Ken, The neoclassical concept of efficiency is defined as "the relationship between scarce Factor inputs and outputs of goods and services" Economic efficiency is defined in cost terms. i.e. the lowest cost for producing the level of output that is demanded at that cost.. (See for instance the Harper Collins Dictionary of Economics). However, even this concept is narrower since it is restricted to single markets and excludes externalities. Prolonging the life of poor people, in this concept, is not 'efficient' if the poor are unable to pay for medicine, etc. However, if pay-per-use deters poor people from seeking health treatment such that they become more sick and either infect other people or become unable to work to support their families or eventually fall upon the charity of ngos or the state, the cost to society will be much greater than if the service had been provided in the first place free of charge. (By the way, a study in Saskatchewan when the Conservatives introduced user fees found that the cost went up and the 'technical efficiency' of health insurance went down even though the economic efficiency, in the eyes of neoclassical economists, went up.) Nevertheless, such subsequent social costs do not normally enter into the calculus of economic efficiency by most economists -- although the really good neoclassical type economists do consider such. See for instance, Mishan's "Costs of Economic Growth". The other contradiction to this narrow neoclassical approach is that prescriptions are not at the discretion of the sick but rather at the discretion of their doctors -- or what some refer to as 'supply determined demand'. In such cases, the concept of efficiency always breaks down, as Stiglitz and others have demonstrated.
Paul
Paul Phillips, Economics, University of Manitoba
k hanly wrote:
Below is a paragraph from an economists post to another list concerning the introduction of various user charges in Iraq including for presecriptions as well as use of emergency services.
From an efficiency point of view, pay per service is felt to be superior topayment through, say, income taxes, and then free at point of use: the resources cost something to provide, but if users can draw on them 'for free', then they will not face the same incentives to ration the use of expensive resources. From an equity point of view, this can be very regressive: the poor and otherwise socially disadvantaged may be more likely to fall ill or suffer from chronic illness.
The author notes that the charges may increase the degree of inequity. But what exactly is meant by "efficiency" here. If efficient means optimum allocation of scarce resources to satisfy medical needs on the basis of need alone it doesnt seem efficient at all. User charges will only deter those who have scarce dollars others will continue to use the resources when they dont need them and that doesnt seem efficient. For the poorest they may not seek needed medical help at all and that is surely not efficient in using scarce resources to meed medical needs on the basis of need. So what sense of efficiency is meant in thuis context. Of course the author puts "for free" at point of use in scare quotes. Of course it is not free but is paid for from taxes or the like. Even from some nebulous economic view of efficiency it doesnt seem clear to me why this would be less efficient. In terms of results medical systems primarily funded through tax dollars rather than user pay cost less and produce at least as good results as systems such as the US where user pay is used more.
Cheers, Ken Hanly
