Economics doesn\'t apply to health care

(note: for this analysis I am assuming the viewpoint of an economist designing a nationwide health care system and ignoring the problems with public, centralized solutions.)

Over at EconLog, Arnold Kling cites his recent TCS essay where it looks like he's arguing that economic efficiency should not apply to the health care industry. He notices that other OECD countries spend less and achieve the same or better life expectancy, and rejects the idea that we should reduce our spending per capita while trying to achieve this same life expectancy.

He firsts makes the valid point that health is about more than life expectancy, as with his father's hearing aids and cataract surgery. I certainly agree that we should focus on metrics of total health, not just length of life. But he then goes on to deny that we should try to focus our spending where it will do the most good: "I think that it is a mistake to define the health care problem as the need to reduce the ratio of expenditures to life-expectancy gains" He cites people told they had 6-months to live who hold on for 5 years as an example of the folly of using doctor estimates to decide policy.

It is very strange to hear this sort of viewpoint from an economist. Health care is a limited resource. If we spend money inefficiently, we will get less of it, just like every other economic good. For example, Kling asks "Would you want to deny care to someone because they only have a 49 percent chance of living another year?" The answer, of course, depends on how much it costs, how likely the care is to work, and what alternative ways exist to spend that money. If we can perform the same procedure with the same costs and benefits on someone who has a 90% chance of living another year, then I certainly would want to deny care to the 49% person! That decision has almost doubled the chance that the procedure will keep on providing benefits after the next year.

Its true that health estimates are imprecise. But this doesn't mean we should ignore them! As in every other area in life, we muddle on as best we can with our imperfect data. Its true that with a different national income, we may want to spend more money on health care than other OECD countries. But we should still spend our money efficiently. Its true that it tugs at our emotional heartstrings to deny someone care. But we are rationing limited goods. The money we spend on a hopeless cancer patient is money we don't spend on people with full lives ahead of them. Improving our spending to health ratio is improving the efficiency with which we produce health care - how can that be a bad goal?

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"If we can perform the same

"If we can perform the same procedure with the same costs and benefits on someone who has a 90% chance of living another year, then I certainly would want to deny care to the 49% person!"

Can you validly weigh the benefits to one person against the costs to another?

Really, all of this is the

Really, all of this is the wrong question entirely. In a free market, people pick the healthcare they themselves want and there is no need for us to make overarching "societal" decisions about health care. In a non-free market, everything will pretty much suck no matter what we do because all the decisions will be political no matter what we'd like.

The first utterly essential

The first utterly essential question must be posed before reading anything like that, irrespective of education or title; is the person an altruist? if so then say no more and throw out 90% of everything they say as irrational, out of hand. you can show them 2+2=4 all day , it won't matter, they 'believe' its three. :razz:

JTK and Perry - the point of

JTK and Perry - the point of my introductory note was to forestall such comments. My point is not that this is the right way to do health care. It is that within the framework of analysis used, where government officials are deciding how to allocate health care dollars, Kling's methods are non-optimal. Not all non-free-market allocation methods are equal, and if we can persuade people that more efficient allocation methods are better, we can then point out that free-markets are even more efficient.

It is that within the

It is that within the framework of analysis used, where government officials are deciding how to allocate health care dollars, Klingâ??s methods are non-optimal. Not all non-free-market allocation methods are equal, and if we can persuade people that more efficient allocation methods are better, we can then point out that free-markets are even more efficient.

I respectfully disagree -- trying to tell a socialist which flavor of socialism is best, in an effort to sell capitalism, is like trying to tell a child which flavor of ice cream is best so that eventually he'll learn to like brussels sprouts.

I'm afraid I disagree, Kip.

I'm afraid I disagree, Kip. The same reasons and logic which cause me to believe that anarcho-capitalism (A) is a superior system to socialism cause me to think that Kling's health care ideas (B) are non-optimal within his own framework, and my modification ( C) is better. The logic of economic efficiency tells me that A is much better than B or C, but it also tells me that C is better than B.

Your political leanings may stem from a different source, hence why you see the issues as unrelated. But to me, they are intimately related. Its all about efficiency. Hence why I believe that if we can teach people efficiency by improving their own systems, we can then get them to switch to different systems. If we just tell them they are being immoral, they will never listen.

The Libertarian view seems

The Libertarian view seems valid ... so long as we remain apathetic and lazy w.r.t. keeping "... a government of the people, by the people and for the people ..." an out of control, bureaucratic, all powerful behemoth unanswerable to ... anyone at all.

In fact though, that isn't the way it was intended to be and isn't the way it should be. It makes very simple sense for citizens to collaborate with eachother through the framework of their government to address issues common to all of them.

