November 18, 2005

#195: “I'm not an opponent of markets"

P. Krugman


Paul Krugman has written two consecutive columns on health care in the United StatesHealth Economics 101 (11/14/05) and Private Obsession (11/18/05). Both columns are boring as hell and can be dismissed on the basis of one colossal howler:

“I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did.”
This is pure fantasy. We can think of no domestic issue on which Krugman has ever sided with a market solution over a government solution. The reason is simple. For the left, government solutions are where the votes are. Making people think they must depend on government to provide services for which someone else is paying is the name of their game. Market solutions encourage people think, choose, evaluate and compare. An informed, self-reliant consumer is the left’s worst nightmare.

In the first of these columns Krugman argues that markets cannot work in healthcare because “adverse selection” makes healthcare different from all other markets. Read this nonsense if you must but realize there are counter examples to all of his points. More important, the issue is never whether the free market handles adverse selection perfectly, but whether a one-size-fits-all government solution improves things. I think we all know the answer to that. “You want a BLUE car comrade? Come back in two years-we may have one.”

In the second column Krugman goes after the one aspect of the recent drug bill that made it halfway reasonable-the possibility of introducing some competition and consumer choice into the industry. The private market has responded to an extent no one thought likely. But to Krugman, this is exactly the nightmare we described above; the threat of an informed consumer! So he starts pounding at how complicated and bewildering the program is to older Americans. He doesn’t say so, but in his condescension he makes buying healthcare sound almost as complicated as buying a house or condominium. We wonder how he thinks older Americans manage to do that.

Krugman also criticizes the private market for having higher costs due to advertising and other marketing programs explaining their various products to consumers. Ah, for the simple life where government provided as much of the same thing to as many people as wanted it and someone else paid. This mentality led the political satirist P. J. O’Rourke to once comment,

“If you think healthcare’s expensive now, wait til it’s free”
Someone always pays and consumer sovereignty is our only hope of controlling costs.

[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 November 18, 2005 11:50 AM
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