Wednesday, 22 February 2012

Schlichter on the NHS

Detlev Schlichter has published an impressive essay on the correct size and proper function of the state. I will highlight further aspects of it in future posts, perhaps along with an explanation of why I am not yet prepared to make the leap to anarcho-capitalism.

For now, here is an excerpt that nicely complements the article by Jamie Whyte featured in my previous post:

Britain’s National Health Service will never deliver a satisfactory service. This is not because the people who work in it are incompetent or lazy. They could be the most motivated, devoted and well-meaning people on the planet and they could still only deliver suboptimal results and do so at considerable cost. Why? Because the NHS has to deliver health services for an entire nation without the help of true market prices and profit and loss accounting. These are the tools of capitalism that – day in and day out – allow the private sector to make informed decisions about best resource use – ‘informed’ because reflecting the preferences and wishes of the customers, the consumers.

Despite the widespread sentimental attachment to the NHS and its superficially appealing motto of delivering health care “free of charge” (obviously not true for the majority of citizens), the fundamental shortcomings of any service organized along socialist lines should be glaringly obvious to anyone: While the still fairly unrestricted private mobile phone industry in Britain delivers the latest advances in telecommunications technology to people across the entire social spectrum with remarkable speed and at constantly falling prices, the nationalized health service bureaucracy has people wait in line even for many routine and long-established procedures and provides such service at ever more staggering cost to the taxpayer.

That health service and education are too important to be left to the private market is a common prejudice that puts economic logic on its head: Because they are important they should be allowed to employ the tools of the private market.


  1. You could almost say they are too important to be left in the less than competent hands of the state ^_^

    The private sector is generally staggeringly more efficient than the public, but some of the resources there go in profits or returns to investors.

    We are all 'investors' in public services and in an ideal world take our returns as less expensive services, or making the money go further.

    What might be the best of both worlds would be public services somehow run like private industry.

    Being realisic tho greater individual reward surely does drive people to work harder and do their best.

    1. Hi Moggsy,

      Thanks for your comment.

      For healthcare and education, I'm confident that taxpayer funding with private provision would be an improvement on the status quo, assuming the funds were directed by the 'customers' (patients and parents) rather than central planners.


      Public-private partnerships don't have a great record in the UK. Outsourced IT, for example, is incredibly poor value for money (I don't know whether it's actually worse than what came before). Large, privileged suppliers on long-term contracts aren't subject to the usual competitive pressures. Their primary goal is not to deliver value, but to extract as much money as possible from their host.

      It would be far better if the government simply did less. Many departments, like those for Culture, Energy and Industry shouldn't exist at all. Those that remain should do as little as possible. HMRC, for example, could probably be run by a handful of competent people if the tax code were simplified (we really only need one or two loophole-free taxes).

      As for services like education, healthcare, and housing that people actually want, it's worth noting that even if the government only funds these services, rather than providing them, they are still distorting the market to the benefit of some groups at the expense of others.

      Government subsidy establishes a price floor. In a free market, schools would offer a range of services catering to all incomes, just as supermarkets currently do for food (Basic or Taste the Difference). However, if schools know that every child is entitled to £5000 a year then they don't need to offer lower prices to get the business of parents on lower incomes. Effectively it is the schools rather than the parents that are subsidised.

      The same applies to landlords and hospitals.

      Ideally the government would private nothing more than police, courts, and a military sufficient merely for national *defence* (rather than interventionism, liberal or otherwise) [1].

      (Anarcho-capitalists would go further, and say that even those functions should be in private hands, but it's hard to see how that would work, especially in the case of the military)

      [1] Perhaps some hostels and soup kitchens too ...