What was true for an Englishman was true also for a citizen of the United States. There were unfortunately many in both countries who thought that freedom was not enough. They believed that in addition to liberty, people had also the right to a large measure of protection from the struggles and uncertainties of human existence. In America the crusade for a government large and powerful enough to offer such protection was led by the so-called Progressives. One of them, Walter Lippmann (1889–1974), later observed that the older faith was that human rulers’ limited moral and intellectual capacities could not safely be trusted with unlimited power. The Progressives believed, by contrast, that there were no limitations on man’s ability to rule others and therefore no need to limit the powers of government. They had renounced the wisdom of the ages, he said, in order to embrace errors that the ages had renounced.

That’s what Lippmann believed in 1937, when he was America’s most popular journalist. His “Today and Tomorrow” column was in 155 daily papers and would soon be in 200. At the height of his popularity he would have over 10 million readers, many of whom, it has been said, did not know how they should think about the issues of the day until they had read his comments. A lady in a New Yorker cartoon told a friend, “A cup of coffee and Walter Lippmann are all I need.”

His credentials as a libertarian were less than impeccable. As a student at Harvard he developed a fondness for the British Fabians, who believed they could overcome the prejudices and inefficiencies of popular democracy with a small core of selfless leaders. In 1914 he published Drift and Mastery, in which Frederick W. Taylor’s principles of scientific management were used to draw up a blueprint for the rational arrangement of society. (Editor’s note: See “Taylorism, Progressivism, and Rule by Experts,” by Kevin A. Carson, The Freeman, September 2011.)

Applying this blueprint, he said, would lead to an America in which the role of private entrepreneurs would be taken over by salaried bosses, government commissioners, and labor leaders. His Public Opinion appeared in 1922 and quickly became the subject of college courses, articles in scholarly journals, master’s theses, and even a few dissertations; it was described by John Dewey as “the most effective indictment of democracy as currently conceived ever penned.”

Lippmann spent most of his life, both before 1937 and afterward, writing things of which someone like Dewey would approve. His conversion to free-market principles was brief and fleeting. Still, it was sincere for as long as it lasted. It seems to have begun with his frustration over the blundering statism of Herbert Hoover. News of the stock market crash was still in the headlines when the President began a series of conferences in which he told industrial leaders that they must promise not to reduce wages. His Agricultural Marketing Act gave farmers a half-billion dollars in 1929 and another hundred million early in 1930. In 1931 he offered a nine-point program of government intervention, which broadened the range of those eligible for assistance of this kind.

As things grew worse Hoover justified himself with words remarkably similar to those of another troubled administration 80 years later: “We might have done nothing. That would have been utter ruin.” Instead of allowing things to take their course, he said, his administration had devised American history’s greatest program of economic defense. He blamed the problem on investors, criticized their interest in profit, and was amazed to see stock market prices continuing to fall.

Lippmann’s patience with all of this sagged rapidly and finally snapped when Hoover put his name to the Tariff Act of 1930 (aka the Smoot-Hawley Tariff), which raised the rate on some 20,000 imported goods to record levels. Hoover signed this despite the more than one thousand economists who endorsed a petition urging a veto. He could not, he said, go back on party pledges: “Platform promises must not be empty gestures.” The words were for Lippmann simply Hoover’s confession that his policies, far from being intended for the general good, were actually an appeal to special-interest groups.

Although he would later become what someone has described as “one of the Roosevelt administration’s most important journalistic assets,” he had no initial enthusiasm for Hoover’s replacement. Franklin Roosevelt, he said, was “a pleasant man without any important qualifications for the office, who would very much like to be president.” The New Deal, he observed, was little more than an extension of policies begun under Hoover, and it was in every way as much of an appeal to special interests. The Agricultural Adjustment Act, for example, helped large landowners at the expense of sharecroppers and agricultural laborers. Lippmann later attacked Roosevelt’s plan to pack the Supreme Court and found himself assailed by the left-wing press as a reactionary.

For the first (and only) time in his life he was excluded from the inner circle of “the intellectual elite.” Upset and a little angry, he sat down to apply his wide reading and literary talents to a defense of ideas he had once opposed and a reconsideration of ideas he had once espoused. The result, The Good Society, was for the most part a brilliant examination of the intellectual, logical, and moral impossibilities of economic planning.

Social Planning: The Intellectual Impossibility

The intellectual problems with social planning are illustrated by Colbert’s troubles in managing the economy of Bourbon France. The regulations for the textile industry, to take one case, filled four volumes of 2,200 pages and three supplementary volumes. It was discovered in 1718 that planners had in spite of this neglected to include the number of threads appropriate for use in the cloth of Langogne, “a matter which must be attended to without fail.” The information for attending to it could be obtained only by means of reference to existing procedures, which was available only from established manufacturers, who were thus empowered to use the law for preventing innovative competitors from introducing new methods.

This points to the dark truth behind every “plan” for “improving society.” Governments, Lippmann said, are made up of people who meet to make speeches and write resolutions, of people who study papers, listen to complaints, and shuffle paperwork. These people suffer from indigestion, asthma, boredom, and headaches, and all of them would rather be making love than passing laws. They know whatever they have happened to learn, are aware of what they have happened to observe, and are interested in whatever has happened to catch their imagination. A power-holder may sometimes have high ideals, but he is in the end no more than a human being, “a little man in trousers, slightly jagged,” as William Vaughan Moody put it.

Such a person cannot possibly know enough to devise wide-ranging schemes for society as a whole. No matter what the source of their authority human rulers are human beings, and as such have only a severely limited understanding of the world in which they find themselves. The social planner sits down to a breakfast that is the final link in a chain stretching far beyond his comprehension. Society goes on as it does because of processes that are habitual and unconscious, and it is only because people can take so much for granted that they have the time to attend to anything. Anyone who attempts to plan everything is immediately trapped in a web of details. “The real, rather than the apparent, policy of any state will be determined by the limited competence of finite beings dealing with unlimited and infinite circumstances,” Lippmann wrote.

