Rationing vs Rationing

Rationing By Any Other Name

from Megan McArdle

Robert Wright notes that "we already ration health care; we just let the market do the rationing."  This is a true point made by the proponents of health care reform.  But I'm not sure why it's supposed to be so interesting.  You could make this statement about any good:

 

"We already ration food; we just let the market do the rationing."

"We already ration gasoline; we just let the market do the rationing."

"We already ration cigarettes; we just let the market do the rationing."

 

And indeed, this was an argument that was made in favor of socialism.  (No, okay, I'm not calling you socialists!)  And yet, most of us realize that there are huge differences between price rationing and government rationing, and that the latter is usually much worse for everyone.  This is one of the things that most puzzles me about the health care debate:  statements that would strike almost anyone as stupid in the context of any other good suddenly become dazzling insights when they're applied to hip replacements and otitis media.

 

The rationing is, first of all, simply worse on a practical level:  goods rationed by fiat rather than price have a tendency to disappear, decline in quality, etc.  Government tends to prefer queues to prices.  This makes most people worse off, since their time is worth much more than the price they would pay for the good.  Providers of fiat-rationed goods have little incentive to innovate, or even produce adequate supplies.  If other sectors are not controlled, the highest quality providers have a tendency to exit.  If other sectors are controlled, well, you're a socialist, and I just agreed not to call you a socialist, because you're not a socialist.

 

But there is also a real difference between having something rationed by a process and having it rationed by a person.  That is, in fact, why progressives are so fond of rules.  They don't want to tell grandma to take morphine instead of getting a pacemaker.  It's much nicer if you create a mathematical formula that makes some doctor tell grandma to take morphine instead of getting a pacemaker.  Then the doctor can disclaim responsibility too, because after all, no one really has any agency here--we're all just in the grips of an impersonal force.

 

But this won't do.  If you design a formula to deny granny a pacemaker, knowing that this is the intent of the formula, then you've killed granny just as surely as if you'd ordered the doctor to do it directly. That's the intuition behind the conservative resistance to switching from price rationing to fiat rationing.  Using the government's coercive power to decide the price of something, or who ought to get it, is qualitatively different from the same outcome arising out of voluntary actions in the marketplace.  Even if you don't share the value judgement, it's not irrational, except in the sense that all human decisions have an element of intuition and emotion baked into them.