2021 Leg Session, Ari Armstrong, Gold Dome, Politics, Uncategorized

Armstrong: Free stuff can be expensive

Nothing is free, ultimately, as Robert Heinlein and Milton Friedman observed. TANSTAAFL, goes the acronym. In terms of goods and services, someone always pays for the “free” stuff that others enjoy.

Of course it can be worthwhile to pay for stuff with dollars or labor that others get for free. That’s the idea behind Christmas and birthday gifts. Americans give on the order of a half-trillion dollars worth of charity every year. Parents provide their children with loads of free stuff—and can be criminally prosecuted if they negligently fail to provide a decent minimum.

My point, then, is not that free stuff is bad stuff. That would be a silly claim. Rather, my point is that we should remember that free stuff is paid for by someone. It doesn’t just magically appear out of the ether. It’s not free in some metaphysical sense. Someone built that or made it or financed it.

In our personal lives, we usually remember that free stuff costs someone something. But when it comes to government, a lot of people tend to speak euphemistically about “free” stuff in an effort to obscure who’s actually providing it. That’s a problem, because, when we’re talking about government, we’re (in part) talking about politicians ultimately directing heavily armed law enforcement officers to take people’s stuff or to physically detain people, in order to force them to provide the “free” stuff in question. So, yes, we should take care to remember who’s paying for the free stuff.

In some cases government forces us to pay for things that we then get to have for “free.” The vaccines are a good example of this. Yes, there’s a subsidy built into the vaccines, in that people who pay more taxes thereby buy more vaccines than they use. But, at least for people in the middle tax brackets, basically government is making you buy something because it’s good for you. You don’t have to get vaccinated, but you have to pay for the privilege.

If you think that government’s job is to solve problems of externalities—and that’s the common view these days—then vaccines for the current pandemic are pretty obviously good policy. By making vaccines free at the point of use—because people pay for them through current or future taxes—government promotes herd immunity. Especially for young, healthy people, the benefit of them taking the vaccine accrues largely to other people more at risk from the disease.

Indeed, there’s even an economic case for paying people to get vaccinated. Ohio ran a million-dollar vaccine lottery, “Vax-a-Million.” The program seems to have worked. Others have suggested paying people $100 to get vaccinated. The economic researcher Robert Wiblin suggests that the net gains of paying people to get vaccinated are probably several times the cost. (However, I still like John Cochrane’s argument that outcomes probably would have been better had government just allowed markets in vaccinations to function from the outset.)

Consider a different example. Recently Rep. Brianna Titone suggested that her House Bill 1068 provides “free annual mental health exams.” I pointed out (via Twitter) that “free” here means “funded through people’s health-insurance premiums.” She acknowledged this: “Yes. And the insurance companies do not object because they know it will have a net ROI that they will benefit from.”

I don’t think Titone’s story is the complete one. If insurance companies really thought that, by covering annual mental health exams, they’d reduce their overall costs, legislators wouldn’t have to force the point. That would be about as useful as demanding that people pick up twenty-dollar bills they find on the street. More plausible is that insurance companies don’t mind the measure because it increases their overall business while forbidding competitors to offer cheaper policies without the exams.

There ain’t no such thing as a free mental health exam. If the exams are paid through insurance, the cost is higher premiums or else reduced service elsewhere.

Mental health exams are not like coronavirus vaccines in the sense that almost everyone needs them. The National Institute of Mental Health says that “nearly one in five U.S. adults live with a mental illness.” That’s an important problem but far from one that directly affects everyone. So, with the insurance mandate, what we’re really talking about is government forcing most people with insurance, including many people who are not financially well-off, to subsidize the minority who need mental health exams.

Plausibly the net returns of widely available “free” mental health exams are greater than the costs, in the same way that subsidized vaccines probably are. If that’s the position—that mental health exams are comparable to the Covid vaccines in terms of offering public benefits—then the most sensible move would be to subsidize the exams directly, rather than through insurance premiums. But that would require that legislators seriously consider the costs rather than bury them in insurance premiums.

Of course, if the aim ultimately is to undermine (nominally) private health-insurance companies (which actually compose a quasi-private government-backed cartel) to usher in government-financed health care, insurance mandates make perfect sense.

My argument here is modest. I haven’t made the case that mental health exams (or vaccines or whatever) shouldn’t be “free.” What I’ve done is point out that who pays for something and how they pay for it matter. Observing that ultimately nothing is “free” may not take us far, but it’s a good place to start.

Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism.  He can be reached at ari at ariarmstrong dot com.

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