“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

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Monday, October 28, 2013

for price controls: a solution to healthcare costs in America

Like many a crank before me, I am unhealthily attracted to arguments about economics.
This last week there has been a lot of fun activity in the blogosphere around that perpetually arousing topic, is economics a science or not? Science, here, doesn’t mean a social science. The problem with economics, I think, is that there is an impulse within the discipline to understand it as something more like a natural science – a science like physics.
This is, I think, a bogus credentialing move with serious consequences for the way economists think and advice.
Being held prisoner by a bunch of assumptions both about what science is and about what the economy is about, economists all too often end up leading those who listen to them into dead ends.
A good case in point is the matter of price controls.
Economists now, whether chicago school or MIT school, show the same horror for price controls as the Victorians showed for the  mention of sex. It just shouldn’t be done! Economics decorum is a bit different than Victorian manners, but they both start with assumptions that are highly fictitious. In the Victorian case, all the speakers were, actually, products of sex – and in the economics case, all the speakers are actually products of highly non-competitive non-markets.
But as we get out of the asphyxiating world of the economists assumptions, we often find “markets” that would be well served by price controls. For instance: the American healthcare market.
At the moment, there is much handwringing over the fact that the cost of American healthcare is way out of synch with healthcare costs elsewhere. This handwringing has resulted in many a clever suggestion about rearranging market arrangements for healthcare. These suggestions, however, turn a blind eye to the fact that the healthcare market is shaped by two government backed monopolies – on the one hand, the monopoly granted to medical device and pharmacy companies from the out of control patent and ip laws – and on the other hand, the various guild monopolies granted to the pool of labor, from doctors to dentists to nurses to pharmacists, enforced by the government.
This, then, is a market in which price controls that are heavily government influenced are already in place. The laws, for instance, that require a patient to get a doctor’s prescription to gain access to prescription drugs makes a mockery of any notion that the healthcare “market” is “free”.
In such situations, price controls can be imposed rather easily.  The room for black markets, here, is pretty narrow. Add this to the fact that the medical device and pharma industries count on the government protecting them from competition – for instance, from foreign drug marketers – and you have set up a situation which would respond perfectly well to price controls.
Don’t expect, however, anybody anywhere to point these things out or discuss a price control policy. That would violate the sensitivities of mainstream economists.  

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