Sunday, March 07, 2010

The Market Doesn't Ration Health Care

One of the fears about a single-payer option for health care is that it will lead to rationing. A very frequently heard response is, "The Market Already Rations Health Care". Sheldon Richman at The Freeman begs to differ. The Market Doesn't Ration Health Care:

When a person buys five apples in a grocery store rather than ten because he wishes to use the rest of his money for other purposes, it seems entirely wrong to say the market (or even the grocer) has rationed the apples. The customer simply makes his choice on the basis of his preferences and the money available (which is the result of previous transactions).

It is true that as a result of market exchanges, goods and resources change hands and (except for land) locations. But in no sense is this rationing or allocation. The resulting arrangement of resources is simply a product of many transactions. Of course, people’s choices of what and what not to buy and sell at which prices create an arrangement of goods and resources that tends to be intelligible in terms of consumers’ subjective priorities. But that does not warrant calling the process rationing or allocation.

Those words (especially ration, which shares its root with rational) suggest conscious decision-making, as part of a plan, by an agent. In a free market there is no consciousness overseeing this “distribution”—another inappropriate word when it comes to describing the market process.

I am not saying anything that a good economist or other thoughtful person doesn’t already know. I am merely pointing out that we can be more effective in the health care debate if we are more precise in our language. We do not face a choice between methods of rationing medical services. We face a choice between rationing according to a bureaucratic plan and freedom to engage in mutually beneficial exchanges.

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