October 3, 2012

DisEntrenchMediation: Healthcare & Education

Healthcare and College both had one problem: Entrenched mediators grabbing control of pricing rather than the market. Attempt in the former case has been to add Gov to control the Entrenchmediary, while on the latter, it has been about removing the Entrenchmediary leaving only Gov.
Are these the best options in the respective cases? This author believes that in both cases, there was a better Regulated-Market solution. The problem is not as much as the intermediary, rather it is/was its entrenchment with public purse on the hook guaranteeing the intermediary's full tummy. I have written about healthcare before, that essentially the employer mandate is best removed, and replaced by a no-frills, individual-buy, catastrophic-only public option.

In this post I focus on Education.

Like Healthcare, College prices are a scam. They are supported by the essentialness that a young person sees of College as his enabler for better earning prospects. So it's not like buying oranges. If you think you need Education, you cannot withdraw from the market if the price is too high. The intermediary banks had been willing to finance any price for a college degree, secure in the Gov guarantees for the loan they made, and the fact that College loans do not get discharged in a bankruptcy and have to be carried through one's entire life.

A Regulated-Market solution to the scam would be to let the intermediary banks stay in the game, but simply legislate that they have only 7 (or max 10) years over which they can recover their loan from the loanee, and in any given year, no more than 40% of the loanee's income can be taken as payment. And with No Gov guaranteeing what could not be recovered under the law. College Education pricing will immediately see correction to reality, as banks are no more going to finance scam pricing of these programs, and it would cost the public treasury...nothing.

Disentrenchmediation in essential items sometimes takes a little Gov or Regulation, but needs to be done smartly, where it gives the best results at least, better NIL, public cost, while forcing private sector to exert and unleash its efficiencies rather than ride the essentiality of the item helped by a Gov guarantee or perceived obligation.

Especially a Gov that wants to stay economically feasible needs to slay market capture, not subsidize it more.


  1. Good one.

    Please analyze from Govt. perspective also.

  2. Sorry, I meant from Indian Govt. / India scenario perspective as well.