The Accad and Koka Report

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The Economics of Healthcare: Market Failure or Faulty Models? (Part 2)

The Accad & Koka Report

Tags Health

06/28/2019Michel Accad, MDAnish KokaRobert P. Murphy

It is commonly believed that healthcare is a sector plagued by “market failure.” A heavy dose of government intervention is therefore necessary to optimize the needs of society. A paper most commonly cited in support of that view is one published in 1963 by Nobel Prize winner Kenneth Arrow, one of the giants of economic theory in the twentieth century, and titled “Uncertainty and the Welfare Economics of Medical Care.”

But how does economic theory arrive at the concept of market failure and how do economists conceive of health care when they apply their theoretical models to medical practice?

To help sort this out, we have as our guest Robert P. Murphy, economist, teacher, and author of many books. Dr. Murphy obtained his PhD from NYU and is Senior Fellow at the Mises Institute. He is co-host with Tom Woods of the popular podcast Contra Krugman, and he is also host of The Bob Murphy Show, “a podcast promoting free markets, free minds, and grateful souls.”

The episode is in two parts. In the first part, we reviewed the theoretical framework that forms the background to Arrow’s paper. In this second part, we delve into the paper itself, discuss how economists conceive (or misconceive) of medical care, and what the implications have been for the US healthcare system as a whole.

Note: The views expressed on are not necessarily those of the Mises Institute.

Michel Accad, MD

Michel Accad, MD, practices cardiology and internal medicine in San Francisco, offering individualized care in a free-market setting. His blog about health care and medicine is He also co-hosts the Accad And Koa Report podcast.

Anish Koka

Anish Koka, MD, is a cardiologist in Philadelpia, Pennsylvania. His practice is Koka Cardiology. He co-hosts the Accad and Koa Report podcast.

Contact Robert P. Murphy

Robert P. Murphy is a Senior Fellow with the Mises Institute. He is the author of numerous books: Contra Krugman: Smashing the Errors of America's Most Famous Keynesian; Chaos Theory; Lessons for the Young Economist; Choice: Cooperation, Enterprise, and Human Action; The Politically Incorrect Guide to Capitalism; Understanding Bitcoin (with Silas Barta), among others. He is also host of The Bob Murphy Show.

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