With American entrepreneurship declining, here's a small roadmap for how regulation is creating friction for new entrepreneurs (let alone millenial entrepreneurs) (Forbes).
Tuesday, July 28, 2015
Read the whole thing (Mises):
So the failure of socialism is not conditional on the culture, time, or place of the victims. Socialism is flawed at its core: the “collective” ownership of the means of production. As such, there is no way to enact a functioning, growth-inducing version of socialism anywhere. In practice, however, the theoretical problems of socialism give way to civil unrest, which is met with state force and results in a death toll higher than any official war ever fought.
"Keep Hope Alive" CrossFit commercial with Constance Tillett from CrossFit South Brooklyn.
Directed by Robin C at CrossFit South Brooklyn with Constance Tillett and David Osorio. For CrossFit inc.
Sunday, July 26, 2015
It’s not just consumers who like the Uber experience and the sharing economy; it’s the drivers, as well.Update: Is technology a natural enemy of "traditional constituencies"? WSJ thinks so:
The New York Daily News recently headlined a column, “Uber Job Beats Working for Yellow Cab,” by one such driver. Rabiul Karim said, “With Uber, it’s like 50 percent stress is gone right there, because you don’t have to look for passengers.” Reducing stress among drivers is a good thing for all of us!
[...] The New York Daily News described the mayor’s anti-Uber plan as “a protectionist crusade for an entrenched industry, absurdly claiming to stand for the thousands of New York passengers and drivers who have flocked to Uber.”
The New York Post noted that the beneficiaries of the mayor’s plan would have been “a yellow-cab monopoly, and fleet owners who’d donated more than $550,000 to de Blasio’s mayoral campaign.”
First, innovative new business models always threaten traditional constituencies, and many of these are Democratic. In New York, for example, Airbnb may be even more disruptive than Uber, because by providing a way for apartment dwellers to make some money by renting out their homes, it is also enabling visitors to make an end run around the high taxes and labor costs (think hotel unions) that help make a hotel room in the Big Apple so pricey.
Friday, July 24, 2015
Steve Forbes on Reason.tv - "You may not love your neighbor but you want to sell to
Markets in action - undermining the caste system in India (Cato.org):
Karl Marx was wrong about many things but right about one thing: the revolutionary way capitalism attacks and destroys feudalism. As I explain in a new study, in India, the rise of capitalism since the economic reforms of 1991 has also attacked and eroded casteism, a social hierarchy that placed four castes on top with a fifth caste—dalits—like dirt beneath the feet of others. Dalits, once called untouchables, were traditionally denied any livelihood save virtual serfdom to landowners and the filthiest, most disease-ridden tasks, such as cleaning toilets and handling dead humans and animals. Remarkably, the opening up of the Indian economy has enabled dalits to break out of their traditional low occupations and start businesses. The Dalit Indian Chamber of Commerce and Industry (DICCI) now boasts over 3,000 millionaire members. This revolution is still in its early stages, but is now unstoppable.
According to Freakonomics, The Economics of Sleep:
And we find that permanently increasing sleep by an hour per week for everybody in a city, increases the wages in that location by about 4.5%.But, as they also point out, there are limits.
Incredibly sad - because their lives weren't already miserable (Reason):
There's strong evidence to suggest that "conflict mineral" regulations in Section 1502 of Dodd-Frank directly led to an increase in looting in affected regions of the Congo.Read the whole thing (Reason).
The result was a drop in demand that caused the DRC's tin, tantalum, and tungsten mines to become much less profitable. Section 1502 succeeded, in other words, at "cut[ting] off funding" to the region's militias. But the militias responded to the change by hurting more innocent people instead of less.
[...] According to Parker, violence increased on two fronts: First, some of the militias in the 3T regions left for greener pastures—in this case, the regions containing gold rather than tin or tungsten mines. They then went to war against the established militias in those places, vying through violence for control of the now-more-lucrative flow of gold.
But other militias saw a different path to replacing their lost income: looting local villages. Indeed, Parker and Vadheim found the incidence of looting increased by nearly threefold in the two years after Dodd-Frank was enacted. As a side-effect, violence against civilians shot up as well.
