CHAPTER 20 THE ECONOMICS OF HEALTH EXTERNALITIES
CHAPTER 20 THE ECONOMICS OF HEALTH EXTERNALITIES
Health is contagious Unlike other factors that affect economic wellbeing(e.g.height or appearance)your health is determined by the health of those around you Ex:Hope your friends got their flu shots! Many economic externalities in health Both positive and negative ones Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Health is contagious Unlike other factors that affect economic wellbeing (e.g. height or appearance) your health is determined by the health of those around you Ex: Hope your friends got their flu shots! Many economic externalities in health Both positive and negative ones
Externalities can justify government intervention Without externalities,economic theory says that markets reach an efficient outcome Taxes subsidies only distort the efficient outcome With externalities,government responses may help the market reach a socially desirable state Ex:Public health efforts,like flu vaccination campaigns or quarantines to combat deadly diseases like Ebola virus Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Externalities can justify government intervention Without externalities, economic theory says that markets reach an efficient outcome Taxes & subsidies only distort the efficient outcome With externalities, government responses may help the market reach a socially desirable state Ex: Public health efforts, like flu vaccination campaigns or quarantines to combat deadly diseases like Ebola virus
Externalities in health Externality:any positive or negative effect that a market transaction imposes on a third party (i.e. someone other than the buyer or seller). Many externalities in the world of health: second-hand smoke catching infectious disease from your neighbors the motivational benefits of living among active people the taxes paid to the government to care for sick people Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Externalities in health Externality: any positive or negative effect that a market transaction imposes on a third party (i.e. someone other than the buyer or seller). Many externalities in the world of health: second-hand smoke catching infectious disease from your neighbors the motivational benefits of living among active people the taxes paid to the government to care for sick people
Private welfare vs.social welfare Important distinction between private and social welfare Private welfare is the utility level isolated to one individual within a society Actions that increase or decrease this quantity are said to have private benefits or private costs. Social welfare is the summed utility levels of all individuals within a society Actions that increase or decrease this quantity are said to have social benefits or social costs. Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Private welfare vs. social welfare Important distinction between private and social welfare Private welfare is the utility level isolated to one individual within a society Actions that increase or decrease this quantity are said to have private benefits or private costs. Social welfare is the summed utility levels of all individuals within a society Actions that increase or decrease this quantity are said to have social benefits or social costs