Sunday, July 11, 2010

Misreading Hayek and More on Health Care

Writing in Ezra Klein's blog, Dylan Matthews has a maddening post which twists Hayek to imply support for Obamacare. The post is in part a response to this New York Times essay on Hayek which highlights some of the contradictions between the writings of the famed Austrian economist and those who might invoke his name today. The point- which I've made before- is that Hayek was not universally opposed to all forms of social welfare spending, particularly in wealthy countries. Matthews goes further than the Times piece to point out that Hayek had also wrote in support of government health care:

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.

Matthews ends on this note:

Now, Hayek obviously isn't an idol of liberal economic policy folks for a whole batch of reasons, not least the central premise of Road to Serfdom that the sorts of social democratic policies being pursued in the United Kingdom and elsewhere in Europe during and after World War II would open the door to totalitarianism. But it's more than a little jarring to hear him invoked in opposition to a health care bill that's, if anything, less ambitious than the sort of thing he's talking about here.

I'm no Hayek scholar by any means, but you don't need to be to understand that Hayek would be horrified by the centrally-planned, market-manipulating monstrosity that is Obamacare. There's a difference in the state guaranteeing basic quality of life measures (as Milton Friedman did in addition to Hayek, with his support of a negative income tax) and the state manipulating and controlling massive sectors of the economy. That such subtleties are lost is not surprising, given the nature of debate in this country. But it does the left little good to debate Hayekian straw men that exist in the mind of Glenn Beck. Our system of health care in America was already administered through incredibly skewed market mechanisms before the passage of Obamacare. Regulation distorts the functioning of markets and comprehensive regulation which impacts every aspect of an industry is even worse.

This plays right back into the "liberaltarian" arguments I've been making for months now. Support of the free market and opposition to the welfare state are not synonymous. Limited government and free market supporters do themselves no favors by attacking Obamacare as an expansion of the welfare state. Social welfare spending is a definable, controllable expense, but monkeying around with the market can have both disastrous and hard to measure consequences.

Updated 7/12/10 @ 8:00 PM : Will Wilkinson links to the same post, commenting, So Hayek basically had Ezra Klein's views on health care, right?


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Anonymous rose said...

Nice post. Two points.

I'm sure Matthews is aware that both Hayek and Friedman supported state sponsored education as well, but in the form of vouchers, which would allow the market mechanisms of choice and competition to continue to drive progress. It's a perfect analogy for what's wrong with Obamacare and shows how meaningless Matthews analysis is.

Secondly, at least in the economics profession, the center has shifted rightward since the time Road to Serfdom was published, mostly because experience has vindicated the market oriented economists of the early post-war period. The newest published Road to Serfdom features a prologue written by Hayek where he explicitly backtracks on some of the state interventions that he previously thought were acceptable. I assume lots of the "see, the modern GOP is more extreme than Hayek" excerpts that liberals like to quote contain arguments that Hayek later disavowed.

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Blogger Dennis B Murphy said...

The problem with your analysis is summarized in THIS sentence: "centrally-planned, market-manipulating monstrosity that is Obamacare."

The bill does NOT 'centrally plan or market manipulate" to the contrary, it relys on and enhances market competition among insurance companies- uses PRIVATE insurance as the means (rather than a central govt payer as many western European nations have).

In other words, the Health Care Act (obamacare) exactly DOES "help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision."

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