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Message
EBC Book #1 - Economics in One Lesson by Henry Hazlitt
Posted on 6/10/17 at 12:02 pm
Posted on 6/10/17 at 12:02 pm
Welcome everyone to the official thread for the Book Board's first selection in our Economics Book Club (EBC) series. Over the two week period starting Monday June 12th, we will be exploring American journalist and "Austrian School" proponent Henry Hazlitt's seminal work, Economics in One Lesson. We will then pivot to Thomas Sowell's Applied Economics, which I've recently realized to be an accidental stroke of genius since Hazlitt was one of Sowell's key influencers. But, first, more on Hazlitt:
Hazlitt was born in 1894 and had published his first book, Thinking as a Science, by the age of 21. While this was more of a philosophical treatise that could just as appropriately be entitled How to Use Your Brain for Dummies, it primed his mind (and the minds of his readers) for his later works on economics and really established him as a serious thinker. I've looked into this book enough and found it interesting enough to add it to the back of our current EBC reading list as our only "Philosophy" book in the queue. Here are a few quotes from that book:
I chose these quotes as I believe the first and third tell us an awful lot about Hazlitt's hunger for knowledge and commitment to seeking the truth at all costs (even at what many perceive to be the most expensive - shattering a pre-determined opinion on something). I challenge this group to take on every topic with this same mindsight. The second quote highlights the importance of actually applying what we learn from this book series. Again, by another accidental stroke of genius, that's what Mr. Sowell will be talking to us about in a couple of weeks.
Hazlitt's logical thought process coupled with the fact he wasn't "overeducated" (he didn't complete college) gave him an uncanny ability to relate something as complex and "dry" as economics to the masses. American journalist and English language scholar, H.L. Mencken, called Hazlitt "one of the few economists in human history who could actually write." At one point, he was chosen by Berntrand Russell to write Russell's official biography (although Russell later decided he wanted to write his own). Ayn Rand and Ludwig von Mises were admirers of Hazlitt and even though Mises was the biggest influence in Hazlitt's life, it was Mises who credited Hazlitt with being the "economic conscience" of the United States.
The Mises Institute would later call Hazlitt the most important intellectual within the Austrian School tradition. Hazlitt was also influenced by French economist Frederic Bastiat and Thomas Sowell himself has been cited as following in the "Bastiat-Hazlitt" tradition. Ron Paul has ranked Hazlitt on par with Bastiat and F.A. Hayek, and Hazlitt is often credited with introducing Hayek's The Road to Serfdom to the American public. Suffice all of this to say we are starting our series with the work of an intellectual heavyweight who, conveniently for our intermediate reading level, also happens to be one of history's most articulate.
The final bit I'd like to add is on the topic of "Austrian economics." For the uninitiated (which would certainly include myself), Austrian economics is so called as it arose in Vienna in the early 1900s. While likely considered outside of the "intellectual mainstream" nowadays, that's probably something its adherents would pride themselves on. At its core, this school of thought tends to promote individualism, is skeptical of the role of governments and central banks in economic affairs, and is highly critical of socialism and the Marxist tradition. There's a lot more in terms of technical characteristics, but I'll let Mr. Hazlitt (and any of you) take things from here..
Hazlitt was born in 1894 and had published his first book, Thinking as a Science, by the age of 21. While this was more of a philosophical treatise that could just as appropriately be entitled How to Use Your Brain for Dummies, it primed his mind (and the minds of his readers) for his later works on economics and really established him as a serious thinker. I've looked into this book enough and found it interesting enough to add it to the back of our current EBC reading list as our only "Philosophy" book in the queue. Here are a few quotes from that book:
quote:
“A man with a scant vocabulary will almost certainly be a weak thinker. The richer and more copious one's vocabulary and the greater one's awareness of fine distinctions and subtle nuances of meaning, the more fertile and precise is likely to be one's thinking. Knowledge of things and knowledge of the words for them grow together. If you do not know the words, you can hardly know the thing.”
quote:
“The only way we could remember would be by constant re-reading, for knowledge unused tends to drop out of mind. Knowledge used does not need to be remembered; practice forms habits and habits make memory unnecessary. The rule is nothing; the application is everything.”
quote:
“The only way we can get rid of this desire to cling to our prejudices, is thoroughly to convince ourselves of the superiority of the truth; to leave not the slightest doubt in our own minds as to the value of looking with perfect indifference on all questions; to see that this is more advantageous than believing in that opinion which would benefit us most if true, more important than “being consistent,” more to be cherished than the comfortable feeling of certainty.”
