What pencils can teach us about health care

I have not yet heard the comparison made between health care markets and the production of pencils, and surely I don't expect it any time soon. Yet I will argue this comparison is not only valid, but is essentially critical at this current point in time. Before you disregard me as crazy, off-base, or otherwise misguided, please – allow me to explain.

Two years ago President Obama's nominee to serve as the Administrator of the Centers for Medicare & Medicaid Services, Donald Berwick, made the following statement regarding health care in an article in the British Medical Journal:

"Please don't put your faith in market forces – It's a popular idea: that Adam Smith's invisible hand would do a better job of designing care than leaders with plans can. I find little evidence that market forces relying on consumers' choosing among an array of products, with competitors' fighting it out, leads to the healthcare system you want and need."

Furthermore, at a speech delivered in Wembley, England that same year, Berwick also said the following:

"I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do."

According to Berwick, any health care system is immensely so complex that it must necessarily involve a vast bureaucracy of government officials to plan, coordinate, and deliver health care services to consumers.

But here's the deal: Berwick has it exactly backwards. It is precisely because health care markets are so complex that it necessarily requires the absence of central planning in order to efficiently and effectively deliver service to consumers.

Which brings me to the pencil. Over fifty years ago, Leonard Read published his thought-provoking essay, "I, Pencil." If you have never read it, I would strongly urge you to take the ten minutes to do so.

At the beginning of his essay, Read states his purpose:

"I have a profound lesson to teach. And I can teach this lesson better than can an automobile, or an airplane or a mechanical dishwasher because – well, because I am so seemingly simple. Yet not a single person on the face of this earth knows how to make me."

Read points out that while "millions of human beings have had a hand in my creation," that "there is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being… Instead, we find the Invisible Hand at work."

And this is where Read, and current bureaucrats and politicians like Berwick, are completely at odds with one another. But I ask you: Read what Leonard Read has written. Read further about what Donald Berwick has written and said. Make your own conclusions. Are you in agreement with Berwick that "leaders with plans" can do a better job of coordinating products, care, and delivery, at the right time, to the right place, in the right quantities at the lowest possible cost? Or are you in agreement with Read that the best way to achieve this is through "the configuration of creative human energies.. configuring naturally and spontaneously in response to human necessity and desire and… in the absence of governmental or any other coercive masterminding"?

Health care markets are immensely more complex than the production of pencils. Yet Read successfully shows how trying to centrally plan the manufacture and distribution of even simple pencils is essentially futile. And if it can't be done for the simple pencil, how could it possibly be successfully done in health care?

A simple pencil – but a profound lesson: "If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing."