The market for health care was once organized to meet the needs and preferences for people using the service. For a long time, this market has been becoming more organized to meet the preferences of politicians. This week’s legislation makes it more so.
Unfortunately, few understand what these words mean. That’s too bad.
An example might help. Consider the market for food, which is more essential to living than health care. This market is still very much organized to meet the needs and preferences of people who buy food.
There are many different ways to assess the success of this market. Some measures might include food availability, options for people at all income levels or size of waist lines. The problem with such measures is that they reduce a rich environment filled with many variables down to a few metrics. These measures can’t capture things like the delight caused by enjoying a favorite snack or that little bit of extra value enjoyed by a few based on a slightly different version of a product (Michelob Ultra vs. Michelob).
Now consider what might happen if the food market was overtaken by government. The politicians in charge might decide that a single factor was most important. Maybe high food availability. For many people this sounds reasonable. Who’d be against high food availability?
What these people miss is that reorganizing the food market to deliver on this goal has trade-offs. A trade-off may be that a politician decides we need to dedicate less shelf space to beer to have more shelf space for wholesome foods like apples. Again, to many this sounds good. The politician will likely cite the destructive results of alcohol abuse and remind us that an apple a day keeps the doctor away. Few people would likely disagree with this reallocation of shelf space.
To free up the shelf space, politicians must decide to eliminate a version of Michelob. They decide to keep Michelob because it sells more than Michelob Ultra. Very smart people those politicians. The people who preferred Mich Ultra are out of luck.
What’s missed by many people in this seemingly justifiable reorganization of the food market is that the previous allocations of products and shelf space were a result of consumers expressing their preferences through their actual purchasing patterns. In other words, this is what customers wanted – even if they didn’t know that explicitly.
While a politician may be able to sell us (even those who prefer Mich Ultra) with fancy talk about how more shelf space need be dedicated to apples and less to beer, that doesn’t change the fact that customers valued the space higher with Mich Ultra.
This reallocation will result in surplus in apples and beer shortages. Stores will have a difficult time giving away the extra apples and beer lovers will be disappointed because they will have a hard time find beer to buy.
Instead of recognizing that food availability worked better before when consumers expressing their preferences through prices and buying patterns with grocery stores and food makers responding accordingly, some do-good politicians will convince us that his new version of shelf space allocation will solve the problem. He’s a smart dude. He went to an esteemed college (though nobody will ask him which class he learned to be better at choosing for others what they are capable of choosing for themselves). He just needs more of your money to implement the change. We all nod our heads in agreement.
The cycle will start all over again to generate new shortages and surpluses causing less food availability with fewer of our needs and preferences met, but because change was made, the politician will be able to spin victory and several years later a new politician will come along with his plan to fix things with more of your tax dollars.
His plan may be to use a different metric to measure success. We’ve done nothing but that make food less available, so let’s switch to measuring options available at all income levels and the cycle begins again.
While politicians continue to use taxpayer dollars to tinker, very few people will understand that everything worked just find before politicians started meddling.
Doe this market sound familiar? This meddling has been happening to K-12 education and the results aren’t great. After decades there’s no agreement on how to measure success and few people realize that the truest measure of a school’s success is whether their student enrollment is growing or shrinking.
While we meet to politician’s desire to deliver on a single variable – make education available to to everyone – in many cases what’s available is a school that is so bad that only those with the least ability to make a choice send their kids there.
And, we all miss out on all the variations, quality, availability and a rich assortment of educational opportunities that the education market could produce if only it were allowed to serve the needs and preferences of the people sending their kids to school rather than the politicians who are trying to put a feather in their caps.