Every now and then various people in New Zealand complain about our health system and say that we would be better off if we privatised it. I think they’re wrong. I think they’re practicing reflex libertarianism, or free-market fanaticism, without looking at the actual facts of the matter.
Frankly, I’ll take our somewhat inefficient public healthcare system over the mindnumbingly expensive US private healthcare system any day of the week, or year, or millenium for that matter. Apparently, as a percentage of total GDP, the Americans pay more to handle the admin costs for their health system than we do to handle the entire thing. I think it’s all to do with the fact that private health insurance companies and providers naturally gravitate towards the formation of a system that maximises the public’s spending on health, and then they use the massive profits derived from that spending to pay lobbyists to ensure that the system stays bloated, inefficient and profit maximising.
Inefficient? Bloated? Surely an inefficient provider would be destroyed by leaner competition? It just doesn’t seem to work out that way. Perhaps it would work out if the health providers were competing with each-other, but in practice they’re mainly competing with all the other things the government and the public might want to spend their money on, and the people who pay the lobbyists in Washington are smart enough to realise that. 1
Having systems for group purchases (eg, governments) is much more efficient than having no systems for group purchases, so these systems will naturally evolve in any modern society after they’ve figured out the trade / currency thing. But there will always be people trying to rip off the systems. The market can try to correct for that, but it won’t work unless there’s a sufficiently large body of the public smart enough to see through the massive interlayered smokescreens thrown up by the people trying to hide how they’re ripping off the systems. This has never worked with a sufficiently large population that I’ve ever heard of, but libertarians keep claiming it honestly will work if you just keep on privatising stuff and lowering taxes, and then when the economy starts to collapse and the pendulum swings back the other way they’ll eventually blame the failure of their revolution on the government not going far enough.
Look, I can understand the moral, ethical & intellectual appeal of libertarianism, it’s just that it’s hopelessly impractical without a serious brain upgrade on the human species. How about we just all work together towards true post-scarcity so that we don’t have to have this particular argument anymore?
[1] I guess with somewhat less corruption in congress it wouldn’t be as easy for them to play this game, but all around the western world, the less privatised healthcare systems tend to be the most efficient.
Update: This article pretty much nails it. Really, this is blatantly obvious stuff to anyone with a shred of sense, and really anyone who suggests we’d be better off privatising healthcare in this country deserves to be mocked ruthlessly for their knee-jerk libertarian naivete.
5 comments ↓
“Look, I can understand the moral, ethical & intellectual appeal of libertarianism, it’s just that it’s hopelessly impractical without a serious brain upgrade on the human species.”
In a blog entry slamming libertarians, you let them off too lightly.
The problem with the US health care system is that consumers don’t pay for health care, they pay for insurance (or, more often, their employers do - which just makes it even more complicated). Insurance companies are in the business of taking in premiums and not paying for health care if they can avoid it - that’s how they make money. So it’s a reasonable market response for health insurance companies to spend very large sums of money on filtering out who they insure (targetting the healthiest, or rather avoiding high-risks), on marketing, and of course on legal depts to contest claims. Hence absurdly large admin costs for the health insurance companies (around 17% - so that’s 17% of health spending burnt before you even get to the actual health providers).
But insurance is rational for consumers: paying a premium to avoid risk makes sense.
It’s perfectly rational responses by smart market participants every step of the way, resulting in complete economic disaster. No corruption required. A brain upgrade wouldn’t help.
Markets work marvellously well in a vast number of circumstances. And they fail to work under some very well understood conditions. The game theory is precise (tragedy of the commons, anyone?), the history of economics bears it out well, etc. The libertarian response is to put fingers in their ears and just pretend that the extremely well understood economic concept of “market failure” doesn’t exist.
Yes, and that 17% is just the admin cost for the *insurers* let alone the admin cost for the *government*, the *providers* and the *insured*.
Given that, as you say Market Failure is well understood (I suspect I shall be calling on that wikipedia page again) and that many libertarians appear to be relatively smart people, how is it that they’re blind to it?
Are they blind to it? Do they really believe in zero taxes and markets for everything? Or is that just the position of an extreme fringe element? I haven’t read any Ayn Rand, so I don’t feel I’m able to make truly informed commentary.
I can understand the appeal of a meritocracy to people who think they’re smart. I can understand the appeal of the personal freedom part of their agenda, or at least what I know about it. I can certainly understand a distaste for government inefficiency, and governments interfering in markets where they really have no business interfering, particularly where the inefficiency and interference is primarily designed to ensure the politicians get re-elected (something we fortunately don’t have a lot of in this country)
But I suspect if I were to take a closer look at the libertarian movement and it’s history, I would find that is mostly comprised if people who haven’t fully thought through the consequences, and those who have thought them through but have decided that for the sake of their personal, business, or political agenda, it’s better to ignore them.
So yes, maybe I let them off lightly, but that’s mainly because I don’t feel I know enough about them or their philosophy to be particularly damning.
I think if the human race actually *did* get a brain upgrade, we’d simply have markets where they were appropriate, and collective provision where they’re not. As a result, we’d get to true post scarcity a lot quicker (we would have got there a long time ago) and many of the arguments we’re currently seeing would just go away.
I think there’s a lot to be said for the concept of a “natural monopoly”. I wonder whether you could delineate the difference between services that work well in free markets and those that don’t by appealing to the degree of choice people want. It seems to me that natural monopolies might arise in situations where people don’t particularly value having a choice of suppliers, because the service in question doesn’t benefit from diversity.
Roads, for example, are pretty much roads to most people. There might be a few willing to pay a toll in order to take a route with differently-coloured asphalt or whatever, but for the most part they want the road to be good, and people pretty much agree on what makes roads good. It isn’t really a matter of taste. Likewise, with public transport, electric power, telecommunications and so forth. Most people just want them to be as good as possible for a reasonable price. The best way to achieve this is usually to go for economies of scale.
Lots of other things, such as food or clothes, are better suited to market distribution because there’s too much diversity in what people want.
I think health falls pretty much on the natural monopoly side - people don’t really want a lot of choice. There are a few exceptions, such as Jehovah’s Witnesses who don’t believe in blood transfusions, but for the most part we all want whatever is the best available service.
JK Galbraith said something like (paraphrase): “The modern conservative is engaged in one of history’s oldest pursuits: seeking a moral justification for selfishness.” Substitute conservative with libertarian and you’ve more or less got my thinking on the matter.
I agree with your comments completely. I’m often incensed with pathetic talk-back radio announcers and callers that seem to think there is something wrong with our health system! If you have a problem with the waiting lists in the public system, then pay for private. The system works.
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