Losing control of the mechanism established [Milton Friedman]

The entire video is excellent. However, one may very well find insight by paying particular attention to the video from time period 6:00 to 7:04.

PIIGS: Remember it is Portugal, Italy, Ireland, Greece and……Spain.

“…the historically important central puzzle of economics was to explain how independently acting people in an unplanned decentralized, private ownership economic system allocate their resources and, in particular, to explain how it is that the uses they seem to make of resources seem to be well coordinated”. - Harold Demsetz (1)

Independently acting people in the unplanned aggregate economic environment coordinate well. Man-made systems do not coordinate well in a vast and aggregate economic environment. (2)

Imagine if one is faced with having to “unwind” man-made political systems masquerading as economic systems in Europe. Europe being a vast economic environment. The unwind becomes a crisis for many as the man-made politico systems, the larger and more complex they are, breed larger and more complex negatives that public choice theory explains. (3)

Robert Higgs at the Independent Institute has made the assertion that legislation leading to regulation “ratchets up”. That is, little is ever repealed, merely more is added on. Hence we have a corpus of regulation that can never erode, only expand. A zero floor of erosion in corpus with all new gains in regulation becoming part of the corpus – rarely or never to erode. (4)

Imagine being on the ground in Europe and trying to ratchet back/unwind all the man-made politico silliness and during every step of the way encountering Marie, Thomas, and Peter living off of, and depending upon, the zero floor of erosion of corpus that sustains his/her income in one form or another.

Notes:

(1) From Economic Man to Economic System, Harold Demsetz
http://www.amazon.com/From-Economic-Man-System-Institutions/dp/1107640857

(2) F.A. Hayek, from the essay The Pretense of Knowledge

(3) James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958

(4) Dr. Robert Higgs, http://www.independent.org/aboutus/person_detail.asp?id=489

Hippocratic Ethic Becomes the Veterinary Ethic? And about that Federal Commission for the Coordination of Comparative Effectiveness Research (FCCCER)….

If one considers F.A. Hayek and his writings, one important proposition discussed at length by Hayek was the mundane, real time, applicable-on-the-spot, grand attempt to create maximum utility knowledge of the many and the plans thereof.


Hayek explained the plans of the few which are based on non-real-time, average knowledge of the "expert", regarding an impossible to calculate number of situations, calculating with the expert's average knowledge of most situations, that ends by yielding average or below average results. -Or- the plans of the many vs. the plans of the few.

Hayek's overriding point being: as an economy enlarges and becomes more and more complex, no one single mind or handful of minds, the plans of the few, can possibly comprehend let alone plan the dynamic and ever changing number of situations occurring. Conversely, as an economy enlarges and becomes more and more complex, that the spontaneous/emergent order resulting from the plans of the many, that is, the mundane, real time, applicable-on-the-spot, grand attempt to create maximum utility is the very best and very decentralized way to deal with an ever enlarging and increasingly complex economy.


Yet the "one big brain" idea persists in that some central brain can out think, out smart, out plan and basically trump the mundane, real time knowledge of the many, and the plans thereof. Further, the "one big brain" error, the classic example thereof, is the price fixing schemes of the former Soviet Union and the price planners that somehow had the knowledge to set price of every last item in every last situation. The results were beyond abysmal.

Let us also add in that not one price fixing scheme, never-ever, in all of recorded economic history, has been successful.

However, "the few" remain undeterred! Enter Federal Commission for the Coordination of Comparative Effectiveness Research (FCCER):


“For centuries, my predecessors and I have been inculcated with what has come to be called the “Hippocratic Ethic.” This tradition holds that I am ethically required to use the best of my knowledge to recommend to my patient what I consider to be in my patient’s best interests—without regard to the interests of the third-party payer, or the government, or anyone else.

But gradually the medical profession has been forced to give up this approach for what I like to call a “veterinary ethic,” one that places the interests of the payer (or owner) ahead of the patient. For example, when a pet owner is told by a veterinarian that the pet has a very serious medical condition requiring extremely costly surgery or other therapy, the veterinarian presents the pet’s owner with one or more options—from attempt at cure, to palliation, to euthanasia—with the associated costs, and then follows the wishes of the owner.

Several factors in combination are bringing this ethical approach to my profession.

Since the mid-1980s, Medicare has imposed price controls on health care providers. Over the years, in order to accommodate increasing Medicare utilization, physician payments have steadily dropped.

Meanwhile, the regulatory burden on physicians has increased. In the last few years, CMS required all providers to adopt electronic health records or face economic sanctions from Medicare. It is the ultimate goal that every health care provider, including pharmacies, will have electronic databases that will be accessible to the U.S. Department of Health and Human Services (HHS).