A succinct rebuttal to a ridiculous post in the Huffington Post (PJMedia via Instapundit):
Modern progressivism keeps its adherents riveted to the narrative by hypnotizing them with two simple, all-encompassing mantras: spend more on education and spend more on infrastructure. These are the perfect arguments for non-thinking puppets to make, largely because both are evergreen (there’s never enough spending, according to them) and involve polysyllabic catch words that make the puppets feel as if they have functioning intellects.Ed Driscoll asks at Instapundit: "shouldn’t the Huffington Post “data justice” director want to ban air-conditioned electrically-intensive server farms first? Or at least set an example to the world by demanding your own Website voluntarily going offline?"
That’s how you get to the a place where you find the city bus more innovative than Silicon Valley.
Wednesday, July 22, 2015
In 1952, Austrian architect Victor Gruen dreamed of building the perfect downtown on an immense plot of windswept prairie grass, just south of Minneapolis. Residents would walk through mixed-use developments, flush with greenery and eateries. Public spaces would flourish amidst the amenities of urban life, from apartments to townhouses and clinics to schools. Gruen’s paradise never materialized. Instead of fashionable promenades and village greens, the city of Edina, Minnesota got the Gruen-designed Southdale Center—the original shopping mall. [...]As John Tierney notes - "To survive, the old shopping centers need to reinvent themselves, and suburban officials need to change the zoning codes that have stifled innovation for so long by making it illegal to build homes near stores and offices."
Southdale Center sat like a city on a hill, drawing shoppers from the Twin Cities and beyond. It became a destination address all by itself. But Southdale was never meant to end at its walls. “Gruen’s original vision was to foster community,” said D. Jamie Rusin, an architect and planner speaking recently to The Wall Street Journal. “He originally saw the mall as a place you could go to shop, eat, see the doctor, have an office—a community center for people who didn’t have one.”
What Gruen imagined for Southdale was a not-too-distant cousin to today’s New Urbanist vision. It was really just an old-fashioned town square dressed up in modern clothes. Around it were to be clusters of walkable mixed-use developments, built with an eye toward providing life and space for community to flourish. Gruen recognized that postwar American suburbs were being built to conform to the arterial highway system. The traditional Main Street was fading. Gruen’s mall would be the new urban core. The goal was to encourage families to cluster in residential communities off the highway, where they could walk and talk with their neighbors as they shopped.
Since then, however, Hanoi has transformed itself more dramatically than almost any other city in the world. Today, the city is an explosive capitalist volcano, and Vietnam is rapidly on its way to becoming a formidable economic and military power. “Many revolutions are begun by conservatives,” Christopher Hitchens once said, paraphrasing John Maynard Keynes, “because these are people who tried to make the existing system work and they know why it does not. Which is quite a profound insight. It used to be known in Marx’s terms as revolution from above.” That’s exactly what happened in Vietnam, though the revolutionaries weren’t conservatives. They were Communists.
Tuesday, July 21, 2015
At least according to an Uber funded study... a study that frankly, makes sense:
According to one Uber-funded study released today, they do.Anecdotally and proven by its pervasive success I'd say that Uber is more convenient and cheaper than cabs for rich people, so why wouldn't that hold true for the poor? Update (NYT): Uber wins in NYC. Or more accurately, the people of NYC win.
Research group Botec Analysis found that summoning an UberX, the company’s budget tier, took less than half as long as calling for a taxi in several low-income neighborhoods in Los Angeles. What’s more, the trips themselves cost less than half as much. Calling for an UberX was more reliable and wait times were shorter, according to the study.
“The answer was clear-cut, and consistent across neighborhoods and days,” writes study co-author Mark Kleiman.
To gather data, pairs of riders called for a taxi and an Uber along pre-planned routes. The riders recorded the time between picking up the phone or opening an app and getting in a car. They also tracked how much each ride cost, then switched off. After each ride, whoever took a taxi last time took an Uber next time.
Kleiman says the riders didn’t know Uber had funded the effort but acknowledged that Uber’s backing “makes some skepticism about our results natural and proper.”
“We would be happy to share our data and methods with other research teams for re-analysis and replication,” he says.
Update #2 (TechCrunch): A reason Uber prevailed? Uber counters NYC's mayor's opinions with data - "while de Blasio has argued that Uber and other ride sharing companies are the main reason for NYC’s increased congestion, the data revealed by Uber today suggests otherwise." The post also notes, "records obtained by TechCrunch show that the NYC Taxi Industry has donated over $500,000 to Mayor de Blasio’s campaign, and are the second-highest donor behind the real estate industry. Additionally, the bill capping new driver sign-ups was first sponsored by the taxi industry three months ago."
