Public Choices, Public Goods, and Healthcare

Public Choice: A decision with consequences for an entire society, including regulations, taxes, and government spending.
Reasons for Government: To maintain property rights, provide nonmarket mechanisms for resource allocation, and redistribute income and wealth.
Decision Makers: The political marketplace consists of voters and firms (demand) and politicians and bureaucrats (supply).
Government Failure: A situation where government actions lead to inefficiency, such as overprovision or underprovision of goods.
Political Equilibrium: A state where the choices of all four groups are compatible, and no group can improve its position by changing choices.

Goods are classified based on two criteria:

Excludability: A good is excludable if only those who pay can enjoy it; it is nonexcludable if it is impossible to prevent anyone from benefiting.
Rivalry: A good is rival if one person's use decreases the quantity for others; it is nonrival if one person's use does not affect others.

Private Goods: Rival and excludable (e.g., food, cars).
Public Goods: Nonrival and nonexcludable (e.g., national defense, the law).
Common Resources: Rival and nonexcludable (e.g., fish in the ocean, atmosphere).
Club Goods: Nonrival and excludable (e.g., internet, cable television).

The Free-Rider Problem: Because public goods are nonexcludable, individuals have no incentive to pay for them, leading to underprovision by private markets.
Efficient Quantity: The level where marginal social benefit ( $MSB$ ) equals marginal social cost ( $MSC$ ).
Marginal Social Benefit ( $MSB$ ): The vertical sum of all individual marginal benefits ( $MB$ ) at each quantity.
Principle of Minimum Differentiation: The tendency for political parties to make their policies similar to appeal to the maximum number of voters.
Rational Ignorance: A voter's decision not to acquire information when the cost of doing so exceeds the expected benefit, which can lead to bureaucratic overprovision.

Market Failure: Healthcare is often underprovided and unfairly distributed in a free market because people underestimate future needs or benefits and many cannot afford it.
Inefficiency: In a competitive market, the perceived benefit is lower than the $MSB$ , resulting in a deadweight loss.

Universal Coverage (Single Payer): Used in the United Kingdom and Canada. Provides care at zero price, resulting in waiting lists as demand exceeds supply.
Private and Government Insurance: Common in the United States. Costs are shared between private insurers, the government (Medicare, Medicaid), and patients.
Obamacare: The Patient Protection and Affordable Care Act uses subsidies to bridge the gap between what families can pay and the cost for insurers.
Vouchers: Suggested by Laurence Kotlikoff as a way to provide buying power to patients, allowing them to choose between public and private providers to ensure quality and cost control.