization is leading to the poor outcomes and irrationality. The group or society has closed off, at least temporarily, the use of peaceful and reasonable methods and replaced them by the use of force. The group has built unreasonable methods of force into its structure. It has raised barriers to the use of anything but these methods of force. Having done that, it has tied its own hands. It cannot escape the consequences, which will appear to be irrational and chaotic, of establishing an essentially irrational means of reaching its goals.
Why then do people adopt these methods of force and build up barriers against their removal so that they cannot easily return to rational means of dealing with their problems? Why do they create barriers to rationality and support for irrationality?
I have in mind, of course, the state vs. the free market. The state is the organization people turn to that uses force to solve problems and, I believe, necessarily results in irrational outcomes. I could qualify this to — by and large creates irrational outcomes — but why quibble? It is hard to think of anything that the state does that is not irrational, so let us, for the sake of simplicity and clarity, simply say that everything it does is done by an irrational means (force), thereby producing outcomes that are irrational. View it as an hypothesis, if you will. But in my mind it is actually an incontrovertible truth. The use of force (compulsion) to solve most problems that the state is supposedly solving is, I believe, fundamentally irrational. One might use force to handle invasions of one’s rightful liberty, or to handle crime and war. It is rational not to allow someone else to injure you, and force might be the best method to stop them; but these standard uses of force are not what I have in mind. I have in mind such matters as health care, where there is no case for using force at all and where instead the society chooses to use it to attain some end or ends rather than choosing that people solve their own problems in liberty, without force, which is to say in a free market.
And so the root question, which I have raised is this: Why do people adopt government by force, that is, a state, when the results are irrational and do not conduce to their welfare? While there are many answers, the real problem with such a choice is that people who do not want a state are roped into the irrational arrangement and forced to comply with it and live by it. State-mandated and regulated health care would be no burden on those of us who think it’s irrational if we could go our merry ways without it, while all those who wanted it could have it to their heart’s content. The odds are that when the latter saw how dysfunctional their system was as compared with our free market system, they would abandon their loyalty to force and come over to our method. I cannot help suspecting that those who build up a state system are anxious to corral everyone into it and quash the free market for this very reason, that if the free market remains as a living case study of liberty vs. compulsion, the victory will go to liberty and compulsion will go down for the count. If this is the case, then I reach the conclusion that "people," meaning all people, do not adopt government-by-force (a state) if they know what they are doing. Some people manage to get going this form of government-by-force by hook or by crook, by all sorts of means that history shows us, or as such writers as Oppenheimer and Nock show us, have been used at one time or another; and once that force is in place, once there is the beginning of prison walls, the state itself can build up those walls over time.
It definitely helps the case for liberty to understand how certain people who love the use of force and love the state go about their business of making liberty disappear. It also helps the case for liberty to understand that the basic outcome, which is state control by compulsion over peaceful and innocent activities such as providing health care, is irrational. Would it be rational to have a state control the production and distribution of pizza or shoes or computers or pets or movies or music by the use of compulsion and regulation? Would we observe pizza stores located where they now are located, open at the hours they are open, providing the variety they provide, at the prices they now charge? Would our pizza desires be satisfied via government-mandated pizzas? If our desires for pizza waned and were replaced by desires for submarine sandwiches, would the state respond quickly and effectively? Evidently not, for the state is not a business. It does not respond to the profit incentive.
Health care, like it or not, is a business. It takes resources to produce it. It takes toil and sacrifice. We cannot deny Adam Smith’s wisdom. A doctor is not doctoring us out of the goodness of his heart and generosity, even if he does possess the milk of human kindness. He is responding to an economic problem wherein he, as much as the pizza baker, has to use limited resources to achieve his ends. No better system — no more rational system — has ever been found for producing health care than a system of liberty in which the choices are left up to the patients who are the buyers and the doctors (or other health care providers) who are the sellers. Profit signals are good. State-controlled health care lacks these. It is far inferior. Bureaucrats and legislators are not doctors and not profit-oriented. If they respond at all to what people want, it is in the most obtuse, roundabout, and counterproductive ways. They seek to augment their own positions or those who pay them off. They produce nothing. Once power and force are used to reach ends, resources are wasted jockeying for a slice of the regulated and/or taxed pie.
