Surprise and Demand


I tried to explained this to my daughter, who is way smarter than me, and she looked at me like I had a huge honking zit on my nose. But when you want to analyze something, start with the basics. Come with me down the logical path, won’t you?

Given: It’s always all about the money.
Given: The first law of economics (that’s money, Bubba) is “Supply & Demand”. Simply put, if there is a large supply of something, the price drops, until the demand for the item reaches equilibrium.

But what if the item in question is money? See, money has a price, too.

If you have insurance, read your pharmacy receipt sometime. It usually says, “You save $125” or something like that. You paid a little copay and your insurance company picked up the difference. But why did those little pills cost so much to begin with? I thought the insurance company was so big it could negotiate lower prices.

That’s bull. The medicine cost so much because of supply and demand. The insurance company is a gigantic money depository. The drug companies set the price of the drugs based on the supply of money available from the insurance companies.

If the average person had to pay the full cost, the price would be $20, $30 tops. Remember way back before there were insurance companies and you could pay the doctor with a chicken? It’s the same concept.

Now, what if the supply of money available for drugs and medical services was unlimited? What would the doctor, hospital, and drug companies charge?

The formula is simple: Supply of money = unlimited; Demand for said money = unlimited.

That’s essentially what the U.S. government is…an unlimited supply of money. If they are going to supplement insurance with tax credits, etc. or eventually become the insurance company, prices are going to go up, way up.

I almost wish we had gone in the other direction. Instead of universal health care, I wish Congress had abolished the insurance companies. Without that massive, mesmerizing pool of money floating in front of them, the medical industry would have to lower prices so the average person could afford them because some money is better than no money.

And that, kids, is the law of surprise and demand. I wonder how much Oxy10 costs. I seem to have a huge, honking zit on my nose.

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3 Comments

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  1. Surprise and debt is missing the other side of the equation; whoever controls the debt obligation of another, wields true power to control even the value of local currency.

  2. Still relevant after all this time. Maybe even more so.

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