4 ms·

This is a little long to commit to close reading. Summary, anyone?

by krapht 10y ago

guelo 10y ago
It's a classic in economics that explains why health care doesn't fit the free market ideal. The basic problem is that, unless you know as much about medicine as your doctor, you can't evaluate the quality of advice you're getting. It's heavy reading, I don't know why it's getting upvoted here.
- ErikVandeWater 10y ago
  This is a bad argument. Does anyone know as much as the contractor who made their house? Then why don't houses crumble, long after they are built? A free market would have various accrediting bodies, and doctors would advertise the quality of their accreditation as evidence of their skills and qualification.
  - notahacker 10y ago
    Houses can and do crumble, which is part of the reason building regulations were introduced. And builders/plumbers/electricians certainly aren't immune to the temptation to charge for unnecessary work. But for the average person, medical care is substantially more difficult to evaluate (your doctor is smarter and more heavily qualified than the average builder, right?) and a person worried about their symptoms has substantially more incentive to procure additional medical care that just might work than a person unsatisfied with their house procure speculative building work. I'd run a mile from a builder that conceded that despite their best efforts their structure might fall down of its own accord, and be nearly as worried by a doctor who insisted a remedy was guaranteed to work. Accreditation bodies may be able to determine whether a doctor is knowledgeable; whether they overprescribe placebos to an individual patient to increase their revenue is significantly more difficult and resource-intensive to evaluate. And homeopaths and faith healers have accreditation bodies too.
  - maxxxxx 10y ago
    Medical stuff is much more complex than building a house. You can pretty well predict how well a house will perform but every human is different. One therapy works for one person but not for the other. In addition your accrediting bodies would be highly susceptible to corruption as the ratings agencies have shown. One thing that could be done is to open up all data hospitals and doctors have about their success rates and other quality numbers, also prices. Then a lot of people could crunch these numbers and make sense of them.
  - davidw 10y ago
    Information asymmetry is the general subject for those who are curious: https://en.wikipedia.org/wiki/Information_asymmetry https://en.wikipedia.org/wiki/Information_asymmetry
  - guelo 10y ago
    I don't think anyone that has dealt with housing contractors thinks it is an ideal free market. The "uncertainty" concepts that Arrow developed in this paper have been used in studying all kinds of other markets from health insurance to used cars. In fact, this paper has been used to argue that health markets are not that special from other markets because there is always some uncertainty.
  - gshulegaard 10y ago
    > A free market would have various accrediting bodies This is actually an example of market distortion. For me, I view the use of "Free markets" to be implied uses of "competitive markets" and Perfect Competition is defined as follows: > the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. An accrediting body (of any type) is a symptom of a market where buyers are not (and perhaps cannot) be well informed enough to make decisions that maximize their utility/benefit. Now you might think, at this point, that's ridiculous! No one can be well informed about every potential market decision they make in their lives. And you would be right, this is why it's an unachievable ideal: > Though there is no actual perfectly competitive market in the real world, a number of approximations exist [2] Moreover, there exist market externalities whose burdens aren't appropriately placed on the responsible actor. The classic example is pollution, which can often be modeled as a social cost rather than a supplier cost [3]. Now accrediting bodies and government regulation can be good steps at correcting these distortions, but they aren't perfect...as anyone who has hired a licensed contractor and gotten poor results can attest. > Then why don't houses crumble, long after they are built? There is a lot of government regulation that tries to correct for this. But even then, a lot of homes have significant issues despite things such as home inspectors, building permits, contract licenses etc. My parent's fairly expensive home, for instance, had a chimney that was nailed to their roof and ended up falling over in a windy storm causing roof and water damage. The house was new construction, inspected, and part of a large development. But a lot of government regulation is actually an argument in support of the points made in this publication...as it means that the market was not suitable to laissez-faire handling [4]. [1] https://www.google.com/search?q=perfect+competition&oq=perfect+competition&aqs=chrome..69i57.3849j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=perfect+competition&oq=perfe... [2] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition [3] https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality [4] https://en.wikipedia.org/wiki/Laissez-faire https://en.wikipedia.org/wiki/Laissez-faire Edit: I am moving fast and simplifying significantly, but I would be happy to address follow up questions/go into more detail if interested. But, as a disclaimer, I am far from an expert...I just have a limited understanding of some precious few Economic fundamental concepts.
