05 Mar 2012

Landsburg Has Another Talk With Us About Sex

Economics, Steve Landsburg 22 Comments

I have long maintained that Steve Landsburg is a modern-day Swift, whose essay “More Sex is Safer Sex” is the best critique of mainstream externality arguments ever penned. The only problem is, Landsburg was serious.

Landsburg displays similar skills with the ladies in his recent posts on the Fluke fiasco. Initially, Steve expressed disappointment with Rush Limbaugh’s comments–Steve was disappointed he didn’t come up with the camera idea himself.

Then in a follow-up post, Steve tackles some of the pro-contraception-coverage arguments. Steve’s dismissal of the first one, as not even worthy of serious rebuttal, seemed too hasty to me. So here is Steve:

The worst imaginable argument [for subsidizing contraception]— the one I have difficulty believing was ever intended seriously — is this:

It is cheaper to foot the bill for contraception than to to foot the bill for childbirth.

This is probably true (though I haven’t seen any actual estimates of the number of childbirths prevented per dollar spent on contraceptive subsidies) but (and I am embarrassed to even have to point this out), so what? If we’re going to start making choices strictly on the basis of what’s cheapest, we should all stop eating.

I don’t think this is as dumb as Steve is suggesting. At least, I hope it’s not, since I conceded that it might be a plausible argument when arguing with Daniel Kuehn on this matter.

So here’s the analogy: Many libertarian-types love to talk about the beneficial role of insurance companies in making us live safer lives. For example, an insurer might give you a break on your premiums for your homeowner policy if you install deadbolts, put in a sophisticated sprinkler system, get extra fire extinguishers, etc. Given that you are signing a contract with the insurer, in which they are on the hook if your house is broken into, or burns down, it might make sense for them to encourage you to take those activities. Rather than giving you a break on the premium, it’s conceivable they could encourage you by letting you send in the receipts from buying the sprinkler system (or whatever), and then refunding some of the price.

So by the same token, given that you have a health insurance plan that provides coverage in case of childbirth, why is it impossible that the insurer would want to encourage you to avoid unwanted pregnancies? Say, by covering the expense of contraception?

Note, in practice this apparently doesn’t make sense; that’s why people are complaining to Congress. So I’m not arguing that it’s efficient for this outcome to occur. Rather, I’m making the modest proposal that Steve has been way too flippant in his dismissal of the argument.

P.S. Here’s a thought: Let’s try to have the maturity level of at least 9th graders in the comments.

22 Responses to “Landsburg Has Another Talk With Us About Sex”

  1. Ken B says:

    If it were an effective cost cutter you wouldn’t have to mandate it. That’s why this is a weak argument for a mandate.

    • Major_Freedom says:

      Bingo, but only if we understand costs as being subjective, and not necessarily monetary and objective.

      It would still be a cost cutter for a religiously inspired employer and/or insurer to voluntarily incur higher money costs by denying coverage for contraception and having piece of mind, rather than incurring lower money costs for offering coverage for contraception and having an unsettled mind. These are the “psychic” gains and losses than cannot be observed through money exchanges only.

      Since focusing on money costs only is an incomplete story, and ignores the subjective preferences of the parties involved, which should by the way be protected according to property rights, this ignorance is inevitably going to be filled by the subjective beliefs of politically motivated parties now that property rights are rejected.

      Some will argue that the out of pocket money costs will be lower with the contraceptives being covered and then make that decisive for enforcing the mandate, while others will argue that the out of money costs will be higher with the contraceptives being covered and then make that decisive for rejecting the mandate, all the while HIDING their own true motivation, which is their own subjective “psychic” gains and losses, some of whom are trying to impose on private property owners against their will, such as the employer who refuses to insure contraceptives. That should be their property right, and the state should not get involved. Fluke presumably signed a contract with her employer that stipulated what is covered and what is not. She has no business dictating what her employer must offer by lobbying the state to “do something.” That’s where she went wrong. Not by enjoying herself in her private life contra Limbaugh.

      Religious folks might be against the mandate psychologically, but then argue their case by saying money costs will be higher. Progressive folks might be for the mandate, but then argue their case by saying money costs will be lower.

