Carnegie, Rockefeller, Ford, Westinghouse, Boeing, Gates and Tariffs

Posted by PITHOCRATES - September 10th, 2013

History 101

Ford brought the Price of Cars down and Paid his Workers more without Tariff Protection

Andrew Carnegie grew a steel empire in the late 19th century.  With technological innovation.  He made the steel industry better.  Making steel better.  Less costly.  And more plentiful.  Carnegie’s steel built America’s skylines.  Allowing our buildings to reach the sky.  And Carnegie brought the price of steel down without tariff protection.

John D. Rockefeller saved the whales.  By making kerosene cheap and plentiful.  Replacing whale oil pretty much forever.  Then found a use for another refined petroleum product.  Something they once threw away.  Gasoline.  Which turned out to be a great automotive fuel.  It’s so great that we use it still today.  Rockefeller made gasoline so cheap and plentiful that he put the competition out of business.  He was making gasoline so cheap that his competition went to the government to break up Standard Oil.  So his competition didn’t have to sell at his low prices.  And Rockefeller made gasoline so inexpensive and so plentiful without tariff protection.

Henry Ford built cars on the first moving assembly line.  Greatly bringing the cost of the car down.  Auto factories have fixed costs that they recover in the price of the car.  The more cars a factory can make in a day allows them to distribute those fixed costs over more cars.  Bringing the cost of the car down.  Allowing Henry Ford to do the unprecedented and pay his workers $5 a day.  Allowing his workers to buy the cars they assembled.  And Ford brought the price of cars down and paid his workers more without tariff protection.

George Westinghouse decreased the Cost of Electric Power without Tariff Protection

George Westinghouse gave us AC power.  Thanks to his brilliant engineer.  Nikola Tesla.  Who battled his former employer, Thomas Edison, in the Current Wars.  Edison wanted to wire the country with his DC power.  Putting his DC generators throughout American cities.  While Westinghouse and Tesla wanted to build fewer plants and send their AC power over greater distances.  Greatly decreasing the cost of electric power.  Westinghouse won the Current Wars.  And Westinghouse did that without tariff protection.

After losing out on a military contract for a large military transport jet Boeing regrouped and took their failed design and converted it into a jet airliner.  The Boeing 747.  Which dominated long-haul routes.  Having the range to go almost anywhere without refueling.  And being able to pack so many people into a single airplane that the cost per person to fly was affordable to almost anyone that wanted to fly.  And Boeing did this without tariff protection.

Bill Gates became a billionaire thanks to his software.  Beginning with DOS.  Then Windows.  He dominated the PC operating system market.  And saw the potential of the Internet.  Bundling his browser program, Internet Explorer, with his operating system.  Giving it away for free.  Consumers loved it.  But his competition didn’t.  As they saw a fall in sales for their Internet browser programs.  With some of their past customers preferring to use the free Internet Explorer instead of buying another program.  Making IE the most popular Internet browser on the market.  And Gates did this without tariff protection.

Tariff Protection cost American Industries Years of Innovation and Cost Cutting Efficiencies

Carnegie Steel became U.S. Steel.  Which grew to be the nation’s largest steel company.  Carnegie had opposed unions to keep the cost of his steel down.  U.S. Steel had a contentious relationship with labor.  During the Great Depression U.S. Steel unionized.  But there was little love between labor and management.  There were a lot of strikes.  And a lot of costly union contracts.  Which raised the price of U.S. manufactured steel.  Opening the door for less costly foreign imports.  Which poured into the country.  Taking a lot of business away from domestic steel makers.  Making it more difficult to honor those costly union contracts.  Which led the U.S. steel producers to ask the government for tariff protection.  To raise the price of the imported steel so steel consumers would not have a less costly alternative.

During World War II FDR was printing so much money to pay for both the New Deal and the war the FDR administration was worried about inflation.  So they put ceilings on what employers could pay their employees.  With jobs paying the same it was difficult to attract the best employees.  Because you couldn’t offer more pay.  So General Motors started offering benefits.  Health care.  And pensions.  Agreeing to very generous union contracts.  Raising the price of cars.  Which wasn’t a problem until the imports hit our shores.  Then those union contracts became difficult to honor.  Which led the U.S. auto makers to ask the government for tariff protection.  To raise the price of those imported cars so Americans would not have a less costly alternative.

These two industries received their tariffs.  And other government protections.  Allowing them to continue with business as usual.  Even though business as usual no longer worked.  So while the foreign steel producers and auto makers advanced their industries to further increase quality and lower their costs the protected U.S. companies did not.  Because they didn’t have to.  For thanks to the government they didn’t have to please their customers.  As the government simply forced people to be their customers.  For awhile, at least.  The foreign products became better and better such that the tariff protection couldn’t make the higher quality imports costly enough to keep them less attractive than the inferior American goods.  With a lot of people even paying more for the better quality imports.  Losing years of innovation and cost cutting efficiencies due to their tariff protection these American industries that once dominated the world became shells of their former selves.  With General Motors and Chrysler having to ask the government for a bailout because of the health care and pension costs bankrupting them.  Something Carnegie, Rockefeller, Ford, Westinghouse, Boeing or Gates never had to ask.

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FT121: “As liberals gain knowledge and experience they become conservatives.” -Old Pithy

Posted by PITHOCRATES - June 8th, 2012

Fundamental Truth

Carnegie and Rockefeller were able to make the World Better because of Capitalism and Free Markets

Liberals campaign hard to get the youth vote.  Before the young grow up and become responsible adults.  Lose their youthful idealism.  And their ignorance of rudimentary economics.  Kids graduating from high school don’t know much about economics.  They don’t know that JFK was a tax cutter just like Ronal Reagan.  And that those tax cuts stimulated real economic growth.  They don’t know any of this.  But they know who Al Gore is.  And will read you the riot act whenever you do anything that will increase your carbon footprint on this planet. 

Those who go on to college build on their liberal high school education.  Where they don’t learn about how Andrew Carnegie and John D. Rockefeller created the modern nation we know today.  Carnegie made steel plentiful and inexpensive.  Allowing us to build the skyscrapers in our cities.  Rockefeller made kerosene so plentiful and inexpensive that he put the whale oil industry out of business.  Saving the whales.  And gave us plentiful and inexpensive gasoline for our automobiles.  Providing fuel for our trains and planes.  Giving us the freedom to travel anywhere.  Visiting big cities like New York.  Where many of the great skyscrapers built with Carnegie steel are still standing today.

