Hello, I'm rather new to Austrian school theory and am having a bit of trouble forming the bigger picture in regard to health care. I think everyone agrees that health care costs are extremely pricey these days, and though my parents in particular support more regulation and government involvement, I have come to the conclusion that the logic behind the free market approach to health care is much more sound. I have arguments with them about supply and demand and deregulation, but they think I'm crazy for supporting deregulation and the removal of, say, medical school licensing.
In the end, the argument always comes to this point: they argue that because health care is a necessity rather than a want, if there were deregulation, health insurance companies and health providers would be able to milk the consumer for outrageous sums of money, in some cases to the point of financial meltdown. Essentially, their argument is that because most will not choose death or disease over outrageous prices or financial ruin, the laws of supply and demand do not apply to health care. Demand will always be sky high because the alternative to financial distress is even more unappealing.
What is the free market argument against this? I know I'm probably missing something that's staring me right in the face.
Thanks for the information in advance.
SG875: In the end, the argument always comes to this point: they argue that because health care is a necessity rather than a want, if there were deregulation, health insurance companies and health providers would be able to milk the consumer for outrageous sums of money, in some cases to the point of financial meltdown. Essentially, their argument is that because most will not choose death or disease over outrageous prices or financial ruin, the laws of supply and demand do not apply to health care. Demand will always be sky high because the alternative to financial distress is even more unappealing. What is the free market argument against this? I know I'm probably missing something that's staring me right in the face. Thanks for the information in advance.
It appears they are assuming that the quantity of healthcare services and goods offered remains completely stable. Instead, what the law of supply and demand tells us that if there is a high demand, and prices go up, that this will attract new people into this market (and/or to be more efficient and supply more with the same amount of resources).
The demand for drinking liquids is almost endlessly higher than the demand for healthcare, but it turns out that those are extremely cheap. Why isn't Coca Cola charging a million dollars per bottle? Without drinking liquids people die very quickly. You can go decades without healthcare.
When people's lives depend on something and the demand is very high then the need for a free market is especially great. A market in food is much more important than a market in, say, umbrellas. If the market isn't allowed to work in food then people die. In North Korea people die from hunger. Under the Soviet regime millions died from starvation.
The short of it is,
when you restrict the supply of goods and services, their price goes up. Supply and demand. Regulation necessarily implies restriction and barriers to entry. In our case restrictions in supply has occurred in product, in physician, and in available consumers as companies are also restricted the number of consumers they can vend to(Like cross state healthcare insurance ect..)
So not only are services and products for consumers limited in supply, available consumers for purchasing of said goods and services are also limited in supply.
When you add up everything how anyone could call our current healthcare system a free market is sheer lunacy, and it should suprise no one why it costs so much.
FDA, Licensing, State laws regulations ect.....
SG875:In the end, the argument always comes to this point: they argue that because health care is a necessity rather than a want, if there were deregulation, health insurance companies and health providers would be able to milk the consumer for outrageous sums of money, in some cases to the point of financial meltdown. Essentially, their argument is that because most will not choose death or disease over outrageous prices or financial ruin, the laws of supply and demand do not apply to health care. Demand will always be sky high because the alternative to financial distress is even more unappealing.
Ahh I missed this.
Then the question is, why does the market handle shelter so well? And food(Ignoring the FDA;s involvements and our silly various subsidies like corn).
Food and Shelter most people would consider a higher need. Second off, no one can decide on behalf of other people how much of a need healthcare is. If it's priced too high people won't purchase the service, the price will be bid down. The concept that they could gouge prices is a fairy tale built on fear, but not on reality and not on praxeology.
Watch this guys videos on HC.
http://fringeelements.ning.com/page/ryans-page
SG875: Hello, I'm rather new to Austrian school theory and am having a bit of trouble forming the bigger picture in regard to health care. I think everyone agrees that health care costs are extremely pricey these days, and though my parents in particular support more regulation and government involvement, I have come to the conclusion that the logic behind the free market approach to health care is much more sound. I have arguments with them about supply and demand and deregulation, but they think I'm crazy for supporting deregulation and the removal of, say, medical school licensing. In the end, the argument always comes to this point: they argue that because health care is a necessity rather than a want, if there were deregulation, health insurance companies and health providers would be able to milk the consumer for outrageous sums of money, in some cases to the point of financial meltdown. Essentially, their argument is that because most will not choose death or disease over outrageous prices or financial ruin, the laws of supply and demand do not apply to health care. Demand will always be sky high because the alternative to financial distress is even more unappealing. What is the free market argument against this? I know I'm probably missing something that's staring me right in the face. Thanks for the information in advance.
It really doesn't matter, I think, how elastic the demand curve is -as long as there is only 1 equilibrium point the lowering of the price is always going to produce a shortage.
so the question is "Would I want this level of health care at high prices, or would I want less health care at low prices?"
But to be honest, I think given their scenario of elastic demand then it is also true that companies would have quite the incentive to always raise prices.
Thank you for your responses, they were enlightening.
In adition to the other posters sound arguments, how about a proof from history. For thousands of years there were doctors on the face of the earth, patients with broken bones and in other deadly situations, and no healthcare. And yet doctors did not charge millions of dollars. Even as recently as 1960 [before the AMA took over] doctors were very affordable.
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It's easy to refute an argument if you first misrepresent it. William Keizer
SG875:they argue that because health care is a necessity rather than a want
And what about food? Is that a want as oppose to necessity? Food is way more vital and important. Should the government takeover the entire food industry as well?
SG875: Essentially, their argument is that because most will not choose death or disease over outrageous prices or financial ruin, the laws of supply and demand do not apply to health care.
Essentially, their argument is that the laws of economics do not apply to health care.