Communism, Karl Marx, Marxism, Surplus Labor and the Labor theory of Value

Posted by PITHOCRATES - August 20th, 2013

History 101

(Originally published December 13, 2011)

Some would call Putting Profits before People Heaven if they had Lived in the Caring Hell of Communism

No ideology killed more people than communism.  In total numbers.  Such as Joseph Stalin in the Soviet Union.  Or Mao Tse-tung in the People’s Republic of China.  Or as a percentage of population.  Where Pol Pot’s Cambodian genocide holds this honor alone.  These communist leaders killed their people directly for political purposes.  Or starved them to death because of agrarian reforms that produced famines.  All in the name of freeing their people from the horrors of capitalism.

Heaven and hell.  That’s how a defector who escaped communism and made it to capitalism would describe what it’s like to live under each system.  Capitalism would be heaven.  And communism would be hell.  The problem with communism was that it didn’t work.  Economically.  People lived in want of the basic staples of life.  And often went hungry.  When they didn’t starve to death by yet another famine.  And if they complained or spoke out against the system they risked torture.  Or they simply just disappeared.  Banished to a work camp.  A reeducation camp.  Or killed.  So it’s no surprise that people trapped in these countries tried to escape.  Which is why communist states were oppressive police states.  To prevent people from escaping their horrible lives.

And yet to this day some people still hold up communism as the ideal socioeconomic system.  The one that cares about the people.  The one that puts people before profits.  Unlike capitalism.  Which puts profits before people.  Of course some would call putting profits before people heaven.  Especially if they had lived in the caring hell of communism.

Communism as an Economic System is an Utter and Abject Failure

Those who champion communism don’t blame the ideology.  They say it’s the people.  The few who use the ideology for personal gain.  And by few they mean basically everyone.  But if everyone is doing it it’s not the people.  It’s the ideology.  And it goes back to its utter and abject failure as an economic system.

Communism goes back to Karl Marx.  The guy that coauthored the Communist Manifesto in 1848.  And from which we get the terms Marxism.  And Marxist.  To describe varying forms of communism.  And communists.  He’s the guy who said that capitalism exploited the working man.  Those with money (capital) who owned factories, the industrial bourgeoisie, charged more for their goods than they paid their workers to make those goods.  Because Marx believed the value of any good was the labor that made it (the labor theory of value), this excess value (profit) was a labor surplus.  And belonged to the worker.  So he encouraged class conflict.  For the proletariat (the working class) to rise up and take over the means of production from those who owned it.  These middle class capitalists.  The industrial bourgeoisie.  And establish a dictatorship of the proletariat.  So the bourgeois capitalist pig-dogs couldn’t exploit the proletariat any more.  And everyone would then live happily ever after.

But no one ever did.  Like in capitalism.  Where happiness abounds.  Because, in capitalism, the market determines prices.  Not some bureaucrat counting up labor inputs through the manufacturing process.  From the mining of resources.  To the final assembly.  Which can make things very expensive.  And, worse, unwanted by the people.  Because when the market sets the price and assigns value, the market tells people what to make.  Normally when something is a hot seller it tells manufacturers to make more of it.  To cash in on those high prices.  So they do.  And people tend to buy this surge in products.  But when the market isn’t setting the price and assigning value, the market can’t tell people what to make.  So a bureaucrat must.  Which is what happens in communism.  Bureaucrats decide everything.  From what to make.  To the allocation of resources.  To the selling price.  And the things they decide to make are rarely what the people want.  Explaining why stores in communist countries were full of stuff no one wanted to buy.  And why people had to stand hours in line to get the things they did.  Or paid more on the black market.  Which is why communism as an economic system is an utter and abject failure.  And why people wanted to escape it.  Their only obstacle being that brutal and oppressive police state.  Which was necessary because if everyone left that wanted to the communist leaders wouldn’t have anyone to provide for them.

There are no Such Things as Market Failures under Capitalism

Communism was one of the worst man-made tragedies to ever befall man.  Karl Marx was wrong.  And his asinine theories killed tens of millions of people.  People enjoy life and prosper under capitalism.  Under communism they set records for genocide.  Why?  Because the communist economic model is an utter and abject failure.

The struggle between communism and capitalism was an economic one.  And pitted the market against bureaucrats who thought they were smarter than the market.  But it turned out they weren’t.  Not by a long shot.  And despite this history people are constantly talking about market failures and the evils of capitalism.  Much like Joseph Stalin, Mao Tse-tung and Pol Pot.  But for them it was never about the economics.  It was about the power.  Much like it is today.  Because there are no such things as market failures under capitalism.  It’s the bureaucrats who fail.  Not the markets.  At least, based on all recorded history.

Markets fail only when they aren’t free.  They fail when bureaucrats insert themselves into the economic process.  Via regulatory policy.  Or high taxes.  When they try to shape market forces to a political end.  And when they do it is capitalism no more.  It’s crony capitalism.  Or worse.

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Above Average Blood Poisoning Deaths at one NHS Hospital

Posted by PITHOCRATES - March 2nd, 2013

Week in Review

Those who favor a national health care system like to look to Britain and sigh.  How they would love to have a system like the National Health Service (NHS).  As much as they may love their Obamacare they know it is a far cry from the NHS.  Which is what they really want.  Free health care for everyone.  Where everyone has equal access.  And the quality is the same no matter who you are.  Or how much money you have (see Data fears over septicaemia deaths at Royal Bolton Hospital posted 2/27/2013 on BBC News Manchester).