Carnegie and Rockefeller are just two entrepreneurs who changed the world.  And greatly increased our standard of living.  Who were free to make the world a better place because of capitalism and free markets.  Instead of working for a paycheck like most people do they took risks and created things.  Better steel.  And better fuel.  As well as jobs.  Lots and lots of jobs.  So people could work for a paycheck.  Why did they take these great risks?  Because the possibility of getting rich is a great incentive.  Which is why aspiring actors go to Los Angeles and starve.  Hoping to get a break.  Get discovered.  So they can become rich.   Which is why people buy lotto tickets.  To become rich.  For it appears everyone wants to get rich.  But there is a difference when people like Carnegie and Rockefeller get rich.  Everyone lives a better life when they do.  Not just the movie star or the lotto winner.

Students live College Life to the Fullest and Pursue Degrees that won’t take up too much of their Time

So what do they learn in college?  That capitalism isn’t fair.  Corporations are evil.  But communism and socialism are good.  Government intervention into the free markets is good.  And, of course, those who do learn economics only learn Keynesian economics.  The school of economics that favors government interventionism into private markets.  And that great industrialists like Carnegie and Rockefeller were greedy and exploited their workers.  While communism and socialism protected their workers.  Which is another failing of our educational system.  Students don’t learn what an abject failure communism was.  Both as an economic system.  And on human rights.  They don’t learn that.  Or that a lot of rich industrialists like Carnegie and Rockefeller spent the last years of their lives giving away the wealth they amassed.  Like some of America’s rich continue to do today.  As exemplified by Bill Gates.

No.  Their education is a poor one.  Which explains why the Indians and Chinese are passing American students by.  The goal of American public education is not to produce high test scores.  But to indoctrinate students into being good Democrat voters.  So those in the public sector unions can continue to earn more in pay and benefits than their counterparts in the private sector.  Another fact they don’t teach these young students.  They keep these students young and dumb as long as possible.  And the government helps.  By focusing on the things important to these students.  Lenient drug laws.  Birth control.  And abortion.  To make sure their first time living away from their parents is a good time.  A fun time.  And to make sure that they understand that Democrat political candidates aren’t like their parents.  Those buzz kills.  Whose favorite word in their vocabulary is ‘no’.  Not the Democrats.  They like the word ‘yes’.  As in “yes we can.”  And yes you can.  Do whatever young people with raging sex drives like to do.  And they do. 

They live college life to the fullest.  Many pursuing degrees that won’t take up too much of their time.  Taking less science and math like the Indians and the Chinese.  Because those are hard and require a lot of homework.  Instead they pursue degrees in women’s studies.  Minority studies.  Family studies.  American studies.  Communications.  Film.  Psychology.  Philosophy.  Things that are fun and have no math.  Allowing a lot of fun when outside of the classroom.  But are absolutely worthless in the high-tech economy.  The only employment opportunities for these degrees is to become a professor and teach other students these worthless degrees.

It turns out Liberalism is a Lie used to maintain a Privileged Class

So when these college graduates can’t get a job that’ll make them rich overnight they get angry.  And struggle to pay down the mountain of debt that paid for those worthless degrees.  Of course it’s not their fault.  Or the universities who sold them those worthless degrees.  It’s Wall Street’s fault.  Those evil rich people who don’t pay their fair share in taxes.  That somehow if they only paid more in taxes they could find gainful employment.

And when the young start working for a living they discover taxes.  From property taxes to payroll taxes to income taxes.  Which are a lot of taxes.  And when they start raising a family they start paying attention to what’s on television.  Which was fine when they were partying in their youth.  But somehow isn’t right now that they are parents.  They start thinking about the things they did in their youth.  And how to hide it from their kids.

And when there are ballot initiates to raise taxes to pay for budget deficits at the city and state level they pay attention to what caused these deficits.  And they don’t like what they learn.  Public sector pensions and health care benefits that are far greater than theirs.  Worse, they are not only paying for theirs (through a payroll deduction and/or lower pay) they’re paying for these generous public sector benefits via ever increasing taxes.  And they will be paying these taxes for a long time as few will be able to retire until they’re well into their sixties.  Working some 40-50 years.  While public sector retirees can enjoy their more generous benefits after only working some 20-30 years.

Which is why as liberals gain knowledge and experience they become conservatives.  Because young and dumb was fun in their youth.  But everyone has to grow up.  And learn that their parents were right.  Which is why a lot of people grow up to become conservative like their parents.  But few conservatives become liberals.  Because as it turns out liberalism is a lie.  It is just a means to maintain a privileged class.  Where life is great within the privileged class.  Where you can retire after 20-30 years and receive generous pensions and health care benefits.  But it sucks for those outside that privileged class who have to pay for it.  Which is why public education is not about test scores.  But producing good Democrat voters.  To maintain that privileged class.  Because education is in that privileged class.

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Carnegie, Rockefeller, Morgan, Interstate Commerce Act, Sherman Antitrust Act, Sherman Silver Purchase Act, Federal Reserve, Nixon and Reagan

Posted by PITHOCRATES - January 31st, 2012

History 101

Government Induced Inflation caused the Panic of 1893 and caused the Worst Depression until the Great Depression

Britain kicked off the Industrial Revolution.  Then handed off the baton to the United States in the latter half of the 19th century.  As American industry roared.  Great industrialists modernize America.  And the world.  Andrew Carnegie made steel inexpensive and plentiful.  He built railroad track and bridges.  And the steel-skeleton buildings of U.S. cities.  Including the skyscrapers.  John D. Rockefeller saved the whales.  By producing less expensive kerosene to burn in lamps instead of the more expensive whale oil.  He refined oil and brought it to market cheaper and more efficiently than anyone else.  Fueling industrial activity and expansion.  J.P. Morgan developed and financed railroads.  Made them more efficient.  Profitable.  And moved goods and people more efficiently than ever before.  Raising the standard of living to heights never seen before. 

The industrial economy was surging along.  And all of this without a central bank.  Credit was available.  So much so that it unleashed unprecedented economic growth.  That would have kept on going had government not stopped it.  With the Interstate Commerce Act in 1887 and the Sherman Antitrust Act of 1890.  Used by competitors who could not compete against the economy of scales of Carnegie, Rockefeller and Morgan and sell at their low prices.  So they used their friends in government to raise prices so they didn’t have to be as competitive and efficient as Carnegie, Rockefeller and Morgan.  This legislation restrained the great industrialists.  Which began the era of complying with great regulatory compliance costs.  And expending great effort to get around those great regulatory compliance costs.

