Calling John Galt

Prophets or Profits?

There’s been a phrase bubbling forth that really bothers me.

“Healthcare is too important to leave in the private sector; it is immoral to make a profit on someone else’s health.”

So, now it’s immoral to make a profit where a life is concerned? Let’s examine that statement a little further, because it’s one thing to make a case for government spending on something like national security or even efficiency. But morality?

This thinking comes as a result of a pair of faulty premises, that when taken together become very dangerous to liberty. They are “Profits are immoral” and “Zero-sum wealth.” The first is an appeal to what we think is the better side of human nature, the latter an empirical observation that is misses the entire nature of trade or pricing.

For that matter, shouldn’t it also be immoral to make a profit on food? Is it now time to initiate a takeover of farms, on the basis we should ensure there is enough food for the hungry? The proponent of government-run healthcare either has to accept this as a newly-christened potential government power, or has to supply a Constitutional rationale as to why food would be any different than healthcare. If I were boxed in such a corner, I’d likely argue for scarcity: there is no need to nationalize the farms, because there is more than enough food in America. It’s that so many Americans go without health coverage that we must address the scarcity.

This line of thinking presumes there’s no relationship between the supply of a commodity and the incentive to produce it. We must ask ourselves, why is there an abundance of produce? Might it have something to do with a free market for those goods? The prices are set by the constant flux of hundreds of millions of individual consumers, who signal what they want in relation to everything else by the act of selecting their groceries. No one individual or entity sets those prices – yet the optimum amount of what was wanted gets produced.

On the flip side, we have another profession (medicine) that comes with a significant barrier to entry in the form of up-front investment. Just like a farmer can’t throw seed on someone else’s property and start reaping, the health professional must spend time and money before earning the first real paycheck. Unlike agriculture, though, there is a large insulating barrier between the consumer and the price information.

Because of the manner in which insurance (and government-paid insurance) is administered, you will very rarely find a patient who knows as much about the cost of healthcare as he knows about the price of carrots or bananas. The “shortage” isn’t in availability of care, it is in the convenience of health coverage. Most have it. A few don’t. But even that system is broken, because the price signal is dampened beyond recognition.

The only way to have “enough” of something is to let people put a value on it for you. This is the genius of eBay, that an item is worth exactly what it is worth because the price is set in comparison to all of the identical items also being sold at that time, and against the opportunity cost of what you might have done with those dollars in another auction.

Taking health to single-payer dissolves any notion of a market. One buyer means one price set – and no data about wants and needs that might inform a course correction. Do we have enough trauma doctors in this city? In this neighborhood? How many podiatrists does this county need, and how many orthodontists? You could try to allocate them based on census data, but how well would that work? The Prophet must divine an answer from a single set of data; Profits are the continuous stream of data that tell us when there is an imbalance to be addressed.

Let’s put it another way. If you want to make something disappear, put it in a basket marked “Free.” People will always avail themselves of something they think they aren’t paying for. The danger in single-payer is that in reality you aren’t paying for your MRI – just 1/300,000,000th of it. That’s a sweet deal, until you end up paying 1/300,000,000th of my hormone replacement therapy, 1/300,000,000th of her surgery, 1/300,000,000th of the kids’ braces…

Essentially, single-payer brings to final fruition the illusion that others will pay for my healthcare. Instead, we’ve created the incentive for more people to use the system than really need to do so. With a greater demand for care and no budget increase (or signal) to allocate for it, we do indeed have shortages and rationing. The profit motive – no matter how immoral you think it might seem – is the only moral means of ensuring the proper amount of care is created.

So, would you rather trust your abundance to Prophets? or Profits.