Sunday, July 26, 2009

Is healthcare a true market ??

(Opinion) (Draft) Well, it is a little late, but the US is starting to debate whether the US healthcare system is a true market or not. And if they are subject to market force, will they respond in the optimal way. Can we design the right incentives ??

Many economists, both on the left and the right, believe that markets allocate goods in the most optimal fashion compared to other systems(such as cronyism, a dictator or communism)

However, the real question is whether there is a working "market" for healthcare ??

From econ 101, we define markets as 1) having lots of buyers and sellers with no buyer or seller being able to influence the market. 2) Perfect information. 3) 4). In real life there are few, if any, perfect markets, but it does not matter. Goods and services are allocated very efficiently.

However, in health care, there is notable lack of market fundamentals.

I don't believe the healthcare system can work as efficiently as government run program.

1) Size matters
2) Profit is the wrong incentive in healthcare
2) Profit costs someone
3) Government is efficient enough

Other examples: Police, Army, Courts

v2

1 comment:

frank said...

I enjoyed your take on the health care conundrum. The battle, unfortunately is taking place, as usual at the 30,000 foot level. What do you think of my take on it from varying perspectives a lot closer to the ground? http://www.theroot.com/views/health-care-reform-minority-report
Best regards,
Frank

Blog Archive