Recently, Canadian Prime Minister Jean Chretien changed his mind about his country's system of socialized medicine. After long and hard opposition, he now favors a two-tier health system, including user fees and private provision. This makes it all the more important to take another look, not just at the surface of state-run medical care, but at its basic principles.
Ever since Vancouver Canuck hockey player Daniel Sedin jumped the health-care queue with his herniated and ruptured lower back disc, there has been an outbreak of wailing and gnashing of teeth on the part of defenders of socialized medicine. Nor was this the only such high-profile case. About a year ago Grizzlies basketball center Bryant "Big Country" Reeves hurt his ankle and was similarly catapulted to the head of the medical waiting list. But beyond such headline-grabbing cases there are numerous other privileged characters; politicians and bureaucrats and their families and friends with political pull and doctors, nurses, other health-care professionals, and those who can rely on them for favors. This is called "professional courtesy."
Most complaints have focused on the unfairness of a system that allows the privileged to receive medical care within a few days of an injury, while forcing others to wait weeks and even months, if not years. But this is exactly backward. The problem is not that some few people are treated quickly, as they should be. It's that we aren't all dealt with like members of an advanced civilization, where quick service is always the order of the day. We all should be treated like paying customers-and if we were, we would be.
Why are there long waiting lines that do not dissipate quickly? In economic parlance, this comes about because demand is greatly in excess of supply. There is no other reason; that is it: supply's falling short of demand is a necessary and sufficient cause of long and enduring queues.
But to answer in this manner is only to put off the inevitable question: why does demand continue to exceed supply in some markets but not in others? Again, the answer comes straight out of Economics 101: a permanent shortage arises and endures if and only if prices are pegged at below-equilibrium levels and kept there through force of law.
Some people think there is something special about medical care. There is not. Yes, if we do not avail ourselves of it, we will be in dire straits. But no less can be said for food, clothing, shelter, energy, transportation-you name it. And economic law, just as in the case of chemistry or physics, is no respecter of how important an industry is to human well-being; it works just the same in medical services as for paper clips or rubber bands. Impose artificially lower prices in a market-let alone virtually zero prices as in medicine-and you guarantee a shortage.
If any evidence of this phenomenon were needed, it has recently been furnished in three completely separate markets. Rent control pegs rents below market levels; it reduces incentives to supply additional residential rental units and decreases benefits to tenants who economize on space. The energy shortage in California stems entirely from the fact that retail prices are fixed at artificially low levels, thus retarding incentives on the part of customers to decrease their usage, and on the part of potential suppliers to bring more energy to this market. …