Inhuman Healthcare Economics

  • by: |
  • 03/18/2008
Here's Alan Greenspan on the economic models used by the Fed and the banking community that "justified" the deep exposure of some financial institutions in subprime mortgage instruments:

"The models used by the finance industry to determine risk and measure economic strength are too simple to fully account for human responses. We cannot hope to anticipate the specifics of future crises with any degree of confidence."

Translation: the rational models of utility and discounting activities are outdated because they fail to capture rapid and wide variations in response to risk and uncertainty.

Similarly, comparative effectiveness research, complete with QALYs and the assumption that standardizing care will lead to lower costs and optimal health are essentially ersatz consumer welfare models based again on the "rational actor" view of economics. There is more variability in healthcare because valuations and value do not correspond to particular price but rather to individual perceptions of risk and uncertainty that are part and parcel of the effort to treat and prevent disease. The simple models developed to predict and shape human responses in the healthcare system will anticipate changes or outcomes with any accuracy. Nor have they.

We have come a long way from when the RAND experiment was conducted.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

Blog Roll

Alliance for Patient Access Alternative Health Practice
Better Health
Biotech Blog
CA Medicine man
Cafe Pharma
Campaign for Modern Medicines
Carlat Psychiatry Blog
Clinical Psychology and Psychiatry: A Closer Look
Conservative's Forum
Club For Growth
Diabetes Mine
Disruptive Women
Doctors For Patient Care
Dr. Gov
Drug Channels
DTC Perspectives
Envisioning 2.0
FDA Law Blog
Fierce Pharma
Fresh Air Fund
Furious Seasons
Gel Health News
Hands Off My Health
Health Business Blog
Health Care BS
Health Care for All
Healthy Skepticism
Hooked: Ethics, Medicine, and Pharma
Hugh Hewitt
In the Pipeline
In Vivo
Internet Drug News
Jaz'd Healthcare
Jaz'd Pharmaceutical Industry
Jim Edwards' NRx
Kaus Files
Laffer Health Care Report
Little Green Footballs
Med Buzz
Media Research Center
More than Medicine
National Review
Neuroethics & Law
Nurses For Reform
Nurses For Reform Blog
Opinion Journal
Orange Book
Peter Rost
Pharm Aid
Pharma Blog Review
Pharma Blogsphere
Pharma Marketing Blog
Pharmacology Corner
Pharmaceutical Business Review
Piper Report
Prescription for a Cure
Public Plan Facts
Real Clear Politics
Shark Report
Shearlings Got Plowed
Taking Back America
Terra Sigillata
The Cycle
The Catalyst
The Lonely Conservative
Town Hall
Washington Monthly
World of DTC Marketing
WSJ Health Blog