Tuesday, May 02, 2017

The conservative central planners

Wall Street Journal editorial page angry at scare stories about pre-existing conditions --

This debate is also distorted by a misunderstanding of health risks. The actuarial probability that a healthy person will become sick is already priced into premiums, meaning it is true insurance for unknown future health outcomes. People with pre-existing conditions don’t need insurance—they need help paying for expensive treatment that is already known. High-risk pools are a fairer and more equitable solution to this social problem, rather than hiding the cost by forcing other people to pay premiums that are artificially higher than the value of the product.

Friedrich Hayek, The Use of Knowledge in Society (1945)  --

One reason why economists are increasingly apt to forget about the constant small changes which make up the whole economic picture is probably their growing preoccupation with statistical aggregates, which show a very much greater stability than the movements of the detail. The comparative stability of the aggregates cannot, however, be accounted for—as the statisticians occasionally seem to be inclined to do—by the "law of large numbers" or the mutual compensation of random changes. The number of elements with which we have to deal is not large enough for such accidental forces to produce stability. The continuous flow of goods and services is maintained by constant deliberate adjustments, by new dispositions made every day in the light of circumstances not known the day before, by B stepping in at once when A fails to deliver. Even the large and highly mechanized plant keeps going largely because of an environment upon which it can draw for all sorts of unexpected needs; tiles for its roof, stationery for its forms, and all the thousand and one kinds of equipment in which it cannot be self-contained and which the plans for the operation of the plant require to be readily available in the market. 

The WSJ perspective, which is widely shared by Congressional Republicans, is that healthcare is easily manageable problem that pesky liberals complicate. In fact, in sweeping aside concerns about adverse selection, moral hazard, and the constant flows of people through various health categories through more or less predictable events, they're the ones engaged in the Hayekian delusion about the simplicity with which this market can operate. 

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