One of the great academic accomplishments of our time is our understanding of markets. They are powerful. They can enable human beings to make the most of scarce resources. I believe in having a market economy.
Now let me add a caveat. While I do believe in markets, I also acknowledge market failures (externalities, monopolies, etc.). When there is a market failure, there is a good case for government intervention. Other than those cases, government intervention is probably not desirable. Yet, even with all our understanding regarding the usefulness of markets, we still don’t seem to trust them.
Take healthcare, for example. Why don’t we trust useful, market forces more? I can’t think of a logical reason (though I’ve heard many illogical ones). We interfere with the market all the time. For example, we allow the American Medical Association (AMA) to regulate medical school admissions. This creates, among other things, a shortage of primary care doctors in the marketplace and increases the price of primary care for consumers. Since fewer people have access to healthcare health quality goes down. It may just be me, but this seems undesirable. Don’t get me wrong, some regulation is necessary for medical school admissions (I don’t want my political science major roommate performing brain surgery on anyone), but I doubt the current regulations are worth the price we pay.
But this is just the beginning of how we mess with the market.
Currently, Medicare regularly cuts the amount it pays doctors for performing a service. Congress authorizes these cuts each year. One argument for not paying doctors is that it will shift costs to doctors who, we assume, “can afford it”. Yes, this does shifts the cost burden, but it comes with a tradeoff. This distorts the market, creating a price control. This kind of price control is called a price ceiling and inevitably leads to a shortage of medical care (click here for a very simple graphical analysis). However, if we stopped cutting doctor payments the price of healthcare would remain unchanged. But doctors would, to maximize profits, supply more healthcare to the market. Since more healthcare is available more consumers could access it, improving health outcomes and eliminating shortages.
To make healthcare more accessible, we should focus on lowering the costs of providing healthcare. For example, we can eliminate the excise tax on medical devices the new healthcare law institutes. This will enable more consumers to purchase the devices they need, again leading to better outcomes.
These are just a few things we can do to let the market to function properly. Now, I’m no policy expert, but maybe we should give them a try.
Policy Interns 