Also during the late 19th century there was a silver boom.  This dumped so much silver on the market that miners soon were spending more in mining it than they were selling it for.  Also, farmers were using the latest in technology to mechanize their farms.  They put more land under cultivation and increased farm yields.  So much so that prices fell.  They fell so far that farmers were struggling to pay their debts.  So the silver miners used their friends in government to solve the problems of both miners and farmers.  The government passed the Sherman Silver Purchase Act which increased the amount of silver the government purchased.  Issuing new treasury notes.  Redeemable in both gold and silver.  The idea was to create inflation to raise prices and help those farmers.  By allowing them to repay old debt easier with a depreciated currency.  And how did that work?  Investors took those new bank notes and exchanged them for gold.  And caused a run on U.S. gold reserves that nearly destroyed the banking system.  Plunging the nation in crisis.  The Panic of 1893.  The worst depression until the Great Depression.

Richard Nixon Decoupled the Dollar from Gold and the Keynesians Cheered 

J.P. Morgan stepped in and loaned the government gold to stabilize the banking system.  He would do it again in the Panic of 1907.  The great industrialists created unprecedented economic activity during the latter half of the 19th century.  Only to see poor government policies bring on the worst depression until the Great Depression.  A crisis one of the great industrialists, J.P. Morgan, rescued the country from.  But great capitalists like Morgan wouldn’t always be there to save the country.  Especially the way new legislation was attacking them.  So the U.S. created a central bank.  The Federal Reserve System.  Which was in place and ready to respond to the banking crisis following the stock market crash of 1929.  And did such a horrible job that they gave us the worst depression since the Panic of 1893.  The Great Depression.  Where we saw the greatest bank failures in U.S. history.  Failures the Federal Reserve was specifically set up to prevent.

The 1930s was a lost decade thanks to even more bad government policy.  FDR’s New Deal programs did nothing to end the Great Depression.  Only capitalism did.  And a new bunch of great industrialists.  Who were allowed to tool up and make their factories hum again.  Without having to deal with costly regulatory compliance.  Thanks to Adolf Hitler.  And the war he started.  World War II.  The urgency of the times repealed governmental nonsense.  And the industrialists responded.  Building the planes, tanks and trucks that defeated Hitler.  The Arsenal of Democracy.  And following the war with the world’s industrial centers devastated by war, these industrialists rebuilt the devastated countries.  The fifties boomed thanks to a booming export economy.  But it wouldn’t last.  Eventually those war-torn countries rebuilt themselves.  And LBJ would become president.

The Sixties saw a surge in government spending.  The U.S. space program was trying to put a man on the moon.  The Vietnam War escalated.  And LBJ introduced us to massive new government spending.  The Great Society.  The war to end poverty.  And racial injustice.  It failed.  At least, based on ever more federal spending and legislation to end poverty and racial injustice.  But that government spending was good.  At least the Keynesians thought so.  Richard Nixon, too.  Because he was inflating the currency to keep that spending going.  But the U.S. dollar was pegged to gold.  And this devaluation of the dollar was causing another run on U.S. gold reserves.  But Nixon responded like a true Keynesian.  And broke free from the shackles of gold.  By decoupling the dollar from gold.  And the Keynesians cheered.  Because the government could now use the full power of monetary policy to make recessions and unemployment a thing of the past.

Activist, Interventionist Government have brought Great Economic Booms to Collapse 

The Seventies was a decade of pure Keynesian economics.  It was also the decade that gave us double digit interest rates.  And double digit inflation rates.  It was the decade that gave us the misery index (the inflation rate plus the unemployment rate).  And stagflation.  The combination of a high inflation rate you normally only saw in boom times coupled with a high unemployment rate you only saw during recessionary times.  Something that just doesn’t happen.  But it did.  Thanks to Keynesian economics.  And bad monetary policy.

Ronald Reagan was no Keynesian.  He was an Austrian school supply-sider.  He and his treasury secretary, Paul Volcker, attacked inflation.  The hard way.  The only way.  Through a painful recession.  They stopped depreciating the dollar.  And after killing the inflation monster they lowered interest rates.  Cut tax rates.  And made the business climate business-friendly.  Capitalists took notice.  New entrepreneurs rose.  Innovated.  Created new technologies.  The Eighties was the decade of Silicon Valley.  And the electronics boom.  Powering new computers.  Electronic devices.  And software.  Businesses computerized and became more efficient.  Machine tools became computer-controlled.  The economy went high-tech.  Efficient.  And cool.  Music videos, CD players, VCRs, cable TV, satellite TV, cell phones, etc.  It was a brave new world.  Driven by technology.  And a business-friendly environment.  Where risk takers took risks.  And created great things.

History has shown that capitalists bring great things to market when government doesn’t get in the way.  With their punishing fiscal policies.  And inept monetary policies.  Activist, interventionist government have brought great economic booms to collapse.  Who meddle and turn robust economic activity into recessions.  And recessions into depressions.  The central bank being one of their greatest tools of destruction.  Because policy is too often driven by Big Government idealism.  And not the proven track record of capitalism.  As proven by the great industrialists.  And high-tech entrepreneurs.  Time and time again.

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President Obama: Worse President than George W. Bush? Or Worst President Ever?

Posted by PITHOCRATES - July 8th, 2011

Obama Rolling up his Sleeves and Wagging his Finger

President Obama has taken out his wagging finger.  And he has wagged it.  Scolding Republicans to grow up and be like his daughters.  It is interesting he referred his daughters for an example of responsible behavior.  And not himself.  Because his track record on acting responsibly hasn’t been all that good as Charles Krauthammer points out and lists some of his failings (see The Elmendorf Rule by Charles Krauthammer posted 7/8/2011 on The Washington Post).

• Ignored the debt problem for two years by kicking the can to a commission.

• Promptly ignored the commission’s December 2010 report.

• Delivered a State of the Union address in January that didn’t even mention the word “debt” until 35 minutes in.

• Delivered in February a budget so embarrassing — it actually increased the deficit — that the Democratic-controlled Senate rejected it 97 to 0.

• Took a budget mulligan with his April 13 debt-plan speech. Asked in Congress how this new “budget framework” would affect the actual federal budget, Congressional Budget Office Director Doug Elmendorf replied with a devastating “We don’t estimate speeches.” You can’t assign numbers to air.

Not even a modicum of responsibility there.  So he’s rather like the pot calling the kettle black.  He should perhaps have said “do as I say and not as I do even though I do not do as I say you should do but that’s okay because I’m smarter than you so there.  When will all of you finally get this?”

