Greg Mankiw on health care inequality

20/09/2009

Interesting, but:

An optimist might hope that my doctor, or someone higher up in the health care hierarchy, made a rational cost-benefit calculation on society’s behalf. To figure out whether my treatment makes sense, one would have to weigh the cost of the drug against the benefit of an extended life. And to do that, one would have to put a dollar value on my life — the kind of calculation that makes everyone but economists squirm.

Who is that “one” who weighs costs and benefits and puts dollar values on lives? Cost-benefit calculations on society’s behalf make very little or no sense. Only individuals value, and they do so subjectively. Aggregating individual valuations is absurd. There is no objective value of a life. A treatment makes sense for you if you value the life extension it could provide for you more than what it costs to you.

With collective issues such as socialized health care it is not the case that someone at the top wisely decides on society’s behalf. Those at the bottom will support the policies that they think will give them concentrated benefits while diluting the costs (I mostly benefit, others mostly pay for it). Individuals may care for other individuals, so they might also support political measures which do not benefit themselves directly but which benefit others they care for. Individuals also care for ideas like ethical values or principles of social organization, so they might support more egalitarianism or more freedom.

The politicians at the top try to pass the legislation that will keep them in power (or give it to them if they are out of power), so they attempt to produce more popular legislation (keeping the votes they had, winning some more and not losing too many), but voters cannot consider each issue separately, with just one vote for a candidate or a full political program they cannot differentiate which policies they like (and how much) and which policies they do not support.