My attraction to the economic way of thinking many refer to as the “Austrian School,” began with an illustration years ago of the failure of an economic prediction based on a “static analysis.”  Talking heads, sycophantic government economists and the usual criminal gang in Washington showed graphs and declared as “fact,” that an increase in taxes would result in an increase in revenue.  Not only did this not occur, actual federal tax receipts fell with the tax increase. The idea that another variable was in play, people’s willingness to change their behavior in reaction to this robbery, to be precise, convinced me of the futility of economic modeling and economic predictions.   

Those banking on an increase in revenue resulting from a tax increase miscalculated.  We are surrounded by miscalculations it seems.  As our society drifts toward socialistic totalitarianism, the intellectual arrogance of the various tyrants and power-seekers will produce more and more examples of miscalculations due primarily to the belief that the laws of economics can be suspended and that human beings will not alter their behavior in response to tyranny.  Let’s look at some examples.

A few years ago, Walmart opened their first stores in Canada.  Not long afterward, they met the iron fist of the unions and their demands.  The workers belonging to these unions miscalculated.  Walmart simply shut down these stores, eliminating these folks’ jobs.  I suppose it never occurred to them that Walmart would react in this way.

More recently, Hostess workers miscalculated, never imagining that the company would simply close.  Hostess was excercising one of the few rights remaining, that of refusing to operate a company on non-mutually beneficial terms.  More on this shortly.

New Yorkers elected a mayor they thought cared about them even more than they cared about themselves, as evidenced by his recent push to ban large sodas.  Their health and well-being was his primary concern, right?  Their miscalculation was apparent recently when he refused non-union power worker’s help with the aftermath of hurricane Sandy, revealing his primary concerns.  

When Medicare began, the price paid for physician and hospital services was the same as whatever the physician or hospital wanted to charge.  Guess what happened to physician and hospital charges?  The central planners got it wrong and more service was provided than necessary.  The central planners decided in the early ‘90’s responded with the Resource Based Relative Value Scale, cutting physician fees drastically.  Once again, they got it wrong, this time on the low side, starting the long journey to a situation where physicians are increasingly reluctant to see Medicare patients, this price set below the market clearing price.  The central planners miscalculated, first that they could come up with a rational price at all, and second, their price was too low.  

One of the finest surgeons I’ve ever worked with was an Argentinian hand surgeon.  Prior to his arrival in the United States, he was waiting tables.  As a hand surgeon.  The government of Argentina’s version of Obamacare made waiting tables more attractive to him than practicing medicine.  The government miscalculated, never considering that a comparison to what the Austrians call “the next best alternative use” of resources would ever be entertained by this man.  This surgeon was better able to feed himself and his family waiting tables.  He simply resorted to the next best use of his time/labor.

The consideration of the next best alternative use of an individual’s time and resources is innate, something that each and every one of us do without even thinking.  That many believe that physicians in this country won’t compare how time spent practicing medicine and how that equates to a wage, with the next best alternative, is naive and arrogant and may represent one of the greatest miscalculations in the bloody history of central planning.  And what will “medicine” look like if the “providers” are working begrudgingly, under terms that are not seen as beneficial to those remaining doctors?  

Physicians in this country will always be physicians.  They just might not be practicing medicine.  The tyrants who would point a gun at a doctor to extract some “right” to health care assume that the doctor will show up for this work camp the next day, again and again.  Physicians will try very hard to identify work conditions that are beneficial to them.  Failure to do so will begin the intellectual process of “what is a better use of my time.”  The current shortage of physicians will look like a surplus in a short time, if price controls and bureaucratic risk outweigh the benefit of medical practice, both predictable miscalculations I think.  

G. Keith Smith, M.D.