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The fallacy this author makes in his response is unfortunately very symptomatic of our society's poor grasp of fundamental economic principles. Worth noting that despite failing to see some of the larger forces at work that the previous post mentioned the author nevertheless acts condescendingly towards that other post, which is also very similar to how society-at-large operates.

The one factor the author completely fails to engage in is the fact that the state-of-the-art of ultrasound production and the resources devoted to its development is entirely endogenous to the regulatory and market structure around it. He spends a great deal of time justifying the price based on the technical challenges involved in building the device, but this completely misses the point. The market doesn't reward innovators or companies because their product is "complex."

The matter-of-fact is that we have crazy regulations in the medical space that sharply distort both the demand and supply of these machines. On the demand side, there's bat-shit crazy things like the fact that in order to open up a new hospital, in certain regions the existing hospitals in the area have to all agree that they are okay with that. Imagine what the technology landscape would look like if every time Apple wanted to open a store it would have to seek approval of the Best Buys that had already been there.

We also rarely pay directly for our own medical treatments. The fake prices we see in medicine (I was once hospitalized for < 1 day and the "bill" came out to > $40k; a juice-box in an itemized hospital list could cost $12, etc.) are a great indication of the lack of competitiveness in that space. The truth is these fake prices reveal the fact that no one actually pays them, and instead are like that so insurance companies can negotiate individually with treatment providers. Now, given all of this, who could possibly enter this space and try to sell you on the idea that they could make an ultrasound that is 10% cheaper?

10% cheaper, that is, on top of an already highly-inflated price. Elsewhere in medicine, the INCREDIBLY high cost of FDA drug approval is extremely well documented, costing in the billions of dollars to bring a new drug to market. I hope it wouldn't shock the author of the post to learn that, with that incredibly high cost to play ball, the default scenario is for young medical startups to quickly sell to pharmaceutical giants, as that is really the only way to bring drugs to market. At a smaller scale, this too happens in the ultrasound arena, thus also making their price artificially high.

Speaking more broadly, the author's post is symptomatic of a view of much of our society which ends up treating prices as exogenous things. "College is expensive," "medicine is expensive." are things you hear all the time, and said with the intent that this reveals some fundamental truth about these things. That's garbage. College is expensive simply and only because colleges have been charging that much and people have been paying for it. Full-stop. In fact, the "free college" would be wise to understand that much of the increase in the price tag can be explained by the artificially low rates that you can borrow to attend them in the first place. I lived overseas for many years, and despite having Harvard Medical School-trained doctors and frequenting world class hospitals there, the actual, full cost of those treatments -- which I paid individually -- were a fraction of what they would have cost me in the U.S.




I definitely get this argument that regulations decreases competition, but they are there for protecting the consumer. I don't believe they were created to skew the marketplace, but they have indeed done this. It's a tough question, because self-policing doesn't work, we need organizations designed to protect the consumer.

The recent fight between CA, SF and Uber around the "self-driving car" tests is interesting to me personally, because I ride my bike in San Francisco almost every day, and sometimes with my kids. I do believe that self-driving or driver assisted cars will be safer than people alone, but I also want to know that there have been some amount of testing requirements met so that I know my family and I are safe.

So I ask this question, if your premise is that regulations are overly burdensome, and there is evidence to support this, what do we replace it with to get the same or better oversight of industries?


As cliché as my answer might be, I really believe in it: competition. There is no force quite as good as keeping companies from shafting consumers quite like competition.

Now, I'm also not knocking safety requirements. I'm fully aware that some of those structures exist for a very good reason -- I just feel like we have gone way overboard in virtually every industry. For a great piece discussing the medical industry specific, I highly recommend this essay: https://faculty.chicagobooth.edu/john.cochrane/research/pape...


>On the demand side, there's bat-shit crazy things like the fact that in order to open up a new hospital, in certain regions the existing hospitals in the area have to all agree that they are okay with that.

I don't believe this is necessarily batshit crazy because hospitals in close proximity will coordinate to manage patient flow. There is also likely disaster coordination but I've not seen that directly.

"Hostile takeovers" by hospital conglomerates (of which are growing bigger these days) would also be very socially upsetting if their entrance causes existing hospitals to shut down. Hospitals are not something you want competitive churn in.

What is batshit crazy is blocking new hospitals while maintaining high patient to staff ratios and having capacity issues (e.g. getting beds to patients).


>> coordinate to manage patient flow

Right there. That's why the costs are so extreme.

Where is it written that someone must 'coordinate to manage patient flow?' Show me what fundamental principle of this nation mandates that some body of colluding apparatchiks are supposed to 'coordinate to manage patient flow.' What great benefit is achieved by subjecting every evolution of the medical system to a horde of bureaucrats?

The entire medical industry is rife with this mentality; that nothing may exist without the blessing of a dozen regulatory agencies and another dozen industry trade groups, all actively colluding to prevent any market forces interfering with their fiefdoms and livelihoods.

>> Hospitals are not something you want competitive churn in.

Why? Where is that written? What makes you think competition would be bad?

You're going to claim something like "churn would make medicine dangerous and put lives at risk." Maybe. That's your guesswork. The last major illness I had -- the only one more exotic than a flu I've ever had in my life -- was C. diff, contracted in a US hospital while visiting a patient. Don't tell me the unbelievably huge costs of our medical system are some surety against risk.

The US medical system is the biggest bubble in the history of our species. At some point the forces of nature are going to pop it. That's not a right wing view or a left wing view. It's just physics. These costs cannot continue to compound unless you're willing to employ gulags.

I'm betting that in the aftermath a full featured ultrasound machine will cost maybe $15k and the biggest measurable effect of that (if anyone is bothering to measure at that point) will be that there are more of them and more people will have access to them. And yes, I'm fully willing to risk whatever parade of horribles you can imagine. I'm also willing to make you risk them as well, and the pressure being created by spiraling costs means that have eventually I and the many, many people that also share my view, will have the power to do exactly that.


The author mostly said that: this kind of equipment is intrinsically quite expensive, because lots of various tech are intrinsically high-end. Now there is also the question of regulation. From my experience, the major part of the cost of a system does NOT come from there, even if regulation does not have a trivial cost. The major part of the cost comes from the BOM, from R&D, and from sales. And this is a sector where there are lots of innovation, despite all of that.


Pretty good summary of what I said, thanks.




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