Rational allocation

George Will has seen why health care in the US costs so much, and it is (the) US (government).  He writes:

The president says that the health-care market "has not worked perfectly." Indeed. Only God, supposedly, and Wrigley Field, actually, are perfect. Anyway, given the heavy presence of government dollars (46 percent of health-care dollars) and regulations, the market, such as it is, is hardly free to work.

As market enthusiasts, conservatives should stop warning that the president's reforms will result in health-care "rationing." Every product, from a jelly doughnut to a jumbo jet, is rationed — by price or by politics. The conservative's task is to explain why price is preferable. The answer is that prices produce a rational allocation of scarce resources.

Blaming the government for the high cost of health care comes out of left field (that's a baseball metaphor) in this piece.  Will has in other words done nothing to establish that claim.  He has argued that Americans spend more on health care–the only reason he has given is this:

Today the portion of income consumed by those four has barely changed — 55 percent. But the health-care component has increased while the other three combined have decreased. This is partly because as societies become richer, they spend more on health care — and symphonies, universities, museums, etc.  

He hasn't addressed two very obvious objections to this: (1) just about every other advanced society pays less for health care and gets more (every citizen covered, better overall outcomes) and (2) paying more for health care does not entail getting more: A "free market" for health care services, in other words, may not produce the most rational outcomes.  That "truism" may not be so true.  And besides, very few people would really view their needs for basic health care as they would Cubs' tickets. 

All of this amounts to a subtle change of subject: let's not talk about (1) the uninsured, (2) the under-insured, (3) the insured but not for long, (4) the limitations of employer-based insurance on the lives of people, (5) the devastating effects of health care related bankruptcy (for people with and without insurance), (6) the empirically verifiable existence of vastly superior systems, (7) the rationing of health care to people who pay tons for it in a "free market," and (7) much more.  Let's instead talk about the glory of choices in the free market–shiny things, in other words:

Your next car can cost less if you forgo GPS, satellite radio, antilock brakes, power steering, power windows and air conditioning. You can shop for such a car at your local Studebaker, Hudson, Nash, Packard and DeSoto dealers.

Keep that in mind, folks, next time you're "free market shopping" for health care.

4 thoughts on “Rational allocation”

  1. It’s awkward to me why Will thinks you can analogize between health care and symphonies, museums, as though an explanation for its high cost is that it’s a luxurious extravagance.

  2. I’m not sure about the particular name for the fallacy — surely there must be one? Ignoratio Elenchi? — but Will’s use of the “free market” mantra betrays a gross ignorance of basic market theory. This is something that Adam Smith already clearly understood over 230 years ago: Persons with wealth and property (he said “merchants and manufacturers,” we’d just say “capitalists”) will manipulate the market AWAY from its free operation into a constrained and artificial position that serves their greedy and short-sighted interests. So permitting “market forces” that have been grotesquely distorted by wealthy insurance companies, big Pharma, etc. to legislate the pricing and availability of medical services to their own private enrichment is the opposite of allowing the market to operate “freely”.

    The short form of this might be summarized as: It is no more possible to have a free market in the absence of regulation than it is possible to have a free society in the absence of law.

  3. Oh, and in terms of the ideal rationality of market allocations: both the Irish potato famine of the early 19th Century and the Ethiopian famine of the 1970’s were examples of market allocation at work. Both regions – where people were literally starving to death in droves – were net exporters of food at the time. People were suffering and dying not because there was nothing to eat, but because the market was such that all the food was being drawn to other regions where there was a better price for the “commodity”.

    There are undoubtedly other examples, but these are the two I am most familiar with.

  4. What a bizarre and convoluted column that is. Republican knee jerk negativity, obstructionism, and intellectual and policy bankruptcy are actually good things because the bill of rights is stated as a series prohibitions, and most new ideas are “false and mischievous?”

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