Monday, July 20, 2015
Writing in Fortune, liberal economist Dean Baker claims that the financial regulations enacted in reaction to the financial crisis of 2009, is a success:
First and foremost the complaint was that the bill would make it more difficult for businesses to raise capital. This argument has not held up well in the last five years. Certainly the businesses that can raise money in the stock market have little basis for complaint. With price to earnings ratios in the stock market at their highest level since the tech bubble, these companies can raise money at extraordinarily low prices.Let's not forget that the crisis resulted from subprime lending on overpriced real estate. "Of the 19.2 million subprime/low quality loans on the books of government agencies in 2008, 12 million were held or guaranteed by Fannie and Freddie" (The Atlantic). Now that the US government owns all of Fannie and Freddie, you might think they would be quite conservative. You'd be wrong: "Fannie Mae and Freddie Mac unveil mortgages with 3% down payment" (LA Times).
This is true for bonds as well, as we see both very low interest rates and unusually low spreads between the interest rate paid by even relatively high risk companies and Treasury bonds. In fact, these spreads are so low that Federal Reserve Chair Janet Yellen saw fit to warn markets about a bubble in the high yield market last summer. And for smaller businesses, according to the Federal Reserve Board’s data, banks made an average of more than $230 billion in new loans in the last three years, up from an average of just over $200 billion in the 3 years before the crash.
We also had warnings that the Consumer Financial Protection Bureau (CFPB) — the creation of which was authorized by Dodd-Frank — was going to impose such high costs through rules and regulations that it would sharply limit access to consumer credit. This also does not appear to be happening. Consumer credit overall is up by almost a third since the passage of Dodd-Frank. In fact, the news in the consumer credit market is in the abuses in the subprime auto loan market, a market not covered by the CFPB thanks to lobbying by the auto dealers.
Meanwhile the facts show that it's gotten more difficult for small businesses to get credit (Bloomberg):
The number and value of small loans has shrunk substantially over the past five years. Federal Deposit Insurance Corporation Call Report data show that both the number of and the inflation-adjusted value of non-farm, non-residential loans of up to $1 million—a common proxy for small business loans—declined by 27 percent fromk June 2008 to June 2013.The WSJ goes further:
Twenty-five percent of respondents to the third quarter 2013 Wells Fargo/Gallup Small Business Index, a survey (PDF) of approximately 600 small business owners conducted every three months by Gallup on behalf of Wells Fargo, said that obtaining credit was difficult over the past 12 months, while 22 percent said it was easy. In the third quarter of 2008, those percentages were 14 percent and 41 percent, respectively.
Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day. Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans. [...]Sounds like a fail to me.
[...] Adhering to the new rules takes time and money, reducing the resources that bankers have to make loans. As Greg Ohlendorf, president and chief executive officer of First Community Bank and Trust, told Congress, “This compliance burden is a distraction from our small business lending. Every hour I spend on compliance is an hour that could be spent with a small business customer.”
Because many small business owners borrow personally to finance their businesses, they have also been caught up policy makers’ efforts to increase consumer financial protections. [... New regulations have led] credit issuers to increase the interest rate spread on their loans, according to an additional Federal Reserve report.
Higher interest rates necessarily mean that small companies need to pay more to borrow funds. Second, fewer small businesses can get loans. The inability to re-price loans has made the high risk segment of the credit-card market less profitable to lenders, causing many of them to reduce their participation in that part of the market. As a result, a sizable minority of high-risk small business borrowers that once obtained credit-card loans can no longer get them.
Sunday, July 19, 2015
Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man’s genetic lineage—the notion that a man’s intellectual and characterological traits are produced and transmitted by his internal body chemistry. Which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors.
Saturday, July 18, 2015
From TechCrunch - aggregated data on some of the startups that made it to billion dollar valuations. And from VentureBeat: a compilation of post mortems of failed startups.
Related (TechCrunch): Good advice to consider when you're working to raise capital.
