Marketisation, Ethics and Healthcare

Policy, Practice and Moral Formation

Therese Feiler, Joshua Hordern, Andrew Papanikitas, Therese Feiler, Joshua Hordern, Andrew Papanikitas

• Verlag: Routledge
• Jahr: 2018
• ISBN:
  9781351736848
• Auflage: 1
• Thema: Médecine
• Thema: Déontologie en médecine

How does the market affect and redefine healthcare? The marketisation of Western healthcare systems has now proceeded well into its fourth decade. But the nature and meaning of the phenomenon has become increasingly opaque amidst changing discourses, policies and institutional structures. Moreover, ethics has become focussed on dealing with individual, clinical decisions and neglectful of the political economy which shapes healthcare.

This interdisciplinary volume approaches marketisation by exploring the debates underlying the contemporary situation and by introducing reconstructive and reparative discourses. The first part explores contrary interpretations of 'marketisation' on a systemic level, with a view to organisational-ethical formation and the role of healthcare ethics. The second part presents the marketisation of healthcare at the level of policy-making, discusses the ethical ramifications of specific marketisation measures and considers the possibility of reconciling market forces with a covenantal understanding of healthcare. The final part examines healthcare workers' and ethicists' personal moral standing in a marketised healthcare system, with a view to preserving and enriching virtue, empathy and compassion.

Chapters 4 and 7 of this book are freely available as downloadable Open Access PDFs at http://www.taylorfrancis.com under a Creative Commons Attribution-Non Commercial-No Derivatives (CC-BY-NC-ND) 4.0 license.

Part I
The place of the market

1
Why the economic calculation debate matters

The case for decentralisation in healthcare

Pythagoras Petratos

Introduction

A major concern in healthcare is its rising cost. As the economic burden of health-care is increasing, there is greater focus on the efficiency of healthcare systems. One of the major debates in economic history about efficiency is the ‘Economic Calculation Problem’. The economic calculation problem mainly regards the level of centralisation of economic systems. In general, the argument is that decentralised systems, featuring market mechanisms, are more efficient in allocating resources. The economic calculation problem has many dimensions and aspects, some of which I will discuss below. However, the main argument of this chapter will be that healthcare flourishes best in a decentralised system.

An important dimension of decentralisation and market forces in healthcare systems concerns ethics. Ethics in this context is often understood as the discipline concerned with individual and clinical decisions. However, ethics in its broader sense may also include the political economy of healthcare. In that sense, this paper attempts to shed light on a less well-researched field, the application of economic theory to healthcare. The main argument – that better healthcare is attained in decentralised systems – is framed in utilitarian terms. In order to bridge ethics with economics, a consequentialist perspective is adopted. The moral objective is to maximise utility, and more precisely the utility associated with health. This is based on fundamental principles of classic utilitarianism. Its proponent Jeremy Bentham (1789) put great emphasis on the ‘pleasure of health’ among the various pleasures and pains. Hence, classic utilitarianism enables us to account for additional utilitarian “pleasures” and value beyond the rather narrow sense of economic units. The discipline of economic evaluation in healthcare analyses some of the limitations and methodologies used in order to represent utility in health in terms of monetary units. Nevertheless, the expression of utility in monetary terms remains the most popular method in economic evaluation in healthcare, since costs are always captured in economic units and benefits (i.e. cost-benefit analysis).¹

Another moral principle is the fulfillment of individual preferences. Preference utilitarianism is considered to be a critical part of healthcare. This is because a lack of health involves suffering and pain, which is frequently a matter of individual tolerance. Moreover, many health conditions involve individual lifestyles, risk attitudes, and in general a wide range of individual preferences and subjective valuations that, I argue, should be freely expressed. At this point, it might be useful to clarify the meaning and conditions of choice. We should consider choice to be free of any coercion. The position of this paper is that competition and therefore pluralism in choice should be encouraged and achieved.

The economic calculation problem is widely known for its influence on political and organisational science. Because of this extension into other fields, it has also been identified as the ‘Socialist Calculation Debate’. However, it should be emphasised from the beginning that the economic problem needs to be split from its political aspects. The focus in this chapter is on cost-efficiency and utilitarian arguments rather than distribution or other political issues. In that sense, the question of distribution is regarded as an exclusively political rather than economic issue. This is in accordance with Ludwig von Mises (1920), a key figure in the Socialist Calculation debate, who states that ‘distribution of consumption goods must be independent of the question of production and its economic conditions’.

Hence, the present analysis will focus on economic efficiency: which economic conditions can produce more, or ideally, a maximum of both wealth and health? Mises acknowledges that this requires the appointment of a special body to manage production, appointed by a political process. This can be a dictatorship or a democratically elected government. And of course, the political process is very important. Nevertheless, following again Mises’ argument, the perspective in this essay remains purely economic.

Importantly, in the context of the original debate, ‘socialist system’ is used here in a specific sense. ‘Under Socialism all the means of production are the property of the community. It is the community alone that can dispose of them and which determines their use of production’ (Mises 1920). Socialism in this context is synonymous with communism. This is quite different from today’s perception of socialism, which is often considered to be a mixed economy of social democracy.

Market failures and externalities are additional economic issues to which we should pay attention. Market failures are situations in which the allocation of economic resources is not efficient, due to asymmetric information, irrational behaviour, and a lack of competition. External effects (externalities) occur when an individual’s actions affect another who did not choose to incur this economic effect. In healthcare, there can be many types of market failures and externalities. However, for reasons of space and simplicity the discussion of market failures and externalities will be excluded here. Nevertheless, competition and information remain key themes. Another term to clarify in advance is the notion of ‘profit’. Normal profit is often confused with abnormal profits. The former represents the reward of labourers or entrepreneurs for their work and risky undertakings. The latter occurs in cases where market failures prevail and individuals or enterprises can extract economic rents resulting in excess profits. The focus here is on normal profits.

