Prolegomena to a Post Keynesian health economics

Abstract

Post Keynesian economics has no specific association with, or has made no specific contribution to, Health economics or healthcare policy. In one sense this is perhaps unsurprising. Post Keynesian economics is for many a distinct approach to macroeconomics. Nevertheless, it has always invoked a strong microeconomic supply-side analysis and thus the purpose of this paper is to make some prefatory remarks as to the types of contributions Post Keynesian economics can make to the economics of healthcare and healthcare policy. The relevance of Post Keynesian themes, such as the relevance of history, uncertainty, distributional issues, and the importance of political and economic institutions for healthcare economics and health policy, is highlighted.

Keywords:

• Post Keynesian economics
• health economics
• healthcare financing
• macroeconomics

Acknowledgements

I would like to thank Stacey Anderson, David Bunting, Maggie Coleman, Vikki Entwistle, Eirik Evenhouse, Bill Jackson, Hal Luft, Gary Mongiovi, Steve Pressman, Libby Roughhead, Malcolm Sawyer, Peter Smith, John Smithin, Ron Stanfield, Jim Sturgeon and three anonymous referees for their discussion, advice and reflections on what a Post Keynesian approach to health economics might usefully contribute. An earlier version of this paper was presented at the February EEA Meeting in Washington, 2004 and I am grateful for the feedback received there. It goes without saying, nevertheless, that the views expressed herein are solely those of the author. This research has been supported by The Commonwealth Fund, a New York City-based private independent foundation. The view presented here are those of the author and not necessarily those of The Commonwealth Fund, its director, officers or staff.

Notes

1 In developing countries, the link between illness and disability and the reduction in incomes and hourly wages is especially strong. This reflects the fact that typically a higher percentage of the work force is engaged in manual labour than in industrial countries (see Strauss and Thomas 1998).

2 In arguing for general tax financing of the universal provision of healthcare, it should not inferred that Post Keynesians would argue for healthcare provision to be exclusively controlled and provided by the state. Indeed this is not what Keynes (1936: 378) had in mind in urging a “comprehensive socialisation of investment” as a civilized response to managing aggregate demand to ameliorate the problems of unemployment. Many have interpreted this as an argument for nationalization in the provision of basic state services to underpin the management of effective demand. This is wrong. Rather, Keynes was arguing that more rational institutions for allocating capital could, and should, be devised so as to reconcile public and private interest. But this need not entail public provision nor “exclude all manner of compromises and of devices by which public authority will co-operate with private initiative … it is not the ownership of the instruments of production which it is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary” (Keynes 1936: 378).

3 Moreover Post Keynesians would reject the notion that such time-series estimates reflect permanent long run behaviour. Instead, Post Keynesians argue that many of the discrepancies observed between time-series and cross-sectional estimates of the income elasticity of health are perhaps econometric and definitional. As Bunting (2004) has argued forcibly, time-series elasticities reflect cross-sectional ones plus cross-sectional shifts, i.e. it is not true that cross-sectional parameters measure current or short-run behaviour while times-series parameters measure permanent or long-run behaviour. Indeed Bunting (2004) demonstrates times-series data have no independent locus beyond cross-sectional behaviour. This is consistent with a historical approach that rejects the predominant ergodic, closed system equilibrium approach to economic analysis whereby there is a long-period equilibrium around which the economy fluctuates or towards which the economy tends and which is unaffected by the short period movements of the economy. As Kalecki (1968: 263) observes, the long run is “a slowly changing component of a chain of short period situations; it has no independent entity”.

4 Such arrangements exacerbate the problems of maintaining an adequate level of effective demand and compound access problems. Research by Cawley and Simon (2003) suggests that 851,000 Americans, the majority of whom were men, lost health insurance through the 2001 recession.