An investigation is under way into unusually high numbers of septicaemia deaths at the Royal Bolton Hospital.

Bolton Clinical Commissioning Group (CCG) confirmed the trust recorded 800 cases from March 2011 to April 2012.

The figure is four times higher than a trust similar in size would expect, according to Bolton CCG.

Bolton NHS Trust said acting chief executive Dr Jackie Bene had stepped aside after initial findings revealed “potential discrepancies” in data.

The BBC understands the investigation is looking at allegations that records were altered to make the hospital’s mortality rates look better…

It added: “We do not believe there are any clinical concerns regarding the care of patients, but rather there are questions that need answering about how the trust reports information about their care for administrative and financial purposes”…

A Dr Foster spokesman said: “The accurate recording of data is essential in allowing us to better understand the quality of care being provided by hospitals, as well as ensuring they receive the correct levels of payment for their services.

Interesting.  The number of deaths from septicemia (aka, blood poisoning) is 4 times higher than a trust similar in size.  But they do not believe that there are any concerns for patient care.  Even though they think that this trust may be underreporting the number of deaths.  So nothing to fear here.  Just an unusually high number of deaths.  Probably even more than they are reporting.  But if you’re not a patient you have nothing to fear.  If you are a patient, then fear.  And put your affairs in order.  Just in case.

The accurate recording of data is essential.  For this data shows them at a glance the quality of care.  And current billing information.  Presumably in separate columns.  Oh, there’s nothing like the warmth of national health care.  In fact, if you want to see what it’s like in the British NHS here is a video showing the miracle of birth.  Warning: the following contains some graphic images.

Actually, that is not video footage of a live birth in the NHS.  It is in fact a scene from Monty Python’s The Meaning of Life.  We apologize for the confusion.  Still, it is a somewhat accurate illustration of the NHS.  A clueless health care bureaucrat demonstrating where the focus is in the NHS.  In the bookkeeping.  While the doctors worry that the bureaucrat may see them NOT using all of the expensive machinery.  Worried that if he does there may be a cut in their budget next year.

This is the way health care is meant to be.  Universal.  Free.  Cold.  Callous.  And mind-numbingly bureaucratic.  In other words, welcome to Obamacare.

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Rationing of Health Care Resources leaves those with Rare Diseases without Treatment in NHS

Posted by PITHOCRATES - October 21st, 2012

Week in Review

So you think Obamacare care will provide everyone the same level of high quality health care?  Think again.  Or take a look at the UK.  For even though the UK has national health care under the NHS everyone still does not receive equal health care treatment.  Especially those with rare diseases that will be costly to treat (see Patients with rare conditions face postcode lottery by Denis Campbell posted 10/20/2012 on the guardian).

Seriously ill patients with life-threatening rare diseases are being denied vital drugs because of a postcode lottery across the NHS that campaigners say is frustrating and unfair.

New research reveals that patients with a rare condition have much less chance of accessing “orphan” medication if they live in England rather than Scotland or Wales. “Orphan” drugs treat patients with a condition affecting fewer than five in 10,000 people.

While the European Medicines Agency (EMA) has approved 68 drugs for use with patients with rare conditions such as unusual forms of cancer and epilepsy since 2000, the National Institute for Health and Clinical Excellence (Nice) has assessed only 18 of them, recommending that seven become available on the NHS in England and Wales, and another five under certain restrictions…

Nice insisted the low number of such drugs it had examined was due to a lack of referrals from the Department of Health, as it can only assess the cost effectiveness of medications which ministers there ask them to look at.

But the DoH denied patients with rare conditions were missing out and insisted that the absence of a Nice appraisal should not stop them getting what they need. “There is no evidence of a ‘postcode lottery’ in access to these drugs”, said a spokesman.

First of all why do they have a government agency (Nice) even doing this?  One reason.  Costs.  So they must ration their limited health care resources.  For if they just give anyone life-saving medications regardless of costs it will limit what other treatments the NHS can provide.  Costs are real.  Just because you have a national health care system doesn’t make them go away.  Of course, in a national health care system costs take on a whole new meaning.  For they fund health care with tax dollars.  Tax dollars controlled by bureaucrats, not health care professionals.  So instead of a doctor deciding what’s best for the patient (as it is in America until Obamacare fully kicks in) a doctor must balance doing what’s best for the patient with what’s best for the state.  For spending too much money on someone who is just going to die in a short period of time is just not an efficient use of tax dollars.

Yeah, no doubt you’re thinking about that ominous phrase some say they included in Obamacare but they did not call out by name.  Death panels.  Where some government bureaucrat (or a panel of bureaucrats) makes life or death decisions in determining a patient’s care.  Not by consulting with the patient’s doctor but by consulting a table of acceptable health care treatments for someone based on the expected return of that health care investment.  They may not call these death panels but if the expected return on the health care investment does not meet the minimum acceptable return for that investment then the patient doesn’t get that life-sustaining treatment.  And will die.

So what can we expect in the future of Obamacare?  Well, it will probably have something like Nice.  A panel that makes decisions with assumptions and math like this (see Measuring effectiveness and cost effectiveness: the QALY from the Nice website).

