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April 23, 2010

Comments

I agree with this post, but I don't understand why we have so many other disagreements if you believe "Unfortunately, the same enormous sums of money that lead our financiers astray greatly influence and distort our political process".

This is true for all large government regulation. This is why we have farm subsidies, rent control, the Chrysler/GM bailout, and really stupid military expenditures that even the military itself doesn't want.

What makes you think that this dynamic is/will be under control in giant new areas of spending, like HCR?

What steps are Democrats taking/you advocating to minimize it in HCR?

And I'm not saying that there shouldn't be regulation. I'm saying that this critique should be foremost on our mind in almost every single discussion about how the government functions in the real world.

What steps are Democrats taking/you advocating to minimize it in HCR?

Now that HCR's the law of the land let me suggest that our entire government work together to ensure it works properly.

This is true for all large government regulation. This is why we have farm subsidies, rent control, the Chrysler/GM bailout, and really stupid military expenditures that even the military itself doesn't want.

I'm opposed to almost all farm subsidies, and you know my position on stupid military expenditures. But I agree, those lobbies are extremely powerful, and their money and influence distorts political outcomes.

Rent control, I'm a bit ambivalent about, and not sure what the big money enticements are there - renters corrupting the political system with their collective lobbying efforts? Seems like the landlords have greater ability to distort outcomes.

As for the Chrysler/GM bailout, it seemed to have harsher terms for the participants than the Wall St bailouts - unionized workers got hit pretty hard, and their contracts voided, while financial institution contracts were treated as sacrosanct. But I think that the money and influence of Detroit might have softened the blow for them still.

What makes you think that this dynamic is/will be under control in giant new areas of spending, like HCR?

Oh, I absolutely guarantee that enormous amounts of money from big pharma distorted the political process involved with HCR. The rational approach would have probably been either single payer, expansion of Medicare or some type of tightly regulated private hybrid as in Switzerland.

Instead, we got some Big Pharma watered down bill that was better than the status quo ante, but fell short by a lot.

What steps are Democrats taking/you advocating to minimize it in HCR?

Time will tell, as many of the particulars need to be fleshed out by HHS. Hopefully, the distorting effect of Big Pharma's money can be shut out somewhat, as it's more of a cabinet level, rather than legislative, process.

What steps are corporations, unions, and other parties taking to minimize the distortion of our political process?

I'm not sure why politicans and government officials are expected to eschew all human frailty for the good of the country but lobbyists are under no such demands.

Distorting the political process is what Americans do, especially the newly christened "citizens" under Citizens United.

How about Democrats legislate and everyone can shut their faces.

"Time will tell, as many of the particulars need to be fleshed out by HHS. Hopefully, the distorting effect of Big Pharma's money can be shut out somewhat, as it's more of a cabinet level, rather than legislative, process."

This is a deeply weird response. Why the focus on bit player pharma? How about doctors and hospitals? They are where the big money is. You could reduce pharma profits to zero (literally zero, as in make it so that creating pharamceuticals never made anyone a cent of money) and you would barely touch the spending gap caused by doctor's pay differentials between the US and the rest of the world. Same with hospitals. I submit that worrying about pharma is likely to get get you less money saved, and larger actual negative medical ramifications than almost any major thing you could possibly focus on in health care reform.

It is like Republicans and earmarks: it makes a nice soundbite and has almost no practical value on the budget.

Sebastian: Your argument seems applicable to any large concentrations of money/power at all, not just government. Large sums of money distort political, social, any kind of process. So why do you object just to government? Why not talk about some way to keep EVERYTHING smaller than some arbitrary size?

Cutting "big government" in favor of just handing things over to giant corporations who are at least as corrupt as the worst excesses of government doesn't seem to get us anywhere. Especially when despite the claims of "the magic of the market!" giant corporations are far LESS responsible or accountable to the citizens of this country.

The whole "government is evil because it's big and the rules get captured by corrupt interests" doesn't make a very good argument against government, because what would the alternative be? Corrupt interests doing as they please, without government's help, or hindrance, and with less accountability.

