"I can’t even count the number of articles and blog posts I’ve seen asserting that markets can’t work in health care. Or that they work very imperfectly. Or that they suffer from serious “market failure.” In every case, the writer just assumes that government can remedy these problems.
Yet when Gerry Musgrave and I wrote Patient Power, we concluded that our most serious health care problems stem from bad government policies, rather than from markets failing to work. In other words, “government failure” not “market failure” is the source of most of what is going wrong.
Why is our perspective so different from so many other health policy analysts? I think the answer is: the vast majority of people in health policy do not understand the concept of “government failure.” For example, health economist Austin Frakt, following Nobel Laureate Joe Stiglitz, produced a list of “market failures” in health care and in health insurance at his blog the other day. These include imperfect competition, unequal access to information, external costs and benefits for others generated by private activities, etc. He then offered this observation:
In principle, government intervention can increase that benefit (economic welfare) in such cases. In practice and in some cases, it’s debatable.
How does Austin know that government “in principle” can solve these problems without a model of government decision making? He can’t. Moreover, it turns out that many of the factors alleged to cause “market failure” also contribute to “government failure.” In fact, in the political sphere their impact is much worse. Here is the bottom line: There is no model of government decision making in health care (and in most other areas as well) that shows that government will reliably improve upon the market. (At least a real market.)"Curioso é que quase sempre que se fala em falhas de mercado comete-se a falácia do nirvana, onde o mundo imperfeito, porém real, é comparado a uma situação idealizada e utópica. O mundo imperfeito sempre perde feio na comparação.