But the Republicans, insolent as they are, refuse to budge.  So Obama had to bring out the wagging finger to discipline these insolent children.  Advising them to be more like his own children.  Who do their homework in a timely manner.

My compliments. But the Republican House did do its homework. It’s called a budget. It passed the House on April 15. The Democratic Senate has produced no budget. Not just this year, but for two years running. As for the schoolmaster in chief, he produced two 2012 budget facsimiles: The first (February) was a farce and the second (April) was empty, dismissed by the CBO as nothing but words untethered to real numbers.

Obama has run disastrous annual deficits of around $1.5 trillion while insisting for months on a “clean” debt-ceiling increase, i.e., with no budget cuts at all. Yet suddenly he now rises to champion major long-term debt reduction, scorning any suggestions of a short-term debt-limit deal as can-kicking.

That’s right, neither the Democrats nor Obama has done any responsible fiscal legislating/governing for the past two years.  Looks like the responsible shoe is on the other foot.  And those deficits?  They’re records.  Over 5 times larger than those world-ending Reagan deficits.  Yet he has the audacity to wag that finger at the Republicans for not being responsible?  Perhaps he should be wagging that finger at himself. 

And what have been Obama’s own debt-reduction ideas? In last week’s news conference, he railed against the tax break for corporate jet owners — six times.

I did the math. If you collect that tax for the next 5,000 years — that is not a typo — it would equal the new debt Obama racked up last year alone. To put it another way, if we had levied this tax at the time of John the Baptist and collected it every year since — first in shekels, then in dollars — we would have 500 years to go before we could offset half of the debt added by Obama last year alone.

Obama’s other favorite debt-reduction refrain is canceling an oil-company tax break. Well, if you collect that oil tax and the corporate jet tax for the next 50 years — you will not yet have offset Obama’s deficit spending for February 2011.

It is clear the president is in reelection mode.  Because he’s stoking the fires of class warfare.  Rich people fly jets.  And own oil companies.  Rich people are getting sweetheart tax deals.  Saving them billions.  And he wants to put a stop to this unfairness.  And make it fair.  It won’t help to erase the deficit at all.  But it gives you something to campaign on.  Which he needs.  Because his policies have been an economic train wreck. 

The June Jobs Report is worse than May’s

How bad have those policies been?  The June jobs report is in.  And it’s worse than May’s (see June Jobs Report Lands With A Thud: Up Just 18,000 by Steve Schaefer posted 7/8/2011 on Forbes).

In a stark reminder that the U.S. economy has been mired in slow growth, the Labor Department reported Friday that nonfarm payrolls added just 18,000 jobs in June and unemployment came in at 9.2%…

The stunning lack of improvement in June’s report – April’s payrolls figure was revised to 217,000 from 232,000 and May’s cut by more than half to 25,000 from 54,000 – rocked Wall Street Friday morning, as index futures sharply reversed after indicating small opening gains earlier. The Dow Jones industrial average, S&P 500 and Nasdaq were all signaling a red start to the trading session after solid gains Thursday.

And as bad as the May report was, the current report revises the May numbers down.  Fewer jobs were added than originally reported.  April’s, too.  It’s a trend.  Both a downward trend in job creation.  And the revising of previous reports.  Which means the anemic 18,000 jobs reported in June will likely be revised down in the July report.  There’s no good economic news out there.  The stimulus spending failed in a big way.  Which is why Obama is resorting to class warfare.  Because economically he has been an utter and absolute failure.

The June Jobs Report is even worse than it Says

And as bad as the June report was, it’s worse (see Without Dropouts, Jobless Rate Would Be Over 11% by Phil Izzo posted 7/8/2011 on The Wall Street Journal).

The share of the population in the jobs market, called the labor-force participation rate, fell to 64.1% last month — the lowest level since 1984 when women were still just beginning to enter in full force… The participation rate was 66% at the start of the recession and 65.7% when the recovery started in June 2009. If the participation rate were still at that level, the unemployment rate would be more than 11% right now…

There’s also a problem of underemployment. A comprehensive gauge of labor underutilization, known as the “U-6″ for its data classification by the Labor Department, accounts for people who have stopped looking for work or who can’t find full-time jobs. That number shot up in June to 16.2% from 15.8% a month earlier.

If we count the people who have given up looking for a job the actual unemployment rate would be as a high as 11%.  If you add in all those only working part-time because they can’t find a full-time job the unemployment rate jumps up to 16.2%.  These are horrible numbers.  How horrible?  These are more Great Depression numbers than George W. Bush numbers.

The Green Energy Bubble

America became the world’s largest economy thanks to the innovation of the private sector.  Great entrepreneurs like Andrew Carnegie, John D. Rockefeller and Henry Ford took risks.  The government didn’t have to tell them how to make steel better, more plentiful and cheaper.  Or how to make gasoline better, more plentiful and cheaper.  Or how to make automobiles better, more plentiful and cheaper.  That’s capitalism in the free market.  The private sector takes risks in pursuit of profits.  And when it does it makes things better, more plentiful and cheaper.  When people like Carnegie, Rockefeller and Ford are left alone to do what they know how to do best.  Create wealth.  And jobs.

Obama, on the other hand, believes he knows best.  That he’s smarter than these entrepreneurs.  And that he can direct the private sector to do his bidding.  Which, of course, in his Ivy League world, should result with economic activity.  And jobs.  Even if you’re telling people to build stuff the market doesn’t want (see The Coming Clean Tech Crash by Devon Swezey posted 7/7/2011 on Forbes).

The global clean energy industry is set for a major crash. The reason is simple. Clean energy is still much more expensive and less reliable than coal or gas, and in an era of heightened budget austerity the subsidies required to make clean energy artificially cheaper are becoming unsustainable.

Clean tech crashes are nothing new. The U.S. wind energy industry has collapsed three times before, first in the mid 1990s and most recently in 2002 and 2004 when Congress failed to extend the tax credit that made it profitable. But the impact and magnitude of the coming clean tech crash will far outstrip those of past years.

After one of the worst housing bubbles in U.S. history we now have a green energy bubble.  That’s about to pop.  And you know what happens when a bubble pops?  You get a recession.  To correct for all that malinvestment (to borrow a little Austrian School vernacular).  Which is pretty bad considering we’re still trying to recover from the first bubble.  And may very well still be in a recession despite all the massaging of economic data to say otherwise.  So if we’re still in a recession perhaps the pop of this bubble will push us into depression.  If we’re not in one already.  Based on those god-awful employment numbers.

