So Hayek Basically Had Ezra Klein’s Views on Health Care, Right?
by Will Wilkinson on July 11, 2010
Dylan Matthews, apparently a bit surprised that Hayek favored of a scheme of social insurance, offers Ezra Klein’s readers an excerpt, emphasis added, from The Road to Serfdom:
There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.
Matthews goes on to to say:
[I]t’s more than a little jarring to hear [Hayek] invoked in opposition to a health care bill that’s, if anything, less ambitious than the sort of thing he’s talking about here.
At a cosmetic level, there’s something to this. Hayek was open to the idea of mandating the purchase of health insurance on the grounds that “many who could thus provide for themselves might otherwise become a public charge.” But I think it’s safe to say that Hayek would not have supported the recent health care legislation. Why not?
Well, Obamacare builds upon and consolidates some of the worst features of the American health care system from a Hayekian perspective, such as (a) It is more or less illegal to sell actual insurance, and (b) There is at best a grievously hobbled price mechanism in the health care market, if you can call it market.
If Hayek stood for anything, he stood for the importance of the informational function of freely moving prices for both individual planning and effective social coordination. (a) and (b) screw it up bad.
The exact set of regulations governing the sale of health “insurance” varies from state the state, but mostly it’s illegal to price insurance policies according to actuarial risk. At the limit, you have states where it is illegal to charge different people different prices and also illegal to refuse to offer coverage to anyone who applies for it. Hayek has a lot to say about price controls and none of it is good.
As many of you know, our dog recently broke his leg and had surgery that involved installing a plate and some pins. (He’s doing really well, thanks!) Do you know what I got when we came to pick him up? AN ITEMIZED RECEIPT?! I could see what the pins cost! The tube for the IV bag! Can you believe it? Later that week I had a doctor’s appointment at the university hospital and mentioned the itemized receipt to the resident and his supervising physician. Man, did they laugh. “How much does this appointment cost?” Hoo! Good times, good times.
Call a hospital and ask “How much for a hip replacement?” and they’ll almost certainly ask, “What insurance do you have?” This is not what Hayek had in mind in “The Use of Knowledge in Society.”
Prices, prices, prices, prices.
What Hayek had in mind was a competitive market in risk-rated insurance and a competitive market in medical services. No price controls. Let the markets rip. Mandate a certain minimum level of insurance coverage. If you’re uninsurable or can’t afford a policy, then the state pitches in. I’m fairly certain that his idea was nowhere in the neighborhood of making Aetna a quasi-governmental mechanism for redistribution.
Singapore, I think, has the closest thing to the sort of system Hayek had in mind. Among wealthy countries, it spends the smallest percentage of GDP on health care, and it gets about the best results. You know what that’s called? Efficiency. How do you get it? Competitive markets with freely moving prices under the rule of law! It’s the sort of thing you’re in favor of if you want everybody to have access to really good health care and money to spend on things other than health care.
willwilkinson.net
Mises OTOH would never have supported any form of government mandate. I read somewhere that he called other members of the Mt. Perlin Society "socialists", for some of the limited government intervention they did support.
Edit - From the comments
# John V
Well done, Will. And you could have gone a lot further. As a huge fan of Hayek, I find the use of bits and pieces of what he said to prop up anything and everything to be beyond silly.
This common social democratic "ah-HA" ploy of using Hayek to bolster arguments for any and every imaginable type of social insurance is one of the silliest there is. I don't consider myself to be a genius or of some extraordinary level of intelligence. Yet, I manage to understand Hayek's point. It's on those grounds that I find the butchering of Hayek's ideas most infuriating. Surely, people who think and write for a living should be more than capable of taking the time to read and understand what exactly Hayek meant. But, obviously, that's much too difficult for some. Either that or that they are simply dishonest and don't care to learn because it's more fun for them to live in their bubble where things are conveniently gray or black and white depending on the subject matter.
People who make such arguments about social insurance in Hayek's name are engaging in lazy, low-grade dialog and discussion....and probably intentionally IMHO.
Hayek's number one concept is the power of and NEED for decentralized knowledge and decision-making authority in the maket process. PERIOD. Any suggestions he makes beyond that, like social insurance, are based on the idea that economic reality is being respected in terms of knowledge, prices and decentralized decision-making. AND YES, it is perfectly possible and plausible to liberalize the economic process while providing some kind of catastrophic safety net at the same time.
The problem, Will, is that people who are not libertarians grounded in Hayek's world (especially Modern Liberals) blur the completely detached concepts of government redistribution and government command and control and they also assume there's no distinction when classical liberals discuss economics. WRONG. AND, they also don't realize that Hayekian thinking AT ITS CORE totally distinguishes between the two concepts. I certainly do and I know you and many others do as well.
Some forms of redistribution...be they large or small....do NOT truly undermine the effciency and integrity of the economic market process. They simply take a little money from many and give it to a few. In general, there's nothing terribly wrong with that in a general economic sense. HOWEVER, short-sighted thinking that advocates changing rules and making exceptions on who can and can't do this or that or what levels prices can or can't rise/fall to or who can make decisions/use local knowledge and who can't and so on and so forth can and will be harmful to the economic process over time and create new problems with the use of resources. THIS LATTER POINT is pure Hayek. ANYTHING else he said is simply footnote with specific context.
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