Cool, There's a Word For This

I have been calling it "the health care Trojan horse for fascism."  It is the phenomenon where government funding of health care is used as an excuse to micro-regulate individual behaviors.  Apparently, the economic term is "government financing externalities."

These kinds of "government financing exernalities" are commonly used
to justify government regulations that restrict individual freedom.
Liberals use these arguments to justify such regulations as mandatory
seat belt laws, smoking bans (because government may end up subsidizing
smokers' medical treatment if they get lung cancer), and most recently
restrictions on morgage terms (because the government may bail out
people who end up defaulting). Conservatives have their own favorite
government financing externality arguments. For example, many argue
that we should restrict immigration because otherwise the immigrants
might collect welfare benefits that are paid for by taxpayers.
Obviously, the greater the role of government in financing a wide range
of activities, the greater the number of potential government financing
externalities. The expansion of government spending facilitates the
expansion of government regulation intended to curb the negative
effects of the spending.

Government financing externality arguments generate their appeal
from the fact that they seem not to be paternalistic. We are willing to
let you hurt yourself, advocates implicitly suggest, but we can't let
your bad behavior hurt the taxpayers.

The libertarian solution to this problem is to eliminate the
government financing that created the "externality" in the first place.


  1. Craig:

    The problem with the listed example of conservative use of this practice is that conservatives don't want welfare programs. Liberals, on the other hand, want seat belt laws, smoking bans, etc. The health cost argument is just an excuse to help them get what they want (kind of like how global warming is an excuse to enact other liberal ideas).

  2. such.ire:

    This is just nitpicking (I agree with the idea itself), but I don't think smoking bans necessarily are only justified by the "government subsidizing externalities" argument; instead, I think they are perfectly good examples of governments intervening to eliminate negative market externalities directly. Second-hand smoke causes a lot of problems, for example, even for non-smokers. Since we don't really have the pre-requisites for Coase's Theorem to apply, I'd say government regulation of smoking is perfectly fine. Creating mechanisms to solve negative externalities is partially what the government is for.

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  4. Mark Alger:

    ...and yet, there is no problem with government workers' joining unions, even though the government inevitably will end up financing over-inflated compensation packages.


  5. BerthaMinerva:

    A bit off topic for this post, but on the subject of national health care as Trojan horse for all kinds of unsavory things, I was wondering what Coyote's take is on the news from Britain that the govt there now proposes that organs be harvested WITHOUT the deceased or the deceased family's consent.

  6. will:

    The concept of "Shared Resources" (air, waterway, roads, public buildings, national/state parks and forest, etc.) is that they are owned and shared by all the citizens and as such are regulated and controlled by the government, the representative of the citizens.

    These concept allows the government to regulate emissions into the air because we all share the same air. This becomes a rationale for regulating where people can smoke, since the results of smoking is expelled into the same air that others are breathing.

    If health care becomes a shared resource, i.e. paid for by the government, then it becomes inevitable that the government will regulate access, allocation and behavior. This is one of the many reasons to avoid government paid for health care.

  7. tribal elder:

    "A bit off topic for this post, but on the subject of national health care as Trojan horse for all kinds of unsavory things, I was wondering what Coyote's take is on the news from Britain that the govt there now proposes that organs be harvested WITHOUT the deceased or the deceased family's consent"

    SCARY STUFF. You can't sell your own kidney, but the gov't can give it away. Are UK residents (or at least deceased UK residents) now chattel for their owner-government to dispose of as it wills ? With gov't gatekeepers/rationers for health care, how long before someone sees that lengthening the time to get care in Nat'l Health will positively 'adjust' the actuarial experience on the benefits-paying (social security) side.