Wednesday, November 16, 2011

A Stray Post

I needed to put this somewhere, but Facebook seemed like the wrong place. Probably because it would lead to people reading it.

The Argument for Health Care Paternalism

My problem with arguments for paternalism like this one is two-fold (or at least, these are the two folds I have worked out so far):

1) How do we distinguish consumers "making mistakes" from consumers "making choices that we don't like/we wouldn't make"? That is, how do we separate weird preferences from irrationality? Who determines how much discounting of future health risks is "excessive discounting of future health risks" and how much is "too much concentration on dimensions that allow easy comparisons"?

2) Supposing that consumers do make mistakes, the case for regulation rests on the assumption that the establishment will not make the same (or worse) mistakes, which is hugely questionable given that it is left up to political processes. Okay, subsidize preventative care: how much? It's easy to say that a small subsidy moves us towards efficiency, but are the efficiency gains worth the institutional costs?

Obviously the health care market is far from the Econ 101 benchmark, and all of the informational arguments made by Dr. McFadden are clearly apt. Improving information provision in the health care market is necessary. But I'm not sure that regulation of the kind currently being considered offers much improvement, given the flaws inherent in our policy-making processes.

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