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Free Market

"Writer Beat"

80

Revered

by 14 Jurors

It is a result of a need being, then the need being met. A free market contrasts with a regulated market, in which government intervenes in supply and demand through non-market methods such as laws creating barriers to market entry or price fixing. In a free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy, and it typically entails support for highly competitive markets and private ownership of productive enterprises.

Although free markets are commonly associated with capitalism within a market economy in contemporary usage and popular culture, free markets have also been advocated by free-market anarchists, market socialists, and some proponents of cooperatives and advocates of profit sharing.

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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Anonymous posted a review

Would it be OK if I cross-posted this article to WriterBeat.com? There is no fee, I'm simply trying to add more content diversity for our community and I liked what you wrote. I'll be sure to givke you complete credit as the author. If "OK" please let me know via email, which can be found via the link below.

Autumn

on July 30, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Sid Poduval posted a review

There's a lot of confusion about the concept of a "free market". Most times when it comes up in discussion, someone invariably says "there is no free market in the world, never has been." And that is true. There are no completely free economies on a national level. Every country has a mixed economy, with varying degrees of taxation and regulation.

But when we talk about free markets, we're not talking about a binary choice of "completely free market or completely unfree market." Some countries are economically freer than others. Hong Kong is usually considered the freest economy. Indeed it's ranked first on the Index of Economic Freedom, an annual list published by The Wall Street Journal and the onservative think tank Heritage Foundation. After Hong Kong comes Singapore, New Zealand, Australia, and Switzerland. At the bottom of the list are Zimbabwe, Venezuela, and Cuba, with North Korea in last place.

Also, "free market" doesn't necessarily refer to the overall, national level economy. Each economy has many markets, and some are freer than others. A free market is a market where a product or service is sold completely by mutual consent. The price, the quantity, the terms and conditions, all are determined by the buyer and seller.

The tech sector is mostly free. The healthcare sector is not. Cable television is not. The internet is (was) a free market. People trade, engage in commerce, and socially connect, without government interference. And sure enough, governments have been fighting to tax and regulate it ever since it was created.

Indeed the reason a free market is often vilified by government is because it takes their power away. The ability of a politician to control the "what, when, where, why, and how" of a transaction is the reason companies shower them with campaign contributions. But in a free market, the politician doesn't control any variables of a transaction, only the people involved do. Therefore, in free markets, it's not the politician a company has to please in order to succeed. It's the consumer, the people.

on June 5, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Yuri Michael posted a review

So why are we perpetually in the minority? And why do people tune our arguments out?

The truth is it's not enough to make the intellectual 'sell' for free markets; we have to make arguments that resonate with people on an emotional level.

on May 22, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Susan Boyle posted a review

THE REALITY: Four out of these five examples have cheap alternatives which arose in response to the price hikes, or coupons which bring the price back down to "normal," proving that the market DOES work. The fifth example is owned by a company whose financials were performing poorly and thus required a price increase.

• DARAPRIM
Two alternatives came out after Turing Pharmaceuticals increased the price of this drug. Express Scripts Holding Co. announced it would make an alternative which costs $1 per pill. [a] Imprimis Pharma also released a compound for $1 per pill. [b]

• SEROMYCIN
The Other 98% claims the price increased from $16 a capsule up to $360 a capsule, but we were able to find a 30 pill bottle on sale at CVS Pharmacy for as low as $497.57. [c] All you have to do is use their free coupon available online. That’s about $16.59 a capsule, which is nearly identical to its original price and far from $360.

• THIOLA
First, keep in mind that Thiola is a small product for a small amount of people. (Only about 4,000-5,000 patients are affected by the disease it treats) [d] Never the less, just as with Daraprim, Imprimis Pharma has released their own compound for $1 per pill as an alternative. [b] This, and generic competitors, are possible because "Thiola no longer has product exclusivity." [d]

• ISUPREL
Isuprel is owned by Valeant. Turns out, the company’s financials weren’t doing all that well, so price increases were likely necessary. "Until recently, shares of embattled drug developer Valeant Pharmaceuticals simply couldn't catch a break. ...The once high-flying stock that commanded a $90 billion valuation tumbled to a valuation of just $3 billion in recent months. ...In fact, Valeant's market cap was lower than its projected full-year EBITDA estimates, which is practically unheard of.” [e] (fyi: EBITDA is essentially net income with interest, taxes, depreciation and amortization added back to it.). The company had to sell the rights to some of its high valued products, restructure its business, and is now doing much better, likely due in part to its price increases. While this may not be pretty, this is a reality of doing business. If you're in the business of sales, and you're failing, you likely need to sell more or raise prices.

