- The Tom Woods Show: Episode 668 – An Economist’s Case for a Noninterventionist Foreign Policy
- The Early History of Regulated Health Care by Michel Accad
- From Carolina Journal: N.C. One of Many States Reviewing Occupational Licensing Rules
- A Weekly Dose of Hazlitt: Inflation as a Policy
- Obscure Progressive Rock: Carpe Diem
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History Begins at Sumer: Thirty-Nine Firsts in Recorded History - Samuel Noah Kramer
Business Tides: The Newsweek Era of Henry Hazlitt - Henry Hazlitt
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‘Economist David R. Henderson, deeply affected by the wars following 9/11, turned his research energies toward foreign policy, looking to see how an economist’s tools could be brought to bear in deciding on a sensible foreign policy. We talk about that today, in a really outstanding conversation.‘
Additional information can be found at the show notes page.
‘Q: What is the starting point in the history of the American health care system?
A: The American health care system was born in the 1910s out of the so-called “Flexnerian reform” in medical education and the resulting licensing laws.
Q: Why is that the starting point?
A: Prior to that time, medical care in the United States was essentially unregulated. Anyone could open up a medical practice, and many did so with little training. Patients had complete freedom to obtain medical care from whomever they wished. When such complete freedom exists, one cannot realistically talk about a “system.”
Q: What were the main features of this “pre-historical” period?
A: There were competing forms of medical care. “Regular” medicine continued the tradition emanating from European institutions and medical schools. It was ostensibly represented by the American Medical Association (AMA).
The regular form of medical care tended to be more disposed toward aggressive interventions (blistering, blood-letting, and toxic purgatives), but over time, it also increasingly incorporated scientific knowledge into its mode of practice. Surgery was part of regular medicine, and surgical techniques were improving rapidly in the latter part of the nineteenth century.
Other forms of medical care, such as Eclecticism, herbalism, and homeopathy tended to be less inclined toward aggressive treatments, and each had its own diagnostic and therapeutic philosophy.
There was a multitude of medical schools, and most of them were privately owned. In many cases, the curriculum lasted one or two years after high school. Given this large number of schools, the United States had the highest number of physicians per capita in the world.
Q: It seems like a very chaotic situation. Were patients confused?
A: It is hard to objectively gauge how the population felt about its medical care at the time, but we can document that over the last decades of the nineteenth century, people seemed to favor medical care which embraced scientific discoveries such as the germ theory of disease.
The number of proprietary schools declined, and those that survived did so by improving their standards. Hospitals and institutions which offered more scientific care flourished. An instructive example of how ordinary people were able to distinguish and reward high quality care is that of the early years of the Mayo clinic.
Q: Who was Flexner and what did he accomplish?
A: Abraham Flexner was an important figure in educational activism who was hired by the Carnegie Foundation to study the state of medical education in the United States. He had previously issued a report critical of higher education in colleges and universities.
Flexner and leaders at the Carnegie Foundation were impressed with recent scientific and technological advances and wished to promote a philosophy of “scientific management” of human and social affairs, a philosophy that characterizes the Progressive Era.
Flexner spent two years visiting medical schools throughout the continent and published his influential report on Medical Education in the United States and Canada in 1910. After publication of the report, Flexner continued to be actively engaged in promoting the report’s recommendations.
Q: What did Flexner find and what did the Flexner Report call for?
A: The Report is described as “muckraking” by Kenneth Ludmerer, a prominent historian of medical education.1 Except for a few academic schools which he praised, Flexner condemned the state of medical education in no uncertain terms.
The Report called for the closure of all medical schools which did not demonstrate a commitment to scientific standards and did not incorporate a laboratory practice. It also called for licensing laws to require higher educational standards. The Report was consonant with the goals of the AMA, established in 1847 ostensibly to strengthen medical education and to reduce the number of physicians.
Q: What effect did the Flexner Report have?
A: The Flexner Report is frequently credited for setting into motion medical education reform, but this is erroneous. Great improvements in education had already occurred in many academic institutions in the previous two decades, and the innovations and higher standards were spreading across the country prior to the report.
The main effect of the Report was to change public and political opinion about medical education and to influence the implementation of strict licensing laws.
In the wake of the Report, states rapidly established medical acts regulating the issuance of medical licenses. Henceforth, licenses would only be given to graduates of schools that met criteria set forth by the Flexner Report. Those medical schools would have to be accredited by the Liaison Committee on Medical Education, a joint venture of the AMA and the American Association of Medical Colleges.
Q: What happened next?
A: From an economic standpoint, what happened next was a period of severe medical price inflation which occurred quickly and dramatically. The situation was so serious that in 1925, a national Committee on the Costs of Medical Care (CCMC) was organized to address the question.
The CCMC was funded by the Carnegie Corporation (which had funded the Flexner Report) and a number of other private foundations, such as the Rockefeller Foundation. The committee received material assistance from the AMA, the American Hospital Association, and other leading professional organizations, as well as from many government agencies, including the National Bureau of Economic Research. Numerous reports were issued over the next few years, and those were compiled in 1932 into a large volume entitled The Costs of Medical Care.
