Medicine as a public good

Medicine is unlike most other goods and services in the extent to which it has important positive externalities – that is, benefits for people outside of the transaction, who are not the providers or consumers. (Of course it has negative externalities as well, including carbon emissions and notably, a huge quantity of plastic waste.) A straightforward positive externality is infectious disease control. Preventing or curing infectious diseases prevents them from being transmitted to others. This is an immense benefit to society that goes far beyond the direct value to people who are vaccinated or treated.

Another positive externality is that people with curable or ameliorable sickness or disability who might otherwise not be able to work can remain in or return to the labor force, and so improve the economic well-being of themselves and their families, and the productivity of the entire economy. They can also better take care of their children or other dependents, maintain their households, volunteer in the community, pay taxes, give to charity, and whatever other good things healthier people are better able to do. And obviously it is distressing to people when their friends and loved ones are sick, disabled or in pain. It may even require them to give up other productive work to care for someone else.

Even if they aren’t directly affected personally, many people are disturbed by the thought that people who are in dire need may go without care that could cure or succor them. It would constitute a great public offense if people were dying at the doors of the hospital because they could not pay, as would the sight of seriously ill or injured people on the streets. Or rather, we do see such sights all the time, but homeless people’s illnesses and injuries are mostly psychological, and for some reason the public seems willing to tolerate that. We’ll get to this problem later. 

For now, however, I'll just say that medicine is what economists call both a public good, and a merit good. It's a public good to the extent it produces benefits that are non-excludable and non-rivalrous, i.e. can't be sold on the market, and therefore can create more value for society than the quantity demanded by the market would produce. And it's a merit good because it ameliorates injustice. That is why we cannot depend on the Free Market™, even if it existed, to produce the optimum amount, or to distribute it justly. 

 

Of course, if we subsidize it unwisely, we could end up producing too much of some kinds of medicine, or distributing it badly. So we do need to plan and operate our policies wisely. I agree that is challenging, but it doesn't have to be nearly as challenging as our current hot mess of a system makes it. As we have seen, all the other affluent countries do better.