Not sure what it is about transportation policy and crony capitalism, but Reason gives another example of Peter Pan busing, working to put Fung Wah in NYC/Boston out of business:
Eleven years later, Peter Pan's move against Fung Wah is paying big dividends. Fung Wah has long been one of the best-operated and safest bus operators on the road, and yet two years ago it was forced to halt its operations because of an incompetent safety inspection carried out by two Massachusetts state employees. That ensnared the company in federal regulatory maze of Kafka-esque proportions. Twenty-one months later, after the company had burned through $3 million buying a new fleet of buses, paying lawyer's fees, and keeping its doors open, Fung Wah finally got the OK to reopen.
Not so fast. As the Boston Globe first reported in May, the two state agencies that run Boston's South Station are refusing to give Fung Wah a spot in the facility to resume its operations. And this week, DNA Info reported that New York City Councilwoman Margaret Chin (D-Dist. 1) was told by Fung Wah's Liang that he was throwing in the towel. If the company were permitted to operate from a street curb, like in practically every other city, this wouldn't be an issue.
While it's a neat story about my home town (Globe and Mail), it also highlights one of the dumb things about governments taking a build it, and then they'll come approach to economic development using fictitious numbers to justify infrastructure.
On one hand, community leaders complain about the lack of funding available to local businesses but somehow find a way to justify spending $800 million on a light rail transit line that runs through the city.
Friday, July 17, 2015
Mugged by reality (Cato):
ObamaCare doesn’t make health insurance more affordable. It robs Peter to pay Paul. When selling ObamaCare, supporters told everyone, 'Don’t worry, you’re Paul.' But as time goes by, more Americans are realizing they’re not Paul. They’re Peter.
Thursday, July 16, 2015
I gotta say, I like how aggressive Uber is in fighting provincial politicians (TechCrunch):
Instead of calling a car, the feature prompts users to take action and send an email to Mayor de Blasio and City Council opposing the new bill. Users will of course still be able to use the other Uber features like UberX and Uber Black.
Uber told TechCrunch that the new feature will “demonstrate what life for NYC riders would be like if de Blasio’s plan to limit Uber is passed into law”.
The bill up for consideration would require the Taxi and Limousine Commission (TLC) to severely limit the issuance of new for-hire vehicle licenses. The law would last one year, during which the TLC would complete a study on the impact of for-hire vehicle services on the city.
I can't help but wonder if the coverage is just a bit too optimistic... but I hope it's right (Globe and Mail):
In September 2012, one of Toronto’s taxi licenses sold for $360,000. As it turned out, this was a peak that presaged a major slide. By 2013, the average selling price of a cab plate had fallen to $153,867. In 2014, it was $118,235.Politicians often need reminding that being pro-business and pro-markets is not the same thing.
The reason behind this plunge is Uber, the online service that lets you order a ride through your smartphone. By the looks of it, Uber may drive a stake through the heart of the cab business. It’s about time.
[...] After my investigation of the industry, my name was mud among the city’s taxi plate holders, who were worried about losing their golden goose. One woman, who inherited a pair of plates from her father, called me a “communist” for recommending that the taxi plate system be abolished. “This is free enterprise,” she declared.
In fact, Toronto’s taxi plate system is anything but free enterprise. Instead, it is based on the artificial restriction of a natural market, and the granting of licences to a fixed number of participants. Even those who paid top dollar for a plate used to enjoy an annual return of more than 12 per cent. And for those who inherited plates, the return was manna from heaven.
On the other side of the coin were drivers and customers. Passengers paid too much for rides in old junkers, and drivers found themselves trapped in a system that skimmed the lion’s share of their revenues. Many have compared the Toronto cab industry to the feudal system, which is probably not far off the mark.
To understand how the taxi plate system and the interests behind it have contorted the Toronto cab industry, imagine how other businesses would work if operated the same way.
Sign me up (Reason.com):
One of the propelling concepts behind self-driving cars isn't just innovation for the sake of innovation, leading us to our sci-fi Jetsons future. If successfully implemented, it will make ground travel safer, particularly in higher population areas, increase transportation efficiency and ultimately human productivity.
But there's one little problem, noted by the government analysts of the Brooking Institution and subsequently highlighted by Wired: Local governments have become increasingly dependent on human screw-ups as a way to raise money. Speeding tickets. DUI citations. Parking violations. Those are all big money-makers for municipalities that could very well go away under a regime of self-driving cars. That's billions of dollars of revenue across the country.
