4 ms·

Gasoline is an inelastic good but its price is relatively low and affordable because of the abundance of suppliers. In the US, local monopolies provide health

Gasoline is an inelastic good but its price is relatively low and affordable because of the abundance of suppliers. In the US, local monopolies provide health care.

dv_dt 9y ago
Gas inelastic as a good, but gas vendors are easily substitutable with low friction. The vendor you get gas from one week doesn't need to be the same as the next. And that transaction, the purchase of gas is completely interchangeable and identical from one week to the next. Medicare care in general does not have any of those characteristics (except for maybe annual checkups - but that's not where the bulk of medical costs are in our system). That has to do with the nature of the product and how it must be delivered, not necessarily with any monopoly effect. Even with a checkup, if you go to a different doctor every time that would reduce the effectiveness of the care.
eesmith 9y ago
How is that relevant? In many European countries, gasoline taxes are quite high. Wikipedia's "Fuel tax" page says that in 2014 Germans paid US$6.14 per US gallon of gasoline. Yet there is also an abundance of suppliers in Germany. The hospitals in many European countries are publicly owned and operated. Quoting Wikipedia's "Healthcare in Denmark" page, "The central government plays a relatively limited role in health care in Denmark ... Hospital care is mainly provided by hospitals owned and run by the regions." There are five such regions. Aren't there, using your argument, also five local monopolies in Denmark? But the situation in Denmark is nothing like the US.
- rukittenme 9y ago
  I think you need to reread what I wrote and understand what I'm arguing. The OP argued inelastic demand drives price gouging which isn't true in the case of gasoline. Price gouging in medicine isn't driven by inelasticity, its driven by a dearth of suppliers. In Denmark, you have few suppliers but the suppliers you do have are owned and regulated by the government. It's not a relevant comparison. They are not a market-based supplier.
  - bonzini 9y ago
    It's not driven by the dearth of suppliers, it's driven by the impossibility of choosing the cheapest provider due to a combination of 1) the lack of transparency in hospital pricing; 2) not being able to anticipate your expenses; 3) the insurers being able to "cheat" by agreeing on lower prices with the providers; 4) insurers forming a cartel. When there are so many forces pushing against the creation of a free market and a healthy balance between supply and demand, there is only one thing that the government can do: either socialize it (that's what happens with roads, for example), or regulate it like there's no tomorrow (that's what happens with utilities). However, in the US it is blasphemy to even suggest doing either thing to healthcare.
    - rukittenme 9y ago
      You're absolutely write to go after my "dearth of suppliers" point. It certainly is not the only reason for healthcare costs or even a large percentage. I even say so in a different comment. 1 and 2 are absolutely valid points and share responsibility for healthcare costs. > However, in the US it is blasphemy to even suggest doing either thing to healthcare. I wholeheartedly disagree with this. Healthcare is the most regulated industry in America.
  - eesmith 9y ago
    I asked for clarification because I didn't understand what you are arguing. I don't think it helps to follow up by repeating that I need to understand. I now understand your point, thank you.
    - rukittenme 9y ago
      I should apologize. I interpreted your question as rhetorical, rather than genuine, which is why I asked you to re-read my point. My mistake.
pimmen 9y ago
There are other ways to travel than by car, you can walk for example. Trains, light rails, bikes and electric cars don’t use gasoline and are options, if you make sacrifices. There’s no alternative sacrifices you can make to solve your cancer problem, though; you need a doctor and the right treatment. Gasoline is also a very bad example. They get loads of tax breaks from local, state and federal governments because they are too big to fail in terms of jobs, revenue and utility. They also get a lot of help when they have to clean up tgeir mess. That’s what I would call subsidy.
- rukittenme 9y ago
  You're missing the point. Gas is priced competitively in areas where there are no alternatives to its purchase. This is possible because there are lots of people who compete to supply gas. Basic econ 101. With hospitals, you have one local monopoly to choose from. Therefore you get monopoly pricing. Yes, if you're shot, you're not going to be too choosy about where the ambulance takes you. But most medical emergencies have some lead up to diagnosis and some wait time for the actual operation. Even cancer is not treated immediately. You schedule an appointment to have it treated over a long period of time. Now with all this time, you theoretically have the ability to compare suppliers. But in our world, there is one regional monopoly providing care. THAT ISN'T THE ONLY REASON CARE IS EXPENSIVE. But it is a factor worth talking about and considering.
  - eesmith 9y ago
    You wrote: "But most medical emergencies have some lead up to diagnosis and some wait time for the actual operation. ... Now with all this time, you theoretically have the ability to compare suppliers. But in our world, there is one regional monopoly providing care." Even when there is more than source of care and when there is plenty of time and the person is interesting in comparison shopping, in practice that is still difficult to do in the US. Last year there was a piece by Johnny Harris at Vox titled "I tried to find out how much my son's birth would cost. No one would tell me." https://www.vox.com/2016/5/5/11591592/birth-cost-hospital-bills https://www.vox.com/2016/5/5/11591592/birth-cost-hospital-bi... Childbirth is the #1 reason why people go to the hospital. If the price estimate isn't available for an average/low-risk birth, then it's not going to be available for other procedures. And again, this includes areas where there are multiple hospitals which provide maternity services, so your explanation of "local monopoly" isn't enough. (Quoting https://www.womenshealthmag.com/mom/costs-of-giving-birth https://www.womenshealthmag.com/mom/costs-of-giving-birth : "this charging system often results in "wildly inflated" costs, and they can vary from hospital to hospital—even if you're just looking at ones in the same neighborhood.") Your "basic econ 101" quip doesn't go very far to explain why it is that the governmental organizations which regulate these hospitals aren't, you know, regulating them to prevent such "basic econ 101" problems. What's the point of giving them a local monopoly if they are going to abuse it?
torstenvl 9y ago
Gasoline is only inelastic compared to consumer goods. It's quite elastic compared to emergency medical care. The alternative to buying gas is to take a staycation or carpool to work. The alternative to treating emergencies is likely death.
bluGill 9y ago
Actually this is wrong. There is an abundance of retailers to buy your gas from. However in any given area they ALL get their gas from the same refinery. Any retailer that doesn't will have to to pay much higher shipping fees and thus cannot compete. That means the refinery has a monopoly even though you have a choice of names on the sign. (note that the station can choose additives so it isn't completely irrelevant) During the golf war (first) I used to laugh at gas stations advertising that they sell gas made in the US. The refinery is in the US, but all the crude came from Canada. (This of course only applies the particular city I lived in at the time)
mikeash 9y ago
Gasoline is also affordable because individual needs tend to be fairly low and consistent. Imagine what the gasoline market would look like if from time to time a person had to buy 100,000 gallons of gasoline or they would die.