Having used the QALY measurement to compare how much someone’s life can be extended and improved, we then consider cost effectiveness – that is, how much the drug or treatment costs per QALY. This is the cost of using the drugs to provide a year of the best quality of life available – it could be one person receiving one QALY, but is more likely to be a number of people receiving a proportion of a QALY – for example 20 people receiving 0.05 of a QALY.

Cost effectiveness is expressed as ‘£ per QALY’.

Each drug is considered on a case-by-case basis. Generally, however, if a treatment costs more than £20,000-30,000 per QALY, then it would not be considered cost effective.

How a QALY is calculated

Patient x has a serious, life-threatening condition.

•If he continues receiving standard treatment he will live for 1 year and his quality of life will be 0.4 (0 or below = worst possible health, 1= best possible health)

•If he receives the new drug he will live for 1 year 3 months (1.25 years), with a quality of life of 0.6.

The new treatment is compared with standard care in terms of the QALYs gained:

•Standard treatment: 1 (year’s extra life) x 0.4 = 0.4 QALY

•New treatment: 1.25 (1 year, 3 months extra life) x 0.6 = 0.75 QALY

Therefore, the new treatment leads to 0.35 additional QALYs (that is: 0.75 -0.4 QALY = 0.35 QALYs).

•The cost of the new drug is assumed to be £10,000, standard treatment costs £3000.

The difference in treatment costs (£7000) is divided by the QALYs gained (0.35) to calculate the cost per QALY. So the new treatment would cost £20,000 per QALY.

During an ABC News’ June 24 special, Questions for the President: Prescription for America, there was the following exchange (see Lungren says Obama would have government require a centenarian to get a pill, not a pacemaker posted 7/28/2009 on PolitiFact):

The exchange began when Sawyer introduced Jane Sturm, who takes care of her mother, Hazel, now 105. When Hazel was 100, Sturm said, the doctor told her she needed a pacemaker. Both mother and daughter said they were game, but an arrhythmia specialist initially said no, before seeing Hazel’s “joy of life” in person.

Sturm asked the president, “Outside the medical criteria for prolonging life for somebody elderly, is there any consideration that can be given for a certain spirit, a certain joy of living, quality of life? Or is it just a medical cutoff at a certain age?”

After joking that he’d like to meet Sturm’s mother and “find out what she’s eating,” the president said, “I don’t think that we can make judgments based on peoples’ spirit. That would be a pretty subjective decision to be making. I think we have to have rules that say that we are going to provide good, quality care for all people…”

Obama continued, “And all we’re suggesting — and we’re not going to solve every difficult problem in terms of end-of-life care. A lot of that is going to have to be, we as a culture and as a society starting to make better decisions within our own families and for ourselves. But what we can do is make sure that at least some of the waste that exists in the system that’s not making anybody’s mom better, that is loading up on additional tests or additional drugs that the evidence shows is not necessarily going to improve care, that at least we can let doctors know and your mom know that, you know what? Maybe this isn’t going to help. Maybe you’re better off not having the surgery, but taking the painkiller. And those kinds of decisions between doctors and patients, and making sure that our incentives are not preventing those good decisions, and that — that doctors and hospitals all are aligned for patient care, that’s something we can achieve.”

This is the kind of information Nice provides.  Cool, calm, bureaucratic number crunching to determine what the proper medical treatment should be.  Balancing those two factors.  What’s best for the patient.  And what’s best for the state.  For spending too much money on someone who is just going to die in a short period of time is just not an efficient use of tax dollars.

So what can you expect from Obamacare when it’s your mother or grandmother in the hospital desperately needing treatment?  Well, the doctor may come out to the waiting room where you’re sitting scared and distraught and say, “I’m sorry.  But the National Health Efficiency Board has calculated your loved one’s quality-adjusted life years.  Or what we in the health biz call QALYs.  Sadly, her treatment would only result in a net gain of 0.18 additional QALYs.  While our guidelines clearly state that this number shall not be less than 0.22 for such an investment of health care resources.  I am truly sorry for your soon to be loss.  So here’s a prescription you can fill on your way out for a pill to manage her pain until she dies.  Thank you and good day.  Next!”

This is the problem when someone else pays your bills.  That someone else has a say in your treatment.  Whether they are called death panels or not.

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The NHS is gearing up to make the NHS more like the American Health Care System prior to Obamacare

Posted by PITHOCRATES - September 30th, 2012

Week in Review

Big change is coming to the NHS.  Their great centralized National Health Service is about to become decentralized.  In an effort to cut out of control costs.  And improve the quality of care (see NHS ‘could get worse from 2013’ by Branwen Jeffreys and Nick Triggle posted 9/27/2012 on BBC News Health).

The health service is currently busy getting ready for the government’s reforms to go live in April…

Under the reforms, GP-led bodies, called clinical commissioning groups (CCGs), will take charge of much of the NHS budget, replacing primary care trusts (PCTs) which will be scrapped…

The NHS is at the start of a savings drive – it has been told to save £20bn by 2015 through becoming more productive.

Britain’s aging population has increased the demands on the NHS.  The number of patients are rising as retirees leave the workforce and suffer the ailments of age.  While the number of new workers entering the workforce to replace them is falling.  As is the tax revenue from those working.  Hence the savings drive.  Because of that aging population.  And the reforms are a decentralization of the NHS.  Putting local doctors in charge of treatment decisions for their patients.  And in charge of the money.  Taking health care back a little to how it used to be.  When a person’s family doctor was in charge of their treatment.  Not a distant bureaucrat.  Like it currently is in the U.S. prior to the full implementation of Obamacare.  But soon will be no more.  Something for the Americans to look forward to once they fully implement Obamacare.  Perhaps sooner than the British.  As the Americans are jumping into a national health care system with all the problems the British now have.