As part of its effort to combat the economic recession, the federal government pumped nearly $80 billion in direct investment and tax credits into the clean energy sector, catalyzing an unprecedented industry expansion. Solar energy, for example, grew 67% in the United States in 2010. The U.S. wind energy industry also experienced unprecedented growth as a result of the generous Section 1603 clean energy stimulus program. The industry grew by 40% and added 10 GW of new turbines in 2009. Yet many of the federal subsidies that have driven such rapid growth are set to expire in the next few years, and clean energy remains unable to compete without them.

The crash won’t be limited to the United States. In many European countries, clean energy subsidies have become budget casualties as governments attempt to curb mounting deficits. Spain, Germany, France, Italy and the Czech Republic have all announced cuts to clean energy subsidies.

Can’t compete without them?  So what was the point in giving them all of those subsidies in the first place?  Were we forever going to pay for a more costly energy while less costly energy (i.e., fossil fuel) was available?  Apparently so.   Being that the life-blood of an economy is energy that would have just raised the cost of all businesses.  And the price of all consumer goods.  Less disposable income means less demand.  Less demand means fewer jobs.  Not a good plan, really.  Unless your goal is to put the country into a depression.

And the problem is global.  So the coming economic crisis will be global.  As if the European Union didn’t have enough financial crises on their hands already.  This could even hurt those emerging markets of China, India and Brazil.  Who depend on these export markets.  As we depend on them.  To buy our debt.

The U.S. has tried this clean energy before.  And all of these attempts ended in failure.  For the reasons already noted.  But if we’ve tried this so many times before, why haven’t we figured out how to do it right?  To find that innovation that makes it cost-competitive with fossil fuels?

Why is the United States still locked in this self-perpetuating boom-bust cycle in clean energy? The problem, according to a new essay by energy experts David Victor and Kassia Yanosek in this week’s Foreign Affairs, is that our system of clean energy subsidization is jury-rigged to support the deployment of only the least-risky and most mature clean energy technologies, while lacking clear incentives for continual innovation that could make clean energy competitive on cost with conventional energy sources. Rather, we should “invest in more innovative technologies that stand a better chance of competing with conventional energy sources over the long haul.” According to Victor and Yanosek, nearly seven-eighths of global clean energy investment goes toward deploying existing technologies that aren’t competitive without subsidy, while only a small share goes to encouraging innovation in existing technologies or developing new ones.

Oh, that’s why.  Because the government is in the business of picking winners and losers when it comes to the lottery of free government money.  Which is par for the course.  For government spending is about political cronyism.  That money is spent based on political forces.  Not market forces.  Which is a shame.  Because spending that money isn’t necessary.  Because there is an incentive to create cost-competitive green energy.  Unfortunately, that incentive is being distorted by the government subsidies.

It is clear that the current budgetary environment in the United States presents challenges to the viability of the fast-growing clean energy industry. But it also presents an opportunity. By repurposing existing clean energy policies and investing in clean energy innovation, the United States can be the first country to make clean energy cheap and reliable, a distinction that is sure to bring major economic benefits in a multi-trillion dollar energy market.

Get rid of all that malinvestment and that multi-trillion dollar energy market will provide the necessary incentive for the private sector to solve the green energy problem. Making it cost competitive with fossil fuels.  For whoever cracks that nut will be the next Carnegie.  The next Rockefeller.  The next Ford. 

You want to create a green energy market?  Okay, I’ll tell you how to do it.  Step one, get government the hell out of the way.  Step two, eliminate the capital gains tax.  That will motivate people to spend money on solving the problem because if they’re successful they’ll be richer than the Kennedys.  Step three, enjoy your green energy.

Barack Obama and his Keynesian Economics have Failed

President Obama has no chance of reelection if he has to run on his economic record.  Because his economic record may prove to be the worst of all time.  And he knows it.  Hence the finger wagging.  And the class warfare.  He has spent more than any other president.  And not just a little more.  A lot more.  Before him the worst post-war federal deficits were around $200-400 billion.  Since Obama they’re around $1.5 trillion.  And yet he scolds Republicans for being irresponsible because they refuse to raise the debt limit without getting real spending cuts.  As if the Republicans spent all of that money.  Not him.  Or his Democrats.  If he was so worried about defaulting on American debt obligations he shouldn’t have spent money his administration didn’t have.  But he did.  And now he’s wagging his finger at Republicans.

And what did we get for all that spending?  Further proof that he and his administration are economically incompetent.  Government spending doesn’t create jobs.  And government doesn’t know better than the private sector.  He can talk with all the righteous indignation and all-knowing condescension he wants but it doesn’t change that fact.  America’s greatest economic achievements and innovation was done without Government butting into the private sector.

Barack Obama and his Keynesian economics have failed.  Time to try something new.

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LESSONS LEARNED #63: “There is no such thing as a monopoly in free market capitalism.” -Old Pithy

Posted by PITHOCRATES - April 28th, 2011

Even the mighty Coke-Pepsi Duopoly can’t stop People from Drinking Tap Water

Coke and Pepsi have a near monopoly in the cola market.  Or a duopoly.  They dominate.  And they’re bitter enemies.  Few brands are locked in such a bitter struggle that we call it war.  The Cola Wars.  They are archenemies.  Even though they may cooperate by alternating their discounting to limit their losses.  One month Coke may be on sale.  The following month, Pepsi.  They’re big and their powerful and when you ask for a Coke at a restaurant you’ll either get a Coke.  Or they’ll ask you if Pepsi is okay.  Or vice versa.  Because they own the market.

But do they?  There’s always another choice.  At a restaurant, we can order ice tea.  Hot tea.  Coffee.  Orange drink.  Beer.  Wine.  A cocktail.  Or even water.  Ditto at the grocery store.  Walk down an aisle and there’s more to choose than Coke or Pepsi.  RC Cola, for one.  And then there’s the un-cola (7-Up).  VernorsA&W Root BeerSquirtDr. PepperCrushSnapple.  And other name brands that aren’t owned by the Dr. Pepper Snapple Group.  Not to mention all the store brands.  And, of course, tap water.  Which I personally drink with most of my meals.  Even though there’s nothing finer than a Coke or Pepsi to wash down a greasy pizza.

