Posted by
Andrews on Monday, December 14, 2009 4:21:16 PM
I was reading the WSJ and saw
an interesting article on the White House claims that up to 30% of health care spending doe snot "affect outcomes" and so can be eliminated. As I wrote in many posts ("
Cutting "Costs"", "
Misunderstanding Profits", "
Again?", "
Government Efficiency", "
Two Examples of "Inefficiency" in Capitalism", "
Medical Reform, An Overview", "
Redefining Insurance... To Actually BE Insurance"), this is another attempt to remove the "waste" of the free market, which completely ignores that those "waste" costs are essentially to enjoying the benefit of the free market. When we eliminate "waste" such as costs due to differing providers and incompatible procedures, advertising, and the rest of the free market, we lose the benefits of free market competition. If you could just eliminate the costs of the free market and enjoy the benefits, the Soviet Union would have been rich and the US poor. The tendency of foolish academic economists and politicos to think you can remove the costs required for a free market and still enjoy the benefits shows a remarkable lack of understanding. Yes, the free market has costs which do not directly provide services, but the benefits of the whole free market system more than compensate for the costs, and so it is idiocy to talk of eliminating "waste" by destroying the free market.
Let me make an analogy. A cook does not directly provide security for the nation, nor does a quartermaster. So, why do we "waste: military funds on doctors, cooks, logistics and administrative staff? If we paid only for front line soldiers and cut all the "waste" of administrative overhead, which does not directly provide for defense, we would be much better defended.
Does anyone think that sounds like a sound policy? If not there, then why would it work for the medical system?
POSTSCRIPT
This will be covered in much more detail in an upcoming "Bad Economics" post entitled "Profit, Advertising and the Free Market".
POSTSCRIPT II
On a positive note, it does appear the "senate consensus" the press gushed about so much was more wishful thinking than reality, and we likely have dodged the bullet until after the 2010 elections.