I chose these quotes as I believe the first and third tell us an awful lot about Hazlitt's hunger for knowledge and commitment to seeking the truth at all costs (even at what many perceive to be the most expensive - shattering a pre-determined opinion on something). I challenge this group to take on every topic with this same mindsight. The second quote highlights the importance of actually applying what we learn from this book series. Again, by another accidental stroke of genius, that's what Mr. Sowell will be talking to us about in a couple of weeks.
Hazlitt's logical thought process coupled with the fact he wasn't "overeducated" (he didn't complete college) gave him an uncanny ability to relate something as complex and "dry" as economics to the masses. American journalist and English language scholar, H.L. Mencken, called Hazlitt "one of the few economists in human history who could actually write." At one point, he was chosen by Berntrand Russell to write Russell's official biography (although Russell later decided he wanted to write his own). Ayn Rand and Ludwig von Mises were admirers of Hazlitt and even though Mises was the biggest influence in Hazlitt's life, it was Mises who credited Hazlitt with being the "economic conscience" of the United States.
The Mises Institute would later call Hazlitt the most important intellectual within the Austrian School tradition. Hazlitt was also influenced by French economist Frederic Bastiat and Thomas Sowell himself has been cited as following in the "Bastiat-Hazlitt" tradition. Ron Paul has ranked Hazlitt on par with Bastiat and F.A. Hayek, and Hazlitt is often credited with introducing Hayek's The Road to Serfdom to the American public. Suffice all of this to say we are starting our series with the work of an intellectual heavyweight who, conveniently for our intermediate reading level, also happens to be one of history's most articulate.
The final bit I'd like to add is on the topic of "Austrian economics." For the uninitiated (which would certainly include myself), Austrian economics is so called as it arose in Vienna in the early 1900s. While likely considered outside of the "intellectual mainstream" nowadays, that's probably something its adherents would pride themselves on. At its core, this school of thought tends to promote individualism, is skeptical of the role of governments and central banks in economic affairs, and is highly critical of socialism and the Marxist tradition. There's a lot more in terms of technical characteristics, but I'll let Mr. Hazlitt (and any of you) take things from here..
This post was edited on 6/14/17 at 4:38 pm
9
Posted on 6/10/17 at 1:00 pm to RedStickBR
I'm an economics virgin. I picked up this book last week after following the thread for a few days, and I have been extremely surprised by how easy it reads.
I have read the first 8 or 9 chapters, but I am going to start over on Monday. Not a lot has set in for me at this point - probably because the ideas are so new to me. I'm hooked though. Love that the primary purpose of the book is debunking economic fallacies. The examples he uses to reinforce his ideas are easy to picture in your head. It makes the book read like a collection of stories.
I have read the first 8 or 9 chapters, but I am going to start over on Monday. Not a lot has set in for me at this point - probably because the ideas are so new to me. I'm hooked though. Love that the primary purpose of the book is debunking economic fallacies. The examples he uses to reinforce his ideas are easy to picture in your head. It makes the book read like a collection of stories.
Posted on 6/10/17 at 1:08 pm to Spitting Venom
Glad you're enjoying it. You've reminded me of two more bits I want to point out. Here's the Mises Institute on how influential this book actually is:
And here's a paraphrase of Hazlitt's stated intention for writing the book:
quote:
This is the book to send to reporters, politicians, pastors, political activists, teachers, or anyone else who needs to know. It is probably the most important economics book ever written in the sense that it offers the greatest hope to educating everyone about the meaning of the science.
