Dean Russell tackled this cliché by discussing Sweden’s much acclaimed state housing projects. Russell admitted the system did indeed look good and upon his visit to the country, since he was “a reasonably honest person,” gave credit to the housing situation. But upon closer inspection things were not so dandy. The government control of housing created a shortage and those waiting for government housing could end up on a waiting list for ten years! And it got worse, since private housing was non-existent due to the incentives the system created. So Russell stuck with his original hypothesis that government cannot outperform the market.

Russell uses only this one example, but what about other areas? Today the health care issue is all the rage and Sweden (along with England and Canada, which all have different types of state-run systems) is counted as a rousing success. But again, a closer look into all the consequences, including the long-run effects, is necessary. Horror stories, like patients being forced to wait for months despite being in pain, abound.  The system also forces patients to attend extremely understaffed local clinics.  These are just a few of the problems.

Supporters of the recently passed Obamacare should seriously analyze the bill as Bastiat suggests all good economists should, by seeing the seen and the unseen effects. This means looking at all groups and in the long-run. It’s not that free market advocates are heartless in opposing free health care for all, it’s that we are “reasonably honest people” who analyze the issue by looking at all the consequences and find that state run health care will make us all worse off in the long-run, particularly those who will need it most. The US health care system has its problems, but they are due to too much regulation, not too little.

What long-run consequences do you see from Obamacare?

Download Clichés of Socialism 66 here.

Enough dithering! President Barack Obama says it’s time to act on health care. I agree.

But act how? Are we really going to be happy with the pussy-footing proposals floating around Congress? All the so-called reformers want to do is tinker with insurance regulations. But how effective would that be, considering that the insurance companies themselves support the changes?

We have taken our eyes off the ball, people. Let’s get back to first principles. Mr. Obama’s premise is that we have a right to health care. A right.

America was founded on the idea of rights — inalienable rights. No one can take them away. I assume that when people say that health care is a right, they mean that health care is an inalienable right. Mr. Obama apparently agrees. In his speech before Congress he called for free services, such as physical exams, colonoscopies, and mammograms. Free! You have a right to those things.

Well, OK. But why stop at free preventive services? Why not free treatments, free surgery, free drugs, and so on? We need those things as much as a physical exam. If we have a right to health care and if we are unable to obtain those services, our rights have been denied or violated. That is something the advocates of health-care “reform” say we must not tolerate.

Okay, let’s not tolerate it. Let’s make sure no one’s right to health care is violated. Let’s get serious for a change.

But how? I can think of only one efficient way to accomplish this. Let’s enslave the providers of medical services — doctors, nurses, paramedics, dentists, chiropractors, acupuncturists, psychiatrists, and the rest. My proposal may shock people, but I am confident that this feeling will wear off as we think about how logically it flows from the principle that we have a right to health care.

First, let me point out that there is no other good alternative. Any other system designed to deliver health care as a matter of right will have gaps through which the least fortunate inevitably will slip. Isn’t that the problem we’re trying to fix? Obama’s approach isn’t much better. He wants to force the insurance companies, with taxpayer subsidies if necessary, to insure everyone — healthy or sick, young or old — at the same price. He might even like a government insurance option, though he can’t make up his mind whether or not that is an essential feature of his plan.

Regardless, it’s a bad plan. Requiring insurance companies to pay for our medical care misses the point. Where do you think insurance companies get their money? From us! What kind of right to health care is it if we end up paying for it anyway? Obama means well, but his plan is a shell game.

On the other hand, enslaving the doctors and other providers would have none of the defects of the current system or the leading reform plans. It goes right to the source. We have a right to health care? Fine. Force the doctors to provide it.

Of course, this wouldn’t be free. I’m no pie-in-the-sky utopian. The doctors and the others would have to be fed, clothed, and housed. They’d need certain comforts. That’s understood. But it would be far easier to keep a lid on costs by enslaving the providers than by the patchwork system we have now, or would have under Mr. Obama’s plan.

The biggest problem I can see is that if doctors are going to be our slaves, no one will want to be a doctor. Most people don’t relish the idea of being slaves even in the national interest. They’re selfish that way.

We certainly can’t be a world-class country without doctors and nurses, so I have a solution to this problem: conscription. President Obama should direct the nation’s schools to look out for students with an aptitude for biology and direct them into medical studies. Then, at the appropriate time, the government should draft those young people into the newly created U.S. Medical Service Corps.

I know what you’re thinking: As word of this got around, the best students will play dumb. If that happens, we’ll have no other choice than to pick our doctors by lottery.

If Congress really wanted to ease the burden they’d go home … for the decade.

