The point of departure of this Editorial is the fact that we all are engaged in self-rationing in our everyday lives. We would like to spend more money on all sorts of nice things and devote more time to our cherished activities. Imposed rationing is characteristic of wartime governments, who seek to prevent the rich from gobbling up the resources left by the army. Since the publication in 1987 of David Callahan's Setting Limits: Medical Goals in an Aging Society (Callahan, Setting limits: medical goals in an aging society, Simon & Schuster, New York, 1987), rationing of health care has become a widely debated issue (the Internet is full of pertinent entries). While rationing has also been addressed by health economists, there are three puzzling observations. First, Callahan (Callahan, Setting limits: medical goals in an aging society, Simon & Schuster, New York, 1987) wrote for an American audience whereas rationing was introduced by the British National Health Service (NHS) well before 1987, with little debate. Second, the economic theory of rationing had been laid out by James Tobin [Ectrica 20(4): 521-533, 1952] as early as 1952-but health economists seem to have neglected his groundwork when writing about rationing. Third, they accept government-imposed rationing as inevitable in the case of health care, as though the selfrationing alternative was unavailable. An attempt is made here to provide rational explanations for these puzzles.Demand for rationing is induced by health insurance (and even more so, NHS provision)A well-known side effect of insurance is moral hazard. In the case of health, consider Mr X who is willing to pay €100 out of pocket for a drug, and let the rate of copayment be 33 percent. Evidently, the drug may cost as much as €300 at the pharmacy, and Mr X will still buy it. In this case, insured patients' marginal willingness to pay is inflated by a factor of three, the inverse of the rate of copayment. In Fig. 1, the 'true' demand function D oop (reflecting marginal willingness to pay out of pocket) is swiveled around to become the observed demand function D obs Ins (as seen by the pharmacist in the example). Given a positively sloped supply function S, the market equilibrium moves from E to E Ins . The prediction is clear: health insurance coverage causes an increase in the price of health care p M , the quantity of healthcare services M transacted, and hence healthcare expenditure HCE ¼ p M Â M. These effects are the more pronounced, the lower the rate of copayment.In a NHS promising access to care free of charge (as the British NHS originally did), observed demand does not react to price. Therefore, D obs NHS runs vertical, giving rise to equilibrium at E NHS which reflects even stronger moral hazard effects than the insurance-cum-copayment alternative. In the words of NHS historian Geoffrey Rivett [19], writing about the 1960s, ''Costs kept rising. The BMJ (British Medical Journal) believed that, ignoring the British capacity for muddling through, the NHS was heading in the...