Many writers have attempted to beat this book as an introduction, but have never succeeded. Hazlitt's book remains the best. It's still the quickest way to learn how to think like an economist. And this is why it has been used in the best classrooms for more than sixty years.
And here's a paraphrase of Hazlitt's stated intention for writing the book:
quote:
His hope was to reduce the whole teaching of economics to a few principles and explain them in ways that people would never forget.
This post was edited on 6/10/17 at 1:10 pm
Posted on 6/10/17 at 5:51 pm to RedStickBR
Your synopsis has me excited to start reading. Looking forward to discussing this book with everyone.
Posted on 6/12/17 at 6:08 pm to RedStickBR
I'm not sure how far we should be going before bringing up any discussion topics.
But I've made my way through chapter 4 and haven't come across anything I disagree with or think that others might disagree with. But it's noteworthy that we still have politicians that spout some of the same talking points about creating jobs through government spending, just as there were back in the author's day.
There is this passage in chapter 4 that might be discussion worthy:
During the stimulus spending rollout in 2007 and 2008, this extra spending was not proposed to come from additional tax revenue, but through the effect of inflation by increasing our debt (also called printing more money).
It's interesting that we hear lamentations about tax cuts for the rich, when tax payers are permitted to keep more of their income, but we never hear about tax increases on the poor when inflation has a more adverse impact on the poor.
But I've made my way through chapter 4 and haven't come across anything I disagree with or think that others might disagree with. But it's noteworthy that we still have politicians that spout some of the same talking points about creating jobs through government spending, just as there were back in the author's day.
There is this passage in chapter 4 that might be discussion worthy:
quote:
Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers.
During the stimulus spending rollout in 2007 and 2008, this extra spending was not proposed to come from additional tax revenue, but through the effect of inflation by increasing our debt (also called printing more money).
It's interesting that we hear lamentations about tax cuts for the rich, when tax payers are permitted to keep more of their income, but we never hear about tax increases on the poor when inflation has a more adverse impact on the poor.
This post was edited on 6/12/17 at 6:10 pm
Posted on 6/12/17 at 7:23 pm to Willie Stroker
Regarding government provision of certain essential services, I'm of the opinion that theoretically they should be able to provide certain services for a lower cost than the private sector - the operative word being theoretically. If you take utilities, for example, if your town gets its water from a municipal utility, the municipal utility is going to have certain advantages over the private sector, namely being exempt from property and income taxes and also having a much lower cost of capital (municipal bond financing of 2-3% is not unheard of). In addition, a private utility will often have to pay a franchise fee as a percentage of gross sales receipts that a municipal utility would also be exempt from. These factors give the municipal utility a massive competitive advantage.
Where this breaks down, though, is when you consider that the public sector is often extremely inefficient (eating into some of their competitive advantage) and often pads the pockets of their general fund with excess profits instead of passing the benefit on to customers.
It all boils down to how efficient the public sector is and whether they do indeed pass cost savings on to consumers. My experience is that the public sector often scores poorly in both regards.
Where this breaks down, though, is when you consider that the public sector is often extremely inefficient (eating into some of their competitive advantage) and often pads the pockets of their general fund with excess profits instead of passing the benefit on to customers.
It all boils down to how efficient the public sector is and whether they do indeed pass cost savings on to consumers. My experience is that the public sector often scores poorly in both regards.
Posted on 6/13/17 at 5:43 am to RedStickBR
So far I haven't disagreed with anything but I do think he makes some thinks far too black and white. His idea of the government helping out those who can't get a loan on their own etc is sound in theory, but if 1/3 of those government loans is paid back and that individual becomes successful, then there will be more total at the end of the day long term. Both will be able to buy a coat as he likes to say.
That is not true in year 1 but potentially in year 5
That is not true in year 1 but potentially in year 5
Posted on 6/13/17 at 6:44 am to Buckeye06
quote:
His idea of the government helping out those who can't get a loan on their own etc is sound in theory, but if 1/3 of those government loans is paid back and that individual becomes successful, then there will be more total at the end of the day long term. Both will be able to buy a coat as he likes to say.