In his efforts to manage this complexity every ruler must imitate Colbert in calling on the expertise of those whose industry he hopes to regulate. In attempting to plan the production of cloth in eighteenth-century France the government got its advice from existing manufacturers and passed decrees that would protect them from competition. This led to laws against the production of printed calicoes, which then were all the rage. Attempting to regulate health care in early twenty-first-century America, the Obama administration accepted the advice (and contributions) of the American Hospital Association and the Federation of American Hospitals. These represent the interests of large community hospitals, whose dominance is threatened by the emergence of smaller hospitals offering superior service in particular physician groups’ areas of expertise. With its provisions against the creation of any additional doctor-financed hospitals, the Patient Protection and Affordable Care Act might have been better named the Large Hospital and Inferior Service Protection Act.

Earlier in his life Lippmann had endorsed a policy of gradual collectivism. He had never admitted to being a socialist, but he had argued that the government should gradually assume control of the economy, if not through outright ownership, then at least by means of detailed regulations. There should be a survey of all the available resources, and then national authorities should put together a plan for developing them. By the time he wrote The Good Society he had come to realize that such a plan would be flawed from the outset. The planners’ limited information must necessarily put them under the influence of such organized interests. “In practice,” he wrote, “gradual collectivism is not an ordered scheme of social reconstruction. It is the polity of pressure groups.”

Though they demand different things, these pressure groups agree in asserting that their interest is identical to the national interest. Those who believe the national interest is best served by means of cheap steel for the automobile industry, however, and those who believe it is best served by fixed and protected prices for the sake of the steel manufacturers, cannot both be right. Every new regulation, Lippmann said, is a decision in favor of some interest and against others.

Those who believe they have been harmed will react by seeking to protect their interests as well as they can. New laws lead to new violations, and these in turn to more new laws. In early eighteenth-century France lawsuits over methods for the production of cloth were endless. Observing that smuggling and bootlegging had become standard business practices Colbert decided to put the power of the State behind his decrees. An estimated 16,000 people were killed in his war on printed calicoes. A much larger number were punished somewhat less severely, though still with great cruelty. On one occasion 77 were hanged, 58 were broken on the wheel, 631 were sentenced to the galleys, one was set free, and none were pardoned. One assumes the Obama administration’s attempts to regulate health care will be less violent.

Social Planning: The Logical Impossibility

During the twelfth century there were 19 stations at which merchants travelling along the Rhine had to stop and pay a toll. Twenty-five more stations sprang up during the thirteenth century and 20 more during the fourteenth, all backed by the firepower of fortresses built for the purpose. Many of these were in the Duchy of Cleves, where they were referred to as the “treasure.” They were a treasure, though, only to the people involved in collecting the tolls. They added nothing to the peace or prosperity of Europe. They were merely a means for the forcible transfer of wealth. That, Lippmann said, is the real meaning of “economic planning.” The government does not produce anything. All it does is take from one group and give to another.

Even as he wrote, the policy of handing out money to appease the farm lobby, first planted by Hoover, was blossoming under Roosevelt. At the beginning of the twenty-first century’s second decade it has spread even beyond our shores. The Department of Agriculture gives American cotton planters about $3 billion a year. These handouts encourage overproduction, lower world cotton prices, and ruin small farmers in many Third World countries. In 2005 the World Trade Organization upheld a Brazilian challenge to these subsidies, but the United States ignored the ruling. When Brazil was granted the right to impose punitive tariffs and lift patent protections on a wide range of U.S. nonfarm products, Congress responded with a proposal to offer over $147 million a year to Brazilian farmers. Rather than eliminate a ruinous and unjust policy, our representatives wanted to expand the list of those who could make claims on it. In terms of Lippmann’s illustration, they decided that instead of abolishing the toll stations and tearing down the castles, they would “turn every cottage into a castle with a toll station of its own.”

The problem with such policies lies in the fact that the owners of these toll stations are the beneficiaries of a government-backed guarantee that they will receive additional income in exchange for reduced effort. Each is promised that his share of the national wealth will increase even though his contribution to that wealth has declined and perhaps even if he makes no contribution at all. This works for each of the stations for as long as there are only a few of them. Unfortunately they multiply. The granting of special treatment in one case is soon followed by the demand for similar grants to others, as in the case of the Brazilian farmers. There cannot in the end be more for everyone if everyone has been granted the privilege of producing less. Soon everyone, perhaps even the average toll station owner, is poorer than he would otherwise have been.

Social Planning: The Moral Impossibility

Specific economic contradictions may be eliminated by changing specific policies. Deeper and more difficult to eliminate is the effect of such policies on the character of the people. It is evident in the case of the cotton subsidy that it is gigantically helpful to the fewer than 20,000 planters who benefit from it. Nonbeneficiaries see this and come to the conclusion that the government has a magical power to create wealth. They forget about the iron chain that binds prosperity to production. They forget that wealth is the result of thought, effort, innovation, and thrift, and are gradually convinced that the path to abundance lies in the power of the State. They once understood that they could advance themselves only by increasing their service. They now believe that they must do it by imposing their will on those around them.

The greater the extent to which this idea is accepted, the more intense the struggle for power becomes. It goes on and must go on because the members of contending factions have been tempted to ignore the logic of their own beliefs. If power allows them to disregard other people’s preferences, their own preferences may be similarly disregarded by some third faction that has more power than they do. If they think about it, they will begin to see that their own liberty is ultimately dependent on their willingness to allow others similar freedom. In Lippmann’s terms, each man’s right to freedom from arbitrary treatment at the hands of his neighbor has an “inescapable corollary . . . the duty of man not to deal arbitrarily with others.”

Lippmann said he had been brought up to believe there was no such thing as a self-evident truth, but this seems to be one. It is also the most ancient axiom of morality. “What you do not want done to yourself,” Confucius told his followers, “do not do unto others.” Mohammed said, “Not one of you truly believes until you wish for others what you wish for yourself.” A Buddhist text says, “Treat not others in ways that you yourself would find hurtful.” The same truth appears even more tellingly in the Upanishads, in the teaching of Hillel, and of course in the words of Jesus: “Therefore all things whatsoever ye would that men should do for you, do ye even so unto them.”

