I am sure there are nuanced arguments for government intervention in the health care sector. Not that I would endorse them, but I’m sure they exist. However, Krugman approvingly quotes the following today on his blog, and I don’t think it qualifies:
A medical technology company is going public to generate the money it needs to advertise its products to hospital directors and insurance-company reimbursement officers. This entails significant extra expenditures for marketing, the new stocks issued to fund the marketing will ultimately have to pay dividends, banks will have to be paid to supervise the IPO that was needed to generate the funds to finance the marketing campaign (presumably charging the industry-cartel standard 7%)…and all this will have to be paid for by driving up the price the company charges to deliver its technologies. But beyond the added expense, why would anyone think that a system in which marketing plays such a large role is likely to be more effective, to lead to better treatment, than the kind of process of expert review that governs grant awards at NIH or publishing decisions at peer-reviewed journals? Why do we think that a system in which ads for Claritin are all over the subways will generate better overall health results than one where a national review board determines whether Claritin delivers treatment outcomes for some populations sufficiently superior to justify its added expense over similar generics?
So why stop there, Krugman? (To repeat, those aren’t Krugman’s words above, but he approvingly quotes them.) Why not have a single payer for sneakers and alcohol? Can you imagine how much more efficient these industries would be?
Also, for people like Daniel Kuehn who can’t understand why I exclude Krugman from the ranks of “free market economists”–look at the bold above. If “free market economist” includes people who believe that, then the term is meaningless.