Try as they might Coke and Pepsi can’t limit entry into the beverage market.  The barriers they can erect are minimal.  They can offer a special price to a store or restaurant in exchange for keeping out their hated rival, but they can’t prevent people from asking for tap water.  Or from people simply going elsewhere to get the Coke or Pepsi product they want.  Or the million other options out there.  And if they raise their prices in their ‘duopoly’, people will just seek out those other options.  Yes, they may be able to tell the difference between Coke and Pepsi in blind taste tests.  But if the price isn’t right, they’ll enjoy RC Cola just fine.  Or even the store brand cola.

Go ahead and Tax our Tea.  We’ll just drink Coffee Instead.

You see, to keep out the competition, you need the power of government.  Just ask the sugar importers.  Who would love to sell to the cola companies.  But don’t.  Because government has erected a barrier to that market.  Now, we don’t know what their highly guarded secret recipes are, but we do know that they each use the same sweetener.  High fructose corn syrup (HFCS).  They don’t use sugar.  Why?  Because Big Ag lobbied Congress to slap high tariffs on imported sugar.  Which they have.  Now the price of sugar is so high the cola companies use HFCS instead.  Though that may be changing as of late with a new round of health concerns about HFSC.  But that’s a whole other story.

To limit consumer choice, you need government to step in.  Because only government can write laws to erect market barriers.  For example, the last straw of British oppression before America’s Declaration of Independence was about a British law that erected a market barrier.  British Americans, being of British stock, liked their tea.  But they didn’t like paying the high price of East Indian Company tea.  In the Mercantile economics of the day, everything bought and sold in the British Empire shipped on British ships through British ports.  Indian opium shipped on British ships to China (via Calcutta).  The British than used the proceeds from those sales to purchase tea.  Which they shipped on British ships back to London.  Where they paid a duty on it.  And then on to America.  Where the colonists paid a tax on it.  All these markups made their tea pretty expensive.

Famine and recession caused financial problems for the East India Company.  To help alleviate their problems, British Parliament stepped in.  Said they could ship their tea directly to British North America (without going through London).  And sell it tax-free in the colonies.  Which made all other tea more expensive.  Which did not go over well with the American tea merchants.  Or the colonists in general.  This led to the Boston Tea Party.  American Independence.  And the switch from drinking tea to drinking coffee in America.  Because even when there is only one tea that is legal to drink, there is always another choice.

Rockefeller benefited Consumers.  The ICC did not.

People love Teddy Roosevelt for his trust busting.  Attacking the big robber barons.  To help the little guy.  And one of the big guys the little guys loved to hate was John D. Rockefeller.  Of Standard Oil fame.  Rockefeller was richer than most nations.  And some people just hated that.  He made his wealth by making refined oil products affordable to the consumer.  And he was a great environmentalist.  He saved the whales by replacing whale oil with kerosene.  And his relentless research and development made every bit of refined oil into a useful product.  While his competitors dumped most of their waste back into the environment.  Not Rockefeller.  He hated waste.  He even experimented in finding the least number of welds it would take to hold an oil barrel together.  He invented vertical integration (controlling industries up and down the product pipeline from the collection of raw resources to the sale of a finished product).  He not only made refined oil products cheap.  He made them plentiful.  Which made America the world’s leading economic power.  Successful corporations follow his example today.

Sure, he put a lot of his competitors out of business.  But it wasn’t because he was a monopoly.  It was because he was just that much better.  He produced refined products better and cheaper than his competition.  By the time the trust busters busted up Standard Oil, competition was coming into being on the Standard Oil model.  Which ultimately produced more refined products at lower costs.  He forced the competition to step up to his level which benefited consumers.  While the trust busters tried to bring Rockefeller down to his competitor’s level which benefited his competitors.  Not the consumers.  No, consumers did very well by John D. Rockefeller.  He created and produced at a relentless rate.  He didn’t ask for government help.  Unlike his competitors.  Who complained to the government.  (It is never a consumer that complains about predatory pricing).  Because when you can’t compete legitimately, you petition government for special favors.  Much like some of the railroads did.

Building a railroad is costly.  And takes a lot of friends in government.  At all levels.  Because you have to lay track through federal land, state land, county land as well as through cities.  Of course, everyone wanted that track to go through their land because the railroad was the way to ship goods.  And people.  So the system was ripe for corruption.  And it often was.  Once built some shippers complained about unfair shipping rates compare to what others got.  Rockefeller, for example, was highly criticized for getting better rates by far than any of his competitors.  Of course, he shipped by far more product than any of his competitors.  Which probably had a lot to do with his rates.  But the government saw that things were unfair in the railroad business.  So they stepped in.  And created the Interstate Commerce Commission (ICC).  Which was to right all the wrongs.  Which, of course, it didn’t.  It just made it easier for the big companies to fix things in their favor.  For they now had a single governing body to buy.  Which made it easier to buy political influence.

But none of this made a difference to save the railroads.  They started to die in the Fifties.  Of arrogance.  When people asked the big railroad executives what business they were in, they replied, “The railroad business.”  But they weren’t.  They were in the transportation business.  What’s the difference?  The ‘railroad’ business had only other railroads for competition.  The transportation business had cars, trucks and, eventually, planes, as competition.  So even though those who used the power of government to restrict other railroads from entering their markets, there was still competition.  The interstate highways and the automobile killed passenger rail.  And the trucking industry almost killed the freight railroads.  What saved them was realigning their operations into the transportation business.  Intermodal transportation combined container ships, railroads and trucks into a seamless and cost efficient transportation system.  Roadrailers took that concept to a higher level.  These are truck trailers that can be pulled by a locomotive without the need of a rail flatcar.  Trucks deliver these trailers to a rail yard.  They add a train bogey to the trailer.  Put it on the track.  Couple them together.  And attach them to a single locomotive.  Very little non-revenue weight.  Making it very efficient.  John D. Rockefeller would be impressed.

In a Free Market there is always a Choice

Wherever there is a market there is competition.  For any market where a profit can be made will attract others to that market.  Companies can try to restrict competitors.  But that’s all they can do.  Try.  Because if it’s a free market, it’s open to competition.  There are no barriers that a competitor can’t overcome.  Except one legislated by government.  And competitors can even crack that barrier.

And this is what it takes to make a monopoly.  Government.  Railroads had monopolies for awhile.  But creative business people found a way to crack their government-imposed monopoly.  Truckers came in and shipped at rates lower than the ICC said was fair.  Of course, fair is a relative term.  What’s fair to the railroad is not fair to the shipper.  Or the consumer.  But a trucker shipping at rate that he can cover his expenses and support his family is fair to everyone.  Except the railroad who depended on government instead of innovation for their business profits.

