During the battle for the 2008 Democratic nomination many of us backed Obama over Clinton partially due to his opposition to mandates which require individuals to purchase insurance. This has seemed like a lost battle since, in addition to many Democrats, the insurance industry has pushed hard for mandates if there are changes such as eliminating restrictions on preexisting conditions. If the insurance industry wants something it is possible some Republicans will make some noise but in the end they will vote for it. The coalition between the Clintonistas and Republicans in the pocket of the insurance industry seemed to prevent any reconsideration of mandates, until now.
Many liberals have had qualms about mandates. Some of us have objected on libertarian grounds while others were simply concerned about forcing people to purchase products from the insurance industry with its track record for mistreating customers. With more questions as to whether there will be a public option, some liberals are again questioning a mandate. Dean Baker still thinks a mandate will eventually be necessary but supports putting this off:
If we get the sort of insurance reform that President Obama has proposed, then mandates, or something very much like them, will be necessary at some point. But they will not be necessary from day 1. After all, not everyone is going to rush out to game the insurance system. It will take some period of time before the number of free riders grows enough to be a real problem.
We know that it will be necessary to revisit health care in the not too future in any case. The lack of mandates will help to ensure that this date comes sooner. Then we can talk about measures that will allow us to control costs, like a robust public plan.
But, if we can’t get a public plan in this round, why should progressives be pushing for a regressive tax that will go into the pockets of the insurance companies and their overpaid CEOs? Let the insurance companies try to make a living in the market, when they grow up and feel strong enough to compete with a public plan, then we can have mandates.
Digby adds:
In my view the Democrats are playing with fire in the worst way if they institute mandates without offering any option for reasonably priced insurance. In effect, they will be telling all the people who are currently uninsured that unless they buy unaffordable policies upfront (for which they may receive some money back at the end of the year when they file their taxes) that they must not just live in fear of getting sick — they are now criminals. I can’t think of a more politically inflammatory thing to do at a time like this. And the right will demagogue this thing in a way that makes Sicko look subtle by comparison.
I’ve always thought it was a political risk to create a new law that forced people to give money to insurance companies. It’s worked in auto insurance, but there’s a completely different set of risk factors involved and the costs are much more manageable for the average person. To get rid of the cost control mechanism while keeping the mandate is a recipe for political backlash…
It was never going to be easy to sell mandates, but they are making it substantially harder if they tank the public plan. They’re another bullshit compromise anyway, made before anyone even got to the table, just like single payer — health care should be paid for by higher taxes on the wealthy scumbags who are the only ones winning in this godforsaken economy anymore and the elimination of health insurance’s obscene profits. But in the interest of “going to the middle” the reformers went with mandates and now, without the public option, they’ll be stuck with a regressive tax that’s going to be very politically difficult to defend.
If the administration and the congress can’t be bothered to stick on the public plan, I see no reason why the left should stick with mandates.
Heh. Digby’s anti-mandate argument is exactly the same as mine:
“In effect, they will be telling all the people who are currently uninsured that unless they buy unaffordable policies upfront (for which they may receive some money back at the end of the year when they file their taxes) that they must not just live in fear of getting sick — they are now criminals. ”
This was my original argument against the whole mess currently being stewed in Washington.
He is wrong about auto insurance mandates ‘working.’ Mandates do not actually mandate ‘auto insurance’, they mandate liability insurance. If everyone had real auto insurance, what is now called collision insurance and what my parents would have just called auto insurance thirty years ago, no one need liability insurance. Likewise, in the long run, collision insurance is cheaper for the insurance companies than liability insurance. State programs to provide affordable collision insurance would do Americans more good than forcing everyone to buy liability insurance and would provide more relief from ‘frivolous’ lawsuits than any tort reform covering accident liability cases.
I do agree, however, the auto insurance reference aside, that an unfunded mandate (absent a public option) is a de facto regressive tax.
While I agree that everyone should have collision insurance, I don’t see why the government should pay for it. For one thing, insurance is only one of the large expenses of owning a vehicle (payments, maintenance, car tabs, fuel). At some point, you figure out that, if you are poor, the car is one thing keeping you there.
OK, yeah, that’s a bit of a diversion.
It seems to me that part of the problem is that there are diseases that are not rare but which have treatments that are really expensive. And, unlike auto repair, the “total it instead” option is pretty repugnant. And most people don’t want anyone to be starkly faced with “total it”, at least openly. At least in Western societies, we like to pretend that there is always something that can be done. Not really the reality — but at least the pretense.