Wednesday, July 15, 2015
Sunday, July 12, 2015
The Obama Presidency isn't done - but I already suspect history will not be kind in remembering his impact on either race relations or advancing the economic condition of Blacks in America. Others seem to be noticing (BlackPressUSA):
Unemployment. The average Black unemployment under President Bush was 10 percent. The average under President Obama after six years is 14 percent. Black unemployment, “has always been double” [that of Whites] but it hasn’t always been 14 percent. The administration was silent when Black unemployment hit 16 percent – a 27-year high – in late 2011.Compare that to the Reagan Administration - who the previous author seems to hold in contempt (UTSanDiego). Somebody ought to tell her the issue isn't so much "trickle down" economics as well, economics.
Poverty. The percentage of Blacks in poverty in 2009 was 25 percent; it is now 27 percent. The issue of poverty is rarely mentioned by the president or any members of his cabinet. Currently, more than 45 million people – 1 in 7 Americans – live below the poverty line.
The Black/White Wealth Gap. The wealth gap between Blacks and Whites in America is at a 24-year high. A December study by PEW Research Center revealed the average White household is worth $141,900, and the average Black household is worth $11,000. From 2010 to 2013, the median income for Black households plunged 9 percent.
A profile of the head of the American Enterprise Institute that speaks a little to the culture wars being waged (and for some, it's a war that's being lost by economic conservatives):
While the mission remains unchanged, Mr. Brooks believes his obligation goes far beyond the production of academic tomes. These have their place, but if the champions of free markets hope to sell the message to those who aren’t already sold, he says they need to speak to the heart as much as to the head.More here (Cato):
It’s what he means by “the music.” It begins by emphasizing that those who benefit most from freer markets are the have-nots: those without inherited wealth, prestigious credentials, social or class advantages—in other words, people whose only hope for a better life is a social order that will reward their hard work and enterprise.
Certainly that has been borne out by the world’s experience. In 1938 it might not have been clear that capitalism was the key to human flourishing. But no longer.
When he was a child, Mr. Brooks notes, one of four people lived on less than a dollar a day. Today, though we still have far to go, the advance of trade and a globalized economy has shrunk that figure to one of 20.
The liberation of hundreds of millions from desperate poverty ranks among the greatest success stories in history. But it’s a story that remains largely untold and mostly unheralded. In his new book, “The Conservative Heart,” Mr. Brooks puts it this way: “Capitalism has saved a couple of billion people and we have treated this miracle like a state secret.”
Stories of the struggle to reform the Greek state before it ran out of other people's money (WSJ):
Their reform proposals were fought by their colleagues in parliament and savaged by the media and labor unions. They invariably found themselves sidelined.
[...] Since the eruption of Greece’s debt crisis in 2010, successive governments have prioritized fiscal austerity—trying to raise government revenue and cut expenditure—instead of tackling deeper reforms of the system head on.
Many foreign officials involved in Greece’s ill-starred bailout efforts over the past five years say they have learned what Greece’s past would-be reformist politicians always knew: In Greece, hurting vested interests is harder than taxing citizens to death.
[...] Today, more so than in their times in government, these three politicians and a few others are coming to be seen as among the minority of officials who spotted and attempted to change early on some of the core problems that have led to Greece’s almost intractable crisis today.
“They called me ‘the Cassandra’” said Mr. Giannitsis of the headlines during his unpopular push for reforming the pension system.
Cassandra, in the Greek myth, was a clairvoyant doomed to always be right, but never believed. She went crazy.
Thursday, July 09, 2015
In a victory against crony capitalism in Texas, the state’s Supreme Court recently struck down a licensing requirement. [...]
Here’s Eugene Volokh at The Washington Post explaining the case: Here’s what happened in this case: The plaintiffs practice “eyebrow threading,” which is apparently a technique for shaping eyebrows and removing eyebrow hair using a cotton thread. Since 2011, Texas has required them to get a cosmetology license, just as it requires for other cosmetologists; and that requires 750 hours of training, of which at least 320 hours — by the state’s own concession — “are not related to activities threaders actually perform.”
In a 5-4 ruling, the court ruled against the cosmetology license requirement for eyebrow threaders on the grounds that it “is not just unreasonable or harsh, but it is so oppressive that it violates” the Texas State Constitution. [...]
