Liberal Talk Radio

Need to give to Caesar what is Caesar’s today, but when a certain Virginian calls me out on health care, I’m honor-bound to respond.

Ryan writes: “Isn’t the fact that corporations are taking over where the government would not an example of the market correcting its own failure?”

My answer: Yes! Absolutely!

My point was not to criticize corporate America for stepping up to the plate. That these private companies have chosen to provide health care in the absence of public leadership actually proves a point I’ve been trying to make for a long time: as long as corporations internally factor in the long-term costs of their actions to their short-term planning, in many cases they’ll eventually “do the right thing” without government needing to impose burdensome regulation. In my view, this is because organizations that do factor in long-term consequences will eventually realize a competitive advantage over organizations that do not.

What I was trying to point out was that a) health care, as a public good with positive externalities, is certainly something properly provided by government and b) the Radicals running our government are so inept and without concern for America’s citizens that they are failing grostesquely to provide leadership on this issue, thereby forcing corporate America to take up the slack.

Without getting into too much detail (mainly because it would take me a while to remember the math) … for every good (“good” in the economic sense), there’s both a “private marginal benefit” (PMB) and a “private marginal cost” (PMC) There’s also a “social marginal benefit” (SMB). Theory predicts that public goods will be underprovided by the market because the PMC exceeds the PMB, even though if the SMB could be added to the PMB, it would exceed PMC. This is a more formal definition of “market failure,” and it’s something that can be demonstrated mathematically.

There’s also the more basic idea of “marginal costs” and “marginal benefits.” The idea is that, for most goods, the first unit purchased will have a higher marginal benefit than the second, the second more than the third, and so on, with the inverse relationship for marginal costs. Any organization (or individual) will consume a given good until MC=MB, subject to budgetary constraints.

So, back to the discussion at hand. Since the corporations are choosing of their own volition to provide this low-cost health care for their workers, one possible implication is that health care, a public good, is so underprovided, that the benefits to corporations are exceeding their costs, even given that the corporations will not capture the full benefit of their actions.

I think that’s a shame. It’s the equivalent of one shipowner deciding that the risks are so great — or the value of her cargo so high — that it’s worth it to pay for a lighthouse on her own. Or it’s the equivalent of a group of people deciding that public schools are so poor, or public policing so bad, that they want to send their kids to private schools and live in gated communities, even though they still pay taxes.

And that’s the real tragedy here. While the 100,000 or so part-time employees of Sears and the others can be thankful, and while we should applaud these corporations for taking this action, there are still millions of uninsured people in the United States. This kind of private provision of public goods only serves to further undermine the idea of equal opportunity — it widens the gaps between the haves and the have nots. It’s another example of the Radicals helping to create an exclusive club for their cronies and the middle-class workers they’ve frightened into supporting them.