America The Pillar
MichaelW on Feb 05 2007 at 3:01 pm | Filed under: Economics, Foreign affairs, Libertarianism, MichaelW's Page, Technology
It is often suggested, without serious objection, that American military spending and prowess allows European governments to free-ride on our military budget, and thus to spend lavishly on social programs. But are those social programs also heavily subsidized by American spending and ingenuity? Brad Warbiany suggests that they are:
Would Europe be where it is today without the American economy providing the basis for the economic growth they’ve undergone? They’ve been able to eviscerate their own defense forces, relying on the American military machine. They’ve been able to plunder their own economies in order to fund their welfare states, relying on American innovation to ensure that their standard of living will rise. I think they wouldn’t have had a chance at keeping up their economic growth if it weren’t for our growth. Our growth relies on limited government and regulation, which wouldn’t be acceptable to the “enlightened†nations across the pond. In essence, they’ve been having our cake and eating it too.
Brad attributes America’s success in military, medical and general technological advances to “it’s property rights, the rule of law, and capitalism that are the engine of that innovation.” Another way to say this might be that the American economic model, as backed by a strong and predictable rule of law, allows for greater risks to be taken and thus greater achievments to be reached. The positive externalities of Americans taking such risks are almost immeasureable, although the real difference between American and European technological and medical advances does help to but a number on the benefit. For example, look at this chart of Nobel Prize winners by country and notice how many Americans have been awarded that honor in Physiology or Medicine, particularly in the past 35 years.
To my mind, the most important implication of what Brad touches upon is that any move we make towards something like universal health care inexorably leads to less of those innovations upon which the whole world seems to depend. If you take away the rewards for accepting risks, then the risks won’t be taken.
Government run health centralizes the risks of exploring new technologies, medicines, techniques, etc. Centralized risk translates into (i) observing a very cautious approach to advances, and (ii) the politicization of research. (I’ve ruminated about the politicization aspect before.) From a purely capitalist point of view, opportunites that might have been pursued otherwise, are foregone since those who accept the risks of pursuing them do not get to maximize their reward, so instead those advances must come from the government. With government as the sole innovator, there are now two types of risk (1) the risk of failure (i.e. spending gobs of money on something that does not deliver as promised, or that costs significantly more than the benefit), and (2) the political risks (i.e. what politicians face for advocating spending on projects that either fail or that don’t disproportionately benefit favored voters). The result is that risk is increased overall, and fewer innovations are realized.
America is pretty much the last industrialized nation to still have a (semi) private health care system, which should be understood to include the pharmaceutical industry (as a supplier of that health care system). What would happen to the growth and advances we’ve realized over the past few decades if (when?) we adopt universal health care? Where will the innovation come from? Who will take the risks? Without the proper incentives, and indeed with some of the worst possible incentives as the only driving force to creation, I fear that the scientific and medical Atlas will shrug.
Technorati Tags: American growth, science, medicine, ingenuity, universal health care
Sphere: Related Content3 Responses to “America The Pillar”
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Superb post.
I just read Arnold Kling’s “Crisis of Abundance” where he points out that we could easily afford all the 1975 health care we want, the demand is for premium medicine with greater specialization and capital equipment.
I’m sure the marginal costs are so low that American firms can make money selling in price-control environments but you are correct in that we are last health care economy that can reasonably fund private innovation.
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