And that brings us to Adam Smith, the famed 18th century Scottish economist and moral philosopher. By shaking Smith’s “invisible hand,” the Canadian health-care system could finally tap into the power of market forces to drive efficiency. The antediluvians who still believe health care and competition are an incompatible combination should consider boarding the Smith ship, and fast, because Canada’s current health-care system is about to go under. To call our health care universal is to satirize it.
The first is the “Economizer” argument, suggesting individuals will seek out the most economical use of their resources to achieve their objective. Since health care is “free,” many patients rarely think twice about the costs of visiting the doctor, even if it’s over an issue Tylenol could fix. In doing so, patients effectively divert the precious time our scarce practitioners could spend on more immediate cases.
The second of the three big Smithian claims illuminated by Otteson is the “Local Knowledge” argument. Only we ourselves know best what opportunities and resources are available to us; therefore, the individual is in the best position to decide how they wish to allocate and expend their resources—not another person or organization, and least of all the government.
This should hold true for all matters, including health care. Publicly funded monopoly systems like Canada’s, however, do not permit such decision-making because critical economic connections have been broken and costs are not transparent.
This, in turn, dampens innovation in medical treatments, processes, and medications. Every year, thousands of Canadians travel to access the newer and much faster treatments readily available in the United States—expending their own hard-earned savings to do so.
Smith’s third key economic idea, the “Invisible Hand,” is his most widely admired, cited—and misunderstood—takeaway. “Every individual ... neither intends to promote the public interest, nor knows how much he is promoting it,” Smith outlines in “The Theory of Moral Sentiments.” “He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”
Smith’s overarching point was that, in pursuing their individual self-interest rather than virtue-signalling about some unachievable utopian goals, people actually do promote the public interest: starting companies, creating jobs, coming up with life-improving inventions, treating the sick. And, if allowed to do so, allocating their own resources towards looking after their own health.
The free market’s dynamics encourage the production of the goods and services that are in demand. A zero-competition monopoly is intrinsically handicapped at achieving better standards, because it has few if any incentives to seek better outcomes.
Canada’s monopoly health-care system eliminates the most powerful incentive of all: the spending power of consumers. Government-sourced funding that is generally budget-based surrenders the usual power of the purse to incentivize performance, quality, and operating efficiency. Robbed of this essential economic instrument, Canadian patients become supplicants, the system free to ignore them—as it habitually does.
Clearly, not all of Smith’s free-market ideals could be implemented immediately. A mass overnight privatization of all hospitals would almost certainly be infeasible and impractical. But the more competition that could be introduced to Canada’s health-care system, the more the quantity of health care provided could be increased and the more its quality improved.
Who knows, an unleashed Canadian health-care sector might finally be able to find the cure to cancer. And not just that, but to actually treat Canadians with cancer in a timely manner. That would be the actual touchdown pass, caught and carried by none other than Smith’s Invisible Hand.
