Thursday, August 19, 2004

The usual argument from advocates of our private healthcare system is that private actors in the economy have an incentive to contain costs. The interesting question is, which private actors. It's not obvious that patients do -- even the most hard-core theorist would have trouble naming the exact figure beyond which his daughter's life would not be worth the next marginal dollar. And it's not obvious that the health-care industry itself does -- everybody else's costs are their profits.

But the way our health care system has evolved, the real customers of the health care industry aren't so much the patients as the businesses that pay their insurance premiums. And we can say that they do have a direct, immediate, bottom-line incentive to reduce the amount of healthcare premiums they pay. Which it seems they're now doing, in the most direct and immediate way possible -- by not hiring people.

Thus do market incentives improve the economy.

And for more on market incentives, see a recent kerfuffle among multiple blogs about whether they can replace housing regulations, on which the most sensible statement I've seen yet is here, from Atrios...


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