      Then of course both will be hoodwinked by positivist dogma and make incorrect inferences of costs over time and which direction they go, rather than using counter-factual argumentation based on economic principles. If the mandate is enforced, and we empirically observe costs going up in the temporal sense, then those against the mandate will incorrectly declare victory. If we observe costs going down in the temporal sense, then those for the mandate will incorrectly declare victory.

      Landsberg is just saying EVEN IF the money costs are lower with the mandate being enforced, that alone shouldn’t be the decisive factor. And that’s right in my judgment. It ignores the human element. Sometimes people VALUE paying higher money costs because they are getting something in return that they won’t get with the lower money costs. For the religious employer who refuses to cover contraception, that gain is piece of mind knowing that they aren’t involved in the ending of a fetus or potential human life. One doesn’t have to be anti-abortion in order to appreciate their right to use their own property as they see fit. That is what is going to get lost in this debate, as usual.

      I think the argument that an insurer would WANT to encourage their clients to avoid unwanted pregnancies, say by covering the expense of contraception, is only true for insurers (and employers too) who aren’t motivated by religion or whatever else that would make them dislike contraception. If one assumes a “money profit maximizer”, then yes, insurers will definitely choose to cover contraception IF it is the case that it cuts costs. But like you said Ken B, if that were true, then surely there would already be non-religious insurers covering contraception. If they aren’t, then it stands to reason it isn’t a cost cutter.

  2. Rick Hull says:

    Landsburg is correct in that:

    > If we’re going to start making choices strictly on the basis of what’s cheapest, we should all stop eating.

    Clearly there is more to the policy calculus than merely the direct cost of policy A or policy B. A merely being cheaper than B is not sufficient to justify its adoption. Frankly, I find the prospect of attempting to justify such invasive policies somewhat repellent because we are on such shaky, fuzzy ground. There will always be a way to justify one or the other based on different weightings, even in a completely forthright manner.

    It is for this reason that we should defer such policy decisions down to the most local governing bodies as possible rather than attempt to blanket society with a one-size-fits-all policy. Let’s not overlook the societal benefit of allowing “voting with one’s feet”.

  3. Mike Maull says:

    I wander if we aren’t missing the something in all this. I find Landsburg boorish most times so I CHOOSE not to read him. I’m quite certain in this day and age the pro’s and con’s of birth control are widely known, even to the laypeople. Access to birth control is not even a remote contributor to unwanted pregnancies, CHOOSING not to use it during intercourse is. I think what is more pressing is the fact that we are debating this issue at all. The current regime deftly captured a significant amount of our intellectual capacity but dropping this little item on us. I’m struck by how shallow and base most of the arguments concerning the measure are (Our esteemed blogger notwithstanding). Really, we are reduced to this? Our best and brightest debating the economic viability of paying for things that people have a CHOICE not to use? I wander if it was discovered that the best form of birth control was extensive and exhaustive readings of Austrian Economics or The collective works of Murry Rothbard if we could get the government to pay for it??? Just sayin

    • Bob Murphy says:

      I wander if it was discovered that the best form of birth control was extensive and exhaustive readings of Austrian Economics or The collective works of Murry Rothbard if we could get the government to pay for it???

      I definitely have found that guys who talk about Murray Rothbard are very unlikely to get anyone pregnant.

      • Mike Maull says:

        Heavy sigh…….

      • Blackadder says:

        I definitely have found that guys who talk about Murray Rothbard are very unlikely to get anyone pregnant.

        I’d say Tom Woods is a clear counter-example to this.

    • Seth says:

      I agree choosing not to use it is a big source of unwanted pregnancies. I think mistaken application of contraceptives is another. Neither of which is improved by the government mandate.

  4. RPLong says:

    Bear in mind, in “The Big Questions,” Landsburg argues that it’s justifiable to kill one man if it prevents the entire rest of the world population from getting a headache. He is a consequentialist to the extreme.

