Nobel laureate Kenneth Arrow shows how health policies drive up costs.

Comment “Contest” and we’ll send you a link to compete for $1,000,000, testing your knowledge of what’s really driving the affordability crisis! Kenneth Arrow was one of the most important economists of the twentieth century. A Nobel laureate whose work reshaped several areas of economics, he also helped create modern health economics with a famous 1963 paper asking why medical care does not work quite like ordinary markets. Arrow emphasized problems that are easy to recognize. Patients cannot predict when they will get sick, and they often know less than doctors about treatments, quality, and results. Those difficulties are often used to argue that health care needs more government direction. But Arrow also warned about the dangers of the cure. Rules, subsidies, and professional restrictions can raise costs, limit who may provide care, and block new ways of serving patients. Insurance can weaken the incentive to compare prices, making it easier for costs to rise without the usual pressure from consumers. Read this way, Arrow offers a useful lesson about affordability. Before adding another mandate, subsidy, or restriction, we should ask whether previous interventions helped create the high prices and limited supply policymakers now want to fix.