Nice article, although when the guy treads into medicine, he stumbles badly. There’s simply no way around the CBO projections unless liability is reformed, and since that won’t ever make it through the senate, the CBO numbers stand.
another deficit terrorist was on charlie rose last night (10/20). ray dalio – largest hedge fund manager in the world – $127b. obviously a pragmatic guy who knows how to make a buck but doesn’t have a fundamental understanding of how our monetary system works. definitely recommend watching the segment when it comes online. as of now they haven’t posted it.
The problem who get the money if the deficit is increase? With the current Fed Reserve system and corrupt Republican majority in Congress, most of an increased deficit will simply go to the 1% and the 99% of Americans will get nanda.
In-equality will increase, Fox News will shout how these 1% worked so hard for this money, and eventually when the 99% become pesants as in Argentina there will be a revolt.
I just hope that American remember how to use their guns and line the 1% up at the edge of the Missippi and then flush thier bodies out into the Gulf.
“I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.”
I find this statement as being totally misguided. What are the assumptions underlying any optimally outcome in a free market? One of MMT’s main benefits is that it makes one question their assumptions about money and central banks (e.g. not like an individual). Yet your statements show utter disregard for assumptions. I have been taught that optimally outcomes from the “law of supply & demand” in a free market include the following assumptions (among others): rationality, no market power (price takers), symmetric/”near perfect” information and no positive/negative externalities (all costs internalized). If you actually believe that the products & services you listed do not violate these assumptions to different degrees then you are out of touch with reality.
Most on this blog appear to agree that the health care industry has significant distortions from market power (e.g. price differentials in hospital costs between states/cities, monopoly conditions in rural locations or emergency situations, monopolistic control of medical schools). However, I would add that information quality and symmetry of information are real imperfections in health care, especially considering that much of health care spending occurs at very emotional (and irrational) times (we need to keep in mind that much of health care spending occurs close to death). Further, both positive and negative externalities in health care are large (e.g. positive from others benefitting from your good health related productivity and negative through bad health’s impact on friends & family).
It is with these opinions in mind that I must object with the plan to provide healthcare vouchers. The only imperfection that this addresses (although a significant benefit) is informational quality of buyers (who would now know prices). In regards to the supply side market power it makes things worse. Supplier induced demand would increase (and eat up the non-refundable portion of the voucher real quick) and overwhelm the benefit from better information. The vouchers other benefit – incentive for cost containment – would exacerbate the more problematic under consumption due to poor understanding of direct long term costs and significant negative/positive externalities.
In regards to the insurance aspect of health care – are there not economies of scale in insurance which would be realized from public provision? Would you rather have a private firm deciding coverage (with a profit motive) or a public entity (with a public purpose objective). We all can’t have artificial hearts like Dick Cheney…rationing is a reality today and will be in the future.
I believe in publically funded, privately provided basic health care (private funding for medically unnecessary or unproven treatments). In doing so the government could help address supply side market power (with demand side market power), informational quality/symmetry issues and internalize many externalities while retaining some private sector competitive forces. Sure, there are significant political challenges to such a change, and risks from poor administration by the public sector, but by using best practices from around the globe I believe the US could significantly improve its health care industry.
Regardless as to whether you agree with my “2nd best” solution for health care I would expect most on this blog would concur that ignorance of economic assumptions leads to many of our issues in the mainstream media. I expect better from folks on this blog…and I actually think this sort of narrative (revisiting assumptions) should be more fully exploited by MMT advocates.
Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.
Yeah, but enough people won’t sue (especially the ones whose denial of care killed them) that paying off the occasional pain in the ass makes denial of care a profit center.
You really should watch Michael Moore’s movie Sicko. There’s a lot you could find fault with in his movies about guns, Iraq or capitalism, but Sicko is a punch in the gut because its damn near impossible to argue with anything Moore says (cannily, the movie isn’t really about the uninsured, he focuses on people who think they’re covered… until their insurer screws them). Bless Moore’s socialist heart, apparently you can watch Sicko for free online. http://topdocumentaryfilms.com/sicko/
“This is a bit of an ironic post because I think it is you who has blinders on.”
And this is from a person who literally quoted half a sentence and criticized it for not containing the other half.
“It is not necessary for a market to be perfectly free in order for it to be useful in allocating resources more efficiently. In fact, our most pedantic posters here frequently state that there is no such thing as a perfectly free market, and I agree.”
Right off the bat I can see that you did not understand my post. How can you say near-free markets in health care (since you say it’s no different than other services) lead to “allocating resources more efficiently”? This is a relative claim that has no theoretical support given that the service in question does not exhibit the characteristics required for pareto optimal outcomes in equilibrium (even if a near free market existed). We are dealing with sub-optimal outcomes and thus blanket statements like this are not possible, unless of course you continue to make misguided assumptions. I contend that the sub-optimal “2nd best” outcome from a single payer HC system is better than a market-driven privately funded HC system.
