December 29th, 2013

Education and Health Care: Getting the Worst of Both Worlds

The root problem in US education (and health care) is that in the United States we have two essentially equally powerful and mutually exclusive political philosophies, ('free enterprise/markets' and 'welfare state') and we also have a lot of people skilled at manipulating the symbols of  those philosophies to get rich. Result: In education and health care, we get massive influxes of federal money making services cheap or free for some classes of people, dramatically increasing demand and making a lot of it insensitive to price increases, because the feds are paying for it, or, in the case of education, because the money is coming from loans and 18-year-olds don't usually understand how screwed up those loans will make the rest of their lives. Then we make little attempt to control prices because that goes against the 'free market', but we do impose massive regulations to keep the money going to 'deserving people', however defined.

Any economist worthy of the name will tell you what happens next: Prices go up at multiples of the rate of inflation for the rest of the economy and the low end of the people who actually have to pay for the services gets priced out of the market or are financially ruined by the expense. The extra money goes to lard up schools/health services with layers of administration that are necessary to deal with federal or insurance company paperwork.

From a health care or education standpoint, those layers of administration start out useless and then get even less useful because they don't understand education/health care, but think they do and keep trying to impose the latest education/health care fads on the doctors/teachers who are actually doing the work.

Middle class gets screwed on both ends because they have to pay their own way and their taxes pay to screw up the system. Prices keep going up until they either reach the limit of what even the feds can pay or the part of the costs customers pay get high enough that it puts supply and demand back in balance, but at several times the price it would have been without the federal or insurance money.

Either free enterprise or welfare state can sort of work, if you're willing to accept their drawbacks. Attempts at hybrid systems, like the ones the US has evolved for education and health care, simply and disastrously don't work long-term.