Kenneth Arrow knows from market efficiency, after all, he piratically 'invented it'-not exactly, though he did show markets can be efficient.
http://en.wikipedia.org/wiki/Fundamental_theorems_of_welfare_economics
http://weber.ucsd.edu/~rstarr/ARTICLEwnotes.pdf
Yet he had this to say about healthcare in a 2005 interview with John Cassidy. The argument over healthcare reform he said:
"really comes down to the fact that the government is better than the private sector at keeping costs down for insurance purposes. This isn't true in any other industry. If, for example, you are trying to produce electronics, you could hardly do worse than have the government run such an industry. But, in an insurance program, it's a different matter."
http://www.amazon.com/How-Markets-Fail-Economic-Calamities/dp/B004E3XIC6/ref=sr_1_1?s=books&ie=UTF8&qid=1375919822&sr=1-1&keywords=john+cassidy+how+markets+fail
See pg. 159 for quote. Delong has more to say about Arrow on healthcare.
http://delong.typepad.com/sdj/2010/08/uwe-reinhardt-on-kenneth-arrow-on-health-care.html
The trouble is hidden information-a major problem in a number of markets, in fact it may be a problem in most markets, which doesn't mean that these markets don't often find ways to function: for example, warranties often do the trick. So are market failures possible? Uh, yes, they happen every day. Arrow says that healthcare is better in government hands. It's clear that we and the rest of the developed world have long since decided the same of at least primary school education-a number of European countries also feel the same way about college.
The finanical industry is another market that can never be wholly a free market and the market will never do an adequate amount of R&D on its own. Speaking of finance, here's L. William Seidman, the head of the FDIC from 1985-1991:
"As Adam Smith recognized, banking is different. Financial systems are not and never will be totally free market systems."
So we have both Arrow and Adam Smith telling us that some markets really need the government role. Notice that Seidman contradicts an error-that the financial market was wholly free prior to 1913 and the rise of the Fed.
Joseph Stiglitz, at this Nobel lecture in 2001 said this regarding Arrow's Arrow-Debreu model:
"In effect, the Arrow-Debreu model had identitied the single set of assumptions under with markets were (Pareto) efficient. There had to be perfect information."
This, of course, is not the case and never could be. Information is a very tricky phenomenon-it's neither a wholly private or public good.
http://en.wikipedia.org/wiki/Fundamental_theorems_of_welfare_economics
http://weber.ucsd.edu/~rstarr/ARTICLEwnotes.pdf
Yet he had this to say about healthcare in a 2005 interview with John Cassidy. The argument over healthcare reform he said:
"really comes down to the fact that the government is better than the private sector at keeping costs down for insurance purposes. This isn't true in any other industry. If, for example, you are trying to produce electronics, you could hardly do worse than have the government run such an industry. But, in an insurance program, it's a different matter."
http://www.amazon.com/How-Markets-Fail-Economic-Calamities/dp/B004E3XIC6/ref=sr_1_1?s=books&ie=UTF8&qid=1375919822&sr=1-1&keywords=john+cassidy+how+markets+fail
See pg. 159 for quote. Delong has more to say about Arrow on healthcare.
http://delong.typepad.com/sdj/2010/08/uwe-reinhardt-on-kenneth-arrow-on-health-care.html
The trouble is hidden information-a major problem in a number of markets, in fact it may be a problem in most markets, which doesn't mean that these markets don't often find ways to function: for example, warranties often do the trick. So are market failures possible? Uh, yes, they happen every day. Arrow says that healthcare is better in government hands. It's clear that we and the rest of the developed world have long since decided the same of at least primary school education-a number of European countries also feel the same way about college.
The finanical industry is another market that can never be wholly a free market and the market will never do an adequate amount of R&D on its own. Speaking of finance, here's L. William Seidman, the head of the FDIC from 1985-1991:
"As Adam Smith recognized, banking is different. Financial systems are not and never will be totally free market systems."
So we have both Arrow and Adam Smith telling us that some markets really need the government role. Notice that Seidman contradicts an error-that the financial market was wholly free prior to 1913 and the rise of the Fed.
Joseph Stiglitz, at this Nobel lecture in 2001 said this regarding Arrow's Arrow-Debreu model:
"In effect, the Arrow-Debreu model had identitied the single set of assumptions under with markets were (Pareto) efficient. There had to be perfect information."
This, of course, is not the case and never could be. Information is a very tricky phenomenon-it's neither a wholly private or public good.
If government is so efficient at providing medical insurance, why are Medicare and Medicaid trillions of dollars short of being able to meet their promises?
ReplyDeleteMedicare is efficient in allocating insurance. We could only wish that the private sector did such a great job.
ReplyDeleteIt was good enough for Ayn Rand and Paul Ryan's mother-and we know Ryan 'loves' Medicare wants to 'rescue it.'
I mean it's all relative. It may have some issues controlling costs but it's troubles are nothing compared with the job the private sector does.
"The idea of Medicare as a money-saving program may seem hard to grasp. After all, hasn’t Medicare spending risen dramatically over time? Yes, it has: adjusting for overall inflation, Medicare spending per beneficiary rose more than 400 percent from 1969 to 2009."
"But inflation-adjusted premiums on private health insurance rose more than 700 percent over the same period. So while it’s true that Medicare has done an inadequate job of controlling costs, the private sector has done much worse. And if we deny Medicare to 65- and 66-year-olds, we’ll be forcing them to get private insurance — if they can — that will cost much more than it would have cost to provide the same coverage through Medicare."
"By the way, we have direct evidence about the higher costs of private insurance via the Medicare Advantage program, which allows Medicare beneficiaries to get their coverage through the private sector. This was supposed to save money; in fact, the program costs taxpayers substantially more per beneficiary than traditional Medicare."
http://www.nytimes.com/2011/06/13/opinion/13krugman.html?_r=0
On the other hand the overall cost of healthcare spending has come down considerably and Obamacare may well be a big part of the story.
ReplyDeletehttp://www.politicususa.com/2013/06/19/bfd-healthcare-costs-fell-time-40-years.html