That's one libretarian argument I've never gotten. It seems very Underpants Gnomes. Step 1: Get rid of government influence that's captured by corrupt interests. 2: ??? (Magic of the marketplace) 3: No corruption or taxes!

"How about Democrats legislate and everyone can shut their faces."

Because "everyone" does not believe that:

Republicans = bad politicians and
Democrats = good politicians

or the opposite.

just because different politicians spend too much on different things doesn't make one better than the other.


just because different politicians spend too much on different things doesn't make one better than the other.

The "just" in this sentence carries a heavy load.

Seb, you're right. It was sloppy shorthand. Please read that to mean the entire health industry lobby.

"Sebastian: Your argument seems applicable to any large concentrations of money/power at all, not just government."

Sure.

"Why not talk about some way to keep EVERYTHING smaller than some arbitrary size?"

Absolutely! I'd be thrilled to get behind this if it really were a liberal-in-the-US concept, or even a sort-of talking point.

But as we see from Eric, his idea is that the best way to have avoided capture was to have the government take over nearly the whole thing. Though how that avoids capture is left a mystery.

Which isn't the same as your proposal at all. And, I strongly suspect that his approach is more characteristic than yours.

But as we see from Eric, his idea is that the best way to have avoided capture was to have the government take over nearly the whole thing. Though how that avoids capture is left a mystery.

I don't think I mentioned capture really. The best way to administer health insurance is probably single payer, or a swiss hybrid model with a robust public option.

I'm not addressing capture in particular.

"I don't think I mentioned capture really."

"Unfortunately, the same enormous sums of money that lead our financiers astray greatly influence and distort our political process"

And your response to "What makes you think that this dynamic is/will be under control in giant new areas of spending, like HCR?"

was:

"Oh, I absolutely guarantee that enormous amounts of money from big pharma distorted the political process involved with HCR."

and

"Instead, we got some Big Pharma watered down bill that was better than the status quo ante, but fell short by a lot."

and

"Hopefully, the distorting effect of Big Pharma's money can be shut out somewhat, as it's more of a cabinet level, rather than legislative, process."

So either you're misinterpreting what is meant by capture or I am. Because my understanding is that you just mentioned it a lot while at the same time focusing on one of the smaller players in the public choice problem/capture problem with the pretty strong insinuation that you were identifying one of the major ones.

And further, you are misidentifying how it works if you think the administrative agencies are *less* prone to it. They are at least as, if not more prone to it (which is why the SEC and the FCC are often thought of as classic examples of regulatory capture, and on the left the NLRB is used as another example). [also note these examples were captured under a pre-Citizens United rule, because capture isn't largely about vast money-spending]

Perhaps I'm not responding directly to your version of capture, but I don't think you made it clear exactly what you were asking.

...focusing on one of the smaller players in the public choice problem/capture problem with the pretty strong insinuation that you were identifying one of the major ones.

Jeez Seb, I did correct myself. I'm not flawless, but if you point out some sloppy shorthand, as you did with "Big Pharma", and I take the time to correct the error (as I did), the least you could do would be to acknowledge that and not return to square 1.

And further, you are misidentifying how it works if you think the administrative agencies are *less* prone to it. They are at least as, if not more prone to it (which is why the SEC and the FCC are often thought of as classic examples of regulatory capture, and on the left the NLRB is used as another example).

Well, that depends on which administration is filling out the ranks of each agency. But look, I don't think the influence of the health care industry has been washed away by delegation to HHS, but I know the legislation would have been impossible to pass if what I hope to see in it from HHS is in fact put in it. I'm hopeful that Sebelius will be able to add heft to the provisions in a pro-consumer fashion.

But, yeah, part of my beef with Dodd's bill - and the GOP's requests for consumer protection - is that they're folding the consumer protection groups under the Fed.

"Absolutely! I'd be thrilled to get behind this if it really were a liberal-in-the-US concept, or even a sort-of talking point."

I had no idea you were an anarchist, Sebastian.