That combination is not conducive to market solutions.
Sometimes there is nothing which can be done but the real problem is that often there are things which can be done if one has insurance. Even a significant number of people with insurance wind up in bankruptcy every year due to failings of our system.
“That combination is not conducive to market solutions.”
Yes, that’s the problem. Market solutions alone will not solve this problem, which is one reason why every other industrialized country has more government involvement.
I don’t see it as a problem that can be solved. It’s a set of tradeoffs. I guess we will see if Americans want to trade up to more government control. Personally, I think we probably would get a better deal with *either* more or less government from our current point — we have enough government involvement to make sure everything is expensively professionalized and cartelized. Sort of a local maximum of suckiness. Anyone who calls the current system a “free market” has been smoking the good stuff.
” I don’t see it as a problem that can be solved. “
It depends upon whether by “be solved” you are expecting perfection. We can improve the system but we are not going to eliminate the problems.
“I guess we will see if Americans want to trade up to more government control. “
It is also an issue of where government control is. Having mandates is definitely a matter of government control. We will also have more government control over insurance practices–but I think that is necessary.
However when people talk about government control and health care they are often thinking in terms of interference with health care choices and physician decisions. In this case government has a better track record than private insurance of staying out of the way on medical questions so more “government control” can also lead to more freedom on health care choices.
On the other hand, many on the left see this as bad as it also might mean the government does less than many private insurances to hold down costs. This might not be as bad as it looks as often attempts by private insurances to hold down costs are counterproductive. For example, hiring lots of people to review cases and require preauthorization often costs more than it saves if it doesn’t weed out many unnecessary procedures.
“While I agree that everyone should have collision insurance, I don’t see why the government should pay for it.”
I don’t know that I actually believe the state should pay for collision insurance or not. I was noting that the goal advocated by the unfunded mandate that everyone own liability insurance could be met far more effectively by programs to provide affordable collision insurance and that if one believes that universal automotive insurance coverage is a desirable goal, then affordable collision coverage solves a lot more problems than mandatory liability coverage. 🙂
Personally, I think auto insurance mandates are somewhat pointless. The original reason offered for universal liability insurance coverage, that it would protect the victims of auto accidents, is rather weak. It was supposed to lower the number of lawsuits and thus ease the burden on the judicial system… but it turns out one has to sue insurance companies to get them to pay as often as someone who sideswipes you. Indeed, the very fact that everyone has liability insurance and not collision guarantees more lawsuits because lawsuits are all one is insured against… so to get actual compensation one has to sue the other guy.
No mandate at all would be the best program in this case, but failing that a funded mandate would clearly have worked better than an unfunded in achieving the desired goals. That was my point. A health care mandate without sufficient funding for those who can’t purchase health insurance is just another way to criminalize the working and lower middle classes and the poor. We don’t need more of those, we have plenty.
“It seems to me that part of the problem is that there are diseases that are not rare but which have treatments that are really expensive. And, unlike auto repair, the “total it instead” option is pretty repugnant. And most people don’t want anyone to be starkly faced with “total it”, at least openly. At least in Western societies, we like to pretend that there is always something that can be done. Not really the reality — but at least the pretense.”
Well, in many cases the expenses are artificial. Many forms of chemotherapy have been around long enough that they should cost less than they do. If we cost-indexed many chemotherapy drugs properly, they’d be cheaper than ED or allergy medication… many chemotherapy drugs are expensive because they save someone’s life, not because the research costs desperately need to be recouped. In many cases, the research costs are long paid and the price is artificially high because a corporation knows people will pay through the nose not to die.
This is just one example why I am unwilling to abandon the classical labor theory of valu’ in favor of the neoclassical idea that something is worth whatever people will pay. The latter may be more conducive to profits, but it’s very much against the interest of society as a whole.
Even if we keep this idea in other areas of our economy, which I think would be a mistake, we need to get it out of health care.
I think the theory is that the extra cost for drugs is also paying for the research that went nowhere.
I think we will go to COGS model (I think this is what you are calling the labor theory of value) for government-approved drugs (which is basically what the rest of the world pays now). We will pay substantially less for those drugs. I think we will then see far fewer new drugs coming down the pipeline.
New drugs is how the pharmaceutical companies make big bucks. They aren’t going to stop trying to come up with new drugs, even if their profit margin is smaller. They now spend far more money on marketing than on research, and will always find the money to continue research.
