Thursday, October 25, 2012

Information Asymmetry and Rationing as an Excuse for Everything


Mrs. Knabe and I have purchased and sold a few houses over the years. Each time we knew more about the house we were selling than the buyer knew and each time we bought the seller knew more about the house than we did. Plus our purchase was rationed by what we could afford. So by your logic Government should do what? Every used car buyer knows less about the car he is purchasing than the seller. When a person decides to repair the car he has to ration how he will manage that expense within his budget. So by your logic the end result is what? I bought a book the other day. Paid about $30. What the bookseller didn't know was I would have probably paid more. That is information asymmetry. I ration my book buying. So the appropriate action of government is what?

Speaking of that bookseller, the more books I buy from it, the more it profits. That bookseller cleverly entices me with well written reviews in the Wall Street Journal and the New York Times. It tries to convince me to buy more and more books. Of course, I can't know what's inside those books as well as the bookseller and the author. Fee for service and information asymmetry! How do I manage?

I treated my nephew to lunch today. Do you know what the waiter tried to do? Prepare to be outraged. He offered me appetizers! bottled water! beer! He showed the specials to me! Fee for service! Information asymmetry!

I love my iMac and iPhone and iPad. Do you want to hear something outrageous? The App store sells things by the piece, fee for service. And its worse because Apple and the developer know much more about those apps than I do. Come to think of it iTunes has the same model. How in the world does the world survive?

Where has unregulated medicine worked? The US: Lasik surgery, plastic surgery. Not good enough? The picture below is from a Congressional Research Service report to Congress, "Life Expectancy in the United States."

No government sponsored health care, increased life expectancy, fee for service, information asymmetry and a rising standard of living. Medicare didn't being until 1966. Subsidized insurance as part of employment didn't begin until WWII.


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