An economic mandate for healthcare reform

Below is something I wrote on the night of the 2008 presidential election. I did not publish it until today because I had not proof read it. I hate proof reading. So with any typographical errors you find, you should score that as proof of its authenticity. A season has almost passed since Obama was elected, so this might be fun reading:

At this moment, my community organizer is kicking your hockey mom's ass in the election. Now you may say that this is not a fair comparison. I should be comparing top of the ticket to top of the ticket, not Obama to Palin. But the comparison is accurate, as McCain and Biden were always the non-alpha personalities in this election. Which is a compliment that I bestow on Sarah Palin.

Now that the election seems to be over, there will be much discussion as to what the 'meaning' of this election is to America. Does it transform our conversation on race? Is it a mandate for a 'liberal' agenda? What of the war in Iraq? And taxes? What of health care reform? In a 'normal' election year, these same questions would difficult to answer. In this year it would be nothing short of chaos to make a lot of meaning out of. Equally difficulat, is to assign 'reasons' for the results. What if the market had not cratered? What if Hilary had beat Obama? If McCain had run a better campaign, could the results be different. If he had picked Lieberman, what would have happened?

In short, none of these questions make any difference, because they are all backwards looking, even if they are fun to discuss.

Where we should look is healthcare. Here is why:

Health care is fundamentally an economic issue. And when we talk about economics, we have been trained to say that "the free market will provide all." This comes from Hayek and Friedman, and somewhat from Adam Smith. Adam Smith invented the theory of the 'invisible hand' of 'free' markets that would efficiently allocate resources, make everyone the best off, and do it thorugh millions of independent decisions of independent decision makers. In general it works. However, later economists after Smith found inefficiencies in the pure theory. Third party externalities created inefficiencies. An important--but ignored by current proponents of 'free market' theory--tenent of Smith's theory is that 'free' markets = 'fair' markets. Essentially, if one party was too big compared to the other players in the market, this was neither a fair nor free market. A current example of this is when an oil company negotiates a contract with a small country. The oil company has many many times the revenue than some small countries. In these cases, the markets will not operate efficiently according the inventor of free market theory Adam Smith.

Health care has many such inefficiencies that the free market cannot take care of. Economic models based on numerous court cases indicates that in many societies, it is better to kill someone than to maim them for life. If you maim them for life, then you have to pay $$ based on what they could have earned over their lifetime. If you kill them, then you only need pay the loss of what they would mean to others.

Insurance is based on the idea of not getting sick. Insurance companies are designed to ensure they have to pay as little as possible for people getting ill, while collecting as much as possible in the form of insurance premiums. Similarly, they are designed to pay as little as possible to doctors, hospitals, etc.

In summary, the free market simply does not work completely. And there is much inefficiency in the administration, paperwork, and bureaucracy. President elect Obama and the Congress should look to impact the health care market first, because the 'free market' is not working their already, so there is more to get out of and less to lose with government intervention.


This was the first salvo at challenging the status quo on exactly how "free market" the health care system is. There are some interesting spellings in there. Obama has not focused on health care, unfortunately. I have found more inefficiencies, especially around birth.