Re: America's Affordable Health Choices Act of 2009 - The USCHO debates
Another take on health care and socialism:
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Socialism in Medicine
Since we’re kind of on the subject of health care reform, I have a few thoughts on the whole socialism in medicine issue also.
One of the most important insights of the Austrian School of Economics is the extraordinary complexity of the free market. It is so complex that no single individual, no committee, and no computer program can account for more than a tiny fraction of the factors that drive a modern economy.
Friedrich Hayek, a Nobel Prize-winning economist, made this the central point of his writings for the last 35 years of his life. He proved that only through the private property social order and the free interplay of pricing can society become the beneficiary of the market’s (masses of individuals) enormous quantities of relevant knowledge. There is no possible way that a committee of salaried bureaucrats can plan an entire economy or even one industry. Ergo, socialized medicine will not work anywhere ever. These schemes will inevitably lead to rationing of care, a lack of adequate medical equipment and supplies, skyrocketing costs, and a general increase in patients’ dissatisfaction.
The fact that socialized medicine cannot work has not stopped the socialist-progressives from giving it the old college try – over and over, and over again. During the past fifty years, most of the industrialized world (including the U.S., but to a lesser degree) has socialized its medical industries.
Under a policy of socialized medicine, capital investment in new technologies like an MRI machine is considered a cost rather than an income-producing asset that reduces real costs. William L. Anderson’s “Socialism and Medicine, Part 2,” published in the June 2008 Freedom Daily, provides a detailed analysis of this issue. In the article, Anderson cites a column by Paul Krugman, the well-known economist for the New York Times and Princeton University, who recently declared that medical care in the United States is costly because of high-quality medical capital such as MRI and CAT scan devices. His reasoning (or rather, the lack thereof) follows:
- Those devices are expensive.
- Doctors charge a lot for tests from those machines, since the devices are costly.
- Because the tests are expensive, they drive up health care costs.
- If you want to have less expensive medical care, then you do away with such expensive items or more strictly ration them.
No “economist” can be forgiven for constructing such a faulty chain of economic logic.
Most importantly, Krugman neglects to consider what high-quality medical capital devices like the MRI replace. In a matter of minutes and without the use of a scalpel, they allow doctors to perform exploratory surgery and diagnose countless disorders for a large number of people. Before the creation of such devices, doctors had to perform invasive procedures that took infinitely longer to perform and for which there was a recovery period for the patient. Diagnosing such problems today is done at a fraction of the total costs that used to be involved.
Krugman erroneously appeals to the discredited cost-of-production theory of value. Carl Menger conclusively demonstrated that demand for the final product is what gives value to production and capital goods, not the other way around. Technical jargon aside, this concept is essential in explaining why Krugman and others like him advocate the policies they do and why they are so wrong when they do so. An economist’s theory of value is what guides all aspects of his or her work. If his underlying theory is fallacious, all his conclusions will be too.
What happens when people like Krugman are taken seriously? An excerpt from Anderson’s aforementioned article helps clarify.
I work in Allegany County, Maryland, and we have three MRI devices in this county of about 80,000 people. I have had two MRIs done, which were performed the same week my doctor scheduled them for me. Montreal, Canada, on the other hand, has about 3.6 million people in its metropolitan area, and there are also three MRI devices, one for more than a million people. Anyone needing an MRI there has to wait at least six months.
Why the difference? The answer lies in the somewhat obscure fact that under a socialistic system, capital becomes a liability rather than an asset. The reason is that under a system of private profit, capital is used by its owners to provide an income; in socialism, capital does not provide an income to anyone. Rather, it is an expense item and nothing else.
Thus, demand for high-tech medical care equipment plummets under such a system, R&D to create new such machines stops, manufacturers go out of business, and people die.
With all that said, I apologize if I came across as too preachy in today’s missive. That was not my intention. Certain issues just really fire me up more than others.
And that, dear readers, is that for today.
See you tomorrow in the weekend edition. In the meantime, thank you for reading and for being a subscriber to a Casey Research service.
Chris Wood
Casey Research, LLC
