What Health Policy Analysts Can Learn From Development Economics

Have you ever wondered why some countries seem completely dysfunctional — enjoying no economic growth or even negative growth and serving as home to millions of people who live on the income equivalent of one or two dollars a day? In 1993, a group of economists developed a model which appears to theoretically explain this phenomenon quite well. As it turns out, the very same model can be used to explain the dysfunctionality in our health care system. It can also help us understand why so many proposed reforms are completely wrongheaded. In the 1993 paper, Kevin Murphy and Robert Vishny (University of Chicago) and Andrei Shleifer (Harvard) distinguish between productive activities and rent-seeking. Production means producing valuable goods and services. Rent-seeking means fighting over the spoils, once production has occurred. In less developed countries, farmers typically can produce cash crops (subsistence level farming) or they can produce potentially more valuable crops to sell in a marketplace. Agriculture markets, however, are regulated in almost every country and it is here that rent-seeking warfare takes place among various special interests. Think of the difference between the cost of producing a crop and its value to consumers as a surplus. The rent seekers battle over how much of the surplus farmers get to keep, how much goes to city dwellers, how much goes to exporters, etc. With those basic concepts (and really not much more) the economists were able to dedu...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Featured Insurance and Coverage Long-term Services and Supports Medicare Payment Policy Population Health Public Health Quality CalPERS John Goodman Minute Clinic productive activities rent-seeking Telemedici Source Type: blogs