If I could remove one thing from the discourse in this country, as well as the rest of the world, it would be the careless approval people lend to the idea that healthcare should be provided free of charge. The assertiveness with which people demand healthcare pro bono comes in part from their conviction that they are entitled, by right, to be furnished with it at another's expense. Belief in a "right to healthcare" is pervasive and I've elaborated briefly but conclusively on the moral implications of enforcing entitlements to free healthcare here. Now I will elaborate a bit upon the forthcoming effects of any such attempt to turn healthcare into a free commodity.
The aim of the free healthcare movement is a state of affairs where healthcare is offered for free upon request to all. Since such an end cannot possibly be fulfilled through persuasion, forcible government intervention is the instrument with which the movement wishes to bring about this state. Our analysis cannot begin unless we are explicitly aware of the ends and the means of the free healthcare campaign. Now that this task is fulfilled, we may proceed.
If the aim of the free healthcare movement is to ensure that healthcare is free upon request, then this means that the aim of the free healthcare movement is a state of affairs where the price of healthcare is $0.00. Now healthcare is a sale-good that holds a high position on the value scales of many people. Any sale-good that holds a high position on the value scales of many people will probably not have a non-zero price; ergo, healthcare, in a free market, will probably not have a non-zero price.
Thus, in a free market, in order to realize the aim of free healthcare upon request, the free healthcare movement, via government, would have to reduce the price of healthcare to $0.00. According to the law of demand, if the price of a good decreases, then the quantity of that good demanded will either remain the same or increase. This occurs for two reasons. First, if the price of a good decreases, then the probability that it will enter the price ranges of more buyers increases. Second, if the price of a good decreases, then the probability that it will enter the additional-purchase price ranges of each buyer increases. The price of healthcare, like all prices, conforms to the law of demand, and since the demand for healthcare isn't too inelastic, its the case that as the price of healthcare decreases, the quantity of healthcare demanded increases.
If the government steps in and forcibly reduces the price of healthcare and therefore increases the quantity of healthcare demanded, then the quantity of healthcare supplied by healthcare providers will disappear. Prices do not merely affect the quantity of goods demanded; they also affect the quantity of goods supplied. According to the law of supply, if the price of a good decreases, then the quantity of that good supplied will either remain the same or decrease. Again, this occurs for two reasons. First, if the price of a good falls, then the probability that it will depart the price ranges of more sellers increases. Second, if the price of a good falls, then the probability that it will depart the additional-sale price ranges of each seller increases.
Thus, if the government forcibly reduces the price of healthcare to $0.00, then the quantity of healthcare demanded would skyrocket (what consumer would abandon free healthcare) and the quantity of healthcare supplied would enter the abyss (what healthcare provider would sell healthcare for free - they would go broke). At this point, the government has one of three options:
#1.) It can allow healthcare providers to fail to supply healthcare at the price of $0.00
#2.) It can enable healthcare providers to increase the quantity of healthcare supplied to match the rising quantity of healthcare demanded by paying them with tax dollars to produce healthcare
#3.) It can pay healthcare providers to increase the quantity of healthcare supplied but not to match the quantity supplied with the rising quantity demanded
Option #1
Adopting this option would completely prohibit the government from offering free healthcare upon request. If the price of healthcare dropped to $0.00, then the quantity of healthcare demanded would vastly exceed the quantity of healthcare supplied, causing a historic shortage. Healthcare would be as inexpensive as metaphysically possible but completely and permanently unavailable.
Option #2
Adopting this option would enable the government to prevent the onset of a healthcare shortage by equalizing quantity demanded and quantity supplied and therefore achieving equilibrium. However, the problem with this option is that given a healthcare price of $0.00, the quantity of healthcare demanded would soar. Thus, in order to equalize the quantity of healthcare supplied with the quantity of healthcare demanded and therefore achieve equilibrium, the government would have to finance the production of healthcare with tax dollars to match the quantity of healthcare demanded at the new price of $0.00. However, with the quantity of healthcare demanded at this price, such an undertaking would involve incurring tremendous, bankruptcy-inducing costs of production and would therefore be massively expensive to taxpayers.
Option #3
Adopting this option would allow the government to avoid the most severe mal-effects associated with options #1 and #2 but it certainly would not enable the government to avoid the mal-effects entirely. On the contrary, adopting option #3 would inexorably plague the healthcare system with both shortages and high costs of production. Whether the former becomes worse than the latter or not depends upon the direction in which the government takes option #3. Choosing option #3 and leaning towards option #1 i.e., allowing healthcare providers to only marginally increase the quantity of healthcare supplied, would allow the government to hedge against production costs, but an unbearable healthcare shortage would inevitably ensue. Choosing option #3 and leaning toward option #2 i.e., paying for an increase in the production of healthcare to approach the quantity of healthcare demanded, would allow the government to hedge against a shortage, but only by incurring unheard of production costs.
So, in conclusion, the following hypothetical argument sums up what I have argued above:
If the government forcibly reduces the price of healthcare to $0.00, then the quantity of healthcare demanded will skyrocket and the quantity of healthcare supplied will plummet. If the quantity of healthcare demanded skyrockets and the quantity of healthcare supplied plummets, then a suffocating shortage will ensue. If a suffocating shortage ensues, then the government can choose one of three options. If the government chooses option #1, then the suffocating shortage will continue. If the government chooses option #2, then the costs of producing healthcare will become frighteningly high. If the government chooses option #3, then a combination of a healthcare shortage and high production costs will appear, the severity of either depending upon the discretion of the government. Therefore, if the government forcibly reduces the price of healthcare to $0.00, then the healthcare system will be blighted by either an extreme shortage, or extreme costs of production, or less severe manifestations of both.
Michael,
ReplyDeleteThis was good but you may want to be careful of your language in the future. For instance, you say:
Any good that holds a high position on the values scales of many people will not have a non-zero price; ergo, healthcare, in a free market, will not have a non-zero price.
That's not necessarily true. It's likely, but not absolutely true. There are many abstract as well as material goods that people value highly but which they might still not place a dollar value on it. Take familial companionship, for instance. Many people highly value spending time with their family members, but that doesn't mean it exchanges on a market with dollar-prices.
In a sense, there's always a price paid (a cost) when an exchange is made, but that price or cost is not necessarily always expressible in dollars.
I made a correction to ensure the soundness of the argument. thanx
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