Food And Medical Care

During the hearing of Obamacare, the news was full of analysis.  One of those pieces, in the “USA Today”, made a point that food is more of a basic need to people than healthcare:

A brief submitted by 215 economists argues that food is even more basic to survival than health care…

I was struck by this last night as I was cleaning out some of my “stack” in my office last night.

See, the food delivery market, while not perfectly so, is a free market example of how goods can be distributed efficiently.  Based on demand and the profit motive, food stuffs are delivered to a literal market where individual shoppers are allowed to “ration” themselves based, in part, by how much money they have and what types of services they want.

For example, in my market I can by generic chicken soup, Ramen noodles and rice.  Or, I can walk 50 feet away and purchase hand rolled sushi, fillet mignon, $60 wine and lobster.

As a real example of the power of markets I picked up this flier:

For $5, this profit driven market is offering a meal that feeds 4 people, perhaps more if the kids are younger.

If medical care were subject to the same market forces you would see the same thing happen with the cost of medical care.  In the same way, if you allowed health insurance to be impacted by the same market forces, you would see prices of health insurance react in the same manner.

It’s only when government intercedes, by mandating acupuncture coverage, or by restricting the sale of insurance polices across state lines, that you see the price of a good or service go up.

15 responses to “Food And Medical Care

  1. Unregulated markets lead to disaster. Markets are not magic, they do not junction on their own devices, and if not regulated usually lead to severe imbalances. The idea of the free market functioning naturally is a myth — real world evidence shows it does not. There are numerous regulations and protections involving how groceries work.

    But where I really disagree is your apparent assumption (you don’t explain why you believe it) that somehow the health care system could function like grocery stores. It’s completely different! I mean, why do you make that assumption, you don’t explain it at all, you just assert it.

    • Unregulated markets lead to disaster.

      I don’t know what you mean by regulation, so I should be careful. However, to me, regulation means that when you contract to sell a bushel of wheat, you actually deliver a bushel of wheat. THAT is proper regulation.

      Improper regulation is stipulating how much wheat a man should grow and dictating what the price should be or restricting the years in which he could grow wheat.

      Markets are not magic, they do not junction on their own devices, and if not regulated usually lead to severe imbalances.

      You are right, there is no magic involved. It’s like gravity.

      The idea of the free market functioning naturally is a myth — real world evidence shows it does not.

      I think that markets DO work naturally.

      But where I really disagree is your apparent assumption (you don’t explain why you believe it) that somehow the health care system could function like grocery stores. It’s completely different! I mean, why do you make that assumption, you don’t explain it at all, you just assert it.

      Health care and medical care are nothing more than services and products; exactly like food and food delivery [think Dominoes to your door or a restaurant].

      You need food on a much more basic level than you do need medicine. People compete to bring you food in the same way they would compete to bring you medicine.

      Allow medical care to be sold in the same way that automobile care is sold and the prices will come down in the same manner. Professionals will compete with each other to sell you their services.

      More astonishing than me thinking medical care is a commodity that reacts rationally to market forces is the fact that you believe the myth it doesn’t.

  2. If the government did food distribution the way they do K-12 education, I’d be faced with having to pay way higher taxes in exchange for a cart full of groceries “free” from my neighborhood market that probably doesn’t match my family’s preferences very well but was chosen by a committee of bureaucrats hundreds of miles away in the state capitol. If I thought the quality of my assigned market was quite a bit lower than the market in a neighboring town, I’d be S.O.L. unless I could afford to move.

    • If the government did food distribution the way they do K-12 education, I’d be faced with having to pay way higher taxes in exchange for a cart full of groceries “free” from my neighborhood market that probably doesn’t match my family’s preferences very well but was chosen by a committee of bureaucrats hundreds of miles away in the state capitol.

      Correct.

      And the quality of the food would be secondary to the pay of the grocery clerks. The food would fill less and less of the cart each passing year as groceries became more expensive. Further, you could no longer choose the food you wanted to buy; rather, it would be picked for you.

      There wouldn’t be innovations like pharmacies in grocery stores. We’d still have stickers displaying prices and cashiers manually ringing up the bill; mistakes and all.

      We wouldn’t have movies or flowers or wine or prepared food available either.

      The government is not built to innovate.

  3. At what point do you consider the government to have interfered in health care services and can you document that the increase in costs started then?

    If health care was deregulated would that mean deregulation of the medical profession?

    • At what point do you consider the government to have interfered in health care services

      Excellent question. One that made me stop and consider.

      I looked around some and found this:

      http://www.pbs.org/healthcarecrisis/history.htm

      Three key statements:

      1940’s:

      President Truman offers national health program plan, proposing a single system that would include all of American society.

      Truman’s plan is denounced by the American Medical Association (AMA) , and is called a Communist plot by a House subcommittee.

      1950’s:

      Many legislative proposals are made for different approaches to hospital insurance, but none succeed.

      1960’s:

      President Lyndon Johnson signs Medicare and Medicaid into law.

      In the 40’s and the 50’s legislation is defeated that would expand the government’s role in health care. This changed in the 60’s when LBJ signed the Medi’s.

