When I don’t have time to blog I still share my thoughts, just in much more compressed form and mostly with Aaron. As we’ve come to learn, he and I basically share the same brain so I can communicate what would be a 500-word blog post to him in about 12 words. Why don’t I tweet it? Seriously, I don’t know. Sometimes I like things to be more private.
Anyway, yesterday, as Paul Krugman was gearing up for his latest column, practicing his arguments on his blog, I kept emailing Aaron that what he was saying was old news, very old. Meanwhile, a few bloggers picked it up as if it was a new insight. I’m sure they know the history, but just didn’t want to go into it. What was Krugman talking about and why am I so sure it is an old idea? He just explained in a post, so now I don’t have to:
Readers familiar with health care economics may have noticed that today’s column was largely a translation into English of part of Kenneth Arrow’s seminal article on the economics of medical care (pdf), especially part IIB — the article that explained, half a century ago, why health care can’t be treated as an ordinary market. It’s amazing that we’re still fighting to get people to understand the same lesson.
What Krugman was focusing on was the fact that physicians (as well as other providers) have much more information relevant to health care than do consumers. That information asymmetry confers market and political power. (That power is there, whether exploited or not.) Much about our health system and costs follow. More here. See also the work of Paul Starr.
Yes, it is amazing that people don’t understand this. I find it hard to believe that that is so. Is it? Or do some people just pretend not to understand it? Is this a hard concept or not?