Archive for November 2013

Recent Posts of Interest

The NAFTA Myth by Murray Rothbard

Inflation, Shortages, and Social Democracy in Venezuela by Matt McCaffrey and Carmen Dorobat

The Fed Must Inflate by Chris Martenson

Robert Murphy on Teaching at Mises Academy by Robert Murphy

Argentina’s Politicians Should Read Mises by Iván Carrino

General Electric’s Crony Capitalism by Hunter Lewis 

Mises Explains the Santa Claus Principle by Ludwig von Mises

Team Player: Robert Shiller on Finance as Panacea by John Staddon

VIDEO: Napolitano, Higgs, Block, and More Discuss the Mises Institute

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The Capitalist Hero in Fiction and Film

2370005054987Edward Younkins has recently published Exploring Capitalist fiction: Business Through Literature and Film

Younkins’ new book examines the themes, plots, and conflicts in more than 20 novels, films and plays, and discusses the role of capitalism within each. According to Younkins’ introduction:

The use of works of imaginative literature to portray and explain the behavior of individuals in business is arguably a method that is richer and more realistic than what is presented in journal articles, textbooks, and even cases. Literature and films allow the asking of more complex questions than case studies do. Business cases can be complex, but not to the same extent as multifaceted novels, plays, and films. People can learn as much, if not more, about the nature and culture of business and effective management as from lectures, books, case studies, and so on.

Fiction provides a powerful teaching tool to sensitize business students without business experience and to educate and train managers in real businesses. Studying business literature and films can prepare students for future situations that they have not encountered before when they enter the workplace. Many works of imaginative fiction present ethical dilemmas that Introduction 3 young professionals may potentially encounter at some point in their careers.

Literary works and movies can play a significant role both in college classrooms and in management development programs. Not only is business fiction interactive, it portrays a more complete and more human picture of the business world than what is communicated through traditional teaching materials. Fiction brings values to life and is also useful i bridging the gap between theory and practice.

The overall literary and cinematic treatment accorded capitalism, business, and businessmen has been unkind, hostile, and unflattering over the years. The commercial world has received bad press at the hands of many novelists, playwrights, and filmmakers. Fortunately, there are also a number of sympathetic business portraits that depict commerce in a more favorable, even heroic, image. Viable capitalist heroes have appeared in a number of works that emphasize the virtues, positive traits, and accomplishments of businessmen. Some feature brilliant, thoughtful, and dauntless business leaders and employees, including King Vidor’s 1944 film An American Romance, William Dea Howells’ The Rise of Silas Lapham, and Cameron Hawley’s Cash McCall.

Other examples include of course Garet Garrett’s The Driver, Ayn Rand’s Atlas Shrugged, and Henry Hazlitt’s Time Will Run Back.

Giving Thanks for the State’s Imperialistic Wars

That was the purpose of Lincoln’s nationalization of “Thanksgiving,” which started out as a celebration by the Pilgrims of productivity and life, and later as a proclamation by George Washington to celebrate the ratification of the Constitution.  That’s why we have such spectacles today as Jay Leno’s “all military audience” tonight, and what will surely be a grotesque display of warmongering and imperialism with gigantic flags, mass singing of the national war anthem, and fighter jet fly-overs during the Thanksgiving day and night NFL games.

Mises Explains The Santa Claus Principle

6313Beginning on Sunday, December 1, Thomas DiLorenzo will be teaching “Santa Claus Economics: An Austrian Analysis of the Welfare State” at Mises Academy. This four-week online lecture course will cover the origins, effects, and myths of the welfare state. Readings include works by Murray Rothbard, Ludwig von Mises, Robert Higgs, George Reisman, Charles Murray, Ludwig Erhard, and Per Bylund, among others.

The Exhaustion of the Reserve Fund

From Human Action, Chapter XXXVI

by Ludwig von Mises

The idea underlying all interventionist policies is that the higher income and wealth of the more affluent part of the population is a fund which can be freely used for the improvement of the conditions of the less prosperous. The essence of the interventionist policy is to take from one group to give to another. It is confiscation and distribution. Every measure is ultimately justified by declaring that it is fair to curb the rich for the benefit of the poor.

In the field of public finance progressive taxation of incomes and estates is the most characteristic manifestation of this doctrine. Tax the rich and spend the revenue for the improvement of the condition of the poor, is the principle of contemporary budgets. In the field of industrial relations shortening the hours of work, raising wages, and a thousand other measures are recommended under the assumption that they favor the employee and burden the employer. Every issue of government and community affairs is dealt with exclusively from the point of view of this principle.

An illustrative example is provided by the methods applied in the operation of nationalized and municipalized enterprises. These enterprises very often result in financial failure; their accounts regularly show losses burdening the state or the city treasury. It is of no use to investigate whether the deficits are due to the notorious inefficiency of the public conduct of business enterprises or, at least partly, to the inadequacy of the prices at which the commodities or services are sold to the customers. What matters more is the fact that the taxpayers must cover these deficits. The interventionists fully approve of this arrangement. They passionately reject the two other possible solutions: selling the enterprises to private entrepreneurs or raising the prices charged to the customers to such a height that no further deficit remains. The first of these proposals is in their eyes manifestly reactionary because the inevitable trend of history is toward more and more socialization. The second is deemed “antisocial” because it places a heavier load upon the consuming masses. It is fairer to make the taxpayers, i.e., the wealthy citizens, bear the burden. Their ability to pay is greater than that of the average people riding the nationalized railroads and the municipalized subways, trolleys, and busses. To ask that such public utilities should be self-supporting, is, say the interventionists, a relic of the old-fashioned ideas of orthodox finance. One might as well aim at making the roads and the public schools self-supporting.

It is not necessary to argue with the advocates of this deficit policy. It is obvious that recourse to this ability-to-pay principle depends on the existence of such incomes and fortunes as can still be taxed away. It can no longer be resorted to once these extra funds have been exhausted by taxes and other interventionist measures.

This is precisely the present state of affairs in most of the European countries. The United States has not yet gone so far; but if the actual trend of its economic policies is not radically altered very soon, it will be in the same condition in a few years.

For the sake of argument we may disregard all the other consequences which the full triumph of the ability-to-pay principle must bring about and concentrate upon its financial aspects.

The interventionist in advocating additional public expenditure is not aware of the fact that the funds available are limited. He does not realize that increasing expenditure in one department enjoins restricting it in other departments. In his opinion there is plenty of money available. The income and wealth of the rich can be freely tapped. In recommending a greater allowance for the schools he simply stresses the point that it would be a good thing to spend more for education. He does not venture to prove that to raise the budgetary allowance for schools is more expedient than to raise that of another department, e.g., that of health. It never occurs to him that grave arguments could be advanced in favor of restricting public spending and lowering the burden of taxation. The champions of cuts in the budget are in his eyes merely the defenders of the manifestly unfair class interests of the rich.

With the present height of income and inheritance tax rates, this reserve fund out of which the interventionists seek to cover all public expenditure is rapidly shrinking. It has practically disappeared altogether in most European countries. In the United States the recent advances in tax rates produced only negligible revenue results beyond what would be produced by a progression which stopped at much lower rates. High surtax rates for the rich are very popular with interventionist dilettantes and demagogues, but they secure only modest additions to the revenue.[1] From day to day it becomes more obvious that large-scale additions to the amount of public expenditure cannot be financed by “soaking the rich,” but that the burden must be carried by the masses. The traditional tax policy of the age of interventionism, its glorified devices of progressive taxation and lavish spending, have been carried to a point at which their absurdity can no longer be concealed. The notorious principle that, whereas private expenditures depend on the size of income available, public revenues must be regulated according to expenditures, refutes itself. Henceforth, governments will have to realize that one dollar cannot be spent twice, and that the various items of government expenditure are in conflict with one another. Every penny of additional government spending will have to be collected from precisely those people who hitherto have been intent upon shifting the main burden to other groups. Those anxious to get subsidies will have to foot the bill themselves for the subsidies. The deficits of publicly owned and operated enterprises will be charged to the bulk of the population.

The situation in the employer-employee nexus will be analogous. The popular doctrine contends that wage earners are reaping “social gains” at the expense of the unearned income of the exploiting classes. The strikers, it is said, do not strike against the consumers but against “management.” There is no reason to raise the prices of products when labor costs are increased; the difference must be borne by employers. But when more and more of the share of the entrepreneurs and capitalists is absorbed by taxes, higher wage rates, and other “social gains” of employees, and by price ceilings, nothing remains for such a buffer function. Then it becomes evident that every wage raise, with its whole momentum, must affect the prices of the products and that the social gains of each group fully correspond to the social losses of the other groups. Every strike becomes, even in the short run and not only in the long run, a strike against the rest of the people.

