We don’t spend enough on health care?

Craig Karpel writes today in the Wall Street Journal that we don't spend enough on health care.  Basically, he writes that as the economy has evolved, we have gone from focusing on food (in the agricultural and mercantile revolutions) to clothing (in the industrial revolution) to shelter (in the late 20th century and this decade).  It is only natural that we would now turn to focusing on our health and longevity.  It's an interesting argument, if different from the viewpoint I have expressed in my previous health care pieces.

One reason that I do believe it is in fact unfair to compare the cost of care in the US to that in other countries is that the rest of the world free rides off the medical innovation that mostly takes place in the United States.  The entrepreneurial medical culture in the US incentivizes the use of advanced technologies, which eventually spread throughout the rest of the world.  Other countries use their monopsony buying power to push down prices so that, in effect, American workers subsidize the health of the rest of the world.

The benefit of spending money on health care versus other items like consumer goods or petroleum is that it is a domestic industry.  In addition, the accumulated R&D that takes place in the United States translates to a large amount of net exports.  Better health care and advances in longevity should also allow for a long term rise in the average retirement age, increasing the productive life of an American worker and boosting the long term potential growth rate of the economy.

The health care conundrum is the classic "on the one hand, on the other hand" situation that permeates economics.

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