New erection drugs is how they make the big bucks. And I don’t see the prices of those being capped.
I don’t know enough about the COGS model in detail to say if it conforms to the labor theory of value or not. The labor theory of value is the original, Classical theory that a product’s value is generated by the effort necessary to produce/harvest it and bring it to market. Thus good and services have fixed values, even if those values are not identical everywhere due to varied conditions of production and transportation to market.
Neoclassical economists devloped the idea of ‘market value’, which is the theory that something has no intrinsic worth at all and is only worth as much or as little as people will pay for it. While there are some items that do fit these categories, primarily luxury goods, this is a dangerous theory because it is directly responsible for the kind of speculative investment that tanks markets.
Labor theory of value is sort of silly because all labor is not the same. And it’s sort of pointless to say that something has an “intrinsic value” if nobody is interested in buying it.
Basically on drugs, the pharma companies wanted to get their R&D out of someone, and then get some money per unit sold. In that way it’s a lot like software companies. So if Americans are paying huge bucks per unit (so the pharma companies can get their R&D back), then when the Europeans say “We will only pay you 10% more than your production costs” the pharma companies say “What the hell, it’s still more money”. But if Americans also are only paying production + 10% then there is no money for more R&D. It will be ugly.
Eclectic — does whale oil have an intrinsic worth for the effort it takes to kill whales, even if almost nobody has uses for whale oil anymore?
“New erection drugs is how they make the big bucks”
While I’m sure they are profitable, there are only three of them on the market. There are many other ways in which drug companies hope to make money.
True — there is a real potential for booby-expanding drugs.
Based upon my spam box, there are other enhancement drugs which at least spammers think there is a big market for.
“Labor theory of value is sort of silly because all labor is not the same.”
This is among many reasons why everything isn’t equally valuable. It’s not terribly hard to gradate different kinds of labor, in fact we do that every day in every economy around the world. Whether we always do it well is another matter, but we still do it.
” And it’s sort of pointless to say that something has an “intrinsic value” if nobody is interested in buying it.”
Supply and demand issues and value issues are and should be independent of each other. The fact that Dutchmen in the 18th century were willing to pay thousands for tulips did not make tulips ‘worth’ thousands, it just meant Dutchmen were willing to overpay for them. This is the classic example of artificial value creating a bubble which then bursts and causes recession. There have been plenty of examples of this throughout American history as well.
Someone may not want to buy something, and if they do not then they will not, but that does not alter its intrinsic value. At the same time, clearly, the artifical value assigned by the market does not affect something’s intrinsic value. If it did, our economy would be doing a lot better now and more real estate investors would still be rich.
So it’s a lot sillier to say that the market creates value than to uphold labor theory.
“Eclectic — does whale oil have an intrinsic worth for the effort it takes to kill whales, even if almost nobody has uses for whale oil anymore?”
First of all, if your premise were entirely accurate, then Japan, Norway, Iceland, and a handful of other countries wouldn’t still be killing whales quite busily. Whale oil is one of the commodities harvested from whalers’ kills and people still use it for quite a few things. No one lights lamps with it anymore, but it is used for a multitude of other purposes in Europe and Asia. Hence (for this and other reasons) people still kill whales.
‘Value’ and ‘price’ are not the same thing. ‘Value’ is the intrinsic worth and ‘price’ is what people are willing to pay. The price can be affected by supply, demand, and scarcity for obvious reasons. The value remains constant. People are often willing to pay far more than something is ‘worth’ or uninterested in something ‘worth’ quite a bit. That does not affect value, no.
When you want something, do you just pay however much it takes to get it? Or do you look for ‘value’ for your money?
That sort of proves the point of intrinsic value right there, just as speculation bubbles prove the point of artificial value.
I look for if I want it more than the price of buying it. I’m not saying whether it has intrinsic worth or not, just how much I want it.
How can you measure this intrinsic and unchanging value? Given that the costs of everything that goes into production (raw materials, energy, labor) are subject to market forces, I don’t see it as possible. And then you have the fact that technology changes production methods.
Does reduced aluminum have a huge intrinsic value because it was insanely expensive to produce before electricity? (I believe reduced aluminum was much more expensive than gold, even though oxidized aluminum is one of the more plentiful things in the Earth’s crust). Or does “intrinsic value” change because of technology?