Coke and Pepsi can fight their cola wars but they can’t keep out competition.  There’s always root beer, ginger ale, orange drink, beer, wine, liquor, water, coffee or tea.  And even when government uses their full weight and power to create and maintain a tea monopoly, tea drinkers can simply become coffee drinkers.  For in a free market there is always a choice.  Always.

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LESSONS LEARNED #41: “The want of unearned money is the root of most evil.” -Old Pithy

Posted by PITHOCRATES - November 26th, 2010

Money is a Temporary Storage of Wealth that Makes Trade Efficient

People don’t want money.  They want what money can buy.  A dump truck full of money is useless when there is nothing to buy with it.  For money is nothing more than a temporary storage of wealth.

We make or do creative things.  Things or services that people want.  There is a world full of people making goods or providing services other people want.  Some people make cellular phones.  Some people make microwave ovens.  Others provide landscaping services.  And these are the things we want.  Not money.

Money is a tool.  We use it to make trading with each other easier.  People who make cellular phones don’t need to find someone who makes microwave ovens to trade with.  Instead, they receive money for the cellular phones they make.  And the microwave oven makers receive money for the microwaves they make.  Then the cellular phone makers and microwave oven makers can take that money and trade it for what they want.

Our Human Capital Determines the Size of our Paycheck

We call the skills we accrue over time that lets us make or do things that other people want ‘human capital’.  People that have human capital have jobs.  Employers hire them because they have valuable human capital. 

Some people have so much human capital that they start a business.  They’re very good at bringing together an idea, people and resources to make valuable things or services that other people want to buy.

People with human capital are traders.  Just like in ancient Mesopotamia.  Nothing has changed.  Except that we trade more efficiently these days because of money.

It’s Easier to Steal Money than Televisions and Mansions

Not everyone traded.  Some people stole.  Some fought.  When peoples came into contact with each other, they often fought each other.  And the winner took the spoils.

Not much has changed today.  There are people who still steal.  And they are peoples who still conquer.  The only difference really is the efficiency of some theft.  Again, this is due to money.  It is more difficult to steal a 42″ plasma television than it is to steal $750 (which they can use to buy a 42″ plasma television). 

Likewise, it is more difficult for a politician to steal a million dollar mansion than it is to steal money.  Either as bribes from some special interest.  Or from taxpayers.

Unearned – Evil; Earned – Good

Those who steal typically have little human capital.  But because they still want those nice things they steal money.  The problem with theft, though, is that stolen money is transitory.  If you have human capital, you get a recurring paycheck.  Once you spend stolen money, it’s gone.  And you have to steal again.

This want of unearned money is the root of most evil.

People who earn their money with their human capital improve the lives of others.  The more they buy, the more others sell.  And the more jobs these others create.  And these jobs allow other people to use their human capital to buy other things.  Or even make charitable donations.

This want of earned money is the root of most good.

Rockefeller and Carnegie Made and Gave Away Fortunes

John D. Rockefeller made a fortune with Standard Oil.  He was ruthlessly efficient.  No one could refine, transport and sell petroleum products cheaper than he could.  People benefitted from affordable petroleum products.  And after he retired, he gave away vast portions of his wealth to charitable causes.

Andrew Carnegie made a fortune from steel.  Like Rockefeller, he was efficient.  No one could produce quality steel at a lower price than he could.  His steel built the skyscrapers and railroads of America.  He made a fortune.  And gave most of it away to charitable causes.

Most of the politicians that make it to Washington leave Washington as millionaires.  They sell themselves to special interests.  Raise our taxes so they can buy political favor.  And their policies are notorious for the unintended consequences that destroy (e.g., Aid to Families with Dependent Children (AFDC) destroyed black families). 

High Taxes and Lottery Tickets Punish the Poor

The federal government has created such an entitlement mentality that some people can’t survive without government assistance.  To fund their destructive policies, they’ve raised taxes on the wealthy.  And impoverished the poor.

With taxes so high, charitable contributions have declined.  Sin taxes (on cigarettes and liquor) have hit the poor especially hard (as they have less disposable income).  Which makes the poor more dependent on government.

But the ultimate insult to the poor has got to be the lottery.  The government entices the poor with illusions of getting rich quick.  And this want of unearned money causes the poor to spend large chunks of their small paychecks or government benefits (that they can’t afford) on lotto tickets.  Hoping to win the big one.  With some of the worse odds in the history of gambling.  (People have a better chance of getting struck by lightning than winning the lotto.  And few people believe that they will ever be hit by lightning.  But they’ll keep buying those lotto tickets.)

But whether a thief, a politician or the poor, the end result is the same.  The want of unearned money makes people make bad choices.  And people suffer because of those choices.

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FUNDAMENTAL TRUTH #22: “The only problem with health care these days is that it’s approached from a cost basis more than a medical basis.” -Old Pithy

Posted by PITHOCRATES - July 13th, 2010

THE PROBLEM WITH cost cutters is their vision.  They see costs.  Not the big picture.  Rockefeller was a notorious cost cutter.  Even determined he could save money by using a few less welds on his oil barrels.  But he saw the big picture, too.  He grew sales.  Something that cost cutters have trouble doing.  He didn’t.  In fact, he was so good that it took the government to stop his sales growth.

Roger Smith was a numbers man.  He managed costs.  Starting in the accounting department of GM, he reorganized GM to make better sense.  On paper.  To make nice, neat, bookkeeping-like ordered sense.  Things tend to work better on paper, though, than in reality.  Suffice it to say that few laud Smith as the greatest CEO of GM.

Robert McNamara was also a numbers man.  And he ran the Vietnam War by the numbers.  He carefully determined what U.S. forces could NOT attack.  (Any place outside South Vietnam was basically a sanctuary for the enemy.)  And he introduced the body count.  There was no strategy to win.  Just a policy to verify you were killing more of theirs than they were killing of yours.  Wars of attrition, though, take years.  And lives.  On both sides.  Americans don’t like sitting back and waiting for enough of their sons to die to declare victory.  McNamara failed to see the big picture.  Strategy.  He just tried to make the combat efficient.  Which did little to inhibit the enemy from making war. 

Managing costs is important.  It can improve profits.  But it can’t grow sales.  And if you can grow sales, you’ll be able to pay your costs.  Even if they are high and inefficient.  Few companies fail because they have a cost problem.  They file because they have a revenue problem.  They lack sales.  Cost cutting cannot fix this problem.  It can temporarily help reduce operating losses.  But if you don’t increase sales, you’ll probably fail in the long run.

