Organizations and Markets

| Peter Klein |

Further to Russ’s post: One of the most frustrating aspects of the discussion surrounding health-care reform is the tendency of politicians, activists, and even a few economists to talk about “health care” as if it’s a homogeneous blob, or an intangible thing like “love” or “happiness.” Of course, what we produce and consume, what we exchange on markets, is not “health care” but specific, discrete health-care goods and services (procedures, medications, insurance policies, etc.). If you never go to the doctor and consume only one aspirin per year, do you have “health care”? If not, what specific bundle of goods and services constitutes a unit of “health care”?

Once we realize we are really talking about discrete, marginal units of particular goods and services the very notion of “universal access to health care” becomes problematic. What exactly is it that people have a universal right to? It’s analogous to debates about the environment.  One can have a sort of philosophical or meta-economic commitment to “the environment,” and its protection (hoo-boy), but this means very little in terms of specific trade-offs at the margin. Is it better to have one more house or airport runway or corn field, or one more patch of meadow or forest? Being an “environmentalist” doesn’t answer that question. You know the old story: everybody values “safety,” but that doesn’t mean you never leave your house or, when you do, drive to work in a Sherman tank. You willingly sacrifice some amount of safety in exchange for units of other scarce and valuable goods (like access to the world outside your house, time spent traveling, money). Each of us evaluates this trade-off differently. Likewise, the marginal valuations of specific health-care goods and services, relative to other consumption and investment goods, cash balances, etc. varies from individual to individual. There’s no such thing as “health care.” As always, heterogeneity matters.