Gasoline is an inelastic good but its price is relatively low and affordable because of the abundance of suppliers. In the US, local monopolies provide health care.

dv_dt 9y ago

Gas inelastic as a good, but gas vendors are easily substitutable with low friction. The vendor you get gas from one week doesn't need to be the same as the next. And that transaction, the purchase of gas is completely interchangeable and identical from one week to the next. Medicare care in general does not have any of those characteristics (except for maybe annual checkups - but that's not where the bulk of medical costs are in our system). That has to do with the nature of the product and how it must be delivered, not necessarily with any monopoly effect. Even with a checkup, if you go to a different doctor every time that would reduce the effectiveness of the care.

eesmith 9y ago

How is that relevant? In many European countries, gasoline taxes are quite high. Wikipedia's "Fuel tax" page says that in 2014 Germans paid US$6.14 per US gallon of gasoline. Yet there is also an abundance of suppliers in Germany. The hospitals in many European countries are publicly owned and operated. Quoting Wikipedia's "Healthcare in Denmark" page, "The central government plays a relatively limited role in health care in Denmark ... Hospital care is mainly provided by hospitals owned and run by the regions." There are five such regions. Aren't there, using your argument, also five local monopolies in Denmark? But the situation in Denmark is nothing like the US.

rukittenme 9y ago
I think you need to reread what I wrote and understand what I'm arguing. The OP argued inelastic demand drives price gouging which isn't true in the case of gasoline. Price gouging in medicine isn't driven by inelasticity, its driven by a dearth of suppliers. In Denmark, you have few suppliers but the suppliers you do have are owned and regulated by the government. It's not a relevant comparison. They are not a market-based supplier.
- bonzini 9y ago
  It's not driven by the dearth of suppliers, it's driven by the impossibility of choosing the cheapest provider due to a combination of 1) the lack of transparency in hospital pricing; 2) not being able to anticipate your expenses; 3) the insurers being able to "cheat" by agreeing on lower prices with the providers; 4) insurers forming a cartel. When there are so many forces pushing against the creation of a free market and a healthy balance between supply and demand, there is only one thing that the government can do: either socialize it (that's what happens with roads, for example), or regulate it like there's no tomorrow (that's what happens with utilities). However, in the US it is blasphemy to even suggest doing either thing to healthcare.
  - rukittenme 9y ago
    You're absolutely write to go after my "dearth of suppliers" point. It certainly is not the only reason for healthcare costs or even a large percentage. I even say so in a different comment. 1 and 2 are absolutely valid points and share responsibility for healthcare costs. > However, in the US it is blasphemy to even suggest doing either thing to healthcare. I wholeheartedly disagree with this. Healthcare is the most regulated industry in America.
- eesmith 9y ago
  I asked for clarification because I didn't understand what you are arguing. I don't think it helps to follow up by repeating that I need to understand. I now understand your point, thank you.
  - rukittenme 9y ago
    I should apologize. I interpreted your question as rhetorical, rather than genuine, which is why I asked you to re-read my point. My mistake.

