3 ms·

I can’t find anything on there that supports the idea that free markets are modeled on “perfect information”. I wouldn’t think that’s the case, anyway. Because

by dfee 9y ago

I can’t find anything on there that supports the idea that free markets are modeled on “perfect information”. I wouldn’t think that’s the case, anyway. Because marketing/advertising/awareness is a cost with diminishing returns, meaning it’s be prohibitively expensive to inform everyone of your product in the market, much less make accessible ALL products in a category for comparison shopping for any customer at any given time (aside from a singularity event). I do think markets require some information liquidity to be maintainable, and I generally understand free markets to be free of coercion. This sounds more like an “transparent market” though I’m not sure that’s a defined concept.

dfee 9y ago
So after some light reading, theoretical free markets are predicated on complete information, and known to be impossible to achieve for the reason I mentioned. Interesting.
- themagician 9y ago
  We assume "perfect information" because that's what lets us create simply supply and demand functions. Obviously in the real world you rarely (if ever) have perfect information—and we have models to deal with that—but healthcare has almost zero information. You either can't make a choice because you literally can't (only one provider in your area) or you can't make a choice because you don't have pricing information. So you can't maximize your own utility, because you don't know what options lead to that outcome. Just about the ONLY assumption that holds true in healthcare is that firms maximize profits. And, in a twist of irony, the only healthcare provider to provide information on pricing is Kaiser Permanente—which is a non-profit. Yeah, they still do maximize profits, but not for shareholders. So you could make the argument that healthcare as a whole meets exactly zero of the assumptions necessary for any kind of free market model to apply.

by dfee 9y ago

dfee 9y ago

So after some light reading, theoretical free markets are predicated on complete information, and known to be impossible to achieve for the reason I mentioned. Interesting.

themagician 9y ago
We assume "perfect information" because that's what lets us create simply supply and demand functions. Obviously in the real world you rarely (if ever) have perfect information—and we have models to deal with that—but healthcare has almost zero information. You either can't make a choice because you literally can't (only one provider in your area) or you can't make a choice because you don't have pricing information. So you can't maximize your own utility, because you don't know what options lead to that outcome. Just about the ONLY assumption that holds true in healthcare is that firms maximize profits. And, in a twist of irony, the only healthcare provider to provide information on pricing is Kaiser Permanente—which is a non-profit. Yeah, they still do maximize profits, but not for shareholders. So you could make the argument that healthcare as a whole meets exactly zero of the assumptions necessary for any kind of free market model to apply.