  - Spooky23 10y ago
    It's not a bad argument, because the relatively minor discoveries in medicine in the 19th century in a hands off market already demonstrated what happens. The right wingers also provided more material by loosening controls over supplement marketing in the 90s. Desperate people seek out cures. In the old days they gave money to the church for miracles. In the 19th century they bought patent medicines, which at best were cocktails of opiates and alcohol and at worst were cheap whisky. Google the "Duffy Malt Whisky" company. In the 21st century, we have homeopathic quackery and supplements. The sober advice of accrediting boards is always defeated by the silver tounge of advertising and marketing. Only government has the power to address this.
  - mikeash 10y ago
    That seems like a pretty bad example. House construction is pretty regulated in most places, with governments dictating anything from materials and design down to the number and location of electrical outlets. A better example might be something like... rock climbing gear, maybe? It's hard to come up with things that are both life-critical and unregulated, whether because regulations are necessary or because government likes interfering.
  - jfoutz 10y ago
    It doesn't work out that way though. Asymmetric information inevitably leads to market collapse [1]. The only reason healthcare "works" is because we're not rational actors. I mean those more as mocking quotes rather than scare quotes. Perhaps it's more accurate to say, the only reason healthcare works is because many actors are not motivated solely by money. Which, a decent MBA would consider a sucker. [1] https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons
    - witty_username 10y ago
      Sure, but forcing healthcare on everyone makes the market failure a government failure--if "failure" means someone paying much more for insurance than it actually costs for that person.
      - jfoutz 10y ago
        There is a pretty easy calculation, but the numbers are hard to come by. People pay about $3000 for health care in the us, per year. people pay $750 for medicare. To be fair, half is by the employee, half is by the employer, so let's say $1500, because theoretically you would make more if the employer didn't have to pay that tax. On the flip side, high paying jobs, the employer pays the lion's share of health insurance premiums - but let's just ignore that. Old people (medicare patients) get sick all the time. Heart attacks, cancer, whatever. Young people rarely get sick, but there are more young people - perhaps 15,000,000 70-74 year olds, and perhaps 21,000,000 20-24 year olds. If the cost of medicare for everyone is less than $3500, it's cheaper to just cover everyone at some basic level via medicare. Very few 22 year olds get cancer. It's expensive. lots of 72 year olds get cancer. That is also expensive. Medicare pays for the expensive part of people's lives (the end of their lives). I'm pretty sure if the medicare tax rate doubled, 3% to 6%, $1500 to $3000 it'd still be cheaper than what we're doing now. I dunno. It's late. It's a complicated topic. I have no problems with well off people paying a whole lot to get special care, extra insurance, or whatever. I think it would be a good thing for people who get in car accidents, have heart attacks, or get cancer to know they're not financially ruined. It's nothing more than a linear programming problem. Right now people pay X. If everyone was taxed more they would pay Y. If Y < X, we should do Y. If not, what we have now is the best we can do. So be it.
- sbuttgereit 10y ago
  > It's heavy reading, I don't know why it's getting upvoted here. Advocacy?
- kmicklas 10y ago
  > It's heavy reading, I don't know why it's getting upvoted here. This is needed exposure for a lot of the libertarians that populate hacker news.
tim333 10y ago
There's some stuff here: http://www.nationalreview.com/critical-condition/245118/gospel-according-ken-arrow-avik-roy http://www.nationalreview.com/critical-condition/245118/gosp... >... Arrow’s paper, which endorses the view that “the laissez-faire solution for medicine is intolerable,” is widely considered to have founded the field of health care economics, and continues to be celebrated, especially by those to the left of center.
- the_why_of_y 10y ago
  That article gives a bit of a summary, but its own arguments are pretty weak - a lot of arguments about why Arrow is wrong, but no explanation whatsoever for the empirical observation that Arrow is right: just compare per-capita costs of health insurance with similar results between countries with mostly free-market systems like the USA with mostly single-payer/public systems like France. http://voices.washingtonpost.com/ezra-klein/2010/01/america_spends_way_way_way_mor.html http://voices.washingtonpost.com/ezra-klein/2010/01/america_...
  - conanbatt 10y ago
    The US is specially screwed up by its insurance system, which adds a lot of noise to the price signals. Another thing that could drop the costs is the elimination or reduction of medical quotas and medical licenses. Those two are easier and smaller to solve than full welfare, which considering the us system, could be really expensive to implement.

