Rothbard, Friedman on Health Care

22 March 2010 at 11:57 am 13 comments

| Peter Klein |

Murray Rothbard and Milton Friedman are no longer with us, unfortunately, but their opinions live on. Lew Rockwell is running a 1994 piece by Rothbard on what was then called Hillarycare, while the Saturday WSJ reprinted a 1996 essay by Friedman on “Soviet-Style Health Care.” My favorite excerpts:

Rothbard on “universal access”:

[T]here is one simple entity, in any sort of free society, that provides “universal access” to every conceivable good or service, and not just to health or education or food. That entity is not a voucher or a Clintonian ID card; it’s called a “dollar.” Dollars not only provide universal access to all goods and services, they provide it to each dollar-holder for each product only to the extent that the dollar-holder desires.

Friedman, quoting a a physician character in Solzhenitsyn’s 1967 novel The Cancer Ward, on Soviet-style “free” health care:

What do you mean by “free”? The doctors don’t work without pay. It’s just that the patient doesn’t pay them, they’re paid out of the public budget. The public budget comes from these same patients. Treatment isn’t free, it’s just depersonalized. If the cost of it were left with the patient, he’d turn the ten rubles over and over in his hands. But when he really needed help he’d come to the doctor five times over. . . .

Is it better the way it is now? You’d pay anything for careful and sympathetic attention from the doctor, but everywhere there’s a schedule, a quota the doctors have to meet; next! . . . And what do patients come for? For a certificate to be absent from work, for sick leave, for certification for invalids’ pensions: and the doctor’s job is to catch the frauds. Doctor and patient as enemies — is that medicine?

Entry filed under: - Klein -, Classical Liberalism, Public Policy / Political Economy. Tags: .

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13 Comments Add your own

  • 1. Joe Mahoney  |  22 March 2010 at 10:02 pm

    I prefer Kenneth Arrow’s observation that prices (e.g., in dollars) should not be the complete arbiter of social life.

    To the low-income parent whose child is dying, the comment that dollars provide universal access to health care is glib.

  • 2. Peter Klein  |  22 March 2010 at 10:43 pm

    Joe, yes, of course, but I don’t think that’s the point. He’s simply saying that health care, like any other economic good, is scarce, and must be rationed by one mechanism or another. State provision is no more “universal” than market provision; in either case, not everyone who wants a unit of health care will get it. There will be unfortunate parents with dying children in any feasible system. Is it more efficient, and/or more fair, to allocate this scarce resource through the political process?

  • 3. Joe Mahoney  |  22 March 2010 at 11:13 pm

    The price system is more efficient.
    In what sense is the price system more “fair” Peter?

    What is fair about a 90-year old millionaire outbidding a 10-year old child for the one remaining heart today?

    Once again, I concur with Arrow that the price system should not be the complete arbiter of social life. And, it should not be the complete arbiter on who gets health care. You disagree?

  • 4. Peter Klein  |  22 March 2010 at 11:26 pm

    Joe, you are not engaging in comparative institutional analysis — what would Ronald and Oliver say?

    You are assuming that under a state-run plan of one kind or another (perhaps the Obama plan, I’m not sure), worthy 10-year-old children from poor families will always get the hearts over 90-year-old millionaires. But that isn’t the experience of state-run plans around the world, and throughout history. In the short term, the hearts tend to go to people who are politically connected, who can afford to wait in line (or on a waiting list) the longest, who happen to be in the right place at the right time, and so on. Is this more fair than allocation according to willingness to pay? (Keep in mind that market pricing is not incompatible with subsidies, public or private, to low-income participants.) In the long term, if a state-run system leads to reduced innovation, less qualified or more poorly motivated physicians, and the like, then 10-year-old kids will definitely be worse off then they would under a market-based system.

    In short, don’t tell me how a market-based system compares to nirvana. Show me the feasible organizational alternatives!

    (NB: On the static issue, I’ve followed the literature on markets for cadaveric organs quite closely. An acquaintance died from kidney failure after spending many years on a transplant waiting list. There are many studies showing that market incentives — allowing potential recipients to pay potential donors or their families for organs — would vastly increase the supply of transplantable organs. Quite simply, this would save many lives. What is fair about mandating a price of zero, and condemning victims of kidney failure to dialysis or death?)

    And yes, I agree with Arrow. But I don’t think that government decision-making should be the complete arbiter of social life either!

  • 5. Joe Mahoney  |  22 March 2010 at 11:43 pm

    Peter, your argument above compels me to report you to the society for the prevention of cruelty to strawmen.

    If you want to slug it out on who knows Williamson’s works better, bring it on!