Adam Smith’s notoriously self-interested butcher and baker understood this. They understood that they would have to close their shops if they did not succeed in delivering something their customers would like. The Golden Rule of morality is the golden rule of economics, and it works because it respects the free choices of everyone involved. Every economic plan that depends on the coercive power of the State, on the other hand, tends toward disaster because it is in the final analysis immoral. “Though it is momentarily triumphant,” Lippmann concluded, “it is a failure, and it must fail, because it rests upon a radically false conception of the economy, of law, of government, and of human nature.”

Let’s concede for argument’s sake there is something unattractive about viewing patients as consumers. Krugman writes, “Medical care, after all, is an area in which crucial decisions—life and death decisions—must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge.”

All true, but not necessarily decisive in answering Krugman’s question—because if we reject the patient-as-consumer model, we must then ask: What’s the alternative?

I believe the answer is this: If the patient is not a consumer he or she will be a ward of the State or a government-empowered insurance company. If the choice is between consumer and ward of the State, consumer doesn’t look so bad after all.

To see what ward status means, ponder Krugman’s thoughts on the Independent Payment Advisory Board, Obamacare’s Medicare cost-cutting apparatus:

“About that advisory board: We have to do something about health care costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can’t maintain a system in which Medicare essentially pays for anything a doctor recommends. . . .

“And the point is that choices must be made; one way or another, government spending on health care must be limited” (emphasis added).

Much of what Krugman says here is correct. Resources are finite. Choices must be made. No matter how medical care is paid for, spending will be limited—regardless of what demagogues imply. But under Krugman’s patient-not-as-consumer model (which is largely in effect today), government experts make all the important decisions. Bureaucrats will have a global budget for medical spending, and it will be their job to stick to that budget. They will not be the patients’ agents. Advocates of this scheme insist the quality of medical care will not be cut along with costs. They assure us they will prohibit only “unnecessary” and “wasteful” procedures. But how objective are those categories? And why should we trust unaccountable bureaucrats and “experts” to make the right decisions, as though there were one-size-fits-all answers in medicine?

The upshot is that anyone who has his or her medical bills paid by the taxpayers will ultimately be at the government’s mercy. If you’re not a consumer you’re a ward of the State.

But won’t private medical coverage also have restrictions? The difference is that if medical coverage were offered in a freed market—no privileges, no licenses, no protectionism—the environment would be competitive. When government is in charge competition disappears or is vastly constrained to the point where it hardly matters. In a competitive environment entrepreneurs seek to discover what services best satisfy their customers’ requirements. Note well: This environment includes nonprofit solutions, such as mutual-aid societies, which through “lodge practice” managed to provide decent medical coverage to people of modest means in earlier times (tinyurl.com/cjca68).

Competition is a discovery process (Hayek). Government is the habitat of bureaucrats who pretend they know it all already.

Krugman cautions, “[B]ear in mind that we’re not talking about limits on what health care you’re allowed to buy with your own (or your insurance company’s) money. We’re talking only about what will be paid for with taxpayers’ money.” This is disingenuous.

After being taxed all their lives, how many elderly people are in a position to forgo Medicare in favor of private insurance? Government creates dependence, then exploits that dependence to justify its power.

* * *

Even if the flawed Consumer Price Index isn’t quite showing it yet, there is talk of inflation in the air. What exactly is going on? One of our sharp economy watchers, Warren Gibson, doesn’t like what he sees.

Advocates of government expansion have not found the Constitution a terribly formidable barrier. Could a better-written preamble have helped? James Payne thinks perhaps it would have.

Schools run by state and local governments are bad enough, but how about a single national school system run from Washington, D.C.? The best-kept secret these days is the Obama administration’s moves toward a national curriculum. Neal McCluskey has the unpleasant details.

H. L. Mencken famously suggested that fear among the people is the government’s best friend. James Bovard finds ample empirical evidence for Mencken’s thesis.

Why are markets, despite their palpable benefits, morally tainted in so many people’s eyes? F. A. Hayek thought it’s because markets don’t embody the nurturing morality of the family that we first learn as children. Dwight Lee endorses Hayek’s explanation and points out that we wouldn’t like the results if great societies were run like families.

After a natural disaster the high-profile first response leaves the impression that no alternative to a centrally planned recovery is available. Peter Boettke says that’s a failure to look more closely.

Labor unions continue to be at the center of controversy. Despite appearances, Wendy McElroy writes, government-backed unions limit workers’ ability to organize in their own interest.

Just because two things are called by the same name is no reason to assume they are actually the same. Take the case of private-sector and government investment. Adam Summers does just that.

Our columnists’ inquiring minds have produced a smorgasbord of provocative fare: Thomas Szasz ponders the legal status of suicide. Stephen Davies looks at Japanese commercial virtues. John Stossel thinks police making arrests have no right to privacy. David Henderson says no particular person can say how much manufacturing Americans should engage in. And Gary Chartier, encountering a newspaper columnist’s claim that opposing military intervention indicates indifference to suffering, responds, “It Just Ain’t So!”

Books on the mistreatment of taxpayers, economics, and an infamous automobile catch the fancy of our reviewers.

‎So how could O’Donnell permit himself to say this in a promo currently running on his network?

We can afford anything in this country. It’s just a matter of deciding what our priorities are. . . . There isn’t anything we can’t afford, if we prioritize.

This clearly is nonsense. He seems to be saying that if we prioritize – ignore who “we” are for the moment – we have the resources to satisfy everyone’s wants. He also might mean that if we prioritize, there isn’t any particular thing we can’t afford. I doubt that’s what he has in mind because it would be far less sweeping a statement. Even so, it would still be nonsense.

A World of Scarcity

We live in a world of scarcity. Individually and collectively we want more than available resources can yield. That will remain true even as the supply of resources expands. That’s how people are. Ends exceed means. Demand exceeds supply. That’s why we economize and  always will. That is why human action is choosing. That is why we face tradeoffs all the time. Indeed it is why the discipline of economics exists.

