Health and Free Trade

by Gary North
Tea Party Economist

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"When they tell me I'm terminal, I'll look for a quack." ~ Murray Rothbard

For over 250 years, economists – even before they were called economists – have struggled to solve a problem: how to persuade people that trade really is positive and that restrictions on trade really are negative. This is one more attempt.

Let us assume that your physician informs you that you have cancer. The type of cancer that you have is invariably fatal. He utters those words that estate planning lawyers thrive on: "You should get your affairs in order."

You go home. After thinking about your situation, you go online in search of a solution. You come across an article on a proposed new cure. There is hope. But you find that the cure is experimental. It has not been approved by the Food and Drug Administration. The estimated cost of getting through the FDA's legal hoops is $100 million. It will take seven years.

You do not have seven years.

Do you believe in free trade in proposed cancer cures? Now you do.

What if you could sign a legal waiver taking full responsibility for your actions? What if you are willing to let the discoverer off the hook legally for any negative outcome of the treatment? Sorry, no can do. That would be illegal.

Why would it be illegal?

There is a simple reason: "Because it would reduce the power of the Food and Drug Administration." If every Tom, Dick, and Harry were willing to sign a waiver, then the FDA could not control drugs. This degree of open entry into the health care field would enable producers of health-care to get together with customers to arrange mutually agreeable solutions.

But wouldn't this open the door to quacks? Yes. Wouldn't this open the door to snake-oil salesmen? Yes. Wouldn't this expose the public to scientifically unsubstantiated claims made by profit-seeking charlatans? Yes. Then why should the government allow it? Because this allows the free flow of ideas. By "free flow" I do not mean zero-cost. I mean legally unrestricted, as in "I get to think this. I also get to share my ideas. Someone else gets to think it, too."

"Of course," says the Congress of the United States. "You may think anything you want. Just don't ask anyone to pay you for your idea. To get paid for your idea, you must be licensed by the federal government."

At every level of civil government, there are politicians who pass laws and legally tenured bureaucrats to enforce them. One purpose of these laws is to restrict the free flow of ideas. Another is to create monopolies for large corporations with teams of lawyers. These firms have the money to get through the hoops established by the bureaucrats.

Some of the senior bureaucrats then retire with full pension benefits and go to work for the corporations that are the beneficiaries of the regulations written and enforced by the bureaucracy.

This is normal. We know it's normal. We are told that this is the price the public must pay to secure safety.

Safety from what? Safety from the free flow of ideas.

Cancer cells do not have a lobby in Washington. They do not need one. But if they did have one, why would it promote laws different from what we now have?

I have presented here the basic case of free trade in ideas, which includes the implementation of these ideas in the form of products.

Am I speaking hypothetically? No. I am speaking from personal experience.

THE "BLACK BOX" (WHICH WAS GRAY)

My wife in 1987 began to suffer from an ailment. It had many names: Epstein-Barr, chronic fatigue syndrome (cfs), fibromyalgia. Whatever the name, it was widely dismissed by physicians as merely psychological. "It's all in your head." This is a code phrase for "You are desperately sick, but I have no clue as to why. Because we physicians can't define whatever it is that you have, your insurance company does not insure it. Please pay by credit card or check before you leave."

A 1987 book by a pair of husband and wife sufferers was titled Waiting to Live. It was a depressing book. My wife had many of the symptoms it described. She was in constant pain: headaches. She was constantly exhausted. She sometimes slept 16 hours a day. She could not recall anything she had just read. Driving over 15 miles an hour seemed like speeding to her. There was no relief.

I heard of a man who had a machine that seemed to cure people of numerous diseases. Her disease was one of them. He had a clinic. Officially, it was a pain clinic. Unofficially, it was a miracle clinic. As a pain clinic, it was legal. The way it reduced pain was to cure the diseases that caused the pain.

In the summer of 1988, I sent her to this clinic in California. She took three treatments, each lasting 8 hours a day. The symptoms disappeared at the end of the third treatment. They have never returned.

The man who invented the machine told me that this was the most rapid recovery from chronic fatigue syndrome that he had ever seen.

Another patient was the actor James Coburn. He had lost his career as a movie action hero. As he told me when I interviewed him, it is hard to be an action hero when it hurts too much to comb your hair. If you look at his hands when he deals cards in Maverick, you will see what he had faced. His fingers remained gnarled, but he could deal the cards.

In 1991, the U.S. government impounded the machines temporarily in his new clinic in Nevada. My wife then loaned him $10,000 to hire a lawyer. (She never got her money back.) But the Feds made a very big mistake. The impoundment order lapsed on day 30. The government's agents showed up at the clinic on day 31 to remove the machines, only to find an empty clinic. The machines wound up in England. (They are no longer in England.) I have written about all this before.

The government is hostile to any arrangement based on money transfers between a caregiver and a sufferer.

The medical establishment is equally hostile. Its above-market income has been based on government restrictions on entry by non-licensed practitioners. This 100-year arrangement is about to backfire. The government has lured the doctors into the trap. Now it is about to spring it.

Every year, the Medicare bureaucracy cuts payments to physicians and hospitals. Every year, Congress delays the implementation of these new regulations. Sometime, possibly on January 1, 2013, the new regulations will go into operation. Having made the medical establishment dependent on government regulations and Medicare money, the government will slowly take the medical establishment off life-support: government money. "Gotcha!"