• NITROPRESS:
This drug, too, now has a competitor due to the price increases. In December of 2016, about a year after the price increases, The FDA approved a generic version of sodium nitroprusside, marketed by Namigen LLC.” [f] [g] [h]

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Sources:
[a]

on May 22, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img John Adams posted a review

>not understanding that profit motive actually is an incentive for paying workers well (if they earn it), providing better services (which people will want more and pay higher prices to get), and for helping consumers (the people you are trying to convince to voluntarily give you their hard-earned money)

on April 14, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Sohail Ahmed posted a review

[One] effect is that the employer market crowds out the individual market. So few Americans use it that insurance companies struggle to create a pool of people that can effectively spread risk among the young and healthy and the old and sick.

Making insurance into an actual market, one where less advantageous forms of coverage aren’t subsidized by government policies would be one step in the right direction.

http://www.willricciardella.com/pre-existing-condition-problem/

on April 10, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Mark Henry posted a review

There can be no denying that legislatively speaking, the Fight for Fifteen movement garnered huge wins during the last election cycle both on city and state levels.

Unfortunately, no matter how much success or popularity an initiative manages to earn at the ballot box, there are economic laws that cannot be avoided, even when good intentions are accounted for—something some politicians are starting to figure out.

https://fee.org/articles/after-studying-basic-economics-mayor-vetoes-minimum-wage-increase/?utm_source=zapier&utm_medium=facebook

on April 6, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Dev Achmed posted a review

THE REALITY: It's a myth that we had free market healthcare. The government has been distorting healthcare markets for decades, thereby significantly contributing to higher prices. Government is not the solution, it's the problem.

Medicaid and Medicare became law after President Johnson signed the amendments to the Social Security Act in 1965. They then took effect in 1966. [a] When examining inflation, this also happens to be when medical care costs began significantly diverging from other living expenses, rapidly inflating faster than overall CPI. [b] [c] You can see this for yourself in the attached chart. This is due, in large part, to the expansion of demand WITHOUT an equal expansion in supply. As Milton Friedman concluded in his 1992 research paper "Input and Output in Medical Care," "The federal government’s assumption of responsibility for hospital and medical care of the elderly and the poor provided a fresh pool of money, and there was no shortage of takers." [d] He observed three notable stages regarding medical care prices.

Stage One:
After the birth of Blue Cross and Blue Shield, precursors to modern health insurance, Friedman observed the following: From 1929-1940, cost per patient day was indeed rising, but it only rose MODESTLY. [d] It wasn't alarming, as the average of ALL things were also rising modestly, including wages.

Stage Two:
After the birth of employer sponsored healthcare, which today is the most common way citizens receive "private market" health insurance, Friedman observed that "cost per patient day tripled from 1946 to 1965." [d]

Stage Three:
After the implementation of Medicare and Medicaid in 1965-1966, which significantly subsidized healthcare spending, Friedman observed that "cost per patient day then multiplied a further EIGHTFOLD." [d]

The point? The birth of private market health insurance wasn't in and of itself the driver of skyrocketing healthcare costs. Having it tied to your employer moderately contributed to the rise in prices, likely because it added one new layer of bureaucracy to the process, but it too wasn't the PRIMARY cause. What truly and most SIGNIFICANTLY contributed to sky rocketing prices was the government's policy of broadly subsidizing healthcare via the creation of Medicare and Medicaid.

Let's back up and walk through each step to see what went wrong.

