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An Economics Lesson for a Tech Blogger


RUSH: I hope you will indulge me.  I want to do an economics lesson.  It's not related to anything to do with the shutdown or with Obamacare or with the exchanges or any of that.  And it comes, once again, from my hobby, perusing tech media, tech blogs.  But it hit a button.  I think one of the reasons why I like accessing these blogs is because they push my buttons. 

Who are these people?  It's very important, I think.  We are all concerned with the future of the country. The young people, attitudes they have, the values they have, it all matters in terms of what the country's going to be.  And I don't mean to say that these tech bloggers are representative of the body politic or of the young population at large.  I don't know that.  I'm not even assuming it.  But this little exercise, I love learning about economics.

Basic Economics 101.  It's the most complicated simple subject there is.  And, you know, our good sponsor, Hillsdale, has their online course, Economics 101, so we're talking about that here.  But this started, I was reading a blog and it's some young blogger all upset at Verizon.  Now, one of the things that I have encountered and I don't know why this matters to me -- well, I do why it matters, I think it's totally unrealistic.  As I read these tech bloggers, there are a number of things that are thematic to them that you can typecast about them. 

Now, these are media people.  They're journalists to one degree or another.  Keep that in mind.  Many of them are nonideological and even apolitical.  But I'm amazed at the number of them who expect things to be given to them and who will literally criticize companies for not making things available free.  Now, we all like free, don't misunderstand.  But it's not realistic to expect that everything should be free.  And oftentimes companies, tech or otherwise, get ripped to shreds by these people when things aren't free, when they are more expensive or whatever. 

Now, in this case, this involved one of these young bloggers, and this is gonna have mass appeal, so stick with me on this, 'cause it's econ 101.  This guy writes a blog post about how he's so mad at Verizon. He is spending $20 a month for a Verizon LTE plan on his phone that gives him two gigabytes of usage for $20 a month.  And he's angry. He's so angry at what Verizon is doing to him, that the whole point of his blog post was how he is doing everything he can to avoid using it.  He's going anywhere he can find Wi-Fi, because he's very angry at Verizon for over-charging his two gigabytes a month of wireless data over the LTE network at $20, because if he goes over that, if you use more than you pay for, they do soak you. 

Now, the fact of the matter is that that pricing structure by Verizon is working exactly as Verizon intends it.  This little guy is livid that they should charge him $20 a month for two gigabytes, and it's so little that if he goes over it, it's gonna be so much more expensive, so he tries not to use it.  And he thinks Verizon needs to be castigated for this.  And this I have found is a recurring them in the tech world.  The cellular carriers are evil, mean-spirited capitalists who are damned because they're trying to make money.  Yet the Googles of the world are angels because they are trying to save the world. Google gives all of their stuff away, but they don't.  But the appearance is that Google does.

Now, never mind the fact that the Google guys are multiple billionaires.  That's okay, because Google is giving their stuff away, and these cads at Verizon have the audacity to charge this little guy twenty bucks a month for his precious little two gigs.  So what did Verizon do, along with AT&T and everybody else?  Verizon puts in this LTE network which cost a lot of money to build.  They invested a lot of money in an expensive network, and they did this because of market demand.  There are people who want to be able to have those kinds of download speeds for data on their phones so that they can watch video or whatever, and they are willing to pay for it.  People like it. 

LTE, 4G, whatever you want to call it, exists because people are willing to pay for it, except this little guy isn't, and that's Verizon's fault as far as he's concerned.  People like it so much, in fact -- and this is where the lesson begins -- people like it so much that Verizon has to do something to ration access to their network. AT&T does too.  I'm just using Verizon 'cause he wrote his piece about them.  These networks have to do something to ration access, otherwise if everybody were accessing it, the high speed aspect would go away because the network would be clogged, and so how do they ration it?  They do it with price.  They price charging you for the data you consume. 

Now, in other contexts, this is thought to be fair and equitable, and nobody has a problem with it.  In cable TV, the scream there is that the carriers force you to pay for all the stuff you don't watch and that the government should force the cable companies and the satellite providers to price not on a fixed bundle basis, but a la carte.  You can't make these people happy no matter what because they're always looking for something for nothing, and they expect businesses to price themselves that way, and you can't do that.  The reason why this matters to me is 'cause these are young people; if they don't understand this, and if they don't learn it, we are in heap big trouble as these people become adults and the shock of reality hits them. 

