On Socialism vs Capitalism (with a touch of health care thrown in)

I'm having a debate ostensibly on health care with a friend, and he provided this link:

http://mises.org/story/3613

... as a good starting point for his position.

I read through the first of 5 parts (one of the others of which itself has 8 parts) and recognized some core assumptions the author was making with which I disagreed, and out of that came this, which I decided to also post here.

I should say, by the way, that I do agree with the author's assessment early on that "The status quo with respect to medical care does not deserve to be preserved. It does bear the earmarks of financial lunacy. It does call for reform – for radical reform. The question is, what kind of radical reform?"

At least in that article, the author agrees with me (and with most people, I think) that there IS a problem... he just has a radically different opinion of how to attack it. It appears to me that the Republicans and the Blue Dog coalition of Democrats seem to want to preserve the status quo. They talk about "taking the time to get it right", but "taking time" is nearly always code for "delay until something else takes priority, so the thing dies the slow death of attrition".

Anyway, here's where I think the author's fundamental assumptions are faulty. Note that I fully recognize here that my conclusion doesn't invalidate his opinions, merely suggests that some of his core assumptions are faulty.

I think before we can have a legitimate, honest debate over this or any other topic, we have to first all agree on which playing field we're actually on.

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In reading the first section, I believe this author makes a fundamental mistake that is prevalent in our society today: Ignoring the middle.

Liberal / Conservative is not a binary state. Socialist / Capitalist is not a binary state. There is a middle ground.

To me, with respect to regulation and "socialist" policies, the current crop of "liberals" are men who just came in from the desert, thus believing that water is essential and everyone should be provided with thousands of gallons of the stuff to live in, while the current crop of "conservatives" are men who have barely escaped drowning and have thus dedicated their lives to banning all water. The truth is somewhere in between: the "liberal" policy will drown us all, the "conservative" policy will have us all dead of dehydration.

So too of communism vs capitalism. Yes, Communism SOUNDS nice, until you factor in human nature and (for just one example) the fact that once the rewards of personal effort are removed from the equation, there's little advancement that people will make, because there's no personal incentive to do so. Communism works WONDERFULLY in families. It CAN work in a small "clan-like" group of people who all care for and love each other. It doesn't work at all in larger groups, where people no longer recognize "the good of the masses" as sufficient motivation to continue working.

Also, since there's ALWAYS someone in charge making sure the system runs, the theory ignores the tendency of power to corrupt those who have it, leading not to a completely egalitarian society, but to a society with a lot of depressed people under the thumb of "the party".

Turning to capitalism. Again, the Libertarian argument SOUNDS great, set up competition and the need to compete fairly in a free market will make everyone behave nicely, so there won't be any need to artificially force them to.

But this ignores several factors. First off, without anti-trust regulation, pretty soon you don't HAVE a free market, you have a small number of big fish, swallowing up all of the smaller fish and then collaborating to keep prices artificially high. But a totally free market is regulation free, so you can't have anti-trust regulations, so we end up with a number of monopolies and two or three major corporations in other markets, "competing" with each other, but ultimately finding more profit in collaborating rather than fully competing. Sure, they'll pounce if there's blood in the water, but as long as there is mutually assured destruction, they'd rather play nice... with each other.

Also, it's very hard for me to see how anyone can still believe in free market economies when we've been so effectively lied to by all corners in the last decade or more. The basis of the free market leading to proper behavior has at its heart that people know what's best for them.

Now, when it comes to two different barbers, that's true. If one guy gives a good haircut and the other a horrible one, you know where the value is. If one guy charges a lot more than the other, you know where THAT value is. You add up all of the values and determine which barber to go to. If everyone comes to the same conclusion, then the other barber had better either change his ways or go out of business.

But suppose you were blind (a horrible caricature of blindness which serves only for the purpose of this example, but which pretty well sums up the state of humanity in more complex arenas) and everyone else you knew was, too, and the only people in town who could see were the two barbers.

Now one barber tells his or her customers how horrible the other barber's hair cuts look, and since the patron can't see, the barber takes the money directly from the patron's wallet and tells them how lucky they are that he's not over charging them, like the other guy. The other guy is ACTUALLY charging less for a better hair cut, but is humbly letting his work and prices speak for themselves, rather than maligning his competitor.

Now there's a "common knowledge" that the more-expensive, less talented barber is "the guy who gives a good haircut and charges a fair price", and more and more people go to him, while the guy whose actually acting in their better interests loses customers.

In a totally free market economy, where are you going to get the information on which drugs are safe and effective, when there are still people who take Shark Cartilage pills because "sharks don't get cancer", even though both the claim and the claimed benefits of the supplement have been proved false?

Or when you see product after product advertised with "personal testimonials", ignoring the fact that there IS random chance in the world.

If you have a stomach ulcer, and you take a pill for a month and your ulcer goes away, you're going to see a correlation, and you'll be willing to tell people that the pill worked for you.

But if you look at any 10,000 people with ulcers in any month, some number of them will heal spontaneously, in the absence of any treatment at all. Give all 10,000 of them regular sugar pills, then find the ones whose ulcers healed (naturally, not due to any sugar pill), and put each of them in front of a camera, and you have an effective commercial that convinces a significant portion of the world that your sugar pills cure ulcers.

Used in reverse, it's why Dow chemical took such a beating over silicone breast implants, when there's no scientific indication that they were anything but benign vanity items.

In any population of hundreds of thousands of women, some are going to develop all manner of illnesses... because that's how illness works. But by statistical chance, a few of them get the same disease in relative proximity to each other and decide that the implants caused the disease (even though they did not), and so they file a law suit.

An unscrupulous (or unscientific) lawyer goes looking for women with both breast implants and that disease and parades a long stream of them in front of a judge, never noting that they had filtered only the 3% of women with implants who had this disease and ignored the 3% of women WITHOUT implants who ALSO got the disease in the same period, and pretty soon it appears convincing to judge and jury that there's a correlation... and Dow chemical loses. Big time.

So, my conclusion to this rant is where I started: The truth lies somewhere in between. Too much regulation strangles, not enough leaves the powerful free to victimize the weak for their own gain. Too much free market capitalism is just as bad as too much socialism for the average person.

Which, of course, leaves us in the unenviable position of debating over WHERE on the spectrum is the best place to be, but THAT is the debate we need to be having, not looking at the end points and pretending that you have to be in favor of one or the other, and nothing in the middle.

(This very much reminds me of the arguments about the "Laffer curve" and Reaganomics, but I've gone on long enough for this time, so I'll let that one drop, unless someone asks me to continue...)