Monday, March 06, 2006

The Distortions of Economic Nationalism

Arnold Kling:
"If libertarians face an uphill battle in selling the notion that education is an individual responsibility, that is nothing compared to the battle we face in health care. Nearly all discussions of health care policy are framed in the rhetoric of economic nationalism. We spend too much on health care. Our system emphasizes acute care rather than preventive care. We have too many uninsured.

When we hear this litany, we should ask skeptical questions. Who spends too much on health care? If I choose to spend a lot on my health care, how does that hurt anyone else? How is the 'system' stopping me from getting preventive care? Isn't prevention my personal responsibility? Why don't the uninsured buy catastrophic health insurance? Is it because health insurers won't take them, or is it because the individuals don't really want health insurance unless someone else gives it to them?"
This is another illustration of the errors of analysis that result when we think in aggregates. On what normative grounds could someone, other than myself, say that I spend too much on my health care? I suspect there are none.

Now, what does it mean to say "we spend too much on health care?" I suppose it must mean that many people spend too much on their own health care. Yet, how can my analysis possibly come to this conclusion unless I have some normative grounds to judge when another person spends too much on his or her own health care?

Perhaps "we spend too much on health care" because we think there are negative externalities involved in people voluntarily choosing to spend on their own health care? Of course, this is why Arnold Kling suggests no one else is harmed when a person spends more on her own health care. I don't see any negative externalities associated with markets in health care.

It seems to me that collective terms, Arnold Kling's term is economic nationalism, serve to muddy analysis rather than clarify analysis. This may be a good thing if you have a political agenda, but it is not a good thing if you have an interest in the sound analysis of public policy alternatives.

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