This was the headline in the Shandong News:
And this is the receipt. My arrow indicates the 3600-yuan ($550 or £380) price:
Where are we going? To why it’s tough to regulate ambulance prices.
Because a typical person calling for an ambulance knows nothing about the expense, too many drivers gouge their clientele. In Shandong, that 3600-yuan charge for the ambulance was approximately half an average worker’s monthly wage and three times what a bus would have cost.
Seeing the system was being abused, Beijing’s regulators decreed that ambulances, “be fitted with taxi-style meters in an effort to allay public concerns about overcharging.” Starting next month, the fare will be 50 yuan ($8 or £5) for the first 1.9 miles (3km). After that, riders pay seven yuan for each subsequent kilometer and a 50-yuan charge kicks in if the call is canceled.
But now we might have a new problems. As one skeptical individual commented, “In [the] future, don’t rule out ambulances taking a detour when using the meter…”
Our Bottom Line: The Market or Command?
The news report said the individual who paid 3600 yuan had a life threatening digestive disorder. With a dying person unable and unwilling to negotiate price, we no longer have a downward sloping demand curve that displays the inverse connection between price and quantity. Instead we get a market with distorted prices.
Adam Smith suggested that government provide police protection, national defense, enforce contracts and oversee a monetary system–whatever the market could not produce. But what to do when supply and demand are dysfunctional? We could accept a government that ran the ambulance service but then the new incentives would be equally or more troublesome.