Meanwhile, a BBC survey of 1,005 people suggested 60% believed services would have to be cut…

Some 61% agreed that they expected the NHS would have to stop providing some treatments and services in the future due to rising costs and increasing demands.

Nearly three-quarters also said they did not trust the government with the health service…

“The end of the public sector pay freeze next April may add to financial pressure and increase the strain on services.

“The difficulty will be finding ways to absorb these costs without compromising the quality of care for patients.”

But health minister Lord Howe maintained the NHS was “on track” to achieve its savings target…

Waiting times have been kept low, infections have been reduced, there are more doctors, more diagnostic tests and more planned operations,” he added.

This is, of course, what that aging population will do to a national health care system.  As more patients enter the health service than the population grows to pay for it (with an expanding tax base) you get longer wait times, more infections, fewer doctors relative to patients, fewer diagnostic tests and fewer planned operations.  Which forces the health service to find ways to make their limited resources cover more of that expanding patient base.  And key to their reforms is making health care more efficient.  By putting the people closest to their patients in charge of their patients’ treatments.  So they can get more from their NHS funds.

The U.S. has the same problem Britain has.  An aging population.  And yet the U.S. and Britain are moving in two different directions with their health care systems.  Who is right?  The one making changes based on the accepted reality of the impact of an aging population?  Britain.  Or the one making changes based on their confidence that they can do national health care better than everyone who has ever tried?  The U.S.  Despite that aging population.

Britain is moving in the right direction.  Because they have no choice but to move in that direction.  Whereas the U.S. has a choice.  Because their health care has been in the private sector up until Obamacare.  In fact that has worked so well that the British are moving in that direction.  Which makes us scratch our heads at those moving away from it.  Are they so full of themselves, are they suffering from such delusions of grandeur, that they think they can do the same thing (national health care) and expect to get different results?  Albert Einstein had a word for thinking like that.  Insanity.

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How can National Health Care lower Costs when they can’t even Buy Computer Equipment at Competitive Prices?

Posted by PITHOCRATES - May 13th, 2012

Week in Review

The problem with national health care?  There is only one buyer in the market.  The government.  And whenever you have only one buyer you’re never going to get the best price (see NHS pays ‘extortionate’ 328 per cent mark-up on printer parts by Christopher Williams posted 5/11/2012 on The Telegraph)

The NHS is paying “extortionate” prices for basic computer equipment and services, with dealers collecting profit margins of up to 328 per cent, a study has found…

On average, at central and regional levels, the NHS buys computer services and equipment at 28 per cent more than their wholesale price, compared to the best average in the private sector of only 3 per cent, said Mercato, a firm which tracks government and commercial IT procurement. As well as basic items this includes expensive equipment such as servers, and software.

These are things they know they are paying extortionate prices for.  Because there are other buyers for these things in the private sector.  And they can see what they are paying for these same things.  It didn’t stop the NHS from getting ripped off.  But they could tell they were being ripped off.  By the prices people were paying in the private sector.  Of course, these people aren’t buying hospital equipment, medicine, supplies, etc., that only the NHS uses.  And they buy these things in a market where there are no other buyers competing for these.  So there is no incentive to lower prices at all.  So if they’re paying 328% profit margins on computer equipment and services you know they are paying at least 328% profit margins on everything else they buy.  Or far, far more.  Because who’s going to know except the seller?

If this is happening in the NHS you know it will happen in Obamacare.  Every supplier in the Obamacare system will be looking to take advantage of some unaware bureaucrat.  Or bribing one to allow extortionate prices.  Because that’s the way government works.  It always has.  And it always will.  Only with Obamacare we’ll be sacrificing the quality of the U.S. health care system in the process.  For all the graft in the system will leave even less funding for health care services.  Because this graft will be new.  Unlike the private insurance companies that are now a pain in the ass to everyone that has to deal with them.  But you have to give the private insurance companies this.  They don’t pay extortionate prices.  Which has kept health care costs under control so far.  At least, as best as anyone can.  And far better than Obamacare will.  Just wait and see.

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The Invisible Hand

Posted by PITHOCRATES - April 16th, 2012

Economics 101

A Command Economy Reduces the Overall Economic Output because those Managing the Economy don’t Understand It

Command economy?  Or free market capitalism?  Which works better?  Well, let’s find out with a little experiment.  Let’s go back in time.  Say ancient Mesopotamia.  Just after they developed mass farming.  And produced some of the first food surpluses.  Allowing the rise of a middle class of artisans.  Now let’s look at what could have been the first two of these artisans.  A potter.  And a winemaker.  Who probably weren’t the first two artisans.  But will suffice for our little experiment.

The winemaker needs some pottery vessels to store and sell his wine in.  And the potter enjoys drinking wine.  They each have something the other wants.  And because we’re so far back in time there is no money yet.  We’re still only bartering at this time.  Trading the goods we make with each other.  But in our experiment the high priest of the civilization is also the economic planner.  This priest communicates to the civilization’s gods.  And guides the civilization in pleasing their gods.  Which he is very good at.  For he knows all of the old teachings and rituals.  But he doesn’t know a thing about pottery or winemaking.  But he looks at an empty pottery vessel and a pottery vessel full of wine and sees that the vessel volume equals the volume of wine.  And deems the price of one pottery vessel is the amount of wine one pottery vessel holds.

