However, it is fruitful to point out that not all markets are created equal. Even if an exchange of money takes place in return for goods and services, the market that exists is not necessarily a free market. Sometimes this is true even in the most idealized of cases.
For example, healthcare isn’t composed of one market, but several between different operators operating under different market forces and regulatory rules. As it’s too complicated to go into each, I’ll go into one that’s most apparent; the market between patients and healthcare providers (not insurance companies!).
Assuming the most idealized of cases that exist without external constraints and regulations, this market would never be a free market. Because the buyer will never be in the position to make the decision to not buy the good. Even a rational free agent would not be in a position to disagree from making a purchase. The value each sentient lifeform places on their life is for all intents and purposes infinity in the healthcare context. No sane suicidal individual or hero would sign up for a purposeless, slow and painful death. This removes the essential mechanism that free markets have to regulate themselves; the freedom to not participate.
In most markets, if a good or service is too expensive then the business selling them will go bankrupt or remain small due to a lack of buyers. This creates an incentive for a cheaper mousetrap to exist. But healthcare isn’t like that. Your choice is severely limited. At best, you can choose between providers (though for serious, and sadly incredibly routine, issues the immediacy of needing treatment trumps this) and at worst you’re unconscious and unable to make any decisions yourself. So the element of choice isn’t present making it axiomatically not a free market.
Please note that I am not going into ancillary factors like the difficulties patients face in making informed decisions, the viral component that exists for certain classes of disease (you choosing not to do X in the case of a serious enough pathogen could lead to a sick household or an epidemic. See: the return of measles), the difficulty of rationing care (Americans spend more partly because they see their doctors less by design and are discouraged from accessing preventative care), and overall incentive misalignment between doctors, pharmaceutical manufacturers, hospital staff, insurers, HMOs etc that creates runaway effects.
We treat all markets in the same way, but they aren’t all the same. The market for healthcare is different from consumer electronics and the market for plastic surgery (a procedure where I must note there is an option to say no). Reductively put, you can choose not to buy a MacBook Pro. But you can’t choose not to treat sepsis. So why does our literature usually assume that both are the same?
>>this market would never be a free market. Because the buyer will never be in the position to make the decision to not buy the good.
A free market does not mean a market where a buyer has a choice of not buying something. It only means one where the market choices of agents are not constrained by coercive intervention of other agents.
We need to buy food, but the market for food is still quite free, and consequently, very efficient.
> A free market does not mean a market where a buyer has a choice of not buying something. It only means one where the market choices of agents are not constrained by coercive intervention of other agents.
That's not how I was taught this concept. I know, Wikipedia is a bad source, but I would like to point out how widespread my specific interpetation is amongst the economics textbooks I've read;
In a free market, individuals and firms taking part in these transactions have the liberty to enter, leave and participate in the market as they so choose. Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources.
Note, enter and leave. This means both as a producer and a consumer, without this we cannot have efficient allocation.
> We need to buy food, but the market for food is still quite free, and consequently, very efficient.
The food market is a really good counter-argument to mine, but when I was first making my observations, I found that food is a very different market that was originally constrained in similar ways but isn't. First is that it's a "market" that's nearing globalized post-scarcity (this doesn't preclude localized scarcity). We produce enough food that we can feed the global population twice over https://ourworldindata.org/food-per-person (3k+ per capita for developed nations and 2k+ for underdeveloped ones).
Humans have reached this state due to government-sponsored research and sponsored application of revolutionary new technologies.
Second, our ability to process food has also led to a surplus in stored calories. We can feed ourselves even during catastrophes (though distribution will remain a challenge).
And third, historically (as I am not certain about this particular point, but it is consistent with my reading of history), prior to the green revolution, the food market was never this free - it has always been state managed to a varying degrees. From feudal lords and chieftains to the Roman grain dole, food has been a carefully managed resources until our time.
Due to its oversupply and heterogeneity, the food market has a very different structure and dynamics that are inherent to it. But, taking my argument at face value, I would argue that it is indeed possible to exit the food market - we can grow our own food! Even a small-ish farm with good practices can feed a family for a year or more using wild seeds, natural compost and herbicides alone.
I could be wrong about the definition of a free market, but the main one on Wikipedia seems to align with my perception of it:
>>In economics, a free market is a system in which the prices for goods and services are determined by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities.
Note "are free from any intervention by a government or other authority" which conforms with my argument that it's a market where the market choices of agents are not constrained by the coercive intervention of other agents. Other agents being the "government or other authority" referred to, and the "authority" alluding to an agent which exercises coercive power over others.
>>Humans have reached this state due to government-sponsored research and sponsored application of revolutionary new technologies.
In the US, since the founding of the country, it has been a very market-based sector, with government's most fruitful contributions being in basic research, as opposed to market inhibiting interventions like regulations.
That would be like the government funding basic research in healthcare, and leaving everything else mostly to people's free choices in the market.
The first places in the world where famine was vanquished were ones with heavily private agricultural sectors with strong contract and private property rights, in Western Europe and North America.
>>I would argue that it is indeed possible to exit the food market - we can grow our own food! Even a small-ish farm with good practices can feed a family for a year or more using wild seeds, natural compost and herbicides alone.
