THE BLOG
11/20/2016 01:02 pm ET Updated Nov 21, 2017

Where The Free Market Fails

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Donald Trump has proposed that we just get rid of Obamacare and replace it with free market forces. This is as original as any of his policy ideas (i.e. not at all), but it's still a bad idea because health care is like education in that the free market cannot possibly succeed in accomplishing what we claim to want as a society.

I'll explain in a moment, but first, let me insert my usual disclaimer that "free market" is a suspect term to begin with. At this point in human history, all markets are controlled and manipulated to some degree by the government. "Free market" is just a name for a particular type of government control. The last time there was a truly free market, a pair of humans were trading a shiny rock for a pointy stick somewhere near a cave.

Putting that aside, Trump's idea to leave health care "customers" at the mercy of the free market is nuts for the same reason that letting the free market run loose in the education sector is nuts.

Health care operating strictly on free market means that everyone gets the health care they can personally afford, which means the wealthy get great healthcare, middle class citizens (both of them) get mediocre health care, and the poor get no health care at all. People who are already sick, on whom the health care biz can never hope to make money, will also get no healthcare at all.

Because the one area where the free market will always fail is in the area of providing a good or a service to all citizens.

Milton Friedman said, "The most important single central fact about a free market is that no exchange takes place unless both parties benefit." And there's our problem-- because there are some citizens in the country who cannot offer sufficient benefit to a company with something to sell.

It is the fundamental nature of the free market to sort customers into two groups-- those from which my business can benefit, and those from which it can not. Whether I'm making a fast-food burger, a fancy shmancy motorcar, or a pair of stereo speakers, my business plan involves saying, "We can only serve customers who are willing to pay $X.00. Anyone who isn't going to pay that will not be a customer." There is no office in this country where businesspersons are getting together and saying, "Okay, how can we best get this product into the hands of people who cannot meet our minimum price point?" The very closest we get is outfits like the phone companies, where the discussion is along the lines of, "How can we balance losing a little money up front for the promise of bleeding our customers for all the money we can get in the long run." And that's not very close.

There is absolutely nothing wrong with this. There is absolutely nothing wrong with saying, "Sorry, but if you can't pay the price of a Lexus, you can't have a Lexus." That's how the system by and large works.

But there is something wrong with a system that says, "Sorry, but you're poor, so you'll just have to die" or, "Sorry, but you're poor, so you'll just have to go without a real education."

It is true that there are times-- bad times, disgraceful times-- when our current health care and education systems say exactly that. But there is at least the hope that we and they can do better. But a free market system must mark some people as too poor for the product. It has to. It is absolutely guaranteed that it will.

For a free market system to work, it must figure out which part of the market it can afford to profitably serve. That means it must absolutely also determine which part of the market it is not going to serve.

Imagine if the feds went to Ford Motor Co. and said, "You must get a car sold to every family in America-- and not just a mediocre car, but a good one. Every family."

Or if the feds went to Apple and said, "You must sell every single person in America a new iPhone. You cannot turn down a single customer. Regardless of their financial resources, you must get your current new phone into their hands, without fail."

Or if the feds went to Arby's and said, "You must feed every single American lunch, every single day, no matter what they can afford to pay for, and even if they aren't very excited about eating the food on your menu."

That would be nuts. It would be bad business, and no even semi-smart business leader would tolerate it.

And yet, if you want to talk about free market education or free market health care, that is the gig-- to provide your service to every single American, regardless of what they can afford to pay (or the government can afford to pay on their behalf). Perhaps you want to change the mission, to say, "No, health care and education are only for those who deserve it, and we can measure what they deserve by how much money they have." But if so, then we need to have a national conversation, because the very foundation of our nation that there are some things, some inalienable rights, that all humans are entitled to from the moment they're born.

Some endeavors are supposed to serve all citizens. Every last one. It is the most fundamental part of the mission, and the free market has absolutely no clue about how to do it. On this point, the point of serving every citizen, the free market fails, and for that reason, the free market is uniquely unfit to take on the work of providing health care or education to the entire country.


Originally posted at Curmudgucation