And it is why we prioritize, that is: “arrange or deal with in order of importance.” Since resources and time are limited, we have to rank our ends so 1) we don’t expend resources achieving a less-important end at the expense of more-important ends, and 2) we don’t achieve a less-urgent end at the expense of a more-urgent end.

If we literally could afford everything in terms of resources and time, we would have no need to prioritize. Prioritizing doesn’t prevent us from running out of resources. It merely aims at achieving the more important and more urgent before the less important and less urgent.

I assume that Lawrence O’Donnell knows all this. To be fair, tucked in between the two sentences I quote is this:

If we want [fair and decent health care] we can afford that. It may mean that we have to cut back on something else somewhere else. But we can do it.

But then he immediately forgets this and says we can have it all if only we prioritize.

So why does he say that? I’d guess it’s a just demagogic strike at anyone who thinks we can’t afford a government that spends close to $4 trillion a year. He apparently wants to say that anyone who believes that is just a stingy bastard, especially when it comes to the poor, the elderly, and the sick. He and his friends, on the other hand, are compassionate.

Making Sense of It

As a subscriber to the principle of charity, I’ve tried hard to make sense of O’Donnell’s statement. Maybe he really means we can afford everything he thinks is worthwhile. That may or not be true – I doubt it — but it takes us into another area of discussion.

Who does “we” refer to and why does O’Donnell feel entitled to spend “our” money? Of course he means the taxpayers. It’s quite remarkable how some people sit around casually spending other people’s money, whether it’s for medical care, pensions, global policing, or nation-building. You’d think our income was public property. By that logic the federal budget isn’t $3.8 trillion. It’s something over $14 trillion – the entire GDP. The 73 percent of our income not taxed at some level is actually a form of government spending because some government could have spent the money some other way but chose not to.

People who think like that (or whose premises logically commit them to think like that) no doubt assure themselves that it’s all for the good of the country. But they can’t escape the fact that their schemes merely empower an elite whose real priority is keeping the corporate state intact. The benefits handed to people outside the governing clique are intended at best to consolidate and maintain power.

Sound dumb?

Why is it any dumber than a law called the Patient Protection and Affordable Care Act, which promises to cover more for less money?

When Obamacare was debated, we free-market advocates insisted that no matter what the President promised, he and Congress couldn’t repeal the laws of economics. Our opponents in effect answered, “Yes, they can.”

Well, Obamacare has barely started taking effect, and the evidence is already rolling in. I hate to say we told them so, but . . . we told them so. The laws of economics have struck back.

Health insurers Wellpoint, Cigna, Aetna, Humana, and CoventryOne will stop writing policies for all children. Why? Because Obamacare requires that they insure already sick children for the same price as well children.

Sick Children

That sounds compassionate, but—in case Obamacare fanatics haven’t noticed—sick children need more medical care. Insurance is about risk, and already sick children are 100 percent certain to be sick when their coverage begins. So if the government mandates that insurance companies cover sick children at the lower well-children price, insurers will quit the market rather than sandbag their shareholders. This is not callousness—it’s fiduciary responsibility. Insurance companies are not charities. So, thanks to the compassionate Congress and President, parents of sick children will be saved from expensive insurance—by being unable to obtain any insurance! That’s how government compassion works.

In 2014, the same rule will kick in for adults. You now know what to expect.

This is just the beginning of reality’s backlash. President Obama promised that under his scheme no one will have to change medical plans, but some 840,000 Americans are already left without coverage because their insurer, the Principal Financial Group, decided to leave the market.

“[T]he company’s decision reflected its assessment of its ability to compete in the environment created by the new law,” the New York Times reports. “Principal’s decision closely tracks moves by other insurers that have indicated in recent weeks that they plan to drop out of certain segments of the market. . . .”

A recent bombshell was that McDonald’s may drop coverage for its 30,000 workers unless the Obama administration waives some rules. The central planners of the Obama administration decided in their infinite wisdom that all insurers should spend at least 80 to 85 percent of their revenues on patient care, a mandate aimed at minimizing administrative costs. It’s natural to assume that higher patient-care ratios are better for consumers, but there’s no proof of that. Health economist James C. Robinson explained years ago that “medical loss ratios” are just an accounting tool and were “never intended to measure quality or efficiency. . . . More direct measures of quality are available.”

The Wall Street Journal reports: “Insurers say dozens of other employers could find themselves in the same situation as McDonald’s. Aetna Inc. . . . provides [similar] plans to Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples Inc. and Blockbuster Inc., among others, according to an Aetna client list.”

McDonald’s may get a waiver, but I like the Cato Institute’s Michael Cannon’s take on that: “Sorry, but I don’t find it comforting that Obamacare gives HHS the power to waive these regulations on a case-by-case basis. Power corrupts. We’ve already seen HHS Secretary Kathleen Sebelius use other powers granted her by Obamacare to threaten insurers who contradict the party line.”

In a letter to the trade group America’s Health Insurance Plans, Sebelius wrote there would be “zero tolerance” for companies that attribute “unjustified rate increases” to Obamacare. “Simply stated,” she wrote, “we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.”

In other words: “We have repealed the basic laws of economics. Insurance companies must now give people more but not charge them for it. If you do charge more, you must not tell your customers why. Shut up, obey, and don’t complain. We are your rulers.”

Almost 50 years ago Szasz published The Myth of Mental Illness. It changed the political framework in which mental illness was addressed by laying the foundation for a concept Szasz developed through a series of books, including The Manufacture of Madness (1970). That concept was “the Therapeutic State”—a collaboration between psychiatry and the State through which “undesirable” actions, thoughts, and behavior patterns were suppressed. Thus Szasz not only disputed the moral and scientific basis of psychiatry but also argued that modern medicine was an engine of social control, with pharmaceuticals as primary tools.

