As a fellow who is a student of economics, one of my pet peeves is the confusion that often arises when economic concepts are misused out of context to justify political ends. In the discussion and debate leading up to the passage of Obama-care, it was famously noted by Sarah Palin that “death panels” are a feature of that plan. In short, the death panels would make “ethical decisions” based not on what was ethical with respect to individuals, but with respect to what was ethical in choosing on behalf of society at large, i.e, the government. The supporters of the Obama-care program maintained that “there were already death panels” imposed by insurers, and that in any event, rationing would always take place as a matter of economics. In this last point, they were correct in the strictest terms, but they were wrong to compare government actions to the actions of individuals and private businesses in the free market. This is one example of the abuse of economics by politicians, so let us examine it more closely.
In economics, everything is rationed, because it is assumed that there is a basic unlimited demand for all goods and services. Since there exists no infinite supply of anything, it is necessarily true that all things are rationed in some fashion. Gasoline is rationed. It’s happening right this moment. Food is rationed. Housing is rationed. There is no good or service that isn’t rationed, and the primary instrument for determining the allocation of the limited supply in a free market is money. The smaller the supply of a thing, relative to the quantity demanded by the market, the greater will be the price. This is the manner in which everything is rationed: There is a only so much money, and he who possesses enough of it can tap into the limited supply. This form of rationing is natural, or free market-based, meaning that this happens organically with or without formal rules, and always has, even before the notion of money as a medium of exchange had occurred to primitive cultures and barter systems still dominated commerce and trade. Strictly speaking, in economic terms, it is true to say that all things are rationed somehow. This is how we reconcile the basic premise underlying modern economics as the study of an unlimited wishes in pursuit of finite supplies.
The question then arises whether natural allocation(or rationing) is “fair.” Since fairness is a wholly subjective term, it cannot be answered in the realm of economics, but instead becomes a matter of politics. This is where the trouble begins, because what politicians most frequently do is to apply their own subjective notions of what is fair in place of the much more objective standard of a natural market. They concoct these notions to satisfy political constituencies, but the twist and turn in order to define the question as a matter of economics. Inevitably, they do so by reducing the question to the subjective grounds of a particular individual, or group, and ask whether it is “fair” that so-and-so cannot afford such-and-such. In this sense, the economics they are discussing are applicable to small groups, but not to the whole market.
What government schemers for socialized medicine have done is to insert government coercion into the place of the natural market allocation. If you say to me, “It is sad that Johnny cannot get his surgery because he has not the money,” if my answer is based on the free market, I must say “it may be sad, but it is fair because he could have obtained the money by previous work, insurance, charity, or even credit.” The fact that Johnny hadn’t the money for the surgery is not a justification to disclaim the objective fairness of the free market system, but sadly, that is how it is used by politicians. Enter the statist, and he will proclaim that he can reintroduce “human fairness” or “social justice” or some such enfeebling concept by virtue of government coercion. If Johnny hasn’t the money, the politician will take it from somebody else at gunpoint to pay for Johnny’s surgery, provided Johnny meets any requirements they may have enacted.
Perhaps the surgery Johnny needs is a kidney transplant, but rather than expend the resources, since Johnny is also a wheelchair-bound, elderly man, the government may say “You’re not worth saving.” Worse, if the government denies Johnny the ability to obtain his own health-care by his own means outside the government system, what the government is doing is to pronounce a sentence of death on Johnny. If Johnny happens to be a recent college graduate in his twenties, in otherwise good health, the government will view it as a good investment in many cases since he will pay much more in taxes over his expected lifetime than the surgery may cost. Notice that the decision criteria is entirely social, and based on the economics of government expenditures, which actually means: Political considerations. It is also the reason that every system of socialized medicine ultimately leads to many more people dying prematurely as they are denied treatments of which they would have availed themselves in an open market. If this were not true, we would not see so many from around the socialized world flocking here to pay cash for treatments they cannot obtain by any means in their home countries.
You might contend, as the leftists do, that this is done by private insurers routinely. There is some truth to this, but it is also substantially dishonest. As a participant in a free market system, you are free to choose an insurer and pay such premiums as you are willing and able, to cover everything to some gargantuan limit, or you may choose a policy less expensive, but also less thorough. In this manner, the rationing occurs because you have enough money, or you don’t, but that is up to your own resourcefulness and diligence and all the factors that frequently make the difference between relative poverty and relative affluence. You might decide at this point to take me back to the argument of the “unfairness of money,” but as I’ve already explained, in a free market, fairness is measured differently than in your subjective wishes.
If it was my choice as to which system I would endure, I would prefer to take my chances in the free market system, because I believe I can manage to afford the coverage I might need, but in a government system, no matter how diligent and efficacious had been my own labors, I might be told “sorry, you’re outside the limits established for this procedure,” and be denied treatment irrespective of my ability to pay. I would always choose this latter option, because it affords me the greater measure of freedom, and if it winds up that I was unable to provide the coverage I actually wound up needing, at least I will have nobody else to blame. That’s where the politicians come in, again.