Surgery Center of Oklahoma Blog

October 20, 2011

Adam Smith, Hero of the Poor and Sick

Filed under: Uncategorized — surgerycenterok @ 12:28 pm

As a non-historian I am going to give the following a shot.   Two of the most brilliant thinkers that ever lived were Francis Hutcheson and David Hume.  There is not enough space in a lifetime of blogging to begin to scratch the surface of just one of these guys.  They are thought of as two of the most influential forces in the Scottish Enlightenment.  Their writings were probably the primary political  influence on the group of men thought of as the founders of the U.S.

Hutcheson believed that man as an individual and left to his own devices was a “natural cooperator,” and that the quality of his neighbor’s life was of paramount concern to him (this is terribly, almost offensively simplified but you get the message).  This is a radical, anti-state message that has been used to downplay the importance of state intervention in human affairs.  Hume was more skeptical and believed that man would act in his self interest, no matter what the effects on society or his fellow man.  He believed that cooperation between men and therefore peace and prosperity were not a natural consequence of human beings living together.  These two men regularly debated openly in Glasgow before a dazzled crowd.  The eloquence and force of their arguments were unmatched except by each other.  The ideas these men were kicking around and advocating were earth-shaking and had consequences that neither at the time could possibly imagine.  Sir Walter Scott was reportedly mesmerized by the intellects of these two philosophical giants sparring in the pubs of Glasgow.

Enter a third individual.  Adam Smith.  Smith was an admirer of Hume and had actually been a student of Hutcheson.  Smith, now famous as the author of “An Inquiry into the Nature and Causes of the Wealth of Nations,” settled the argument.  He argued that Hutcheson and Hume were both correct.  My apologies for the simplistic conclusion here.  He argued that left to his own devices man would act in his own self interest and that this promotion of one’s self interest improved the condition of his neighbor.  He argued that the realization of one’s self interest in a free society didn’t occur at the expense of the neighbor but actually promoted the neighbor from his previous condition.  This was radical stuff.  Up until this time, the idea was that wealth could only be acquired through pillage and conquest, leaving the source of the goods or services diminished to some degree.

Economic exchange between free individuals suddenly became  another matter entirely with this new, enlightened line of thought.  Men would simply not exchange money for goods, or goods for goods, unless it benefitted both of them to do so.  This mutual benefit (both parties in an exchange emerging better off than they were before) is the power of the free market and the birthplace of profits and capital.  Walter Williams’ example of buying milk from the grocer is a great way to understand this.  Simply, you say, “I want your milk more than I want my two dollars,” and the grocer says,”I want your two dollars more than I want this milk on my shelf.”  You both walk away better than before or there would be no reason to make the exchange in the first place.

What’s the point of all of this?  Neither party can know whether the anticipated exchange or purchase is worthwhile if no price is attached to the good or service.  The lack of transparent pricing makes the exchange irrational…there is no way to even know if the purchase makes sense.  This is the economics of health care currently.  It simply doesn’t make sense.  In addition, there are those who are throwing mud in the water to make sure that it doesn’t make sense so you can’t see how they are profiting from the irrationality.

Posting clear pricing (not some bait and switch gimmick) brings much needed sanity to the economics of health care.  The market competition that forces suppliers or sellers to be better and more innovative brings prices down and pushes quality up.  Only those who wish to embrace insolvency ignore market competition.  Free competitive markets bring prices down.  Every time.  No exceptions.  This is incredible news for the least fortunate in our society.  Making health related purchases more affordable is the outcome of price transparency and market competition.  Our wonderful government is focused, not on cost of care, but, rather the method of looting the taxpayer to pay for very expensive care.  This wrong focus is due to the pressure of very special interests who stand to suffer greatly if price transparency is adopted.

Want to do what is best for the least fortunate among us?  Allow the free market to flex its muscle in the health care arena and everyone will see that the wisdom of Adam Smith is confirmed.

G. Keith Smith, M.D.

  • Share/Bookmark


  1. Voluntary exchange brings people naturally together. Mandated exchange requires compulsion that people naturally resist, requiring more still more force to achieve compliance. This is why socialism and fascism occur together so often. We are on the threshold of that situation now. There is such a thing as voluntary socialism that arises out of an enlightened self interest. For example, health insurance would probably be much different without the influence of qualified plan requirements. People would insure catastrophic risk only. Market forces would be much more prevalent.

    Comment by Tom — October 22, 2011 @ 12:24 pm

  2. I agree. I would say, however, that voluntary socialism is just another product of the free market, the voluntary nature of any cooperation signaling the absence of coercion (government). I am thinking you would agree with this, that my point is semantics. I increasingly think of government as coercion, that is, interference with free exchange. Rothbard had it right, I think…government is a monopoly on violence. The less of it the better. Thanks for your thoughtful comment and for following the blog.
    G. Keith Smith, M.D.

    Comment by surgerycenterok — October 22, 2011 @ 4:09 pm

RSS feed for comments on this post. TrackBack URL

Leave a comment

Powered by WordPress