….your first thought upon reading professor Boudreaux’s letter is “Widgets? I thought this was about health insurance.”

Here’s a letter to the New York Times:

Your lead headline today reads “Health Insurers Seek Steep Increase in Plan Rates,” which is followed by this opening sentence in the report: “Health insurance companies around the country are seeking rate increases of 20 percent to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.”

Wow!  Who’d a-guessed that when government arranges for Dick and Jane to buy widgets using Bob’s and Ann’s money that Dick and Jane would buy more widgets, and become less sensitive to the price of widgets, than when spending only their own money – and that, in consequence, the price of widgets would rise?  How surprising!

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030