Recently
I visited a church I hadn’t been to for years.
I was very impressed at the improvements they had made. The music was better, the sermon was better
and the entire experience was much better.
Churches are notoriously slow to make these types of changes. So what was at work here? Was it the “unseen hand” of God? No, it was the “invisible hand” of
competitive markets as described by economist Adam Smith in 1759.
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| Adam Smith was one smart guy! |
This
church made these changes because a large, very popular, mega-church in a
near-by city decided to build a satellite church two miles down the road. When faced with this strong competitive
threat, the church quickly made the improvements necessary to retain, and even
grow, its congregation.
Competition
is an essential part of our free markets.
Promoting competition is a key factor in the U.S. economy being the
largest in the world. Americans love
competition. That is why billions are spent on professional sports.
Companies
compete aggressively for consumers’ dollars.
This results in better products, better service and lower prices. When competition is reduced, you get lower
quality products, poor service and higher costs.
When
government provides services, competition is reduced and usually
product/service quality suffers and costs (which are the taxes that pay for it)
increase. The best example of this is
education. The idea of providing
standardized education to all children was a great and noble concept that
worked well for years. But in the absence of competition:
-
Product
quality diminished
-
There
is a lack of innovation
-
There
is strong resistance to change
-
People
have figured out how to “scam” the system for their financial gain
-
Costs
have skyrocketed (can we just pass another levy?)
We
have tried to increase competition in education by way of vouchers. So far the public schools have spent more
time and money trying to thwart the new competition rather than trying to
improve their product.
The
Affordable Care Act (ACA) now gives government a larger role in the healthcare
markets. The ACA is supposed to help
limit the growth of healthcare costs, but I see nothing in the law that
actually does this. Usually more government
control means less competition and less competition always leads to higher
costs.
In
addition, the current government healthcare programs (Medicare and Medicaid)
waste large amounts of money from both illegal fraud and “legal” gaming of the
system. It can be assumed that the ACA
will result in similar waste as soon as people figure out how to take advantage.
Whenever
proponents of the ACA admit that costs will go up for individuals, their answer
is that the higher costs will be offset by government subsidies.
This
would be fine if the government was sitting on a big old pile of money that
needed to be spent on something. But we
are broke. It’s really the Unaffordable Care Act and who do you think is going
to end up paying for all the expensive promises the government has made? The costs are going to start rising next year
and I’m not sure they are ever going to stop.
And
the economic law of “Unintended Consequences” continues to impact the ACA. The benefits and number of new people getting
insurance is greatly overestimated. The
estimates were based on companies just accepting the new rules without
responding. But businesses are cutting
employees hours, limiting hiring and doing whatever is necessary to control
costs.
Nobody knows exactly
how this will all play out because people are finally reading the entire law
and getting legal clarification of all the confusing details. More onerous,
costly, provisions are suddenly being “discovered”. This could get very, very,
ugly.
The best solution to
the healthcare problem is to increase supply and competition so that the cost
of healthcare is reduced to the point where it is truly affordable, with
government having a limited role in managing the process.
