January 2015

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« Robert Leeson, Hayek and the Underpants Gnomes | Main | Theory, History and Industrial Policy -- Joe Stiglitz's View on Creating the Learning Economy »


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Perhaps you are familiar with William Allen, who did 3-minute radio bits as the Midnight Economist? http://www.fee.org/the_freeman/detail/book-review-the-midnight-economist-choices-prices-and-public-policy-by-william-r-allen

Pete is right about this being an issue of incentives. Charles Krauthammer, himself an MD by training, offered the following statistic. In the U.S., the average cardiologist in the private sector sees as many patients in a week as does the 8-person cardiologist unit at the Albuquerque VA hospital.

The issue is that in the VA system,doctors are paid a salary and their income is independent of how many patients they see. A private cardiologist's income is directly correlated with the number of patients he sees.

There is a scandal in this. That is the secret wait list. That is apparently a relatively new element in an old story. It was reportedly done so that managers could earn bonuses for good performance. The VAs bonus system is actually perverse.

In the medium-term, John McCain is right. Give vets a choice and allow them to use whatever medical service they want.

Cotton Lindsay also published this great JPE piece in 1976:


I don't understand why there are VA hospitals in the first place. Specialization in the kinds of injuries veterans have can take place under any funding scheme. Secondly, don't these veterans have jobs and hence regular health insurance? How urgent, typically, was the need for appointments?

None of this is to suggest that I think veterans deserve to be treated badly.But I do think it should be a warning to those who think going into the military is a good idea. The government will not treat you well.

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