Health care and "Market Economics"

by Robert Forrest

In recent years consumers and a number of industries have experienced difficulties because of problems with regulation. Deregulation of electrical power suppliers has proved disastrous in California, and supplying adequate health care to U.S. citizens has proved to be quite difficult. A number of politicians, and suppliers of services have argued that "market economics", "free enterprise" and "the power of the market", would automatically lead to optimal self-regulation in such industries. The argument seems to be, "the less regulation there is of business, the better economic processes will take care of themselves", and, thank goodness, we won't have to bother with the details. Yet "market regulation" would seem to require certain ingredients. There must of course be demand for a commodity from potential buyers. There should be a number of producers who can offer the product or service desired. Presumably the suppliers compete in offering the commodity in a more or less desirable form, at a more or less desirable price. Competition brought about by the buyer's leverage, his ability to choose between suppliers, should result in an optimal compromise between the suppliers' profits, and the fulfillment of the buyer's demand (a good product at the best price). But there's a rub, for if the buyer has no leverage an essential ingredient is lost. Most buyers of cars, or television sets, can shop for new models while using or repairing their old ones. They can wait for better models, or lower prices, or a raise in salary. It is, however difficult to live without food or water, electricity, or a phone, or to delay surgery if one has appendicitis. It may be unrealistic to expect that essential services (where the buyer has no adequate leverage) will be adequately regulated by "market forces".

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