A new slate of drugs now addresses a wide range of so-called disorders, or dysfunctions, that former generations considered environmental problems or lifestyle choices: from obesity to attention deficit, from erectile dysfunction to social anxiety (shyness), from menopause to alcoholism. Indeed, laziness is now being discussed as “a neuro-developmental dysfunction” for which drugs are being developed. The current Therapeutic State may be best analyzed as a collaboration between modern medicine, the pharmaceutical industry, and the State.

The debate stirred by Szasz has muted. The medical establishment and mainstream media are now advocates of the Therapeutic State. Similar advocates dominate universities, studies, prestigious committees, FDA hearings, and governmental bodies. Since writing The Myth, Szasz himself has noted that “the formerly sharp distinctions between medical hospitals and mental hospitals, voluntary and involuntary mental patients, and private and public psychiatry have blurred into nonexistence. Virtually all medical and mental health care is now the responsibility of and is regulated by the federal government, and its cost paid, in full or in part, by the federal government.” Problems of everyday life have been medicalized, and people are viewed as having little or no ability to “cure” conditions such as alcoholism or drug abuse through willpower or change of habit. The focus Szasz tried to foster on the individual’s responsibility for his or her own dysfunctions has eroded.

Happily, a backlash against the medicalization of everyday life is occurring. Alas, it is being fought on the wrong ground.

In this regard, a fascinating book has just been published. Sex, Lies, and Pharmaceuticals: How Drug Companies Plan to Profit from Female Sexual Dysfunction by Ray Moynihan and Barbara Mintzes is a work of investigative journalism that explores the close financial relationship between the medical experts who define and develop the “science” behind new dysfunctions and the $500-plus billion pharmaceutical industry that profits from treating them. For example, Moynihan examines the makeup of experts on committees that define dysfunctions for the extremely influential Diagnostic and Statistical Manual of Mental Disorders (DSM); it is from the DSM that “social anxiety disorder” derives. (Revealingly, homosexuality was only delisted as a disorder in 1970.) Moynihan observes, “The DSM has been criticised for the closeness between the expert committees who write the definition of diseases and the pharmaceutical companies that sell the drugs prescribed to treat them. One study that looked closely at the affiliations of the men and women on those committees found that more than half of them had ties to drug companies. On the committees revising mood disorders, including depression, the figure was closer to 100 per cent.”

In short, he constructs a strong case for endemic bias within the medical establishment in favor of drug companies and the creation of disease.

Another sign of backlash is the emergence of grassroots rebellions against specific “diseases,” such as the currently emerging “female sexual dysfunction,” and against the use of drugs, such as Ritalin, to “cure” attention deficit disorder in children.

A reopening of debate on medicalizing everyday life is to be applauded. But, unlike Szasz, the new critics, such as Moynihan, do not take aim at the Therapeutic State; instead they focus on the therapeutic industry—that is, the flow of money between the medical establishment and the pharmaceutical companies. The culpability of the government in the creation of disease is either marginalized or denied.

Other pharmaceutical dissidents tend to view the State as the solution, not part of the problem. For example, feminist activist Leonore Tiefer works through the World Health Organization to impose new legislation that promotes such “rights” (or entitlements) as “the right to comprehensive sexuality education” and “the right to sexual health care, which should be available for prevention and treatment of all sexual concerns, problems, and disorders.”

It is possible that critics like Moynihan and Tiefer will accomplish some good. Perhaps they will be able to reduce the widespread prescription of the powerful Ritalin to grade-school children. But without understanding the essential role played by the State in the medicalization of everyday life, critics can never strike at the root of the problem. Indeed, they may well worsen matters by shifting blame and giving more authority to the very agency most responsible for the creation of disease.

The Need for a New Focus

The focus of the reemerging debate needs to shift onto Szaszian grounds, onto an analysis of the Therapeutic State, in at least four ways.

First, it must be clear that government defines the framework for all medical practices within North America. Second, the protection offered to pharmaceutical companies should be analyzed as legal privilege. Third, the relatively new and influential “private-public partnerships”—a marriage between the corporate sector and government institutions—should be examined and exposed. And, fourth, the role government plays in “marketing” drugs through institutions like the public school system and social services must be examined.

Government framework. There is no genuine competition allowed in the practice of medicine or the administration of drugs. Both of these vital functions of society are monopolies that the government assigns to those who meet State requirements and abide by State rules. Thus the American Medical Association (AMA) is able to exert monopoly control of medical care, such as hospitalization, and has a long history of persecuting competitors such as midwives.

But licensing is only the most obvious way in which the State and AMA define medical care. There are many other labyrinthine ways in which the medical establishment partners with authority. In reporting on the AMA’s support of Obamacare, for example, the Wall Street Journal explained last year, “The organization wants to protect a monopoly that the federal government has created for it—a medical coding system administered by the AMA that every health-care professional and hospital must use if they wish to get paid for the services they provide. This monopoly generates income of $70 million to $100 million annually for the AMA. That makes the AMA less an association looking out for doctors and more a special-interest group beholden to Congress and the White House.”

FDA Approved

Legal privilege. All prescription drugs must be approved by the FDA; but, again, the monopoly privilege of being the sole legal drug dealers in society is only the most obvious one granted the pharmaceutical industry and hardly captures the extent of partnership. Moynihan chronicles a less obvious privilege in writing about “one of the biggest healthcare frauds in U.S. history. Pfizer was accused of illegally promoting an anti-arthritis drug for unapproved uses and, so, creating a health risk to users. Pfizer admitted to limited guilt and paid a criminal fine of $1.2 Billion and civil penalties of $1B.” Despite the hefty financial hit, not one executive was held personally responsible; no retribution was sought. The sentencing judge, federal District Court Judge Douglas Woodlock (Massachusetts) commented in his concluding remarks, “This is a case in which no human being, apparently, is going to be held responsible for substantial criminal activity by a corporation.” He notes that Pfizer absorbed the financial hit as a “cost of doing business” and still returned record profits.