Too often, licensing rules are nothing more than a mechanism for the dominant players in an industry to shield themselves from competition—suppressing jobs (especially for the poor or undercapitalized), raising prices, and stifling creativity along the way. We are glad to see this Texas regulation come down, and hope that others will follow.
Tuesday, July 07, 2015
Scientists are commercializing a way to use stem cell dental implants to grow new teeth directly in your mouth (PopSci via Instapundit) while others are proposing to use lasers to burn away some mental illnesses (Wired) - as others have pointed out with the latter, what could possibly go wrong?
Pretty much... after all, people - even kids, respond to incentives (Instapundit):
Yep–this is what happens when you let progressives run a country. They spend like drunken sailors, then demand a bailout from others, accusing them of bigotry and hatred if they don’t acquiesce. Most families have at least one of these types. They have the emotional and financial maturity of a two year-old (sorry, two year-old readers out there). By repeatedly caving into these childish demands, the EU acts like parents who enable their children’s prodigal habits. It never turns out well.More here (Bloomberg): "Germany deserved debt relief, Greece doesn't"
Saturday, July 04, 2015
Evidence based interventions in poverty - randomized control trials (WSJ):
World-wide, in 1981, 2.6 billion people subsisted on less than $2 a day; in 2011, 2.2 billion did. Most of that progress came in China, while poverty has barely budged in large swaths of sub-Saharan Africa, South Asia and Latin America.Not surprisingly, those who have been on the edge of the status quo of the interventions and the billions of dollars spent that have done little to nothing, are skeptical:
Is it time for a new approach? Many experts who study poverty think so. They see great promise in a new generation of experimental programs focusing not on large-scale social support and development but on helping the poor and indebted to save more, live better and scramble up in their own way.
Prof. Sachs says that “many, almost surely most, of the cutting-edge breakthroughs in actual development in recent years did not result from [randomized controlled trials].” He believes that tackling problems at the level of communities or entire societies, rather than just households, is likely to be more effective—though, he adds, randomized controlled trials should be “a part of a diverse arsenal of analytical and policy tools.”
...while reducing the amount of harm to the economy - though entrenched interests will be the primary casualty (ASI): deregulating childcare and healthcare, reduce payroll taxes on low income earners and well, just giving money to them through a basic income or negative income tax.
A trend to watch: food tech used to be about scale - the next wave is about both scale and improving quality (MITTechReview):
For years, the most important food technologies were all about scale. How could we feed a fast-growing population at less expense? By doing everything bigger: food grown on bigger farms was sold by ever-merging global food giants to grocery chains of superstore proportions.More here (MITTechReview): Robots Start to Grasp Food Processing
Many of today’s food technologies seem to be moving in the opposite direction, toward methods and products that are economical for small farms as well as large corporate ones. This does not mean an end to big food: with the planet’s population projected to reach 9.6 billion by 2050, agriculture and food production will still have to achieve a massive scale, with help from technology and innovative research. Still, evolving technologies, including inexpensive sensors, mobile devices, and data analysis, have helped an increasing variety of food companies, retailers, and producers lower their costs and compete in many specialty markets.
This could be the start of a new food economy—one that reflects more competition and more innovation, provides opportunity for a broader group of investors, and is more dynamic and responsive than the industrial model that has dominated for decades.
The widespread adoption of high-deductible plans does, however, face two major challenges.I think even the WSJ is underestimating the potential for concierge care.
First, advocates of consumer-directed health care suggest that much of the money saved in premiums—high deductible plans can be thousands of dollars less expensive than comprehensive plans—be put into health-savings accounts to help pay for routine care. Over time, that savings can grow into a large nest egg.
But without that backstop, Americans will face the worst of both worlds: no coverage for everyday care and no dedicated financial resources to offset new expenses. Hence, critics cry that high-deductible plans leave patients “underinsured”—and that they will avoid or delay needed care as a result. The evidence is mixed. But it seems to be a problem particularly among those who enroll in high-deductible plans on the ObamaCare exchanges; few appear to be establishing health-savings accounts. One problem is that the exchanges make it very difficult to identify HSA-eligible plans.
Second, consumer-directed health care works because it encourages competition. Unfortunately, competition in medicine seems to be falling as hospitals and insurers merge, potentially leading to higher and more opaque prices.