Tuesday, January 19, 2010

Ahhh, Sweet Reason...

Ahhh...more sweet reason from Thomas Sowell. To those who believe that the federal government can lower the cost of health care without inducing grave unintended consequences, I urge you to read up on the history of price controls. And I ask you to delve even deeper and explore the fundamental question of what are prices. The source of many progressive fallacies is their tendency to treat prices are arbitrary, rather than as market signals that are essential in any productive economy. The great paradox is that in a free market prices convey supply, demand & scarcity and offer vital incentives to producers and consumers, far greater than the most brilliant economic planners could ever hope to do so. In virtually every instance when prices were arbitrarily assigned by the state, scarcity, poverty and a misallocation of resources emerged.

The ‘Costs’ of Medical Care, Part III

By Thomas Sowell

http://www.jewishworldreview.com/ One of the strongest talking points of those who want a government-run medical care system is that we simply cannot afford the high and rising costs of medical care under the current system.

First of all, what we can afford has absolutely nothing to do with the cost of producing anything. We will either pay those costs or not get the benefits. Moreover, if we cannot afford the quantity and quality of medical care that we want now, the government has no miraculous way of enabling us to afford it in the future.

If you think the government can lower medical costs by eliminating "waste, fraud and abuse," as some Washington politicians claim, the logical question is: Why haven't they done that already?

Over the years, scandal after scandal has shown waste, fraud and abuse to be rampant in Medicare and Medicaid. Why would anyone imagine that a new government medical program will do what existing government medical programs have clearly failed to do?

If we cannot afford to pay for doctors, hospitals and pharmaceutical drugs now, how can we afford to pay for doctors, hospitals and pharmaceutical drugs, in addition to a new federal bureaucracy to administer a government-run medical system?

Nothing is easier for politicians than to rail against the profits of pharmaceutical companies, the pay of doctors and other things that have very little to do with the total cost of medical care, but which can arouse emotions to the point where facts don't matter. As former Congressman Dick Armey put it, "Demagoguery beats data" in politics.

Economics and politics confront the same fundamental problem: What everyone wants adds up to more than there is. Market economies deal with this problem by confronting individuals with the costs of producing what they want, and letting those individuals make their own trade-offs when presented with prices that convey those costs. That leads to self-rationing, in the light of each individual's own circumstances and preferences.

Politics deals with the same problem by making promises that cannot be kept, or which can be kept only by creating other problems that cannot be acknowledged when the promises are made.

Price controls are a classic example. At various times and places, in countries around the world, price controls have been put on any number of goods and services — going all the way back to the days of the Roman Empire and ancient Babylon.

Price controls create lower prices for open and legal transactions — but also black markets where the prices are higher than they were before, because the risks of punishment for illegal activity has to be compensated. Price controls also lead to shortages and quality deterioration.

But politicians who take credit for lower prices blame all these bad consequences on others. Diocletian did this in the days of the Roman Empire, leaders of the French Revolution did this when their price controls on food led to hungry and angry people, and American politicians denounced the oil companies when price controls on gasoline led to long lines at filling stations in the 1970s. It is the same story, whatever the country, the times or the product or service.

The self-rationing that people do when prices are free to convey the inherent impossibility of any economy to supply as much as everybody wants is replaced, under price controls, with rationing imposed by government, which cannot possibly have the same knowledge of each individual's circumstances and preferences — least of all when it comes to medical care, where patients differ in innumerable ways.

Here, as elsewhere, there is no free lunch — even though politicians get elected by promising free lunches. A free lunch in medical care is one of the most dangerous illusions of all.

Waiting in long gasoline lines at filling stations was exasperating back in the 1970s, but waiting weeks to get an MRI to find out why you are sick, and then waiting months for an operation, as happens in countries with government-run medical systems, can be not only painful but dangerous.

You can be dead by the time they find out what is wrong with you and do something about it. But that will "bring down the cost of medical care" because you won't be around to require any.



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  2. I believe in free speech, but not porno-spamming, so I deleted the last comment.