Let’s just put it bluntly. When it comes to economics, most Christians are completely ignorant about even the most basic of economics principles. We might understand the concept of supply and demand, but we even get that wrong a lot of times because we don’t understand what those two factors really signify in the marketplace. There are lots of supply and demand scenarios that we don’t even recognize as such, even though it’s right in front of our face. The same problem extends to all areas of economic thought. Christians just do not have a good understanding of the basic laws of economics. And this is, to me, a serious error on our part.
Why do I think it’s so important? Well, partly it’s because of what i just wrote above. There are laws of economics, just like there are laws of physics. Gravity is a law. And, jumping off of a tall building means you will fall and kill yourself. Even if you don’t understand gravity and could care less about physics, you will still die. And, economic law might play itself out differently in the real world, but it’s no less of a law than physical laws are. If you do A, then B will happen. It’s that simple. And, because of that, Christians are consistently making stupid blunders in thinking on moral and social issues because we don’t understand these things.
Let me give you an example of what I’m talking about. I stumbled on an article the other day while doing some research for an upcoming blog post on retirement. The title is: “Does God only care about abortion and homosexuality?” The article was a critique of a response that William Lane Craig recently gave to a question about politics. In general, I see the writer’s point and agree with his conclusion that evangelicals seem to only get involved in politics when it comes to abortion, same-sex marriage and one or two other hot button issues. This has been a critique by the so-called “Christian Left” for a long time, and it’s generally true. But he attempts to make larger points that show his total ignorance of economics:
I was more than a bit dismayed by these comments. Craig only seems interested in the ethical dimensions of healthcare when the issue touches on the life of a fetus. But what about healthcare itself? Isn’t that a moral issue? What about a baby born addicted to crack? Or a single mom who cannot afford health insurance? Or a family who just had Cigna deny their request for their child’s organ transplant? What about the very idea of a system of healthcare that is driven not by care of the patient but delivering profits to shareholders? What about the soaring profits of corporations like Wellpoint even as they raise premiums on people already living at the margins? On what planet aren’t these moral issues?
–Randal Rauser, ChristianPost.com
This sentence is the heart of his argument: “What about the very idea of a system of healthcare that is driven not by care of the patient but delivering profits to shareholders?” That’s what he is complaining about, and the rest of what he describes are, in his view, logical outflows of that one issue. And that issue is an economic complaint about the nature of health care. He is complaining that health care workers care more about making money than helping people. The problem is that is a completely meaningless, but sadly oft-repeated, statement because of what is called the “economic calculation problem.” Let’s look at it in more detail.
What’s called the “economic calculation problem” is a law of economics that, in part, describes the impossibility of making rational economic decisions when confronted with unknowable values. These unknowable values can be unknowable by virtue of the “knowledge problem” of central planning, or because their value is simply inscrutable, such as with slavery. What is the “value” of a slave? How do you rationally factor labour costs when you don’t value that labour(slaves in this case) in monetary units? You know that the slaves are costing you something, but you don’t know how much. You can’t know because you are trying to factor monetary decisions using non-monetary criteria. It’s the same problem as putting a price tag on “good will” when buying a business. The valuations of the owner, the buyer and independent valuators can be wildly different.
And, this is the problem with a statement like, “What about the very idea of a system of health care that is driven not by care of the patient but delivering profits to shareholders?” Health care providers must operate in the realm of monetary calculation. They cannot purchase 1000 gallons of betadine solution with 100 units of “care of the patient.” That’s completely irrational. There must be money(a medium of exchange) involved in order to make the proper business calculations to properly allocate the necessary resources to provide “care of the patient.” There’s no other way this can happen. And, what’s being completely missed in Rauser’s complaint is the role of the consumer in these calculations.
When he says, “What about the very idea of a system of health care that is driven not by care of the patient but delivering profits to shareholders?”, he’s making an implicit argument that valuing profits devalues your product. But this is silly. It doesn’t matter if the product in question is health care or basketballs. As consumers value your product less, more of them will buy that product elsewhere, which will reduce your profits. In a properly functioning free market, increasing profits requires increasing product value to the consumer. This is the way that businesses know what they are doing wrong and what they are doing right. By profits. As profits go down, good businessmen will see that for what it is: a signal that consumers are valuing their products less. As profits go up, the reverse it true. Thus, you must calculate “care of the patient”, not on some inscrutable emotional level, but by profits. How else do you know, as a business man, if you’ve given satisfactory care to your customers(the patients), unless profits increase. That’s called the price signal.
Rauser has, unknowingly, set up a false dichotomy between profits and product value that doesn’t make any sense. Profits are the results of increasing product value. They are inextricably linked together by economic law. And for good reasons. This relationship of profit to product is absolutely necessary to produce quality products that consumers need. But, Rauser is commenting on the basis of Christian conviction, without a proper understanding of economics to inform those convictions, so what he says comes off confused. He just doesn’t understand what he’s talking about.
I want to make a followup point, though. When the natural relationship of product to profit is interfered with by government intervention, as our health care system has been, bad things happen. Again, there’s the law aspect. I’m not saying that the health care industry as we know it now is functioning properly. It’s not. Government has been slowly encroaching more and more into health care for decades, to the point where most of the industry are actively in bed with government policy makers. They have destroyed their own pricing mechanism through government involvement in the market, so that now, many of them simply don’t have a coherent link to the consumer any more.
The channel of health care provider -> insurance company -> place of business -> consumer with hundreds of layers of mandated government compliance at every step has retarded the price mechanism beyond recognition. This is why the age old example of an aspirin costing $8 per pill in the hospital but .05 cents per pill at the grocery store holds true. The answer to our health care woes, therefore, is to eradicate government involvement from the industry. This would restore the proper competition and economic calculation to the industry. But, something makes me think this isn’t what Rauser had in mind. And that’s too bad. Because, if he understood the underlying economics better, as all Christians should, he would be part of a solution that would restore good quality medical care to even the most poor among us. The problems he lists would be solved once and for all instead of just band-aided with more government manipulation which will eventually collapse the whole system.