It's not the first time, by any stretch of the imagination, that I've flagged up stuff posted on Cafe Hayek on here. As I always seem to say about Hayekians, or Austrians, or libertarians, they tend to ignore issues of imperfect information when launching their defence of markets in everything. The latest example, continuing with the healthcare debate in the US, is:
The question is: Can the government deliver a most cost effective healthcare system than fully free markets could?
We can bring to bear fairly simple economic ideas relating to imperfect information to say: It is possible, because both extremes are probably not helpful places to begin.
Fully free markets would most likely be a disaster. Why is that? Well, customers are not well informed about their health, and healthcare procedures, and nor will they likely be even if there was an attempt to inform the public better. After all, a doctor does not learn in a few newspaper articles all he or she knows about operating on a patient.
Furthermore, what are the costs of mistaken choice in this market? Well, death is one possibility, and severely impaired health is another. It's not like if we're trying out different chocolate bars, or pet foods, where if we find we don't like it, well the cost is the cost of the bag of pet food or the Snickers bar. This is the crux, and why Boudreaux's attempt an an analogy completely fails and is in fact dangerous.
And we haven't even got on to talking about the externalities surroudning infectious diseases, or the problems of moral hazard and adverse selection in health insurance markets!
Other arguments could be brought to bear on this to argue in favour of some form of intervention - the market can't correct the kinds of information difficulties here as it might in other industries (with things like What PC magazine, etc). The only thing left is to ask: What form should that intervention take?
One thing would be to force all citizens to take out insurance to mitigate adverse selection (premiums going up because good healthy folk leave the market), but then that leaves moral hazard where providers (doctors, hospitals) convince patients to take out excessive healthcare since the insurance company pays, not the patient.
We could carry on. There are pros and cons to all systems, and healthcare is so damn complicated it's hard to sit in a room and theorise about things. But funnily enough, a report has just been released showing that out of all the decrepit, socialized (to use the North American parlance) health systems, the NHS actually comes out as most cost effective.
The thing I love most about the table on the link is the healthcare spending per capita. The US is at $7,290, while the UK is at $2,992. Last time I checked, health outcomes weren't all that different here in the poor old UK...
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