Uncertainty and the welfare economics of medical care: an Austrian rebuttal Part 2
Part 2 of this 3 part series continues a rebuttal to Kenneth Arrow’s famous argument that health care is special and free market economic principles do not apply. The rebuttal is based on concepts of Austrian Economics. Part 1 of the series framed the debate and discussed general concepts. Part 2 discusses specific examples of how health care is special and does not behave according to market principles. Uncertainty of demand and uncertainty of outcome are discussed in detail. Information asymmetry is a special form of uncertainty that Kenneth Arrow claimed was somewhat unique to health care. Free market solutions to these problems are discussed in general with specific examples provided. The conclusions are that free market insurance (as opposed to subsidy) handles uncertainty of demand, branding handles uncertainty of outcome, and the free market for specialized information handles information asymmetry.
Berdine G. Uncertainty and the welfare economics of medical care: an Austrian rebuttal: part 1. Southwest Respiratory and Critical Care Chronicles 2016; 4(16)57-61. doi: 10.12746/swrccc2016.0416.221.
Arrow KJ. Uncertainty and the welfare economics of medical care. Am Econ Rev 1963;
Gaffney AW, Verhoef Phillip Hall JB. Rebuttal from Drs Gaffney, Verhoef, and Hall. Chest