Posted by: graemebird | January 30, 2007

Principles Of Creative Public Policy Development.

Reworked from Catallaxy:

Part 1 (The Main Part)

“People who want to should also be allowed to opt out of Medicare in return for tax cuts. The tax they save would be used to buy health insurance, with the balance paid into their Personal Future Fund to cover everyday doctor’s and pharmacy bills.”

Lets split this up:

“People who want to should also be allowed to opt out of Medicare in return for tax cuts.”

Yes you bet. Its just a disgrace that we cannot do this already.

And it brings up a tangential point that a safety net would be possible but the incentives tweaked such that more people opt in then opt out each month.
The tweaking could be hard-wired into the legislation.

And if it wasn’t happening that more people were signing off then signing on then the incentives could be tweaked until it WAS happening.

Such hard-wired gradual carrots and sticks would in itself be a good phase-out in getting to economic freedom.

But here’s where he goes off the beam….

“The tax they save would be used to buy health insurance, with the balance paid into their Personal Future Fund to cover everyday doctor’s and pharmacy bills.”

Actually no he doesn’t go off the beam.

I read it wrong and thats perfectly right what he’s saying but its a second-best option to encouraging savings more generally.

Why FORCE PEOPLE ultimately at gunpoint to sock money away in mandated, regulated, snooped and inspected accounts when what you could do is get rid of the taxes on interest earnings and perhaps even make dividends a tax-deductible expense for business?

Perhaps in opting out the citizen would swear an oath that they will sock enough of their money away so they cannot possibly be a burden in the case of sickness.

I now want to turn around and do the Popper thing and attempt to falsify and critique what I’m saying above.

The damage done from decades of Keynesianism and currency debauch has caused our society such grave ulceration and corrosion that many of us have lost the ability to save, and we carry incredible debts and the ones carrying the debts are often the lucky and more able/virtuous ones.

So now it might be the case that compulsary savings is the only way in the interim to stop various utilitarian tragedies from happening.

But if this is the case lets get to repairing the damage that Keynesianism and currency debauch has wrought!!!!!

I don’t see a provision for such societal healing in the proposals above.

Lets have monetary policy such that the growth in total spending is postive but less then the growth in output. Lets make it that way and lets keep it that way.

Lets take those taxes off interest earnings and make dividends tax deductible.

If we are going to fight compulsion with lesser compulsion, as Saunders seems to (rightly) want to…….. then lets at least start repairing the problem that would seem to make this compulsion necessary.


Compulsion is a bad thing and we want to be reducing the level of compulsion in total all the time.

But a short, sunsetted regulation is far less of a put-upon and offence against natural justice, then a law that stays on the books indefinitely.

And since the short (lets say) 18 months regulations that I’m about to suggest, would be in conjunction with eliminating greater compulsion, then this scheme I will describe ought not be ruled out OUTRIGHT.

And the scheme would be that after you make dividends tax deductible for business you FORCE companies to sell their shares in in as convenient a way as possible for the low-paid worker.

Currently I would have to pay many tens of thousands of dollars for a single share in the company Berkshire Hathaway.

But if we want the low-paid worker to accumulate a massive buffer of savings so that there is not the perceived (or actual) need for welfare then we want it both possible, easy and CONVENIENT for low-paid individuals to buy shares in companies and for the dividends to be linked to his bank account.

So AN EXTREEEEEEEEME scenario of what I’m talking about MIGHT BE that you go to the bottle-shop to buy a carton of beer…… and you hand over your LOOSE-CHANGE-TIN, with the slit on the top of it.

…and you hand over also a smart card with a bank account attached
And you are buying a carton of beer AS WELL AS shares in Carlton Breweries at the same time.

And the purchase of beer covers the transaction costs.

Now summoning Popper again I want to say that THOUGH…


That though 18 months of regulations IS far LESS offensive then open-ended compulsion we can do much better then my suggestions above.

(psssst? Why not try asking?shhhhhhh don’t tell anyone. Whats wrong with asking? Am I a sinner for asking about ASKING? Surely I embarrass myself for suggesting such a weak namby pamby thing?)