It's not really my proposal, I was extrapolating from what you'd said, to try and understand your meaning. If regulatory capture is your biggest worry, then the solution is more accountability, not simply saying "Welp, government can't do anything right." We can't just say "Well, this solution has this problem, let's not do it," if the status quo has a bunch more problems.

Do you think the spectre of regulatory capture is worse than the situation without the health care bill, or a financial reform bill?

I have to say... I want some punishment of the ratings firms. The CEOs who fudged the ratings to enrich themselves? Massive fines plus jail time, please.

Make some examples.

And I'm not saying that there shouldn't be regulation. I'm saying that this critique should be foremost on our mind in almost every single discussion about how the government functions in the real world.

You seem to be saying that we should regulate intelligently. Maybe with open processes that allow everyone to see influence being exerted.
Or is there more? Because if that's what you're saying, I don't see anyone disagreeing with that. On the other hand, I don't see that as the sort of position that rules out many of Eric's other positions, despite your apparent surprise in the first comment.

And I'm not saying that there shouldn't be regulation. I'm saying that this critique should be foremost on our mind in almost every single discussion about how the government functions in the real world.

I would also argue that this was the point of checks and balances and elections and Consitutional rules. Was to try to mitigate for these obvious influences.

My point was that we should apply the philosophy behind dissipation of power in political structures to financial systems.

But, yeah, I'm all for remaining vigilant in each context that power is dissipated. Interestingly, one of the ways of putting a check on private sector abuse of power is through the government. Regulation in this context.

"Jeez Seb, I did correct myself. I'm not flawless, but if you point out some sloppy shorthand, as you did with "Big Pharma", and I take the time to correct the error (as I did), the least you could do would be to acknowledge that and not return to square 1."

Sorry I didn't see your correction comment until now. I saw your other comment (right after that) and didn't look up further.

Unlike you, I know how to accept an apology/correction ;)

"You seem to be saying that we should regulate intelligently. Maybe with open processes that allow everyone to see influence being exerted.
Or is there more?"

Hmmm, I wouldn't really phrase it that way. One of the biggest areas where I think that governments can effectively regulate without taking over the field is by enforcing transparency. Lots of government proposals to 'put a check on private sector abuse of power' end up just having government inhabit the field such that there isn't much check on government power. In regulatory concerns this often ends up being captured by the currently powerful corporations which then use the governmental power to squelch competition that they never could have squelched with just 'private sector abuse of power'. See for example the FCC, or car companies regulating away Japanese competition for decades.

In the present example, forcing banks and shadow banks to treat these exotic debt instruments as actual liabilities for capitalization purposes would have achieved a lot.

Actually enforcing fraud, with stiff penalties, as with Goldman and the rating agencies would also help.

Transparency is also, almost as a general rule, a good thing.

SEC disclosure requirements are part of what make US markets such an attractive place to invest.

But if those documents can't be trusted...

This is a deeply weird response. Why the focus on bit player pharma? How about doctors and hospitals? They are where the big money is.

Maybe because . . .

2009 Lobbying Money Spent:

Pharmaceuticals/Health Products $263,377,975
Hospitals/Nursing Homes $107,106,372
Health Professionals $84,606,162
Health Services/HMOs $72,703,045
Misc Health $10,348,155

"Well, that depends on which administration is filling out the ranks of each agency."

Actually, public choice investigation has pretty much shown that it doesn't. It depends mostly on how long the agency has been around. The longer an agency has been around the more likely that it has been captured. (See for example the military industrial complex). This tends to be overcome only by incredibly strong incentives in opposite directions (ie not wanting to be the FDA reviewer who authorizes thalidomide) which causes perverse results in other ways--ask HIV+ people who couldn't get experimental meds fast enough in the 1990-1994 period. Or rather don't ask them, since it took about two hundred thousand of them dying needlessly before the FDA was willing to seriously consider the concept of fast tracking.

Yeah but Seb, the Bush years were an outlier then, because there was a severe gutting of the administrative state.

The Bush years were a tour de force on how if you're willing to appoint naked political operatives who don't give a damn about the rule of law or the mission of various regulatory agencies to high positions you get away with just about anything. And, for the most part, they did.

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