These remarks are prompted both by the pending health care legislation in Congress and a few articles appearing this morning about health care in Massachusetts, but especially the latter because several years ago I wrote three articles heavily critical of the changes in the Massachusetts system brought about under Mitt Romney. Of course I am critical of the entire system. It is all irrational. It is pure madness for a society to have the state construct a health care system that it controls by regulation. This view is not widely appreciated. But even to the extent that it is appreciated, many of those who view such state control with misgivings or even alarm do not understand that any state regulation and control in health care is bound to produce irrational outcomes. There is no conceivable combination of regulations or changes that can "fix" the system. As long as force is introduced as a method of handling the goal of creating and distributing health care, and a state necessarily uses force, the results are going to be irrational.
Three years after Massachusetts instituted its new health care system, the system is not working. Costs are rising "by more than 8 percent annually." Year in and year out since Medicare was adopted in 1965, I have regularly heard that medical costs were rising at 8 percent annually. The needle seems to be stuck. When I haven’t heard that, I have read instead that medical costs are rising at twice the rate of inflation. You would think that after 45 years, the people would wake up. Just the opposite. The state will never wake up. It, as I have said, can only act irrationally in providing services and reaching health care ends that satisfy consumers, and the inflation in medical care costs is evidence in support of that proposition. But evidently the state is very effective in manipulating thought so that consumers continue to prefer its irrationality over a rational method of health care provision, which is liberty and a free market.
Massachusetts has an incredibly Byzantine system of commissions and boards to control health care in the state. What made news is that one of these commissions is recommending a change in the way that doctors and hospitals are paid. Previous compulsory mandates have produced excess demand and rising prices. The article speaks of "heavy use of hospitals." The state is now looking for ways to ration health care. This is it: price controls and rationing. That is often the end-result of getting rid of free markets, wholly or partially. None of this is really news. We have seen it all before. It is all predictable. That is why we have to conclude that the system of state-compelled health care and regulation is fundamentally irrational. Society is choosing means to achieve its ends that are not achieving those ends. Society is getting the opposite — worse medical care and more problems than ever. And I believe that this irrationality is a constant and necessary outcome whenever the state gets into the act of controlling and regulating goods that can be produced in liberty.
The commission proposes that payments will no longer be made one at a time for each service that is provided. Instead doctors and hospitals would be given a fixed or budgeted amount and they would have to work within that budget during a year’s time. The economic result of this is that they would be forced into rationing health care services to patients. There would no longer be negotiated fees between insurers and doctors. The market, such as it is which is already defaced, would be entirely obliterated. In this system, the individual demands of health care buyers no longer have any say. Health care becomes entirely collective. Taxes are collected by the state and insurers, and then they dole out the money to providers. The person who obtains the service is left out in the cold, at the mercy of this system. This is fascism with a vengeance. Like all state-controlled methods of providing goods and services, fascism is fundamentally irrational.
So that you will know who your immediate enemies are, they include the insurers. I quote the article:
"u2018This is an historic moment, an extraordinary moment in healthcare in Massachusetts,’ Andrew Dreyfus, senior vice president of Blue Cross and Blue Shield of Massachusetts and a commission member, said after the panel’s vote. u2018I urge the Legislature and the administration to take this up quickly.’"
In an earlier article, I referred to the health care system as "Aetnacare."
More fundamentally, we ourselves are our own worst enemy. Our society and our system are committed to government-by-force — to compulsion. Our society and our system not only allow fascism but want it. If we want irrationality, we shall have it. And we are getting it.
Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.