Monday, March 15, 2010

"The real magic of the invisible hand...

... is based on two pillars: self interested action to motivate people, and competition. Without competition, self interest leads to monopolies and sloth, but workers compete with other workers, and companies compete with other companies, we get better workers and widgets."
Eric Falkenstein has an outsanding post on what lack of competition in health care means. He argues that progressive's distrust of competition leads them to neuter markets so that they produce the inefficient, some say villainous, outcomes we see currently in insurance markets that are anything but laissez faire. Imagine, he proposes, what our food shopping would look like if it were run like healthcare:
It's as if the state decided that food was too important for the mere market, and so gave us all food insurance. We paid a special food contribution (not a tax!), and we were all entitled to a buffet offered by 3 different private companies. The buffet has to include traditional American fare, as well as Chinese, Mexican, Italian, Korean (dog), etc.--68 mandates in all. Most people don't want all the choices they pay for, but as they don't pay when they eat most people do not notice they are paying for things they don't eat. Now, as the food budget as a percent of GDP in America grows, and Americans are not any healthier than other developed countries, people ask, hey, can I just buy what I want to eat? The government tells you 'no', that is just a race to the bottom, and your stupid, irrational inclinations will cause you to buy the medical equivalent of a pet rock.
It sounds like the familiar comparison to grocery stores run by the board of education. An apt one, as ever.

One other difference, though, is that we don't go to the store to buy health, but to buy professional opinions about health. Imagine going to a grocery store to meet with a nutritionist who was the only person allowed to prescribe food for you. The food you receive depends on that other person. I can understand someone being a touch risk-averse in giving their nutritionist that kind of authority, and hence wanting to set rules regarding what kind of care such a nutritionist/doctor would be required to or allowed to give (ie - to regulate them).

All the more important then to also have competition as another of the forces that encourage nutritionists/doctors to give the best advice at the lowest cost possible.

Hat tip: Newmark's Door

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