March 26, 2004

#151: "Efficiency" Krugman-style

P. Krugman

The Medicare Muddle (03/26/04) is Paul Krugman's third column in six weeks on this topic and makes him the champion recycler of the New York Times. There's really nothing new. As in Social Security Scares (03/05/04), see Squad Report # 148, and The Health of Nations (02/17/04), see Squad Report #145), he continues to walk a tightrope between scaring seniors enough about their benefits to keep them voting Democratic, but NOT scaring them so much that they might embrace privatization. For once the privatization camel has his nose under the health care tent there is no turning back.

Krugman continues referencing undocumented studies showing that government health programs are more efficient that private ones. We would love to see those studies. Our guess is that these efficiencies come at the expense of choice, timely service and quality. When you price something below cost rationing always occurs, one way or another. Then there is an even greater problem. If you wring all the profits out of a private system to provide cheap service, how does innovation continue to get financed? On this point Krugman's silence is deafening.

This photo helps make the point. These two cars are Soviet ZIL-41044s circa 1980. They too were produced "efficiently", because the prices of their inputs were controlled, their design costs were minimal (they were stolen them GM) and customer service was non-existent. So if you didn't mind waiting a year or two and didn't really care which color you got..... Which one would you want?
The Zil, a Soviet automobile

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]

Posted by John Weidner at March 26, 2004 7:27 AM
Weblog by John Weidner