      With a very brief assessment, I would cautiously say the government stepped in during the 60’s.

      can you document that the increase in costs started then?

      I went to the BLS site and looked up the CPI data for Medical Care. I graphed the data dating back to 1935 and saw this:

      Costs

      To me, there are two functions graphed here.

      1. The function describing the price from 1935 to 1973-75. The slope of the line is consistent and near 0.

      2. The function describing the price from 1973-75 to the current day. This slope is just as consistent but comes in near .7.

      I would say that the price “inflection point” occurred 8-10 years after the signing of Medicare/Medicaid. Certainly not “proof”, for sure.

  4. Markets do not work like gravity. Markets are not natural. That is a myth based on vastly simplified ideology and theory. If everyone had perfect information, if there were no power differentials that could allow people to claim advantage, if there was a standard of self-interest that people rationally calculated and stuck to and if people were ethical and not prone to cheat, then markets might approach a good outcome. As it is, markets fail when left to their own devices – countries without a strong state tend to turn into areas where a small elite dominate the game. China, Taiwan, South Korea, Japan, Germany and every other state that has successfully developed their economy (China has had near 10% growth for over 30 years) has done so with an active state. Countries that leave it to the market tend to stagnate.

    I mean, I understand how the abstract theory can seem persuasive, but in the real world markets are riddled with problems that prevent them from operating effectively. And in some cases, they don’t work at all. In cases of collective goods rational individual self-interest works against achieving what people want — that’s the free rider problem.

    Note that we pay much more for health care than any other industrialized state, leave a huge chunk of our population uncovered, are the only country that has medical expenses causing bankruptcy (and it’s the number one cause), and our statistics are behind many other states. States with national health insurance out perform us on every level but one — care and luxury service for the very wealthy. But even there the very wealthy can pay for perks anywhere.

    • Markets do not work like gravity. Markets are not natural. That is a myth based on vastly simplified ideology and theory. If everyone had perfect information, if there were no power differentials that could allow people to claim advantage, if there was a standard of self-interest that people rationally calculated and stuck to and if people were ethical and not prone to cheat, then markets might approach a good outcome.

      No one thinks that the state doesn’t have a role in enforcing contracts and property. We don’t want to go back to the Wild Wild West where it was every man for himself with no larger law present. When that happens you get brute rule very similar to all the world history until America.

      But we DO want people with advantages to gravitate to their source of advantage. We want talented hunters to hunt while allowing the talented farmer to farm. It is the exact nature of the market that drives this proper behavior.

      States with national health insurance out perform us on every level

      That simply isn’t the case. The numbers cited by the CIA and WHO are not adjusted to account for anything. When they ARE normalized, the United States slides to the toop.

  5. I’ve read a lot of studies and almost always the US is somewhere low on the list in terms of health care, and our clear disadvantages – people uncovered by insurance and high levels of medical bankruptcies (again no other state even has those) – are profound. We spend a much higher percentage of our GDP as well. That said, I do have qualms about Obama’s reforms and I am not supportive of a single payer system (the US is just too big). Germany and France have good systems, but Switzerland’s canton based system, while more expensive than most, might be a better model for the US. I have many conservative friends in Europe who are appalled by our health care system. It’s one area where people really look down on us.

    • I’ve read a lot of studies and almost always the US is somewhere low on the list in terms of health care

      Those lists don’t take into consideration other factors.

      I have many conservative friends in Europe who are appalled by our health care system.

      There is a difference in believing that you as an individual should do something to help people in need and then you voting that I do something to help people in need.

  6. Scott ,

    I do not care what Europeans think of us . Americans always have an inferiority complex about Europe . But Liberals are selective about who they feel inferior to . President Obama had no such deference to the British when he got rid of Churchill’s bust .

    With Europe’s structural weaknesses and the fact that their nanny states are bankrupting them, they cannot lecture us about anything . Besides the numbers Obama used to sell Obama-Care are all bad and everyone, including you, know it .

  7. Actually outside of a few problem states the Europeans are financially much better off than we are. They have less debt (even including the EU problem states of Greece, Ireland and Spain their total debt is less than ours) and their budgets are in better shape. The Germans and Scandinavians (except Iceland) are doing much better than we are. So in terms of structural weakness, I think we’re in a more problematic situation.

  8. Scott,

    I disagree. The EU is barely hanging together . Their socialist mentality will not allow them to break out of their malaise. Once Obama is voted out of office, American capitalism will lead us out of our slump like it did in the early 80s . Europe is nothing but 50 year old retirees, 30 year old college students, and rent collectors. Their whole culture encourages dependency and punishes innovation and risk takers .

    Northern Europe is trying to save their Southern European cousins because they need somewhere to sell their wares. Native Europeans are committing cultural suicide with their low birth rates and atheist dogma . The immigrant underclass will at some point refuse to support the fat retirements of their socialist masters .

  9. I really wish the government would stop trying to have more control of this nation. They’re becoming way too involved, and need to let their citizens to make their own choices.

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