Well, the potter is quite happy with this price.  Because he is skilled.  And can dig up some clay.  Throw it on the potter’s wheel and knock out vessel after vessel.  Glaze them and fire them in the kiln.  Even working by himself he can achieve some economies of scale.  By repeating this process every day.  Something the winemaker isn’t quite able to.  For he makes wine by the batch.  Because each step in the process takes a lot of time.  Maintaining his grape vines.  Then picking the grapes.  Carrying them back to his winery.  Putting them into his winepress.  Squeezing the juice out of the grapes.  Putting the grape juice in large vats to ferment.  Monitoring the process.  When he determines the process is complete he fills the small pottery vessels with wine.  When it was finally ready for ‘sale’ and consumption.  Considering all the work it took him to make one vessel of wine the winemaker was not at all happy with the price the high priest set.  And instead builds his own potter’s wheel and kiln to make his own vessels.  Greatly increasing his workload.  And reducing his winemaking output.  While the potter loses a potentially large customer.  Thus reducing the amount pottery he makes.  Reducing overall economic output in the command economy.

The Invisible Hand makes sure we use our Limited Resources Efficiently to Make the Things People want Most

In this command economy the civilization suffered a deadweight loss.  Economic resources went unused.  They could have created more economic benefits with the available resources.  They could have made more pottery.  And made more wine.  Perhaps even creating some jobs to help with the economic output of efficiently using the available resources.  But they didn’t.  Because of the fixed prices economic resources went unused.  Thus creating a market equilibrium lower than where it could be.  Hence the deadweight loss.  Now let’s look at the same example with only one difference.  The high priest does NOT set prices.

In a barter economy people agree to trade the goods they make.  And now the potter and the winemaker are free to determine what they think is a fair trade.  That is, they set the price of pottery in wine.  And the price they agree on is one they find mutually acceptable.  Where the potter agrees to trade an amount of his pottery for an amount of wine.  And the winemaker agrees to trade an amount of his wine for an amount of pottery.  Everyone wins.  For the potter gets an amount of wine he values more than the pottery he traded for the wine.  The winemaker gets an amount of pottery he values more than the wine he traded for the pottery.  And the civilization wins because at this mutually agreed upon price both the potter and the winemaker increase their production.  Providing the civilization with more of their goods.  The potter and the winemaker may even hire people to help them produce more goods to meet this higher demand.  Thus increasing the level of happiness in the civilization.  By increasing the amount of economic activity.  Moving the market equilibrium to a higher level of economic output.  And thus reducing the deadweight loss.  By using the available resources in the most efficient manner.  As determined by these mutually agreed upon prices.

This is the Invisible Hand in action.  An economic concept put forth by Scottish economist Adam Smith (1723-1790) in his The Wealth of Nations (1776).  In a competitive market place where traders set the price for their economic trade (not a command economy) two things happen.  First, resources flow to where we demand them most.  That is, to the buyers willing to pay the highest price.  Second, because of the competitive market place only those companies that sell at the low prices the market demands stay in business.  Which means that they have to use those resources as efficiently as possible.  Especially when they’re paying the highest prices for them.  And all of this happens because of the Invisible Hand. 

History has Proven that no Government Bureaucrat can do a Better Job than the Invisible Hand

Those who favor a command economy (or more government intervention into market forces) say the economy is too complex for us to leave it to its own devices.  That without a smart government bureaucrat managing this complex thing we cannot reach a market equilibrium that maximizes economic output.  Whereas Adam Smith says it is because the economy is so complex that no one is smart enough to manage it.  Just as a high priest doesn’t understand pottery or winemaking a smart government bureaucrat cannot hope to understand all the intricacies of a complex economy.  Nor can they ever hope to understand what millions upon millions of consumers want to buy most.  But the beautiful thing is we don’t have to.

The multitudes make individual decisions just like our potter and winemaker.  Where everyone is looking to maximize their own value.  And when they agree on a mutual acceptable price all parties in the trade win.  While making sure our resources flow to where they are demanded most.  And that we use these valuable and limited resources most efficiently.  Thus maximizing overall happiness in our country.  Reducing deadweight losses to a minimum.  And obtaining a market equilibrium that maximizes economic activity.  All of which happens with no one in charge.  As if an Invisible Hand guides us in the market place to make all the right decisions to maximize this economic output.  And our happiness.

So which is better?  Command economy or free market capitalism.  Well, if you’re being honest you have to choose Adam Smith’s Invisible Hand and free market capitalism.  For history has proven that no government bureaucrat can do a better job than the Invisible Hand.  Not the Soviets.  Not the Chinese Communist (under Chairman Mao).  Not the Cubans.  Not the North Koreans.  Even the Americans failed when their government actively intervened in the private economy.  Something that President Jimmy ‘one-term’ Carter knows only too well.  So based on our hypothetical Mesopotamian example, and history in general, free market capitalism is, and always has been, and always will be, better than a command economy.

