Arguing that �economic incentives in health care� are perverse, David Leonhardt asserts that �As long as doctors and hospitals are paid for each extra test and treatment, they will err on the side of more care and not always better care. No doctor or no single hospital can change that. It requires action by the government� (�Making Health Care Better,� Nov. 4).

Hogwash. To see why, change just a few words in the above quotation: �As long as sales people and clothing stores are paid for each extra necktie and nightie that they sell, they will err on the side of more selling and not always better customer service. No salesperson or single clothing store can change that. It requires action by the government.�

From Don Boudreaux. He suggests the real problem is third-party payer. Certainly so. But does the difference in short-run demand elasticities between a necktie and an emergency bypass surgery on a beloved 75-year-old grandmother play any role here?

Labels: economics, health care