Independent entrepreneurs and creativity
Modern economic equilibrium theory assumes that market information is available to all agents, or as a minimum that the agents know where to find or purchase the necessary information. However, some knowledge remains unknown («unknown unknowns») (2). The rampant economic growth over the last 200 years was largely caused by discoveries and mobilisation of knowledge that previously was completely unknown. New creative information and growth are brought into the market by independent entrepreneurs. It is impossible to know in advance whether a new product will be a success or failure. There are many more ways to be wrong than to be proven right (3). Again, the pricing mechanism comes to the rescue. Profitable products satisfy customers, are copied by other manufacturers and help create growth. Losses cause products to disappear from the market. In this way, the pricing mechanism coordinates the trial and error of entrepreneurs through profit and loss.
Coordination of both new and established knowledge leads to economic development with a highly creative potential. Total economic development is internationally sustainable as long as independent agents are subject to the pricing mechanisms. I believe that concepts such as competition and incentives are misleading as descriptions of the core of the free market. This core consists in trial and error by independent actors, coordinated by the pricing mechanism.
A key point of the theory is that in all areas, creativity is based on trial and error undertaken by independent agents (4). One precondition is the existence of mechanisms that can pick winners and weed out errors (5). But what about a state health monopoly? By definition, a monopoly does not consist of independent agents. Thus, a health monopoly is unable to be creative in an economically viable manner in the area in which it is a monopoly, i.e. treatment of illness, since it includes no interaction between independent health entrepreneurs.
The assertion that a state health monopoly is not creative appears inconsistent with the undoubtedly impressive development seen within the health services over recent decades. I believe, however, that this development has been based on the fact that the health monopoly has been surrounded by a market of numerous independent agents in fields other than health. This has provided opportunities to copy from the market (and from health services in other countries), but a health monopoly is unable to be creative in an economically sustainable manner, since it has no health agents to measure itself against. A monopoly is barred from using the coordinating function of the pricing mechanism for purposes of viable innovation and growth.
It can be claimed that medical research is creative and has contributed to the considerable development of new therapies. This is undoubtedly true, although research involves creativity measured by another standard than the pricing mechanism – empirical trial and error in an academic community. For results from medical research to be incorporated in an economically sustainable health sector, independent health entrepreneurs are required.