From Paul Romer's website:
Imagine a world in which the only way to get a soda is to get your doctor to write a prescription. It costs $20 per can. Your insurance company pays. The economy produces about 100,000 sodas each day.
If you lived in this world, do you think you could get people to scale up the production of soda to a level of millions of cans per day? It would be a challenge, but not because it is hard to produce and distribute soda.
Because they have to keep total costs from running out of control, insurance companies, health care providers, and government regulators have cobbled together a system that limits access to soda. One part of this system is an expensive regulatory process that has to approve:
- the ingredients in each particular brand of soda;
- the insert that comes with the soda informing patients about its risks and benefits;
- the delivery system used by the soda supplier, be it a glass bottle, an aluminum can, a paper cup, etc.
Then, everyone decides that they want more soda. Why, they ask, can't the nation produce enough soda for everyone to have some each day?