IOver the past decade health care reformers from Americaís business schools preached the virtues of "seamless" integrated hospital systems. Several years ago at an AMA meeting I heard one young MBA sermonize with evangelical fervor about the dawn of a new utopian health care millennium. The reformersí sweet siren song convinced hospital trustees, desperate for a quick fix for rising health care costs, to implement their unsubstantiated theories. This costly mistake is largely responsible for the current sorry state of affairs in the hospital industry. Harvard Business School Professor Regina Herzlinger in her book "Market Driven Health Care" convincingly refutes the  reformersí theories by marshalling studies that conclusively demonstrate that vertical integration does not improve efficiency and drives up hospital costs.
By Arthur H. Gale, M.D. Dr. Gale is a past president of SLMMS. St. Louis Metropolitan Medicine/October 2001

Saul's* "central thesis: the free market system is good not as an end in itself but insofar as it is a means of achieving economic benefits that are distributed
       in some just manner -- and to the extent that it fails to do so it needs curbing and channeling by civil society and democracy "
*Saul, John Ralston, The Unconscious Civilization , House of Anansi and CBC, Toronto: 1995 (the 1995 Massey Lectures), cited at Profits vs Wages: The Ocandida Case a website mounted by Rod Anderson

The Free Market System is also referred to as a Laissez Faire Economy, and is one in which people and firms pursue their own self interests without any central direction or regulation.

                           In this unit students are introduced to the elements of free enterprise and compare them
                           to the elements of both a traditional and a command economy. Concepts such as
                           scarcity, choice, and opportunity cost are applied to various nations to deepen
                           understanding of economic organization. Students evaluate how well different systems
                           achieve the broad social goals of freedom, efficiency, equity, security, development,
                           and stability, and they determine whether a system based on voluntary exchange is best.
                           Through the use of case studies, they explore the role of supply and demand in a free
                           market and analyze why businesses do not have complete freedom to establish prices
                           and determine production. Further, students study the four sectors of the nation's
                           economy, how they relate to each other, and how they relate to the world economy.

In our Free Market Economy there are several elements which are imperative for understanding regarding the nursing shortage. They are
Scarcity [exists because of an inequity between limited resources and unlimited wants] , choice [the choices that must be made by individuals and groups as a result of scaricity]  and opportunity cost [the conxequence of choice. THat is , opportunity cost reflects what opportunity is lost as an alternative for the choice made] . In addition there is "weighing the cost of present and future opportunity costs" [do you save or spend, for instance]

"This brings us to wrestlers and nurses. Because so few have the physical attributes to satisfy the demand for wrestling performances,
                                         people are willing to pay a lot to attract one more person with those attributes into the ring. Many more have the attributes to satisfy our
                                         demand for nurses, and so people are willing to pay a lot less to attract one more person into nursing. Although the total value of nurses is
                                         far greater than the total value of wrestlers, the marginal value of nurses is far less. And it is the marginal value of people in an occupation,
                                         not total value, that is important in determining salaries in that occupation.

                                         So there is nothing remarkable about professional wrestlers' earning a lot more than nurses, although some consider it objectionable. But
                                         what some really see as objectionable in the large ratio of wrestlers' to nurses' earnings is that people with "disagreeable" preferences have
                                         the freedom to communicate those preferences through market prices. There is nothing wrong with trying to reduce the earnings gap
                                         between different occupations by trying to change peoples' preferences. But if people try, as some do, to reduce earning gaps with
                                         government controls over wages and salaries, they are trying to distort the price communication that benefits us all.

                                         Unintended Consequences

                                         Government could mandate higher salaries for nurses, for example. This would send a signal that the marginal value people receive from
                                         nurses has increased, and more people should train to become nurses. Few professional wrestlers will want to shift into nursing, but many
                                         other people will. Unfortunately, the higher salary communicates the wrong information. While telling more people to become nurses, the
                                         higher salaries are telling consumers that the marginal cost of nurses is greater than their marginal value, and so fewer should be
                                         employed. The result would be that few newly trained nurses will find jobs, some practicing nurses will lose their jobs, and consumers will
                                         have fewer nurses than they want at market salaries, that is, salaries that reflect their marginal value.

                                         Because people fail to distinguish between marginal value and total value, they believe nurses (and those in many other occupations) are
                                         suffering an injustice and recommend solutions that harm everyone, particularly nurses. " It's the Margin
                                                                                     that Counts

                                                                                        Dwight R. Lee

                                                Reprinted with permission from The Freeman, a publication of The Foundation for Economic Education, Inc., June 2000, Vol. 50, No. 6.