If technology changes the amount of labor required to produce something then, yes, the ‘intrinsic value’ of the product will probably change. The cost of production drops, so the ‘real value’ (in the economic sense of the words) drops.
The Neoclassical notion that value is based solely on demand is a bald-faced justification for the business practices during the Gilded Age, dependent on a specific world-view that since nothing is ‘worth’ anything then everything is worth what people will pay for it. It serves to justify monopolistic (or, today, corporate) abuse of capitalism and is, fundamentally, an anti-free market notion.
The ‘market’ is a metaphorical device to describe what people do, and over-reliance on the ‘market’ in explanation is a sign of poorly worked out economic theory. There are only two ‘real’ market forces… ‘labor’, which is not just ‘labor’ as we mean it when talking about work for pay but the sum total of effort necessary to produce a commodity, and ‘scarcity’, the total finite availability of said commodity and the resources necessary to produce it. Everything else is entirely subjective and is of little value in anchoring theory.
Labor needs change based on technology, but are rather constant even taking technology into account. Scarcity is constant.
Demand is entirely cyclical and frequently subjective, and often malleable. When mass media marketing can manufacture demand as another commodity, it’s difficult to say that it is a reliable baseline for anything.
Just because a theory is used for justification for barbaric acts does not make a theory wrong. William Jennings Bryan formed his opposition to Darwinian evolution (that led to the Scopes trial) because of the use (or misuse) of that theory by the German government during WW I (I guess the Germans stayed true to their vision for the next few decades).
Of course demand is subjective. Market theory does not say that value is anything but subjective and transient.
And scarcity is certainly not constant (unless you are just saying that there is always effort to do something). Scarcity changes dramatically with time, with conditions, with technology.
In a labor theory of value, do you make any distinction between different types of labor? Or is it all one cost?
And what good is a labor theory of value if nobody is willing to buy what is produced at the cost you have calculated the product is worth? Is it wrong to sell it at what you calculate is a “loss” and simply get less per hour than you think you are worth? In that case, why is there any sense to what you have calculated your time is worth?
“And scarcity is certainly not constant (unless you are just saying that there is always effort to do something). Scarcity changes dramatically with time, with conditions, with technology.”
Actually, no, it doesn’t. Supply can change based on a lot of a factors, but scarcity changes very little or does not change at all. Resources are finite, and until/unless physics advances to the point that we can literally create something out of nothing or transmute elements with degree of practicality, the ultimate avalability of basic resources is a constant. There is X amount of the resources necessary to produce a given commodity and when they are gone they are gone.
We may reach the point where technology can affect that problem, along the lines of matter replicators a la Star Trek, but we are a long way from that point now.
“And what good is a labor theory of value if nobody is willing to buy what is produced at the cost you have calculated the product is worth?”
‘Wrong?’ Only if ‘wrong’ means that you’ll go out of business if you can’t recoup the ‘value’ of your produce. If there is no demand for something, then it might be impractical to produce it… but it does not require less total ‘effort’ to make because there is no demand. No one stays in business selling at a loss.
If people don’t want something they will not buy something, but since the whole point of economic activity is to meet demand, this is a red herring. Any production is to meet a perceived demand, or because someone believes the utility of the produce will create demand.
What if they want it, but not at the price you want to charge to pay yourself for the labor you put into it at the rate your labor is “intrinsically” worth? There is a demand, but not at the price you are trying to charge. People will buy your dream catchers, but not for the $50 that it would take to pay yourself your “intrinsic” wage. But if you are willing to pay yourself less than that “intrinsic” value, you can sell them for $20 and eat. If that is true, then what allows you to calculate that the intrinsic value of your labor is higher? See — I just don’t understand where that calculation comes from.
Scarcity is not fixed. It cannot be based on the total amount of something on Earth or in the solar system or in the galaxy. It depends on what is economically extractible, which is highly based on technology.
“What if they want it, but not at the price you want to charge to pay yourself for the labor you put into it at the rate your labor is “intrinsically” worth? There is a demand, but not at the price you are trying to charge. People will buy your dream catchers, but not for the $50 that it would take to pay yourself your “intrinsic” wage. But if you are willing to pay yourself less than that “intrinsic” value, you can sell them for $20 and eat. If that is true, then what allows you to calculate that the intrinsic value of your labor is higher? See — I just don’t understand where that calculation comes from.”