Q: What were the findings of that committee?
A: The CCMC confirmed that the costs of medical care had risen dramatically in the prior years. The committee also found that health care disparities had increased, with access to medical care in rural and poor areas being particularly problematic.
Q: What was the attributed cause?
A: The committee erroneously attributed the cause of medical price inflation to scientific and technological advances, to the increased use of hospital care associated with these advances, and to the associated increases in the costs of medical training and medical supplies.
Q: That sounds reasonable. Why is it erroneous?
A: In general, expensive scientific and technological advances tend to be broadly adopted when they produce commensurate improvements in productivity or well-being. In such cases, the increases in costs are not viewed as causing a crisis, since they are offset by the benefits they provide. The fact that the crisis was blamed on technological advances suggests that other factors were at play.
Q: What were those factors?
A: One factor was the forceful way by which “non-regular” medicine was discredited and Flexnerian medicine promoted. The other factor was the effect of licensing laws on the supply and maldistribution of physicians.‘
“N.C. One of Many States Reviewing Occupational Licensing Rules” is a good summary of the problem of excessive occupational licensing in the US. What is particularly egregious about this issue is that the same politicians who enact such laws, mainly due to outright bribery by those who want to keep new competition at bay, then turn around and advocate more welfare, job training, school subsidies, etc. to help the jobless. This is one of the many reasons why I believe that the US is doomed to decades of poor economic performance. Here is an issue in which not a penny of government money is required to remove barriers to entrepreneurs to create productive jobs. Many of these jobs require no formal education and thus are particularly important for people who do not graduate from high school or college and have little work experience.
‘In most cases, occupational licensing requirements require workers seeking to enter an occupation to pass industry-authorized tests, certify the completion of coursework from authorized providers, perform a number of hours of work as an apprentice, or some combination of the three.
Wells says there are more than 50 occupational licensing boards in North Carolina, and more than 700,000 occupational licenses of one form are active in the state. (A person can hold licenses for several occupations.) And yet some of these rules may interfere with the North Carolina Constitution’s acknowledgment of a “self-evident” right of residents “to the enjoyment of the fruits of their own labor.”
The Mercatus Center at George Mason University ranks North Carolina 39th of the 50 states on occupational licensing freedom, ahead of South Carolina (41st) and Tennessee (44th) but trailing Georgia (30th) and Virginia (34th).
Many states retain extensive licensing regimes. In Arizona, attorneys with the libertarian public-interest legal firm Institute for Justice filed a lawsuit on behalf of a woman accused of practicing veterinary medicine without a license because she was giving horses rubdowns. Two years later, the case is still in litigation.
Further west, California requires a state license for 177 different job categories — the most of any U.S. state and nearly twice the national average of 92 occupations. In 2012, there was an attempt to license pet groomers.
Nationally, 36 states require a person to have a license in order to be a “makeup artist.” At least five states require a license to be a “shampooer.”
But some states have undertaken aggressive reforms. In Texas and Colorado, state “sunset” commissions review occupational licensing rules and — unless the regulations are approved by the legislature — requirements for licensing are eliminated if the licensing boards cannot demonstrate that the rules “protect the public interest.” For example, a Colorado Sunset Commission eased requirements for manicurists after finding that just 90 of the required 350 hours of training for the profession centered on health and safety concerns.
In others, the process has been more targeted. In 2014 Virginia officials deregulated hair braiding, allowing people to braid hair commercially without a license from the state. The deregulation process took years. Hair braiders previously had to complete a 1,500-hour cosmetology course to qualify for a license. The state reduced the requirement to a 170-hour course before finally doing away with the rule altogether.‘
‘Historically, such requirements were used to keep certain groups from attaining upward mobility. “Whether it was the Chinese in San Francisco or blacks in the South, it was primarily a discriminatory tool to keep out competition,” said Adam Summers, an editorial writer and columnist at the Orange County Register who has studied the issue. “It’s not so much ethnically- or racially-based right now. But stringent occupational licensing still disproportionally affects the poorer or ethnic minorities.”
States with less restrictive licensing requirements have higher rates of entrepreneurship among low-income workers, concluded a study from the Arizona-based Goldwater Institute.‘
“Inflation as a Policy” is the title of Henry Hazlitt’s Newsweek column from April 6, 1959. Except for the comments about unions, this column could have been written today. Note the call for 2% consumer price inflation. This is the type of economic “thought” representative of the return to what Robert Higgs called “vulgar Keynesianism”, the absurd belief that raising the cost of living magically creates wealth.
‘In his classic little history of fiat money inflation in
the French Revolution, Andrew D. White points out
that the more evident the evil consequences of inflation
became, the more rabid became the demands for
still more inflation to cure them. Today, as inflation
increases, apologists emerge to suggest that, after all,
inflation may be a very good thing—or, if an evil, at
least a necessary evil. The chief spokesman of this group
is Prof. Sumner H. Slichter of Harvard.
