The Nightmare of a Free Market: Buying Drugs from Strangers
John will be giving a version of the same talk tonight (May 8) at 9 PM ET:
Hope to see you there!
This week’s featured guide at Liberty.me is Dr. John Hunt’s "Surviving Obamacare"— which is about navigating around Obamacare in order to pursue free-market healthcare in an ever-less-free healthcare market.
John is a local comrade. I only met him in person about a year ago, but we had already worked together extensively online to put together his great libertarian action-adventure thriller Higher Cause for Laissez Faire Books. (I’m sorry to say that I had nothing to do with his wonderfully funny novel Assume the Physician — free to Liberty.me members this month.)
When the Young Americans for Liberty, University of Virginia chapter, hosted John for a talk on the same subject as his Liberty.me guide, I of course had to attend.
Last time I went to a talk given by a local libertarian, I was one of maybe 4 people in the audience, and I’m pretty sure I was the only libertarian among them. So it was a delightful surprise to be in a packed classroom for John’s talk.
I don’t think everyone in this audience was a libertarian either, but it seemed like most were sympathetic to the free market, or at least openminded on the subject.
Nope. No such drama.
But there was one young woman who asked the last question of the evening, and it was definitely a challenge to the plumb-line libertarian position: "Shouldn’t I, as someone who knows nothing about medicine or chemistry, be glad that pharmaceuticals are regulated? Don’t I want the government regulating these things to keep me safe?"
John did an excellent job challenging the assumption that government regulation keeps anyone safe. I’ll call this the negative side of the argument, which involves both history and logic.
Q&A after a talk doesn’t allow for in-depth conversation on important issues. So for the positive side of the argument — why the free market would keep us safer than the state does — I felt there was still a lot more to say.
At the beginning of his talk, John stated that the issue at the center of the always-rising healthcare costs is moral hazard, which he defined, in this context, as a situation where the person making the decisions is not the person bearing the costs of those decisions. (No, it’s not advances in fancy medical technology. As John said, "Name any other industry in which technological advance makes prices go up instead of down!")
If you think that rising costs have something to do with Big Pharma and their outrageously expensive little pills, you’re right, but the expense of those pills is itself a result of moral hazard in an unfree market.
My impression is that the young woman accepted that government’s heavy hand is the cause of the financial disaster we call American healthcare. She didn’t challenge any of John’s cause-and-effect arguments. Instead, she was asking if the libertarians’ apparently radical solution — get the government out of healthcare entirely — wasn’t, well, too radical.
She wanted to know why "just buying pills from anyone out there in the free market" (her words, as accurately as I can reproduce them) wouldn’t kill her, or at least render her terribly sick as often as it helped her reduce her sniffles.
The thing that struck me about her question was how deeply entrenched it was in a nightmare cartoon of the market: a shadowy chaos of uncaring and anonymous figures pushing pills for quick cash. I have to assume that she was indoctrinated in this image, because it can’t match any of her own experience of voluntary exchange — unless she’s thinking of what it’s like to buy nickel bags of weed in the park.
I’m sure I’m dating myself with that reference. Do people even know what a nickel bag is anymore? When I was a kid in New York City, late 1970s and early 1980s, shifty looking men on street corners and in city parks sold tiny polyethelene zipper-sealed pill pouches full of what was supposedly marijuana. "Nickel" was slang for $5 worth. A "dime bag" would cost $10. I’m sure inflation has changed all of this. (I imagine cranky old-timers complaining, "Why, in my day, a nickel bag cost only a nickel! And the dope was high quality, not this skunk weed you kids puff today!")
But outside the black market of city parks under drug prohibition, where in the world did she get this image of "the free market"?
When I was already an ethical libertarian but new to economic theory and anarcho-capitalist arguments, the main answers I’d encounter for all such questions about safety in a deregulated market appealed to one of two institutions:
(1) independent certification agencies;
(2) private insurance.
The second is especially ironic in this context, because John’s main point was that insurance isn’t the solution; it’s the problem! (But he’s not really talking about free-market insurance; he’s talking about a corporatist creation that came out of the controlled economy of World War II and continues to depend heavily on government intervention.)
The problem with both the old standard answers is that they come across as guess work. Yes, we already have independent certification agencies, but hardly anyone realizes that they exist, and when they do know about them, they assume they’re government agencies. We also have private insurance, but the insurance industry is such a creature of the state at this point that very few skeptics even begin to understand the economics of insurance. (Even 19th-century individualist anarchist Benjamin Tucker rejected insurance as a creature of government. That’s why he went bankrupt when his uninsured bookstore burnt to the ground. For a clarifying article on the subject of what insurance is and isn’t, see "Uncertainty and Its Exigencies: The Critical Role of Insurance in the Free Market." For a more whimsical treatment, see my own anarchic fairy tale, "Goldilocks and the 3 Sovereign Clients of Ursa Mutual.")
But I bet all of the students in that room, including the young woman who wants government regulation to keep her safe, regularly buy stuff from Amazon and eBay — and don’t think twice about the possibility of getting ripped off or poisoned.
I wanted to say, "Why would you buy your medicine from the guy in the park when you can buy it from Amazon?"
Why when we hear about a hypothetical free market do we reach for images of criminal markets instead of our own now-thoroughly-familiar experiences shopping online?
The case of eBay is especially relevant, because you’re not only buying from strangers; you’re buying from individual strangers whom you probably couldn’t track down and sue for fraud. So why do we do it?
Well, I for one always buy from the people with the highest customer-satisfaction ratings. Not only is their past performance a good indicator of how I can expect them to behave with me but I also wield the power of yet further customer feedback. I know that they want to please me because I can influence their reputation, and in the world of online commerce, reputation really is everything.
Another critical example of moral hazard — slightly different from the type John was talking about — occurs when you are more casual with your safety decisions because you believe that someone or something else is keeping you safe. "Well, the government wouldn’t let them sell it if it weren’t safe." And the result, of course, is that we are thereby less safe.
So while I understand where the woman’s question was coming from, I also think she has the story exactly backwards. As John pointed out to her, the regulations she’s relying on do not do what she thinks they do. But more than that, she has let someone else’s map override her own experience of the territory: her image of the chaotic nightmare that would result outside of government regulation is entirely at odds with the majority of her own experience of commerce.
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