A Quick Note on Health Insurance and Free Markets

Having lived through the recent unpleasantness that was the public debate over health care reform in the US there are a lot of observations I could, and probably will, make. Number one on the list, and the focus of this post, is the bizarre level of blind faith a very large number people in the US place in the idea that just turning any economic problem over to "the market" will automatically fix it.

Before getting into why this idea is spectacularly wrong when it comes to things like health insurance, let me get something out of the way first.

1. No, I'm not a communist.

2. No, really, I'm not a communist.

3. I LIKE capitalism. It works really well for lots of things. If I got to build my very own custom-designed society from scratch and I had to figure out what system to put in place to keep its people supplied with basic commodities like food and clothing and transportation and books and televisions and little yellow rubber duckies for the bath, I'm going with the market. It's GREAT at that kind of thing.

Unfortunately, instead of treating it like the useful tool that it is and putting it to use doing things it's designed to do and then hanging it up on the wall when you're finished, there is this large segment of the US population (I'll call them... Republicans) that has decided to practically deify it and declare it's the right tool for ALL jobs economy related. And this is where we run into trouble. Because a free market *sucks* at handling insurance. Any insurance at all really... but especially something like health insurance. To illustrate why this is let's take a look at a very simple example of how market forces act on two different businesses.