Sunday, August 16, 2009

Prices are not rationing, not in any way

It's bad enough that liberals believe that "the price mechanism is a form of rationing goods and services," leading to their argument that health care can't be worse if government rations it. (Note that some liberals deny that government-run health care will be or will require rationing, demonstrating that one side is lying, and the other is a bunch of fools.) We have enough of these idiots in the world. We don't need twits like McArdle, who dare to call themselves "libertarian," who also believe that prices are rationing.

The plain fact is that prices are not rationing. I always meant to link to my comment at QandO a month ago but never got around to it. I reproduced it here, which you should check out for my latest exposé of McArdle's idiocy.

Slightly clarified, let me explain that it is a pure fallacy that a price system is "still rationing."� Prices allocate who gets goods and services, but that is not the same as "rationing." Rationing implies an attempt at equal shares, whether an individual's consumption over time or a population's aggregate consumption, whereas allocation can and often is unequal. Rationing is a system that forcibly controls demand, no matter that buyers are able and willing to pay what suppliers ask. By contrast, allocation by price means that whoever has the ability and willingness to pay (that is, for what sellers have and at their asking price) will buy what he wants, based purely on his own perception of his needs and desires.

Now, any distribution of goods and services by government depends 100% on rationing. There's no way about it, because government creates nothing on net. As Bastiat taught us 160 years ago, it can produce nothing except by taking an equal amount from the private sector. So government's resources are finite by definition, and because government distributes on the arbitrary basis of politics rather than someone's ability and willingness to pay, government must try to institute some sort of rationing system so that supply does not exceed demand.

We can see how well that works with Social Security and Medicare, which the NCPA reported two months ago have "unfunded liabilities" of $107 trillion, as of 2009! The NCPA reported in 2008 that the unfunded liabilities were $101.7 trillion then. Year-on-year, the unfunded liabilities grew at over a third the size of the current U.S. economy. This, clearly, is not sustainable. But did we really expect government to be "efficient" when it steals from Peter to give to Paul? At some point Peter will have to be taxed more, and/or Paul will have to accept less.

It would be nice to live in a world of infinite resources, but we don't. Given the choice between government choosing how much to give me, and the freedom to pay for it myself, there's no question for me: as someone who is an economic producer, I'd much rather depend on myself. At least it's up to me to develop my talents to improve my situation in life and afford more (including health care). Therefore I have influence over how much I earn, perhaps not complete influence, but I can't say I have any influence at all over how much a bureaucrat will decide to give me.

I make no excuses whatsoever for liking that "money talks."� It's precisely how people can get the resources they need badly and when they need them, instead of waiting for "their turn." This summer, both my wife and I had to go to the doctor for insect bites. My wife's developed a bacterial infection, and some bug gave me a virus that left me lethargic with terrible chills. We've never had anything like those before in our lives, but no matter, we paid cash. Because the doctor required payment, it allocated his limited time only to those who deemed it worthwhile to pay his fees. Quite modest fees, too. Thinking about his costs of taxes, paying the staff, maintaining the building, I wonder how much he really made. But it was clearly a beneficial trade for him, and for us. Government could never perform such a marvelous feat.

Imagine if (when?) Obama and Co. get their dream of an Canada-like system with 100% government-provided health care and a ban on private care. It was patently obvious to me at 17 years old, when the Clintons were pushing for universal health care, that everyone would want a doctor's appointment for the slightest cough, since "after all it's free." Meanwhile, "saving money in the system" -- like Obama's recent rubbish of "rewarding doctors for quality, not just the quantity, of care that they provide" -- will mean government reducing what it pays to health professionals, driving them out of the health care system into other jobs, further reducing supply and increasing wait times.

But no matter, right? Just wait your turn for a "free" appointment. We can look at the present UK system for how we'll develop: in some cases, that appointment will only be with your undertaker. "The doctor will not be seeing you now...or ever."

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