September 3, 2009
Are free market prices and government rationing the same thing?
By James Wilson

Quotes of the Day:

American Colonel: “How dare you relax our rationing system, when there's a widespread food shortage?”

Ludwig Erhard (German economics minister):“But, Herr Oberst. I have not relaxed rationing; I have abolished it!"

Subject: Are free market prices and government rationing the same thing?

If you tell someone that government-controlled healthcare will lead to rationing, they may respond by saying, "Healthcare is already rationed, by prices. If you can't afford a treatment, you can't get it."

This seems like a powerful argument, but it isn't. Here's why . . .

* Free market prices are flexible, negotiable, and respond to consumer choice
* Prices set by the government are inflexible, non-negotiable, and respond only to back-room lobbying, or to the whims of the bureaucrats who set the prices or do the rationing

Free market price send signals to produce more or less of things, according to consumer demands. By comparison, government rationing only reflects what the politicians want.

Is healthcare different? It is not. Healthcare responds to free market prices, or to government dictates, in exactly the same way as all other goods and services. Consider . . .

* America's half-socialized health care system is already having trouble maintaining an adequate supply of primary care doctors. Many of them are quitting their practices because the prices they're paid by government programs, or by government-distorted insurance policies, aren't worth it.

* Meanwhile, America's half-free-market health care system still leads the world in medical innovation. Americans have won 11 Nobel Prizes in Medicine in the last 10 years, 26 in the last 20 years, and 39 in the last 30 years. No other country even comes close to this. What's left of free-market pricing in America is keeping the health care of the entire world afloat.

* Healthcare procedures not covered by government programs, or by government-distorted insurance policies, show us that true free market pricing could give us ever-improving care at ever-lower prices.

In addition . . .

* In a free market, if you can't afford the cost of a treatment, and can't find a cheaper alternative that's nearly as good, your doctors may decide to lower the cost, or even provide the treatment pro bono

* But will doctors be as flexible and generous when healthcare decisions are dictated by the federal Comparative Effectiveness Board, and there are fewer doctors seeing more patients because prices no longer reflect market realities?

If free market prices are really the same as government rationing . . .

* Why have societies run by government rationing and price fixing always had shortages and long lines?
* Why did the Soviet Union fail?
* Why did China adopt a free market economy?
* Why did the post-WWII German Economic Miracle begin precisely when the German authorities abandoned government rationing, over the protests of the occupying powers (see our quotes of the day above)?

It's a simple fact: human beings have experimented with government rationing and price-fixing over and over again, always getting the same catastrophic results. Must we do it yet again before we finally learn our lesson?

If anyone tells you free market prices and government rationing are the same thing, don't let them get away with it. Don't let the politicians get away with it either. Please keep telling them you don't want their Big Government healthcare scheme. It's simply impossible for you to send Congress too many letters on this issue. Send them another one now by going here.

Use your personal comments to tell them you will be very angry if they pass any bill that authorizes any kind of "comparative effectiveness" rationing in any way.

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