The Impossibility of an Altruistic Health Care System
Michael Moore thinks the profit motive should be removed from health care. Many others agree. They are not talking about profit in the narrow sense. What they really want is to remove self-interest from health care. But if people do not act on the basis of self-interest, what else is there? Altruism.
If it is good to deliver health care altruistically, doesn't the same argument apply to food, clothing, and shelter? What if the whole economy were structured so that all our needs were met by altruists rather than egoists? What would such a world look like? I'll start there and then wend back to health care at the denouement.
Informal Theorem on Altruism: While an occasional act of altruism may be good and commendable, no rational person would want to live in a world where most people act altruistically most of the time. Such a world would be chaotic and dysfunctional – so much so that individual acts of altruism would become impossible.
I know what some of you are thinking. Informal theorem? Isn't that an oxymoron? Probably. Too many academics (myself included) spend too much time proving formal theorems that only a handful of specialists can read and comprehend. The world would be a better place if we took the time to explain our ideas intuively in lay language. So here it goes.
The Self-Interest Model. This is the world of Adam Smith. The butcher, the baker and the candlestick maker can pursue their own interests only by meeting other people's needs. Indeed, profit maximization and meeting-other-people's-needs maximization is almost the same thing. There is a role for government in this world – not to encourage altruism, but to refocus self-interest by better aligning private costs and benefits with social costs and benefits in those areas where they would otherwise diverge.
As Frederick Hayek taught us, this is a world in which prices convey an enormous amount of information that is impossible to gather in any other way. For example, if the wage rate in the widget industry is $20 hour, compared to $15 for whatsits, a worker knows that widgets are more socially valuable at the margin. By accepting work at a widget factory, he will not only have more take home pay, he knows his work will meet more needs. If widgets sell for $30, that means $30 is the value society places on widgets at the margin. When someone who values widgets at $40 buys them and when someone who values widgets at $20 sells them, goods are moving from lower-valued to higher-valued uses – again, meeting more needs.
The Altruist Model. In this world, firm managers do not hire workers and pay wages to minimize costs. Instead they make their decisions based on the good that will be done for individual workers and their families. Also, firms do not sell their products to the highest bidders. They sell instead to those whose perceived needs are greatest. In such a world prices and wages do not convey information about social benefit and social cost. In fact, they convey no information at all. And that's the whole problem.
In such a world, a worker who accepts a higher-paying job would never know whether he was, in that act, meeting more of other people's needs. Those who buy and sell in the marketplace would never know whether their acts were moving goods to higher-valued or lower-valued uses. If the government arbitrarily took money from higher-income Peter and gave it to lower-income Paul, we could never be sure we had taxed the fortunate to help the less fortunate. The reason: in this world, incomes do not reflect productivity. Therefore, they do not signal any information about who is fundamentally more or less fortunate. This is a world in which even a single act of altruism becomes virtually impossible.
Application to Health Care. Now imagine a health care system in which prices and wages reflect random acts of altruism rather than social benefit and social cost. A medical student wants to choose a specialty where she can create the most value for others. But since specialists' incomes do not reflect relative scarcity, there is no way for her to know which field is best. Suppose a wealthy person donates money to build a new hospital. To staff it, the hospital pays wages sufficiently high to draw doctors, nurses and administrative personnel from other parts of the system. Would this new hospital cause unmet needs to go up or go down? Who would ever know?
As in the previous model, this is a system in which individual acts of altruism become impossible.
Our System. Now imagine a hybrid system in which everyone acts in his self interest, but the market has been so suppressed that no one ever faces a real price for anything. Arguablely, this is the worst system of all.
Have a great day.
As I said in my 1999 book THE GRAND DISGUISE, the laws of human nature cannot be repealed even by a unanimous vote.
Invididuals should and often do act according to the Golden Rule. But…
Systems must be designed to harness, not oppose, the laws of human nature, else the systems will fail. Communism reverted to fascism within weeks. The Animal Farm didn’t work. The first Thanksgiving was a disaster; the second a success because in the interim they converted from communal to individual ownership. Nobody washes a rental car.
California dreaming doesn’t work in the real world. Why do we need to keep repeating these experiments?
So what’s the answer? 🙂
ABSOLUTE (expletive deleted)
Well done!
I read your material regularly and agree most of the time. I found your discussion of Altruistic Health Care to be excellent.
The organ donation/transplantation system is a real-life example of what happens when we make altruism the foundation of health care.
We rely exclusively on altruism to provide organs for transplant operations in the United States. The result is an organ shortage that gets bigger every year. Today, over 98,000 Americans are waiting for organ transplants, and most of them will die waiting. Every year, 8,000 Americans die because of the organ shortage. At the same time, every year Americans bury or cremate 20,000 transplantable organs. There is no doubt that this terrible waste would be reduced if we weren’t relying on altruists for our entire supply of transplantable organs.
Here are a couple of pieces on this subject, written by me and Professor Lloyd Cohen of the George Mason University Law School:
The Limits of Altruism and the Power of Self-Interest http://www.techcentralstation.com/082305B.html
Organ Socialism
http://www.lewrockwell.com/orig6/cohen3.html
Thanks, and keep up the good work.
Regarding the “Application to Health Care”:
“A medical student wants to choose a specialty where she can create the most value for others. But since specialists’ incomes do not reflect relative scarcity, there is no way for her to know which field is best.”
This is incorrect. A medical student or doctor has opportunities to learn about the real-life, real-person impacts of specialities she might engage in. This is part of the public’s reasonable expectation that she will consider medicine an elevated and caring profession. Whether she is a free-market enthusiast or a budding socialist, on becoming a doctor she enters into a social contract that exists independently of economic considerations.
“Suppose a wealthy person donates money to build a new hospital. To staff it, the hospital pays wages sufficiently high to draw doctors, nurses and administrative personnel from other parts of the system. Would this new hospital cause unmet needs to go up or go down? Who would ever know?”
This is incorrect. Any hospital worthy of the name makes conscientious assessments of its impacts on the surrounding communities, including benchmark measures of similar communities elsewhere. Any hospital, whether for-profit or non-profit, which does not make such assessments violates the same social contract incumbent on the hypothetical medical student above.
In the real world, the medical profession sells itself to the public, to the government, (and even to itself) as committed to health for its own sake. Under such a self-created aura of implied altruism, it is fraudulent for the medical profession to see its positive aspects as ratified simply by the obtaining of profit.