by Don Boudreaux on December 6, 2013

in Health, Seen and Unseen

While reading the Washington Post on-line this morning a banner ad across the top of one of the pages read “Oppose Cuts in Hospital Funding.”  I clicked on the ad and was not surprised to find a list of the many benefits that well-functioning hospitals bestow on communities.  I do not doubt the reality of these benefits, and nor do I doubt that there is, in general, a positive relationship between the financial resources available to a hospital and the quality of care that that hospital provides (although much depends here upon the source of that funding).

Being an economist, though, I am utterly unimpressed and unmoved by such a plea to oppose cuts in hospital funding.  The reason is that the economist always asks “As compared to what?”  To oppose cuts in hospital funding is to support refusals to raise funding elsewhere.  So if it’s sufficient to make a case for opposing cuts in by pointing out the likely benefits of maintaining funding for H, then proponents of those programs and activities that will inevitably not receive greater funding if funds for H are not cut can just as easily make their case for more funds by listing all of the benefits that those funds would render in the non-H uses.

Perhaps all or some of the not-cut funds for hospitals would have otherwise been used by government to supply other goods and services – say, more Food Stamps, or more military adventures abroad, or more highway improvements, or a larger dole for midwestern corn farmers.  Or perhaps all or some of the not-cut funds would have otherwise been used by the people who earned those funds in the first place – entrepreneurs, investors, workers – to buy better education for their children, or more elaborate European vacations, or better and larger houses, or more elaborate jewelry, or more charitable giving to hospitals or food banks or typhoon-relief funds.

Whatever might be those goods and services that those not-cut funds would otherwise have been spent on had those not-cut funds not continued to flow to hospitals, one thing is certain: those funds – and the real resources that those funds purchase – had alternative uses that are of real value to real people.

So it’s impossible to make any assessment of the merits of maintaining or cutting current levels of hospital funding without knowing how those funds would otherwise be used.

The point here is a simple one.  Yet it’s worth making because the nature of pleas such as the one that caught my eye earlier today at the Washington Post site typically suggests that there is no real cost to maintaining or increasing government funding for programs and projects that most people recognize to have some merit.  The costs are seldom mentioned in such pleas.  But these costs are as real and as unavoidable as is the ‘tails’ side of coin when an observer is admiring the ‘heads’ side – and it’s too easy for lazy minds to suppose that government can always snatch the funds that it uses for ‘noble’ causes (such as hospitals) from private uses that are “of course” less valuable than the uses to which government puts the funds.



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