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Economic Perpetual Motion Machines?

The Patent Office requires a working model of only one type of invention - the perpetual motion machine. The reason is that it defiles the laws of physics, yet crackpots insist on filing patents for them.

In economics, there are now two examples of attempts to build perpetual motion machines i.e. systems that recirculate money and produce new money by so doing.

The latest example is new language in the Health Bill that imposes some kind of fee/tax on medical device manufacturers to raise money to pay for healthcare reform. So let's see how this is a circular system. Let's say that a medical device company pays this new tax. It recovers that cost by either reducing its profits or passing the cost onto the customer. Hmm, anyone brilliant enough to figure out which option will be exercised by the medical industrial complex? So the device manufacturers who can (large ones), will pass the cost onto the doctor who buys the equipment but the equipment will be paid by Medicare indirectly. I've already written about the great ripoff that device makers impose on Medicare. This could just make that worse. So the government ends up shelling out more money for the use of the equipment. Where did that money come from? The tax paid by the device company - circle closed.

So what does this achieve? It creates the impression that device companies will help to pay for healthcare reform. But that's a myth. The money just recirculates, and with some friction (to use the physics analogy), money is lost in the process.

I don't want to be in the "Don't tax him, don't tax me, tax the man behind the tree" category, but I'm not sure that taxing device companies is really the way to go. A few months ago, I proposed the converse idea, back in July, on this blog. I suggested that companies that REDUCE charges to Medicare should be given FAVORABLE tax treatment to incentivize companies to stop milking Medicare and rather help save money. That would open the flood gates of capital for innovative cost reduction.

Sadly, as much as I support healthcare reform, I'm not seeing enough innovation on the cost REDUCTION side. I hope this is the start, but I'm not yet optimistic that cost reduction is being taken seriously.

Footnote - Oh, and as far as another example of economic perpetual motion machines? Advertising-driven websites. Remember when everyone was going to get rich running ads on the Internet? Worked for a few companies - Google, and, I can't remember the names of the other companies.

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