[ExI] More on Health Costs

Lee Corbin lcorbin at rawbw.com
Thu May 28 03:07:15 UTC 2009

I'd like to quote all of Dan's excellent post, but
instead I should just go back myself and read the
whole thing once more. And probably a certain number
of other people here should too.

Dan wrote:

 >> Health Industry means jobs for people.
 > ...My guess is you're talking about more public
 > funding of healthcare meaning more jobs overall
 > -- as if the same or less public funding of
 > healthcare must be the same or less jobs overall.
 > There seems to be no reason to believe there's a
 > relationship here.
 > My guess is more public spending on healthcare
 > might mean more healthcare jobs, but less jobs
 > in other sectors of the economy.

What matters is not the number of jobs, but how
much wealth is produced by jobs. Paying people
to do nothing or to just fool around destroys
wealth. But you summed up this whole train of
thought in referencing the "Parable of the broken

    The parable describes a shopkeeper whose window
    is broken by a little boy. Everyone sympathizes
    with the man whose window was broken, but pretty
    soon they start to suggest that the broken window
    makes work for the glazier, who will then buy
    bread, benefiting the baker, who will then buy
    shoes, benefiting the cobbler, etc. Finally, the
    onlookers conclude that the little boy was not
    guilty of vandalism; instead he was a public
    benefactor, creating economic benefits for
    everyone in town.

 > http://en.wikipedia.org/wiki/Parable_of_the_broken_window

The key phrase is "the broken window makes work...".
It sure does, but no wealth at all is created in the

It's very similar to the way that people believe you
can spend your way out of a recession. Sometimes I
think that the Keynesians suppose that if we just had
the right kind of magic pill that everyone could take,
---which would simply restore complete full confidence
in everyone that everything is fine---all the problems
associated with a recession would disappear.

 > Actually, I think one effect of a recession -- basically, the
 > process by which the economy tries to recoordinate after an
 > unsustainable boom -- is unemployment as people shift from
 > unsustainable jobs -- e.g., in the US, from finance, real estate,
 > home construction, and related industries that were obviously not
 > sustainable to ones that are (a priori, no way to tell exactly what
 > these are).  But the more important aspect of the recession is
 > cleaning up malinvestments from the (unsustainable) boom.

Artificially low interest rates will always create malinvestment,
as should be obvious to everyone. That it isn't obvious to
everyone causes my paranoid circuits to fire, and wonder just
how much in the grip of financial elites are all of our habits
and prejudices, and even our whole economy.

It's those who are nearest the new, hot money who prosper,
(the big players and insiders of your footnote), and it's
everyone else whose money depreciates in value.


 > Also, any interference in reallocating capital or in the cleansing
 > process will prolong the recession and might lead to a secondary
 > unsustainable boom.  This is being done now -- as is the case with
 > most recessions -- by bailouts, lowering the prime lending rate,
 > continued but increasing inflation [of the money supply], and more
 > regulation and control of investment (e.g., the prohibition on
 > short-selling last year**).
 > Regards,
 > Dan
 > *  I personally know people who use unemployment as a way to take a
break from work -- who are actually eager for a lay off.
 > **  In this example, prohibitions against short-selling make it much
harder for asset prices to re-adjust.  This is similar to other forms
of price control and it tends to protect big players and established
market players -- and, notably, such big players and the established
insiders lobby for prohibiting short-selling to protect their market
position at everyone else's expense.

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