Economic scholar Thomas Sowell published a book last December called Applied Economics: Thinking Beyond Stage One. He has allowed Investor’s Business Daily to publish the chapter on the economics of medical care. IBD broke it into a nine-part series (see lead page). The parts are:Sowell’s treatise is reasonably well written and lucid. It is geared at a level that could be understood by a moderately informed adult. I am quite disappointed that no bibliography or references were provided. Without this, it can appear that some references and examples were cherry picked and/or skewed. The article series includes many useful tidbits, including this conclusion:
“[M]isconceptions of the economic function of prices lead not only to price controls, with all their counterproductive consequences, but also to organized attempts by various institutions, laws and policies to get most of the costs reflected in prices paid by somebody else. For society as a whole, there is no somebody else.”
I must add that the attempt to obfuscate medical costs plays directly into the hands of the powerful. Both our current system and Washington’s proposed system destroy transparency in favor of obfuscation. If you’ve ever tried to make heads or tails of all of the billing and insurance paperwork that flows from a single hospital stay, you’ll know what I mean.

Those that benefit from such obfuscation include politicians, employers, insurance companies, and the medical industrial complex. When costs are hidden — when it looks like someone else is paying the bill or that you have to make sure you get your slice of the pie — you are more likely to see something as a ‘need’ that would simply be a desire (or even unwanted) otherwise.

Multiply that by all of the people in the system and you have a lot of people getting a lot of care that has diminished real value. But each extra procedure done brings money into the coffers of providers as well as the army of paperwork pushers in both private and public organizations.

Employers look like heroes because they appear to be generously giving employees benefits, when it has been demonstrated that all such benefits are merely in lieu of actual salary. Employees feel more tied to an employer for fear of losing medical insurance coverage.

Politicians get to look like heroes for saving the poor and the sick from horrible fates. Never mind the fact that most of these could be helped without skewing an entire sector of the economy. Moreover, when politicians look like heroes they ensure a continuing flow of calls for political salvation — a self-perpetuating stream of business. Perverse incentives, indeed.

We live in an age where many imagine that they can design methods that exceed the laws of economics. This differs from those that use airplanes, parachutes, and rockets to do things that can appear to defy the law of gravity. They are actually working within the constraints of the law. Rather, there are plenty around today that ignore the very existence of economic laws. They do so at the peril of those that willhave to live with the results of their experiments.

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