FEE Timely Classic:
“Planners, Go Home!” by Lawrence Sullivan

This is most obvious when the advocate of a State solution says, as President Obama said, “The scary thing is to do nothing.” Anyone who thinks that the free-market solution means doing nothing is either ignorant or dishonest. Sorry, I see no other alternative. It doesn’t take much looking to see that we have nothing like a free market in medical services and insurance. Insisting we do is an effective way to assure that the free market is never considered as an alternative to the current State-ridden system.

The statist also shows his lack of understanding (or of honesty) by loosely accusing the free-market advocate of “being in the pocket of the insurance and drug companies.” Is it impossible that someone could sincerely believe that the market solution is just and efficient? Those who throw this charge around miss a perhaps subtle point. A free-market advocate and big entrenched insurance companies could oppose the same proposal — say, a government-run insurance program — without having any other positions in common. The market advocate rejects not only the so-called public option; he also favors dismantling the entire protectionist-regulatory-monopoly-privilege system the insurance companies have enjoyed for generations. No insurance company favors that. Similarly, libertarians and pharmaceutical companies oppose government’s negotiating drug prices. But no Big Pharma company is likely to favor repealing the FDA, the monopolistic patent system, and other privileges because these interventions protect it from upstart competition.

There’s a deeper barrier keeping the honest advocate of nationalized medical care from truly hearing what the libertarian says: the (implicit) belief that medical care is a right, and its corollary, that no one should have to pay (very much) for these services.

This is where the discussion needs to be but usually isn’t, which accounts for the mostly unsatisfying outcome. There is no meeting of the minds on what is in dispute, much less on what ought to be done.

Someone who believes that medical care is a right will never accept that consumption of medical services should have anything at all to do with one’s income or wealth. That’s just wrong, he will think. What’s more, he’ll think there’s something deeply wrong with the market advocate for thinking this way. “What’s the market got to do with it?” he’ll wonder in horror. “We’re talking about medical care!”

The libertarian may never convince the statist, but the first (and perhaps the last) thing to be discussed should be whether medical care is a right. Of course, it can’t be a right. In the absence of a contract, no one can have a right to anything that must be provided by someone else’s labor. It really is that simple. The alternative proposition is in essence a slave proposition. Most people will never be persuaded by the excellent efficiency arguments against nationalized medicine — the fact that bureaucratic rationing and triage are inevitable with government in charge — if they cling to the medical-care-is-a-right theory. So we may as well have the debate there.

No Right, No Service?

The libertarian must also head the statist off at this pass: the inference that if you don’t believe health care is a right, you must believe that people of modest means would be — and even should be — without adequate medical attention.

Of course, this is ridiculous. Opposition to nationalized agriculture or housing doesn’t imply that people of modest means should starve or go homeless. When you consider how concentrated wealth was throughout history, it is astonishing how competent market-oriented society — despite all the State’s efforts to cripple it  — has been at delivering necessities and one-time luxuries to the masses. From the Industrial Revolution onward, to the extent people have been free to engage in enterprise, it was regular people whose living standard increased by orders of magnitude.

The point is that markets deliver, and medical care has been no exception. If the price of basic care has soared since World War II, we can largely thank all the ways government has unhinged demand from cost considerations. Much medical care is optional or marginal, and  if government, by disguising the true cost, makes it possible for people to overconsume it, those of modest incomes who don’t qualify for handouts will suffer the consequences.

It is simply wrong to believe that in a “freed market,” as Charles Johnson calls it, large numbers of people would  go without medical attention. A free society would be richer at all levels than our semi-free society because it would have none of the barriers that today impede economic self-advancement. (See Johnson’s article on the matter.) A freed medical system would be competitive, entrepreneurial, and innovative in getting services to greater numbers of people at reasonable prices. How do we know? We’ve see the same pattern in other industries that are far less straitjacketed than the medical industry. In case after case, what began as luxuries for the rich have become commonplace items for nearly everyone. A government-free medical industry would have no income-preserving professional licensing, no paternalistic drug prescriptions, no competition-inhibiting patents, no monopolistic certificates of need, no protectionist medical guild. In their place would be competition and entrepreneurship, the discovery process that serves consumers in ways we cannot imagine in advance

