Monday, April 23, 2007

A Free Market in Childbirth

My latest article published by the Ludwig von Mises Institute

A Free Market in Childbirth
By Jim Fedako

Recently, my wife and I celebrated the birth of our fifth child in twelve years. Over that stretch of time, we have seen hospitals adapt to the wants of the consumer: future mothers and fathers. Some of the changes we have witnessed have been subtle, mere nuances, while other changes have been quite dramatic. Together, these changes lead me to two conclusions: I love the free market; and, I would love a truly free market in healthcare.

The Free Market

In the technology-driven free market, twelve years is an eternity. It's sometimes hard to imagine how fast life is changing, as the only-imagined gigabyte is now standard and soon to be substandard. For a reminder, simply contrast the box that sat on your desk in 1995 with the current data-cruncher that easily folds into your briefcase.

Over this same period, businesses have improved their ability to bring products to the market, and to satisfy consumer demand for the intangible, such as customer service, quality, options, etc. Sure, there are blips and occasional bad patches, but consumer demand is driving changes that benefit us all.

The entrepreneur looking for profits is always one step ahead of the consumer demands of yesterday, yet still behind the ever-distant horizon of consumer wants. Even before our previous demands are satisfied, we already desire the as-yet-to-be-created product or service. Moreover, it's the ever-distant wants-horizon that sometimes leads consumers to believe that the free market is not efficient, not the optimal delivery system in a world of scarcity.

Yet, the free market continually improves the condition of man. While these improvements go unnoticed in the short term, over the long term the staggering level of change is stark indeed. The internet, cell phones, e-business, etc., were the storylines of comics and sci-fi books but 25 years ago. The dreams and plans unleashed in a profit-seeking environment have improved the quality of life for all of us; nowhere more obvious than in the healthcare profession.

Consumers want more than just new and improved products; they want experiences that leave them satisfied; satisfied in the short term anyway. The consumer is certainly a heartless taskmaster. We want cheaper products, higher quality, and a better shopping experience.

In the hands of a central planner, those three distinct wants would be judged mutually incompatible; a certain impossibility in his mind. The planner would suffer exhaustion trying to satisfy even one of them. Yet, the entrepreneur must satisfy all three or he loses his position and becomes a simple wage earner, such as this writer. Though exhaustion and fatigue are real, the consumer cares nothing of the pains of the entrepreneur. If the entrepreneur is not up to the task, there are legions ready to replace him.

So, we have supermarkets with low-cost, high-quality foods from all over the globe. Nevertheless, that is not enough, the shopper also wants to get in and get out as quick as possible, hence the self-service checkout lines. Once those aisles appeared in one store, other stores were forced to follow suit. The decision to invest was not made by the grocer on behalf of the consumer; the decision was made by the consumer without regard to the grocer. Woe to the grocer who fights such changing consumer wants.

I just love the free market. Something new and improved is coming to stores tomorrow, and tomorrow, ad infinitum.

Healthcare and Childbirth

Certainly third-party payers, guild professionals, and government regulations have created a system of healthcare that would improve dramatically under the pressure of profits in a free market. Yet, I have seen changes over the past twelve years of deliveries to recognize a system ready to improve in the manner of Moore's Law; if only healthcare were subject to a truly free market.

During this latest delivery, the nurses were exceedingly professional and caring — as they had been with each previous delivery — yet this time they were well versed in the language of the consumer. As one nurse assured us, "This experience is yours. We want to make it special for you since we know that you will tell your friends about us." What? Yes, the nurse was looking out for our wants, and fearful of competition from the hospitals just down the road.

Sure, the soda was generic and the father's hospital gown was gone from the delivery room, but those were never the concerns of ours. There were new tangibles such as security systems for the newborn and cable TV — to ease the hours of waiting for our newest arrival. In addition, there were the intangibles that come with providing an environment that felt more like Disneyland than a hospital. In a word: wonderful.

Now, it was not always this personal. Go back twelve years and the hospital was more concerned about their own rules, and less concerned about the patient and family. Where the hospital now has a 24/7 Tim Hortons restaurant loaded with donuts, bagels, soups, and sandwiches, the same hospital used to have just the simple hash-slinging cafeteria. To think, Tim Hortons is profit seeking, yet I was able to feed my four children fresh sandwiches for less than $15 — in a hospital setting nonetheless. What a wonderful concept, this free market.

Through this latest experience, I observed and contrasted nurses with public school teachers. Both claim to care about children, yet only the nurses are willing to accept the free market and consumer demand.