Private-public partnerships (PPP). A PPP is a collaboration between government and the private sector in which a venture is funded (in part or in full) by tax dollars and operated through the private sector, or else the private sector raises capital under contract with the government to provide services. Although PPPs are most often associated with infrastructure projects, such as the repair of roads or building of bridges, this sort of ersatz capitalism is rampant within medical research and drug promotion. According to a 2001 study, “hundreds of millions of dollars” have been invested in the United States to promote partnerships around health issues, creating “thousands of alliances, coalitions, consortia and other health partnerships.” That trend has only increased in the ensuing years. Tax-funded research is commonly funneled through nominally private organizations or researchers. Conferences, studies, reports, and such are conducted at taxpayer expense. Arguably, such funding constitutes the greatest barrier to alternative, independent research.

Uncle Sam the Pusherman

Government peddling of pharmaceuticals. It is not merely that private for-profit organizations have used tax dollars to climb aboard the public health bandwagon. The government uses its agencies to create a market base. Just one example is the role of the public schools as a “pusher” of Ritalin—a form of speed more potent than cocaine—to millions of school-age children. Overwhelmingly, it is prescribed to boys who are “unruly” in class. A 2001 report stated, “If Huckleberry Finn and Tom Sawyer were in a school in Massachusetts today, they’d be drugged with Ritalin, according to many psychiatrists and other experts.” As a recent September Huffington Post headline asked, “Do 2.5 Million Children Really Need Ritalin?” Dr. Sanford Newmark continued, “What is going on here? Have millions of our children become so hyperactive and unable to focus that they are incapable of succeeding at school or dealing with the demands of normal life? Or are we creating an illness where there is none, calling normal variations in temperament and personality a ‘disease’ that requires the intervention of long term, and extremely profitable, pharmaceutical medication?”

Monopoly, legal privileges, the rise of PPPs, the use of tax dollars to create disease and eliminate competition, the peddling of pharmaceuticals through government agencies—these issues must be prominent in any productive discussion of the medicalization of everyday life. If the discussion focuses on corporate greed, then the Therapeutic State will have merely entered a new phase.

Cuba banned Michael Moore’s 2007 documentary, Sicko, because it painted such a “mythically” favourable picture of Cuba’s healthcare system that the authorities feared it could lead to a “popular backlash”, according to US diplomats in Havana.

The revelation, contained in a confidential US embassy cable released by WikiLeaks , is surprising, given that the film attempted to discredit the US healthcare system by highlighting what it claimed was the excellence of the Cuban system.

But the memo reveals that when the film was shown to a group of Cuban doctors, some became so “disturbed at the blatant misrepresentation of healthcare in Cuba that they left the room”.

Castro’s government apparently went on to ban the film because, the leaked cable claims, it “knows the film is a myth and does not want to risk a popular backlash by showing to Cubans facilities that are clearly not available to the vast majority of them.”

The rest of the Guardian’s story is here.

UPDATE: Moore replies:

Sounds convincing, eh?! There’s only one problem — the entire nation of Cuba was shown the film on national television on April 25, 2008! The Cubans embraced the film so much so it became one of those rare American movies that received a theatrical distribution in Cuba. I personally ensured that a 35mm print got to the Film Institute in Havana. Screenings of ‘Sicko’ were set up in towns all across the country. In Havana, ‘Sicko’ screened at the famed Yara Theater.

The lesson? Be skeptical of anything originating within the U.S. government.

But there’s one thing doctors never talk about, even though it easily explains the problems patients have in getting good treatment and doctors have in providing it:

Doctors are government employees.

I’m not talking about only the doctors that work in the Department of Veterans Affairs or the hospitals run by the Bureau of Indian Affairs. I’m not talking about the training centers known as county hospitals, where students learning the practice get to make mistakes on poor people prior to actually going out in the real world.

I’m talking about all doctors—because the government contributes about 50 percent of all health care dollars to physician pay. And 40 percent more is contributed by third-party payers that are themselves highly regulated by government and routinely follow the government’s lead in pricing.

People in the United States don’t need to have it explained to them why FedEx and UPS do a better job than the U.S. Postal Service (USPS). They know why they stand in long lines when they use the USPS and face surly unpleasant employees behind the counter. It’s a government monopoly. For years, the post office I frequent had a number dispenser, like at a deli. You’d wait for your number to be called. I would typically walk in, pull the number—say, for example, 57—and find they were currently calling 13. Recently, this technique was discontinued. I asked the postal employee why, and he explained studies showed the system made people feel they were waiting too long, so the Postal Service got rid of the number dispensers—not to speed things up . . .  just to make it harder to know how long you had to wait.

People in the United States don’t need to be told why their garbage pickup is not always as dependable as their dry cleaning pickup. They know one is paid for out of taxes while the other is paid for out of pocket, that one is a monopoly you have no choice but to use while the other is a service you can take or leave, or change. They know the dry cleaning company will never berate them if they don’t pre-sort their clothes properly before pickup.

But the fact is, many post office employees are not happy either. Like doctors, they feel hampered by regulation; like doctors, they often find themselves drowning in paperwork. Every one of them sees inefficiencies they have to live with because the system doesn’t provide easy ways to correct or eliminate them.

Why should medicine be different? Because doctors are smart? Not smart enough, it seems, to avoid a field thoroughly transmogrified by government regulations. Because health is important? So are sanitation and communication. Epidemiology tells us improvements in the former account for a significant increase in longevity in the last century, and communication is so important we have essentially eliminated much of the post office’s work by a technological fix the government doesn’t control: email.

If doctors and patients want better health care, there’s an easy way to achieve it. Doctors have to start working only for patients, and patients have to start paying doctors for their services.

Granted, it’s not quite as simple as it sounds. Here are two quick difficulties:

•  Doctors are trapped in a system that likely overtrains them. This lowers supply and maintains a high physician income. That could change over time as people refuse the high fees, but only to the detriment of doctors already out of training.

•  Doctors have to operate on patients in hospitals or surgicenters, and both are highly regulated by state and federal governments, making efficient and cost-effective service more challenging.

But the first step is clear: Don’t expect good quality service from a government employee. And don’t expect, if you are a government employee, to be able to provide good quality service.

