Rizzo started class by saying to us again that there is not enough stuff available for everyone. The way we choose to ration goods determines the way we compete over them. The way we ration goods has long-term implications. Much of economic activity happens over time. When consumers can’t convey values to producers, producers don’t know when to deliver more. The price system allows this. Medicare doesn’t pay for long-term treatments. Medicade covers long-term care. Rizzo’s grandmother had $200,000 and gave it away so that she could qualify for Medicade. It is very hard to allocate financial aid on need base. Doing this is unavoidable though.
When we ration not by lottery, advantages allow people to decide for themselves how or if they are going to get the good. Others forms of rationing take away this freedom. Rizzo told a great story about the swine vaccine and they tried to allocate it based on need. Because of this, people lied and said they needed it when they didn’t. This left some people who did need it without the vaccine.
The beauty of markets is that there is no honor system. We don’t need the vaccine police. Price determines who gets it. NY city has a lot of water shortages in the summer and places restriction on water use in a drought. Shortages will get worse from this. Nothing is a powerful enough incentive besides price. Price should fluctuate on scarcity of water. Prices force uses of water and will make us use less water. No one has to determine the best way to use water under the price system. We are free to use water how you want. It forces us to consider other value that people place on water. Price mechanism shows who needs water more. We have an incentive to use less water. Price system shows that low demand where you live and high demand somewhere else. This will send the product to the area of high demand. Under the price system, it incentives people to get more and better technology for lower prices. It’s harder for the poor to get anything. When you can’t sell something, marginal value of kidney goes through the roof. Causes price of kidney in the black market to be very high.
Problems in health care. In respect to basic needs, developed countries have safety nets to make sure ones not well off have care. More or better determined by income. Britain tries to allocate- inequality of access to come is worse today than when the allocation started before WW2. Some questions to think about are,
1. Is it possible to make access to health care every person.
2. If possible could we make access independent from income desirable.
3. If its neither possible nor desirable, why do many people talk about it?
Depending on where you live, get better care. We can’t create equality of skill of doctor. Higher incomed people can get to better doctors and spot where openings are. The wealthy can get to the head of the line easier if rich. There is a major racial gap now with organ transplants of kidneys. Racial and ethnic minorities, as well as poor people are less likely to get kidney transplant. There is a system set up to prevent this but it still happens. People have an easier way to get things when they are rich.
Rizzo lives closer to bad schools but sends his kids further away to the best school. Bad schools in bad areas are where the poor live. There is never equal access to things. If we did make access equal, would we make choices by flipping a coin? This doesn’t happen. Doctors make similar decisions all around the world based on what they think, not equality.
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