    Williiamson in Market and Hierarchies provides an insightful discussion of the limits of the creation of markets in the context of health care on pages 37-38.

    Now that we agree that neither the price system nor government decision-making should be the complete arbiter, we now can begin a more serious discussion about difficult problems, avoiding glib and inaccurate “solutions” using pure markets (or pure politics, which is an oxymoron for sure),

  • 6. Dean Coulter  |  22 March 2010 at 11:52 pm

    I’m with Joe.

    As an Australian, I can choose to use either the government health system (low cost, high latency) or the private health care system (high cost, low latency). My family and I use the latter, covered by my private health insurance policy (which is not cheap). Either way, as a high income earner I pay a 1.5% annual levy to support the government health system.

    I have choice. Society is generally healthier and therefore more productive. The pragmatic compromise position is, as usual, to be found somewhere between these strawmen of heartless capital and communist central planning. Its not really a big deal.

    There are many of us around the world who want all the citizens of the US to be healthy and happy. We are celebrating the passing of this Bill and hope it will generate a virtuous circle of well-being, for your country and thereby the whole planet.

  • 7. Taha Hameduddin  |  23 March 2010 at 3:26 am

    I agree with Dean Coutler. There is always a compromise. A completely market driven heath care industry would truly be heartless, no matter what one might say of the perceived benefits, and on the other hand, a government mandated market. However, a government controlled market would not have the kind of efficiency that a purely market driven industry would, and can actually turn out to be more ‘heartless’. The bottom line is, individuals(in this case the government) cannot allocate resources efficiently, only the market can.

  • 8. cosas  |  23 March 2010 at 9:59 am

    Healthcare it is not just another good or service, as cars, pizzas or TV sets, there are people involve. I would like to know what if your child has to die because you have no money to pay, or because your insurance company decides that for whatever reason they do not cover him, you just can not let all these up to market!!!!…….universal access to healthcare is a human right…Europe get it, Asi get it, everyone in this earth get it….I’m for free trade and economic freedom, but there are “buts” and these is one of them.

  • 9. Peter Klein  |  23 March 2010 at 10:06 am

    Of course, a discussion on feasible institutional alternatives is exactly what we need. I’m not sure that a quick-and-breezy blog post is the right place for it, however.

    I’d just add that the health care sector is already one of the most heavily regulated segments of the modern economy (along with financial services), such that the status quo (pre-Obama) is already a hybrid, public-private solution. (Think Medicare and Medicaid, differential tax treatment of employer-provided health insurance, FDA regulation, occupational licensing, price controls, etc. etc.) One can hardly blame problems with the current system on a lack of government intervention in health care, any more than one can blame the financial crisis on “market fundamentalism.”

  • 10. Peter Klein  |  23 March 2010 at 10:07 am

    Cosas, may I suggest that you read this post:

    http://organizationsandmarkets.com/2009/08/11/heterogeneity-and-health-care/

  • 11. srp  |  24 March 2010 at 6:05 am

    Talk about straw men! Here’s an idea: Let’s separate the resource equity problem from the resource allocation problem. We can have an argument over how egalitarian our society should be as well as the role of private charity versus coerced transfers, but that debate has no logical relationship to state control over medical supply and demand.

    If we want to create an income floor of some sort and let individuals allocate that income to medical services or food or entertainment, fine. We could probably work with that.

    But the idea, to take just one example from the festival of insanity that is the new plan, that we’re going to make catastrophic insurance illegal by mandating first-dollar coverage, is just nuts. The idea that young, healthy, but poorer people have to be additionally soaked to pay for extra care for older, wealthier, sicker people is not obviously fair. And the inevitable price controls, new practice restrictions, and strangling of innovation that will result from this fiscal train wreck will lower our life spans and increase our suffering over the long term. Otherwise, what’s not to like?

  • 12. Roberto Dandi  |  25 March 2010 at 7:21 pm

    I think that US people may benefit by looking more into some statistics before saying that a market driven system is more efficient than a Government ruled one…

    Here is what OECD says: your life expectancy at birth is lower, your infant mortality rate is higher, and you spend almost double than many other Countries in terms of % of GDP. Also, millions of Americans do not spend money on healthcare because do not have access to insurances.. yet. This seems a less efficient system to me. I would welcome ANY reform…

    http://en.wikipedia.org/wiki/Health_care_compared#Cross-country_comparisons

  • 13. David Hoopes  |  26 March 2010 at 9:10 pm

    The health care system in the U.S. is not “market” driven. No more than the mortgage business was market driven. And for the OECD report to be helpful numerous controls would need to be included. It’s hard to have open borders and a welfare state (health care or otherwise).

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