In 2009, as part of the so-called stimulus bill, the Federal Commission for the Coordination of Comparative Effectiveness Research (FCCCER) was created. Its mission is to collect the data culled from all electronic health records and make recommendations regarding the comparative effectiveness of drugs, procedures, and therapies. In rendering advice, the FCCCER will essentially answer the following question: What is the most cost-effective way of allocating a fixed amount of resources among a population of roughly 310 million people?

With this same question in mind, the U.S. Preventive Services Task Force, a committee that reports to HHS, concluded in 2009 that mammogram screenings should not be recommended to women under age 50. This caused an uproar among both private health care providers and breast cancer advocacy groups, and the task force soon backed down. Similarly, in the fall of 2011, the task force recommended the abandonment of certain routine prostate cancer screenings. Once again, health care providers and cancer advocacy groups protested, and the task force rescinded its recommendation.

In 2010 the Patient Protection and Affordable Care Act established an Independent Payment Advisory Board (IPAB). Beginning in 2014, the 15 presidential appointees on this board will determine what therapies, procedures, tests, and medications will be covered by Medicare, using advice provided by the FCCCER. Such determinations will then be used to design the coverage packages for the non-Medicare insurance offered through the government–run exchanges. The decisions of the IPAB are not subject to Congressional oversight or judicial review.

Meanwhile, in an effort to control costs now, CMS has developed practice guidelines and protocols for physicians to follow. Committees of health care academics and statisticians developed these guidelines, using data from large population samples.

These protocols govern the therapeutic decisions made by the health care practitioner—right down to the pre-operative antibiotics a surgeon may order. Despite the fact that several recent peer-reviewed studies concluded that the protocols have had no positive effect—in fact, one study showed post-op skin infections increased since the protocols were instituted—CMS imposes financial penalties on hospitals that fail to get protocol compliance from their medical staff.

Medical students and residents are now being trained to follow federally-derived protocols and guidelines as a normal part of medical practice. As a result, this new generation of doctors will be less inclined to challenge the recommendations of federal task forces and agencies. Some academics also worry that “teaching to the protocol” might discourage independent thinking and the use of intuitive knowledge, two traits essential to the practice of good medicine.” - The Coming Medical Ethics Crisis , Reason.com, Jeffery Singer, 03/15/2012












　

Did the European Union [EU] Have a Counterpart to the Federalist Papers?

The Federalist Papers, the collection of the eighty-five articles written from 1787-1788, where/are important in many ways. One very important point about the federalist papers and the discussion of a constitution based on a central government is that the discussion was widely published in newspapers and periodicals. Therefore, wide accessibility was accomplished and consequently widely discussed by the general public.



Did the European Union [EU] Have a Counterpart to the Federalist Papers? Yes and no.

In a most excellent essay entitled Does the Treaty of Lisbon Need A European Version of the Federalist Papers? , Dr. Timothy S. Boylan, 04/2008  discusses this very subject. (1)

Several excellent points exist in the essay. Two excellent points are:

(1) the lack of a Federalist Papers, 85 articles published in widely accessible public media, leading to a wider public discussion/understanding: "..little guidance in term of simply, clearly, and effectively communicating these realities to the public". (2) That is, the under pinning's, theory, concept, etc. of the "treaty" aka "constitution" of the EU was not and still is not widely communicated to James and Jane Goodfellow,

(2) a discussion similar to the 85 articles making up the Federalist Papers does exist, but it exists in such obscure places that the public would have no ready access. (3)

One could surely look at the above two points in many different ways. One way to look at the Federalist Papers is: even today the Federalist Papers are studied, many generations after the fact. That is, the Federalist Papers were not only an open public discussion when originally written, the Federalist Papers remain an open public discussion two hundred years later. Hence wide public access by the original generation , many subsequent generations, right up the current generation, has created a "public" reference point.

For example, although the average U.S. school student hasn't read the Federalist Papers, the concepts of the Federalist Papers are taught in history and civics classes two hundred years later. Hence the "concepts" are discussed, debated, understood or rejected, etc. Two hundred years from today will EU children subsequently growing into adults have the same knowledge, discussion, debate, etc.?

The "general public" disconnect regarding the formation and constitution of the EU is likely another piece of the puzzle regarding the current difficulties in the EU.

　

Notes:

(1) Does the Treaty of Lisbon Need A European Version of the Federalist Papers? , Dr. Timothy S. Boylan, 04/2008. http://verfassungswandel.files.wordpress.com/2008/10/21-boylan-paper.pdf

(2) Ibid

(3) Ibid