Praise for Ignorance

Recently, the statements of the Minister of Health became known, who asserted that "The market can't be the one to regulate", saying that "one could consider capping doctors' salaries." All of this is in the context of wanting to improve the functioning of the failed and poorly conceived S.N.I.S. (which should never have existed).

These statements constitute a monumental absurdity, which reveals ignorance of basic issues regarding how the price system works. First of all, it must be said that salary is one of the many prices in the economy. The free, non-intervened price system is what allows for the most efficient allocation of always scarce resources, for better utilization of them.

But what happens when politics intervenes? A distortion is caused in the price system, which now, as a result of political intervention, is artificially altered, no longer according to people's valuations, but to the preferences of the bureaucrat in office.

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The price control proposed by the minister by capping doctors' salaries, if implemented, is doomed to fail, inexorably and irreparably.

Prices in the market serve a cleansing function: they regulate the imbalances between supply and demand. The adjustment price is the one that ultimately manages to balance the situation. When the State sets maximum prices, as in this case, it prohibits selling above the fixed cap, generating distortions and encouraging black markets.

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The maximum price artificially set by politicians is usually below the market price. This generates shortages: demand persists, but production is discouraged. As a consequence, there are no incentives to produce and people end up facing shortages and overpricing in parallel markets.

A clear example was what happened with hand sanitizer and basic basket products during the pandemic. Whenever a maximum price is set below the market, there will be shortages, as well as cronyism and violence.

Maximum prices not only affect consumer goods, but also other prices such as interest rates, which should be liberalized as once happened in the nineteenth century in Uruguay.

If some doctors earn a lot, it is because what they offer is scarce. This type of proposal creates the incentive for the best to emigrate. It is that simple.

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The supposed evil that is intended to be avoided ends up being encouraged. Maximum prices have never worked in the history of humanity. It is a recipe that has been systematically failing for more than 4,000 years.

It seems that the message for doctors who earn good salaries is: "Your services are valuable... but not for this country". Thus, while the minister celebrates a "praise of ignorance" with each statement, the only result will be the gradual emptying of operating rooms.

The only supply that will increase under her administration will be that of plane tickets for professionals who decide to take their "price" to markets where elementary logic has not yet been declared illegal.