There are detail people.  And people with vision.  Rarely are people both.  Rockefeller was.  Smith and McNamara were detail men.  They could not see the forest for the trees.  And this is the problem in health care.  We’re not looking at the big picture of medical care.  We’re looking at the details of cost. 

YOU WOULD THINK that doctors would oppose the government taking over health care.  Because when governments do, they tend to put salary caps on doctors.  Kinda diminishes the return on all that costly medical training.  I talked to two recently who favor a national solution.  Why?  Because of costs.  They like Medicare.  Because it’s simple.  Most of their patients are seniors.  So the bulk of their billings are uniform.  Medicare reimbursements.  They like anything that simplifies their overhead costs.  Private insurance companies don’t do this.  They’re not all the same.  Different people to call.  Different procedures.  Different approved tests.  Different paperwork.  And more of it.  And a bigger staff to handle it.

Doctors hate paperwork.  No doctor ever went through medical school because they wanted to shuffle paper.  Or because they wanted to fend off malpractice lawsuits.  Doctors are under a bureaucratic assault.  They spend more time with paperwork than with patients.  And paperwork does have a cost.  As do frivolous lawsuits.  A government takeover would standardize the one.  And, hopefully, eliminate the other.

I understand these doctors’ concern.  But they can’t see the forest for the trees.  Government is not going to approach health care from a medical basis.  They’ll approach it from a cost basis.  They’ll use statistical analysis.  They will manage care to maximize cost efficiency.  They will approach health care like Smith did in GM and McNamara did in Vietnam.  They’ll crunch the numbers.  Then determine what health care is cost effective.

THEY PROBABLY NEED no introduction.  Most people are family with the British comedy troupe called Monty Python.  Funny, a bit naughty and rather bookish, they’ve appealed to the masses across generations.  They spent a lot of time researching before making some of their movies.  Reading books.  The realism it adds made some of the funniest scenes.  A Roman centurion gives a Jewish terrorist a Latin lesson at the point of a sword (Life of Brian).  Dennis the constitutional peasant arguing with King Arthur (Monty Python and the Holy Grail).  And this scene from The Meaning of Life during a live birth lampooning the British National Health Service:

Nurse:  The administrator’s here, doctor.

First Doctor:  Switch everything on!

[They scramble to do so.  Machines turn on with flashes and sounds.  The administrator enters.]

Administrator:  Morning, gentlemen.

First and Second Doctors:  Morning Mr. Pycroft.

Administrator:  Very impressive. Very impressive.  And what are you doing this morning?

First Doctor:  It’s a birth.

Administrator:  Ah, what sort of thing is that?

Second Doctor:  Well, that’s when we take a new baby out of a lady’s tummy.

Administrator:  Wonderful what we can do nowadays.  [A machine makes a ‘ping’ sound.]  Ah!  I see you have the machine that goes ‘ping’.  This is my favorite.  You see we leased this back from the company we sold it to.  That way it comes under the monthly current budget and not the capital account.  [They all applaud.]  Thank you, thank you.  We try to do our best.  Well, do carry on.

This is funny.  Because it’s true.  When we approach health care on a cost basis.  You must show you need and use every piece of expensive equipment you have so it stays in the budget.  And the administrators administrating health care don’t understand health care.  They understand and make their decisions based on numbers in columns.  And speaking of numbers in columns.

 ONE THING STANDS out more than everything else when looking at numbers in columns.  In one cost column in particular.  Of all the costs in columns, one dwarfs all others.  The costs in treating very sick and very old people.  You can cut and trim the budget everywhere else but you won’t make a dent in overall costs.  Unless you cut and trim this one column.  Manage these costs.  Do some statistical analysis on these costs.  For if you cut THESE costs, it will make a difference.  It could even stave off bankruptcy without having to further raise taxes.  Yes, we can make the system more financially sound if we just stop treating so many sick and old people.

But it’s a body count mentality.  You have to willingly accept a defined number of additional deaths.  The Soviets were willing to trade 10 lives for one against the Nazis.   A steep price to pay.  But it did wear the Nazis down and lead to victory.  There was a similar ratio in Vietnam with America on the better side of that ratio.  But it was still too high a price for Americans.  It goes against our nature to think in terms of ‘acceptable’ losses.

But there will have to be a line that health care will approach but does not cross.  Where there are ‘acceptable’ losses.  Statistical analysis will take into account probable remaining years of life in a potential patient.  If few, the system will assign an appropriate value of care to match the health care expenditure with the expected return on the medical treatment.  People with more probable years of life left will receive more health care treatment.  People with fewer years left will receive less.  We’ll help manage their pain until they no longer feel that pain.  For it would be inefficient to spend a lot of money on someone who is going to die ‘soon’.

Perhaps I can best summarize this in song.

When you were young and your heart was an open book
You used to say live and let live
(you know you did, you know you did you know you did)
But in this ever changing world in which we live in
Makes you give in and cry
Say live and let die
Live and let die
Live and let die
Live and let die

(Live and Let Die, Paul McCarthy)

And that’s what bureaucrats will use all that statistical analysis for.  To determine who to let die.  You can sugarcoat it anyway you’d like, but it comes down to this.  A bureaucrat, not a doctor, will have the power of life and death as they decide what health care is appropriate and prudent.  As it must be under a system where bureaucrats distribute limited resources on a cost basis.  They will have no choice but to deny care that is not in the budget.

ONE PUZZLING THING about health care is that it is perfectly acceptable to approach it from a cost basis but not on a revenue basis.  For it is immoral to profit on health care.  Pity, because introducing market forces is one sure way to bring down costs.  People are willing to pay for medical services.  They pay for abortions.  And abortion clinics are readily available.  The free market laws of supply and demand work for abortions.  And so they would for other outpatient medical services. 

Instead of running a battery of tests because an insurance company requires this incremental approach of the cheap stuff first, you could go to an MRI (or some other expensive procedure) clinic and pay out of pocket.  Because they do nothing but MRIs, they achieve economies of scale.  The clinic makes money by offering low cost, high quality MRI scans that result in a high sales volume.  You benefit because you miss less work.  The doctor benefits because he gets your MRI scan results without additional paperwork to process.  I’m sure a market is there just waiting for an entrepreneur to come along.  I mean, if you can make money by performing abortions, you should be able to make money with some non-invasive, high-tech machines.

HEALTH CARE SERVICES will not become more affordable and more readily available by cutting costs.  If the bean counters try, they’ll damage the quality of health care.  Because the bean counters rarely look at the big picture.  You need someone with vision.  Because no cost cutter ever saved a business.  Or made the world better.

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