An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole doctrine of interventionism collapses when this fountain is drained off. The Santa Claus principle liquidates itself.

Notes

[1]In the United States the surtax rate under the 1942 Act was 52 per cent on the taxable income bracket $22,000–26,000. If the surtax had stopped at this level, the loss of revenue on 1942 income would have been about $249 million or 2.8 per cent of the total individual income tax for that year. In the same year the total net incomes in the income classes of $10,000 and above was $8,912 million. Complete confiscation of these incomes would not have produced as much revenue as was obtained in this year from all taxable incomes, namely, $9,046 million. Cf. A Tax Program for a Solvent America, Committee on Postwar Tax Policy (New York, 1945), pp. 116–117, 120.

Daniel McAdams Examines the Prospects for Peace on Iran

Daniel McAdams, executive director of the Ron Paul Institute, and author of this piece on the Libya War at Mises Daily, injects some sound analysis into the debate at RT TV.

Bitcoin over $1000

9956884654_1ea657e615_qI was interviewed today on RT TV about Bitcoin and the reasons it has soared in price to over $1000 per Bitcoin. It is both greater acceptance by vendors and governments as well as the world wide currency war and worry of war in the Middle East, especially in Iran which is in a hyperinflation that is driving the price higher.

The Mises Institute can take donations in Bitcoin and you can also make purchases in our bookstore with Bitcoin.

 

Is the Norwegian Housing Bubble Popping?

Norway's Housing Bubble 2012

I have been talking about the Housing Bubble in Norway for a while and about one year ago I wrote an article here. The story was picked up in by a variety of publications including here. It turns out that the bubble has spread over the entire Nortic region.

It caused quite a stir in Norway and was reported on in the leading business publications of Norway here.

It now appears that they have entered the denial phase and that the Bubble maybe coming to an end.

VIDEO: A Thank You to Our Donors and Members

Your support of the Mises Institute has helped create an intellectual powerhouse for liberty. Thanks to you, the Institute can use cutting-edge technology in reaching an ever-expanding audience across both traditional and new media channels. We are educating the young and providing new ideas to a world starved for an alternative to the failed economics of government.

Team Player: Robert Shiller on Finance as Panacea

imagesGuest Post

Team Player: Robert Shiller on  Finance as Panacea

 Book Review by John Staddon

Shiller, Robert J. Finance and the Good Society. PrincetonUniversity Press. 2012. 304 pp. 

Yale professor Robert Shiller is one of the most influential economists in the world.  Co-inventor of the oft-cited Case-Shiller index, a measure of trends in house prices, he is author or co-author of several influential books about financial crises.  He shared the 2013 Economics Nobel with Eugene Fama and Lars Peter Hansen.

In 2012 Professor Shiller published a full-throttle apologia for plutocracy: Finance and the Good Society.  FATGS is a reaction to the hostility to finance provoked by the 2007+ crisis.  But rather than being an effective defense, FATGS just underlines what is wrong with present arrangements.

Shiller sees the solution to our still-unfolding problems not as less financial invention, but more: “Ironically, better financial instruments, not less activity in finance, is what we need to reduce the probability of financial crises in the future.”  He adds “There is a high level of public anger about the perceived unfairness of the amounts of money people in finance have been earning, and this anger inhibits innovation: anything new is viewed with suspicion. The political climate may well stifle innovation and prevent financial capitalism from progressing in ways that could benefit all citizens.”

Is he right?  Is financial innovation always good?  Have the American people turned into Luddites, eager to crush creativity and settle into a life of simplistic poverty, uncorrupted by the obscure and self-serving creations of financial engineering?

Yes and yes, says Professor Shiller, who applauds what others deplore in the rise of ‘financial capitalism’ which Shiller describes as “a system in which finance, once the handmaiden of industry, has taken the lead as the engine driving capitalism.”

Finance capitalism, a new name but an old idea, has been unpopular for years.  In the 1930s, especially, right after the Great Depression, the big finance houses, like J. P. Morgan were seen as conspirators against the public interest.  Goldman Sachs, the ‘great vampire squid’ of Rolling Stone’s Matt Taibbi, plays the same role these days.

