The other night I felt the need to get offended, so I decided to watch a little Fox News. But, instead of Glenn Beck’s scheduled histrionics, I found myself confronted with something called an Anne Coulter. With sharp analytical acuity, the Anne Coulter equated health care cooperatives, the public option, and socialized medicine – all the same thing – before prescribing “free markets” as the solution to any possible health insurance concerns. I have to admit, I turned Fox off the fourth or fifth time the Anne Coulter repeated the exact same statement about free markets ”historically” driving costs down. But it got me to thinking about how, beyond Republican slogans, health insurance really fits into neoliberal thought.
It’s useful to return to the grand daddy of free market ideology, Friedrich Hayek. Hayek, being a much more serious thinker than the Anne Coulter, gives very specific reasons for supporting free markets. Hayek’s main argument in The Road to Serfdom, one that Milton Friedman would later adopt, is that the needs and desires of the populace are too varied and change too quickly for central planners to take them into account in their production decisions. As a result, central planners – working on bad or outdated information - overproduce or underproduce goods. Furthermore, these production decisions are often biased by the planner’s value-judgements: certain goods are favored over others for ideological or tactical reasons. This misfit between the needs of the people and the decisions of the central planners is what causes central planners to become tyrants: rather than adjusting the plan, the planners force the people to accept it.[1]
That is not to say that Hayek does not have a place for the centralized state at all. Hayek, unlike some of his successors, recognizes that the state must create the preconditions for the market and provide for social welfare. Things like policing fraud or deception, public infrastructure, environmental regulation, and any necessary product or service that cannot be produced profitably fall under the scope of the state according to Hayek. He also includes a more general category of goods best provided by collective institutions: “common ends.” To understand common ends, we have to examine Hayek’s notion of the market. For Hayek, the market is the economic manifestation of pluralism. Everyone can do with their money what they please, fulfilling their own individual ends; to borrow from Hayek’s disciple Milton Friedman, everyone can vote their own tie. With the state, however, this multiplicity of ends becomes a single end or, at best, a single suite of ends. The majority or the dictatorship decides, leaving the preferences of the minority or the powerless unfulfilled or even suppressed. However, according to Hayek, there are situations in which individuals can unanimously agree on ends and, by voluntary agreement, enter into collectives to fulfill those separate but identical, common ends.
It seems, then, that there are three related questions to be answered before we can apply Hayek’s thoughts to the current health insurance debate: (i) is health insurance a good like those described in Hayek’s negative account of central planning, (ii) is publically provided health insurance helpful in facilitating free competition in the market, and (iii) is it possible for health insurance to be a universal or near-universal common end?
I would argue that health insurance is fundamentally different from the commodities that Hayek’s central planner oversees. Unlike the demand for widgets and sprockets, the demand for health insurance does not vary wildly and unpredictably. While preferences for plans and level of coverage might differ somewhat, the need for health insurance is fairly stable. Any economically rational individual would choose some kind of health insurance if it was within his or her means and the rate at which individuals voluntarily change plans is probably measured by years if not decades. So the economic calculations involved providing for health insurance are not comparable to those facing Hayek’s frustrated central planner.
If Hayek would not rule out publically provided health insurance as an instance of bad central planning, would he include it under the state’s purview as a precondition of or an aid to the market? I think he should. While it is clear that health insurance is a profitable industry, the state might still provide it as part of its duty as adjutant to the market. Employer or privately provided health insurance distorts the labor market: many individuals remain in undesirable jobs for fear of losing coverage. And, of course, there are issues involving the burden of health insurance upon small businesses and the unlevel of position of American companies vis-a-vis companies in countries which do provide health insurance.
Finally, there is the question of common ends. In many ways, health insurance is already socialized: it is the collective management of risk. Health insurance consumers realize that they cannot bear the cost of health care on their own, so they join together with others under the umbrella of the insurance company. As the health insurance industry stands now, each company might be described as a Hayekian common end. But would a publically run health insurance company qualify, as well? I see no reason why not. The public option meets several of the descriptors Hayek gives for common ends: it covers a “limited sphere,” it would be entered into by voluntary agreement, and it is a means to fulfilling the individual’s desires rather than an ultimate end.
In light of what we have seen, it should come as no suprise, then, that Hayek – progenitor of neoliberalism – goes even further and endorses universal, government run health insurance in the Bible of the free market movement. After arguing that the state should provide a minimum of social welfare for its citizens, Hayek states:
Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of the assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to supersede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatibility in principle between the state providing greater security in this way and the preservation of individual freedom. (emphasis added)
It seems as if the first intellectual of the free market movement is more of a health insurance radical than Obama! I wonder if anyone’s told the Anne Coulter?
[1] Much of this argument depends on a false dichotomy between free market capitalism and centralized, authoritarian, state socialism; Hayek does not admit any alternatives. Hayek rationalizes the exclusion of a third way in the form of Keynesian liberalism with an argument that is a bit like the capitalist obverse of the Frankfurt School’s administered society: once the state reaches a certain critical mass, its influence extends to all of society and the market just gradually withers away. Meanwhile, more libertarian forms of socialism are dismissed as chimerical, utopian idealism.
