Talent flows to where it is highly rewarded so if price and wage control limit rewards in one sector of the economy, talent will flow to the uncontrolled sector. Mark Ramseyer looks at one implication:

The Japanese national health insurance

provides universal coverage. Necessarily, this entails a subsidy that

dramatically raises the demand for medical services. In the face of the

increased demand, the government suppresses costs by suppressing

prices. By combining extensive biographical (including income) data on

all 449 Tokyo cosmetic surgeons and a random sample of 499 other Tokyo

physicians, I explore the effect of this price suppression on the

allocation of talent and the development of expertise. Crucially, the

national health insurance does not cover services – like elective

cosmetic surgery – deemed medically superfluous. Facing price caps in

the covered sector but competitive prices in these superfluous sectors,

the most talented doctors should tend to shift into the superfluous

sectors and there to invest heavily in their expertise. I find evidence

consistent with this: cosmetic surgeons earn higher incomes than other

doctors; are more likely to have attended a national (generally more

selective) medical school; are more likely to have served on the

faculty of a medical school; and are more likely to be board-certified.

I speculate on the broader implications this phenomenon poses for the

allocation of talent in medicine.