How Ludwig von Mises Explained America’s Healthcare Mess

By Carl Close / Independent Institute

Ludwig von Mises died in 1973 and wrote most of his books well before Barack Obama was born. Nevertheless, the unofficial dean of the Austrian school of economics provided an indispensable framework that enables us to understand, at the most fundamental level, why the president’s healthcare law has disastrous side effects—and why the U.S. healthcare system was sick even before Obamacare. In his new book, Choice: Cooperation, Enterprise, and Human Action, Robert P. Murphy explains the ongoing relevance of Mises’s unsurpassed contributions to economic theory and the analysis of public policy.

It was Mises who gave us the crucial insight that free-market prices act to coordinate and harmonize the economic plans of everyone who buys or sells goods and services, Murphy explains. The American healthcare system, however, is plagued by government policies that distort the price system. Medicare’s arbitrary fee schedule is a prime example.

Mises also explained that government intervention in the economic system creates imbalances that foster pressure for subsequent interventions. The U.S. government’s differential tax treatment of health insurance, for example, artificially stimulated the growth of the third-party payment system, which contributed to rising healthcare costs—one impetus for Obama’s overhaul of the healthcare system. Obamacare, however, imposes new regulations, mandates, and taxes that harm job growth, stifle consumer choice, and create pressure for additional interventions. Murphy writes in his concluding chapter: “Deviations from laissez-faire capitalism are self-defeating, and pushed to their logical extreme—outright socialism—only invite total war and economic chaos.”

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