Slichter’s testimony and writings overflow with fallacies.
I confine myself here to three: (1) That a “creeping”
inflation of 2 percent a year would do more good
than harm. (2) That it is possible for the government to
plan a “creeping” inflation of 2 percent a year (or of any
other fixed rate). (3) That inflation is necessary to attain
“full employment” and “economic growth.”
I long ago pointed out (Newsweek, Sept. 23, 1957),
as did others, that even if the government could control
an inflation to a rate of “only” 2 percent a year, it
would mean an erosion of the purchasing power of the
dollar by about one-half in each generation. This cannot
fail to discourage thrift, to produce injustice, and to
misdirect production. Actually inflation in the United
States has been much faster. The cost of living has more
than doubled in the last twenty years. This is at a compounded
rate of about 4 percent a year.
It Can’t Be Planned
The moment a planned “creeping” inflation is announced
or generally expected in advance, it must accelerate into
a gallop. Even Slichter now recognizes that, if lenders
expect a 2 or 4 percent rise of prices a year, they will
insist that this be added to the interest rate otherwise
paid to them to maintain the purchasing power of their
investment. But he still fails to see that all businesses
will be forced to offer a correspondingly increased gross
rate of return to attract new investment, even new equity
capital. He still fails to see that if there is a planned price
rise, union leaders will simply add the expected amount
of that rise on top of whatever wage demands they would
have made anyway. He still fails to see that speculators
and ordinary buyers will try to anticipate any planned
price rise—and thereby inevitably accelerate it beyond
the planned percentage. He still fails to see that inflation
forces everybody to be a gambler.
The burden of Slichter’s argument now is that “a
slow rise in the price level is an inescapable cost of
the maximum rate of growth”—in other words, that
inflation is a necessary cost of “full employment.” This
is simply not true. What is necessary for maximum
“growth” (i.e., optimum employment and maximum
production) is a proper relationship or coordination of
prices and wages. If some wage rates get too high for
this coordination, the result is unemployment. The cure
is to correct the culpable wage rates. To attempt to lift
the whole level of prices by monetary inflation will simply
create new maladjustments everywhere.
In brief, if a real coordination of wages and prices exists,
inflation is unnecessary; and if coordination of wages
and prices does not exist—if wages outrace prices and
production—inflation is worse than futile.
Slichter assumes that there is no way to restrain
excessive union demands except by “breaking up”
unions. It never occurs to him that we need merely
repeal the special immunities and privileges conferred
on union leaders since 1932, especially in the Norris-
LaGuardia and Wagner-Taft-Hartley acts. If employers
were not legally compelled to “bargain” with (in practice,
to make concessions to) a specified union, no matter
how unreasonable its demands; if employers were free
to discharge strikers and peaceably to hire replacements;
and if mass picketing and violence were really prohibited,
the natural competitive checks on excessive wage
demands would come into play.
Slichter argues that labor unions are much the most
important cause of present-day inflation, yet contends
at the same time that a general wage increase is just the
right medicine for the economy right now! His delusion
is that we can inflate ourselves out of the inflation.‘
From Prog Archives:
‘This French group was founded on the Riviera (Nice more precisely) as had SHYLOCK also. They both managed to make two albums both on the Musea catalogue nowadays. However they do sound different, CARPE DIEM sounding more diversified and also holds some singing, as well as some wind instruments (flute & saxes). One can say that they had that typical French symphonic prog sound of the second part of the 70’s much like PULSAR, ATOLL and a bit less in the ANGE and MONA LISA mould.‘
“All procure for themselves by way of exchange whatever it would cost them more to procure by way of direct production. And nations would do the same if you did not prevent them by force.” – Frédéric Bastiat, Economic Sophisms.
Some good advice from Doug Casey that applies to all countries.
‘First, let me thank you for all your fantastic hospitality and attention.
I think there are at least four areas where we can advise Zimbabwe on improving its economic situation and status in the world community, pursuant to U.S., EU, AU, and international law. And we can execute these things quickly:
- A program of economic citizenship. We believe that a properly executed program could generate several hundred million dollars per year of income. Plus, increase the prestige and acceptability of the Zimbabwe passport.
- The establishment of a 100% reserve gold bank. This bank will reform Zimbabwe’s reputation in the economic world by being totally solvent and liquid through using gold money, will be acceptable internationally, and will preserve the savings of Zim citizens. Strict separation of demand (checking) and time (savings) deposits, and 100% (as opposed to fractional) reserves, would make it unique in the world. We believe it would draw many, many billions of dollars of capital into Zimbabwe.
- The establishment of a People’s Empowerment Corporation (PEC) to maximize the benefits of government assets to individual Zimbabwe citizens. This entails taking 100% of all government assets—parastatals, land, etc.—and putting them into the PEC. Although they theoretically belong to the people, these are now dead assets. Actually, they are now liabilities that cost the government huge money every year.‘