The Stupid Right

Nothing worse than an intelligent person who says a stupid thing. Tyler Cowen, on health care:

...we don't have a good explanation of why private insurance markets do not function better. But since single-payer national health insurance violates every economic law known to mankind, I am again unsure how I could leap on the Democratic bandwagon.

Jesus that's stupid. It simultaneously a) ignores the cornucopia of evidence that single-payer (i.e., national) health care performs better than US-style private health care, and b) pretends that there aren't easy explanations for why this is so.

Some quick reasons for why public health care works better, written by a non-economics undergraduate on lunch:

1) No profit motive. Between a profit-making and non-profit organization performing substantially identical services, the non-profit will obviously be cheaper. (Obviously, it becomes a debate over whether profit and non- can provide "substantially identical" services.)

2) No perverse incentives. Public, universal health care doesn't choose who it serves. In a private, selective system, a firm's profitability is directly linked to how few unhealthy people it insures. Therefore, the firm's motives are to insure the fewest, healthiest people they can.

3) Perverse incentives, II: Assuming unhealthy people are insured, they pay much higher rates for their insurance than they would if they were publicly insured. This being the case, some will choose to forego insurance altogeter, either from inability or unwillingness to pay.

4) The public good qualities of health care. Hospitals deliver emergency services, and we generally don't approve of turning gun shot victims away at the door if their Visa's expired. That being so, the most critical cases of health care will be served whether the patients are insured or not. This is highly inefficient, as it leads to hospitals trying to recover their costs from the poor, who generally can't pay.

Now, some of these problems could still conceivably be addressed by a universal, private insurance monopoly. Think something like the late-18th centry crown monopolies - the Dutch and British East India Companies, or the Hudson's Bay Company at it's height. But given a state-enforced monopoly on health care, why would we choose a private over a public monopoly?

Interestingly, almost all of the above criticisms apply not just to health insurance, but to all forms of insurance. This is one of those areas where the economy would benefit hugely if we could bite the bullet and socialize auto insurance for example. Especially in cases where insurance is mandatory (again, see auto insurance) there's a compelling case that the state should deliver that service.