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Response to Jonathan’s Post on Hayek and Healthcare Reform

By John Morton

In his post of May 30, Jonathan makes a good case that Hayek believed the state should provide a minimum level of assistance to individuals who cannot guard themselves.  He clearly says in The Road to Serfdom, “There can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody.”  (Fiftieth Anniversary Edition, p. 133)  Hayek also says his opposition to planning should not be confused with “a dogmatic laissez faire attitude.”  (p. 41) 

However, it’s a big jump to think Hayek would be a supporter of a growing welfare state, single-payer health insurance, or Obamacare.  In his essay on “The Use of Knowledge in Society,” his thesis is that no planner can match the efficiency of a decentralized market because what is known by a single person is a small fraction of the knowledge held by all members of society.  To act on the belief that planners know enough to shape “the processes of society to our liking, knowledge which we do not possess, is likely to make us do much harm.”

Obamacare and the possible Trumpcare make his point.  Obamacare is a Rube Goldberg machine.  It makes every aspect of heathcare more complex.  It’s a fantasy that a single-payer system would work more smoothly than a market-based system.

Instead, let’s just try a minimum income and allow people to decide where to spend their income.  It’s a novel idea.


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A basic income guarantee may possibly be more efficient than, say, SNAP benefits or Section 8 vouchers, which are designed to solve a basic problem: people don't have enough income to survive.

I fail to see what bearing it would have in the health insurance and healthcare markets, where there is an actual market failure due to, among other things, incomplete information and individuals' behavioral biases.

As a thought experiment, try and imagine how a basic income guarantee would solve Akerlof's Market for Lemons problem.

Jonas raises some excellent points. Asking the market to solve problems won't work if the prices and incentives aren't right. And they won't be right in health care when there are huge problems of asymmetric information and negative and positive externalities.

Yes, Obamacare has problems, but many of these arise from trying to ignore the potential market failures outlined above. There were riots in Paris in the 19th century when the government insisted that every house must buy into the sewer system (forcing them to pay for something they didn't want--most people wanted to simply throw their feces into the street as before). Requiring homeowners to connect to the sewer is somewhat akin to forcing citizens to buy into health insurance, for all the negative and positive externalities reasons!

It's the 21st century and a universal basic health system is the way to go. (E.g., Trump recently praised Australia for its health results.) This is not to say that a private system could not exist alongside. Let those who want drink champagne; clean water is good enough for me.

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