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Elderly Cancer Patients are not Worth the Cost of Health Care they Consume so the Policy of the NHS is to Let them Die

Posted by PITHOCRATES - March 25th, 2012

Week in Review

Proponents of Obamacare attack the profit-oriented private health insurers, medical device and drug manufacturers and hospitals.  Putting profits before people is wrong and shameful they say.  And just plain wrong.  No, the better way is to do like the Canadians.  And the British.  Adopt a health care system that puts people before profits.  Where everyone can smile and enjoy life.  Content in a perfect world where everyone gets whatever health care they need.  Not just the rich who can afford it.  So, with that in mind, let’s take a look at that health care utopia in the United Kingdom.  And see how wonderfully just, kind and generous their health care truly is (see Elderly dying due to ‘despicable age discrimination in NHS’ by Rebecca Smith posted 3/25/2012 on The Telegraph).

A lack of treatment or insufficient treatment is contributing to 14,000 deaths a year in people over the age of 75, Macmillan Cancer Support has found, in what it called an ‘unacceptable act of discrimination’.

Deaths from cancer are reducing in most age groups but at a slower rate in those aged 74 to 84 and are increasing in people aged 85 and over, the report said.

The report, The Age Old Excuse: the under treatment of older cancer patients, said treatment options are too often recommended on the basis of age rather than how fit the patient is…

Few clinical trials involve older people so clinicians are lacking evidence of how effective drugs may be in elderly people and few cancer specialists have had training in care of older people, the report said.

A survey found six in ten trainee oncologists had not received training in the additional care needs of the elderly such as preventing falls and incontinence management. This is despite half of all cancers occuring in the elderly, the report found…

“The NHS and social care providers must wake up to the specific issues older people face and ensure treatment decisions are based on their overall health not just their date of birth. Writing people off as too old for treatment is utterly shameful.”

This is the future of Obamacare.  This is what happens when the government pays for health care.  The government decides.  They decide who lives.  And who dies.  Who gets treatment.  And who is not worthy of treatment and should consider themselves lucky if they get a pill to dull their pain until they die.  When they finally stop being such an inconvenient and inconsiderate burden to government.

Why is the NHS like this?  Are the British cruel?  No.  It’s just business.  Health care costs continue to rise despite the power of government to stop these costs from rising.  Their population is aging.  And they have a massive budget deficit.  Made up primarily from the budget deficit in the NHS.  Taxes are already high.  And the economy is not doing as well as it once did.  Which means you can’t raise taxes anymore.  Unless you want to crash the economy and reduce tax revenues even further.  And with a massive deficit you can’t borrow anymore.  So if you can’t tax and you can’t borrow and you have an aging population consuming an ever larger share of the health care budget what do you do?  Why, you do what the NHS is doing.  You ration health care.  By making life and death decisions.  And the NHS has made a decision.  Old people over a certain age shall die of cancer.  And they will take that health care and give it to someone else who is more worthy of it.

Bureaucrats making life and death decisions for cost reasons?  Kind of sounds like a death panel, doesn’t it?  Now Obamacare doesn’t include anything called a ‘death panel’ but there will be a death panel.  Because there always is when you ration health care.  Which is what will happen as the government tries to rein in health care costs.  Because that’s the only way they can control costs.  By cutting costs.  And how to you cut costs?  You spend less on life-saving health care services.  And ration these services.  Deciding who has enough value to save.  And who doesn’t and should die.  By authority of the death panel.  The secretary.  Or some other bureaucrat.  Who you hope their life and death decisions are based on costs alone.  And not your politics.

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Communism, Karl Marx, Marxism, Surplus Labor and the Labor theory of Value

Posted by PITHOCRATES - December 13th, 2011

History 101

Some would call Putting Profits before People Heaven if they had Lived in the Caring Hell of Communism

No ideology killed more people than communism.  In total numbers.  Such as Joseph Stalin in the Soviet Union.  Or Mao Tse-tung in the People’s Republic of China.  Or as a percentage of population.  Where Pol Pot’s Cambodian genocide holds this honor alone.  These communist leaders killed their people directly for political purposes.  Or starved them to death because of agrarian reforms that produced famines.  All in the name of freeing their people from the horrors of capitalism.

Heaven and hell.  That’s how a defector who escaped communism and made it to capitalism would describe what it’s like to live under each system.  Capitalism would be heaven.  And communism would be hell.  The problem with communism was that it didn’t work.  Economically.  People lived in want of the basic staples of life.  And often went hungry.  When they didn’t starve to death by yet another famine.  And if they complained or spoke out against the system they risked torture.  Or they simply just disappeared.  Banished to a work camp.  A reeducation camp.  Or killed.  So it’s no surprise that people trapped in these countries tried to escape.  Which is why communist states were oppressive police states.  To prevent people from escaping their horrible lives.

And yet to this day some people still hold up communism as the ideal socioeconomic system.  The one that cares about the people.  The one that puts people before profits.  Unlike capitalism.  Which puts profits before people.  Of course some would call putting profits before people heaven.  Especially if they had lived in the caring hell of communism.

Communism as an Economic System is an Utter and Abject Failure

Those who champion communism don’t blame the ideology.  They say it’s the people.  The few who use the ideology for personal gain.  And by few they mean basically everyone.  But if everyone is doing it it’s not the people.  It’s the ideology.  And it goes back to its utter and abject failure as an economic system.

