Notes From Babel

Mis-Applying Hayek to Government Health Care

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Mark Thompson at the League of Ordinary Gentlemen provides this quote from The Road to Serfdom in defense of a public health insurance option:

“Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong… Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken,” – The Road To Serfdom (Chapter 9).

Of course, there are both advantages and drawbacks to citing a bit of abstract theory in support of an actual proposed program, but it is a wager I often take, so I can’t fault Mr. Thompson for the exercise.  But there’s something a little misleading about this quote, which can be illustrated by looking behind the dot-dot-dot that Mr. Thompson substitutes for the following:

There are many points of detail where those wishing to preserve the competitive system and those willing to supercede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffectiveBut there is no incompatibility in principle between the state’s providing greater security in this way and the preservation of individual freedom.  To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such “acts of God” as earthquakes and floods.

There are two important points in this missing passage that relate directly to the health care discussion.  First is the notion that the government’s intervention in the private market will unnaturally effect market competition.  That is, when the sorts of procedures that are encouraged by the nation’s largest payer, the rest of the market will follow suit.  Thus, saying “if you don’t like the public option, you can go elsewhere,” is just lip service—the contours of medical services available will be defined, whether de jure (some ilk of advisory board) or de facto (the sheer number of dollars pumped in), by the government.

The other point relates to the examples Hayek uses to demonstrate his principle.  It is much easier to define the necessary minimum baseline of insurance to offer in cases of earthquakes and floods and other “acts of God.”  In these cases, we are simply talking about saving people’s lives and restoring basic infrastructure.  There does not seem to be a lot of danger of the government throwing its weight around to improperly effectuate its particular policy choices by doing this.

But health care choices are exponentially more nuanced, and impact almost every facet of our lives—the foods we eat, our stress levels, the number of children we have and at what age, the activities we engage in, the hours we work at our jobs, and on and on.  Can we still say that this sort of comprehensive social health insurance—rather than a simple baseline coverage for catastrophic injuries and illnesses—can fit within a Hayekian model in which “there is no incompatibility in principle between the state’s providing greater security in this way and the preservation of individual freedom”?

Hardly.

Update: The Hayek misreadings carry on here and here.

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Written by Tim Kowal

October 3, 2009 at 12:23 pm

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