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Is Health Care Really Different than Groceries?

Posted By Don Boudreaux On November 20, 2005 @ 10:42 am In Health | Comments Disabled

Calls for government-supplied ‘universal’ health-care seem to be louder and more freuquent.  Many of those who demand collectivized provision of health care are fond of pointing out that most other industrialized nations have collectivized their health care far more to date than has the U.S., implying that Americans are barbaric for not doing so.  (See, for example, this letter [1] in today’s Boston Globe.)

Oceans of virtual (and real) ink have been spilt on this issue.  But one consideration for me looms above all others, at least as far as the economics of the matter go.  This point is the one that Russ Roberts made in a Wall Street Journal essay, now available here [2], several years ago — namely, if at a restaurant Joe pays for a large share of Sam’s dinner and if Sam simultaneously pays for a large share of Joe’s dinner, then both Joe and Sam have incentives to order more and more-expensive dishes and drinks than they each would order if each were responsible for paying principally, and only, for that which he orders.  One result is that the prices of restaurant meals increase.

Here’s one way I think of the matter.  Suppose we had taxpayer provision of ‘universal’ grocery needs.  That is, we are all taxed to stock supermarket shelves, and in return for these higher taxes that we pay, each of us is accorded by government the ‘right’ to take from each supermarket whatever grocery items we ‘need.’

Isn’t it obvious that each of us, having to pay no marginal cost of whatever grocery items we take from supermarkets, will take more than we need — or, at least, try to take more than we need?  Isn’t it obvious that, having to pay no marginal cost of whatever grocery items we take, we will consume wastefully?  Isn’t it obvious that the prices of grocery items (and the actual costs, including queuing, of acquiring such items) will rise to heights far higher than those that we pay now with our private system of supplying groceries?

What am I missing?  Why do so many people — including some faculty members [3] tenured at presigious Departments of Economics — fantasize that if we collectivize medical-care provision, ordinary people will be made better off?

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URLs in this post:

[1] this letter: http://www.boston.com/news/globe/editorial_opinion/letters/articles/2005/11/20/hard_working_and_at_risk/

[2] here: http://www.invisibleheart.com/Iheart/PolicySirloin.html

[3] some faculty members: http://krugman.page.nytimes.com/b/a/217179.htm

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