Communism goes back to Karl Marx.  The guy that coauthored the Communist Manifesto in 1848.  And from which we get the terms Marxism.  And Marxist.  To describe varying forms of communism.  And communists.  He’s the guy who said that capitalism exploited the working man.  Those with money (capital) who owned factories, the industrial bourgeoisie, charged more for their goods than they paid their workers to make those goods.  Because Marx believed the value of any good was the labor that made it (the labor theory of value), this excess value (profit) was a labor surplus.  And belonged to the worker.  So he encouraged class conflict.  For the proletariat (the working class) to rise up and take over the means of production from those who owned it.  These middle class capitalists.  The industrial bourgeoisie.  And establish a dictatorship of the proletariat.  So the bourgeois capitalist pig-dogs couldn’t exploit the proletariat any more.  And everyone would then live happily ever after.

But no one ever did.  Like in capitalism.  Where happiness abounds.  Because, in capitalism, the market determines prices.  Not some bureaucrat counting up labor inputs through the manufacturing process.  From the mining of resources.  To the final assembly.  Which can make things very expensive.  And, worse, unwanted by the people.  Because when the market sets the price and assigns value, the market tells people what to make.  Normally when something is a hot seller it tells manufacturers to make more of it.  To cash in on those high prices.  So they do.  And people tend to buy this surge in products.  But when the market isn’t setting the price and assigning value, the market can’t tell people what to make.  So a bureaucrat must.  Which is what happens in communism.  Bureaucrats decide everything.  From what to make.  To the allocation of resources.  To the selling price.  And the things they decide to make are rarely what the people want.  Explaining why stores in communist countries were full of stuff no one wanted to buy.  And why people had to stand hours in line to get the things they did.  Or paid more on the black market.  Which is why communism as an economic system is an utter and abject failure.  And why people wanted to escape it.  Their only obstacle being that brutal and oppressive police state.  Which was necessary because if everyone left that wanted to the communist leaders wouldn’t have anyone to provide for them.

There are no Such Things as Market Failures under Capitalism

Communism was one of the worst man-made tragedies to ever befall man.  Karl Marx was wrong.  And his asinine theories killed tens of millions of people.  People enjoy life and prosper under capitalism.  Under communism they set records for genocide.  Why?  Because the communist economic model is an utter and abject failure.

The struggle between communism and capitalism was an economic one.  And pitted the market against bureaucrats who thought they were smarter than the market.  But it turned out they weren’t.  Not by a long shot.  And despite this history people are constantly talking about market failures and the evils of capitalism.  Much like Joseph Stalin, Mao Tse-tung and Pol Pot.  But for them it was never about the economics.  It was about the power.  Much like it is today.  Because there are no such things as market failures under capitalism.  It’s the bureaucrats who fail.  Not the markets.  At least, based on all recorded history.

Markets fail only when they aren’t free.  They fail when bureaucrats insert themselves into the economic process.  Via regulatory policy.  Or high taxes.  When they try to shape market forces to a political end.  And when they do it is capitalism no more.  It’s crony capitalism.  Or worse.

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The Only Way to cut Health Care Costs while Expanding Coverage is to Ration Services with Death Panels

Posted by PITHOCRATES - November 6th, 2011

Week in Review

Vermont has solved their health care problem.  To reduce costs they’re going to cover more people.  And in some other world of mathematics, this may actually make sense (see Report: Vt. public health care cost could top $9B by DAVE GRAM posted 11/1/2011 on the Associated Press).

New projections by the state of Vermont say a public, universal health care system would cost between $8.2 billion and $9.5 billion a year – roughly $13,000 to $14,000 per resident – by 2020, but that sticking with the current system based on private insurers would cost even more.

Without a health care overhaul approved by lawmakers this year, including a new law that could move Vermont closer than any other state to a Canadian-style single-payer system, costs would surpass $10 billion by 2020, the report said.

$14,000 per resident is a lot of money.  Which is why a lot of young, healthy people choose not to have health insurance.  Because they don’t consume anywhere near $14,000 per year.  Well, the young and healthy will be paying now.  Because that’s the only to pay for people who consume health care services.  By making the people who don’t consume them pay for those services.

“In a way we’ve been a victim of our own success,” said health care consultant Steve Kappel, who helped write the report. “As people get covered, spending will go up.”

Imagine that.  Cover more people.  And spending will go up.

The goal of this year’s legislation actually runs counter to that – a key target of lawmakers was to reduce cost growth while extending coverage to the roughly 10 percent of Vermonters still without it.

So, you want to reduce costs.  While at the same time you want to expand coverage.  Only one way to do that.  You have to give each person less.  Way less.

The largest category of projected savings would come from “changes in the care process,” the report said. The focus here would be on redoubling efforts to make sure necessary care is delivered and unnecessary care is sharply limited. Among the strategies: better management of chronic diseases like diabetes and getting patients to have regular checkups so they don’t end up in emergency rooms.

I won’t use the expression ‘death panels’ but what you have here is a bureaucratic panel approving treatment.  And denying treatment.  Not a doctor.  So a doctor may say that a certain treatment is necessary to save a patient’s live.  And these bureaucrats may deny that treatment.

If it looks like a duck, walks like a duck and quacks like a duck, it’s a death panel.  Because if you don’t pass muster with the bureaucrats you may be denied life-saving treatment.  Which is the only way to cut costs.  While expanding coverage.  You give each person less.  Way less.  That is, you ration services.  And if someone dies as a result the system will realize real savings.

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FUNDAMENTAL TRUTH # 50: “What do the great entrepreneurs have in common with politicians? Not a whole hell of a lot.” -Old Pithy

Posted by PITHOCRATES - January 25th, 2011

A Mathematician, an Engineer and a Beautiful Woman

Stop me if you heard this one.  A mathematician and an engineer are at one end of a long room.  At the other end is a bed.  On the bed is a beautiful, naked woman.  She also happens to be a brainiac.  And someone who enjoys a bit of fun.  If you know what I mean.

