It’s easy to get distracted by the details and crushing cost estimates of “health-care reform” while losing sight of the key question: Can a handful of congressmen, most of whom probably have never even run a small business, design an entire market for medical services and insurance?
A few moments’ thought should be enough to see is the answer. Markets are unbelievably complex, and the details are beyond the grasp any individual. They consist of hundreds of millions of people making countless judgment calls, tradeoffs, and transactions with respect to a huge array of services and products. Each person makes these choices within his personal situation, which no one can know as well as that particular person can. Providers of medical services, insurance, and products undertake those activities after calculating that such work is their best opportunity for income and other forms of satisfaction.
Given this complexity, only someone lusting for power or incredibly conceited would presume to design a market. An appalling ignorance of economics is also a prerequisite for such a conceit.
As a way to coordinate supply and demand, economize resources, and create wealth, markets are simply unmatched. They do so well precisely because they use the critical knowledge scattered among all the participants. This is one reason central planning never works. No planning board could possibly know what everyone put together knows. Individuals contribute their partial knowledge to the market process through their decisions about what to buy, how much to buy, and what not to buy. Those decisions, based on subjective often unarticulated information, send signals through the price system, guiding entrepreneurs who buy resources and turn them into usable products and services according to consumer demand.
The process constantly rewards those who serve consumers well and penalizes those who don’t. That is the economic function of profit and loss.