This is a little long to commit to close reading. Summary, anyone?

by krapht 10y ago

This is a little long to commit to close reading. Summary, anyone?

guelo 10y ago

It's a classic in economics that explains why health care doesn't fit the free market ideal. The basic problem is that, unless you know as much about medicine as your doctor, you can't evaluate the quality of advice you're getting. It's heavy reading, I don't know why it's getting upvoted here.

ErikVandeWater 10y ago
This is a bad argument. Does anyone know as much as the contractor who made their house? Then why don't houses crumble, long after they are built? A free market would have various accrediting bodies, and doctors would advertise the quality of their accreditation as evidence of their skills and qualification.
- notahacker 10y ago
  Houses can and do crumble, which is part of the reason building regulations were introduced. And builders/plumbers/electricians certainly aren't immune to the temptation to charge for unnecessary work. But for the average person, medical care is substantially more difficult to evaluate (your doctor is smarter and more heavily qualified than the average builder, right?) and a person worried about their symptoms has substantially more incentive to procure additional medical care that just might work than a person unsatisfied with their house procure speculative building work. I'd run a mile from a builder that conceded that despite their best efforts their structure might fall down of its own accord, and be nearly as worried by a doctor who insisted a remedy was guaranteed to work. Accreditation bodies may be able to determine whether a doctor is knowledgeable; whether they overprescribe placebos to an individual patient to increase their revenue is significantly more difficult and resource-intensive to evaluate. And homeopaths and faith healers have accreditation bodies too.
- maxxxxx 10y ago
  Medical stuff is much more complex than building a house. You can pretty well predict how well a house will perform but every human is different. One therapy works for one person but not for the other. In addition your accrediting bodies would be highly susceptible to corruption as the ratings agencies have shown. One thing that could be done is to open up all data hospitals and doctors have about their success rates and other quality numbers, also prices. Then a lot of people could crunch these numbers and make sense of them.
- davidw 10y ago
  Information asymmetry is the general subject for those who are curious: https://en.wikipedia.org/wiki/Information_asymmetry https://en.wikipedia.org/wiki/Information_asymmetry
- guelo 10y ago
  I don't think anyone that has dealt with housing contractors thinks it is an ideal free market. The "uncertainty" concepts that Arrow developed in this paper have been used in studying all kinds of other markets from health insurance to used cars. In fact, this paper has been used to argue that health markets are not that special from other markets because there is always some uncertainty.
- gshulegaard 10y ago
  > A free market would have various accrediting bodies This is actually an example of market distortion. For me, I view the use of "Free markets" to be implied uses of "competitive markets" and Perfect Competition is defined as follows: > the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. An accrediting body (of any type) is a symptom of a market where buyers are not (and perhaps cannot) be well informed enough to make decisions that maximize their utility/benefit. Now you might think, at this point, that's ridiculous! No one can be well informed about every potential market decision they make in their lives. And you would be right, this is why it's an unachievable ideal: > Though there is no actual perfectly competitive market in the real world, a number of approximations exist [2] Moreover, there exist market externalities whose burdens aren't appropriately placed on the responsible actor. The classic example is pollution, which can often be modeled as a social cost rather than a supplier cost [3]. Now accrediting bodies and government regulation can be good steps at correcting these distortions, but they aren't perfect...as anyone who has hired a licensed contractor and gotten poor results can attest. > Then why don't houses crumble, long after they are built? There is a lot of government regulation that tries to correct for this. But even then, a lot of homes have significant issues despite things such as home inspectors, building permits, contract licenses etc. My parent's fairly expensive home, for instance, had a chimney that was nailed to their roof and ended up falling over in a windy storm causing roof and water damage. The house was new construction, inspected, and part of a large development. But a lot of government regulation is actually an argument in support of the points made in this publication...as it means that the market was not suitable to laissez-faire handling [4]. [1] https://www.google.com/search?q=perfect+competition&oq=perfect+competition&aqs=chrome..69i57.3849j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=perfect+competition&oq=perfe... [2] https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition [3] https://en.wikipedia.org/wiki/Externality https://en.wikipedia.org/wiki/Externality [4] https://en.wikipedia.org/wiki/Laissez-faire https://en.wikipedia.org/wiki/Laissez-faire Edit: I am moving fast and simplifying significantly, but I would be happy to address follow up questions/go into more detail if interested. But, as a disclaimer, I am far from an expert...I just have a limited understanding of some precious few Economic fundamental concepts.
