Let’s read from an economics textbook!
No, really.
But we’ll get to that.
To start this off: I’m a fan of the free market. I think more of us are than realize it. Broadly speaking, we like the idea of making our own choices, which is one way of defining the term “free market.” When some people wretch at the word “capitalism,” I’d guess they’re actually often (not always, but often) reacting to cronyism, in which the free market is hampered in exchange for bribes in a system we call “lobbying.” Capitalism has lost its meaning. Let’s say free markets instead.
I only say all that to say that while I’m a fan of the free market (and I should add here that I have only a bachelor’s degree in economics, which means I’m not an expert on the subject but I’ve taken more classes on it than the vast majority of you [and I did so at a decent college—make of all of this what you will]), I also recognize that it has some limitations, or if you want to get funky, it has some situations in which massive collaboration is required, which is kind of how governments would have come to exist in the first place were we less evolutionarily inclined to desiring to exert power over others.
Sorry, getting distracted again.
All I’m saying here is that I like free markets but they have some limitations and I think that’s a viewpoint we should all probably have even if we disagree on the scope of those limitations and the ways to counter them.
Ok. Healthcare markets.
Healthcare is expensive. It’s really expensive. We spend a buttload of money (that’s a term thirty hours of economic academic credit will give you) on healthcare. And it’s gotten worse. We spend more on healthcare than we used to. And while healthcare’s improving, it doesn’t sound like improved quality is the only reason for the increase. Which indicates that the healthcare market is broken, or at least not functioning very well.
Now, this doesn’t necessarily mean that a free healthcare market is broken. We don’t have the freest healthcare market. There are a whole lot of government regulations in healthcare, a lot of which are eminently necessary. (And at least some of which are not—remember cronyism?) Which finally brings us to our point:
While free markets almost all have some sort of limitation, they hit some of their biggest limitations in healthcare.
Here’s the textbook reading. It’s from N. Gregory Mankiw over at Harvard. Mankiw, incidentally, wrote my introductory microeconomics textbook, and has thus been rather influential on my thinking across all sorts of aspects of life. But that’s not important right now either. What’s important is that if you want to read fourteen pages about the healthcare market and get what seems to me to be a decent, broad understanding of it, that’s a great fourteen pages to read. But whether you do or don’t read it, let’s talk about one specific point Mankiw makes:
As you may recall from Chapter 10, market outcomes may be inefficient when there are externalities. To recap: An externality arises when a person engages in an activity that influences the well-being of a bystander but neither pays nor receives compensation for that effect. If the impact on the bystander is adverse, it is called a negative externality. If it is beneficial, it is called a positive externality. In the presence of externalities, society’s interest in a market outcome extends beyond the well-being of buyers and sellers who participate in the market to include the well-being of bystanders who are affected indirectly. Because buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply, the externality can render the unregulated market outcome inefficient.
This general conclusion is crucial for understanding healthcare, because externalities in the market are so prevalent. These externalities can call for government action to remedy the market failure.
Take vaccines, for example. If one person vaccinates herself against a disease, she is less likely to catch it. But because she is less likely to catch it, she is less likely to become a carrier and infect other people. Thus, getting vaccinated conveys a positive externality. If getting vaccinated has some cost, either in money, time, or risk of adverse side effects, too few people will choose to get themselves vaccinated because they will likely ignore the positive externalities when weighing the costs and benefits. The government may remedy this problem by subsidizing the development, manufacture, and distribution of vaccines or by requiring vaccination.
Mankin goes on to talk about other externalities in the healthcare market, or at least the externalities associated with medical research. But I found the vaccine point interesting, especially as the United States faces a problem in which many are unwilling to receive the coronavirus vaccine, and especially especially on the heels of this fourteen-month political slapfight about how responsible we are for keeping our neighbors safe. Some of the issue, of course, is misinformation, and some of it partisanized distrust, but a lot of it just comes down to this: People don’t care enough about other people for that to make the difference in convincing them to do their part when it comes to wearing a mask or taking a shot. There are plenty of reasons a free healthcare market is inefficient (really, if you’re curious, read those fourteen pages—it won’t take that long and I think Mankiw explains it as well as just about anyone could in a textbook setting), and there are plenty of reasons well over 500,000 Americans have died from the coronavirus, but a reason common to them both is this:
We just don’t care that much about our fellow man.
