> Government is not spending its own money but that of taxpayers present and future - an agency-style conflict of interest.
The government is spending its own money it collected in taxes[0]. Whether it is more like a thug or more like an embodiment of the collective will of society is immaterial. It's just another customer on the market.
> This is then made worse by the fact that the party who receives the services purchased (the patient) is someone different again who has no skin in the game at all.
This is the exact same scenario as an advertiser paying a company to expose me to advertising; I have no skin in that game either, and I'm subjected to something I do not necessarily want. But nobody would say it's not "free market". Hell, in the case of the clinics, the situation would be identical if the party paying for the procedures was not the government, but a billionaire philanthropist.
In fact, nothing about a free market precludes such scenarios, where the choices available to a buyer are dependent on the deals made between the seller and some third parties.
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[0] - The concept that "government has no money" is silly outside the quite obvious reminder that government is mostly funded by its subjects.
I'm not trying to make a moral point about whether taxes are right or wrong, simply that people behave differently when spending other people's money rather than their own. Government spending taxpayers' money is exactly the same conflict in this sense as company management spending shareholders' money. These agency conflicts can an do often lead to bad outcomes and when this happens it's generally viewed as a form of market failure.
Considering you are talking about the health care system where insurance companies spend money on behalf of their customers. At no point did the customer of the doctor or dentist spend his or her hard earned money. It was always a large, authoriative corporation.
Why would it matter if the corporation is the government or an insurance company? Also, are you implying that you can't have a free market if you have insurance companies?
It is indeed a problem with insurance as well where it's more commonly called moral hazard. With insurance traditionally there are a number of mechanisms which can help mitigate this eg copays, deductibles, etc. - and there is (sometimes) a market for pricing of policy premiums and terms.
But it's far from perfect, especially in the US (at least as I understand the American system).
I'm also not trying to make a moral point. I'm trying to show that these kinds of problems are one of the possible failure modes on the free market, and whether one of the actors happens to be a government is immaterial - you could (like you personally just did) draw an equivalent scenario involving only private businesses.
When people talk about "free" markets it usually means markets where these types of problems are effectively managed or mitigated, not "markets with no rules".
There's of course lots of debate about what the right policies to manage and mitigate these are but it doesn't mean that markets aren't a good mechanism just because there might be trade-offs or imperfect solutions.
I always understood "free" markets to be ones run by supply and demand, without authoritarian interference. That does not exclude principal-agent problems, though.
I'm also not saying markets aren't a good idea. Just I don't believe they're the core of the solution to the problem I outlined upthread.
The government’s money are unearned money, confiscated from taxpayers. There is a saying about this kind of income: "easy come, easy go". You can be sure that "the subjects" this money was taken from would be much more careful about spending it.
Not convinced? Just look at the way government borrows: no sane person would sell her future like that. Also, just ask a politician how worried he is about spending money "for his constituents". I know stadiums made for tiny towns, boulevards for undriven neighborhoods, and so on and so forth...
Sure. But that's neither here nor there, as the market is an equal opportunity institution. It doesn't ask whether you got your money by providing goods in exchange, or confiscated it from your subjects, or won it in a casino, or robbed a bank, or stole it from your employees' pension fund, ...
Sure, but that does not apply to the case we're discussing - which is a government paying clinics for procedures. You could substitute "a billionaire philanthropist" for "a government" and the outcome would be exactly the same.
Now if you want to talk free markets in general, then I want to point out that in the real world, a free market cannot thrive without some sort of government that ensures social stability and enforces contracts. Without such government, the market would quickly degenerate into trading violence alongside currency, and either disintegrate or... end up producing a government. Ultimately, "private enterprise" and "public governance" don't have a clear boundary between them - they're two modes of the same phenomenon, people negotiating with each other.
There is no billionaire who can even remotely approach the purchasing power of a government. If billionaires could truly influence markets, we'd have seen it on the stock market. Instead, we saw the Fed.
I am not proposing to get rid of the government, that leads to anarchy. A government is required to uphold the rule of law and, for markets, to sustain contracts. I would also argue that they should tax externalities. The trouble starts when governments go beyond that and start regulating and influencing the markets, ending up corrupting them.
The government is spending its own money it collected in taxes[0]. Whether it is more like a thug or more like an embodiment of the collective will of society is immaterial. It's just another customer on the market.
> This is then made worse by the fact that the party who receives the services purchased (the patient) is someone different again who has no skin in the game at all.
This is the exact same scenario as an advertiser paying a company to expose me to advertising; I have no skin in that game either, and I'm subjected to something I do not necessarily want. But nobody would say it's not "free market". Hell, in the case of the clinics, the situation would be identical if the party paying for the procedures was not the government, but a billionaire philanthropist.
In fact, nothing about a free market precludes such scenarios, where the choices available to a buyer are dependent on the deals made between the seller and some third parties.
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[0] - The concept that "government has no money" is silly outside the quite obvious reminder that government is mostly funded by its subjects.