Markets Don't Ration
By David Henderson
For example, Uwe Reinhardt, an economics professor and advocate of government-controlled medicine, writes, “In short, free markets are not an alternative to rationing. They are just one particular form of rationing. Ever since the Fall from Grace, human beings have had to ration everything not available in unlimited quantities, and market forces do most of the rationing.”
Sadly, interventionist economists are not the only economists who talk this way. Most free-market economists would agree that where there is scarcity there must be rationing and that the most efficient way to ration is by price, that is, through the market.
This is factually wrong and strategically ill-advised. As we’ll see, markets-even completely free markets-do not ration. Thus the health care debate is not about which method of rationing–State or market–is superior.
This is from Sheldon Richman, “The Market Doesn’t Ration Health Care.”
I am one of those economists who has often claimed “where there is scarcity there must be rationing and that the most efficient way to ration is by price.” But Sheldon Richman’s article has talked me out of that on both grounds: it is factually wrong and strategically ill-advised.
I won’t bother repeating his argument here. He states it eloquently and tersely.
Immediate Update: I just noticed that Don Boudreaux already posted on this, writing:
No non-economist has taught me as much economics as has Sheldon Richman – and few economists have taught me as much economics as he has. Sheldon’s essay here just taught me that I have, until now, misused the term “rationing.” It’s an important lesson.
I would second that, except that there is one non-economist who taught me more economics than Sheldon Richman–a mutual friend of Sheldon and mine named Roy Childs.