BIRTH OF MODERN HEALTH INSURANCE:

• Blue Cross - In the 1930s, hospitals banded together via the AHA (American Hospital Association) to offer groups of employees "pre-paid" plans, agreeing to give them X number of days in the hospital in exchange for Y amount of dollars a month. This operated as a non-profit and was therefore not taxed, unlike traditional commercial insurance companies. [e]

• Blue Shield - Physicians, seeing the growing popularity of Blue Cross, feared they'd lose autonomy over their practices if hospitals expanded into their services, and thus banded together via the AMA (American Medical Association) to offer groups of employees "pre-paid" physician services, similar to the Blue Cross plans. [e]

For decades, traditional insurance firms had shied away from offering health insurance since they feared it wasn't actuarially sound [e], but the aforementioned non-profit models seemed to work because they stuck to employed individuals, naturally avoiding the elderly who are both retired AND the most expensive to care for. All that was needed now, for this new model to be cemented, was an unnatural spike in demand for this particular type of health insurance which was specifically tied to groups of employed people.

UNNATURAL GROWTH IN DEMAND:

"Because much of America’s work force was off fighting World War II, the Roosevelt administration feared that the domestic demand for workers would outpace labor supply, leading to a spiral of higher wages and runaway inflation." [y] "To combat inflation, the 1942 Stabilization Act was passed. [x] "The 1942 law mandated wage ceilings for a broad range of occupations, and required federal approval for any changes thereof. ...But fringe benefits, such as health insurance, were not covered under the 1942 wage controls. As a result, many employers started offering health benefits as a way around the new federal wage limits. This loophole gained further strength when, in 1943, a federal court held that employer-sponsored health insurance was exempt from taxation." [y] Then, Congress passed a comprehensive revision of the federal tax code in 1954 which "officially excluded employer-sponsored health insurance from taxation." [y] As a result of this tax-free form of compensation, "the demand for [employer-sponsored] health insurance further increased throughout the 1950s (Thomasson 2003)." [e]

Ideologically, those who favor reduced taxation may be thinking "but making it tax free sounds good!" While that's understandable, let's clarify that the danger isn't necessarily in the tax free status but the unnatural incentive created when only ONE form of compensation is allowed to be tax free. In other words, to avoid unnaturally incentivizing the growth of this or any other insurance model, it would have been preferential to have all forms of compensation taxed in the same way, even if it meant reducing all tax rates in order to tax the insurance benefits without seeing a net increase in overall tax burden. Whatever the course of action, for the price mechanism to work as it does in most functioning industries, markets must be crafted from the organic and natural feedback of consumers, NOT the inorganic and unnatural feedback resulting from government taxing one form of compensation but not another. The government, without realizing it, accidentally incentivized the widespread adoption of employee-sponsored health insurance, which destroyed any business incentive to create a functioning private health insurance model which catered to ALL individuals, since now, the only individuals left in the individual pool were unemployed, disabled, and retired (the elderly).

Then came the most significant distortion to the healthcare market ever. In 1965-1966, Medicare and Medicaid were implemented, subsidizing health insurance for millions. This was no small change. By 2015, while employer-based insurance covered approximately 55.7% of the population and directly purchased insurance (not through an employer) covered only 16.3%, Medicaid had grown to cover around 19.6% of the population and Medicare another 16.3%. (With an additional 4.7% for military coverage.) [f] Note, the reason these figures add up to more than 100% is because some individuals are “Dual eligible beneficiaries," enrolled in both Medicare AND Medicaid. [g] That means roughly 40% [i] of the healthcare industry buys from one customer: the government. This is important not only because it represents a massive surge in demand, which means higher prices if supply isn't drastically increased, but because it gives the government enormous power over suppliers. They can, and do, underpay while pushing responsibility onto us. "Payment rates for Medicare and Medicaid, with the exception of managed care plans, are set by law rather than through a negotiation process as with private insurers. These payment rates are currently set below the costs of providing care resulting in underpayment." [h] In the aggregate, both Medicare and Medicaid payments fall below costs. See examples below:

• Combined underpayments were $51 billion in 2013. This includes a shortfall of $37.9 billion for Medicare and $13.2 billion for Medicaid. [h]

• For Medicare, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2013. [h]

• For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2013. [h]

• In 2013, 65 percent of hospitals received Medicare payments less than cost, while 62 percent of hospitals received Medicaid payments less than cost.

That means costs are shifted away from Medicare and Medicaid as hospitals charge the privately insured inflated prices to make up for the shortfall. Of course the government only gets away with this thievery BECAUSE it's the government.

