Why is Healthcare so expensive: Regulations = knowledge paralysis
The image below perfectly captures the fact that although the US healthcare sector employs millions of people, very little in terms of great care is produced thus leading the outrageous premium, deductibles, and the medical-related bankruptcies we are all too familiar with.
How do we fix this problem? How does one order millions of healthcare professionals in a way that they produce tons of cheap and wonderful services/cures so that even a relatively poor individual can easily afford great care and charitable organizations easily take care of the rest? How do we discover the best way to do this? Easy, if it is superior knowledge we are after the best way to motivate its discovery and automatic spread throughout the social order is via economic competition. For example, power door-locks emerged in the minds of a few, and competition motivated and inevitably forced all auto-manufacturers (competitors) to copy/spread/adopt the superior knowledge/idea. Economic competition motivates every person/company to either innovate and thus discover superior ideas/knowledge, or to copy the superior ideas/knowledge/innovations of others (competitors). As cost-cutting ideas spread and ripple through the social order via competition, new profitable ideas arise in an endless cycle of knowledge generation. For example, there was a time when computers were very expensive, but thanks to competition, cost-and-thus-price-cutting innovations kept making PCs more powerful and affordable which eventually gave rise to the Internet and all the innovation that flows from it. So one can see how economic competition turns every brain into a sort of global supercomputer that discovers and spreads superior knowledge and restructures itself accordingly. In order for this civilization-creating process to work, people, in their role as producers/entrepreneurs/workers, must be free to attempt what they consider to be superior business ideas. And in their role as customers or consumers, they must be free to spend their money and thus nourish/sustain/judge the best ideas/companies, which is what motivates and inevitably forces everyone else (competitors) to adopt them. Anything that slows down this process slows down the very progress of mankind. Unlike private sector social orders/companies which are constantly morphing and learning from each other via competition, government bureaucracies/orders are monopolies that are immune from competition and get their wealth/nourishment by taxes so they inevitably grow more inefficient/bureaucratic/consumptive leading to a shrinking economic pie and eventually socioeconomic chaos, especially when not just a few sectors of the economy are government run and thus ‘socialized’ like education and medicine as is the case in many countries, but when the entire country is, as happens in all Communist/Socialist countries like Lenin’s Russia, Mao’s China, Cuba, and more recently Venezuela. It is one of the greatest ironies of the last couple centuries that the more people care and are willing to sacrifice for others, the more they fall for economically disastrous monopolistic/socialist ideologies that end up making things worse.
With this in mind we can now understand why healthcare is so expensive, how to remedy this problem, and how to reach a much more prosperous socioeconomic order. A government regulation is essentially a “way” of doing things, it is knowledge. But unlike superior knowledge that arises in the private sector and is constantly improving due to economic competition, a government regulation is knowledge that arises out of a few brains in government and is then forced upon the entire social order via the law and can only be changed via a painfully slow monopolistic/bureaucratic apparatus made up of economically ignorant politicians, lawyers, lobbyists and special interest groups who always lack the necessary knowledge and incentives to discover what is the best way to do something. The more the government regulates, the more it paralyzes competitive knowledge discovery. As government regulations have increased in the health care sector, turning it into a sort of island of paralyzed top-down competition-less socialist central planning, so have costs. These increased costs have led the sector to grow from consuming just 1.6% of the American economic pie in 1960 to 4.2% in 1980 to a whopping 16% in 2006 and about 18% by 2017. What a person must learn in order to legally offer medical advice via licensing of doctors, where he must learn it via licensing of medical schools, what chemical compounds can be legally consumed, how to test drugs, how the medical insurance industry should work, and countless other gigantic bodies of knowledge are dictated by monopolistic competition-less bureaucracies like the American Medical Association and the Food And Drug Administration and numerous others. By comparison, the Information Technology sector has very few government regulations so competition motivates the creation and spread of superior knowledge at breakneck speed and is obviously transforming our world right before our eyes. There is no American Association of Computer Programmers dictating what a computer programmer must learn, or where to learn it. There is no government monopolistic bureaucracy ensuring the proper functioning of the software that runs PCs, smart-phones, the Internet, or ensuring the lack of malware or viruses in software. Freedom and competition in the Software Development industry is even quickly evolving culture. It is increasingly seen as uncool and backward to have a traditional degree, where one wastes thousands of dollars and time physically attending gigantic temple-like universities, inefficiently (profs. instead of popular online videos you can pause/rewind) learning things that have nothing (English 101, ‘humanities’, etc.) to do with being a productive software/web professional. Economic ignorance leads many to believe that since one has to be seemingly more careful with medicine, such monopolistic regulatory oversight is somehow necessary. This is irrelevant, if it is superior knowledge that is needed, which includes figuring out how careful to be, freedom and competition is the best way to discover it, period.
These small articles provide a quick overview of economics/‘the market process’ and how it creates the social order:
“Private Governance” (8 mins)