 A big issue in the last few weeks in the U.S. has been Obamacare, in particular the disastrous rollout of healthcare.gov, the website where consumers are supposedly able to pick out new plans on the government-sponsored insurance exchanges. Moreover, it was revealed last week that many consumers, contrary to the president's explicit statements, were going to lose the healthcare coverage they already had and were quite satisfied with. But I want to talk about something more fundamental about the healthcare system in the U.S. and the economics of healthcare more generally. Why are we so worried about healthcare and healthcare costs? Why does the government spend so much time trying to deal with health insurance markets much more than it spends dealing with other kinds of markets? What is unique or special about healthcare? Well, it's true that in the United States healthcare expenditures are really high. The U.S. spends more on healthcare per capita than many comparable countries, and the service level doesn't seem to be especially high. That's both because the prices of many healthcare services are higher than they are around the world, and the quantity consumed by Americans is also quite high. What do we do about it? Both the president's defenders and his Republican critics all seem to agree that there's something special about healthcare markets and health insurance markets. Something is wrong with the healthcare system in the U.S., and something has to be done about it. Now, from a fundamental economics point of view, what is healthcare exactly? One of the things that's particularly frustrating for me as an economist in thinking about healthcare and following these debates is this notion that healthcare is some kind of a unique good or service that everybody needs, everybody wants, but cannot be provided by the market the way the market provides shoes or tomatoes or automobiles or any other good. But what is healthcare? Nobody consumes healthcare. No one has a right to healthcare because healthcare is not a homogeneous thing. There's no such thing as one unit of healthcare. Rather, what we mean by healthcare and insurance for healthcare is a discrete set of specific commodities, goods and services that you can buy in different combinations at different levels, at different quality levels. So open heart surgery is a service you can purchase on the market that contributes to your health, but so is taking an aspirin, so our diet and nutrition, taking a walk in the woods is good for your health. In other words, there's no such thing as healthcare. There is a heterogeneous bundle of different goods and services that different individuals will want to consume at different levels. Likewise, if we say everyone has a right to housing, what does that mean exactly? It doesn't mean everybody gets a mansion in Beverly Hills or a penthouse on Fifth Avenue. No, there are lots of different kinds of housing. There's long term, there's short term, there's regular housing, there's vacation housing, some people own homes and condos, other people rent, students live in dormitories, people stay in hotels, that's a kind of housing. It's a very, very, there's a huge variety of different kinds of things that go into housing and it's the same thing with healthcare. So instead of talking about a universal right to healthcare, we should be talking about the specific healthcare goods and services that individuals want to buy. Now when we think about it this way, it becomes far from obvious that these particular kinds of goods and services, getting surgery, having a consultation with a physician, putting a bandaid on your leg, that these goods and services cannot be supplied on the market, just like any other goods and services can be supplied on the market. Now among economists, there's a feeling that, well, healthcare goods and services are different somehow because of uncertainty. The patient is not in a position to judge the quality of the surgery until after it's taken place and the consumer simply doesn't have enough information about the characteristics of the surgeon, the quality of the procedures and so forth. One of the most influential articles in mainstream welfare economics is on this very topic by Kenneth Arrow in 1963. Arrow argued that healthcare cannot be supplied efficiently on the market because of this asymmetric information. But if you think about it, the market provides all kinds of goods and services where one party doesn't have as much information as the other party. Right, buying a used car, you don't know the quality of the car as the buyer, as well as the seller. Firms hire workers without knowing for sure if the workers are going to turn out to be as productive, as effective in the workplace, as the employer is hoping. So there's no such thing as perfectly distributed or perfectly symmetric information in any market transaction, nor does this asymmetry pose a unique problem. Competition among providers, third-party intermediaries such as ratings agencies and magazines and encyclopedias, warranties and guarantees and other kinds of contracts all help to protect people when they're engaged in transactions in which they don't know as much about what's being sold as the other party. So there's nothing really unique about a surgical procedure or a type of medicine or a therapeutic routine in this regard. It's just an ordinary market transaction like other ordinary market transactions. If we would just allow the free market to work, if we could eliminate the third-party payer system, the government subsidies on the expenditure side that drive prices up, there's no reason why a truly free market in health care goods and services couldn't be just as effective in the US as the market for computers, the market for software, the market for automobiles or the market for anything else.