Saturday, July 24

Like the Soviet economy, only less rational

Last week's issue of The Economist (June 15th) had a survey of health care economics (registration required for some articles). They note an agency problem from hell:


In this third-party-payer market, doctors play an ambivalent role: they both supply medical care and demand it on behalf of their patients. This can create “supplier-induced demand”. Victor Fuchs draws an analogy with the car market. Suppose, he says, car dealers had to certify whether you needed a new car, and you were not paying for it directly out of your own pocket: there would be a lot more luxury cars around.


Stalin didn't bother with proper price mechanisms or labor incentives either, but at least he would shoot the managers of factories that were not productive.

1 comment:

Rabbi Jonathan B. Freirich said...

There's only one problem with this - health ought not be a for-profit industry. Follow the most money and you end up with the insurance companies. Doctors are being squeezed. Lawsuits are down, and still the current administration is pushing for tort reform.