Good point. I'd like to see government data track "crop yield" on expenditures like this. It should be trackable data through income tax filings.
Actuarial tools can assess the probability of future income earning potential at the time of loan application. Five and ten year year outcomes can assess whether there was a positive gain or no difference, and whether that positive gain offset the losses.
Posted on 6/13/17 at 7:34 am to Willie Stroker
Hope everyone is enjoying the book so far. I was on the road yesterday and am on the road today so will begin "moderating" more tomorrow, but glad we already have some early discussion going. Note also that those who need a little more to hold them over until next week should check out this week's Econ Talk podcast covering the topics of Command Economy / Central Planning vs. Free Market Economy / Invisible Hand and also the phenomenon around spontaneous/emergent order in the world. Also, to give us all a sense of "where we are on the map" with Hazlitt, I found this "economics family tree" helpful:
Posted on 6/13/17 at 7:37 am to Willie Stroker
quote:
Actuarial tools can assess the probability of future income earning potential at the time of loan application. Five and ten year year outcomes can assess whether there was a positive gain or no difference, and whether that positive gain offset the losses.
Agree. I know he is trying to keep it extremely simple but his assumptions sometimes make the scenarios too simple
There was one situation (not sure which chapter I'm about 1/4 in) where he said something like "assume for a minute there is someone who can take that exact job." He makes the huge assumption that there is skilled labor ready to take an open job and perform it at a competent level. Of course that makes things look rosy, but it's just not realistic.
As I said I know he is trying to keep it simple, but sometimes being too simple makes things look different than they are
Posted on 6/13/17 at 7:55 am to Buckeye06
quote:
His idea of the government helping out those who can't get a loan on their own etc is sound in theory, but if 1/3 of those government loans is paid back and that individual becomes successful, then there will be more total at the end of the day long term. Both will be able to buy a coat as he likes to say.
I just came across a passage where the author touches on addressing this:
quote:
This argument will seem plausible only as long as we concentrate our attention on the particular borrowers whom the government supplies with funds, and overlook the people whom its plan deprives of funds. For what is really being lent is not money, which is merely the medium of exchange, but capital.
The rebuttal points out why economics is more of a social science. Without tangible data, there's not much we can do to address the "alternative use" side of the argument.
Posted on 6/14/17 at 1:16 pm to RedStickBR
I read through chapter 4 and I have been pondering public works and how different people view the success of tax payer funded projects. I agree that their is a necessity of basic taxation to be used on projects that Hazlitt mentioned (infrastructure, policeman, fireman).
It may just be me but because of my background I think the perfect balance of doing charitable works to benefit the community is the governments responsibility but that of the Churches regardless of denomination.
I tend to see people that don't have any religious affiliation be more prone to praise a government undertaking when according to Hazlitt the government has no business doing.
I feel as though a fundamental pillar of the American economy prospered on this ideal that government provides necessary services and a common framework and that the Churches provide help to the common man of their respective communities through charitable endeavors.
It may just be me but because of my background I think the perfect balance of doing charitable works to benefit the community is the governments responsibility but that of the Churches regardless of denomination.
I tend to see people that don't have any religious affiliation be more prone to praise a government undertaking when according to Hazlitt the government has no business doing.
I feel as though a fundamental pillar of the American economy prospered on this ideal that government provides necessary services and a common framework and that the Churches provide help to the common man of their respective communities through charitable endeavors.
This post was edited on 6/14/17 at 1:22 pm
Posted on 6/14/17 at 1:54 pm to RickySauwce
The evolution of the role of government has always been fascinating to me. From law and order to infrastructure to housing to water/electricity to education to healthcare with medicare/medicaid (and ACA) and finally to some extent it has even evolved to providing phone/internet via other government subsidies. Some of these services are obviously tiered by the propensity to pay higher for quality, but they are provided to all citizens one way or the other.
As we progress and the private sector continues to place capital at its highest and best use, the "standard of living" and poverty lines continue to become more expensive to maintain for the general public. Where does everyone here stand when it comes to the role government plays and when is the right time for government to be "handed the buck" so to speak?
