“Rationing Truffle Oil:” Also Known as “Buying Food”

Jonathan Darden replies to my post criticizing the fact-checking industry. I don’t want to rehash the whole debate about Sarah Palin and death panels, but in the course of his response Jonathan makes a very strange argument. He criticizes me for believing that healthcare can be rationed according to a free price system. He writes:

While [price rationing] is fine for most goods, I think the case is significantly weaker for health care. No one cries themselves to sleep over the idea that their neighbor cannot afford truffle oil. At the same time, the idea that the neighbor will die because he cannot afford open-heart surgery or chemo is highly objectionable to most people.

This is a strange argument, because it assumes that the more “important” a good is, the more the government should interfere to ensure can access it. At the same time, in mentioning “truffle oil,” he only reminds the reader that, not only truffle oil, but every other kind of food is subject to free market pricing and government non-interference. But by almost any definition, food is much more important than healthcare. While you can die from lack of chemo treatment, you will surely die much quicker and more painfully from lack of access to food.

Nevertheless, there is no analogue to Medicare for food. Programs like food stamps are relatively tiny and have little effect on the market. And yet, while healthcare costs have skyrocketed since the advent of Medicare, food prices most certainly have not. While huge numbers of people struggle to afford healthcare, hardly anyone in the developed world cannot afford basic food. And though some groups attribute healthcare’s price increase to “better medical technology,” it is hard to understand why technology leads only to ever-increasing costs for healthcare but not for, say, computers, cars, or iPhones.

Indeed, we should thank our lucky stars that the people who “cry themselves to sleep” over lack of access to important goods have not turned their benevolence to food, whether simple bread or truffle oil. What could we expect from such a “Foodicare” program?

For one thing, given the fact that the entity paying for the food (the government) has virtually unlimited resources and commits to covering all the recipient’s costs in advance, we can expect sellers of food to continually increase their prices. (We observe the same effect not only with healthcare, but also in the heavily-subsidized education industry, where, because of subsidization, there is no market-clearing price.)

We can also expect that people who might have held back from buying more expensive foods if they had to cover the costs themselves would decide to take them once the government foots the bill, thus driving up prices more. As prices rise, we can expect that the Foodicare recipients will become less and less able to pay for food on their own, and ever more dependent on the Foodicare program.

Meanwhile, for the people who don’t receive Foodicare, the only way to combat ever rising prices will be to buy some private insurance. But this will only exacerbate the problem of third party payers and drive prices up even more. Not only will they have to buy their own private food insurance, but they will also suffer an ever-rising tax burden as the cost of Foodicare increases, leaving them less money for other, non-food related things.

Eventually, some future Jonathan Darden will scoff at the naivete of anyone who could ever believe in a free market for food. “We can’t end Foodicare as we know it!”

In a sense, though, Jonathan is right that free-market pricing is just another form of rationing, like government rationing. But he’s only right in the sense that he could say that gardening and self-mutilation are both things that people do in their free time. One system of rationing is healthy and functional, and leads to lower prices over time as businesses try to expand their reach to the broadest market possible. The other is usually the outcome of failed government policies aimed at providing free goods, but which have actually driven up prices or demand to unsustainable levels. We have not yet got to the point where healthcare must be rationed. But when we do, I highly doubt that anyone will find it comparable to life under a free price system.

N.B. Jonathan makes two other unrelated points that don’t fit into my response. For one, he says that the statement that states don’t have to set up Obamacare exchanges is “true, but inconsequential.” While who sets up the exchange may be inconsequential on a macro level, it is certainly not inconsequential for the state government that has to decide whether to set one up. Second, he says that Sarah Palin couldn’t have been talking about rationing when she mentioned death panels, because she was referencing the Independent Payment Advisory Board. But the Independent Payment Advisory Board is set up to decide how to allocate scarce Medicare payments, which clearly involves rationing. Perhaps he means that Sarah Palin’s son is not himself a Medicare recipient. If so, I concede the point, but maintain that that is the definition of “true, but inconsequential.”