John Cochrane correctly decried the costs of health care in today’s economy, but he has the wrong solution.
Why is paying for health care such a mess in America? Why is it so hard to fix? Cross-subsidies are the original sin.
No, cross-subsidies, “sinful” as they are, are not the original sin. The original sin is government involvement at all in the form of any sort of subsidy. Far from the subheadline’s claim that “honest subsidies” (eliding the oxymoronic nature of that label) would encourage competition and innovation, they’d do the opposite, as all subsidies do: they’d suppress competition and innovation by giving the government-favored recipients a government-mandated advantage over their government disfavored competitors, freeing the one from competition’s pressures to innovate and reducing the other’s access to resources needed to innovate—and stifling competition’s engine, the need to innovate to stay ahead of rivals.