RSBR - I know you mentioned in your post the government intervention is when public can provide goods and services for cheaper than a private entity. I agree that it 100% should be provided by government in this case, unfortunately the government is only enabled to do this because of the tax advantaged system for bond offerings that the government itself created. But I also agree that what ultimately ends up happening is that projects with good intentions create bad actors that end up abusing the system and funds for other uses that they were not originally intended, which inevitably hurts the taxpayers due to misallocation of the the funds to not their "highest and best use".
I agree with Hazlitt, that the private dollar is always going to be more efficient and productive to the public dollar, but Hazlitt remains fairly vague when it comes to what the government should and shouldn't provide as "essential services" which has continues to evolve over time. Which is a pretty key question when balancing public vs private spending.
ETA: Ricky - to comment on your post. While I agree that churches regardless of denomination do a good amount of charitable work in the communities, they themselves are subject to a wide variety of goals and purposes with little accountability or transparency with the use of the funds. I've seen some fairly gross misappropriation of church dollars in my work which jades my viewpoint on this subject. So in theory, yes, they could/should be doing a lot of the public works and community related projects with their dollars, the donations and capital is typically spread over a number of different initiatives that are meant to achieve each individual church's specific strategic objectives.
As we progress and the private sector continues to place capital at its highest and best use, the "standard of living" and poverty lines continue to become more expensive to maintain for the general public. Where does everyone here stand when it comes to the role government plays and when is the right time for government to be "handed the buck" so to speak?
RSBR - I know you mentioned in your post the government intervention is when public can provide goods and services for cheaper than a private entity. I agree that it 100% should be provided by government in this case, unfortunately the government is only enabled to do this because of the tax advantaged system for bond offerings that the government itself created. But I also agree that what ultimately ends up happening is that projects with good intentions create bad actors that end up abusing the system and funds for other uses that they were not originally intended, which inevitably hurts the taxpayers due to misallocation of the the funds to not their "highest and best use".
I agree with Hazlitt, that the private dollar is always going to be more efficient and productive to the public dollar, but Hazlitt remains fairly vague when it comes to what the government should and shouldn't provide as "essential services" which has continues to evolve over time. Which is a pretty key question when balancing public vs private spending.
ETA: Ricky - to comment on your post. While I agree that churches regardless of denomination do a good amount of charitable work in the communities, they themselves are subject to a wide variety of goals and purposes with little accountability or transparency with the use of the funds. I've seen some fairly gross misappropriation of church dollars in my work which jades my viewpoint on this subject. So in theory, yes, they could/should be doing a lot of the public works and community related projects with their dollars, the donations and capital is typically spread over a number of different initiatives that are meant to achieve each individual church's specific strategic objectives.
This post was edited on 6/14/17 at 2:33 pm
Posted on 6/14/17 at 3:50 pm to GregYoureMyBoyBlue
To expand on the private vs public issue, there are two instances when the public sector should provide the service, in my opinion. The first is when the private sector refuses to supply it and the benefit of funding said service on the backs of taxpayers far outweighs the expense. A perfect historical example of this would be the rural municipal utilities (and, on a somewhat related note - the co-ops). The private sector refused to go into certain rural communities because the returns weren't there, so the public sector ran utilities on its own with the help of tax subsidies. I think few people in those communities would prefer not having electricity to being taxed for those services. We are arguably seeing this same principle play out today with rural broadband.
The second case is when the public sector can actually supply the service more cheaply. This can and does actually happen as corporate taxes, a required return, and other payments are often too large for the private sector to offset. However, when comparing the cost of these services, the public sector proponents almost never include taxes and millages in their cost of service. While the private sector is subject to certain taxes the public sector isn't subject to, citizens receiving the public service are also subject to certain taxes they wouldn't have had to pay if the service were private. Of course, as you said, it was the government who created this tax asymmetry in the first place, so we can hardly rely on them to be honest about it in the first place.
