Public Goods vs. Private Goods

Funny, but I haven’t spent a lot of time on issues with these posts. I’ve talked about general concepts like racism, leadership, and judgment, but I really haven’t dived in and talked about a core campaign issue. The cult of personality of Donald Trump dictates that we could talk about him all the time. I still could today because he is in the news, but this time I want to talk about health care.

In order to do this I’m going to start with a general topic in economics that I like to call public goods vs. private goods. Fear mongerers love to talk about socialism or communism. I don’t find these terms very constructive. The main reason is that we already have elements of both capitalism and socialism in our society. So, I prefer to think of them as public goods or private goods.

A public good is a good that is provided by the government or regulated to the point where one single entity provides it at the behest of the government. We do this for a variety of reasons. The main reason is that it is just more efficient to do it that way. The right loves to poke fun at government and how inefficient it is. It is true that government is inefficient at doing a lot of things, but that is not true across the board.

The postal service is a public good. National defense is a public good. Public education is a public good. We could go down to the municipal level and include public libraries, community centers, and then include industries that do not have competition but are not necessarily run by the government directly. This includes landline phone service, electrical services (in terms of the infrastructure) and things like that.

Private goods are goods manufactured or created by private companies and sold for profit. They include goods and services. Televisions, clothes, computers, phones, and other consumer items might be regulated loosely or more by the government, but the government does not produce them and does not profit from it.

These are things the government would be very inefficient at producing. The regulation is meant more to protect consumers and not necessarily to tell those businesses how to build a better mousetrap. So, we regulate the advertising end of it. They provide for basic safety regulations in the production of the item. They regulate parameters around labor and some of the materials involved. They don’t tell Samsung how much they can sell the television for.

If you shot up every politician with truth serum they would admit that there should be goods that are public and goods that are private. They might disagree on which specific ones fit into which category and they might disagree on the level of regulation of private goods, but they all agree there shouldn’t be a world where 100 percent of goods are public or 100 percent are private.

I would stipulate that a good should be classified as public under three conditions. First, the good is produced more efficiently or regulated more efficiently by the government. Second, the mere existence of the good as a private good is morally repugnant. Finally, the free market cannot exist for that good.

Where does health care fit into this paradigm. The second test is difficult to prove. How do we grade anything as repugnant? Well, profiting off of other people’s health and misery seems pretty damn repugnant. However, no one would begrudge a doctor or pharmaceutical company’s right to make an honest buck helping people be healthy. The question comes down to the difference between an honest buck and gauging. This is where regulation comes in.

The first part of the test is also difficult. Our health care system exists, so it is not impossible for it to be run by private entities. However, this is where the rubber meets the road. Is it the most efficient use of resources? If we make an honest comparison with the rest of the developed world, would we find that the American system is efficient? My guess is no. Opponents of “socialized medicine” will point out that some procedures take longer if they are elective in nature, but we have to look at the overall results. Are people healthier here and at what price?

My chief complaint with health care as a private good is that private goods exist in a free market. If beef suddenly went up to 50 dollars a pound then I could purchase a substitute good like chicken, ground beef, SPAM, or fish. I don’t have to eat steak to survive. Therefore, the consumer has power in determining the cost of a consumer good like beef.

The same is true for televisions, cell phones, computers, new clothes, and any other traditional consumer good you can think of. We can shop different providers and each of those have a substitute that is available as well. What is the substitute for health care? When I’m sick I might be able to select my doctor, but I better go to a doctor. If doctors all bandied together to charge 1000 dollars an office visit then what would my recourse be? Voodoo? Witch doctor? Holistic medicine? I think everyone sees the point.

I went into the hospital 18 months ago for an infection in my foot. It required surgery to clean the infection out and I stayed in the hospital for six days to regulate my blood sugar as well. Before insurance got involved, that visit ended up costing 70,000 dollars. Thankfully, I have good insurance, so our family was not bankrupted in the process. Could you imagine it if we had no insurance? What would have been my recourse? I could have not gone to the hospital and likely lost my foot. Millions of Americans are one major emergency away from bankruptcy. That’s no way to live.

When a good is a public good it is a fundamental right. We have collectively decided that a free and appropriate public education is a right for everyone in this country. It doesn’t mean people can’t choose a private option. Private and parochial schools do very well because they can offer something that those public schools don’t offer.

If I fully commit to the parallels between health care and education you have to consider this: how do businesses make money? They charge more money than they spend. That means that the price goes up and it also means that costs go down. I work in public schools because public schools need specialists to accommodate the needs of every child. Private schools don’t have to do that. They can deny your admission because you have a learning disability or because you have a physical disability that would require them to spend too much money to accommodate.

In a similar way, private insurance companies can deny you coverage outright or can deny your claim because it would eat into their profits. That’s repugnant. Sarah Palin and conservatives in the last decade loved to tout that the ACA was going to have “death panels”. I wonder what they think private insurance is. If they deny a patient’s cancer treatment because it eats into their bottom line then what exactly should we call that?

Now, to be perfectly fair, these decisions are made in public and private systems. The main difference is that profit motive is not the motivating factor in a public system. Public schools don’t make a profit. Someone may disagree about how we are accommodating a child’s disability, but I can guarantee that costs is not the driving factor in that decision. It may be a consideration down the line, but it isn’t the driving force.

We do just fine in education with a public and private option. I suspect we would in health care as well. Public education certainly isn’t free and neither should a public option in health care. I’m not a health care expert. I’ve heard the proposals of a public option as compared to a single payer system. My opinion is not set in stone yet. I want to hear more. What I know is that what we are currently doing is not the best thing for every American.

Author: sbarzilla

I have written three books about baseball including The Hall of Fame Index. I also write for You can follow me on twitter @sbarzilla.

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