    But in this case, I think he’s actually conceding too much, too soon. Paying for years of ongoing contraceptive therapy is a lot more expensive than paying for the occasional “accidental child” (which is a pretty horrible way of looking at children – another point Landsburg tried to get across to his readers). This is why statin therapy costs the Ontario government far more than, say, snake anti-venom – even though snake anti-venom is a lot more expensive per pill. The most costly medications are those therapies that have to be sustained for long periods of time, even though their unit cost is comparatively low. This is also why many plans don’t cover the BCP at all (and also why life insurance is a profitable business (and gambling)).

    The reason people think it’s not true is because within the scope of their own cognitive time-horizons, it seems to be true. 9 months of BCP is cheaper than the birth of a single child. But years and years of BCPs across a huge cross-section of the female risk pool adds up.

    But people shouldn’t really look at these things from an economic perspective. If my body means my choice, and my choice is important, than that’s the best argument *against* BCP mandates. The minute you bring the State into the picture, your body, your choice becomes political fodder. Your choice is now a public cost that the public is now entitled to debate. You lose your choice; it’s society’s choice now.

    I live in Canada, and trust me, the debate is not about BCP, it’s about things like cancer drugs. The stakes are far higher here because most of this is publicly funded. Americans should resist this terrible eventuality as long as they possibly can.

    • Seth says:

      ‘Paying for years of ongoing contraceptive therapy is a lot more expensive than paying for the occasional “accidental child”’

      Nice point.

    • Seth says:

      I’ll revise my compliment. On further thought, I believe one could argue that years of ongoing contraceptive therapy would prevent multiple accidental pregnancies in the absence of that contraception, not just the occasional one.

      But, I think it’s right to say that the incremental reduction in prevented unwanted pregnancies from forcing insurers to pay will not be enough to pay the cost — as most of those pregnancies are already being prevented.

    • Anonymous says:

      Paying for years of ongoing contraceptive therapy is a lot more expensive than paying for the occasional “accidental child”

      The average cost of a child from birth to 18 in the US is on average around $200,000, give or take.

      I don’t know what kind of contraceptives you’re referring to, but in my experience it is nowhere close to being that high.

      Call me a conspiracy theorist, but I think some very shady people in power want to reverse the current trend of population growth decline, and one of the ways to do that is by making contraceptives more expensive than they are in the market, via making them mandatory for insurance providers. The costs will expectedly shoot through the roof, pricing out many couples, and that’s going to result in more pregnancies.

      They might use the “feminist” angle as a cover, the same way the Rockefellers used the feminist angle to finance the women’s liberation movement, in their magazines to promote “women in the workforce”. With more income taxes being collected, there is more “risk free” interest profit to be earned by lending to the state. Similarly, with more pregnancies, there are more individuals to produce and be taxed.

      If we see this Sandra Fluke story relentlessly presented as a women’s rights thing going forward by the major publications, and if we see the price of contraceptives dramatically rise, then I submit it’s a rouse. It’s also convenient for Obama who is running for re-election and needs to garner feminist’s votes.

      • Ryan says:

        The argument wasn’t the total cost of raising a child – it was the total cost of child birth. Not every unplanned child becomes a ward of the state, nor a welfare case. The argument that BCP is “cheaper” simply isn’t true.

        • Gee says:

          Lets mandate that insurers pay for abortions instead. It’s the cheapest option, *and* prevents welfare babies. Isn’t democracy great?

        • Anonymous@hotmail.com says:

          1. Total cost of children should include more than the child birth, since babies grow up. Ignoring the costs of raising a child is silly.

          2. Nobody was talking about children becoming a ward of the state. The $200,000 costs are the costs that the caregiver has to incur, and the caregiver can be anyone. This is the costs of raising the child, period, not raising the child by parents only or the state only.

          3. Birth control is in fact cheaper if you don’t omit the full costs of raising children. You speak as if the only costs that are incurred are childbirth costs.

          • RPLong says:

            Sorry, I should have been clearer. What I meant was that “the full cost of raising a child” is only incurred by the state if the child is a ward of the state. Similarly, “the full cost of raising a child” is only borne by an insurance company if the child is a ward of the insurance company.

            Because that doesn’t happen, your argument is off-base. Insurance premiums off-set the future costs of the child. BCP is more expensive. Like Ken B pointed out, if this weren’t true, then a mandate would be unnecessary.

