Competition Creates Wise Consumers

John Stossel applauds competition in health care:

But Obama's so-called reforms would not create real competition and choice. They would prohibit it.

Competition is not a bunch of companies offering the same products and services in the same way. That sterile notion of competition assumes we already know all that there is to know.

But consumers often don't know what they want until it's offered, and their preferences and requirements change. Businesses don't know exactly what consumers want or the most efficient way to produce it until they are in the thick of the competitive hustle and bustle.

This is true in the field of education, as well as health care. If we created a complete separation of school and state -- that is, abolished all government education -- a.k.a. "public" schools (the "public option") -- it is true that there are many parents who don't know enough to choose the best education for their children from private options. This changes under true competition. Education System "A" comes to those parents and says "Here's what you should be looking for in education for your children," and then lists several features which, to nobody's surprise, Education System "A" provides. (Healthcare examples:
• American College of Surgeons: Looking for a qualified surgeon?
• ACS :: Choosing a Doctor and Hospital) Then Education System "B" comes a-knockin', and tells the parents that children should have several options which System "A" does not offer -- which, of course, System "B" does.

In this way, advertisers educate parents.

System "C" comes along and says they offer the same features as System "A" but for a lower price. "D" competes with "B" in the same way. This forces "A" and "B" to lower their prices. Quality education increases, the price goes down. Just like healthcare used to be.

A, B, C, and D, are all doing fine, they think, until their enrollment goes down. They find parents are enrolling their kids in System "E," which has features that nobody in A-D ever thought of. There's really nothing new about the features of Education System "E" -- "radical" educators thought of them years ago, but government never approved them. Parents do.

Thus, as Stossel notes:

Nobel laureate F.A. Hayek taught that competition is a "discovery procedure." In other words, the "data" of supply and demand emerge only through the market process. We need open-ended competition not merely to see which rival is better, but to learn things we didn't know before and aren't likely to learn any other way.

"Competition is valuable only because, and so far as, its results are unpredictable and on the whole different from those which anyone has, or could have, deliberately aimed at," Hayek wrote.

Well-meaning politicians have created untold misery by assuming they and their experts know enough already.

What a surprise. Millions of consumers and hundreds of competing businesses have more information and make better decisions than 535 Congressmen. Competition means rational economic planning.