Review On Uncertainty And The Welfare Economics Of Medical Care Paper – Article Example
no. Review on "Uncertainty and the Welfare Economics of Medical Care" paper The of ‘Uncertainty and the Welfare Economics of Medical Care’ begins his study by comparing the characteristics of the medical-care industry with the norms of welfare economics. He explains the problems of medical care as adaptations of uncertainty in the frequency of disease and the efficacy of treatment. In this article, Arrow contributed to the information problems that lead to market failure in medical care markets. To date, Arrow’s theoretical framework that views market failure because of the imperfections of information remains consistent with the current studies. He also discussed the shifting nature of informational asymmetry between physicians and patients.
Arrow posited that medical care markets are extremely uncertain. Patients are especially uncertainty about the consequences of acquiring medical treatments. The patients’ innate uncertainty about the effectiveness of medical treatments prevents them from gaining important information on the quality of medical care services. He clarified that medical markets are in themselves information markets and that conditions of uncertainty makes accurate medical information very valuable. For instance, skilled care is a type of information that patients buy from physicians.
He further described the nature of information as ‘elusive’ as a result it is a limiting factor on demand and supply in the information market. He expelled the limits on consumers’ ability to acquire information and ability to process that information. For example, individuals confronted with new illnesses usually do not have enough time to collect information because effectiveness of medical treatments often depends on minimizing the time between the onset of the illness and the start of the treatment. Arrow’s observation about the failure of the medical profession to insure against uncertainties led to the reevaluation of insurance as a public good and private commodity. He further addressed the roles of nonprofit institutions, self-regulations, and technological innovations that address medical needs. His contributions to the economics of medical health remain relevant to date.
Arrow, Kenneth. Uncertainty and the Welfare Economics of Medical Care. The American Economic Review. Vol LIII, No. 5 Retrieved from< https://www.aeaweb.org/aer/top20/53.5.941-973.pdf >