Socialist Democrats have a bizarre way of thinking – most do not understand market economics, in part because they never took time, except to profit from it, and in part because they do not want to understand economics. If they did, they would oppose price controls – and stop pushing them.
The US Congress faces a deficit of quantitative understanding – in 535 members, you get two PhDs scientists, one Ph.D. in math, 17 doctors, 11 accountants. Overlapping that group, roughly 45 majored in economics. Eight in ten members of Congress have zero background in business, economics, or anything quantitative. Yet this group makes huge tax, spending, and quantitative decisions affecting us all. See, e.g., https://www.huffpost.com/entry/lawmakers-background-business-economics_n_934157.
On one hand, we are best served in Congress, as on a jury, by our peers. We also pay for congressional staff, who often have depth – actually, almost always do – in areas members know little about. But those consolations are hardly comforting, when you think that most have never run a business, could not explain how to
Most of those hyped about global warming could not explain how you convert Fahrenheit degrees to Celsius (take 30 off F; half that number is C), how a barometer works (mercury reservoir reacts to atmospheric pressure, pushes mercury up glass tube; high pressure clear, low pressure storm coming), how a radiometer spins (four vanes, two reflective, two white, all black one side, react to photons, reflective ones bouncing with twice momentum, creating spin), or why fewer prime numbers as values rise (more factors), or what a prime number is (not product of two smaller numbers). Yet they will tell us the world is ending – so be ready.
Most who manage tax policy do not – likely – do their own taxes, cannot explain indifference curves (which demonstrate equal preference between two consumer goods), or price elasticity of demand (which can also change with taxes); most who sit on the transportation committee likely do not change the oil, oil filter, or air filter in their car, rotate tires or know what a rocker arm cover is. Still, they decide whether cars with combustion engines will exist in ten years.
Perhaps the most immediate example of blind leading blind is the push for price controls on prescription drugs – which House Democrats want Joe Biden to put in his coming legislation to “Remake American Families Plan” (actually called “American Families Plan”). On one hand, greater transparency in pricing, more quality and price competition, a wider range of alternatives, and less dependency on China – or any monopolists – would be good. Republicans are pushing such ideas, and long have been. Free markets tend to lower prices while rewarding innovation.
Bad planning is putting the federal government in charge of prices, capping them low – so drug research companies, which now spend roughly 20 percent of returns hunting novel cures and treatments say, “forget it.” They would look for economies of scale, new markets for old drugs, no innovation. Or they would cut quality, look for margins in unregulated quarters, the way rent-controlled apartments suffer.
Price controls also cause shortages, as demand at low prices outstrips supply and production. Nobel prize-winner Milton Friedman once noted economists are not good at much, but they can quickly create a shortage by capping prices, and a surplus by creating a price floor.
The main point is that markets are the best regulators of supply and demand, with real consumers of prescription drugs (not ill-informed, all-knowing congressmen) sending clear, authentic, timely signals to researchers, producers, and corporate aggregators of medical talent and capital – showing what is needed, what people will pay for it, and thus what to research, produce, and what the market will bear.
As more people need a cure, treatment, or prevention for a disease, assuming price transparency, competition, and input and supply availability, more innovation, more production, and more drugs become available – and as they do prices drop. In reverse, the potential payback for medical innovation is rewarded – with or without tax incentives.
Now, if you are doubting all this – imagine what would happen if your COVID vaccine had to be invented by a member of Congress, God forbid, or Congress mandated no money could be made on a vaccine or on any other drug, or that socialist medicine would save you – if you were still alive to be saved when they got around to it.
Imagine how many other businesses, creating things you want – from food and bicycles to restaurant experiences and travel options – also depend on that vaccine, on incentives to make it – no price controls.
In short, there is only one way to lower prices and raise quality – and it is not price controls, not mandates from an all-knowing, self-important, non-quantitative, hardly mathematical Congress.
The way to assure a reliable, well-stocked market for quality, affordable prescription drugs is to incentivize innovation, open trade, reward skills acquired, hard work, and investment, assure transparency, ethical and legal behavior, and speed good options to market.
The truth – that free markets generate solutions and price controls do not – is self-evident. America is the proof. That Democrat-socialists want to change all this, control all this, and manage your life too – is proof enough that they should go back to school, or at least stay away from what works. Still, be on guard … price controls are the next big thing, once Democrat spending drives inflation sky high.
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