She offers to get intimate with the guy who can solve this riddle.   Cross the room in a series of moves.  Each move shall be one half of the distance between them and her.  Be the first to do that and reach her and she’ll make all of your dreams come true.

Well, the mathematician sits down with paper and pencil and starts scribbling.  He proves mathematically that is impossible to ever reach the beautiful woman.  Because by moving half of the distance each time, there will always be a remaining distance to cover.  Therefore, he concludes, it’s impossible.  He looks up to tell her this.  And when he does he sees the engineer lying up in bed with her.  Smoking a cigarette.

Entrepreneurs Like to Think outside the Box

So what happened?  Well, while being theoretically impossible to reach her, the engineer could get close enough for a bit of fun.  And did.  It’s an old joke.  With many variations.  And depending on who’s telling it the loser is sometimes a physicist.  Or even the engineer.  Of course, some may say it’s the beautiful woman that losers in all cases.  Because smoking hot women don’t hang out with math and engineering geeks.  Until they get rich enough to buy them things, that is.  But I digress.

Entrepreneurs and politicians are a lot like mathematicians and engineers.  At least in this joke (and I apologize to mathematicians everywhere who are offended.  But you shouldn’t feel bad.  I’m sure if you could have been engineers you would have).  Nothing is ever easy for a politician.  Like the mathematician, they feel that they must over analyze everything.  Get a lot of bureaucrats involved. Layers and layers of oversight and control.  Hoops to jump through.  Exhaust every possibility to get to the ‘best’ solution.  Even if it takes weeks.  Months.  Years.  Time is never of the essence.  They have forever.  And they take forever.  No matter the costs.

Entrepreneurs don’t work this way.  They have an idea.  And want to act.  They hate waiting.  Time is money.  They hate bureaucracy.  Because time is money.  And they have an easier way to determine what the best solution is.  Sales.  Those who have the greatest sales have the best solution.  Because thus speaks the market.  So they keep thinking.  Keep creating.  Keep coming up with good ideas.  They see what the market is demanding.  Or what it will demand.  Once they show that market the wonderful new thing they’ve created.  Sales proved the Sony Walkman a success.  And sales proved the Apple iPod a success.  Why?  Because Sony and Apple are a couple of companies that like to think outside the box.  And create things people aren’t even demanding yet.  And you gotta admit that that’s some pretty damn good thinking.

Politicians Fear what’s Outside the Box

Politicians, on the other hand, fear what’s outside the box.  They want to stay inside the box.  They like it there.  It’s snug.  Familiar.  Dark.  Orderly.  No surprises.  No new things to have to think about.  Or worry about.  Like all that uncertainty in an uncontrolled free market.  Yeech.  They don’t like that.  Or understand it. For when it comes to the economy, these progressives are ‘conservative’.  They want to build on the governmental bureaucracy of the past.  The bureaucracy they know.  And love.  It may not have worked.  But so what?  It’s just so cozy.  And makes a [deleted expletive]-load of federal jobs.

Of course, this expanding bureaucracy doesn’t give us anything new.  Anything innovative.  Anything that we’re yearning for.  Or anything we will yearn for once we learn about that next great thing.  Because they don’t create anything.  Other than obstacles to those who do.  Once someone comes up with an idea, though, they’ll then want to take that idea and over think it.  Manage it.  Regulate it.  Tax it.  Because an entrepreneur may come up with a great idea.  But a politician knows best how to use that idea.  Or so they believe.

Of course, when you think of the great inventions, you never think of a politician.  To prove this, tell me who you think of when I mention some famous inventions.  The telephone?  (Alexander Graham Bell).  AC power distribution?  (Nikola Tesla).  An affordable automobile?  (Henry Ford).  The light bulb?  (Thomas Edison).  An efficient steam engine?  (James Watt).  Notice anything about all of these inventors?  That’s right.  They don’t have a ‘Senator’ or ‘Congress Person’ in front of their name.  But Senators and Congress people have been regulating and taxing these great inventions ever since.

Can’t see the Nude Woman on the Bed

An entrepreneur, like an engineer, doesn’t get lost in the theoretical.  They see possibilities.  And they act.  Politicians, like mathematicians, like to crunch numbers.  Prove things can’t be done.  And then call for blue ribbon panels or commissions to further analyze things.  Entrepreneurs are positive, can-do people.  While politicians are negative, can’t-do people.  They can’t see the forest for the trees.  Or the nude woman on the bed.

Politicians can’t not interfere with people.  An entrepreneur can’t stand being interfered with.  He or she is too busy creating stuff.  They’re not sitting around waiting for something to happen.  They’re leading the way.  While the politicians are nipping at their heels.  Trying to catch up with them.  Just so they can slow them down.

Our future is like the nude woman on the bed.  The entrepreneurs know how to get to her.  And will.  If left alone to do what they do best.  To think.  And create great things.  Make the world a better place.  But the politicians haven’t a clue.  They covet the nude woman.  But they can’t get to her.  Because she’s somewhere outside the box.  Smart.  Complex.  Something new.  Waiting to be discovered.  And when her riddle is solved, it won’t be a politician smoking a cigarette in bed with her.  It’ll be an entrepreneur.

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