Demand-Side Innovation

Innovation would also emerge on the demand side. Again we can refer to history. In an earlier time Americans (and Britons and Australians) of modest means, including new immigrants, obtained medical care through sophisticated mutual-aid societies and in particular the institution called lodge practice. Exemplifying what Tocqueville identified as an American penchant for setting up associations, early Americans established “friendly societies” not only for social contact but for the safety net later provided, in coercive and much inferior form, by the welfare state. One member benefit of these societies was access to a family physician with whom the group contracted on an annual basis. “Lodge practice,” historian David Beito writes, “became particularly extensive in urban and industrial centers. In 1915, for example, Dr. S.S. Goldwater, Health Commissioner of New York City, went so far as to assert that in many communities it had become ‘the chosen or established method of dealing with sickness among the relatively poor.’” Lodge practice flourished until State-empowered organized medicine, whose members’ incomes were threatened by this unorthodox competition, put the screws to the “lodge doctors” it reviled. Who knows how mutual-aid would have evolved had it not been crowded out by “Progressives” aping Bismarck and wielding the power of taxation? What we do know is that people found a way to make medical care “universal and affordable,” that holy grail the politicians still haven’t located.

Free people are resourceful even when their resources are modest. The key is to keep government out of the way.

Admittedly, the sick and destitute would have had trouble joining a mutual-aid society. But a free and prosperous society would also be a generous society. History demonstrates it. As in the past, philanthropic foundations, charity hospitals, teaching hospitals, and pro bono medicine would all combine to provide for those who truly could not make it on their own. Government intervention undoubtedly makes these things less common. If laws mandate that all hospital emergency rooms treat whoever shows up with whatever ailment, we can anticipate that charitable efforts will be less abundant than in a free society.

We will never achieve the medical system — indeed, the society — worthy of free people as long as we are trapped in the juvenile mindset that someone owes us medical care. It is an absurd doctrine — is that someone also owed medical care? But worse, it is fodder for political opportunists, who will exploit this demand to increase State power at the expense of freedom and therefore dignity. If we follow this path, rationing of medical care might be the least of our worries.

Right-wing opponents of reform would have you believe that President Obama is a wild-eyed socialist, attacking the free market. But unregulated markets don’t work for health care — never have, never will. To the extent we have a working health care system at all right now it’s only because the government covers the elderly, while a combination of regulation and tax subsidies makes it possible for many, but not all, nonelderly Americans to get decent private coverage.  (Emphasis mine)

Now, I hardly would be surprised to read such a comment from a politician or political science professor, but when a supposedly-august economist makes this claim, I believe the statement needs to be further analyzed before we can utter the phrase, “Not so fast.”

In doing this, however, we have to define our terms.  First, we have to define what an “unregulated market” is, and second, we then have to define the term “work” as he applies it.

Now, when Krugman refers to an “unregulated market,” he is describing a “market” in which the government does not set the terms of exchange, the prices, and govern the output.  In his view (expressed elsewhere) an “unregulated” market is chaotic, full of gaps, and generally operates out of control.  For example, he has described the turmoil on Wall Street as being the result of “unregulated markets” in finance.

I don’t know what academic world Krugman inhabits, but I would say that there is no such thing as an “unregulated” market.  Even a market in which government plays no role absolutely is going to be regulated by the Law of Scarcity and by profits and losses.  Indeed, markets exist precisely because of scarcity; non-scarce goods (like the air I am breathing right now) do not have to be allocated because my use does not deprive anyone else of using this good.  I give up nothing to breathe this air, and neither does anyone else in my house.

If a good is scarce, however, it not only must be produced, but also distributed, and markets are those entities that govern the process of production and exchange.  The only goods that can avoid some kind of market process are precisely those that are non-scarce, and no one, not even Krugman, is claiming that medical care is a perfectly free and abundant good.

However, that clearly is not true.  Krugman is saying that the medical markets cannot function unless government is directing the production and exchange.  What he means is that the medical market is different than the market for, say, cars or CDs.  From what I can decipher from his and other claims to support “universal” medical care, a “market failure” occurs when someone is not able to access immediately all of the medical care he or she “needs” immediately.

Now, if this is what he means by a “market failure,” then every market (including the distribution of government-produced goods) falls into that category.  If I cannot afford a Rolls-Royce, is that due to “market failure”?  Lest one think I am exaggerating, read on:

…government involvement is the only reason our system works at all.

The key thing you need to know about health care is that it depends crucially on insurance.

This is a non sequitur. There is nothing inherent about medical care that requires insurance or any other third-party payment for ordinary treatment.  In fact, health insurance first came about as a mechanism to deal with paying for catastrophic events, not routine care.  Government involvement in medical care, and especially the advent of Medicare with its third-party payments for nearly all medical care hastened the invasion of the modern mess.

From an economic point of view, a scarce good is a scarce good, whether it is medical care or sirloin steak.  The problem is that government has piled intervention on top of intervention, and driving up the costs and making care less available in the process.  The “failure” of the present system is a government failure, period.