The British National Health Service: Lessons from the ?Socialist Calculation Debate?

Abstract

The "Socialist Calculation Debate" is little known outside the economics profession, yet this inter-war debate between liberal and socialist economists on the practical feasibility of socialism has important implications for all contemporary public sector bureaucracies. This article applies the Mises-Hayek critique of central planning that emerged from this debate to the crisis presently facing the British National Health Service. The Mises-Hayek critique suggests that the UK government's plan for a renewal of the National Health Service will fail because of the epistemological pathologies that face any centrally planned system. It is argued that the key lesson of the Socialist Calculation Debate is that market prices and private property rights are essential for the efficient allocation of resources and the attainment of the best possible health outcomes.

Does the Private Finance Initiative Promote Innovation in Health Care? The Case of the British National Health Service

“…Little has changed in the general structure of the NHS over time; indeed, as already noted, after the collapse of communism, the NHS is likely the largest centralized bureaucracy in the world (Meadowcroft, 2003). Characterized by the "triple nationalization" of health care (Blackwell & Kruger, 2002), the NHS nationalized health care supply and demand, as well as the decision-making process to purchase and allocate health care goods and services.…”

“…Unlike the NHS, for-profit corporations have a financial interest in seeking efficient solutions to common problems. As a planned system, the NHS lacks principal features of the market, such as prices, which would permit it to judge supply and demand (Meadowcroft, 2003). As competition increases, the economic system becomes more efficient with concomitant increases in welfare, in terms of both financial savings and increase access to health care.…”

The epistemic impossibility of economic calculation

“…Meadowcroft points to the absence of prices in the NHS as an epistemological barrier that prohibits central planners from acquiring the necessary knowledge. Meadowcroft links the absence of prices (and hence of knowledge) to NHSs failures and argues that they could have been largely avoided if a price system of a privatized health care was allowed to occur (Meadowcroft 2003). Setting aside issues regarding efficiency, Meadowcroft's analysis carries the implication that if one shows that prices exist, this indicates that central planners can have all the knowledge at their disposal.…”