Comment 31889

By arienc (registered) | Posted June 18, 2009 at 16:28:12

A Smith > Imagine you run a drug company that can extend people's lives 100 years. How much will people pay you for that drug? In this case, you want as many people to live as long as possible and have as many children as possible, so that your profits are as high as possible. Helping people live a healthy, enjoyable life is something they will pay you lots of money for and it's also good business.

Not necesssarily. The drug company will price that drug at the price which maximizes their profit, not the price which maximizes the welfare to the people who need it.

For example, lets say that a drug company comes up with a drug which is demanded by 1 million people to keep them alive and healthy.

If 10 people can afford to pay $10,000 per pill, 1,000 people can afford the drug at $1,000 per pill, and 500,000 people can afford the drug at $1 per pill, the drug company would (assuming little or no cost just to make it simple), offer the drug at $1,000 per pill, thereby maximizing their profit. The 999,000 who can't afford the pill...what happens to them? they aren't the drug company's "clients" so why would they care?

Self-interest and public interest go hand in hand. For those areas where individuals or groups' self-interest conflicts with the public interest, limited government (public) intervention is necessary.

A Smith >If government can't know the direct benefit of providing goods/services to the people who actually use them, how can it know the much more opaque secondary benefits. That's like saying I don't know how much money I have in my bank account, but I know I will be able to buy that new car I want.

I don't understand what this has to do with my comment? Do employers not benefit from the education that was provided by the public schools to their workforce? Do road users not benefit from easier commutes due to having fewer cars on the roads? They do not pay directly for these things, but they benefit from them. These are the externalities I was talking about.

In a fully private "user-pay" system such as you seem to advocate, these external benefits would be absent. These are benefits which make society richer - financially as well as in less tangible "quality of life". To me, a fully private ecomomy is equally tyrranical and just as inefficient as a fully public economy. There has to be a balance between the individual's role and society's role.

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