Ummm, this whole question is almost too silly to really believe you’re asking it, Fritz. If you can sell it for $20 and still eat, then $20 is a lot closer to the correct value than $50. If you’re selling it at $20 and can’t get what you need to make more, let alone eat, then $20 is too low and if you can’t sell it for more you need to make something else or get a job for someone else rather than trying to sell the dreamcatchers at all. The calculation comes from the total amount of ‘effort’ necessary to make something… raw materials + labor for produce and (de facto) scarcity + labor for raw materials. It’s extremely basic microeconomics.
“Scarcity is not fixed. It cannot be based on the total amount of something on Earth or in the solar system or in the galaxy. It depends on what is economically extractible, which is highly based on technology.”
Technology changes what is economically extractable, certainly, but technology will not solve the final problem of scarcity… which is that all the raw materials necessary for production are ultimately finite. Technology can prolong the ability to stay ahead of scarcity by making more of something economically extractible, but it will not solve the problem of finite resources. ‘Scarcity’, properly, is the finite totality rather than what can be extracted now.
It sounds to me like you are calculating that “intrinsic value” by what you can sell the product of your labor for in the market (which is an entirely sensible approach). So how does this become an “intrinsic value”? It sounds like you are taking market calculations at some point in time and trying to nail that in the sand and call it eternal.
You have moved “scarcity” to some final-problem status, so it is way less interesting, at least to me. Technology enables a great deal of resource substitution and, as you say, delays problems. If technology can delay things enough so we can mine asteroids, that is good enough for me.
“You have moved “scarcity” to some final-problem status, so it is way less interesting, at least to me.”
I haven’t moved it there. ‘We’ (the collective ‘we’), these days, have moved it away from that status because we are uncomfortable with the idea that everything is going to eventually run out. The Classical economists always intended it to be just that, it’s one of the reasons they dubbed economics the ‘dismal science’ in the Victorian era. Ricardo predicted the apocalypse. 😉
Mind you, I’m hoping for the asteroid mining and space colonies too.
“It sounds to me like you are calculating that “intrinsic value” by what you can sell the product of your labor for in the market (which is an entirely sensible approach).”
Again, no. I gave you the calculation that you wanted specifically: raw materials + labor. I hate the phrase, but I suppose ‘cost plus’ is applicable.
What one ‘can get for the product of your labor in the market’ is a question of price, not value. If the price one can get is not in accord with the value, however, it’s stupid to keep producing.
How do you come up with a non-market-driven formulation for the value of your labor?
The original bar was total effort adjusted up or down by quality of work. In today’s industrial society that measure appears to be pretty much out the window, though it’s still a standard worth applying to determine value.
It’s unrealistic not to concede that a lot of today’s labor is valued arbitrarily. But it’s equally unrealistic to argue that such values are not arbitrary and are instead the result of ‘market driven formulations.’ Such formulations are as rare in the system of valuating labor in actual use as the use of labor theory of value in the modern corporate ‘free market.’
Eclectic — I can understand how supply and demand can set labor rates. A worker can be replaced by one who is either more skilled at the same rate or one with the same skills but who is willing to work for less. Similarly a worker can seek greener pastures if he has skills in demand.
You have a different approach — that labor has an intrinsic value apart from market forces. But you have not, at least to the extent of my reading ability, told me the algorithm to determine this intrinsic value.
“You have a different approach — that labor has an intrinsic value apart from market forces. ”
This is a straw man statement.
The value of produce is instilled by the labor necessary to produce it and bring it to market. That was my statement. Reframing the argument to suit your viewpoint and then declaring victory is not the same as offering refutation.
If you want algorithims, here is something a bit more scholarly than my explanations.
My mastery of the keyboard does not extend to all the neat little mathematical symbols, as good as I am at typing.
Thanks. That’ll take a while.
Yes. It’s not exactly ‘light reading’ even for me.
So have you used it to calculate what you should be earning?
ROFL
I am able to say, because of the nature of the business I am in right now (sales), that what I am earning conforms entirely to labor theories of value. How much money I make correlates directly to the amount of work I do and how well I do it. 😉
Ah, yes. I remember those days. Selling door-to-door. I made more than a fair piece of change.
I did the direct sales thing and didn’t like it at all, that was long ago. I run my own very small call center business, operate on a subcontractor basis and bill based on the actual amount of work done (in this case calls handled) plus incentives. It’s a little too anarcho-capitalist for my tastes, but it pays for the anarcho-socialist blog.
I’m good with either anarcho-capitalist or anarcho-socialist.