The following discussion is divided into three main sections. The first section critically reviews the history and evolution of the economic calculation debate. The historical progress of the original Mises-Hayek argument is discussed as well as the Lange-Lerner model. The second section examines the structure of different healthcare systems and assesses if, and to what extent, the economic calculation problem applies to them. The UK National Health Service (NHS) represents the main reference case. The final section will summarise the previous sections and suggest how decentralised markets can contribute towards more affordable and better quality healthcare.

1. The history and evolution of the economic calculation problem

1.1 Economic calculation in the socialist commonwealth – Ludwig von Mises

We have already noted that the economic calculation debate started with Ludwig von Mises (1920). Arguably, this debate can even be identified with the so-called Mises-Hayek critique of central planning (Meadowcroft 2003). While there are suggestions of profound differences between Mises and Hayek, these differences are small when compared to the rest of economic thought in the twentieth century (Boettke 1998). Our intention here is to first present the arguments of Ludwig von Mises and then analyse the positions of Friedrich von Hayek, the 1974 Nobel Laureate in Economics. We will then have a complete overview of the original and complete Mises-Hayek critique.

Mises (1920) mainly wrote his critique during a time when socialist parties were gaining power in Russia, Hungary, Austria and other countries, and different types of socialist systems were evolving. The prevailing ideology was Marxism, as the Bolsheviks had taken over and were consolidating their power in Russia. Mises (1920, p. 38) concluded that Marxist writers preferred to focus on the immediate future and the ‘path to Socialism and not Socialism itself’ – ‘they are not even conscious of the larger problem of economic calculation in a socialist society’.

So Mises was writing with highly, or even totally centralised economies in view. The final step to a socialist nationalisation programme, according to the Austrian Marxist Otto Bauer, is the socialisation of banks and their amalgamation into a single central bank, of which the administrative board would be the ‘supreme economic authority, the chief administrative organ of the whole society’ (Mises 1920, p. 39). Part of Mises’ critique (1920) is that in the case of a single centralised bank, the monetary system as it was known would disappear, and there would be problems with credit.

Although central banking and monetary policy are not key concerns in the context of healthcare, they have broader economic implications for our analysis. First, without an effective monetary policy inflation rises, which has consequences for every aspect of economic life, including healthcare. Second, the availability of credit and the financing function has effects on how much money can be allocated to the healthcare system. Third, an effective monetary policy is critical in health-care to finance entrepreneurship and innovation in order to find new cures for illnesses or improve existing ones.

Every person makes some value judgment in order to choose between the satisfaction of one need against another (Mises 1920). This value judgement is basically utilitarian because the person intends to satisfy their individual needs. A rational individual would be able to appropriately value goods of lower or higher utility order. ‘But where the state of affairs is more involved and their interconnections not so easily discernible, subtler means must be employed to accomplish a correct valuation of the means of production’ (Mises 1920, p. 8).

According to Mises, in order to attain a correct valuation and optimise production, an exchange economy is necessary. It is then possible to make a calculation that entails the valuation of all participants in the trade. An exchange economy is also an inclusive mechanism that respects and accounts for all participants’ preferences. No one can be excluded, and therefore it can be viewed as a democratic process in which every individual participates in a process to determine the price. Access is not fundamentally limited in the exchange process. Every individual can participate. Even absence from the exchange can be regarded as non-active participation, since it affects demand for healthcare services, and thus monetary values (prices).

Participants can value the goods according to their preferences and at the same time calculate how much of their own labour is required in order to attain or produce them.

Anyone who wishes to make calculations in regard to a complicated process of production will immediately notice whether he has worked more economically than others or not; if he finds from reference to the exchange relations obtaining in the market, that he will not be able to produce profitably.

(Mises 1920, p. 10)

Another advantage is that individuals can easily refer to monetary – in this case, values – and connect them to utility. Since goods are substitutes for each other in accordance with the exchange relations, the participant can use the monetary value as a guide to choosing which goods to obtain. This is the basic line of Mises’ argument regarding the benefits of the market exchange. The process of production is even more complicated regarding a plant or a large energy project because ‘vague valuations’ cannot be applied.

In his early work, Mises is more concerned with the economic mechanism, although in later works he focusses more on the importance of choice (e.g. Human Action 1940). As stated in the introduction above, the perspective here is classic and preference utilitarianism. An important conclusion from the brief analysis of Mises’ critique is that everyone can choose freely. In socialism, by contrast, it is the central committee or other types of centralised authority which make decisions. These decisions most likely do not represent individual needs and preferences. At this point, it is useful to mention that choice depends on the degree of centralisation and administration. We can say that Mises was prophetic about what would happen in Russia. In 1921, the State Planning Committee, known as Gosplan, was established, and the main line of Mises’ arguments stems from this very centralisation of decision-making. Eventually communism in Russia collapsed.

In the former U.S.S.R., which is probably the example closest to socialism as theorised by Mises, decision-making was highly centralised and centrally controlled through the Soviet Health Ministry in Moscow. It ‘controls health care facilities, medical education training, personnel, and financial resources throughout the Soviet Union’. (Rowland and Telyukov 1991, p. 76). Medical personnel were appointed by the Ministry and...

Inhaltsverzeichnis

• Cover
• Title
• Copyright
• Contents
• Acknowledgements
• Contributors
• Foreword
• Introduction
• PART I The place of the market
• PART II The influence of the market
• PART III The place of ethics
• What next? Editors’ epilogue
• Index