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Inequality is inevitable

By Yesun Kim
web posted September 24, 2018

Economics is often incompatible with ethics. In other words, the way that an economy works is not necessarily morally good, but it is efficient and reasonable. Why? It all boils down to the fact that there is scarcity all over the place. One has to constantly choose among various alternatives because of the lack of resources. Obviously, not everyone can have everything, and this economic principle also applies to the case about healthcare. In the article, “What’s wrong with inequality”, Angus Deaton argues that the gap between the rich and the rest is a threat to our health because the wealth of the rich insulates them “from any need for the collective action on which national health depends.” This is problematic because while they are disinterested in issues about public goods such as health care, they are using their resources exclusively to their own advantage at the expense of others. While this argument is valid to some extent, it is flawed in several ways. First, Deaton’s assertion assumes that the rich ought to support public goods, which goes against the core belief of economics: self-interests. Also, it does not address the issue of scarcity regarding health care.

When viewing the issue of healthcare from an economist’s standpoint, Deaton’s argument invites us to consider: are the rich obliged to use their wealth for public goods? In fact, there has been some millionaires who practiced philanthropy, such as Andrew Carnegie, who voluntarily dedicated their wealth for public goods such as establishment of hospitals and schools. However, it is unreasonable to assume that the rich are obliged to pay for public welfare, just because the rich have more wealth than the rest, since that’s not how economics work. In the world of economics, people have to be selfish. When people behave according to their self-interests, the economy becomes more efficient because self-interests serve as incentives for them to work harder, which contributes to economic growth. According to Adam Smith, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love.” Although this quote may not directly apply to the case about health care, it still conveys the essence of economics: it’s not about moral decisions but about self-interests and efficiency.

Now, how would this economic principle apply to the case about healthcare? Timothy Taylor pointed out in his lecture that selfishness helps the economy, and the issue of healthcare may seem like an exception to this statement as the rich would have no incentives to produce better health care. However, just because some wealthy elites do not invest their wealth in public healthcare, one ought not to assume that they will not better a society at all; they may invest in other things, such as technology or business, which would still significantly benefit the society. In fact, Deaton himself had said that since “people get rich by making things, innovating, and generally expanding what the system can offer…, their personal incentives are aligned with what is good for society.” Thus, the rich can still better the society by investing in things other than healthcare; healthcare would simply be the opportunity cost of their choice.

More importantly, one ought to remember that health care is not a free good, but a scarce good. It is a limited resource because there are a finite number of doctors, medical facilities and medicines. Even if the rich support public healthcare, it will be impossible for everyone to receive public healthcare on an equal footing. The sponsors will have to decide how many people will receive health care and to what extent, and in the course of their decisions, there will always be statistical people who will be still disadvantaged regarding health care because healthcare is a finite resource. Thus, inequality is inevitable. One example that demonstrates the limitation of health care is the National Health Service. The NHS is a British universal healthcare system that provides healthcare for free, though it is often limited by external authorities such as government bureaucrats and rules. Recently, it has entered the worst winter crisis of its 70-year history: “a shortage of doctors, nurses, beds and care packages for elderly patients means that black alerts trolleys in corridors and dangerous safety levels for patients are at a peak.” (Chand, 2018) The NHS has cancelled tens of thousands of hospital operations, which proved to be “the biggest backlog in the health service’s history”, and “what was once confined to winter is now an all-year-round occurrence.” As shown, because health care is a scarce good, it cannot be distributed equally. Any attempt to provide a finite resource on an equal basis would only be met by inefficiency and breakdown of the system.

To sum up, Deaton’s view on healthcare and economic inequality does not fully address two essential concepts in economics: self-interests and scarcity. While it stands true that the gap between the rich and the rest may lead to the lack of public goods and unfair distribution of resources, it is unreasonable for the rich to act against their self-interests or to sponsor healthcare that will be available to all. Inequality is inevitable! ESR

Yesun Kim is a high school student who studies AP Macroeconomics through Pennsylvania Homeschoolers.

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