Wednesday, July 1, 2009

Economist George R. Newman makes a great point in The Wall Street Journal this morning, knocking down some of the myths of health care "reform" that we hear frequently:

- "A universal plan will reduce the cost of health care."

Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

A point worth pondering further. If 120 buyers show up, shouldn't we be figuring out how to produce more 100 apples? The existing debate on health care is almost entirely on the demand side--how to arrange for financing in the ideologically correct fashion: Liberals want single payer, currently disguised as "the public option." Libertarians want the free market to finance everything, without ever getting adequately into such questions as who will provide for public health, the health of children, and so on. And stand-pat conservatives want the insurance companies to keep their place, on the presumption that people will be happy having their health care rationed by insurance company bureaucracies, just so long as the rationing is not done by government bureaucracies. Got that? That key distinction?

So what's needed, one might say, is a "supply side" approach to health care: create more supply. And while we're at it, make it better.

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