The Lilac Cruiser

Having just discovered her, I can’t work out whether I like Megan McArdle or not.  I’m  attracted to her description of herself as a libertarian and her obvious fluency in philosophical debate on economic issues, but astonished at just how alien some of the stances she takes seem to be.  This is her “last word” on the healthcare debate.  One key para says:

I’m actually happy to be at the impasse, which I knew was coming.  All I wanted to do was get some liberals to admit that there might be some reason that someone with basically progressive ethical priorities might be worried.  I don’t think we’ll go beyond that, because progressives also have a lot of priors about the market that I don’t share, to wit that it rarely produces anything really useful.

I suppose my main objections are first, is to her (what seems to me to be) rather fundamentalist set of views about the superiority of  the market in the provision of healthcare, and second, her sniffiness about “liberal” or “progessive” attitudes to the superiority of market mechanisms.  Without going into the reasons why healthcare might be different from other markets (though Paul Krugman is very interesting on this), what appalls about the US system is its amazing cost (15% of GDP in a country with nearly 30% higher GDP per capita than the big western european countries) and limited coverage across the population (40m people without insurance and therefore excluded from proper primary care). Contrast this with the systems in other high income countries where comprehensive coverage is usual and where without exception costs are much lower.  We’ve all seen the comparisons between systems (and the usually misleading American comparisons with the NHS), but basically all other advanced systems have greater government intervention than the US.  Outcomes across populations seem by and large to about be the same as or better than the US system but with the whole population receiving care.  Most offer lower consumer choice and service to those who have sufficient income to demand it, although none of the high income countries outlaw private healthcare and even the UK has a vibrant private health insurance sector which allows higher income groups to opt out of the NHS if they want to.  The US system clearly is excellent for consumers who can afford it, but overall at staggering cost.

In the UK we have very good reason to be thankful for the revolution of the 1980s with its focus on the role of the market, and the impact of this on economic dynamism.  But it is hardly difficult to believe in the efficiency of markets in the provision of goods and services while having a keen awareness of the potential for market failure and therefore the need for regulation or some other government intervention.  Before the 1980s, we would have set the bar rather lower – and at some point in the 1990s I once had a very prominent (and I think Thatcherite – he’d certainly benefited personally from privatisation) executive in a former nationalised industry bemoan to me how ridiculous water privatisation was, a view few would bother with now.  But climate change and the banking crisis are good examples of market failure where there is a clear role for government, and healthcare clearly is a market where a substantial role for government, even including provision of healthcare as in the UK, provides a superior outcome.  You don’t have to be from the left to believe this.