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Can health care function in a free market?

Government control of our health and of the market has only created shortages.

by James Leroy Wilson
July 23, 2009

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Can health care function in a free market?

Richard Maybury writes  that after the Mayflower landed at Plymouth Rock, the Puritans formed a covenant in which the product of everyone's labor was to be put into the common stock, and then withdrawn according to need. The first couple of years, the people suffered famine and death. In 1623, however, each family was given a plot to farm, and were allowed to keep and trade away as they saw fit. By 1624, the community had plenty to eat and was exporting food. A few years earlier, Jamestown had similarly suffered under a socialist system and then propsered under a market system.

The problem was that those who were potentially the most productive members of society, young men, had no incentive to be so. They were be fed no greater amount than lazy men. There was incentive to take from the system, but no incentive to contribute to it. When each had the opportunity to keep what they produced under a market system, however, they were inclined to work harder and produce surpluses with which to trade.

But, is not eating a "fundamental right?" If it wasn't, wouldn't people starve?

That's the paradox: socialism provides the "guarantee" that everyone should get some food, only it's not enough food; free markets don't make the guarantee that everyone is fed, but it does produce more than enough food for everyone. 

Many people claim that health care operates by different market fundamentals, because if you're really sick you don't care about the price of treatment until after you're cured. But what is food, but daily "medicine" for the body? Feeding people is the #1 form of health care.

Indeed, because land is limited while much of health care requires little space and is mainly the intellectual work of providers, health care in a free market would be less susceptible to market distortions and fluctuations than even the price of food.

In any case, health judgments are terribly subjective. In a system where health care is "free," that is, a socialized system, a mother may take a son to the emergency room because he's running a temperature, whereas another parent in a similar situation would just keep the boy in bed. Similarly, in a "free" system elderly patients may be neglected in favor of younger, more productive individuals. This only makes sense, as retirees on government pensions only consume from the system, and do not pay to support it.

If many people take and take from a health care system without regard to the costs it imposes on everyone else, we will get in health care what Plymouth Colony experienced with food: shortages.

The American health care system is not completely socialized, although government does pay for more than half of it. Yet costs keep going up, reflecting among other things a shortage of available medicine and care. Such problems are associated with other forms of government control.

For instance, government control of money leads to inflation, driving medical costs up. It also leads to recessions, creating unemployment which in turn creates greater stress when the jobless face medical emergencies. A complete free market in money, which will most likely revert to a gold standard, would see all prices drop, because the money supply would not be inflated.

Government is also heavily involved with the licensing of medical professionals. In a free market, anyone who believes they can give effective medical treatment and who makes no fraudulent claims could sell their services at a lower price. In such a system, no incompetent doctor could hide behind his license, and quality providers won't be shut out of the system for lack of one. The market would demand the best possible performance at the lowest possible price, as they do today in, say, the computer industry. The government doesn't require  that all engineers in Silicon Valley have an M.S. degree. What do you think the industry would be like if it did?

The government-created patent monopoly is another cause for high prices and shortages. In a free society in which the the basic laws are against force, coercion, theft, and fraud, the first person to invent something won't enjoy the monopoly privilege on producing the product. Rather, the market would reward those who bring the best, safest, lowest-priced products to the market the soonest. From drugs to medical technology, no company would ever reap the rewards of merely being the first to a discovery; they would rather compete with each other in doing the best with discoveries that are made. 

Finally, the government's attempt to control our health through the FDA and War on Drugs lead to high prices. Many drug companies see the FDA take several years to approve their drugs even while the patent clock is ticking. No wonder they subsequently have high prices for these drugs before facing competition from generics. At the same time, government is obsessed with prohibiting many drugs that can have medical or psychological benefits, but which can be home-grown or homemade. In addition, the government has been trying to regulate nutritional supplements and has obstructed alternative or faith-based therapies.

We do not have health care shortages because of the free market, but rather because the market is not anywhere free enough. If government got rid of its legal tender laws, licensing cartel, patent monopoly, and allowed people to seek their own drugs and treatments, there would be a gigantic supply of available medical care, and its price would plummet.

And just like the case of food, while there would be no "guarantee" that everyone would get all that they need, all who are able to work would afford it. And if the overwhelming majority of people who can work won't willingly and voluntarily support those who can't help themselves, then it's unlikely a socialized system would either. As we have seen, what government and socialized systems succeed best at is not in helping the helpless, but in creating shortages.


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