EclectEcon

The Important Difference between Protecting Competition and Protecting Competitors

For decades and probably centuries, businesses have lobbied gubmnts to be free from the vagaries and pressures of competition. A very telling example of this incentive was the Robinson-Patman Act of 1936 in the US which essentially limited the scope for price competition with the goal of protecting neighbourhood stores from inroads being made by chain stores and supermarkets (most of which no longer exist due to changing economic conditions and new forms of competition).

As internet shopping, especially for music and ebooks, has blossomed, once again the former industry giants are concerned about losing out to new business models.... in this case, such firms as Apple and Amazon.

But this article in the NYTimes cogently makes the point that what is important is competition, no matter who provides it. Schumpeterian creative destruction will lead to some businesses failing as others emerge. But the new ones will, in general, be successful only if they offer customers a better combination of products, prices, and service. What needs protection is the competitive process, not the incumbent firms in an industry.

Just as important as ensuring that platforms cannot abuse their dominance is to ensure that the companies that make the products that flow on these platforms — book publishers, say — do not use anticompetitive tactics to benefit one platform at the expense of others. This is the kind of competition that the Justice Department’s civil suit against Apple and the book publishers is meant to protect.

Admittedly, the Justice Department’s case may be bad news for the established book industry. Amazon and other online competitors have squeezed Borders out of business. It is only a matter of time before cheap e-books put an end to hardcover tomes selling for $25. And with Amazon pushing into publishing itself, some publishers could become victims as well.

But what really matters to society is what the case means for the production and consumption of books. That might not be so dreadful.

For sure, if brick-and-mortar bookstores disappear, browsing will die with them. But writers and publishers will have plenty of other ways — think Amazon, Facebook or Google — of letting readers know about their books. [emphasis added]

I Am Unemployed and receiving employment insurance benefits

I am unemployed by any definition of the term. I am not presently working, and I have been actively seeking work; and, in fact, I still am.

My teaching contract at The University of Regina ended in December, and I have written to all the post-secondary education institutions in my home area letting them know of my availability. I am willing, able, and eager to accept another job (in this geographic area) teaching economics at a post-secondary institution.

As a result of my currently being unemployed, I applied for what is known as "employment insurance" benefits [EI]. After some confusion on my part, since I've never done this before, I started receiving the benefits this week.

Several of my friends are aghast that I would do this. They know I have a decent pension, having taught at The University of Western Ontario for 40 years, and they know I don't really need the money to survive. 

What my friends are really telling me is that those who have the foresight to save for contingencies should NOT receive unemployment benefits (my pension is entirely derived from savings, analogous to IRAs in the US or RRSPs in Canada). If I hadn't saved and didn't have a pension based on those savings, then I guess it would be okay in their minds for me to receive benefits. Or if I had withdrawn all my pension funds from my savings and spent them on something frivolous, I guess my resulting destitute state would justify (in their minds) receiving EI benefits. In other words, it is my having been frugal in the past that would disqualify me, in their minds, from receiving EI benefits now.

What kind of incentives does this view generate? It tells everyone that if you save, you get taxed, but if you don't save then other taxpayers will be required to bail you out. It reminds of the fable of the ant and the grasshopper. 

 

 

Scarcity, Rationing, and Death Panels

One of the fundamental principles in economics is that goods and services are scarce. People want more than is available and therefore choices must be made. 

The question is NOT "should things be rationed?" Rather, it is "How should things be rationed?"

This distinction is made clear to us every day, but possibly no more so than in the area of health care. When individuals are not required to pay for medical care, we tend to ask for more, better, and more expensive care. But the system simply cannot provide all of what we want at a zero price. And so choices must be made.

In many instances, who gets the goodies will be determined by who you know, who you are politically connected with, what your politics are.

In other instances, medical care will be rationed by our ability and willingness to pay (somewhat crass but realistic digression: if a given procedure will extend my life by 4 years and cost the gubmnt/taxpayers, say $400,000, I'll want to receive it; but if my heirs could have the money instead, I might choose to forego the treatment). 

And in some instances, death panels composed of persons with medical training (and political connections?) will decide how to ration scarce health resources. 

I have enough trouble with physicians who like to play god as it is. Giving them the ability and power to decide who should receive a heart, a kidney, or a cancer treatment adds to my concerns. 

For example, consider this story [h/t Rebekkah]:

When Kenneth Warden was diagnosed with terminal bladder cancer, his hospital consultant sent him home to die, ruling that at 78 he was too old to treat.

Even the palliative surgery or chemotherapy that could have eased his distressing symptoms were declared off-limits because of his age...

Thanks to [his daughter's] tenacity, Kenneth got the drugs and surgery he needed — and as a result his cancer was actually cured. Four years on, he is a sprightly 82-year-old who works out at the gym, drives a sports car and competes in a rowing team.

But it wasn't just her tenacity that saved her father. It was also her willingness to spend her own time and money combined with the fact that in the UK a private option to the National Health Service is available. In Canada, the gubmnt does not permit a private option.... unless you are willing to pay to travel to some other country (e.g. the US). 

Everyone needs to understand that health care, like every other good or service, is being rationed and will always be rationed. The only question is how will it be rationed? And so long as we refuse to let people pay for their own health care, we will have death panels, like it or not.

Over a Million

It went by without my noticing, but sometime a week or two ago, EclectEcon (combined with its earlier manifestations) reached a million page views. I realize that probably half the page views are directed to the blog by Google searches for nude curlers or crotch shots of Britney Spears or maybe even the infamous Danish cartoons. But at least some visitors have some interest in what I have written.

Imagine the traffic if I had continued posting two or more items/day!