The Economics of Healthcare: Market Failure or Faulty Models? (Part 2)

Mises Media · Jun 28, 2019

It is commonly believed that healthcare is a sector plagued by “market failure.” A heavy dose of government intervention is therefore necessary to optimize the needs of society. A paper most commonly cited in support of that view is one published in 1963 by Nobel Prize winner Kenneth Arrow, one of the giants of economic theory in the twentieth century, and titled “Uncertainty and the Welfare Economics of Medical Care.”

But how does economic theory arrive at the concept of market failure and how do economists conceive of health care when they apply their theoretical models to medical practice?…