Why not try asking?

Why not just get out there and talk to any business-group and on any radio station and try and persuade decision-makers in companies and people more generally to do whatever low-cost thing they can to make buying shares more convenient for poorer people.

Why not try asking to split shares that cost hundreds or thousands of dollars up into shares that you can buy by whacking a 50c peice into a slot and a smart card into another?

Why not ask them to split these shares up so that all shares are ‘penny-shares”?

By and large we are talking about good people here. And even the bad minority and perhaps even ESPECIALLY the bad minority amongst all these good and hard–working folk have a concern for their public image and that of their company.

The good people and the closet psycopaths alike will see the sense in this scheme and good people are not to be treated with such contempt as to point guns at their head.

We don’t, afterall, want our businessmen wasting great amounts of money on schemes like this.

Even if they are MY SCHEMES and therefore bloody good ones.

Let each company who wants to co-operate with these suggestions do so in such a way as is convenient and cheap for them.

Why point guns at people when you could roll this massive effort in persuasion out in conjunction with making dividends a tax-deduction?


There are two tangential matters I have to deal with here before I explain why I seem to be playing silly-buggers. Why I appear to be lost in silly-buggery….


Monetary debauch and Keynesianism……
((((( and the consequent high debts and low savings that the victims of these twin evils wind up with))))))

……lead to us relying on insurance to a very great degree.

There is always a place for insurance. Even in a free society there will always be insurance. But the afformentioned worms in the apple mean that we use MORE insurance, and insurance is more expensive then it otherwise would be.

And this overuse of insurance is one of the things that buggers up the cost-effectiveness of the medical proffesion.

It must be emphasised that the problem is not to do with the demand-side or the supply-side for insurance.

The problem is not the insurance companies or the people who buy insurance….


The problem is Keynesianism and currency debauch.
The problem is that all this insurance hampers the normal operation of an already highly rigged market.


The medical labour market is by far the most rigged market in the world.

That was my second point right there.

How do the two points dovetail to fuck up the poor, the old, the sick and the weary?

Well its the case that alll this insurance amplifies the effects of this rigged market to make sure that the market for medical services doesn’t act like a PROPERLY competitive market in a free society acts.

A properly competitive market in a free society produces greater cost-effectiveness for its output every year.

If the market isn’t producing greater cost-effectiveness every year you’ve either been subject to nuclear attack or its a rigged market.

So we have got to work at fixing the market for medical services and then the value-for-money of medical services will fall very rapidly.



Its about deregulating. Its not about more compulsion.


As rigged as the market for medical services is the Macromancy that leads to OVER-RELIANCE on insurance makes things much worse.

It makes for a situation where costs are always increasing. Perhaps the quality improves (thanks largely to our American friends) but the costs of medical services just gets more and more and more in real terms.

If you doubt that it is (macromancy-created over-reliance on) INSURANCE that is indicted here…………

……think about those medical services that you cannot get the insurance to pay for?

Boob Jobs? Other cosmetic surgery?

Laser surgery?

The prices go down (in real terms) for procedures where you cannot typically use insurance.

Of course they would go down MUCH FASTER if we sorted out the medical services labour market.


Whatever scheme we have then it must encourage SAVINGS over insurance.

A lot of people that Mr Saunders might be wanting to strong-arm, to take out insurance, might be so debt-free and wealthy they don’t need it.


In fact we can never be free of this welfare, and poverty, and all these nasty choices, unless we get rid of the Macromancy.


The main point…..

What was my main point and why the faux-Popper silly-buggery?

The point is that David Saunders policy options are far better then the status quo.

And as well he has the PRINCIPLE right.

IE: That of encouraging people off the public tit but still having some sort of safety net AS AN INTERIM MEASURE.

But if we are willing to toss ideas around we can usually find STILL BETTER options.

And the way you find better policy options is to ask the following questions:

1. What is the problem(s) that the proposed policy is trying to deal with?

2. Can we solve these problems and others AS effectively as the current proposal would………… LESS effectively but at a far lesser cost or MORE effectively…………..

