Imagine that someone invented a pill even better than the one I take. Let’s call it the Dorian Gray pill, after the Oscar Wilde character. Every day that you take the Dorian Gray, you will not die, get sick, or even age. Absolutely guaranteed. The catch? A year’s supply costs $150,000.
. . . So here is the hard question: How should we, as a society, decide who gets the benefits of this medical breakthrough? Are we going to be health care egalitarians and try to prohibit Bill Gates from using his wealth to outlive Joe Sixpack? Or are we going to learn to live (and die) with vast differences in health outcomes? Is there a middle way?
As Free Exchange says,
His overarching point is actually not that complicated: medical treatments cost money, and so figuring out who gets what is tricky.
Greg bills this as a reason health care will never be equal. What I see is a reason that health care will never be infinite.
Pills don’t just appear by magic. They are funded by research and currently profit seeking firms. If far and away the largest market for drugs was a universally covered public then drugs will be made for a universal public. Ones with an actual treatment cost of 150K a year wouldn’t be made.
Now, suppose that for some weird reason it was profitable to develop a drug whose actual treatment costs were 150K a year. And that this drug prevented all aging! What you would see is a radical transformation in society. A massive increase in work effort and an national an effort exceeding WWII mobilization to get this drug for everyone.
Consumption would collapse. Investment would rise sharply. There would probably be rationing of everything. The entire focus of the country and likely the world would be production of the Dorian Gray Pill (DGP).
I am guessing that in a relatively short time we would achieve pills for everyone in the US and then the world would turn to the trickier task of providing it for every alive. It would shape every political discussion and every international negotiation. There would be no other issue.
In short, Mankiw’s DGP example doesn’t make sense in the context of our current social and economic structure because such a thing would radically alter our social and economic structure. In a post DGP world it wouldn’t be about preventing the rich from getting access, it would be about striving to get everyone access.
Note: Jeff Ely beat me to the title but it was too good to give up.