- Spooky23 10y ago
  It's not a bad argument, because the relatively minor discoveries in medicine in the 19th century in a hands off market already demonstrated what happens. The right wingers also provided more material by loosening controls over supplement marketing in the 90s. Desperate people seek out cures. In the old days they gave money to the church for miracles. In the 19th century they bought patent medicines, which at best were cocktails of opiates and alcohol and at worst were cheap whisky. Google the "Duffy Malt Whisky" company. In the 21st century, we have homeopathic quackery and supplements. The sober advice of accrediting boards is always defeated by the silver tounge of advertising and marketing. Only government has the power to address this.
- mikeash 10y ago
  That seems like a pretty bad example. House construction is pretty regulated in most places, with governments dictating anything from materials and design down to the number and location of electrical outlets. A better example might be something like... rock climbing gear, maybe? It's hard to come up with things that are both life-critical and unregulated, whether because regulations are necessary or because government likes interfering.
- jfoutz 10y ago
  It doesn't work out that way though. Asymmetric information inevitably leads to market collapse [1]. The only reason healthcare "works" is because we're not rational actors. I mean those more as mocking quotes rather than scare quotes. Perhaps it's more accurate to say, the only reason healthcare works is because many actors are not motivated solely by money. Which, a decent MBA would consider a sucker. [1] https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons
  - witty_username 10y ago
    Sure, but forcing healthcare on everyone makes the market failure a government failure--if "failure" means someone paying much more for insurance than it actually costs for that person.
    - jfoutz 10y ago
      There is a pretty easy calculation, but the numbers are hard to come by. People pay about $3000 for health care in the us, per year. people pay $750 for medicare. To be fair, half is by the employee, half is by the employer, so let's say $1500, because theoretically you would make more if the employer didn't have to pay that tax. On the flip side, high paying jobs, the employer pays the lion's share of health insurance premiums - but let's just ignore that. Old people (medicare patients) get sick all the time. Heart attacks, cancer, whatever. Young people rarely get sick, but there are more young people - perhaps 15,000,000 70-74 year olds, and perhaps 21,000,000 20-24 year olds. If the cost of medicare for everyone is less than $3500, it's cheaper to just cover everyone at some basic level via medicare. Very few 22 year olds get cancer. It's expensive. lots of 72 year olds get cancer. That is also expensive. Medicare pays for the expensive part of people's lives (the end of their lives). I'm pretty sure if the medicare tax rate doubled, 3% to 6%, $1500 to $3000 it'd still be cheaper than what we're doing now. I dunno. It's late. It's a complicated topic. I have no problems with well off people paying a whole lot to get special care, extra insurance, or whatever. I think it would be a good thing for people who get in car accidents, have heart attacks, or get cancer to know they're not financially ruined. It's nothing more than a linear programming problem. Right now people pay X. If everyone was taxed more they would pay Y. If Y < X, we should do Y. If not, what we have now is the best we can do. So be it.
sbuttgereit 10y ago
> It's heavy reading, I don't know why it's getting upvoted here. Advocacy?
kmicklas 10y ago
> It's heavy reading, I don't know why it's getting upvoted here. This is needed exposure for a lot of the libertarians that populate hacker news.

tim333 10y ago

There's some stuff here: http://www.nationalreview.com/critical-condition/245118/gospel-according-ken-arrow-avik-roy http://www.nationalreview.com/critical-condition/245118/gosp... >... Arrow’s paper, which endorses the view that “the laissez-faire solution for medicine is intolerable,” is widely considered to have founded the field of health care economics, and continues to be celebrated, especially by those to the left of center.

the_why_of_y 10y ago
That article gives a bit of a summary, but its own arguments are pretty weak - a lot of arguments about why Arrow is wrong, but no explanation whatsoever for the empirical observation that Arrow is right: just compare per-capita costs of health insurance with similar results between countries with mostly free-market systems like the USA with mostly single-payer/public systems like France. http://voices.washingtonpost.com/ezra-klein/2010/01/america_spends_way_way_way_mor.html http://voices.washingtonpost.com/ezra-klein/2010/01/america_...
- conanbatt 10y ago
  The US is specially screwed up by its insurance system, which adds a lot of noise to the price signals. Another thing that could drop the costs is the elimination or reduction of medical quotas and medical licenses. Those two are easier and smaller to solve than full welfare, which considering the us system, could be really expensive to implement.