Brad DeLong asks:
What is the most likely outcome for the U.S. budget come 2060? 1. We will have raised taxes to pay for government health spending. 2. We will have cut doctors\’ wages and enslaved them by drafting them into a socialist national health service. 3. We will have abandoned our commitment to providing state-of-the-art health care to the sick and not just the wealthy. 4. The health care fairy will have figured out a way for us all to have all the medically-appropriate care we need for a surprisingly low private and public budgetary cost. 5. The federal government as we know it will have collapsed, and those of us still alive will be starring involuntarily in a remake of “Mad Max: Beyond Thunderdome”.
The health care fairy, obviously.
Assuming we continue to allow markets to work of course.
For, as I\’ve noted already today, while Baumol tells us that improving productivity in services is hard and that thus the price of services will rise relative to the price of manufactures, this isn\’t the end of the story although it is what gives us the grief of the projections for health care costs.
For the let out here, the escape hatch, is mechanisation: which brings us back into the realms of manufacturing where we can improve productivity.
As I\’ve also already said today, aspirin is the mechanisation of that comely maiden with the brow cooling cloth attending upon a headache. Vaccines the mechanisation of tending to those pustulent with smallpox, penicillin the mechanisation of tending to those with the general paralysis of the insane.
Each medical treatment is becoming cheaper as we mechanise them: it\’s only that we keep finding new things we can treat which is pushing up the total cost.