Some of Shiller’s defense of the financiers is simply puzzling because it is pretty obvious nonsense.  This is what he has to say about securitization – the bundling of hundreds of mortgages into layered bonds that have been sold all over the world:

Securitized mortgages are, in the abstract, a way of solving an information asymmetry problem—more particularly the problem of “lemons.” This problem…refers to the aversion many people have to buying anything on the used market, like a used car.[i]

The claim that securitization solves the information problem is paradoxical to say the least.  How can removing a mortgage from the initial lender improve the buyer’s knowledge of the borrower?  Surely the guy who actually originates the loan is in the best position to evaluate the creditworthiness of the borrower?

Ah, the answer is apparently the rating agencies:  “Bundling mortgages into securities that are evaluated by independent rating agencies, and dividing up a company’s securities into tranches that allow specialized evaluators to do their job, efficiently lowers the risk to investors of getting stuck with lemons.”

Really?  Not everyone agrees.  Here’s a comment about rating agencies from Michael Burry, who was one of the few to spot the eroding quality of sub-prime mortgages in the years leading up to the 2007 crash.  Burry’s conclusion was that the proportion of demonstrably bad loans in MBSs increased over the years, but the credit scores remained the same!  So much for the credit-rating agencies which were, in effect, captives of (and paid by!) the bond issuers. Shiller concedes that securitization “turns out not to have worked superbly well in practice,” but he blames optimism about house prices (and where did that come from?), not the built-in opacity and erosion of responsibility of securitization itself.

Read More→

P.J. Hill Discusses Frontier Property and Crime on the Tom Woods Show

4108Last week, Tom Woods interviewed P.J. Hill, author of The Not So Wild, Wild West that examines the relatively low rates of crime in the West which is why Hill and his co-author Terry Anderson also called western settlement the “American experiment in anarcho-capitalism.” This research was first published in The Journal of Libertarian Studies in 1979, and then expanded into a book.

Although I was not, at the time, familiar with the work of Hill and Anderson, I published an article ten years ago in Mises Daily that came to similar conclusions, and used many of the same sources as Hill and Anderson. I also use some of the same information in my book Commie Cowboys.

In the 24-minute interview, Hill discusses property rights among Indian tribes, the law governing mining claims and the management of resources in the absence of a functioning central government.

The Hidden Role of the IRS in Obamacare

The highly publicized glitches and failures associated with the  launch of the Affordable Health Care Act have obscured the central role of the IRS in carrying out the law’s mandate.  Stripped down to its essentials, Obamacare is not an “insurance” plan at all.  It is rather a naked redistributionist scheme to coerce the young and the healthy into paying for the healthcare bills of the elderly and the sickly.  This means that some agency had to be enlisted to penalize the young and healthy who refused to willingly participate in their own fleecing. What agency is better equipped to do this than the IRS?  In an article in the Washington Post, Tom Hamburger and Sarah Kliff point out,

. . . the IRS also has a huge role in carrying out the law, including helping to distribute trillions of dollars in insurance subsidies and penalizing people who do not comply.

The fine is intended to encourage healthy people to enroll even if they do not have an immediate need for care. If the elderly and the sick dominate the ranks of those who sign up, it could lead to what health economists call an “ insurance death spiral” of rapidly escalating costs, premium hikes and declining enrollment.

This means a massive increase in the scope and operations of the IRS, which is

. . . charged under the act with carrying out nearly four dozen new tasks in what represents the biggest increase in its responsibilities in decades. None is more crucial than enforcing the requirement that all citizens secure health insurance or pay a penalty.

Fortunately for the American public, because the IRS has lately become so universally reviled, it has been “hamstrung” by Congress in carrying out its mandate: it is legally precluded from employing its full fascist panoply of liens, foreclosures, and criminal prosecution.  It can only garnish tax refunds due to those uninsured who have overpaid their taxes.  (The penalty is $95 or 1% of income, whichever is greater).

Meanwhile some are beginning to express doubts about whether the law can be made to work given the present structure of incentives and penalties.  Jon Gruber, the MIT economist who helped design the mandate in the Massachusetts insurance plan says, “We should be absolutely clear we don’t know how this will work.”  And Robert Laszewski, president of Health Policy and Strategy Associates opines, “I now think there is little hope we are going to get enough younger healthy people to sign up, and that means that this law is in grave danger of financial collapse.”

Another thought about Obamacare:  it is a redistribution scheme that egalitarians contemplate only in their most fevered dreams.  It  actually redistributes health itself from those endowed with it to those who are not, because  real income is directly correlated with health,  and by financially penalizing the healthy, whether though formal penalties if they do not enroll or over-priced premiums if they do,  it deprives them of part of the means by which they can maintain their health.

