<p>The most common one I have considered is health insurance as a private market. It becomes a case of the &quot;market for lemons&quot;, where in this case the `lemons' are the people seeking insurance. <a href="https://personal.utdallas.edu/%7Enina.baranchuk/Fin7310/papers/Akerlof1970.pdf" rel="nofollow noreferrer">https://personal.utdallas.edu/~nina.baranchuk/Fin7310/papers/Akerlof1970.pdf</a></p>
<p>The simplified narrative goes something like this:</p>
<p>Assumptions: Say insurance companies sell to everyone who wants insurance at some fair rate, and we cannot discriminate based on pre-existing conditions. Some people are very sick, and cost a lot to insure (lowers profits for the insurer) and others are healthy (profitable for the insurer.)</p>
<ol>
<li><p>As sick people, who frequently utilize the insurance buy into the market, the average rates go up.</p>
</li>
<li><p>Healthy individuals, who don't need it at much, leave the market in response to the increasing prices, which only serves to continue increasing the price.</p>
</li>
</ol>
<p>This process of healthy people leaving and sick people joining continues until the market collapses, nearly only sick people are insured.</p>

CC BY-SA 4.0
2021-06-28T15:09:33.527Z
Since everybody eventually dies and usually from a medical issue, this would be the time-inconsistent preferences market failure, is that right?
user121330
CC BY-SA 4.0
2021-06-28T16:08:10.310Z
This story doesn't have depend on any sort of time-inconsistency. Even if people have perfectly consistent time-preferences this problem will still arise as long as there is a distribution of sick individuals in the population.  You could probably tell another tale that depends on time-inconsistency.
RegressForward
CC BY-SA 4.0
2021-06-28T17:33:14.930Z
Wait, shouldn't we expect to get more sick towards the end?
user121330
CC BY-SA 4.0
2021-06-28T18:08:46.240Z
Sure, but it's not a necessary part of the model I'm presenting here- that would be a different story altogether. This model says that it is sufficient to only have a distribution of sickness levels in the population.
RegressForward
CC BY-SA 4.0
2021-06-28T18:56:18.290Z
So your model does an ok job of describing things and therefore you can ignore anything else, even if it's real, because it tells a different story? Do economists place working models atop the hierarchy of truth as a rule?
user121330
CC BY-SA 4.0
2021-06-28T19:09:32.577Z
Maybe we should move to chat. If you have another model you want to propose about time-inconsistency, feel free to present, but I'm not familiar (offhand) with a model that does that in this context.
RegressForward
CC BY-SA 4.0
2021-01-15T16:24:18.260Z
2021-01-15T16:24:18.260Z
RegressForward
<p>The justification for public health care subsidies often involves declaring the health care sector to have market failures, for example infectious diseases being a public good and the customer having limited knowledge of the products. Are there any other aspects of health care that can be considered market failures, and under what justification?</p>

CC BY-SA 4.0
2021-06-28T15:08:17.747Z
It sounds like limited knowledge of the products is knowledge-asymmetry which gets a lot worse when the customer is comatose.
user121330
<public-goods><health-economics>
Which parts of health care can be considered market failures?
Philip Meyer
# Which parts of health care can be considered market failures?

(Asked by: username_0 on 2021-01-15)

The justification for public health care subsidies often involves declaring the health care sector to have market failures, for example infectious diseases being a public good and the customer having limited knowledge of the products. Are there any other aspects of health care that can be considered market failures, and under what justification?

**Tags:** public-goods, health-economics

> **Comments:**
> **username_1**: It sounds like limited knowledge of the products is knowledge-asymmetry which gets a lot worse when the customer is comatose.  

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## 1 answers

### Answer by username_2 on 2021-01-15. Score: 3

The most common one I have considered is health insurance as a private market. It becomes a case of the "market for lemons", where in this case the `lemons' are the people seeking insurance. [https://personal.utdallas.edu/~nina.baranchuk/Fin7310/papers/Akerlof1970.pdf](https://personal.utdallas.edu/%7Enina.baranchuk/Fin7310/papers/Akerlof1970.pdf)

The simplified narrative goes something like this:

Assumptions: Say insurance companies sell to everyone who wants insurance at some fair rate, and we cannot discriminate based on pre-existing conditions. Some people are very sick, and cost a lot to insure (lowers profits for the insurer) and others are healthy (profitable for the insurer.)

1. As sick people, who frequently utilize the insurance buy into the market, the average rates go up.
2. Healthy individuals, who don't need it at much, leave the market in response to the increasing prices, which only serves to continue increasing the price.

This process of healthy people leaving and sick people joining continues until the market collapses, nearly only sick people are insured.

> **Comments:**
> **username_1**: Since everybody eventually dies and usually from a medical issue, this would be the time-inconsistent preferences market failure, is that right?  
> **username_2**: This story doesn't have depend on any sort of time-inconsistency. Even if people have perfectly consistent time-preferences this problem will still arise as long as there is a distribution of sick individuals in the population.  You could probably tell another tale that depends on time-inconsistency.  
> **username_1**: Wait, shouldn't we expect to get more sick towards the end?  
> **username_2**: Sure, but it's not a necessary part of the model I'm presenting here- that would be a different story altogether. This model says that it is sufficient to only have a distribution of sickness levels in the population.  
> **username_1**: So your model does an ok job of describing things and therefore you can ignore anything else, even if it's real, because it tells a different story? Do economists place working models atop the hierarchy of truth as a rule?  
> **username_2**: Maybe we should move to chat. If you have another model you want to propose about time-inconsistency, feel free to present, but I'm not familiar (offhand) with a model that does that in this context.  

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