Economics, Community, and Health Insurance

With the current debate about if and how to change the health insurance system in America becoming more heated over the summer, I had the opportunity to attend a Town Hall meeting hosted by Oregon's Sen. Jeff Merkeley.  At times it was quite "spirited" with a not insignificant contingent representing what I'll graciously call the Libertarian wing of the electorate.  At one point, one audience member quite clearly stated to Sen. Merkeley that it is the Senator's job to preserve his right to not buy health insurance.


Sen. Merkeley is Oregon's junior senator, recently elected, unseating Sen. Gordon Smith.  In this part of the state, its not an exaggeration to say that former Sen. Smith was revered.  This was Sen. Merkely's first Town Hall meeting in this part of the sate. Also, he followed Sen. Wyden by several weeks.  As a result, people dis-satasfied with Sen. Wyden's meeting laid in wait for Sen. Merkeley.


Economics has something to say about the issue of whether or not people should be required to carry health insurance.  One aspect of what economics has to say on the issue pertains to how individuals without insurance impact services available to others, even when those not carrying health insurance pay for their health care out of their own pockets.  You can read my perspective on the matter -  Wallowa County Chieftain.  


While the argument I make in this piece is grounded in mainstream economics practiced today, the perspective I take in this letter is troubling to people who have an inordinate belief in the 'free' market.


My arguments rest on a sub-area of economics often referred to as environmental economics.  This sub-area is very extensive with a massive body of conceptual and empirical literature.  Part of this literature focuses on externalities.  Within that literature, the externality I speak of in my essay is called a network externality.  More specifically, network effects in health care and health insurance.  (A note to the more specialized reader - in my short essay, I don't distinguish between network effects and network externalities).


There are many in and out of the economics profession who hold the belief that externalitie do not exist.  They have very influential advocates, perhaps most notably Uncle Milty - Milton Frriedman and the Chicago School.
With The Chicago School there is even a brand of Institutional Economics that extends free market principles to the study of institutions!  I subscribe to a different bread of Institutionalism that is related to the Land Economics of John R. Commons.  A somewhat humorous view of part of that school may be viewed at - American Institutionalist School.


I will likely pick some of these themes up in future posts.