Respek the equilibrium

Schumpeter:

MILLIONS of school-leavers in the rich world are about to bid a tearful goodbye to their parents and start a new life at university. Some are inspired by a pure love of learning. But most also believe that spending three or four years at university—and accumulating huge debts in the process—will boost their chances of landing a well-paid and secure job.

Not in the Great Depression 2.0.

Vox Day:

It's not rocket science. If supply is increasing faster than demand, then wages for university graduates are going down even as tuitions rise.

In other words, a degree is worth less and less with each passing year. One only needs a simple understanding of basic economics to understand this issue. This can be learned in a Grade 11 course but too many are ignorant.

Take another issue: medicine. Specifically, cancer drugs.

Last week in the New York Times, veteran health correspondent Gardiner Harris wrote of the recent sharp and puzzling shortages of critical drugs used for treating a wide range of life-threatening cancers and bacterial infections. The total number of shortages has increased from 58 vital drugs in 2004 to 211 in 2010. These shortages have prompted some wholesalers to hoard certain scarce drugs, which has only aggravated the problem.

But how could a shortage arise? Couldn't firms simply increase their price? Nope.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 introduced a set of complex price controls as part and parcel of the new prescription drug benefit contained in Medicare Part D. These are not garden-variety price controls, like those on gasoline or rents, which interfere with solely private transactions. They are controls that the government introduced as an effort to prevent overpayments under the Medicare program.

Because the government is your friend! Again, as Vox wrote, this isn't rocket science. The price controls in this case are meant to act as a price ceiling which logically lead to shortages. This was and is predictable. Yet, the US government keeps on using the same policy which results in serious consequences.

I'm sure Obamacare will fix all such issues. To think otherwise would be raciss!