By Graham Bowley
The New York Times
October 15, 2007
The Nobel Prize in economics was awarded today to three Americans for their work in mechanism design theory, a branch of economics that looks at the design of institutions in situations where markets do not work properly.
Leonid Hurwicz of the University of Minnesota, Eric S. Maskin of the Institute for Advanced Study in Princeton, New Jersey, and Roger B. Myerson of the University of Chicago shared the award for “having laid the foundations of mechanism design theory,” the Royal Swedish Academy of Sciences said.
Their work addresses situations in which markets work imperfectly, such as when competition is not completely free, consumers are not fully informed or people hold back private information.
The prize winners’ groundbreaking work has been pivotal in assessing how institutions perform under such conditions, and in designing the best mechanism to make sure that goals, such as optimal social welfare or maximum private profit, are reached, the academy said. The winners’ work has helped determine whether government regulation may sometimes be necessary.
http://www.nytimes.com/2007/10/15/world/16nobel.html?_r=2&hp&oref=slogin&oref=slogin
And…
Markets and Medical Care: The United States, 1993–2005
By Joseph White
The Milbank Quarterly
Volume 85, Number 3, 2007
Many studies arguing for or against markets to finance medical care investigate “market-oriented” measures such as cost sharing. This article looks at the experience in the American medical marketplace over more than a decade, showing how markets function as institutions in which participants who are self-seeking, but not perfectly rational, exercise power over other participants in the market. Cost experience here was driven more by market power over prices than by management of utilization. Instead of following any logic of efficiency or equity, system transformations were driven by beliefs about investment strategies. At least in the United StatesĆ¢ā¬ā¢ labor and capital markets, competition has shown little ability to rationalize health care systems because its goals do not resemble those of the health care system most people want.
http://www.milbank.org/quarterly/8503feat.html
And…
The Presidential Candidates on Health Care
The New York Times
Selected quotes from some of the candidates:
“…market-based solutions, not government-run health care.”
“…increasing competition… empowering patients and their doctors, not government bureaucrats.”
“…encourage the private sector to seek innovative ways to bring down costs and improve the free market for health care services.”
“…letting the free-market determine health care costs.”
“…not putting more government into it… instead… bring in place market dynamics…”
http://politics.nytimes.com/election-guide/2008/issues/healthcare/index.html
Comment:
By Don McCanne, MD
Optimal social welfare? Or maximum private profit?
Milton Friedman? Or Leonid Hurwicz, Eric Maskin and Roger Myerson?
The next time someone insists that we must keep the government out of health care and allow the free market to work, stop him or her right there. Insist that he/she first read the Milbank Quarterly article by Joseph White so that you can have an informed discussion based on knowledge and understanding of the realities and complexities of marketplace and government interactions and the impact that they have on health care.
If that person refuses to abandon the fiction of an isolated marketplace utopia, then you would be wise to remove that person from your milieu so that you can move on with your important work to help bring us a health care system that provides optimal social welfare.
And while you’re at it, give some thought as to whether you want to put into control of our government one of the candidates who preaches the fiction of marketplace utopia while actually supporting the economics of maximum private profit.