Sunday, November 3, 2013

The Law Of One Price vs. "Pesky" Variances in Income

Sometimes I think about the Overton Window and the fact that it's not apparent whether I "reside" in it. Yet when I consider the fact that I seem to be outside of it, exactly which way would that be? Glen Beck's direction? Argh. Marxism, perhaps? Heck no. But here's the problem. Political dialogue often revolves around trying to fit square pegs into round holes. Why so? To a certain degree at least: the law of one price - let alone product offerings - versus wild variances in income. People routinely twist themselves into pretzels trying to make sense of it all. The law of one price applies especially when product is readily observable (and understandable) to all, but when product turns out to be heavily regulated or of subjective value, trouble ensues...

The Wikipedia page has some helpful information on the law of one price and this paragraph includes a brief summary. Basically a good sells for one price in all locations and is the basis for purchasing power parity. Exceptions include the same item selling for different prices at different times, less than perfect info on part of buyer, and local non tradable goods such as land and labor. It's not hard to see how these three exceptions create problems in local and regional markets.

And sometimes the whole process can break down - or apart - when product definitions become needlessly straitjacketed. Local, state and national non tradable goods often become "sitting ducks" for further requirements and pages of regulation: especially after many local tradable goods have already had "all the fun they can stand" so leave the premises. In these unlovely circumstance,  fairness in one price terms often translates into "If I had to knock myself out just to make ends meet, you're not going to get a break!"

Plenty of present day local political discussion offers variations on this theme. Significantly the law of one price shouldn't present this quagmire, in a society where people were still closely linked to the production processes they use on a regular basis. Specifically, someone in a primitive society - if they were able to sum up our situation - might be forgiven for wondering if we were dingbats.

Just one downside of governments benefiting from special interests in (sitting duck) non tradable markets, is trying to mandate the one price laws which everyone expects, after all the regulatory "goodies" and high fives have already been passed around. How does one give special privilege and yet take it away in the same motion? That is the sleight of hand that Obamacare can't really accomplish. How to think differently about the process? Scott Sumner has a recent post which delves into a number of possibilities for healthcare. Were practices such as his suggestions adopted, many problems would indeed be solved for the long term. Just the same, providers in these circumstance would suffer considerable losses in prestige. For this reason alone, it is hard to find practical answers in a linear fashion.

Indeed, the law of one price is most difficult in knowledge use terms because it involves the greatest amount of rethinking re subjective realities. One way to approach the problem is to allow healthcare providers to serve customers directly without the mediation of government, which is the preferred choice of many Republicans today. However, advocates of a less government approach can often forget how many favors (in restrictions and valuations) were already extended to healthcare in the last century. That's what placed us in this predicament to begin with, and Obamacare is but a last ditch effort to deal with long term fallout from the ongoing process. Scuttling Obamacare now - with no further changes - just means further reducing an already crippled marketplace which would only become more limited over time, because of those past privileges.

What I suggest is just thinking about the scenario a bit differently. Say Obamacare didn't work out and there was in fact nothing to replace it. What then? I hate insurance. My Dad hates insurance (of any kind) so much he is probably one of the few individuals over 90 not actually enrolled in Medicare. So everyone "pretends" in this post that there's no insurance. (hmm maybe being outside the Overton window is something genetic I inherited...) Doctors should like this, and where they actually have practices they would probably go out of their way to give their patients and customers better deals. Because doctors deal with pricing on their terms, overall gain and patient/consumer satisfaction is likely.

But what I'm concerned about are the people who 1) live in multiple places where doctors can't or won't reach out to them, and 2) those who still don't have money to pay. What I suggest is that the doctors and other healthcare practitioners who desire to do so, teach these people how to help and heal themselves. In other words, give people the right to heal on terms that don't interfere with normal pricing systems.

While there are not yet recognizable means to do so, voluntary, completely decentralized systems could be set up in the next decade to make that happen. Monetary compensation would reflect arbitraged hour sets instead of "knighted" skills valuations, and local education would be able to internally smooth out differences in skills for those who use the system. Plus, our very limited time means that time arbitrage seeks out unique variations from one "price" (of "labor"), on individual terms. Local services digital "votes" (perhaps quarterly) indicate potential market directions. Also, coordinated teams, just in time knowledge use and robotics can adjust for difference in skills aptitude.

So that this would not become a problem for the law of one price in an overall sense, anyone who took part in such services would already need to be steeped in knowledge of how to use skills arbitrage in local voluntary systems. In other words we would be comparing apples to oranges, with two very different economic systems and ways of looking at time use in general. No one would have to yell about slackers "getting things unfairly" anymore, nor would they have to wrestle with meaningless political applications of one price theories.

Fortunately the law of one price is a bit simpler when it comes to something that is a product outside the use of our own time. Here, even though value is still subjective, it's not the extreme subjectivity that comes into play for healthcare and education in general. Thus, the problem is more one of special interest preference and gain, rather than concerns on the part of the public that product specifications are not being delineated "properly". For instance, today's hard delineations of skills use suggest equally hard delineations in land use definition as well. Just the act of freeing up skills use, would suggest counterparts in land use which could provide mobile and flexible options for the future.

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