Let’s start with something simple, like ketchup. Hilts’s first regulatory hero is Dr. Harvey Wiley, a government chemist who in the early 1900s began campaigning for a ban on many food preservatives. Wiley came close to getting President Theodore Roosevelt’s backing for a prohibition on benzoate in ketchup, but failed. Hilts closes the chapter with Wiley supposedly being vindicated by history because some of the firms that originally opposed him eventually stopped using the chemical.

You won’t learn it from this book, but Wiley’s views of benzoate’s risks turned out to be wrong; even today, the chemical is widely used as a preservative. Banning benzoates in Wiley’s time might well have increased ptomaine poisonings. And finally (for you public-choice fans), it’s likely that the few ketchup companies that supported Wiley, such as Heinz, had more than the public interest at heart. Yes, they used better tomatoes and production methods, but they also charged more — Heinz cost over twice as much as regular ketchup. Wiley’s ban would have helped Heinz competitively, while punishing people who had better use for their money than high-priced ketchup.

Medicine is more complicated than ketchup, but Hilts’s simplistic approach doesn’t change here. In his world, corporate greed is to blame for all defective drugs, the FDA’s incentives are always beneficial, and the few government mistakes he acknowledges could be cured by more funding. As for the lives lost due to FDA delays in approving new therapies, those are a figment of the New Right conspiracy to dismantle the agency.

For example, Hilts excuses the FDA’s three-year delay in approving Interleukin-2 for advanced kidney cancer because, he claims, the drug “was useful to only a small number of patients” and during the delay the agency provided “early availability for those who felt they needed to take the risk.” Now it’s true that Interleukin-2 produced temporary remissions for only 15–20 percent of those taking it, and that the drug itself was highly dangerous. But many patients preferred that to the 100 percent death rate of the disease itself. As for its alleged pre-approval availability, the head of the National Kidney Cancer Association had a one-word comment at the time, a word we won’t reproduce in this magazine.

Compare this to Hilts’s stirring account of how the FDA took only six weeks to approve the first of the protease inhibitors for AIDS. The agency didn’t insist on data of reduced mortality because such information would have taken far more time to collect and demanding it was viewed as unethical given the life-and-death situation of AIDS patients. Instead, the agency approved the drug on the basis of preliminary data that showed improved cellular function.

AIDS patients were highly organized; kidney cancer patients were not. If they had been, they probably would have been treated better by the FDA. When access to new therapies is controlled by government, political clout may well determine who gets better service. But this issue doesn’t fit into Hilts’s framework.

Corporate wrongdoing has certainly been a factor in such medical disasters as thalidomide and the Dalkon Shield, but regulatory delays inflict at least as much damage. When the FDA approves a life-saving therapy, some number of people have to have died waiting for the agency to act. Hilts, however, refuses to even acknowledge this. He characterizes as “grotesque” the argument that the FDA’s focus on preventing bad drugs may lead it to delay or deny useful drugs. But this risk is clear. While defective drugs and drug delays both have adverse medical consequences, their political impacts are incredibly different. Drug recalls are the subject of news stories and congressional hearings. Drug delays, on the other hand, rarely get noticed; all that their victims know is that their doctors can’t do more for them. The skewed regulatory incentives that result were acknowledged by former FDA head David Kessler, another of Hilts’s heroes, who wrote that “speeding access to urgently needed products was not nearly so deeply ingrained in our culture.”

In its emphasis on drug recalls and its rationalizations for drug delays, Protecting America’s Health unintentionally demonstrates this very point. It’s unfortunate that, in a book of this scope, this issue gets a bum’s rush.

Sam Kazman is general counsel of the Competitive Enterprise Institute (www.cei.org), a Washington, D.C.-based free-market advocacy organization.

To the Editor:

As a former wartime draftee — the Korean War — I’m of two minds re Aeon J. Skoble’s “Neither Slavery Nor Involuntary Servitude” piece in your September issue (“It Just Ain’t So!). No question, he did a very good job of picking apart the operational flaws inherent in any draft. But where I found him woefully deficient (especially considering the wonderful title of the piece!) was in how quickly he backed off from belaboring those two atrocious Supreme Court decisions designed back before 1920 to make military conscription look acceptable. I mean really, how can we libertarians hope to teach young people the rightness of our cause if we roll over so easily?
—JOHN SIMONS
Sheffield, Vermont

Aeon Skoble replies:

John Simons takes me to task for “how quickly [I] backed off from belaboring those two atrocious Supreme Court decisions” that failed to understand conscription from the point of view of the Thirteenth Amendment. But there’s nothing to belabor. My point was that it doesn’t matter, legally, whether I think that since conscription is involuntary servitude it ought to be forbidden by the Thirteenth Amendment—it only matters whether the Supreme Court thinks so. What does matter is my contention that regardless of the Supreme Court’s ruling, conscription is bad public policy. So I concentrated instead on replying to the flawed reasoning of contemporary academics and legislators who are in a position to drum up support for new policies. It would be important to refute the reasoning in Butler and Arver if I were preparing a brief for a court challenge to those decisions. But that’s not what is before us. What is before us are grandstanding politicians, backed up by some mistaken academic theories, proposing new laws that are irrational on several grounds. It is that reasoning to which I was responding. Simons wonders how we can “hope to teach young people the rightness of our cause if we roll over so easily?” I certainly wasn’t rolling over easily—I thought I was fairly strident—but there’s no point in pretending that Supreme Court decisions are other than what they are.

No Common Good?

To the Editor:

Professor Harold B. Jones, Jr.’s cursory dismissal of the idea of a “common good” deserves far more thought. (Review of The Collapse of the Common Good by Philip K. Howard, September 2003.) Relying as he seems to on individualism, of course, is a familiar theme for libertarians, but it seems to neglect matters of criminal law, constitutions, common law, natural law, and just plain common sense. While the author he reviews might have erred in his concept of the common good, e.g., in favor of collectivism, socialistic or bureaucratic solutions, gargantuan government, and so forth, the real debate should maintain respect for the common good while deciding just how far government should go. At times, this may even overlap what Jones might happen to consider the “well-being of the individuals of whom the commonality is composed.” (E.g., does he mean, “To each according to his needs?”) Otherwise, Jones will subject us to anarchy, another familiar pillar of libertarians which they’ve never entirely justified.

