David R. Henderson  

Calvin Coolidge on the Federal Government

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Only in one key respect were the two presidents similar: even considering Harding's belated conversion in Denver, neither man was particularly interested in enforcing Prohibition. In Coolidge's case this was consistent with his general position on the role of government. "If the federal government should go out of existence," he said, "the common run of people would not detect the difference in the affairs of their daily life for a considerable length of time." [DRH comment: that would not be true today. Many people would miss their Social Security check or Medicare payment; others would "miss" being nailed on drug charges; others would find pharmaceuticals more available; still others would find health insurance more affordable because their would be no tax treatment of employer-provided health insurance providing an incentive to over-insure. I could list 100 ways, both in absence of traditionally relied on benefits and traditionally expected costs and invasions of one's life, in which Coolidge's statement would not be true today.] It was as if he viewed government as a vestigial organ of the body politic. The president's inclination toward inactivity, wrote Walter Lippman, "is far from being indolent inactivity. It is grim, determined, alert inactivity."
This is from Last Call: The Rise and Fall of Prohibition by Daniel Okrent.

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COMMENTS (6 to date)
Brandon Berg writes:

Not so sure about the pharmaceuticals. It would lead to greater availability of existing drugs, but without patent protection, the supply of new drugs would dry up pretty quickly.

vikingvista writes:

Brandon Berg,

It is hard to say what effect it would have on new drug development. Without the government approval process, prescription requirements, and legal costs to defend patents and avoid infringement, patent protection may not be so valuable. Even today, some non pharmaceutical companies choose secrecy over patents, but that isn't really a legal possibility for drug companies even though morally, there is no good reason why it shouldn't be.

MikeP writes:

I have to agree that it isn't obvious that the ending of government granted patents will dry up new drug development.

Regardless, the standard to meet is "If the federal government should go out of existence,... the common run of people would not detect the difference in the affairs of their daily life for a considerable length of time."

A significant part of drug development costs come during FDA approval time. If the FDA ended along with patents, all drugs in the pipeline that were simply going through the years of FDA hoops would still come out. So, in the worst case, it would be years -- i.e., a considerable length of time -- before consumers would detect a dearth of new drugs.

ThomasH writes:

"Employer provided" health insurance? This sounds like the Hobby Lobby mistake and quite odd coming from the pen of an economist. Employers do not provide health insurance; they transact for it as a way (until ACA the only way) for the employee to receive the tax subsidy (which is why it was so grotesque for Hobby Lobby to stick it's nose into the issue of which contraception services employees should buy). I agree, however, that ACA should have gone farther toward letting everyone buy subsidized coverage individually.

MikeP writes:

"Employer provided" health insurance? This sounds like the Hobby Lobby mistake and quite odd coming from the pen of an economist.

Is there any reason to change my response the last two times this came up?

Yes, economics tells us that employer provided health care is part of the employee's compensation. Nonetheless, the government has incentivized both employer and employee into this arrangement, and it is clearly the employer making the decision on what health care to buy with the employer's money. That the employer would rather, tax incentives being equal, give money to the employee so he could buy his own portable health insurance is beside the point. You seem to think the Supreme Court should make a decision based on such a hypothetical. Isn't that rather silly as well as legally unsupportable?

michael pettengill writes:

Is the health care in Liberia, et al so bad because the US government is paying for so much medical care in the US, and paying a British Columbia based firm to develop an ebola treatment that the US government has allowed by given as a treatment to sick people who can pay for it out of their employer's pockets the reason hundreds of drug developers have failed to develop ebola treatments and vaccines to be sold to people who live off the land with very little cash income?

The ebola cases are pretty clearly trans-species infections from people who live off the land catching and eating wildlife carrying ebola strains that are not as devastating to the animals as to humans. This happens because there are no laws protecting/regulating wildlife hunting and consumption, no regulations on slaughter and preparation of meat, and in short, Liberia is very close to the ideal small government that is supposed to offer health care for much less that would be at least the equal of and perhaps better than in the US.

In Pakistan/Afghanistan, people are resisting the jack boot government forcing polio vaccination on children, which should result in better outcomes from individual liberty and superior decision making. Would we in the US be better off if everyone just gave up on trying to eradicate polio and just let everyone decide of they should risk the polio vaccine, or pay the high cost of the vaccine, although I suppose deregulating drug production and delivery could provide the really cheap doses sold as the real thing for a lower price. The patent medicine days in the US were the days of the best health care? A mercury or radium tincture polio vaccine would ensure you would no need to worry about polio.

The biggest problem dealing with the ebola outbreak is the workers are not being paid, are forced to work without protective equipment, and have no supplies to treat those with ebola to get the survival rate to 50-70%, or even to 90% if treatment begins right at the beginning of symptoms. Why haven't these workers getting paid very poorly and in significant danger invented very cheap solutions to the problem out of self interest? Is it simply the fact that health care workers in the US are well paid and are well equipped that causes them to quit and go home instead of innovating ways of delivering care superior to the US for a few dollars a day? Is it US government regulations that stop them from innovating in Liberia where they are free of government regulation?

Easily three billion customers live in places without any government regulation like the FDA, nor government payments distorting the market place for health care, so half the world's population should have cheaper health care that equals or exceeds that in the US, if the theory that the government has made US health care so expensive and worse than it should be.

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