Free Markets and Healthcare… Again

Posted: April 4, 2012 in free markets, government, healthcare

A colleague recently told me that the reason that US healthcare is so expensive is because of market forces. Putting aside the fact that the US Government spends more as a proportion of GDP on its Medicare and Medicaid programs than the UK does on the NHS, I found this claim utterly preposterous and self defeating.

Free markets work to reduce the price of commodities – just look at many of the items we take for granted everyday; cars, smart phones, laptops etc. All these goods were at one time unaffordable to the poorest in society but a flourishing market in these goods increased competition, reduced costs and passed on the benefits to consumers.

Now look at areas where the state has a monopoly on a service. Education, healthcare, defence – these are all things which continue to escalate in their cost. As I touched on in my previous post, you don’t have a choice when the state comes to collect its dues for these things. You cough up or go to jail.

To those who would cite the argument that prices have a tendency to rise I would counter that this, in its broadest measurable form, is due to inflation caused by government and central bank debauching the currency. In a true gold standard a government has no ability to manipulate the currency. History shows that periods where a gold standard has existed have tended towards mild deflation, reducing the costs of goods and increasing the purchasing power of the monetary unit.

It’s hard to put a price on a persons health, even harder to put a price on life. But the medical means to keep you healthy and extend your life DO cost something. These resources have to come somewhere. Here in the UK I’m sure that most people when asked would support the NHS. However, this question does not highlight how much people would be prepared to pay for it. Would they pay 50% of their income? 75%? 100%? It may sound ridiculous but there is a point at where it no longer becomes service that represents real value to the individual. The free market is the only system capable of assessing where this tipping point is.

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