08 October 2010

Unintended consequences revisited

Last week I wrote about how some people were actually going to lose their health insurance coverage as a result of the new health care law. USA Today reports today via Bloomberg that the government has reversed course and issued waivers to McDonald's and 29 other companies exempting them from the conditions imposed by the new law. Those employees will now get to keep their insurance, but they won't be afforded the "protections" of the new law. Look at it this way, though: the government actually helped these people more by doing nothing at all.

The whole debacle is a perfect example of the failure of central planning:
The most notable critique of economic planning came from Austrian economists Friedrich Hayek and Ludwig von Mises. Hayek argued that central planners could not possibly accrue the necessary information to formulate an effective plan for production because they are not exposed to the rapid changes in the particular time and place that take place in an economy, and are unfamiliar with these circumstances. Transmitting all the necessary information to planners to accumulate and form a comprehensive plan is therefore inefficient.[13]

Centralized economic planning has also been criticized by proponents of de-centralized economic planning. For example, Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and understand/respond to local conditions and changes in the economy would be unable to effectively coordinate all economic activity.[14]
Ultimately, though, as reported in the USA Today article, it's highly unlikely that the government set out to help these people at all.
"The big political issue here is the president promised no one would lose the coverage they've got," says Robert Laszewski, chief executive officer of consulting company Health Policy and Strategy Associates. "Here we are a month before the election, and these companies represent 1 million people who would lose the coverage they've got."
Those in office need to stay in office so that the can keep "helping" the people.

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