July 31, 2009 1:46PM

Socialized Medicine Socializes the Cost of Irrationality, Too

Over at The New York Times' Economix blog, health economist Uwe Reinhardt has a fun post about the fundamental irrationality of American voters when it comes to health care reform:

To be responsive, then, to the “simple common sense” of the American people, any proposed health reform must not reduce the revenues of hospitals, lest some neighborhood hospital may have to close; or of doctors, lest some doctors might refuse to see patients; or of the manufacturers of health products, lest they are unable to innovate; or of anyone on the supply side of the health sector, lest they go out of business and have to lay off employees.

At the same time, the “simple common sense” of the American people dictates that any health reform that fails to bend down the growth curve of future health spending — the current jargon for controlling health spending better — is unacceptable, too.

But Reinhardt does not ask why the American public is so fundamentally irrational when it comes to health care reform.

The answer is actually pretty simple: government has given us a health sector where everyone is spending someone else's money.  In such an economy, individuals can make irrational demands (cut spending — but don't reduce my access to care!) because they don't bear the cost of their irrationality.

Professor Reinhardt closes, "Your homework assignment, dear reader, is to design such a plan," one that satisfies the irrational demands of American voters.

How about a plan that forces each individual to bear the cost of their own irrationality?  That would improve our health sector — and public discourse.