pimmen 9y ago

There are other ways to travel than by car, you can walk for example. Trains, light rails, bikes and electric cars don’t use gasoline and are options, if you make sacrifices. There’s no alternative sacrifices you can make to solve your cancer problem, though; you need a doctor and the right treatment. Gasoline is also a very bad example. They get loads of tax breaks from local, state and federal governments because they are too big to fail in terms of jobs, revenue and utility. They also get a lot of help when they have to clean up tgeir mess. That’s what I would call subsidy.

rukittenme 9y ago
You're missing the point. Gas is priced competitively in areas where there are no alternatives to its purchase. This is possible because there are lots of people who compete to supply gas. Basic econ 101. With hospitals, you have one local monopoly to choose from. Therefore you get monopoly pricing. Yes, if you're shot, you're not going to be too choosy about where the ambulance takes you. But most medical emergencies have some lead up to diagnosis and some wait time for the actual operation. Even cancer is not treated immediately. You schedule an appointment to have it treated over a long period of time. Now with all this time, you theoretically have the ability to compare suppliers. But in our world, there is one regional monopoly providing care. THAT ISN'T THE ONLY REASON CARE IS EXPENSIVE. But it is a factor worth talking about and considering.
- eesmith 9y ago
  You wrote: "But most medical emergencies have some lead up to diagnosis and some wait time for the actual operation. ... Now with all this time, you theoretically have the ability to compare suppliers. But in our world, there is one regional monopoly providing care." Even when there is more than source of care and when there is plenty of time and the person is interesting in comparison shopping, in practice that is still difficult to do in the US. Last year there was a piece by Johnny Harris at Vox titled "I tried to find out how much my son's birth would cost. No one would tell me." https://www.vox.com/2016/5/5/11591592/birth-cost-hospital-bills https://www.vox.com/2016/5/5/11591592/birth-cost-hospital-bi... Childbirth is the #1 reason why people go to the hospital. If the price estimate isn't available for an average/low-risk birth, then it's not going to be available for other procedures. And again, this includes areas where there are multiple hospitals which provide maternity services, so your explanation of "local monopoly" isn't enough. (Quoting https://www.womenshealthmag.com/mom/costs-of-giving-birth https://www.womenshealthmag.com/mom/costs-of-giving-birth : "this charging system often results in "wildly inflated" costs, and they can vary from hospital to hospital—even if you're just looking at ones in the same neighborhood.") Your "basic econ 101" quip doesn't go very far to explain why it is that the governmental organizations which regulate these hospitals aren't, you know, regulating them to prevent such "basic econ 101" problems. What's the point of giving them a local monopoly if they are going to abuse it?

torstenvl 9y ago

Gasoline is only inelastic compared to consumer goods. It's quite elastic compared to emergency medical care. The alternative to buying gas is to take a staycation or carpool to work. The alternative to treating emergencies is likely death.

bluGill 9y ago

Actually this is wrong. There is an abundance of retailers to buy your gas from. However in any given area they ALL get their gas from the same refinery. Any retailer that doesn't will have to to pay much higher shipping fees and thus cannot compete. That means the refinery has a monopoly even though you have a choice of names on the sign. (note that the station can choose additives so it isn't completely irrelevant) During the golf war (first) I used to laugh at gas stations advertising that they sell gas made in the US. The refinery is in the US, but all the crude came from Canada. (This of course only applies the particular city I lived in at the time)

mikeash 9y ago

Gasoline is also affordable because individual needs tend to be fairly low and consistent. Imagine what the gasoline market would look like if from time to time a person had to buy 100,000 gallons of gasoline or they would die.