CAPITALISM AND FREEDOM, by Milton Friedman, The University of Chicago Press
“The United States has continued to progress; its citizens have become better fed, better clothed, better housed, and better transported; class and social distinctions have narrowed; minority groups have become less disadvantaged; popular culture has advanced by leaps and bounds. All this has been the product of the initiative and drive of individuals co-operating through the free market. Government measures have hampered, not helped this development.”
UNCERTAINTY AND THE WELFARE ECONOMICS OF MEDICAL CARE, by Kenneth J. Arrow, The American Economic Review
“The failure of the market to insure against uncertainties has created many social institutions in which the usual assumptions of the market are to some extent contradicted. The medical profession is only one example, though in many respects an extreme one.”
Comment:
By Don McCanne, M.D.
The United States has by far the most expensive health care system in the world, and yet its performance is amongst the poorest of industrialized nations.
There is a wide difference of opinion as to what we should do about this. We have a mixture of government programs such as Medicare and Medicaid and private programs such as individually purchased and employer-sponsored private insurance. The mixture of public and private is quite complex, but obviously our high costs and poor performance confirm that we do not have a viable combination. Which way should we go?
It’s time to take an objective look at the contrasting views of two of our most noted economists – Milton Friedman and Kenneth Arrow – each the recipient of a Nobel prize in economics. Although neither totally dismissed private markets or a government role in the health system, they did definitely disagree on the degree of control that private markets should have. Friedman believed that the free market should predominate, whereas Arrow believed that in health care the laissez-faire solution is intolerable due to tne difficulty consumers have in making optimal choices, with severe consequences for errors in judgment.
We would certainly like to know their thoughts on the topic today, but since they are no longer with us, we will have to rely on an alternative source. Artificial Intelligence (AI) has made stunning advances, even with the potential for abuse. Rather than thinking of AI as a digital source of independent production of new concepts, we should consider it an accessible source of encyclopedic information to shed light on a subject as we frame it. Thus, it can be immensely helpful in providing structured summaries of complex ideas otherwise available only in long books or articles. Of course, we must note possible biases in the sources that AI relies on. In other words, we can use AI if we assess its validity based on the components we know. We then use this accessible information to advance our values, such as social justice. Such is my approach today: use AI to remind me (and us) of major contrasting economic philosophies on health insurance.
With this in mind, I submitted several questions to AI “large language models” (LLMs). This is a long post, but I think worth perusing and contemplating. I offer my interpretation at the end.
Part I
I started with a ChatGPT inquiry: “How do Milton Friedman’s concepts compare to Kenneth Arrow’s as a basis for providing health care to everyone?”
Core Philosophical Difference:
Kenneth Arrow: Health care is not a normal market because of:
- uncertainty
- information asymmetry
- ethical obligations
- social expectations of equity
Conclusion: Market forces cannot reliably or efficiently provide universal health care; public intervention is both justified and necessary.
Milton Friedman: Health care should be treated as a normal market. The main problems is U.S. health care come from:
- government interference
- insurance distortions
- third-party payment
- overregulation
Conclusion: Less government, more market choice; universal access should be achieved through individual responsibility and market-driven efficiency
What They Believe About insurance:
Arrow: Insurance is essential because illness is unpredictable. But private insurance markets fail due to:
- adverse selection
- moral hazard
- risk-based pricing
- profit motives that conflict with access
This leads naturally toward:
- universal compulsory insurance
- government regulation
- single payer or NHS-like models as most coherent
Friedman: Insurance is overused and misused:
- third-party payment drives up spending
- employer-based insurance distorts the market
- people should pay directly for most care
- catastrophic insurance should be minimal and private
He opposed:
- Medicare
- Medicaid
- employer tax subsidies
- regulation of insurance markets
He favored:
- Health Savings Accounts
- high-deductible catastrophic coverage
- competitive private insurance
How They Think Universal Coverage Should Be Achieved:
Arrow: Universal coverage requires:
- compulsion (the healthy must subsidize the sick)
- government as a primary insurer or regulator
- community rating and standardized benefits
Single payer aligns best with his logic:
- largest risk pool
- lowest administrative waste
- removal of profit-driven selection
- protects access as a social good
Friedman:
Friedman opposed government-guaranteed universal insurance. He argued universal access could be achieved by:
- reducing regulation
- lowering prices through competition
- giving individuals cash transfers or vouchers if needed
His model is:
- universally enabled, not universally insured
- Everyone would have access to a competitive private market, not a public guarantee
Ethics and the Role of Society:
Arrow:
Medical care is a social obligation. Society views relieving suffering as a collective moral duty. This justifies:
- universal entitlements
- regulated prices
- public financing
Friedman:
Medical care is a consumer service. Equality in access is not a social right but an aspiration. The role of society is limited to:
- charity
- voluntary philanthropy
- targeted subsidies
He rejected health care as a “right.”
Bottom Line:
Arrow: Health care is inherently non-market – needs universal public funding.