I saw this coming in 1978. Now it's almost here.

ACROSS THE BORDER

Let us assume that you want to get that experimental treatment, despite the fact that the Food and Drug Administration has not yet authorized its sale to the American public. You continue to research the matter.

Lo and behold, a clinic in Mexico is offering it. So, you call the clinic and schedule an appointment. You fly there and get the treatment.

Let us say that it works. You go to your oncologist. He gives you a clean bill of health. He says it is a case of spontaneous remission. What is spontaneous remission? It's just one of those things, just one of those crazy things.

You have a choice. You can say nothing. This is the safest course of inaction. You can say you got treated in Mexico. He will think "quack." He will still attribute it to spontaneous remission. Or maybe he will decide to invest part of his pension money in the Mexican firm that produces the product. It's hard to say what he will do.

Let's go the whole nine yards. What if it's a pill? You can administer treatment yourself. Anyone can.

What if someone could buy the pills online? They would be shipped by Federal Express to his door.

What if the Food and Drug Administration finds out?

It can take remedial action. It can impose heavy penalties on anyone who buys the pills. Or maybe the FDA can say that the supplier is a Mexican drug lord. Any FedEx packages from the address will therefore be confiscated.

By whom? How? Where? How will the FDA enforce this restriction?

Can the FDA impose sanctions on the seller? No. Can it somehow block the money transfer? Maybe, but at what cost? Can it follow the money when the seller shifts banks?

The FDA could then contact some international regulatory agency. It could go to the World Health Organization, the source of the Codex Almentarius. This code regulates the sale of health supplements across borders. But these agencies cannot enforce anything that respective nations refuse to enforce. They have no meaningful sanctions of their own.

As the cost of communication falls due to the World Wide Web, the ability of the U.S. government to control the flow of information is collapsing.

As the cost of package delivery across borders falls, the U.S. government finds it increasingly expensive to stop the flow of goods. At some price, it can reduce the flow of products, but this price keeps rising.

Why is the price rising? Because of increased trade. The more goods that cross borders, by way of Federal Express and UPS, the more costly it is for the government to identify and intercept a single package. The haystack keeps growing. It gets easier to conceal the delivery of individual needles.

The gatekeepers cannot control the flow of ideas, goods, and digital money. The gatekeepers stand at the gates, but the walls have collapsed, like Jericho's walls.

The wife of an old friend of mine suffers from a lot of pain. He has a friend who occasionally would drive to Mexico. The person would buy the pills, bring them back, and send them to him by mail. This is no longer necessary. They buy the pills online. Bottles are delivered to their door.

Meanwhile, if you cross the Alabama border and buy a bottle of Sudafed, you can go to prison for eight years.

Here, we see political insanity in action. The idea that legislation securing a border can somehow protect people from charlatans is itself one of the most important ideas in the history of charlatanism. Politicians are the charlatans. When it comes to snake oil, can any private manufacturer rival the U.S. Congress?

DIAGNOSTICS AT WAL-MART

A computer program available to veterinarians allows them to diagnose the health of animals by doing a simple blood test. The program costs $1,000. It probably costs a lot less from some "pirate" site in China.

It is illegal for the vet to run a test on anyone in his family.

Let me write some science fiction. In a decade, you will be able to walk into a clinic at Wal-Mart and get the test for (say) $50. A licensed para-nurse will administer the test. She will make $20 an hour. This will take at most 10 minutes, most of which will be devoted to filling out a form. The digital data will be sent to a specialized diagnostic firm in India. There, a licensed physician will look at the program's analysis and offer his assessment. This will be sent to your email address.

Obviously, this is implausible. With the Federal Reserve running things, it will cost more than $50.

What is to prevent this, other than the AMA, the FDA, the FTC, the FBI, the CIA, or whatever agency or agencies assert primary jurisdiction? Take the government out of the picture, and what do we get? Better health. Cheaper health. Innovative health.

If we are talking about digits, things get cheap, fast. Things also get fast, cheap.

Why would this be bad for consumers? It wouldn't. Why would this be bad for American physicians' incomes? I don't have enough time to list the ways. I can say this: the number of medical school applications will fall. Anyway, applications to American medical schools. Tuition rates will fall due to a hundred online medical schools training people in digital medicine. Most of these schools will be located outside the USA in a room with a computer. The faculty will be all over the world.

CONCLUSION

Medical care is about to receive a shot in the arm. It will be driven by price competition. It will be available to people in clinics that will serve people too poor to buy medical care today.

Will there be quacks? Of course. Will there be genius innovators – the equivalent of Salman Khan and his Khan Academy? Of course.

Will there be concierge doctors for the rich? Yes. The price will fall, as today's licensed physicians get out of Medicare delivery and start serving only non-Medicare patients.

Will there be better living through chemistry? Count on it.

Will there be long waits in local doctors' offices – doctors who still serve Medicare patients? Yes.

Will thousands of physicians cease to take new patients because too many new patients will be on Medicare? Yes.

Start making plans to shift to the medicine of the future. It will be cross-border medicine. That is where the savings will be. That is where the innovation will be. That is where the FDA won't be.

April 28, 2012

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2012 Gary North

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