Book Review of: "Everything for Sale: The Virtues and Limits of Markets", by Robert Kuttner.
Published: 1997, by Alfred A. Knopf, Inc., New York, (ISBN 0-394-58392-2).
http://www.randomhouse.com/

From Chapter 4, Markets and Medicine:

From the Reviewer, (John H. Frenster, M.D.):

From the Conclusion:

"This book begins with the working hypothesis that a capitalist system is a superior form of economic organization, but even in a market economy there are realms of human life where markets are imperfect, inappropriate, or unattainable. Many forms of human motivation cannot be reduced to the market model of man."

"In this age of the resurgent market, we are promised that technology, ingenuity, and freedom from the dead hand of government will revive economic efficiency and material progress. Yet, despite the triumph of market principles, market society is no Utopia. Compared with the golden era of the postwar boom and the mixed economy, this is a time of broad economic unease. As society becomes more marketized, it is producing stagnation of living standards for most people, and a fraying of the social fabric that society's best-off are all too able to evade. One thing market society does well is to allow its biggest winners to buy their way out of its pathologies."

"In the United States, the alternative to laissez-faire has never been socialism. Rather, the interventionist party, from Hamilton and Lincoln, through the Progressive era, Franklin Roosevelt and Lyndon Johnson, sponsored what came to be known as a "mixed economy". The idea was that market forces could do many things well - but not everything. Government intervened to promote development, to temper the market's distributive extremes, to counteract its unfortunate tendency to boom-and-bust, to remedy its myopic failure to invest too little in public goods, and to invest too much in processes that harmed the human and natural environment."

"As my subtitle implies, I am a believer in a balance between market, state, and civil society. I arrive at this belief primarily from a reading of economic and political history, which suggests that pure laissez-faire is socially and even economically unsustainable. Although defenders of a mixed economy often argue their case on equity grounds, there is significant evidence that, quite apart from questions of distributive justice, the very stability of the system requires departures from laissez-faire. My previous books have all treated, in different ways, the intersection of economics, politics, policy, and ideology. They have dealt with the boundaries between state, market, and society. In these earlier works, I challenged one of the central claims of the marketizers - that equality necessarily comes at the expense of efficiency. I also examined the corrosive influence of international laissez-faire on the project of operating a mixed economy at home. And I explored the practical difficulty of center-left parties serving their natural constituency in an era of limited budgets and resurgent laissez-faire."

"In this book, I hope to go deeper into the dynamics of the market itself, searching for first principles. Where, really, do markets perform roughly as advertised ? Where is the market model a reasonable approximation of human motivation, and where is it misleading ? By what criteria are we to know when the market has overstepped its proper bounds ? How do different kinds of markets fail to optimize outcomes ? What patterns of failure recur ? How are we to know when we are in a realm where markets produce rough efficiency and rough justice, versus one where markets produce avoidable calamities ? When is the best response to market failure to contrive procedures or outcomes that are more "marketlike" ? When does that approach only make things worse ? Where is the proper boundary between market and nonmarket ?"

From Chapter 4, Markets and Medicine:

"In America, the overreliance on market logic and market institutions is ruining the health-care system. Market enthusiasts fail to tabulate all the costs of relying on market forces to to allocate health care - the fragmentation, opportunism, asset rearranging, overhead, underinvestment in public health, and the assault on norms of service and altruism. They assume either a degree of self-regulation that the health markets cannot generate, or farsighted public supervision that contradicts the rest of their world view. Health care now consumes fully one-seventh of our entire national income. There is no realm of our mixed economy where markets yield more perverse results."

From the Reviewer:

In his analysis of Markets and Medicine, Kuttner views health care from the outside. He acknowledges the national significance in macro-economic terms, but even here he makes the familiar mistake of referring to health care as a "consumer" rather than as a "component" of our national income. Of course, every monetary exchange in the entire health care industry is added to our Gross Domestic Product. All of the resources of health care, including medical school tuitions, medical laboratory research, hospital and clinic construction, doctor's fees and nurses salaries, drug company and pharmacy construction and charges, medical equipment design and manufacture, and even the design, production and delivery of childhood vaccines against polio and diphtheria, all of these expert and effective human activities are part of our Gross Domestic Product.

But then, maybe these vital protective and restorative medical services, should NOT be part of the Gross Domestic Product. Maybe they should be in the nature of defense forces, or fire and police forces, or municipal ambulance services. Maybe they should not involve transfers of money, but acceptance of vouchers from each patient to the physician of their choice. Maybe each physician could then use such vouchers to obtain the medicines, the lab tests and x-rays, the hospital space that the patient might require.
Maybe, then, health care would not be a component of the Gross Domestic Product, but rather, a basic human right. So much the better then for each patient and each physician, as they can then do all that is medically necessary without interference.

There are several approaches to such a double-voucher system for patients and physicians. One is the Freedom of Choice Medical Care Plan submitted to the American College of Physicians. There will be many others. But it is already obvious that voucher plans do work in health care, that voucher plans preserve both patient and physician incentives to optimize use of health care resources, and that by removing cash payments from health care, both patients and physicians can return to the beneficent relationship which is at the heart of true healing.

From the Conclusion:

"As this book has sought to illustrate, the case for the market is much more of a mixed case than its champions insist. Some domains are inherently beyond the reach of the market. They belong to the province of rights, which by definition cannot be alienated or sold. These include the sanctity of one's person (human beings may not be sold , no matter how great their desperation); the prohibition of commercial exchange of one's vote or of public office, of free speech, of professions, of honors and awards, of military service, or of products such as illegal drugs and weapons that society has deemed too dangerous for private exchange. We can all think of common violations of these principles, even as we can agree, with minor differences, that they should be upheld."

"Such proscriptions have little to do with "efficiency", but everything to do with the good society. Breaching them would hardly bring greater prosperity or increased liberty."

"Other incursions are more insidious. Conflicts of interest, in scientific research, in medicine, finance, law, journalism, in public office and other positions of trust, invariably stem from individuals compromising legal or customary extra-market standards in exchange for monetary rewards."