In reading some posts regarding health care reform, someone made a comment that struck me as unusual regarding the pharmaceuticals, namely that they had a right to make a profit too.

What an interesting phrase; "a right to make a profit". Of course, it isn't even remotely true. Companies aren't even guaranteed a right to be in business, let alone make a profit. One could argue that companies are entitled to make whatever profits they may without interference from the government, but then why should a company have a right that isn't available to ordinary citizens? So where does such a phrase come from and what does it mean?

Generally, the only time such a statement is made is when there is an implicit understanding that the company in question isn't really participating in a free market good or service. In short, the first thing that must always be established when examining a company or industry is to determine whether what it does is rightly subject to free market considerations and competition. If not, then whatever else it is, conventional supply and demand models cannot and will not apply.

Therefore the first question that needs to be answered, is whether the company in question is in a free market style industry and what the basis for that is.

Interestingly many people presume that all businesses are automatically free-market based, but in fact there are three types of goods/services in our economic model, each of which has dramatically different ways of interacting within the economy. The three types of goods/services are (1) the conventional free market system whereby people can elect to purchase goods and services from any provider, (2) controlled monopolies where there are companies providing goods or services, but they are not subject to competition and consequently cannot respond to conventional market pressures, and (3) required good and services that cannot respond to supply/demand because there may not be any opportunity to profit at all.

The first case is easily understood and is represented by the companies that we normally engage with to purchase everything ranging from eyeglasses to iPods to groceries. The second example would be filled by companies like utilities, cable companies, where there are no viable
competitors, so the market is essentially a controlled monopoly. The third example consists of services such as law enforcement, fire departments and the military.

Therefore while there may be numerous positive and negative points regarding something like health care reform, the overriding problem is that it currently exists in category 1 and we want it to behave as if it were in category 3. Until this discrepancy is resolved there can be no real solution to the problem.

So what determines the goods/services that belong in category 3? I would argue that those are articulated, at minimum, in the Constitution of the U.S., itself, in the section relating to promoting the general welfare.
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
Without necessarily rising to the status of law, it seems that one of the primary missions of the government is to provide those goods/services that are necessary to achieve that protection for the general populace. Therefore, it seems that any attempt to privatize such activities is neglecting one of the fundamental reasons for the government's existence.

If we don't think that such a circumstance applies, then let's consider why we don't privatize law enforcement or even the military itself?

If we acknowledge that the market cannot solve every problem and address every circumstance, then questioning the free market status of health care is a reasonable position to take.

While some may choose to disagree, it seems that any services that are pertinent to the protection and general welfare of the population are rightfully under the jurisdiction of the U.S. government and not private industry. However, we should also be clear that the government does not exist separate and apart from the citizens. The question, therefore, isn't whether the government can afford to provide health care to its citizens. If the United States should be threatened by an external power, we would expect all of its citizens to act in its defense.
Shouldn't the citizens of the country also act to provide those same protections to everyone? The question then becomes, can the citizens of the U.S. afford to ignore the welfare of the same people it may well count on for its protection?

In the end, it comes down to the fact that in the absence of true competition in the marketplace there is no point invoking conventional economic models to explain how things should work, because it's the wrong model being applied to the wrong problem.