Jones’s idea of “justice” or “fairness to particular parties” is no easy paradigm. Both sides in court are seldom equally happy, so on what basis is it to be decided? His very mention of “fairness” and “justice” introduces an element above mere individualism.

Of course, rejecting the “common good” is a standard tactic for new movements — e.g., feminism, which considers it anathema — but it’s always a bit hypocritical since they also enjoy the benefits of civil society, courtesy, gentlemen, right law and order, family, property law, various ordered freedoms, security from predators, etc., all commensurate with the common good. That individuals benefit from the common good in many ways (a sort of trickle-down phenomenon) should be a given.
—W. EDWARD CHYNOWETH
Sanger, Calif.

Harold Jones, Jr., replies:

The “common good” is of necessity the good that is actually enjoyed by particular persons. There is no higher entity from which it can, in Mr. Chynoweth’s words, “trickle down.” It exists only to the extent that it bubbles up in the experience of concrete individuals.

A sense of “justice” is a part of this experience. It arises from the conviction that the law will be consistent in its defense of reasonable conduct. This does not mean that every party to every lawsuit will leave the court rejoicing. It means rather that third parties can look at the decision and reliably find either encouragement or warning with regard to whatever it is they may be planning. It means that laws can be trusted, in the words of Justice Holmes, as “prophecies of what the courts will do.”

The Collapse of the Common Good describes a society in which this has ceased to be the case. Its author fails to see that the ills he deplores are the result of what he suggests as a remedy. They are the result of government by men rather than by law. They are the result of precisely the fact that those whom Mr. Howard refers to as “people with responsibility” (bureaucrats) are permitted to impose their will on others “just because it seems right” (to the bureaucrat). The “plain common sense” to which Mr. Chynoweth makes his appeal says that any “good” forced upon the individuals concerned is not “common,” and it is unlikely to be experienced as “good.”

The level of social cooperation is highest when the government is restricted to guarding the borders, minding the infrastructure, and protecting the unoffending citizen. Under such a system, individuals can be confident about the rewards of honest effort. Each seeks his or her own good by providing something others regard as valuable. Any “debate,” as Mr. Chynoweth puts it, “over just how far government should go” is ultimately a debate over whose interests are to be encouraged and whose are to be sacrificed. When that debate is taken seriously, people seek to advance themselves not by providing a service but by having the law declare they are entitled to something at the expense of their neighbors. It is then only a short step to Hobbes’s description of the struggle of “every man against every man,” and to the social collapse of which Philip Howard writes.

Nature Conservancy Is Not Benign

To the Editor:

Re: Arthur Williams’s letter on the Nature Conservancy (TNC) in your October 2003 issue: TNC is not the benign organization that Mr. Williams holds it out to be. It lives not on individual donations but on corporate grants and federal tax dollars—more than $32 million between 1995 and 2000. Your readers may want to read the Washington Post’s investigative series on TNC, peruse some of the TNC-related postings on www.propertyrightsresearch.org and www.eco.freedom.org (instructive is the article “Nature Conservancy—Fraud and Theft”), and read “Nature’s Landlord,” published by Range Magazine.

The TNC may not engage in the terrorist activities used by Earth First, but it is advancing the same environmentalist goal— evict humans from broad areas of the country (a.k.a. The Wildlands Project) and prevent the productive use of land. The ongoing revelations about TNC’s modus operandi bring to mind Lord Acton’s observation on power and corruption.

—JOHN D’ALOIA JR.
St. Mary’s, Kansas

No Tears for Drug Companies, Please

To the Editor:

I always enjoy the articles in The Freeman: Ideas on Liberty. As a physician, I wish to comment on Doug Bandow’s article, “Healers Under Siege,” in the November 2003 issue.

In the article, the author paints the drug companies as underdogs — under siege. The reality is these companies have had their “foot in the door” at the Food and Drug Administration (FDA) for about 100 years. The Bureau of Chemistry, later renamed the FDA, was formed in 1906. Recent studies showed that over 50 percent of FDA employees were consultants for or in some way had worked for drug companies before or after their tenure at the FDA. This is a shocking case of the “revolving door” between a government agency and the industry it is supposed to regulate.

The legal “drug culture” in America, the product of excellent public relations and FDA rules, is not improving the health of the American people. That is a major reason health-care costs are rising so fast. Drugs are excellent for short-term trauma medicine. However, many drugs are toxic, and longterm they damage the body.

A recent study by the American Medical Association found that side effects of pharmaceuticals killed about 192,000 people each year, just in hospitals. This makes pharmaceuticals the fourth leading cause of death in America. There is definitely trouble in paradise, and the cost explosion in health care is but a symptom. Drug manufacturers lobby hard to defeat any proposals that would allow alternative products on the market that are far safer and less costly. The drug industry is part of a medical cartel held in place by licensing laws, hundreds of other anti-consumer laws, and the FDA, which has legislative, executive, and judicial powers all rolled into one.

For this reason, I grow weary of articles praising or feeling sorry for the drug industry. The reality of the legal drug culture is a classic case of government regulation gone awry.
—LAWRENCE WILSON, MD
via e-mail

Doug Bandow replies:

There’s no doubt that drug makers work hard to game the regulatory process, but that’s hardly a surprise when Washington asserts its control over the approval of new medicines. Government control is no more justified there than elsewhere in the healthcare system—such as limiting competition with MDs by other medical professionals. And while drugs should not be viewed as the only remedy for disease and injury, their benefits can be enormous.

Fine. But then the editorial writer adds, “In fact, the real choice with medical care, as with any good or service, is between rationing via politics and bureaucratic lines or via a competitive market and prices.”

Wrong. Markets don’t ration, for the reasons I explain here.