Econ Sense: Equality vs. Efficiency, the Case of Universal Health Care
May 14, 2009 § 14 Comments
One of the common mistakes people often make is to equate equality to efficiency. While equality can certainly enhance social efficiency, it can also lead to greater inefficiency. Confused? Perhaps a few examples will help you understand this concept a little bit better.
The first example is a simple one. A box of chocolates is to be shared by two children. The box contains 10 milk chocolates; both children like milk chocolates. Each child is given 5 chocolates. Well, it doesn’t take a rocket scientist to realize that the allocation of the chocolates is both fair and efficient.
The second example is bit more complicated; the numbers in this example have been normalized for greater clarity. There was a fruit sale at the local farmers market; my sister was able to buy 8 bananas and 4 mangoes. The bananas cost $1 each and the mangoes cost $5 each. My sister has two daughters, Julie and Christine. Julie loves to eat mangoes, while Christine loves to eat bananas. My sister doesn’t eat fruits.
Good Morning, Mr. Simon 
A sticky issue, to be sure. I’m not an economist or a health care expert. I’ll sit back and wait for your other, more knowledgeable readers to sound off.
I don’t expect many comments. There are so many factors to universal health care that most people would shy away from commenting. But I would love to read any personal (non-expert) opinion on this issue. I am sure we all can contribute something.
it has always been my opinion personally in our government to aid universal health care in our country. I never thought of the end results. However, USA is definitely way the furthest opposite of ours. We have poor health service and care, so for us, it would not matter anymore, people are used to it…
I may sound so cynical about our health care here, there are other local government hospitals which are ‘patient-centered” but still…
As direct to your entry, it is hard to give opinions as my knowledge is limited and I do not have first-hand experiences in the health benefits in your country 😀
This topic is great because ive always had strong remarks about our health care here.
The gap between rich and poor in the United States is quite large. Wealthy people want the best health care; poor people just want health care. This is a serious conflict. My point is that we should thrive for social efficiency instead of social equality. At the very least, equity (not equality) in health care coverage should be considered.
in the fruits example you gave , equality still has been achieved by giving both what they like but also maybe utility wise they get the same satisfaction?
Providing for health care is something which the government here tries to do..as the private hospitals are happy to serve in the cities(and they cater to those who can afford it)…and well as you can expect not many can afford insurance..
And from your reply above , i think maybe the rich should keep going to the rich hospitals and the ‘poor’ can be given quality by the government..but the important thing would be to attract medics to work , so that would higher salaries….
Equality means everyone gets the same quantity, consumption amount, and/or access no matter what their preference is. I think you may have mistaken equality for equity.
Insurance only works if the citizens of a particular nation are on average healthy. If that is not the case, insurance companies will have to increase fees to cover rising costs. We will be sadly back to square one–many people will not be able to afford health care.
yes guess I made a mistake between the two 🙂
This is a common mistake. I used to make this false distinction all the time.
A hard question. As you probably know, most European countries have healthcare that is largely funded with taxes. This however leads to varying degrees of health. For instance Denmark and Finland have a distinctly lower life expectancy than Sweden even though these countries are similar in many ways.
Still, equality matters just the same. Here in Sweden a recent study found that people in low income areas don’t get nearly as good healthcare as the rest of us.
Perhaps it would be more efficient to use incentives like vice taxes and subsidizing vegetables and gym memberships and things like that?
I think you and I are getting to the same conclusion. Maybe we should focus more on changing our lifestyle/ preference. A healthy lifestyle leads to better health which then leads to lower costs. Prevention is just as important as treatment.
You have made a great point and used some simple examples which all can follow. I have lived in both circumstances and I have to say that universal health care can work however it is very costly and in most instances inefficient as compared to private health care. What does the government do with efficiency? Still pondering an answer? Then what would make one thing a government run universal health care system would work? Then there are the abusers of any system, people who will run to the hospital or doctor for every hangnail and split end if the service is free. Tough subject and much easier to judge when I have health insurance.
The current Medicaid system is neither perfect nor most efficient, but it provides people who can’t afford health insurance sufficient health care coverage. I don’t think most low-income families care much about the quality of services (provided that they are at least adequate); they have more things in life to worry about than to abuse the system. Universal health care may be too much of a task for government bureaucracy to handle; expanding Medicaid to cover more people, on the other hand, is more feasible.
I don’t know much about this topic or the exact situation in your country, but I remember reading somewhere about a compulsory universal health insurance cover for everyone with all the “common” ailments covered, thus making sure that no one is left out. Patients would still have their choice of hospital, doctor etc. while those who want (or can afford) higher insurance can buy it themselves.
In terms of your analogy, the situation would be like this: your sister takes her kids to the farmers’ market and gives them an equal share of the money and lets them buy what they want. Julie can buy mangoes with the money and Christine can buy bananas. If either of the kids or both of them have some pocket money of their own, they can buy the fruits they like with that money as well.
This method sounds efficient, equal and fair 🙂
But since mangoes cost more, Julie won’t be able to enjoy as many mangoes as she would like. Christine, on the other hand, can buy a lot of bananas with the same amount of money. Doing this will make Julie worse off and Christine better off. Your method only works if both banana and mango cost the same, but they are not.