David R. Henderson  

David Friedman on Markets vs. Coercion

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Earlier today, David Friedman posted a thoughtful piece on a speech by a retired judge who told the audience how badly government works and why they should, therefore, try to make it work better. David points out that the judge was unwilling to consider his initial favoring of coercive solutions over voluntary solutions. One two-paragraph excerpt:

Under existing law, she [the judge's autistic daughter] was entitled to a wide range of medical and educational services. When he tried to obtain those services for her, however, he found himself involved in a tangled web of bureaucracy, detailed and inconsistent rules, phone conversations with a computer on the other end. He suspected that insofar as he finally succeeded in working his way through that tangle to a successful outcome, it was at least in part because a federal judge was better able to get attention and favorable treatment from government bureaucrats than most other people would have been. He concluded that the young law graduates to whom he was speaking should devote their lives, at least in part, to seeing that poor Americans got from the government the things to which they were legally entitled.
It apparently did not occur to him that the contrast between his experience in getting services provided by government and his experience buying groceries on the private market, where you simply pay your money and walk out with what you have bought, might say something about the relative workability of the two systems for providing goods and services. Nor that if a system introduced in large part on the theory that it would even out differences between rich and poor turned out to serve higher status people much better than lower status people, perhaps the theory was wrong, perhaps government production and distribution was creating, rather than eliminating, inequality. When a judge goes to the grocery store, he gets the same groceries at the same price as anyone else.

For some reason, David doesn't name the judge and so I looked him up. His name is Carlos Moreno, Associate Justice (Retired), California Supreme Court.


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COMMENTS (7 to date)
Phil writes:

As one with a special needs child, obtaining a "wide range of medical and educational benefits" cannot -- and never should -- be remotely compared to walking down the grocery aisle and picking up a jar of jam. The more appropriate comparison is to hiring an architect and the army of contractors (carpenters, plumbers, electricians, etc.) necessary to design and build you a house; and not just any house, a custom one that is most appropriate to you. Complete with all the minute decisions about drawer pulls and wall color.

I do agree wholeheartedly that the federal judge should not get services ahead of others, based solely on his position. Painfully, I have seen that those most in need tend to get fewer services because they are either not as capable at navigating the bureaucracy, may be ignorant of benefits available or their rights, or may be in a state of crisis and are not thinking clearly. To the extent government ought to provide those services, they should knock down the barriers to entry for those who would benefit most. If that is what the judge or Friedman meant, I concur.

One should not, however, begrudge the judge for having knowledge of the system any more than the free market should begrudge the advantage an architect/contractor has who hires another to design and build his home. The distribution of knowledge in society is "lumpy" and those with it have a comparative advantage, whether they deal with a government agency or a commercial vendor.

David R. Henderson writes:

@Phil,
Well put. Notice, though, that neither David Friedman nor I begrudged the judge for having knowledge. What David pointed out is that the judge didn't learn from his experience. The judge didn't say, "Oh, wow, look how badly government works; maybe we should try voluntary solutions." Instead, he said, in effect, "Look how badly government works; you young lawyers go out there and make it work better." Could that be effective? On the margin, yes. But only on the margin. The incentives matter and the judge wasn't recommending changing the incentives in any fundamental way.
Of course, that then gets back to your first point that the analogy with the supermarket fails. Point taken. But wouldn't a better analogy than his or yours be with hiring a nanny for a kid who's difficult? People do this all the time and when they are paying, they get something or someone approximating what they want.

Phil writes:

I know the analogy is not your main point -- which is now clearer, thank you -- but it bears a word. The judge was seeking "medical and educational" benefits, not a caregiver. The caregiver (or nanny) is only going to sustain the child; they are unqualified to improve the child. The analogy is not just a nanny, but a psychologist, a special ed teacher, maybe an occupational or physical therapist, probably a speech therapist. I have hired all the above, plus others, including an eating therapist (at age four our son still did not know how to chew). If only it were as simple as a nanny.

I know you are a limited government guy, but there are members of our society whose needs greatly exceed those which a family is intellectually and financially able to handle on their own. I'm grateful to live in a compassionate society that pools its resources for this sort of thing.

As a pooled resource, maybe there could/should be a market for insurance against profoundly disabled children, but I think our societal mores would find that distasteful.

Peter T writes:

A less US-centric perspective might be useful here. The experience of people with eg French public health care as compared to US health care, or historical studies of where private, market-incentive based systems have been replaced with public ones would be useful (private cholera rather than clean public water, in a famous German example).

For lots of historical reasons (and with some exceptions), US public services are not nearly as good as most other Western ones. Which reinforces US stereotypes about public provision. But these are stereotypes, as any look around the world would tell you. How do others do it? Partly by developing and maintaining strong incentives to perform that are not based on monetary rewards.

David R. Henderson writes:

@Phil,
While I agree that the motives behind the use of force are often compassionate, the use of force is not: it's the opposite. Are you saying just that some people in society would find insurance distasteful or that you do? If so, do you care to say why?

Joe Cushing writes:

Phil,

Lets assume that your argument that the government take from the fortunate (with force by the way) and give to those who are in special needs situations is sound. The government could simply send a check to those with certain diagnosis and let the people spend the money in the marketplace. This would be far more efficient. The would make it cheaper for the tax payer and far cheaper for the recipient. Of course the red tape comes in in trying to determine who is in need because where there is free (stolen) money to be had, there are many who will line up to get some. This is an area where private charity excels. They can much more quickly and efficiently determine who is in need and who isn't. Perhaps if there was no income tax and no welfare state, more people would give to charity.

Phil writes:

@David - I think a large segment of our society would be uncomfortable with the idea. As squeamish as the US public is about issues related to genetic engineering, abortion, and considering the outrage over the proposed use of online marketplaces to predict terrorist attacks shortly after 9/11, there seems to be a sentiment in our country that particularly emotional issues should not be reduced to pure rational cost-benefit analysis. As logical as it might be to offer "pervasive developmental delays" insurance to expectant parents I think many would be uncomfortable with that. Medical insurance protects you from external forces, this kind of insurance protects you from a defect of your own making. The cost-benefit calculation is tangled up with issues of self-worth. Would I have bought such insurance during our first pregnancy? No. Would I buy it now if we were to continue our family? If the terms seemed favorable.

@ Joe - While a direct subsidy would probably lower transaction costs to the government/taxpayer than direct delivery of service, it would not likely produce as good an outcome. The typical parent facing this issue does not know what to do and while money is good, direction and coordination of effort is better. Most of the services provided by government in this domain are merely that: case management. Nearly all of the delivery is done by the private sector with a blend of state, charitable, and private payments. In my son's case, it seems the government is the minority payer. My health insurance provider and I are the majority payers. One also cannot isolate this particular policy area since it is also linked to mandated education and other government interference in our lives.

Question for Joe: How is it that charities are able to identify those in need better than government? Do they have superior processes or knowledge to identify the truly needy from the greedy? Is not the incentive for the beneficiary to line up to get free money, irrespective of whether that money was voluntarily donated or confiscated?

(I prefer the term confiscated to stolen. Stolen implies it is without your consent. While you, as an individual, may not consent, the democratic process within which you operate has consented on your behalf. Don't like it? Sway the vote your way.)

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