no third solution

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Health Care: Rationing vs. Allocation

September 17th, 2009

In a recent discussion about the no one should die because they can’t afford health care meme, I made the distinction in passing that markets allocate, only governments ration.  Responding, the person with whom I was discussing the matter on FB argued that “a free market also engages in rationing”.

I didn’t give this topic a thorough exposition at the time; consider this my penance, because it’s crucial that people understand the distinction.

Rationing vs. Allocation

Make no mistake about this: if the government mandates some form of health care (and I have every reason to suspect it will come down to this), rationing will prevail.

Allocation is the product of exchange: when those doing the demanding exchange value-for-value with those doing the supplying. You might not like the manner in which prices allocate goods and services, but if the price mechanism has no other virtue it is this: you don’t have to pay for it if you don’t want it.

Rationing on the other hand (especially in any venue mandated by politics), happens after you’ve paid in to the system. It happens when quantity demanded exceeds quantity supplied and all of the demand is backed up by a positive legal privilege; really an entitlement/welfare.

Rationing is the inevitable result of policies which dictate: no matter how badly you want or need something, and no matter how much you’re willing to forsake in exchange, you are entitled only to a roll of the rationing-dice. Some people win, and some people lose, but they were all forced to pay.

Allocation by price, via the market is not perfect, and no honest defender of free markets would dare suggest that it is. But it preserves personal control, responsibility, and freedom; ideals to which no government rationing scheme could even hope to aspire.

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no third solution

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