Editor’s Note: This column was first published on August 7,
2009.

Health care reformers say they have two
objectives: to enable the uninsured and under-insured to consume
more medical services than they consume now, and to keep the prices
of those services from rising, as they have been, faster than the
prices of other goods and services. Unfortunately, Economics 101
tells us that to accomplish those two things directly—increased
consumption by one group and lower prices—the government would have
to take a third step: rationing. The reformers are disingenuous
about this last step, and for good reason. People don’t like
rationing, especially of medical care.

But some defenders of government control acknowledge that
rationing is the logical consequence of their ambition. They parry
objections by saying in effect: “So we’ll have to ration. Big deal.
We already have rationing—by the market.”

For example, Uwe
Reinhardt, an economics professor and advocate of
government-controlled medicine, writes, “In short, free markets are
not an alternative to rationing. They are just one particular form
of rationing. Ever since the Fall from Grace, human beings have had
to ration everything not available in unlimited quantities, and
market forces do most of the rationing.”

Efficient Pricing

Sadly, interventionist economists are not the only economists
who talk this way. Most free-market economists would agree that
where there is scarcity there must be rationing and that the most
efficient way to ration is by price, that is, through the
market.

This is factually wrong and strategically ill-advised. As we’ll
see, markets—even completely free markets—do not ration. Thus the
health care debate is not about which method of rationing—state or
market—is superior.

Let me be clear about what I am not denying. I am not denying
that economic goods are by definition scarce and that at any given
time we must settle for less of them than we want. I am also not
denying that the marketplace is relevant in determining who gets
how much of those scarce goods.

I am denying that this is appropriately called “rationing.”

Markets
Don’t Do 
Anything

To see that the market does not ration one need only see that
“the market” doesn’t do anything. To talk as if
it does things is to reify the market—worse, it is to
anthropomorphize the market, ascribing to it attributes—purposes,
plans, and actions—that only human beings possess. We may also see
this as another instance of literalizing a metaphor, which,
as Thomas Szasz has so often warned, is fraught with
peril.

I’m not saying that economists don’t realize this diction is a
metaphor. Of course they do, and there’s no harm in using this
shorthand among those who understand it as such. The problem, as I
see it, is that the general public doesn’t fully grasp the
metaphorical nature of these statements. For the sake of public
understanding, free-market advocates should not welcome a debate in
which they begin by saying, “Our method of rationing is better than
your method of rationing.”

Better to respond to the interventionists this way: The market
does not ration or allocate. The market does
not do anything. It has no purposes or
objectives. It is simply a legal framework in
which people do things with their justly
acquired property and their time in order to pursue their own
purposes.

Mises and Hayek

This is squarely in the Austrian conception of the market as set
out by Ludwig von Mises and F. A. Hayek. The market order “has no
specific purposes but will enhance for all the prospects of
achieving their respective purposes,” Hayek wrote in volume two
of Law Legislation, and Liberty.