I've found that when you also consider the greater economies of scale the private sector is able to achieve and the inherent waste in the public sector (ever hear about how hard it is to fire a "civil servant"?), the private sector, assuming their own cost structure is efficient, can almost always deliver the service more cheaply. I would include what you said about "bad actors" as one example of public sector inefficiency. This all ties back to the concept of spontaneous/emergent order in the free market system. In the private sector, the free market has an incredible ability to separate the wheat from the chaff, forcing the chaff to either improve or become uncompetitive. There is no such mechanism in the public sector.
To bring things around full circle, however, just because the private sector can provide a service more cheaply doesn't mean they will choose to provide it (e.g. where the returns aren't there either on an absolute basis or opportunity cost basis). So there is indeed a need for public sector services, but in an advanced economy like the U.S., that need is becoming rare. One obvious way to bridge the gap is through PPP, something gaining steam in America but nonetheless something we are still tremendously behind the curve on.
The second case is when the public sector can actually supply the service more cheaply. This can and does actually happen as corporate taxes, a required return, and other payments are often too large for the private sector to offset. However, when comparing the cost of these services, the public sector proponents almost never include taxes and millages in their cost of service. While the private sector is subject to certain taxes the public sector isn't subject to, citizens receiving the public service are also subject to certain taxes they wouldn't have had to pay if the service were private. Of course, as you said, it was the government who created this tax asymmetry in the first place, so we can hardly rely on them to be honest about it in the first place.
I've found that when you also consider the greater economies of scale the private sector is able to achieve and the inherent waste in the public sector (ever hear about how hard it is to fire a "civil servant"?), the private sector, assuming their own cost structure is efficient, can almost always deliver the service more cheaply. I would include what you said about "bad actors" as one example of public sector inefficiency. This all ties back to the concept of spontaneous/emergent order in the free market system. In the private sector, the free market has an incredible ability to separate the wheat from the chaff, forcing the chaff to either improve or become uncompetitive. There is no such mechanism in the public sector.
To bring things around full circle, however, just because the private sector can provide a service more cheaply doesn't mean they will choose to provide it (e.g. where the returns aren't there either on an absolute basis or opportunity cost basis). So there is indeed a need for public sector services, but in an advanced economy like the U.S., that need is becoming rare. One obvious way to bridge the gap is through PPP, something gaining steam in America but nonetheless something we are still tremendously behind the curve on.
This post was edited on 6/14/17 at 3:59 pm
Posted on 6/14/17 at 4:09 pm to GregYoureMyBoyBlue
Also, since you mentioned it, can anyone think of any more perfect example of focusing on the short-term effect / effect on special groups (as compared to the long-term effect / effect on all groups) than the ACA?
Its proponents sold it to the people based on the latter, but now openly defend it based on the former. It's a textbook example. Granted, I realize you can't reduce everything to dollars and cents (e.g. if you give a homeless man your coat, there is a certain non-quantifiable value associated with that act). And the ACA proponents of course draw on this theme when they talk about the underprivileged and those with pre-existing illnesses.
But the solution to solving problems for the few is not to cause new problems for everyone else. There had to have been a better solution than the ACA.
Its proponents sold it to the people based on the latter, but now openly defend it based on the former. It's a textbook example. Granted, I realize you can't reduce everything to dollars and cents (e.g. if you give a homeless man your coat, there is a certain non-quantifiable value associated with that act). And the ACA proponents of course draw on this theme when they talk about the underprivileged and those with pre-existing illnesses.
But the solution to solving problems for the few is not to cause new problems for everyone else. There had to have been a better solution than the ACA.
Posted on 6/14/17 at 4:15 pm to GregYoureMyBoyBlue
To the points being made on churches and charity: sure, churches should provide charity and we should encourage that. But there are other groups with much more transparency and/or higher reporting standards that could also help out that simply don't exist in certain areas. Business people often fail to see this, but any sound economic development plan for a region will also include allocations for charity organizations that are most needed in an area. It's maybe not a huge piece of the ED pie, but it's still an important one that often goes overlooked.
Posted on 6/14/17 at 8:12 pm to RedStickBR
quote:
The private sector refused to go into certain rural communities because the returns weren't there, so the public sector ran utilities on its own with the help of tax subsidies. I think few people in those communities would prefer not having electricity to being taxed for those services. We are arguably seeing this same principle play out today with rural broadband.
