[WalterBright]

> how exactly the 'free-market' for medical supplies would work without regulation, just look at the 1800s.

Do you have a source for this? Medical costs started angling up steeply in the 1960s with the advent of heavy regulation.

> dumping were still more profitable than competing on price.

Isn't dumping competing on price?

[Ironchefpython]

> Medical costs started angling up steeply in the 1960s with the advent of heavy regulation

Broadly, to a first approximation: Medical costs, real-estate, and education have increased in price to capture the consumer surplus created by the decline in food. clothing, and fuel costs.

> Isn't dumping competing on price?

Nope, dumping is used to drive new entrants out of a market. It also acts as a signal to prevent new market entrants.

If I sell 2 million widgets per year at a price of $10 over a cost of $1, after $4 million in capital costs, I can maintain a monopoly if I'm willing to drop my sale price to 50 cents every time someone enters my market, and I raise the price when they exit it.

This creates a Nash Equilibrium were no rational actor will spend $4 million to build a factory to compete with me.

[WalterBright]

> have increased in price to capture the consumer surplus

It is quite a remarkable coincidence that medical costs angled steeply upward immediately after heavy regulation and government involvement in it began.

> I can maintain a monopoly

It'll be pretty hard to swallow $1 million/year in losses to do so. You'd have to maintain those losses to beat back even a small competitor, who would have proportionally smaller losses. A small competitor would have the capability to ruin your business with a small investment on their part. I bet they could finance it by shorting your stock.

[makomk]

The US government has been heavily involved in regulating medicine since 1906. The only reason why "medical costs angled steeply upward immediately after heavy regulation and government involvement in it began" is because "heavy regulation" is a weasel-word; you could pick almost any point after 1900 or so and claim that's when it started in order to justify that argument. Take a look at the list of milestones here for example: http://www.fda.gov/AboutFDA/WhatWeDo/History/Milestones/ucm1...

[WalterBright]

The two seminal events in the 1960s are the FDA 1962 "effective" mandate, with subsequent sustained price spikes is well documented in Peltzman's "Regulation of Pharmaceutical Information".

The other one is the enactment of Medicare/Medicaid in 1966/1965. From the graphs I've seen, that corresponded with the knee in the curve.

[Ironchefpython]

> It is quite a remarkable coincidence that medical costs angled steeply upward immediately after heavy regulation and government involvement in it began.

Regulation didn't give people more money to spend on medicine. Offshoring jobs to China drive down prices of consumer goods to make more money available as a consumer surplus that could be captured by healthcare.

If the price of food increased, the price of housing, education, and medical care would decrease. Because the demand curve would change.

> A small competitor would have the capability to ruin your business with a small investment on their part. I bet they could finance it by shorting your stock.

That's a nice hypothetical that completely ignores all of financial theory AND history. If you ever start a company, let me know so I can short YOUR stock.

[WalterBright]

> could be captured by healthcare.

Why wouldn't it be captured by farmers? or carmakers?

> all of financial theory AND history

Can you give case history of a company that maintained a monopoly via periodic dumping to bankrupt any competitors? I'm not aware of one, and no, Standard Oil is not one (see the book "Titan" about it). I've read many econ/history books, and none them put forward your dumping theory. Do you have a book reading list?