THE CHURCH AND THE MARKET(Woods 171) – Healthcare a victim of its own success?

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    In THE CHURCH AND THE MARKET (Woods 171) the paradoxical point is made that the Industrial Revolution became open to accusation of making people worse off primarily because it made people better off. “Economic suffering both became more conspicuous and seemed less justified,because general wealth was increasing faster than before…”. Perhaps this same paradox applies to the advancement of the subset of industry known as health care? At the time that Medicare was created, there was hardly gap between the treatment which was usually provided by an M.D. vs. a veterinarian. Lyndon Johnson himself, the champion of Medicare and the great society, died of a cardiac condition which could have been readily treated by a now extant but very expensive procedure known as bypass surgery. Now that these procedures exist, everyone has want of them.(Bypass surgery, organ transplants, dialysis, joint replacements, chemo therapy, heart valve replacements, penile prosthesis to name a few.) For many, if not most voters, the cost of a life saving procedures can exceed their life savings. Many Americans cannot distinguish between unavoidable scarcity and arbitrary injustice. Therefore, the health care industry may be especially susceptible to cries of injustice from demagogues and the desperate. Many would love to see the industry socialized because they consider queues to be more democratic than the market, -the thinking being, why should the well-off have preference for survival simply becausey the have a greater proportion of unjustly acquired wealth? Why, they ask, should a Dick Cheney have preference for survival with a multi-million dollar heart pump simply because he has acquired those millions of dollars?


    Of course, the other contributing factor is the false assumption that when government provides benefits, those benefits are free. Had I the proverbial magic wand, I would give everyone in America the economic understanding of someone who had completed introductory Microeconomics with a grade of “A” and had read 10 economics books of my choice. This, I believe, would resolve several of America’s most pressing problems.


    M. Rothbard would probably want to mention the Flexner Report – among the first national intrusions into health care, which led to the empowerment of the AMA (mostly at the State level) to, in essence, license medical schools, and they immediately closed about half (and sharply limited the number of new ones they later authorized), in order to decrease the supply of new doctors and thus, in time, drive up prices.

    The Flexner Report also led to the situation where the AMA was empowered by the government as a trade association to decide what procedures had to be done by Doctors and what could be left to Nurses and the like, and naturally they made decisions so as to force more procedures to require a Doctor, again driving up costs.

    Then later of course one gets the whole tax-deduction-for-businesses-during-a-time-of-price-controls things, which further distorts the health care market, leading to subsequent government interventions, which follow essentially the pattern outlined by Mises in his critique of interventionism (probably – and this is just a SWAG – among the 10 books Dr. Gutzman would want people to have read).

    The Flexner Report/AMA situation, btw, is a good counter-argument to the people you sometimes run across who think that we’d all be better off if we reoriented our economy along the lines of a modernized version of the medieval guild system.

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