Now, the cable companies, they bundle all this stuff and they charge you for it.  In wireless, the cell carriers are just the opposite.  They have gone from one price serves all to pay for what you use. So you can buy this many gigs for this amount of money per month or you can buy unlimited, whatever you want to pay for, you can get.  But for those who are paying the least, Verizon is happy if they don't use the network.  That is the point.  They have to ration usage, otherwise their network isn't gonna provide the service people are demanding: High speed.  The bigger load you put on it, the better.  So Verizon here is faced with servicing its customers.  Now, which customers is it gonna consider to be the most valuable?  The people who use it.  The people who use it and pay for it. 

Now, this guy who pushed my buttons, he finds that he doesn't have to use it.  He can go Wi-Fi, and he can screw Verizon.  Yeah, and that's good! Verizon should be screwed.  So he's either a cheapskate or what have you.  But he'll just wait.  This whole piece is based on how he tries to avoid using it simply 'cause Verizon is raping it 20 bucks a month for two gigabytes of data.  However, now we add to it this guy happens to be a pundit, and he thinks that he's making an important social comment.

So he has to tell the reader how silly it is for the wireless carrier to make him not use their network.  In fact -- and this, again, is the lesson -- it is efficient, and it is completely straightforward for the carrier to price usage such that the highest valued customers and users get access, uncluttered and unimpeded by low valued users who can wait until they get access via Wi-Fi.  Why should Verizon care as much about somebody who don't even want to use the data, who cares so little he's not even willing to pay for it?

Yet this guy's getting all ticked off 'cause he thinks he's getting ripped off. He thinks Verizon's is targeting him and people like him to rip him off when the exact opposite is happening.  They're making it available at a price that he can afford, but that isn't enough; he wants more for nothing.  Meanwhile, Verizon has people willing to pay for it, are paying for it, and they have expectations that that high speed's gonna be high speed -- and the only way they can do that is to make sure their effort isn't clogged, and they do that with price. 

It's amazing how price works. 

Price is one of the greatest rationers there is. 

This all makes perfect economic sense,a nd there's no animosity in it.  It's strictly business.  It is unfettered, full-fledged capitalism, ad this guy finds a problem with it because they don't care about the little guy.  So he wants everybody to do what he's doing, screw it, not use 'em.  Frankly, that'd be fine, because while he bumps out of the network, that leaves more data for everybody else at high speed, and the claims that Verizon makes about speed delivery and all that on their LTE network will be borne out. 

So it all works.

In the meantime, this guy's not being denied anything.  He's the one denying himself by being all haughty and John Kerry-like.  Now, the thing about this... Well, cable is all different, as I said.  Cable being fixed price rather than a la carte makes sense, too, and the difference is consumption.  The consumption of the cable networks does not exclude other consumption.  Programs are public goods.  If you watch ESPN, it doesn't lessen the amount of ESPN. 

In other words, the more people watching ESPN doesn't affect your quality of ESPN.  The more people using a data network, the more deterioration there's gonna be in the network, and the provider doesn't want that deterioration, so he rations it with price.  But it's this expectation that companies give it away that troubles me.  This desire, I understand it's nothing new, and I'm probably making a mistake by making too big a deal out of this.

But one of my pet peeves is people who want something for nothing and expect something for nothing, people who do not accept the notion that they should pay for what they use. To me, it's a personal responsibility issue.  The notion that corporations or businesses are charities and that they're there to provide health care or jobs for the community is asinine, and yet this is how economics is taught.  This is how liberals teach young people what a corporation is. 

If a corporation doesn't do what a liberal thinks, they come in for high criticism and they're ripped to shreds, and they end up on the Democrat Party enemies list.  And it just all adds up to an ignorant -- and I mean ignorant, "they know-nothing," not stupid -- bunch of people who have unrealistic expectations of something for nothing.  And then when you have a political party that comes along and is willing to provide that, then you get real trouble, and that's where we are. 

But in this instance, this guy's attitude is exactly what should happen based on what the carrier here is seeking to do.  They're making their service available, "Here's the price for what you get," and it just isn't enough for this little guy.  Well, he's just not gonna use it, and that's Verizon's fault.  It's the carrier's fault, as far as he's concerned, and he doesn't understand what's going on. But, see, the market comes through.  He doesn't have to use 'em when he gets mad.  There's Wi-Fi out there. There's any other kind of option he can choose. 

