October 27, 2013
It’s always fun to see conservatives arguing for the preservation of big government, especially when they don’t even seem to understand this as their position. Ross Douthat gave us a great example of such an argument as he warned that squeezing costs in the U.S. health care system might not just damage the quality of the U.S. health care system, but the quality of health care worldwide.
The story is that without government guaranteed patent monopolies, drug companies and medical device companies would not do all the wonderful research they are now doing into developing better drugs and devices. Of course granting these companies monopolies is a form of big government. That doesn’t get changed just because people like Douthat like the beneficiaries or think the purpose is good.
If the government allows drug companies to pull in an extra $300 billion a year (@1.8 percent of GDP), by threatening to arrest anyone who competes with them, it is pretty much the same thing as if the government were to raise taxes by $300 billion and hand it to the drug companies. The biggest difference is that in the latter case there would be more public control over what happened to their tax dollars.
There are other more efficient and more market oriented mechanisms for financing drug research. It is striking that people like Douthat seem unable to even conceive of alternatives to a grotesquely inefficient and corrupt system. (Ask any economist what they would expect to see if we had a tariff of 2000 percent in a market. That’s the story with prescription drugs.)
Of course we also could have enormous savings from freer immigration for doctors bringing their wages in line with doctors in other countries. That would come to around $1 trillion (@$7,000 per household) over the next decade. But again, conservatives seem to have little interest in the free market. Perhaps they have too many friends and family members who are doctors.
Addendum:
I have a few quick thoughts in response to comments below.
Yes, around 25 percent of our doctors were trained abroad, and the point is what? If 25 percent of our shirts were manufactured overseas, this would be evidence of huge protectionist barriers. That is the story with doctors as well.
We’re supposed to believe that more doctors won’t lower their wages. Really? So if we double the number of doctors in the country we would double what we pay for doctors? Sorry, I don’t think the world works that way and the doctors’ lobbies that fight for protection agree with me.
No, excessive pay for doctors is not the only source of waste in health care, but $1 trillion over the course of a decade (@ 2.5 percent of federal spending) is real money no matter how you slice it.
Could we bring down doctors’ pay by other mechanisms? Sure, but none of those seem very likely right now and this one has the beauty (to me) that we can make conservatives argue against the market and free trade. Perhaps there is some huge force for radical change that I haven’t seen, but until that force shows up, I can see few better options than to show that the professed advocates of free markets and free trade are harsh opponents of freedom when it might hurt the income of their friends.
We must recognize that the only ideology these people support is that the ideology that the wealthy should have more money.
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