Justice Scalia’s Law School Economics

Here’s an odd remark from Justice Scalia wondering where it all stops if the government can levy a fine on people who aren’t active duty soldiers, veterans, Medicare beneficiaries, Medicaid beneficiaries, participants in an employer-provided health care plan, purchasers of an individual health insurance plan, or recipients of a hardship waiver*:

If people don’t buy cars, the price that those who do buy cars pay will have to be higher.

This is perhaps true at some unusual margin, but of course the standard analysis of the market for automobiles is that if there’s extremely high levels of demand for the Toyota Prius, Toyota can and will charge a lot of money to people looking to buy one. Conversely, if the car’s sales start stagnating relative to Honda’s Civic Hybrid or people decide they’d rather take the bus to work and save money for a vacation, then prices will fall. It’s true that in a market for health insurance characterized by regulations limiting firms’ ability to screen customers for health status, expanding the pool of customers will lower average prices. But that’s not true of the market for cars or broccoli or anything else. Scalia seems to me to have stumbled right into the limiting principle he’s asking for, namely that the minimum coverage rule is a way of reducing average prices in the special circumstances of an insurance market in which Congress is seeking to ban health status discrimination.

* This is what seems to be passing in the media as a law that “forces you to buy health insurance” even though it’s plainly the case that the overwhelming majority of Americans will be exempt from the rule in question.