February 6, 2010

You don't have to be smart to get the best deal...

Save Money, Whether You Shop Here or Not - Stephen Spruiell - The Corner on National Review Online:

You benefit from Wal-Mart whether you shop there or not.

In most goods and services there are very few active consumers. What happens is, everybody selling a good is affected by Wal-Mart. You benefit from that wherever you are. So many of those who oppose consumer-driven health care use the perfect as the enemy of the good. You're not going to shop for health care if you're hit by a bus. That's not the point. The point is you're served in a health-care system that's been tightened up, both from a cost and quality point of view, by the fact that some consumers, for many procedures, are shopping around, and not just on price.

The reality is that if I'd known what I know about this hospital, it's not where I would have put my father. It's not that I would have been able to discover that when he got sick. It's that in the same way that I can find out about almost any business that I choose, their quality record and their pricing, I want the same thing for health care. It doesn't mean that if you're hit by a bus you pick up the phone and call ten hospitals.

And I think this misunderstanding of how consumer economies actually work is crucial to a mistake that's made a lot, which is that it's much better to have some big, financially interested institution make a decision on your behalf because you're not smart enough. You don't have to be smart enough to get the best deal on most things in our economy, because some people care enough to create the Wal-Marts of the world. And that's all that happens, is that once there's a Wal-Mart, you'd better be competitive with Wal-Mart, or you're out of business.

It's a simple point that somehow people have a hard time grasping. If only 10% of the people are careful shoppers, then all prices (or the price/service combo) will tend towards those of the most appealing outlet. When I shop at Target I don't worry about comparative prices, because I know that there are people at Target who do nothing but watch that prices are comparable with the competition. They make sure I'm not going to buy pork rinds for 4.99 and then later feel cheated and angry when I discover that everybody else sells them for 2.99! Therefore I don't have to think much about the issue.

Posted by John Weidner at February 6, 2010 3:17 PM
Weblog by John Weidner