Elections are not only about personalities: They are also about political philosophies. Many elections’ undercurrent is an ideological debate about the proper role of government.
A fundamental premise of the American economic system is that free markets support democracy. Competition among producers, and freedom of choice among consumers, generally promotes the public welfare. Firms which abuse their customers will lose market share to competitors that treat them better. States or cities that abuse their citizens will see residents vote with their feet and emigrate to greener pastures.
The free market is far from perfect. It is hardly “fair.” The prosperous have far more options than the poor do. Democracy can become one dollar, one vote. Consumers may not always experience the full effects of their choices. There may be what economists term “externalities”: impacts of my purchase on third parties. Externalities can be negative or positive. The power plant that burns coal to power my TV spews pollution into the troposphere: a negative externality. The college education I earned allows me to make a higher salary, which I spend at local merchants, expanding their incomes: a positive externality. But a vibrant market of robust competition can achieve many “public” goals. Many political debates are ultimately about how necessary government intervention is. Said differently: Can the market alone achieve our purpose?
Liberals and conservative reflexively line up on opposite sides of this divide. But the answer really depends on how closely the actual market resembles the competitive ideal. Each side holds an inbred assumption of guilt or innocence.
Our default assumption is that markets do a better job than governments for achieving a variety of desirable ends, including efficiency, prosperity, and freedom of conscience. But we part with our fellow conservatives who have never met a market they didn’t like. Some industries are far too concentrated to be truly competitive. Sometimes the concentration is unavoidable. For a century, utilities have experienced such profound economies of scale (where larger firms are more efficient) that their natural state was extreme concentration. The production technology created “natural monopolies.” (Today as electricity production technology is evolving such as with solar panels on building rooftops, challenging the permanence of these monopolies.)
Sometimes concentrated market power is man-made. A later chapter will argue that several features of today’s health-care sector violate free market tenets. We call it the “health cartel.”
Health reform is at a clear crossroads. On one side are advocates of greater government involvement, exemplified by Senator Bernie Sanders’ promotion of single payer health financing. Their opponents see five decades of expanding government funding of health care (going back to Medicare in 1965) as destructive, and advocate rolling it back. Several Grand Old Party (GOP) presidential candidates wish to repeal the most recent incursion by government, the Affordable Care Act (Obamacare), whether or not they have a developed replacement.
To gain perspective on this, central debate for the 2016 campaign requires a clear-eyed appraisal of how much competition really exists in American health care. The answer is: Only in pockets. Where patients spend their own funds on procedures not covered by insurance, such as LASIK eye surgery, or cosmetic surgery, competition is fierce and delivers its customary results: rapidly falling prices and improving quality. But for the bloated, subsidized majority of the system, competition is scant. This is taken up in Chapter 11 on the health cartel.
The cartel is not some evil capitalist conspiracy but is a natural outgrowth of government policies whose unintended side effects have over-whelmed good intentions. Many reform proposals, including a number discussed in Part II, are highly incremental. They make modest improvements but leave in place the dysfunctional core.
Liberals who recommend an expanded government role have a responsibility to defend its performance thus far, and should explain why we should expect improvement.
Conservatives who wish the opposite must demonstrate how competition can provide far more pervasive benefits than at present.
We have considerable sympathy with the conservative position, but our mission in this book is to help you be a skeptical consumer (voter). Health reform will be prominent in the 2016 election, and likely in almost every future election. Some education now will help you to distinguish the candidates with real solutions from those offering only pleasant placebos.