Chapter 16- Public Choices, Public Goods, and Healthcare

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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


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