….. But with a:
(a) Lesser level of total compulsion
(b) A lesser total non-defense governmental footprint…. and
(c) With a view to limiting the time period of any COMPULSION that your new proposed policy (regrettably) involves?

On balance then we must admit that Mr Saunders’ ideas are far better then the status quo.

But I say we cannot support them unless he can rework these proposals and put them into a less-open-ended form.

That goes for Mr Charles Murrays proposal as well. A good shock-absorber to wean us all of blood-sucker-central but not to be accepted without a built in phase-out.

All such schemes should come with their own phase-out.

Government INSTITUTIONALLY is such a hard-wired guns-in-the-face bully-boy and blood-sucking-sucubis, that we cannot campaign for any compulsion that could get itself locked in.

I know that saying we cannot support this draft of Davids policies is paradoxical when one has to admit they are massively superior then the status quo.

But he has to go away and come back with a new draft that makes the compulsion a thing that has its own phasing out imbedded within the scheme itself.

And he’s a smart, well-meaning guy and he can do that.

Good show Saunders.


Bring on the new draft.

PARTS II AND III (Only included to drive home some critical points about the economics of medical services:

National Health Insurance is no good Jason.

Because it will fuck up the market so that we don’t get better cost-effectiveness each year.

You wind up having old sick people having to pay $500 a day for even passing quality.

Its not on.

Its unacceptable.

Yes its true that we ought not pull the rug from under peoples feet in some sort of orgy of ideological piety.

But national health insurance is not the safety net that you were looking for.

Keep looking.

“My point is that this opting out policy might as well come right out and say ‘It will abolish Medicare’ because that’s essentially what it will do over the long run. ”


And a good thing too.

And with it we abolish one of those things that keep medical costs heading to the roof rather then falling through the floor.



  1. What do you think Graeme?

    “We could end welfare (social security, welfare and health insurances) forever in one hit. We could end all taxation funding such expenses immediately.

    1. Corporatise all Government business enterprises.

    2. Prepare all crown land not affected by native title for sale by making rights over real property extend from the core to the heavens. Extend this over sea bed and sea lane rights in our exclusive economic zone.

    3. Auction off the land, pay out the proceeds to citizens and distribute shares equally amongst citizens after pensioners, long term welfare recipients and invalids have been paid out in cash for the present value of their benefits from the land sale and the auctioning off of some of the shares in the newly privatised public companies.

    Why opt out of it when we can make it utterly unnecessary. Such a change in wealth is permanent and not temporary and so productive, not wasteful activity would ensue.

    Radical, but not unfeasible or nuts.”

  2. Mark,

    I would think that the fundamental rationalisation of state funded welfare is not about redressing an inbalance in wealth but rather an inbalance in financial management ability. You can give some people huge sums of wealth and they will still managed to become impoverished and in many instances they will achieve this state of poverty quite quickly. I do think that it is wrong to assume that this is true of most people, however I think it is certainly true of some people. The alternative to state funded welfare would be charity and wealthy benefactors. Some people in society do need assistance to function, the issue is whether the government is the right institution to provide that assistance.


  3. With that massive trasnfer of formerly unrealised assets and 40% tax savings to private citizens, this is possible.

    We should keep welfare because a small percentage of people will always be poor due to bad choices?

    Obviously not. This is a utilitarian question.

    Based on average estimates of deadweight losses of 40%, GDP would increase by about 16% of the tax bill, which is about 33% of GDP. A one-off permament increase of about 5.28%. Growth rates should increase too given revenue has been cut by 40%.

    Given the problems with staterun welfare, why could this fail or be the least optimal choice?

  4. It may be a good idea (and probably is). I was just probing your assumptions.

  5. Three criticisms:

    1. Not practical

    2. Infeasible.

    3. Some people will in the future fall to absolute levels of poverty.

    i) It has administrative costs, similar to any other conveyance or administration of public companies.

    ii) Some figures would be great to work on. I concur. One third of resources are owned by the crown, in addition to GBEs.

    iii) Making everyone else subject to a social welfare system is not utilitarian or moral. See the dynamic macroeconomic effects mentioned above as well as probable levels of philanthropy also mentioned above.

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