Recent Items of Interest in ‘Mises Daily’

Last Week’s Daily Articles:

Krugman’s Adventures in Fairyland by William Anderon

Social Security: The Most Successful Ponzi Scheme in History by Gary Galles

Germany’s “Dangerous” Current Account Surplus by Frank Hollenbeck

Are Bubbles Caused by Psychological Problems? by Frank Shostak

Janet Yellen, the “Pink Dream,” and a Coming Economic Nightmare by Joseph Salerno

The Skyscraper Curse Hits New York by Mark Thornton

Also posted last week:

Ben O’Neill’s in-depth analysis of the minimum wage in Australia.

 

November’s ‘The Free Market’ Now Online

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Now in mailboxes is the November issue of The Free Market, the Mises Institute’s monthly, featuring new articles on Sweden’s great depression and a wide-ranging interview discussing the progress of the Austrian Economics movement in Japan.

On the front page, Per Bylund examines how Sweden, by shrinking its government in the 1990s, saved itself from a longer depression:

…Since that time, Sweden has, across the board, seen consistent government cutbacks while increasing restrictions on welfare poli­cies, deregulating markets, and privatizing former government monopolies. The coun­try has instituted an overall new incentive structure in society making it more favorable to work. The national debt tumbled from almost 80 percent of GDP in 1995 to only 35 percent in 2010.

… Sweden is an interesting case to study. We do indeed, as Krugman repeatedly tells us, have much to learn from it: from the long-lasting era of economic growth thanks to free markets to the rise and fall of the welfare state. The country’s recently (re)gained financial strength and its ability to resist a global recession are due, not to a strong welfare state as Krugman claims, but to the long-term rolling back of the expansive welfare that Keynesians so often praise.

And Marc Abela, organizer of the Mises Meetings in Japan, talks with us about Austrian Economics in his adopted country:

Ludwig von Mises received one single Japanese student while he was teaching in New York in the 1950s and this student, Toshio Murata, has become a shining beacon of courage and a lighthouse of liberty since his return to Japan. Murata-sensei took on the courageous task of translating Human Action into Japanese…

The internet revolution and all the new social media, Facebook, YouTube, and Wikipedia, along with the Japanese counterparts, Mixi and 2channel, have allowed for completely new and fresh discussions to be nourished and grow, even if they are anonymous most of the time. As a result of Murata and the internet, young people in Japan are discovering the work of the AustrianSchool, largely through the expansive Mises Institute website. Also, thanks in large part to Amazon, an increasing number of Japanese translations are being made available, among them books by Hoppe, Rothbard, Mises, Rockwell, and others.

Also this month, The Free Market takes a look at Leonard Read and his contributions to the freedom movement.

More Problems for GDP

Not all of the arguments here are correct, but it shows you the declining validity of government statistics for real life. It is true that we obtain tremendous value from all the free goods of the digital age such as apps, Twitter, and Facebook and are not measure in GDP. However, they do forget to mention that Apple, Twitter, and Facebook do “spend” money into GDP when they buy things, hire workers, and pay the power bill. There ain’t no such thing as a free app.

Caution: the author does raise the robot bogey at the end of the article where “consumers” are made better off by these free technological goods and workers are made worse off, as if both groups were not the same people!

HT: JRH

See here for “Gross Domestic Freebie” in the New York, its free.

David Stockman: ‘It’s 2007/2008 All Over Again.’

David Stockman, author of The Great Deformation, describes the nature of Housing Bubble II: “Bubbles are breaking out everywhere.”

 


It’s also significant that Cavuto refers to the current situation as “good times.” I have no doubt that is true on Wall Street, but millions of Americans, including the millions who have left the work force, the unemployed teens and twentysomethings, and millions more who are about to have their health insurance cancelled, may beg to differ.

Video: Rothbard in the European Parliament

In a speech in the European Parliament during a debate over the “problem” of tax avoidance in the European Union on November 21st.

Got the Wrong Right but the Right Wrong

Post Crash Economics Society want more Keynes and Marx to cure society’s ills.

“Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.”

“Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs.”

The Minimum Wage: Are Economic Laws Valid in Australia?

 Guest Post: The Minimum Wage and Unemployment in Australia

 by Ben O’Neill

Are things really topsy-turvy down-under?  Since people in Australia are already walking upside down on the bottom of the Earth, do the laws of economics operate upside-down also?  Does the minimum wage in Australia lead to more employment, instead of less?

