Plainly, too many have never read Adam Smith, whose Wealth of Nations showed that allowing individual self interest—personal greed—to operate in unfettered in a free market was the fastest, most efficient way to broad prosperity for the entire population of economic actors. Apparently we don’t teach basic economics in school, anymore.
In a Wall Street Journal op-ed about the failure of Vermont’s overt move toward a single-payer health system, the paper noted that Harvard’s William Hsiao and MIT’s Jonathan Gruber, architects of that state’s plan, had assured all concerned of the following:
The promise of single payer is that governments can save money by eliminating the profit motive and administrative costs.
But that could be true (but not certainly so) only if there were only one player in the market.
It’s that profit motive, after all—that individual self interest—that saves money. It’s that profit motive—that personal greed—that drives down costs.
The economically illiterate—not just Hsiao and Gruber—miss (or, a cynic might suggest that a Liberal ignores, for political gain) the competition factor: the fact that there is more than one player in the market, and every one of them—competing suppliers and competing buyers—want profit.
Suppliers (of health insurance and health provision services, for instance) compete for the buyers’ dollars, so they work hard to drive down costs so they can lower their prices farther than can their competitors. Buyers want those cheap services so they compete with each other to pay as little as possible for them, but to pay a skosh more than their competing buyers so that they succeed in closing the purchase.
The result is what those in the trade call a market clearing price: the price at which all the service sellers sell their product, with nothing left over and no seller left out, and all the buyers get what they want, with no buyer left out. That price is fair, too, because no one was forced to sell or buy at a price they didn’t want or couldn’t afford.
It’s also the lowest price, with the lowest “administrative costs” (there is a non-zero floor to those costs because the workers doing the actual production get to be paid, and the producers of the services being bought for assembly into that final service get to be paid), available in order for the service to be saleable—available to interested buyers—at all.
And it’s a more accurately set price than even well-intentioned government politicians can achieve through mandate.