Tyler Cowen, A libertarian case for expanding Medicaid.

I have next to no views about health care funding policy. I can tell you horror stories about Canada but I also know plenty of horror stories about the U.S., and I don’t believe that those two countries’ systems are useful synecdoches for “state” and “market” respectively. I know enough to know that figuring out how to improve a few pieces at a time of a vast complicated patchwork like the US health care system requires knowledge that is way outside my competence, and that no particular good is served if I pretend that my ideological priors count as useful substitutes for policy knowledge in a domain in which I have zero decision-making authority.

But I do think Tyler’s post is relevant to what we do here. I take one of the BHL ideas to be this application of the theorem of the second-best:

When Libertaria is not an option and when libertarian first-best policy choices are not available, selective and piecemeal spending cuts will often make things morally worse not better. If, for example, the features of active state policy that make life worst for the disadvantaged or vulnerable are sticky and durable, then taking easy chops at the state expenditures that mitigate disadvantage and vulnerability makes things morally worse. “Cut poor relief last, not first” is one way to think of this. Holding constant a world of immigration restrictions, mass incarceration, occupational licensing, corporate welfare, agricultural subsidies, and upward redistribution of all kinds, large-scale state action to mitigate absolute material suffering among the poor is a necessary offset; cutting that state action first is immoral, and there will often be an obligation to increase it in the meantime. If libertarians are right about the poverty-reducing potential of the rest of our policy goals, great; once we’ve checked them off the list, then we can remove these no-longer-necessary programs. But in the meantime, selective spending cuts are as beset by public choice dilemmas as any other piecemeal state action, and it’s all too easy for them to be focussed on the politically weak. Likewise, in some particular mixed-economy sector like health care, even if there’s a clear libertarian first-best situation, the theorem of the second-best will hold. One has to be very careful about just ratcheting back state spending that supports the poor on the grounds that in the first-best situation such spending would be very low. And– I think, and this is one of the ways in which I’m a BHL– “careful” here definitely includes “attentive to distributive consequences, and not doing the things that take away support for the poor as an early part of the transition to an optimal end-state.”

I also happen to think that Tyler’s prisoners analogy is of potentially very widespread applicability; a thought for another day. For now I’ll just note that his post represents the kind of inquiry that I think BHL demands.