United States Healthcare: the Need for a More Comprehensive Approach
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2008
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Haverford College. Department of Economics
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eng
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Abstract
This paper discusses the relationship between two threads of social science research: traditional analysis of healthcare market failures and criticism of the narrow assumptions economic models make. The results that the American healthcare system produces are relatively poor compared to other developed countries at significantly higher cost. The best economic approach to improving the system could be achieved through either a private or public production system, but there is substantial theoretical and empirical evidence that heavy regulation of the system is required in either situation. A deeper question, however, is about what a market distribution (efficient or otherwise) actually gets us beyond the maximization of the narrowly and circularly defined economic concept of utility. When some assumptions of the Arrow Debreu model are relaxed, we can no longer presume the market outcome is efficient for a given set of endowments and preferences. Further, presuming the supremacy of existing preferences is naïve; preferences change and utility curves are not constructed in a social vacuum. Healthcare not only exhibits qualities of a public good and not only suffers from considerable imperfect information problems; it is a good that is heavily embedded within moral and ethical considerations. Economic theory has little to say on such matters other than the presumption that what individuals want has real value. The theory argues for pure income transfers as the most efficient way to solve inequities, but this presumes people make wise decisions. Further, it ignores that there is already considerable paternalism coming from other social structures that are much more difficult to control. Let government be a force of good in society; through government, well reasoned collective decisions on the social pressure we place on one another can be actively made, rather than made for us by the more nebulous and organic process of the formation of social norms and the influences of market players with considerable market power.