THE SHORTAGE IN SUPPLY:

Around 1969, the number of prospective physicians applying for residency training began to out pace the number of offered residency positions, which only increased slightly. [j] This gap continued to widen significantly over the last several decades. Today, we have a significant shortage of physicians and it's expected to get much worse. The AAMC estimated that the number of physicians per capita will decrease in the next decade if we don’t train more doctors. [k] Only 17.6% of all hospitals are "teaching hospitals." [k] This makes it difficult to train new physicians quick enough to react to the supply shortage, since no physician can practice without first completing residency training. [k] This is why the AAMC projects that, by 2025, we'll have a 46,100 – 90,400 shortage of physicians, further compounding the problem of increased demand with restricted supply. [k]

"Over half a century ago, Milton Friedman examined the political economy of occupational licensing. He recognized that regulating the professions was not really intended to promote the public interest. Instead, it was demanded by the members of a profession to promote their economic interests. In essence, members of an occupation recognize that fees, prices, wages, and income cannot rise above the competitive level without attracting entry, which expands supply and thereby causes fees and income to decline." [L] Licensing physicians limits entry, curtails supply, increases fees, and reduces the quantity of physician services offered. [L] As a result, those who continue to consume those services are made worse off by higher prices, but perhaps more importantly, some consumers will go without..." [L]

Milton Friedman and Simon Kuznets, who each won the Nobel Prize in economics, argued that "the difference in ease of entry reflects a deliberate policy to limit the total number of physicians to prevent so-called overcrowding of the profession." [m] Friedman and Kuznets attribute the deliberate restrictions of supply to the AMA and its Council on Medical Education. (Friedman 1998). [m] This restriction in supply is exacerbated by the aforementioned subsidization/expansion of demand. Anytime demand is artificially increased while supply artificially decreased, prices skyrocket. This is exactly what we've experienced.

CONCLUSION:
Let's envision a hypothetical America where nutritionists were long ago gifted the power - via legislation - to prescribe each of our meals. You'd be free to pay them for permission to access food, but only the food they recommended for you (and little more). Run through the mock history of this fictitious "food-care" industry while paralleling it to the healthcare industry. Instead of the "affordable care act," envision the "affordable feeding act" which mandated that everyone sign up for monthly pre-paid feeding plans, whether they wanted it or not. Prior to that, envision the implementation of massive government feeding programs, titled "Foodicare" and "Foodicaid," designed to give millions of individuals free access to the aforementioned pre-paid feeding plans. Prior to that, envision that these monthly pre-paid feeding plans were the only form of untaxed compensation, and firms therefore began offering them in lieu of dollars, as a way to save on employment costs. Remember that, under this scenario, there would also be a massive shortage of nutritionists, despite the government mandating widespread demand for them, pushing prices sky high. Of course this all sounds preposterous, since we all know that no such "food-care" industry is needed for 300 million U.S. civilians to readily access food. But the same is true about medical care, yet people forget how unnatural our healthcare system is and act like healthcare wouldn't be accessible if not for the government. The truth is, it's only become prohibitively expensive BECAUSE the healthcare market has been severely harmed through government meddling. It wasn't natural for us to go down this route. Misguided Government policies took us here. Since WWII, our healthcare industry has NOT been the result of free market policies. It has NOT been an accumulation of consumer choices. It is NOT a failed capitalist experiment. It is - quite literally - a failed FASCIST experiment, where the government colluded with a limited group of private enterprises, burdened entities via costly regulation, unnaturally created the dominant form of employer-sponsored, bureaucratically heavy insurance we see today, controlled the market by forcing individuals to purchase a product they then forced others to offer, while subsidizing more than a third of purchases via taxation. Bureaucracy expanded. Demand shot up. Supply was constrained. The results have been tragically indefensible, and it's the government's fault. Get them out of the healthcare business!
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Sources:
[a]

on April 1, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

img Ian Da Silva posted a review

"The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents."

- 2016 Paper published in the Journal of the American Medical Association https://tinyurl.com/gqbht7h)

Stop blaming the free market for problems caused by government.

on March 30, 2017
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Libertarianism.panjury.com

This is a subjury for discussing things related to the ideology of Libertarianism. Generally this is more focused on Libertarianism within the United States which tends to be more fiscally conservativ...

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Free Market

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Book rating: 80.8 out of 100 with 14 ratings