All Commentary
Wednesday, March 24, 2010

See? Repealing the Law of Scarcity Is Easy!

The ways of Washington.

To the surprise of no one who understands Congress, ObamaCare passed, and the Usual Suspects are celebrating this leap into the abyss. President Obama, has signed the bill, declared that he and Congress answered “the call of history.”

In the eyes of some people, to question the virtue of ObamaCare is racist and indicative of a wish to see people get sick and die. Think I exaggerate? Read Paul Krugman:

…[T]he emotional core of opposition to reform was blatant fear-mongering, unconstrained either by the facts or by any sense of decency. It wasn’t just the death panel smear.

It was racial hate-mongering, like a piece in Investor’s Business Daily declaring that health reform is “affirmative action on steroids, deciding everything from who becomes a doctor to who gets treatment on the basis of skin color.” It was wild claims about abortion funding. It was the insistence that there is something tyrannical about giving young working Americans the assurance that health care will be available when they need it, an assurance that older Americans have enjoyed ever since Lyndon Johnson — whom Mr. [Newt] Gingrich considers a failed president — pushed Medicare through over the howls of conservatives.

And what are these “facts”? The Congressional Budget Office declares this new legislation will “control” health care costs and reduce the federal deficit. So if you question the “nonpartisan” CBO you must be a racist who hates sick people. Yet when we step back at look at this legislation, the reality is different from what was presented on the House floor or on the New York Times editorial page.

Let us start from the beginning. Medical care is a scarce good. That truth is fundamental to understanding everything else about its production and distribution. Someone must produce this good, and what is produced and who receives it (at least in a free market) are determined by the laws of supply and demand. We can rail all we want against the alleged unfairness of reality, but the fact remains that producing and obtaining units of medical care entail opportunity costs. Something of value must be given up.

Yet in a single vote we heard members of Congress declare that they were going to “provide world-class health care” to needy Americans and save money! They will provide nothing. All they can do is to coerce someone to provide medical care for someone else. In his classic piece that I often quote, 7 Fallacies of Economics,” FEE President Lawrence Reed lists his seventh fallacy as The Fallacy of Economics by Coercion. Indeed, at the heart of this bill, with its mandates, fines, and arbitrary dates, is the attempt to impose a specific medical regime by force. Reed says this about such coercion:

There’s an old adage which is enjoying new publicity of late. It reads, “If you encourage something, you get more of it; if you discourage something, you get less of it.” The good economist realizes that if you want the baker to bake a bigger pie, you don’t beat him up and steal his flour.

Medical care will be no less scarce with the passage of this law. Insurance companies could find price ceilings on their premiums while, at the same time, they are expected to pay unlimited amounts on care for whomever wants it. This is not sustainable under any circumstances, and the framers of this law know it. In the end the government will turn insurers into “public utilities” while raising taxes to finance subsidies. The result will be long lines and less medical care than many people receive now. Thus the law of scarcity will impose itself even though Congress officially has repealed it.

  • Dr. William Anderson is Professor of Economics at Frostburg State University. He holds a Ph.D in Economics from Auburn University. He is a member of the FEE Faculty Network.