The fear is that public employees will turn from helping children into profit-maximizing automatons for dollar-hungry investors; in short, children will suffer. Yet, there I stood helpless in the delivery room as a squad of nurses raced to help my newborn who had arrived a too-dark shade of blue. I can honestly state that a unionized workforce, protected by government monopoly power, could not have provided any better service. As I replay those first minutes in my head, better is not an adjective that comes to mind as the staff addressed the situation like true professionals.

OK, the hospital was a not-for-profit entity. Yet, even as such, it has to satisfy the consumer. Choice in hospitals has created a pseudo–free market in healthcare. Woe to the hospital that turns its back on its patients.

I am convinced that deregulation of healthcare would only improve the system. Break the healthcare guilds that exist all the way from medical education through licensing, reduce government interventions, and watch the healthcare system improve at Intel speed. Please do not advocate for a government-run healthcare system, or even its predecessor, universal coverage. Think Walter Reed or the Soviets before going that route.

I am fearful of a government-run, centralized healthcare system staffed by a unionized workforce. My own experience would have certainly been quite different. Funny, those forced to chase the almighty dollar are always those who serve the consumer with smiles and helpful hands. I dream of the day when the future Michael Dells and Bill Gateses of healthcare are the ones driving improvements, from their garages or basements if needed.

Yes, the consumer in that day — including my newest son — will still be slightly dissatisfied with their situation, not because it is not better than what I experienced, but because it is not as good as his dreams and desires.

Given that reality, the entrepreneurs of that age will be working to exhaustion in order to satisfy the dreams of the ever-distant horizon of consumer wants. What a wonderful world that will be.


Jim Fedako, a former professional cyclist who lives in Lewis Center, OH, is a member of the Olentangy Local School District and maintains a blog: Anti-Positivist.


Anonymous said...

Interesting how you say in one post education doesn't adapt to the needs of the consumer and in another you bash education for wasting tax dollars trying to introduce new and improved curriculum and courses to fit the needs of the majority of their consumers. Your mouth must ache from talking out both sides.

Education is very much like the security system and Cable TV the hospital offered. You enjoyed it and were pleased to have it. Think of those who visit that same hospital and don't want TV and don't care about security systems that can be circumvented. They are still required to pay the same fee you paid. They don't get a reduced bill just because they ignore the clicker or sneer at the electronic ankle bracelet. They can't go down the road and find a hospital that doesn't offer those services just to save a few bucks. They are forced to cover those expenses to please the majority of the consumers. They are forced to share the added cost of TV and security.

Now, instead of being one who enjoys the services provided to consumers of public education you are one who is disgusted you are required to fund someone else's wants. That's life. I see no point in fantasizing about a perfect economic system anymore than I wish to fantasize about honest politicians. They both are the proverbial unicorn. If you know of a place that has this perfect economy than I'll buy a one way ticket for your family and mine.

Congrats on your new baby boy, he is blessed to have loving and passionate parents.

Jim Fedako said...

You are missing the point: One is government, while the other is at least a nongovernment entity.

Sure, I pay for the blue Peanut M&M's, though I would not purchase them if could. While it is true that I don't have to purchase M&M's at all - thus boycotting those nasty blue ones, I must pay taxes regardless of whether or not I desire the supposed public good resulting from my coerced tax dollars.

If you don't like the mix of services at the hospital I used, you are free to go to any other you chose. Or, you can abstain and save by using midwife services. Should you abstain, you will not be billed for my use of hospital services.

Don't like insurances offered at your place of employment? Then simply become self-insured. I spent years self-insured and was able to select policies that provide for my wants and desires, at a sensible cost also.

We are at a crossroads: either we allow the slow drive to socialized healthcare to continue; or we rebel against such a failed system and begin pushing for a free market solution.

Oddly enough, while our memories may fail, our system wasn't always like this. Our nation was not founded by those who sought a state solution for perceived failures. We were founded independent souls who fought for Liberty.

Regarding education: It is a government-run system that will always waste money and fail to adapt to the needs of consumers. There are no real consumers, as all have to pay. There are those who benefit, and those who pay.

Governments do not work for a consumer - as they have none - though they do work for those who benefit from the service - the administrators and teachers.

That is not talking out of both sides of my mouth; it is simply the reality of government.

So, based on your comments, why would a government-run education system that is looking out for the consumer fear competition from schools of choice - charters and vouchers? If they are indeed working for what you term the consumer, and if they possess an underpaid, high-performing workforce, they should not fear competition from any entity.

I am not a free market utopian. I only claim that the free market works for the consumers, making all consumers better off. Government works for the tax consumers, leaving the taxpayers worse off - and, in the long run, the tax consumers end up being worse off also.