Friedman: Health care should be a market – government financing distorts incentives.
Part II
Next, I turned to Gemini (Google’s AI) to explore the contrasting views of a modern free-marketeer and a democratic socialist. The richest man in the world, Elon Musk, noted for his strong belief that manipulating society to bring greater personal wealth, might be expected to support markets as a method to fund health care. In contrast, a popular senator, Bernie Sanders, has been quite outspoken in support of single payer as a means of making health care accessible to absolutely everyone at a price each can afford.
Hence, my Gemini inquiry: “Contrast the outcomes of our health care system in the United States that we would see under the guidance of a person such as Elon Musk who values wealth as a determinant in our outcomes as opposed to Bernie Sanders who values social justice in our outcomes.”
Wealth-Driven Outcomes (Elon Musk-aligned Values):
Access and Equity:
Highly stratified access. Premium, personalized, and rapid care for the wealthy; basic, minimized, and technologically lean care for others.
Worsening health disparities. The poor and low-income populations would see reduced coverage for non-essential or high-cost care (e.g., long-term care, some chronic disease management).
Quality of Care:
Elite, high-tech quality for those who can pay. Focus on disruptive technology (AI diagnostics, novel therapies, bio-engineering) accessible primarily to top-tier clients.
A two-tiered system where the most advanced life-saving treatments are a luxury item, not a basic right.
Cost and Efficiency:
Driven by a push for extreme efficiency and cost-cutting in government programs (like Medicare/Medicaid) through technological solutions, aiming to eliminate “waste” and “fraud.”
Lower overall government spending but higher out-of-pocket costs for the majority. Increased financial stress for low- and middle-income families facing medical crises.
Innovation:
Rapid, commercially viable innovation focused on high-profit-margin specialities or luxury-level concierge medicine.
Research and development would be highly concentrated in areas with the clearest path to monetary returns, potentially neglecting low-profit public health issues.
Overall Health:
Increased life expectancy and health for the high-income bracket, potentially widening the gap with lower-income groups.
Poorer population-level health outcomes as preventive care and treatment for social determinants of health (housing, nutrition) are defunded or minimized.
Social Justice-Driven Outcomes (Bernie Sanders-aligned Values):
Access and Equity:
Universal access and comprehensive coverage (e.g.,dental, vision, mental health) for all residents, aiming to eliminate financial barriers to care.
Reduced health disparities across income and race/ethnicity. Poorer Americans and those in rural areas would gain access to services currently unaffordable or unavailable.
Quality of Care:
A single standard of high-quality care for everyone, from primary care to specialty treatments. Focus on preventive care and addressing social determinants of health.
Improved average health and longevity across the entire population as people seek care earlier and manage chronic conditions better.
Cost & Efficiency:
Driven by systemic cost control through federal negotiation of drug prices and standard reimbursement rates for providers, eliminating the fragmented, high-cost private insurance overhead.
Significant reduction in medical bankruptcy and overall household healthcare spending for most families. Higher taxes for wealthy individuals and corporations.
Innovation:
Innovation would be focused on what improves public health and is cost-effective for the entire system, potentially including streamlined processes and primary care improvements.
Drug and device development might be slower or focused less on blockbuster drugs and more on essential, widely accessible medicine.
Overall Health:
Decreased infant mortality, reduced rates of treatable chronic disease, and a narrower life expectancy gap between the richest and poorest citizens.
Improved national health statistics that align more closely with other developed nations that have universal healthcare systems.
Central Contrast: The Guiding Principle
The core difference lies in the guiding principle of the system:
Wealth-Driven: Individual liberty and market efficiency are paramount. The market is seen as the best allocator of resources, and health outcomes are ultimately the individual’s financial responsibility.
Social-Justice Driven: Equality and equity are paramount. Healthcare is a social responsibility and a fundamental right, and health outcomes should be decoupled from an individual’s financial status.
Back to the original question: Will the market cure our health care system?
There is no question that a well-designed single payer system would cure the problems we see, making our system comprehensive, universal (covering everyone), and affordable for each one of us. The evidence from wealthy nations definitively supports Arrow & Sanders: the best-performing systems, on efficiency and outcomes, rely on universal insurance (a single payer or mandated standardized coverage).
What about the free market? Our current system is highly dependent on the market, and, except for the wealthy, it fails on almost every measure, in spite of being by a large margin the most expensive in the world. The only logical conclusion is that we can no longer cite “the Market” as the solution to repairing our highly dysfunctional health care system. Friedman’s and Musk’s predominantly free markets don’t work well in health care.
We need to oppose solutions that are designed primarily to increase the personal wealth of those who are already wealthy, and move to solutions wherein we all take care of each other – solutions wherein we all get the care we need at a price each of us can afford. The market is not and cannot ever be crafted to accomplish that. Single payer would do precisely that.
Market enthusiasts: Silence!
Health care justice advocates: Get to work!
https://healthjusticemonitor.org…
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