Friday, September 4, 2009

Healthcare: Whatever Happened to General Equilibrium?

Economists seem to love general equilibrium. For those non-technocrats, general equilibrium is the state sought by the forces of supply and demand. General equilibrium tells us that doctors, and health-care services in general, command such a high price because (1.) they are in short supply relative to demand and/or (2.) their price is commensurate to the amount they have invested in developing their skills/services.

An overview of general equilibrium on wikipedia

My next statement is pretty obvious. Why isn't anyone talking about increasing the supply of doctors, pharmacists, bio-chemists, nurses, etc? I'm really shocked that no one on the hill has proposed such an idea and even more shocked that such an idea hasn't been floated in the media (consider McGraw-Hill's ties to mainstream media and one of their businesses: education).

A very simple and non-controversial policy measure for the current administration would be to extend (substantial) financial aid to those wishing to enter medical-service related fields.


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