"In most areas of the economy," writes James Surowiecki in the Oct. 29 issue of The New Yorker, "free market principles insure that products and services keep improving, and that consumers get better and better deals." Yesterday's announcement by Apple of new and better products, some at the same prices as their now-obsolete predecessors, is an example.
But in this excellent, brief analysis of health care reform, he notes that the free market "falters when it comes to paying for bypass surgery or chemotherapy," and he points to what he says is a classic article published by Kenneth Arrow nearly 50 years ago. [That's my link, not his, and I think it's correct; he should have linked to the article himself.] Among other things, Arrow pointed out that markets work only if consumers have the option of saying "no" if the price is too high. That might work for the iPad mini, but it doesn't work for brain surgery. And because consumers rely on insurance, they don't have the final say on how much to spend, Surowiecki points out.
Mitt Romney's health care proposals rely on the workings of market forces, because he believes that they will bring costs down. Surowiecki refers to another economic study that found "overwhelming" evidence of a close link between the amount of public-sector involvement in health care and lower health care costs.
Surowiecki doesn't find much to like in Romney's proposals; it is a partisan piece. But the analysis seems quite sharp to me, more focused than anything else I've read recently on the contrasts between Romney's proposals and Obamacare. This issue, Surowiecki notes, is where "the election's outcome will have the most immediate and powerful impact on how Americans live."
-Paul Raeburn
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