Most people cannot grow enough food to feed themselves. Saying we can exit the food market because we can grow our own food is like saying we can exit the healthcare sector because we can provide our own medical products/services. We can technically, but practically the vast majority would have a much lower quality of care if they did so.
Thanks! I have done my best to study about this topic as much as I can :)
I decided a long time ago that if I was going to be an entrepreneur; I was going to figure out how the whole stack works. And that definitely includes economics.
I’m doing my best to learn how to see things clearly and insightfully. :)
The market for food is different from the market for essential (=life-saving) medicine in that foodstuffs are largely fungible. Consumers can choose from a large variety of roughly equivalent products (e.g., substituting chicken for beef, potatoes for rice, etc.), whereas a diabetic patient cannot switch to a blood pressure medicine. Markets for many common foods can be about the same size as the national population. But markets for drugs will always be a fraction, often a tiny fraction, of the population. Price is also a consideration. While the USDA estimates it is possible to feed a family of four for around $10,000/year, many new drugs cost ten times that amount (well beyond the ability of many individuals, even insured individuals, to pay.)
> We treat all markets in the same way, but they aren’t all the same.
This is completely inaccurate. The US healthcare market (much like finance, pharmaceuticals, construction, most of the largest farming industries, etc, right down to the expensive licensing required to be a hair stylist or interior designer) are some of the most heavily regulated markets in the world.
The US health insurance market has been the farthest thing from a free market for some time. Whether health insurance would benefit from total centralization is one thing (one of the few markets I personally believe in being gov controlled).
Agencies like the FAA and FDA are some of the largest and most thorough of all regulatory agencies in the world. One that other foreign governments with allegedly "big government" administrative agencies look up to as a model replicate or simply take their findings as policy instead of testing their own.
Pretending the US economy is some capitalist free-for-all is one of the biggest global misconceptions.
The rising cost of the US health care market vs the world [1] has little to do with lack of gov intervention but the result of a centuries worth of half-baked compromises between two different worldviews, often featuring the worst of both worlds.
I feel that you are responding a different comment than mine. I have not said that it is a hyper-capitalistic free-for-all. Quite the opposite, from my comment;
> healthcare isn’t composed of one market, but several between different operators operating under different market forces and regulatory rules. As it’s too complicated to go into each, I’ll go into one that’s most apparent
The market that exists between Hospitals and Suppliers is different than Health Insurance and Consumers (and businesses) which is different from Insurance and Independent Providers... There isn’t one big “healthcare” market but several interacting with one another in removed ways.
My definition of a market is,
The term market refers to a situation where buyers (consumers) and sellers (producers) interact (directly or through intermediaries) to trade goods and services. It is a situation where forces of demand and supply interact to determine prices of goods and services being exchanged. Therefore, a market includes mechanism for: determining prices and quantities of the traded item, communicating information about prices, and for the distribution of the goods and services.
This can be argued to a certain degree for any modern commodity, but healthcare is a unique beast in how different forces for each market is and how interrelated they seem to be. However, I can be wrong about this part.
I have also said that I am proving my point in the context of an idealized free market. My goal is to show from first principles what pop literature seems to miss;
> Assuming the most idealized of cases that exist without external constraints and regulations, this market would never be a free market.
I have specified my definition of free markets elsewhere.
For example, healthcare isn’t composed of one market, but several between different operators operating under different market forces and regulatory rules. As it’s too complicated to go into each, I’ll go into one that’s most apparent; the market between patients and healthcare providers (not insurance companies!).
Assuming the most idealized of cases that exist without external constraints and regulations, this market would never be a free market. Because the buyer will never be in the position to make the decision to not buy the good. Even a rational free agent would not be in a position to disagree from making a purchase. The value each sentient lifeform places on their life is for all intents and purposes infinity in the healthcare context. No sane suicidal individual or hero would sign up for a purposeless, slow and painful death. This removes the essential mechanism that free markets have to regulate themselves; the freedom to not participate.
In most markets, if a good or service is too expensive then the business selling them will go bankrupt or remain small due to a lack of buyers. This creates an incentive for a cheaper mousetrap to exist. But healthcare isn’t like that. Your choice is severely limited. At best, you can choose between providers (though for serious, and sadly incredibly routine, issues the immediacy of needing treatment trumps this) and at worst you’re unconscious and unable to make any decisions yourself. So the element of choice isn’t present making it axiomatically not a free market.
Please note that I am not going into ancillary factors like the difficulties patients face in making informed decisions, the viral component that exists for certain classes of disease (you choosing not to do X in the case of a serious enough pathogen could lead to a sick household or an epidemic. See: the return of measles), the difficulty of rationing care (Americans spend more partly because they see their doctors less by design and are discouraged from accessing preventative care), and overall incentive misalignment between doctors, pharmaceutical manufacturers, hospital staff, insurers, HMOs etc that creates runaway effects.
We treat all markets in the same way, but they aren’t all the same. The market for healthcare is different from consumer electronics and the market for plastic surgery (a procedure where I must note there is an option to say no). Reductively put, you can choose not to buy a MacBook Pro. But you can’t choose not to treat sepsis. So why does our literature usually assume that both are the same?