            But it doesn’t make sense arguing about it. I used to do these calculations for drug submissions to payers, and that’s what we found. The empirical evidence suggested to me that it is so. Perhaps it suggests otherwise to you.

            Cheers.

            • Anonymous says:

              What I meant was that “the full cost of raising a child” is only incurred by the state if the child is a ward of the state.

              I was actually not referring to costs incurred by anyone specific. I was referring to the money costs of whoever raises the child. Money costs don’t disappear just because the child’s guardian changes. This dollar amount is what the guardian, any guardian, will end up paying.

              Similarly, “the full cost of raising a child” is only borne by an insurance company if the child is a ward of the insurance company.

              This makes more sense. I finally get your point. To the insurance company, they will pay either the one time child birth or the years and years of contraception. Comparing those two, it’s probably way more expensive to pay for the contraceptives.

              Is that right?

  5. Michael says:

    Does government-subsidized birth control reduce pregnancies? Here is National Review making the case that it does not necessarily do so: http://www.nationalreview.com/articles/274374/free-birth-control-all-deroy-murdock

    “Although the Medicaid population made up only 18.92 percent of New Yorkers in 2009, they had 39.75 percent of abortions. This lends pause to the notion that eliminating co-pays will have any constructive effect on preventing unwanted pregnancies.”

  6. Matt Flipago says:

    “P.S. Here’s a thought: Let’s try to have the maturity level of at least 9th graders in the comments”

    What percent of conversations in your 9th grade could possibly be considered mature? IDK what you expecting.

  7. Mark says:

    This whole discussion makes me literally sick.

    The rate of illegitimate births has increased substantially over the last few decades, and one of the causes is public policy.

    Due to this problem, we need to subsidize contraceptives, since children have become a negative externality (stop here for a moment, think about this, and that let it sink in). Or, at least, children birthed by the “wrong” kind of people have become a negative externality.

    So, what is next? What happens when illegitimate birth rates remain at current levels? Shall we raise Margaret Sanger from the grave? Are we prepared to enact further policies that will ensure that only the “right” kind of people have children? Where does that lead us?

    Prof. Murphy, I believe in God too, and I believe He has a Plan. I only wish that he would give me a small glimpse at times like these.

  8. Ken says:

    Preventive medicine has never been shown to cut the cost of healthcare overall. It’s generally good (thought not always good) for people to utilize preventive medicine because it can stave off disease in the future, but the costs of covering preventive medicine tends to be more expensive than treating the few people who would not otherwise have contracted cancer or heart disease or some other preventable disease. If it costs $1000/year to cover contraception, and $10,000 for a birth, then the company has to calculate whether 10% of those female customers who do not want to pay for contraception but also do not want to get pregnant will wind up getting pregnant and carrying the child to term. That seems unlikely. The accidental birthrate is probably quite low, and even when contraception is covered by the insurance company, not every woman will take advantage of it even if they don’t want to get pregnant. Some will still get pregnant anyway because they don’t follow instructions.

    Insurance companies give breaks because of the reduction in risk. So, if it makes sense to give breaks for contraceptive purchases, they will. It doesn’t seem likely that it’s worth the cost to them, except where the pregnancy might lead to expensive complications. My wife, for instance, could not have more children after our first one. The pregnancy was so bad that they felt that another might kill her. So, the insurance company covers her contraceptive and she gets the best. A few thousand a year is nothing compared to the cost of neonatal ICU for two months, plus, their job is to help her keep safe, so it’s paid for on that basis.

    Slightly off topic is this double-speak of referring to mandated maintenance payments as “insurance.” Insurance is indemnity against unexpected loss. If you have an expected loss and seek to insure it, that’s fraud, whether it be getting your contraceptives paid for or burning down your business on purpose. Healthcare plans loaded with government mandates are just legalized fraud and should not be referred to as insurance. Progressives are often smart, but they abuse the English language by utilizing terms that are inaccurate.

  9. someofparts says:

    If we are not supposed to measure in terms of dollar costs when it comes to something fundamental, something beyond debate, as he frames childbirth here, then, by his own logic, we can’t haggle about costs when the issue is something as fundamental and beyond debate as a woman’s right to her own body.

Leave a Reply to Blackadder

Cancel Reply