Vouching for healthcare, Part 5

Vouching for healthcare, Part 5

Many years ago, when Calabresi and Bobbitt wrote Tragic Choices, they said that whether you allocate resources in a market or through political means, you run into “fundamental flaws.”  This blog thread on vouchers for healthcare benefits is based somewhat upon this notion.

Markets have flaws

As we demonstrated earlier, ideally markets have two benefits, liberty and efficiency.  They allow everyone to decide which trades to make, and they create more happiness without having to increase inputs. 

Markets also have three fundamental flaws:

1.  They overweight the prevailing distribution of resources.  If you are poor to begin with, you won’t be able to bargain your way to prosperity.

2.  They overweight individual preferences over preferences of the community.  There is no “we” in the marketplace, so what we want is subordinated to what “I” want.

3.  They overweight the instrumental over the intrinsic.  Since markets are based on voluntary exchange, they give weight to that which is exchangeable, like instrumentalities, rather than what is valuable in and of itself, like intrinsic values.

Political allocation systems may avoid the market’s flaws

Turns out, we can avoid some of these problems by using political means to distribute resources, but we run into another set of fundamental problems.

But first, what do we mean by political allocations?  Any allocation system that uses power is a political allocation system.  So, back to our “hats” example, if you get a particular hat because that is what the king decrees, or if you get a hat because that is what you were able to take and hold through force, these are political distributions.  As are distributions through the actions of committees or a hat commissar.  The same if we had a direct democracy, and allocated hats through a town meeting. 

The political allocation system we discuss most in the US is our representative (at least on paper) democracy.  If a legislature or a regulatory agency determines who gets which hats, this is a political allocation.

Note that political allocations can change the prevailing distribution of resources.  The decision maker can simply choose to overcome an inequitable distribution, and give the poor more.  Simply?  Well, apparently not so much.

And politics can overcome the will of the individual.  Politics enables the community, which can tell the individual what the community desires him or her to do.

And if the community is set on a particular intrinsic value, like equity or impartiality, it can superordinate that value above any transactional benefits.

But political allocations have their own flaws

The one benefit of political allocation is that it is directable.  Politics includes the potential to choose.  (We will see in subsequent blogs that our current governmental actors are systematically avoiding the making of choices, but that is for a future discussion.)

However, political allocation systems, such as government decisions, have three fundamental flaws:

1.  They overweight the community over the individual.

2.  They are inherently inefficient.

3.  They carry the “Burden of Explicitness.”

Danger to individual liberty

Let’s look at the first of these.  The community, through its agent, the government, can coerce the behavior of individuals.  What “we” want becomes enforceable against “me.”  We know this because we are all forced to pay taxes, we are all forced to hire people without using our prejudices, we are all forced to bend our property rights to the will of the zoning board.  Governments can, of course, make me do things and prohibit me from doing others.

One of the problems with empowering the community is that it can too easily overcome the will of the individual.  If you go down this route too far, you can enter a Stalinist nightmare, where the will of the community (as expressed by the elite in power, of course) justifies extreme, even deadly sanctions against the individual.  Think Mao’s Cultural Revolution of the 60's. 

This is the essential fear of Libertarians.  “We must have as little government as possible, because too much government is a danger to our liberty.” 

When I heard Calabresi discuss these ideas forty years ago, he argued that this concern about the danger of unbridled governmental power was what tipped him towards market-based solutions to as many problems as possible.  I imagine that such concerns are at the base of much “Neo-liberalism.”

If we allocate bicycles through government, we need to set up a bicycle commissariat, and which bicycle I get will be a function of that bureaucracy’s decisions.  I don’t get to choose which I want.  I buy the bicycle that is made available by the government. 

That loss of liberty is regrettable, but under certain circumstances, probably acceptable.  Many of us would support a government ban on the sale and ownership of assault weapons.  That is a threat to the liberty of those who want them.  But so is a ban on tanks and missiles.  So, too, are speed limits, and requirements to immunize, and the need for nutrition labeling, and zoning ordinances.  All of these are restrictions on the will of the individual that we, as a community, are relatively comfortable with.  (Well, not all of us.  Strict libertarians would consider many of these restrictions odious.  OK, maybe not a prohibition on tanks.)

What “I” want versus what “we” want

So, we want to empower the community and its values, and we know that doing so is a potential threat to the values of each individual.  If the threat to the individual is too great, as with reproductive rights or a universal right to be married, we choose to let the individual decide.

Sometimes, “we” win.  And sometimes “I” win.  That is one of the most difficult tasks of democracy, making exactly these choices between the public will and the private will.  If we let markets decide on healthcare, things that the group wants (prevention, equitable distribution of healthcare resources) may be subordinated to what the individual is willing to pay for with his or her voucher.  If we use government, we run the risk of infringing on liberties (like choosing my own doctor or deciding what medicine I am willing to pay for) that are important to some people.

We are starting to see that there is no such thing as a perfect allocation system.  Markets have their problems.  And governmental allocations have their problems.  We will have to choose which set of problems we prefer.

But political resource allocations are inherently inefficient.  Is that acceptable?  We will discuss that next.