Medicine as a Subjective Good
Americans’ freedom was suspended during the COVID-19 pandemic in part to prevent overwhelming the health care system. A shortage of hospital and intensive care unit (ICU) beds allegedly justified some of the most radical suspensions of liberty in American history: business shutdowns, school closures, and stay-at-home orders.
Consider in contrast the rationales political theorists offer to justify human freedom. Arguments include our possession of rational faculties, our capacity to interact peacefully with others, the moral value of all persons, and the indispensability of freedom in pursuing happiness given subjective preferences.
No philosophical argument for freedom depends on the absence of shortage in any market. America’s public health establishment espoused a preposterous political philosophy. Shortages of other goods -- like toilet paper or hand sanitizer in 2020 or gasoline in the 1970s -- were never claimed to justify the suspension of freedom. Since economic freedom improves the performance of markets, shortages should call for more freedom, not less.
What lies behind such bizarre political philosophy? I suggest an economic fallacy, the objective good (or cost) fallacy. The health care establishment views medical care as an objective good. The objective good fallacy sustains the myth of efficient expert management and the desperate suspension of freedom in the face of a shortage.
Economic value is subjective, meaning that it exists in the eyes (or preferences) of the consumer. Goods have value because people willingly trade their time, effort, or money for them. Economics does not try to explain preferences. Nor in a free market must consumers justify their purchases to any authority, with a request voided for an insufficient justification.
By contrast, many people see medicine as objective. Objective means independent of the subjects’ perceptions; two doctors should readily agree on a diagnosis and course of treatment. The objectivity of life and death provides medicine with an objective element. A massage will not cure cancer regardless of the subjective beliefs of the patient. This element of objectivity provides a foundation for the fallacy.
Many subjective goods, however, possess an objective element. Whether a “boat” will carry passengers across a river is objective. A cement boat will sink, regardless of the consumer’s subjective belief. Yet only the customer can judge if the value of crossing exceeds the cost of a seaworthy craft. Value remains subjective.
Ultimately, medical care is no different. The existence of treatment options highlights the subjectivity. A knee injury could be treated with ibuprofen and a brace or could require surgery. Dialysis or a transplant can both treat kidney failure. Plastic surgery can prevent lacerations from producing scars. Only the patient can evaluate these options. Informed consent, the foundation of modern medical ethics, implicitly acknowledges subjective value.
The objective good fallacy sustains the illusion of efficient bureaucratic rationing. Scarcity is an objective fact of the world, and every economic system must address it through rationing. With health care, doctors certify “need” based on their expertise and insurers pay only for procedures judged medically necessary. Insurers, doctors, or hospitals negotiate the tradeoffs, and this performs the bulk of the rationing. Patients presumably only demand medically necessary treatments and do not appear shortchanged.
Pain management reflects the absurdity of ignoring subjective preferences. Doctors ask patients to rate their pain on a scale from 1 to 10, as if “7” has some interpersonally valid meaning. The tradeoff between pain management and impairment from strong medicines is subjective. Patients willing to pay can only access strong painkillers if they can justify their preferences to a doctor. And a politicized system allows elected politicians to interject their preferences.
The objective good fallacy is closely linked to the objective cost fallacy. In the subjectivist economic tradition, cost must be borne by the decision-maker. An objectively defined good can be costed using market prices for all the components and this cost shifted to third parties. In reality, shifting cost also shifts decision-making; it is no coincidence that James Buchanan titled his book on the subjective cost tradition Cost and Choice. Third-party payment by insurance or government necessarily means bureaucratic decision-making.
All production processes have capacity constraints. Airplanes have a fixed number of seats and hotels a fixed number of rooms. Variations in demand creates the potential for periodic shortages. In markets, fluctuating prices and contracts manage potential shortages. Reservations and appointments help manage capacity constraints, with commitments like nonrefundable deposits locking in rooms or seats.
Our health care system treats facilities -- hospitals, ICUs and ventilators -- as open access resources. Doctors can send sick patients to a hospital and emergency rooms are open to all. The non-market system sustained by the objective good fallacy blocks evolution of contractual arrangements to manage crowding. Instead, the governing experts during COVID-19 turned to draconian restrictions on freedom to control crowding.
Concierge medicine illustrates a market alternative. Wealthy customers pay to avoid open access crowding (e.g., waits to schedule surgery); concierge doctors worked to secure care for their patients during the COVID-19 pandemic. While some criticize this as preferential access, I see it as empowering customers over experts.
We would never consider issuing stay-at-home orders to prevent the overcrowding of flights. That the experts running America’s health care did so during COVID-19 is partly due to an economic fallacy. If we find restrictions on freedom due to healthcare shortages intolerable, we need to begin thinking about medicine as a subjective good and embrace a market for health care.
Dan Sutter (firstname.lastname@example.org) is a policy advisor with The Heartland Institute.