Friday, February 17, 2012

Underpants Gnomes and Health Care with Art Carden

In light of some recent debates about a mandate for contraception now provided by law, I would love to re-visit my massive collection of articles on Health Care. However... Time being limited, and my own skill-set being a little better suited to making 35+ videos in 4 days for major corporations in addition to my work advancing liberty with, I'll let Art Carden do the work for me!

In an article in Forbes on Tuesday, he wrote:
"...consider a hobby horse of my friends on the left: universal health care. The very phrase is misleading because it assumes that passing a “make it so” mandate will lead to “universal health care.” Or, to modify the way Steven Horwitz and I put it last year, the implicit model borrows from the Underpants Gnomes:

  • Phase 1: Pass a law decreeing that everyone gets free health care.
  • Phase 2: ?
  • Phase 3: Everyone has all the health care they need.

This certainly isn’t to say that American health care isn’t really, really messed up or that it doesn’t need fixing. It is and it does. However, we have to be very careful to understand first what happens in Phase 2 and second whether this will lead to everyone having all the health care they need.

When we don’t allow prices to emerge when they can help mediate cooperation, we distort people’s incentives and create waste in the form of either shortages or surpluses. It happens in the market for gasoline when we impose price ceilings and it happens in the market for unskilled labor when we impose price floors. Even if we grant that universal health care is a desirable goal, I’m comfortably certain that by the time such a proposal made its way through the American political process and by the time people responded to the incentives in it, the legislative cure would have been found worse than the disease."
The Underpants Gnomes to which he refers are these:

I wish more people understood this about policy-making.

I actually especially wish many of the panelists at the massive event I just produced huge amounts of video for also understood this (some did, many others did not). More on that later perhaps, once I've had an opportunity to think about it.

At the beginning of Art's article, he explained that:
"Economics is the art of seeing what happens in Phase 2 and determining whether the proposed intervention will lead to the desired outcome. As Henry Hazlitt wrote in his book Economics in One Lesson (which I discuss here), “(t)he art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
...and unfortunately, people who jump on various bandwagons of getting the state to favor this group's policy or that never look at Phase 2.

Especially on health care - but on many others like wars (on drugs, terror, poverty, etc.) - this is a huge problem. People just assume that there are no unintended consequences or hidden costs to mandating that a particular thing be done via force.

But there are.

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