Thoughts on Health Care

Here are some loosely titled axioms, in that they are things I think almost everyone can agree on.

1. People do not want health care, they want health, and life.

1.5. More health care is not necessarily better, if it does not lead to more health.

2. There is a limit to the amount of health care that can be provided.

What is the role of insurance?

Insurance collectivizes risk. In its most simple form, insurance is a collection of people that pool together to share risk (and cost). In the instance of health insurance, the cost of health care. It is unreasonable to think that every person should set aside enough resources to cover any catastrophic health event (i.e. cancer).

There are some procedures which should not be covered. The questions becomes:

1) What are the procedures?

2) What criteria is used to decide them?

3) Who decides which ones?

Economic Models and Foundations

What is the proper level from which to build an economic model?

How do you measure the goodness of a model? There is a longstanding scientific tradition that establishes these criteria:

  • Accuracy
  • Repeatability
  • Simplicity

Any model is a simplification of reality.

Proposition: models that are build using very basic microeconomic foundations (rational expectation models) suck more than models that are less constrained.