Monday, July 12, 2004

Popping a Whitehead (again) 

If one follows National Review Online for any length of time, you will see articles from the "Krugman Truth Squad" on the site. The columns are posted by Donald Luskin and are also posted on his own blog. Donald Luskin coined "The Krugman Truth Squad" (KTS for short) to name a cadre of bloggers who dog New York Times "economics" columnist and Princeton professor. The group was formed to keep a track of the "nation's most dangerous liberal columnist" and to keep the truth shined on him.

Well, in the grand tradition of active bloggers who are dogging public figures, I have decided to become a one-man consistency squad to John Whitehead. Yep, widely printed Wall Street libertarian types catch a widely read economics professor writing lies and I catch a DC-based civil liberties trial lawyer with logical inconsistencies. It's not much of a life, but it allows me a chance to get things off my chest.

In my last post, Mr. Whitehead was caught by me in the grips of two contradictory desires: The desire to curb state search and seizure powers via the PATRIOT Act on one hand and a desire to ban cigarette production and consumption on the other. In his latest post, Mr. Whitehead is talking about prescription drug prices in Canada and the FDA's "Gestapo" tactics in trying to stop illegal practices.

Mr. Whitehead starts his column by referencing a USA Today story noting that the AARP (one of DC's most powerful lobbying groups according to Fortune) was yelling and screaming about drug prices going up at "three times the rate of inflation". He then sets up one of his typical rhetorical devices: The government agent dressed in black gear being firm and/or aggressive with harmless and helpless citizens. What I find incredulous with this device is that people are openly admitting to an ILLEGAL activity and then becoming huffy when agents conduct a 30 minute "search" "harassing" these poor, defenseless seniors. The search may have been "illegal", I don't know the jurisprudence of search and seizure case law to say one way or another, a simple question still stands in my mind: "What did these seniors really expect?" Engaging in ILLEGAL activities tends to get people roughed up by government agents simply upholding the law like they are supposed to do. The fun is just beginning....Why were these poor, defenseless seniors being compelled to go to Canada by the busload to get prescription drugs?

I will let Mr. Whitehead speak for himself:

Why Canadians are spared higher drug prices is due, in large part, to price controls. The Canadian government has wisely established a review board to ensure that drug prices are not so expensive that people cannot have access to them.
After listing some of the much cheaper prices Canadian citizens pay compared to what American consumers pay, Mr. Whitehead puts the above quote down and at this point in the column, he is being honest with the reader. However, it is his assertion that price controls are a wise maneuver that has me irritated. This just in: price controls are a massive expansion of the state's power first of all and second of all, they have undesired and unexpected consequences. Price controls are a market distortion of what the price of drugs should be. If Canadians had to pay more for their drugs, there would less economic pressure on the pharmaceutical industry to try make up their losses here in the U.S.

By the way, is anyone schooled in classical economics not surprised by the price increases here in the states. The drug companies were being forced to discount their wares by government fiat and the added cost of doing business is simply being passed on to the consumer through higher prices. It is infuriating to me that people think that increased taxes and regulations don't have any effect on people's behavior (This is the essence of the government's view of tax returns V. tax cuts otherwise known as Keynesian Economic Theory). Ludwig Von Mises and other classical economists have blown this theory out of the water time and again.

So, how does Mr. Whitehead solve this problem? Allow the reimportation of drugs from other countries with price controls of course. He dismisses concerns over drug quality with a wave of his hand
Unfortunately, the Bush administration and other politicians are opposing drug imports, mainly citing safety reasons. However, this is something that could easily be taken care of through the passage of prudent legislation.
Not only is he dismissive of the potential health risks associated with importing drugs from other countries with price controls, he does not inform his readers of two important facts to consider: 1. Many pharmaceutical companies ALREADY have discounts for seniors in place (just watch day time t.v. for one day to see all of the senior specific ads to see what I'm talking about). 2. The costs of researching and developing new drugs is around an estimated $800 million dollars per drug.

Finally, Mr. Whitehead doesn't consider for his own reasoning what drug reimportation would do to government powers. The Pacific Research Institute, among others has argued recently that reimportation would
EXPAND the FDA's regulatory authority. If Mr. Whitehead thinks the FDA is a bully now, just wait till they have to seriously police reimported drugs AND tobacco products. That 30 minute "search" he highlighted would just be the beginning. Mr. Whitehead needs to study human nature and economics more closely in the future to spare himself embarrassment in the future.

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