Great points and thanks for the historical reference. While Hazlitt does a great job of breaking down economic principles to simple concepts, I do wish it was supplemented with more real world context and examples. My question here would be more related to what was the impetus to infrastructure investment in the first place. If people already live in the rural communities prior to government providing certain services, then aren't those people in essence valuing their current living situation better than the convenience and costs associated with governmental services such as electricity? Otherwise they'd migrate to a city/town that taxes and affords them such services.
However if there is an expansion of infrastructure to enable people to live in the rural communities where it was previously uninhabitable for one reason or another, then the use of public dollars seems in this case to be a much better use of capital than the former example.
Posted on 6/14/17 at 8:25 pm to RedStickBR
quote:
Also, since you mentioned it, can anyone think of any more perfect example of focusing on the short-term effect / effect on special groups (as compared to the long-term effect / effect on all groups) than the ACA?
100% agree.
Maybe not specifically ACA related, but to expand on your ST vs LT point within healthcare, the creation of medicare and medicaid eventually led to medicare advantage plans, which are some of the best examples of public private partnerships and entrepreneurship i've seen. Unfortunately, It took from 1965 when Lyndon Johnson created medicare to the early 2000's for the government to better instill competition within the segments, but since then companies have been created, funded, and grown based on a shared savings model with these two populations of patients. Public entities can't figure out how to give better care and lower costs, so they partner with entities/entrepreneurs that have better capital allocation models, assume the financing risk of a certain subset of patient population for a per member per month fee (PMPM), and share the savings created by better care coordination and quality of care for these two "expensive" parts of the HC ecosystem. Win-win for public and private sector.
This post was edited on 6/14/17 at 8:32 pm
Posted on 6/14/17 at 8:48 pm to GregYoureMyBoyBlue
It all goes back to farming. Farmers owned lots of acres of uninhabited land, which meant less population density, which meant fewer potential customers per electrical, water or gas line mile, which meant sub-par returns for the private sector. They couldn't move to the city because there livelihood was in the country; however, there was still a tremendous need for electricity. And so the public utility or co-op model was born.
Today, it's even less extreme with "rural" broadband. Rural, in the broadband context, can mean towns of 30,000 or 40,000 people. While these towns would likely be profitable for the large multi-nationals to serve, they simply have better investment opportunities elsewhere. That's why you see such a heavy push towards municipal broadband in many small-mid size towns (see Chattanooga, for instance).
I'm not opposed to public investment in these instances; but when the government starts doing things like buying real estate and offering below-market rents to attract development that competes with local real estate entrepreneurs, or when they start developing special tax-free districts for places like Chili's or Wal-Mart at the expense of locally-owned establishments, I get uneasy. And I really start to have a problem when governments do things like start "proprietary funds" to supplement their general fund with the stated intention of operating like a for-profit business, especially when there are private-sector alternatives in the area.
The question is how do you address anti-competitive abuses without hindering public sector investment where it's really needed.
Today, it's even less extreme with "rural" broadband. Rural, in the broadband context, can mean towns of 30,000 or 40,000 people. While these towns would likely be profitable for the large multi-nationals to serve, they simply have better investment opportunities elsewhere. That's why you see such a heavy push towards municipal broadband in many small-mid size towns (see Chattanooga, for instance).
I'm not opposed to public investment in these instances; but when the government starts doing things like buying real estate and offering below-market rents to attract development that competes with local real estate entrepreneurs, or when they start developing special tax-free districts for places like Chili's or Wal-Mart at the expense of locally-owned establishments, I get uneasy. And I really start to have a problem when governments do things like start "proprietary funds" to supplement their general fund with the stated intention of operating like a for-profit business, especially when there are private-sector alternatives in the area.
The question is how do you address anti-competitive abuses without hindering public sector investment where it's really needed.
Posted on 6/14/17 at 9:04 pm to RedStickBR
Great points. Thanks for sharing.
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