Chapter 16- Public Choices, Public Goods, and Healthcare
For healthcare,
MSB>willingness/ability to pay for it
Private and government insurance
Private health insurance Government Medicare/medicaid Patient out of pocket DWL from overproduction
Public vs. private MSB
Public- vertical sum of individual MB curves Private- horizontal sum of QDs at each price
MSB that pushes social benefit over the line of efficiency
care for elderly
Political EQ
choices of voters/firms/politicians/bureaucrats are compatible and no group can see a way of improving its position by making a different choice
Public choice
decision that has consequences for many people and perhaps for an entire society
Private choice
decision that has consequences for the person making it
Free rider problem
economy would provide an inefficiently small qty of a public good MSB>MSC, DWL arises
Competition in the political marketplace results in _____ provision of a public good
efficient
Politicians
elected persons in governments- goal is to get elected and remain in office
Functions of government
establish and maintain property rights, provide nonmarket mechanisms for allocating scare resources, redistribute income and wealth
Universal coverage, single payer
everyone is covered by health insurance, with no exceptions and no excluded preconditions government alone pays health bills
Problem
first-come, first-served waiting DWL from underproduction Some people pay more to jump the line
Nonexcludable
impossible to prevent anyone from benefiting from goods
Rational ignorance
it is rational for a voter to be ignorant about an issue unless that issue has a perceptible effect on voter's eco welfare
Goal of bureaucrats
maximize department's budget
Natural monopoly good
nonrival excludable
Public good
nonrival nonexcludable
Rival
one person's use of good dec that of other person
Nonrival
one person's use of good does not dec that of other person
Rationally uninformed voters enable bureaucrats to _____ public good
overprovide
Obamacare
people apply for subsidies (plans offered through marketplace must cover pre existing conditions, preventive services, and 10 essential health benefits) premium paid depends on family size and income unsure whether efficient
Excludable
possible to prevent someone from enjoying benefits of good
Bureaucrats
public servants who work in government departments- goal to maximize budget of his department
Private good
rival excludable
Common resources
rival nonexcludable
Government failure
situation in which government actions lead to inefficiency- under/overprovision
Principle of minimum differentiation
tendency for competitors, including political parties, to make themselves similar to appeal to maximum number of clients or voters
Vouchers
token that can be used to buy only the item the voucher specifies Americans given voucher tied to their health profile
Consumers and customers of healthcare...
underestimate benefit, underestimate future needs, can't afford, unfair
Inefficiency leads to
underprovision