For the “Healthcare is Special” Crowd

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I keep seeing posts on social media to the effect that healthcare is somehow “special” because it deals with people’s lives and well-being, so it is not or should not be subject to the laws of economics, such as supply and demand, in the same way as gasoline, pet food, or apples. This is like saying that people are special and therefore are not or should not be subject to the laws of physics, such as gravity. Healthcare, drugs, medical equipment, and so on are scare goods, and therefore subject to the laws of economics whether people like it or not. If demand for a given drug goes up with the supply remaining fixed, ceteris paribus, the price will rise.

The second fallacy is that healthcare is not a regular market good, because people’s lives are at stake, so the government must step in to make sure the awful free market doesn’t keep it away from the poor, etc.. Setting aside for a moment the fact that the average American visits the doctor just over 3 times a year, mostly for a cough, and the fact that mortality rates drop when hospitals close, and the fact that iatrogenic errors are usually cited as the fourth leading cause of death, there is another good that is far more important and far less regulated, and that is food.

We eat several times a day, and without food we would die in less than a month. Yet, every attempt to centrally plan the cultivation, harvest, and distribution of this vitally important good has resulted in starvation, shortages, and food riots that are astonishing in their scale. The Five Year Plans had the central planners making errors at every step in the production chain, from what crops to sow, to how many tractors and plows to make, to what fertilizer to mix, to how to get rice to market before it rotted, to what price to sell it. All along the value chain, prices signal the farmers, tractor makers, fertilizer peddlers, and grocers what to charge and what to produce in a feedback loop of supply and demand that puts asparagus to zucchini on the table millions of times a day, and automatically signals consumers that lobster is rare and delicious, while few people like beets.

This is the miracle of the market at work, feeding millions. To the extent that we trust the government it has given us the deeply flawed food pyramid, and a food system based largely on soy, corn, and wheat in the hands of a few favored mega-corps. Happily, the relatively free entry into the market means that alternatives can thrive as smaller farms with better quality food enter the market. If we trusted government to manage and regulate the food supply as completely as some would have with healthcare, we would end up with meals of the same general quality as “government cheese” at best, and the food riots, breadlines, and starvation of past central planning attempts at worst. Pass the broccoli, please – not today, your plan only covers broccoli 3 times a month.

1:47 pm on October 31, 2013