[N]eoliberalism today represents a set of default assumptions in favor of unregulated markets. It does not map on perfectly to the more extreme market libertarian position associated with the early Chicago School. It is instead a more moderate view: the view that government intervention in the economic domain tends to be inefficient and should therefore be avoided. What characterizes this more moderate view is a set of softer a priori assumptions that are reflected, especially, in the rhetoric of economic debate. In contrast to the more extreme rhetoric of the early Chicago School—for instance, the argument that the free market is practically always more efficient—market neoliberals suggest that government intervention tends to be less efficient; that it is generally the case that market mechanisms work better, in part because of lower transaction costs, but also because market participants are better information gatherers and tend to be more invested in the ultimate outcome; and that government agencies suffer from greater principal‐agent problems, are less nimble at adjusting to changing market conditions, and become more entrenched and subject to interest group capture. These are familiar arguments and, together, they tend to promote a loose default position that favors market mechanisms over “regulation”—a tilt in favor of “free markets.”
Its shelf-life has expired, but in the same part of the post where he discusses some rightwing rhetorical moves, Chris characterizes the left as “harping on market failures” in arguing for universal health care. I don’t think that’s entirely correct. One of the left’s arguments — that “A final market failure [is that] because hospitals and other health care providers offer charity care, some people do not purchase insurance . . . [T]he availability of charity care reduces the rate of private insurance coverage, suggesting that there is some “free riding” on the system” — is a confused and possibly disingenuous resort to the rhetoric of market failure. It is confused because the situation described is not a market failure in the sense that there is an alternative to it under which some are better off and none are worse off. It is possibly disingenuous because even if the left’s solution (the ACA) causes overall costs to decline it also redistributes those costs that remain in such a way that some pay more than they would absent the legislation, which is plainly not a Pareto improvement — to the extent that the left characterizes the problem at which the ACA is addressed as a “market failure” in order to purchase market liberal bona fides for that piece of legislation it is being dishonest.
But the left also rests its defense of the ACA on its promotion of a substantively good state of affairs. That is, the left is happy to defend the ACA on the ground not that it costlessly increases preference satisfaction (absurd), but that it secures what is objectively desirable. Consider, for example, the closing passage in the article I linked here:
The ACA will achieve near universal coverage, something that seemed unimaginable just a short time ago. Health reform envisages a social contract in which everyone shares the cost, recognizing that virtually everyone will become ill one day. The ACA and its individual mandate are not unjustified limits on freedom, but rather are vital to a decent society. If the social contract must be accomplished through the private market, then the simple logic of insurance must prevail, which is to spread the risk among the rich and poor, healthy and sick, young and old alike.
As the slogan has it: this is fairness, not efficiency — albeit it is in tension (though not, needless to say, in direct conflict) with the “loose default position that favors market mechanisms over regulation,” which is where this post began.