Thursday, September 2, 2010

Healthcare and Austrians

The Austrian School of Economics believes deeply in price coordination and foresees massive unintended consequences and mis allocation of resources occurring where markets and economies are set up so that a multi-headed hydra of actors actions are coordinated effectively by price signalling. Fair enough.

Historical examples of this abound. The demise of central planning in Moscow and Beijing being among the easiest to call to mind as those countries could neither feed themselves or produce sufficient quantities of needed goods to advance themselves beyond a society of peasants. Stories of scarcity managed by long queues for desired goods while piles of unwanted goods of shoddy quality abound. Unfortunately countries and economies have been know to continue their existence in this sorry state for many years - wasting large amounts of resources and irritating, or worse, everyone that participates, but, nevertheless, muddling along.

That is our healthcare system today. Envision a massive, centrally planned economy with production plans doled out by some combination of the mandarins at Medicare and three or four large health insurance companies. It doesn't work very well.

Accurate Reality: Healthcare will not become cheaper and more effective until consumers of healthcare have a direct stake in the costs and can become one of the actors on the stage of decision making. This will only occur through price transparency of healthcare costs to consumers.

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