This debate is essentially on the interpretation of the Constitution. It has been ongoing since the very early years of the Union. For all practical purposes, it was finally settled by the Supreme Court more than six decades ago: "... Congress may spend money in aid of the "general welfare". Constitution, Art. I, section 8 ... There have been great statesmen in our history who have stood for other views. We will not resurrect the contest. It is now settled by decision. ... The conception of the spending power advocated by Hamilton and strongly reinforced by Story has prevailed over that of Madison..." (Benjamin Cardoza, Opinion of the Supreme Court, May 24, 1937).

For the citizens of the United States to collaborate with each other to address health care issues through their own government makes at least as much sense as their paying through the nose separately to corporate entities that have only a single motive and have the option of simply dissolving into Enron-ian chaos.

You are arguing over whether

You are arguing over whether it's nicer to stab someone or shoot them, and forestalling the answer "neither are particularly nice, and the iota of difference doesn't matter".

Arnold Kling has added some

Arnold Kling has added some clarification over at EconLog in response to my comments.

Dan O'Donnell, The state, by

Dan O'Donnell,

The state, by its very nature, cannot be "ours." Ever hear of Michels' Iron Law of Oligarchy? The people actually controlling the machinery of government will always have a massive advantage, in time, attention span, information, and agenda control, over those they "represent." The state can only truly represent a minority; it will inevitably be a ruling class's instrument of exploitation.

I'm going out on a limb here, but I'd guess that you probably support most of the "progressive" things the welfare-regulatory state did in the twentieth century. You should check out the New Left revisionist history of those policies, and see how much influence people like Gerard Swope and David Rockefeller had on them, along with an army of corporation lawyers and investment bankers. That's true of both parties--just look at Kennedy's cabinet. For starters, I recommend Gabriel Kolko's *The Triumph of Conservatism* and G. William Domhoff's *The Power Elite and the State*.

Most of the high costs and artificial shortages we face today in healthcare are the result of government's intervention in the market on behalf of Big Pharma, or to enforce the licensed monopoly of the white coat priesthood.

"JTK and Perry - the point

"JTK and Perry - the point of my introductory note was to forestall such comments."

I saw that note and still think my question is legitimate.

Kevin, My fathers been

Kevin, My fathers been involved in the health care industry for 40 years at the highest levels, and mark my words even most professionals don't 'get it' because they're altruists first and rational thinkers second. Simple cost benefit analysis are met with red faced screaming hatred. To the emotional non professional its a virtual impossibility to 'get it', so when it comes to health care you can throw rational economics out the window and begin thinking of a system where Keynes meets L Ron Hubbard and they put Puff Daddy in charge of accounting. Its completely intertwined with all the hairbrained issues we read on Catallarchy everyday. Its a no win.

John Kennedy, I would say

John Kennedy,
I would say that you cannot validly weigh the costs to one person against the benefits to another, but many people believe that you can. Under socialized medicine, bureaucrats will do exactly that. Therein lies the horror of it. My favorite example of this was an article in the Washington Post written by someone who recounted the story of an 86 year-old relative in Canada who traveled to the United States to obtain an experimental cancer drug. The author's point was that socialized medicine deprives people of the chance to get treatments like that (unfortunately, I can no longer find the article). A letter to the editor in response to the article (in favor of socialized medicine) said that unfortunately, tradeoffs have to be made in health care, since the resources used to give an 86-year-old cancer patient a little more life could be taken and better used to provide many people with basic primary care. So, this letter writer would gladly sacrifice that elderly relative, believing he is perfectly able to make that decision for someone else! How can you say that the benefit to one person (extension of his life) is less than the cost to other people (going without primary care they won't pay for themselves?). You cannot, but under socialized medicine people who believe that they can decide that for others will be running the system.

Under a crushing socialist

Under a crushing socialist system like Canada's even the goofballs are starting to realize they have no time or latitude for those kinds of altruist decisions. The stark reality is looming and all they can do is spew out fuzzy platitudes like Don and tow the left wing party line. The smarter ones realize that continuing down that road is bad, but they absolutely CANNOT sanction any thing that remotely resembles American healthcare, and so what we'll get is less and less care for the same or higher taxes as they cannot{read; won't) cut costs or fire employees.
They'll maintain thier insane dogma until we're all dead, but they violently refuse wage cuts,layoffs, or outsourcing and absolutely refuse to introduce policy that would send users invoices or statements about how much it actually costed ME.

"a system where Keynes meets

"a system where Keynes meets L. Ron Hubbard and they put Puff Daddy in charge of accounting." --qwest

Wow! I wish I'd seen something like that when I was in the hospital.