In light of recent debate over minimum wages, referring to the situation in Australia, one might be tempted to believe that the answer is yes.  Some commentators have argued, contrary to prevailing economic theory, that the minimum wage can actually increase employment, owing to additional “money in the pockets” of workers flowing on to greater spending in the economy, which in turn causes greater demand for goods and services, and more employment for workers.[1]  Some have attempted to bolster this argument by pointing to the high minimum wage and low unemployment rate in Australia as evidence that the policy either does not cause unemployment, or possibly even increases employment.[2]  If only other countries could be more like Australia, where the beer is cold, the women run around in bikinis, and the minimum wage and employment levels are both high!

Australia and the USA: a simple comparison

A simple comparison of the reported minimum wage rates and unemployment rates in Australia and the USA show that, prima facie, Australia has a higher minimum wage and lower unemployment.[3]  Even after conversion of the minimum wage into equivalent currencies, or equivalent purchasing power, the higher minimum wage in Australia still holds.[4]  This simple comparison tells the story of an Australian economy with greater employment and higher minimum wages than in the US.

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However, as with many superficial comparisons of this kind, there is a lot more to the story that must be understood.  First of all, the rosy picture of employment in Australia ignores a great many statistical issues which take certain kinds of unemployment and underemployment out of the official figure.  Second, the minimum wage in Australia is exaggerated somewhat by the above figure, since its application to low-skilled groups is tempered substantially, using a sliding scale of rates that reduces the hallmark figure for the main groups affected by the policy.  Finally, there is the simple fact that basic comparisons of this kind do not get to the root of the causal effects of a policy like minimum wages — economic comparisons must occur ceteris paribus, not cum hoc ergo propter hoc.  When one takes account of these various issues, the reality of economic law is brought back into focus, and the situation in Australia is neither unusual nor inspirational.

Read More→

Judge Napolitano on Obamacare, the Courts, and Economics

10451395914_c8ac541a0f_zWriting today at LRC, Mises Institute Distinguished Scholar Judge Napolitano notes:

The law was found constitutional by the Supreme Court only after the chief justice — who acknowledged in his opinion in the case that Congress lacks the authority to compel people to engage in interstate commerce by forcing them to purchase a good they don’t want — changed his mind on the ultimate outcome of the challenge. In order to save the law from imminent constitutional extinction, he created a novel legal theory, and he persuaded the four progressives on the court to join him.

They ruled that the punishment for the failure to obtain the level of health care coverage that the law requires is actually a tax. Then the court ruled that because Congress can constitutionally tax any event, it can tax nonevents (like the failure to purchase health insurance), and so the entire scheme is constitutional because it is really just a tax law.

The Supreme Court, lawyers sometimes say, is infallible because it is final; it is not final because it is infallible. I am a student of the court, and I revere it. It can change the laws of the land, but it can’t change the laws of economics. And so, when Obamacare ordered all insurance carriers in the land to cease offering health care plans that provide insurance coverage below the federally mandated minimum, they naturally began to cancel those plans. And when the new health care exchanges that Obamacare established failed to find coverage for those formerly insured by the substandard plans, those who had these plans and liked them suddenly were told that on Jan. 1, 2014, when Obamacare becomes effective, they will have no health insurance. The old insurance coverage will be illegal, and there is no new coverage for them.

One of the reasons many Americans had their policies canceled this month is the failure of those policies to conform to the new federal minimum requirements. At the heart and soul of Obamacare is the power of bureaucrats to tell everyone what coverage to have. At the core of Obamacare is the removal of individual choice from the decision to purchase health care coverage. The goal of Obamacare is high-end coverage for everyone — brought about by Soviet-style central planning, not in response to free market forces.

From the perspective of the central planners who concocted Obamacare, minimum insurance coverage is the sine qua non of the statute. They want you to pay for coverage you will not need or ever use, so that the insurance carriers will have extra cash on hand to fund coverage for those who cannot afford high-end policies. This is where the laws of economics enter. By forcing all carriers to offer only high-end policies, the statute forced the carriers to raise their rates. By raising rates, the substandard policies — with their lower rates — could no longer be offered. If the government forced everyone to buy a Mercedes, when most are perfectly happy with an Acura, soon the Acuras would disappear from the market and most of us would be walking to work.

Read the whole thing.