Wednesday, September 23, 2009


Should we have health care rationing? That is the wrong question; we will have rationing of health care and nearly everything else. The question is how will things be rationed? The fact is that, with few exceptions, we do not have enough of anything for everybody to have as much as they want. We have plenty of air and no reason to ration breathing, but that is the exception. For nearly everything else the sum of human desires far exceeds availability.

Take housing for example. What kind of house would you like? Where do you want it to be? Maybe you want a beachfront mansion, a penthouse atop a skyscraper, or a mountain lodge with all the amenities and a great view. Such desires are natural but now think of what it would take to provide every human, or even everybody in the U.S., with the home of his dreams. How much lumber would it take? How many workers to build it? What would it take to furnish it?

Or consider something as basic as drinking water. Earth is plentifully supplied with water, but not with pure, fresh water. Most of this water is too salty to drink and the rest is mostly contaminated with disease-causing microbes. Good drinking water is a rarity in nature. To avoid disease we have to purify our water before we slake our thirst. Billions of people are ill because they lack safe drinking water and must drink from contaminated sources.

Food is also a common shortage item throughout the world with millions regularly malnourished. Even most U.S. citizens, though not hungry, do not always have the food they would prefer. We eat hamburger instead of filet mignon, tuna instead of lobster tail, green beans instead of asparagus tips. There just isn't enough to go around of the foods we prefer, and in some places there is not enough food of any kind to go around.

I could describe similar problems with clothing, cars, books, and on and on and on. For most commodities there simply is not enough to provide everybody with everything he wants. That is why Sowell describes economics as the study of scarce resources which have alternative uses. We have limited amounts of prime beachfront property. That property could be used for your dream house, for a hotel, for a restaurant or other purposes. Not everybody will have all the beachfront property he wants because there just isn't enough of it to supply all those wants.

Why do we have these shortages? There are different reasons, some we can somewhat control, some beyond our control. There is, for example, only a limited amount of beachfront property and we are unlikely to create more. However many of these limitations are due to human factors. For example (and contrary to popular perception), Earth has a plentiful supply of oil for the foreseeable future. The problem is not an absolute shortage but that (a) much of that oil is in the hands of tyrants who control the flow from their oil fields, (b) much of the oil in the western world is either very deep or tied up in shale or tar sands which make it difficult for humans to extract it with current technology, and (c) political restrictions have placed many potential oil fields off-limits. The resources required to extract much of that oil can be used for other things which is one reason we have not been more aggressive in developing newer sources.

Human skill is another limited resource, in fact the most important limited resource. For example, consider what it takes to produce a physician. The prospective physician must first have a great desire, drive and ability; otherwise he will not qualify for medical school nor will he survive the six to ten years of training required after he graduates from college. In addition to the talent and drive he must bring to the training, we must provide the opportunity for him to learn what he needs to know. That means medical schools and teaching hospitals – both of which are expensive. We must divert resources from other uses in order to train a physician and he must divert years of his life to the training – time he might spend in other profitable pursuits.

The other facets of medicine also demand resources that might be useful elsewhere. Nurses and physicians' assistants do not require the arduous training demanded of physicians, but their training is still time-consuming and expensive. Medications and medical instruments also require both human talent and natural resources. The engineering skills used to develop things like magnetic resonance imaging could have been used to develop things like computers or more efficient automobiles. Somebody had to decide to use that talent for medical equipment instead of other, probably equally lucrative, purposes.

In fact I believe that the main limitation we have is the fact that we have only so many highly skilled people. Engineers, scientists, technicians, plumbers, farmers, all are necessary to supplying our needs and wants but nobody can know it all. Time spent studying medicine cannot be devoted to studying agriculture. Worse, not everybody has the drive to develop and use their talents to the fullest. Humans tend to be naturally lazy and to take the easy way. For every Edison who is driven to improve the human condition there are probably a thousand people who prefer to sit on the couch and watch TV.

The result of all this is that we do not have, and in the foreseeable future will not have, as much of anything as people want. Even if everybody worked his hardest we would not have that, and not everybody works his hardest. That means that there must be some way of rationing what we do have. There are two primary ways of doing this, with of course a continuum of intermediate methods. The pure capitalist way is to simply let everybody earn what can or wants to earn, then spend it as he pleases. Those who fail to earn enough for their needs fall by the wayside as the victims of survival of the fittest (though many capitalists have been at the forefront of providing voluntary assistance to those in need). This has the advantage of encouraging people to work hard in order to meet their needs and desires.

The other extreme is socialism, especially communism. In that system, at least in theory, everybody's needs are met. All production is put into a common pot and doled out as appropriate. This has the advantage that it tends to meet people's needs. However it has the disadvantages of encouraging sloth and of susceptibility to manipulation by those who dole out the resources. Communistic societies tend to share the misery rather than the wealth.

Both systems have their advantages and disadvantages. However the capitalistic system seems preferable. If we allow people to benefit from their production, we encourage production and independence. If we take from them the fruits of their labor, we encourage laziness and dependence. That is why I do not believe in government-provided (read taxpayer funded) health care. It encourages dependence and sloth. It also helps people self-justify in not taking care of their health. If they think the government will pay the medical bills, why not watch TV and eat French fries? If the heart attack comes, those nice tax-funded doctors will fix you up – at least until they are forced to ration care because there isn't enough to go around.

So it is with other needs and wants. If we hand them over on the dole, people will not work for them but will become leaches on society. That will increase demand while decreasing production. However if people get what they earn, production will increase and demand will be only what people can afford, based on what they earn. That is a result of rationing by ability to pay, which also means rationing by productivity. Combined with charitable aid for the less fortunate, I believe that will provide enough for everyone. Not all people want, but enough.

Rationing should be done by the market, not by government.

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1 comment:

Bobkatt said...

Hal-while I don't always comment on your blog, I really enjoy your essays. I agree with your premise that no complicated economy can be effectively micromanaged. This became evident with the collapse of the Soviet Union. You have endless lines and shortages of necessities while resources were often misallocated and wasted in the wrong areas. There is no possibility of a central planning office correctly setting prices or allocating resources.
On another note I was wondering if you have ever heard of Dan Carlin. He was a local Eugene radio talk show host a few years ago and now he has a very good podcast on the internet. I believe you would really enjoy his take on current events at and also a great history podcast.