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Rational rationing?

David Leonhardt writes (HT: Elizabeth Terrell):

Milton Friedman’s beloved line
is a good way to frame the issue: There is no such thing as a free
lunch. The choice isn’t between rationing and not rationing. It’s
between rationing well and rationing badly. Given that the United
States devotes far more of its economy to health care
than other rich countries, and gets worse results by many measures,
it’s hard to argue that we are now rationing very rationally.

It's an interesting column and I think Leonhardt is maybe half right or maybe even three quarters. He's right that the choice isn't between rationing and not rationing. But I don't agree that the choice is between rationing well and rationing badly. I don't know what rationing well or badly means. He means we ration badly because we spend too much. He's right. The current system doesn't let prices ration. Prices are artificially low. There isn't enough rationing in the global sense.

For me, the crucial question is who does the rationing, a centralized decision-maker or a decentralized system. Centralized decision makers influenced by political pressure inevitably ration badly. Decentralized systems can potentially avoid the problem of political pressure.

The "reformers" want more top-down rationing with prices playing a smaller role than they do now. I want prices to play a bigger role. Prices also play a role in rationing any overall level of care among individuals. This is one reason people tend to be suspicious of prices–they appear to give the rich an advantage. And they let people profit. But those profits produce incentives to control costs that are missing from the current system and that would not be in place in the typical reforms that are on the table.

I want more rationing with less control where power is dispersed. The "reformers" want more rationing with more control and more power. They scare me.


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