Free Markets, Free People

monopoly

Observations: The QandO Podcast for 11 Aug 13

This week, Michael, and Dale discuss many things.

The direct link to the podcast can be found here.

Observations

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The Public Option: When Competition Isn’t Really Competition

It is, instead, a prelude to monopoly.  That is the case with the “public option” in the health care reform desired by the left:

The problem is that government, by definition, isn’t just another economic player, and will always tend to want to control markets for its political purposes. That threatens economic as well as political liberty.

And that’s precisely what a government run entity in a private market will be directed by – politics and an outcome favorable to the goal of politics – the accumulation of power. So there’s a basic level of dishonesty going on here when those in support of a “public option” talk about “competition”. Rep. Paul Ryan calls Kathrina Vanden Heuval on just such a use:

What’s concerning about this debate with me is that you’re using capitalist rhetoric to try and move a plan that is inherently anti-market. The problem is that the facts tell us this: A public plan option quickly becomes a government-run monopoly.The actuaries are telling us is that in a few short years, the public plan option displaces the private sector, employers dump their employees on the public plan, and then they have no choices but the public plan. And so, lets not try to sell a government-run plan using free market rhetoric.

Redefining “competition” to mean nothing more than the introduction of another entity in the field is the ploy.  Relying on the economic ignorance of most Americans to carry it off is also part of the plan.

Instead competition is the battle of private entities with the same goal – market share and profit.  In a free market system that goal is attained through winning the preference and loyalty of customers for their product at an acceptable price for both consumer and producer. It is the existence of other producers and their products which keeps the other producers “honest”.   But the introduction of a government entity into such a market introduces a “competitor” which is only interested in one aspect of that competition – obtaining the preference and loyalty of customers. It has no interest or need to have that price acceptable to the producer since it doesn’t have to seek a profit to provide the product.  In fact, it can run a loss as long as it takes to clear the market of other “competitors”.  Such predatory pricing will be supported by whatever subsidies are necessary from the US Treasury.  It will end up distorting the market to the point that those who must have a profit to continue to serve their customers and produce their product (actually pay for it with money they earn) will leave the market.

That’s not “competition” by any stretch of anyone’s imagination. And, in fact, with the ability to absorb as much loss is necessary to drive private firms out means government will indeed, at some future point, enjoy a “single payer” monopoly. They’ll be the only game in town.  It seems that our government is unfriendly only to private monopolies, not public ones.

So, in summary, defenders of the public option are being blatantly disingenuous with their rhetoric and stated intent when they claim that the “public option” would introduce “competition” and keep insurance companies “honest”. In fact it won’t do that at all.  It will, instead,  evolve over time into a “market” in which the only insurance entity standing will be the government run one which will enjoy monopoly status and give the liberal left the “single payer” system it so badly wants to see enacted here.

~McQ

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