Uwe Reinhardt’s second post on Arrow’s 1963 paper that launched health economics as a discipline is up at Economix. As I said before, this series is as close to required reading as can exist for followers of this blog. Do I have to threaten a quiz?
Here’s a quote:
[I]nformation on both the diagnosis of and the likely consequences of treatment are asymmetrically allocated between the sell-side (providers) and the buy-side (patients) of the health-care market. The very reason that patients seek advice and treatment from physicians in the first place is that they expect physicians to have vastly superior knowledge about the proper diagnosis and efficacy of treatment. That makes the market for medical care deviate significantly from the benchmark of perfect competition, in which buyers and sellers would be equally well informed.
There’s much more.