“And if you believe that the cost-constrained choices people make in the areas of food, shelter, transportation, energy, or even communications technology don’t impact human health, then you are out of touch with reality.”
I’m not sure what your point is here as I did not say anything related to this. I was in fact arguing about the uniqueness of health care services (not the institutional arrangement) which your point actually supports.
“In any case, there will always be plenty of choice in terms of doctors and hospitals and even treatments.”
This is not the US marketplace. You either have 1) not done any empirical work in this field or 2) are extremely liberal in your definition of “plenty of choice”. Like I stated in the second half of the sentence you ignored – look at regional hospital monopolies (evidenced by price differentials between areas) or rural health care and tell me that there is plenty of choice.
“Well, they are now because we don’t have a free market at all in most of health care. In those areas where we do, e.g. eye care, plastic surgery, even dentistry to a large degree, the market works pretty well, and costs have risen at about the rate of inflation or less.”
If inflation is lower then the market is functioning better? What if the inflation difference is purely due to price elasticity differences? What if quality is increasing faster in health care than these other markets? Even if we agree that these markets are functioning better (closer to a pareto optimum) than HC that leaves us with two possible explanations – that the institutional/regulatory set-up is better (e.g. more “free”) or because the dental/eye/plastic surgery services themselves have different characteristics that allow for more efficient outcomes (e.g. less externalities, less information symmetry/complexity issues, etc.). I have not read any empirical work that has answered this question, and thus to me, this argument is inconclusive. If you have such a study I would love to see it.
“Both of those are positive externalities. An example of a negative externality would be medical waste that pollutes the environment. The problems with externalities are not fundamentally different than in any other area.”
I was struggling with the terminology here as well. It could be considered as a positive externality since more HC = lower negative externality (so a double negative = positive), or alternatively that the current health care system produces unnecessary costs that are not priced in the market (and hence negative externality since more HC as currently provided = higher negative externality). Thinking about it more you are probably correct. However, this does not change the point (which we clearly disagree about) – that there are many benefits/costs associated with health care that are not being factored in when making HC purchase decisions (and that the degree of externalities in HC is much higher than for most products/services due to the fundamental nature of HC).
“Yes, there are economies of scale. But what you lose are choice and competition. The economy of scale argument could also be used to justify merging all car companies into one.”
So you concur that economies of scale exist (from both an administrative perspective and from an adverse selection perspective since everyone in the country would be in the insured pool), yet you suggest that this benefit is somehow less that the benefit from “choice and competition”. I don’t think that increased competition in HC insurance would provide many benefits given the unique nature of HC and market power on the supply side. Further, I believe that competition would still exist to some degree if private supplemental insurance was allowed (and perhaps even from the public sector as states could compete with one another on efficiency). My last point on competition would be that since HC has long term implications private firms are not the best suited to facilitate it’s provision as they tend to be short term focused (the biggest failing of publically held firms IMHO). Then there are the benefits from choice – for one, there would still be choice in a single payer system that allowed for secondary private insurance (as I argue is best). Sure, you could argue the point that many libertarians make about individual preferences regarding risk aversion suggesting that less insurance would be optimal (and hence requiring coverage is utility reducing) but I would retort that since basic medical services to sustain life is going to be provided regardless of insurance, the “no insurance/less insurance” choice would simply allow free-loading to occur (again assuming that public insurance only covered necessary treatments). Further, I would argue that lack of insurance coverage increases overall HC costs as it tends to reduce preventative HC & delays the purchase of treatment (again a function of the unique nature of health care – it’s not like buying a car).
“Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.”
We obviously disagree here. There are downsides to both alternatives to be sure. Being a Canadian who has lived in the US for more than a decade I have experienced both systems personally and strongly believe that the Canadian system is better in this regard (and in general).
Michael Moore’s “Sicko” was a pretty pathetic attempt at telling this story IMHO. He makes random silly comments and then undermines his narrative by only explaining one side of the story.
@ Tom Hickey
Yes. My rationing point was referencing real constraints, not financial ones (thanks MMT!!). However, I believe that the latter point, real resource constraints, is very real and especially concerning given the baby boom generation going into retirement and climate change.
@ Warren Mosler, Bill Mitchell & the whole MMT community
Thank you for educating me on the workings of the Fed/Treasury and what this means to economic policy. Further, thank you for helping me with the fallacy of composition that was polluting my logic – being a microeconomics guy in general I was assuming (with the help of mainstream macroeconomic teachings) that macro results followed from microeconomic dynamics when in fact general equilibrium constraints (sectoral balances) are binding.
Note – I stumbled upon MMT two months ago (through a Krugman article) and have been hooked ever since. I have been spreading the MMT word around my network and hope to contribute to its broad acceptance. I am a Finance manager at a professional services firm and hold a BS in Chemistry, an MBA (Finance focus) and a Masters in Applied Economics.