Citing a recent report in The Economist, Scott Sumner (writing over at EconLog) highlights some ill unintended consequences of restricting the ability of the competitive price system to discipline and to allocate managerial talent . A slice:
It’s tempting to think that we’d be better off if we severely limited the ability of bankers and businessmen to amass large fortunes. But so far no one has figured out how to achieve a dynamic modern economy without rewarding merit. The sad decline of the once dynamic Japanese economy is a case in point.
Writing in the Journal of Policy Analysis and Management, Brian Mannix and Susan Dudley explain the limits – and dangers – of using behavioral economics as an excuse for government regulation . (gated)
Most people understand generally that businesses are extremely cost-conscious, operate on thin profit margins, and have to operate as efficiently as possible to survive and stay in business, and will shift their factories and production facilities from high-wage to low-wage countries. But then many of those same people seem to think that small businesses and restaurants in cities like LA who operate on razor-thin margins and who employ minimum wage workers can somehow easily absorb a 66% increase in their labor costs? The eventual $6 per hour increase in LA’s minimum wage will increase the annual cost of employing a full-time minimum wage worker by more than $13,000 (including employers’ share of payroll taxes). No wonder the LA business community objected. In comments I featured before on CD, raising the minimum wage to $15 per hour is not a political problem, it’s a “math problem.” And the “new math” of a $15 minimum wage will break the system for many restaurants and small businesses.
The core of President Obama’s sales pitch to America was that the program, which he called the Affordable Care Act, would “bend the health care cost curve” and save an average family $2,500 on their premiums each year. How would it accomplish this feat? Essentially, he said, by forcing uninsured “free loaders” who show up in the emergency room to obtain free care to either buy (subsidized) coverage on the insurance exchange or sign up for the expanded Medicaid program. The point was that if they had coverage, they’d get cheaper care sooner in a doctor’s office rather than more expensive care later in a hospital emergency room.
Things don’t seem to be working out that way. ObamaCare is indeed bending the cost curve—but up, not down. There is no better evidence of this than the recent rate filings by insurance companies.
Every year, companies selling coverage through ObamaCare’s exchanges have to ask state regulators to approve their premiums for the following year—a practice more appropriate for the Soviet Union than an allegedly free-market economy. And this year, according to several news reports , some are requesting increases of over 50 percent.
Tim Carney explains that it would not be inaccurate to rename that great geyser of cronyism, the U.S. Export-Import Bank, the “International Bank of Clinton” – although, as Tim says, Ex-Im remains, at the end of the day, the Bank of Boeing .