Map of life expectancy at birth from Global Education Project.

Wednesday, July 01, 2015

Why libertarianism is a crock, continued

Yesterday was a travel day. I didn't even have time to unpack my computer, let alone post, during the changeover in Atlanta, and I got home at 11:30, which is past my bed time. So no post yesterday, sorry. But I wanted to continue the trashing of the Economics 101 fantasies on which conservative economic claims depend, sticking for the time being to medical services.

Among the manifestly false assumptions which freshmen are taught as axioms of economic theory are the ones called "perfect information" and "consumer sovereignty." In order for the (imaginary, impossible, and non-existent) "free market" to allocate resources "efficiently" (yet another bogus concept which I will get to) we must presume that as a buyer, you know everything important to you about the products on offer; and that you enter into transactions of your own free will and deed so as to maximize your "utility." (Yet more bogosity.)

Like all the assumptions, this is actually never true, but in the case of medicine, it is manifestly preposterous. The reason you go to see the doctor in the first place is because she knows more than you do. You are buying expertise. It is true that the current fashion is for "shared decision making," in which the doctor is supposed to educate you about your options and their various benefits, costs and risks; and you are then supposed to make up your own mind about which to select.

This sounds peachy, but it seldom works very well. On the one hand, in a typical 12 or 15 minute visit there may be several decisions to make, and there just isn't time to process them all with any depth. And most patients wouldn't want to. Frankly, it would place a burden on them that they don't want and couldn't handle. On the other hand, when there is one big decision to make, the tradeoffs are often very complicated and few people have the pre-existing expertise in biology and probability theory to make a meaningfully empowered decision. In fact, when given the chance, the modal response is to ask for the doctor's recommendation. And, in the final class, there just isn't much doubt: do this, or suffer or die.

The result is what we call provider induced demand. It isn't the health care consumer who makes purchasing decisions, it's the provider. And as a consumer, you sometimes have no choice at all. (You might even be unconscious.) More on the implications anon.


Daniel said...

I am just signing up for Medicare, so much fun with all the options of the free market system. I can choose from 30 drug plans, oh boy! I've always wanted access to all this perfect information about which to choose. Or maybe I should choose between a dozen or more Medicare Advantage plans, even more fun. Or maybe I should choose between about 10 different Medicare Supplement plans offered by numerous insurance companies. I can't wait to get back on these tasks.

Your label of a crock is too polite.

Cervantes said...

Just go for classic Medicare. You will need to choose a part D plan but since you're still young, it probably won't much matter.