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Megan McArdle Talking Gibberish (Again)

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by Ben Cohen

Not only is Megan McArdle an astonishingly bad writer, but her grasp of basic economics is pretty appalling too. Check out her latest assault on left wing economics:

What I don't like is the government stepping in and deciding what drugs
are worth how much money. The government does not do a good job at
setting prices. How do we know this? Generations of attempts at wage
and price controls. Price controlled markets don't work well, whether the price controls are a ceiling or a floor.

kind of embarrassing to have to explain this, because it's a pretty
elementary and widely understood component of the classical liberal
analytical framework. I frequently disagree with liberals
(obviously). But I hope I don't often airily proclaim that I don't
take them seriously, because after all, they don't really mean anything
they say about market failures--it's all just a fig leaf for their
ideological mission to destroy the private sector.

McArdle's writing is so awful, I can't figure out whether the last paragraph was sarcastic or not, but her general point about government price setting in regards to purchasing medical drugs is just utter rubbish. When she says, 'The Government does not do a good job at setting prices', she is simplifying the Left/Right debate down to the whole "America vs The Soviet Union" jingoism. McArdle is basically saying that because centrally planned command economies aren't very successful, any form of it must be bad. This is a silly argument, and not really worth getting into. Sweden is a striking example of a mixed economy (part command, part market) and very successful. This of course doesn't fit into McArdle's world view, so it is therefore ignored.

However, the notion that the government should not compete with the private sector when it comes to drug purchasing is a more interesting argument (but probably equally as stupid). In the case of Obama's proposed Public Option, the government won't be price setting, just using its considerable resources to drive prices down. Governments can buy in bulk and therefore negotiate far better prices than smaller private companies, and the public then reaps the benefit. McArdle is essentially saying that people should not be able to group together (in the form of a government) and get a better price for their medicine because, well, private companies don't like it and they won't be able to compete. It's a self refuting argument. McArdle doesn't like it because in her head, government intervention in the market leads to North Korea despite the obvious evidence that no one is suggesting anything remotely similar. To disguise this, McArdle relies on complicated economic terms to bolster her argument that otherwise wouldn't be taken seriously anywhere outside of Fox News.