Question:What are the 8 scariest words in the English language?Answer:“I’m from the Government, I’m here to help”Now I do not intend to propagate any political views here, nor am I trying to insult any of our members that may happen to come from the country in question in this blog post...I am simply bringing to your attention a great example of where bureaucratic “solutions” can be far worse than the “problem” they are trying to solve.Greece has been in the headline a lot lately, for all the same reasons...Debt, Deficits...etc etc.But how much do we actually know about what the Greek Government is now looking to do to solve the country’s problems? No doubt you have seen the riots on the streets of Athens against cuts in the public sector and no doubt you have heard about the problem of tax evasion the taxman faces (to be honest, I quite like this)...But have you heard about the sudden magical ability the government in Greece has obtained? Apparently they are now able to calculate what prices should be.Yes folks, Greek bureaucrats have finally been able to crack it! They are now able to work out what the price of medicine SHOULD BE. There is no brain small enough in the Greek cabinet of ministers to not be able to take into account all the individual preferences of the citizens, costs of production and opportunity costs related to the production and purchase of medicine.The conclusion: Prices must be fixed at 25% below their current levels. GENIUS!If prices of medicines are fixed at a lower level... that means people can afford it easily...and they will have more left over in their pockets.... they can spend this money in other areas of the economy... and this will stimulate growth.... and we will be saved!I can see Neo-Keynesian economists patting each other on the back in Athens now as they receive honorary medals for economic achievement... only one small problem.The results are not exactly as they expected.Two pharmaceutical companies have suspended sales and left. "WHAT? THE BASTARDS!"Leo Pharma and Novo Nordisk, two Dutch companies have gotten up and left. Maybe it’s just that the Dutch have some crazy attachment to selling goods for more than they cost to produce? Who knows... but there is probably a lot of head scratching going on in Greece right now.How has the Greek government responded?It has condemned the actions as “unfair”.So what is the outcome? The intention was to provide the people with cheaper medicine and stimulate the economy. The result is that now 2 major drugs companies have packed their bags and left, taking a state of the art insulin product with them. (looks like the government is going to lose the diabetic vote).In reality this is no laughing matter. My fear is that governments worldwide will follow this sort of economic logic and not limit themselves only to medicine.So it looks like now is a good time to pull out my dusty copy of “The Road to Serfdom” by F.A Hayek, sit back and indulge in its warnings published decades ago. The times are certainly changing, but it is highly debateable whether it is for the better.
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