QotD: Government Healthcare

When confronted with the question of single-payer health care, Democratic economists often seem to suddenly act as if all the normal rules they take for granted about markets had been repealed. Pharmaceutical companies apparently do not respond to incentives, and so will continue to invent drugs even if we drive down the price to the marginal cost of producing the pills. Also, unlike other markets, competition between different providers is bad: we should have just one pill for every condition. And the government does an excellent job of identifying and filling consumer needs, so that its success at funding basic research will translate directly into inventing good drugs. Also, apparently there are never any suboptimal equilibria in monopsony markets, so that if the US decreases its funding for research, the French will altruistically pick up the slack. This even though the lack of new drugs will not be politically traceable to the decision to force pharmaceutical companies to price at marginal cost.

Jane Galt, "Yes, Virginia, there are tradeoffs", Asymmetrical Information, 2006-10-06