Healthcare Economics: Standing Athwart History, Shouting "Stop!"

I'm very interested to see Herb Stein's famous quote being invoked by liberals to talk about healthcare.  When Herbert Stein first said "If something cannot go on forever, it will stop" in 1980, he was arguing against people who were using scary charts mindlessly extrapolating some trend out to 100% of the total economy in order to demand immediate government action on a problem--in that case, the balance-of-payments problem. 




The problem with these extrapolations is twofold.  First, you definitionally cannot see the feedback systems that will probably mitigate the trend--all trends seem inevitable until they stop.  Think about the population explosion literature of the 1970s.  Now, in theory the people of the 1970s had a piece of information available to them that should have warned them that their charts were likely to be off:  to wit, that women in the wealthy West no longer averaged six or seven children apiece.  In practice, they were distracted from this data point by a lot of other factors, including their own racism.

But also, especially in cases like this, we react inappropriately to future extrapolations, because we project them onto our own situations--we ignore the fact that the changes in income shares devoted to a given product arise from economic growth.  It is true that I cannot afford to spend 40% of my income on healthcare.  It was equally true that my great-great grandparents could not afford to spend a third of their income on housing, and another half on clothing, manufactured good, transportation, and services--Land o' Mercy, everyone in the future is going to starve to death!!!

Obviously this is ridiculous.  I am not consuming less food than my ancestors; I am consuming more.  (Too much more, according to the waistband of my favorite pants.)  But my income is vastly higher than theirs in real terms, so that the food I consume is 10% of my household budget, rather than 50%.  Similarly, our descendents in 2100 giving over 40% of their income to health care (if indeed they do), will not be skimping on housing, transportation, clothing, entertainment, or what have you.  In all probability, they will be consuming more of everything than I do, except maybe energy and housing.  It's just that they'll be devoting a large share of their extra income to health care.  This prospect doesn't worry me.  And it probably won't worry them, other than the way it (mostly) worries us:  because we'd always like everything we consume to cost less, and be more equally distributed.