So he's not being screwed.  He just wants to go through life thinking he is, and that just offends me. 

I'm sorry.  I had to get that off my chest.


RUSH:  Snerdley said, "Who are these people you keep talking about?" They're journalists, folks. It's a blogger, a journalist. Sorry if I had not made that clear.  They are journalists.  So they're liberals, whether they know it or not.  How many these tech bloggers are gonna complain about the glitches in all the Obamacare sites?  I bet somewhere between few and none.  That would be my wild guess. 


RUSH: Todd in Lawton, Oklahoma, great to have you on the program, sir.  Hello.

CALLER:  Thanks, Rush.  This is kind of like a combination of Christmas and my birthday but rolled into one.  I've been trying to get through for a long time.  One quick comment on the Verizon blogger guy.  Just imagine what he's gonna feel like when he realizes he can't opt out and go to another provider of insurance like what's gonna be under Obamacare.

RUSH:  Well, that's a great, great point.  That is a great point.  All of these young people have a massive educational awakening ahead of them.

CALLER:  I would just like to kind of dovetail that into my wife's got MS, and she currently has good insurance.  It's continues to go up, and she has to have it, obviously.  We looked, when they floated a trial balloon about what the premium (garbled) "affordable," in quotation marks. Preexisting condition stuff is gonna be, and right now our premium is around $600. Plus, you know, you have deductibles. 

But I believe at that time in Oklahoma was gonna be like $980 a month, and then we looked at a list. If you know anything about the VA system, on the drugs that are covered, they don't cover any of her treatments or drugs that she's gonna need. So we'll get to pay a lot more to get basically nothing in return if and when private health insurance is driven out of business, which is the design of this law.  What do you think?

RUSH:  Well, I'm having trouble hearing you because you're on a cell phone.  It's not your problem, it's mine.  Did you say something about preexisting condition in there?


RUSH:  Okay, because if you did, what people are discovering, some of those who are getting through and being able to set up their accounts at HealthCare.gov, they're finding that the deductibles are like -- one example I saw, $5,000 deductible, and the premium to get enrolled with the preexisting condition was $13,000.  Now, I forget what the condition was, but my point, a lot of people who are gonna be accessing this I am sure are expecting it to be either free or not cost them much at all.  That's what they mean by being insured for a preexisting condition. 

CALLER:  Exactly.  It's unaffordable to go have a house burn down and then go buy health insurance for that house --

RUSH:  Right, it's like our little tech blogger.   (crosstalk)

CALLER:  -- economically.

RUSH:  It's like our little tech blogger who thinks his wireless coverage ought to be practically free.  The way they have sold this preexisting condition business, the way the Democrats and Obama have sold this, is they have said to people who can't be insured because of preexisting condition that Big Insurance is shafting you.  And your example is right.  If you can go buy insurance while your house is burning, we're not talking insurance; we're talking welfare.  This isn't insurance.  This was simply a sales gimmick that the regime used in order to appeal to people who think that they're being victimized by an evil capitalist insurance system.  And now they find out what it's gonna cost them to be able to be covered with their preexisting condition. It may be the mother of all October Surprises, as you have encountered yourself.  It's not a pretty picture.  I appreciate the call. 


RUSH:  So Todd in Lawton, Oklahoma, what he's basically saying was, his wife has MS, and their rate is going through the roof, basically, and that was not expected, obviously.  Nobody's expecting what is going to happen.  Now, I want you to remember, the regime ended enrollment for the preexisting conditions program back in February.  Do you remember why?  They ran out of money for it.  It's called the high-risk pool program.  High risk is the legalese for preexisting conditions. 

They ended enrollment even before it gets implemented because they ran out of money.  They ran out long before they thought they would.  They thought they had funded the program for an adequate number of years, and they're already out of money.  They've ended enrollment.  If you didn't get in on it, you are up a creek.  Now, just imagine what this is gonna do to the private sector insurance companies who cannot print money, which, of course, is the intention.  It's basically to shut 'em out. 

It would be wise to bear in mind that the real purpose of all this is to simply deal a deathblow to private sector insurance.  So that your options there are so limited to nonexistent that you eventually have to go to the government, because the end of the day objective for Obama, the Democrats and everybody who believes in this is single payer government socialized medicine.  That is the dream.  And that's what they're on the road here to creating. 



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