National Health Insurance
Public and Private as Technical Issues

The debates around public and private involvement in healthcare can be very heated when ideological positions are defended by all sides. But there is another way to think about these issues.

Prof Nicholas Barr argues that “Depending on political perspective, markets were seen as ‘good’ or ‘bad’ – hardly a good guide to policy design. Recent developments in the economics of information, however, allow us to better evaluate when markets work well and when they do not. (The) article summarises the core of that theory and uses it to explain why Britain is right to have a national health service but not a national food service, and right to have free school education but to be introducing market forces into higher education.”

The interested reader is left to read the full paper, but essentially Barr argues that whether a service is provided by the public sector or the private sector is really a technical, not an ideological issue. “The key lesson is that ideology should come into the picture at the stage of setting the objectives of policy – how much redistribution should there be, how much weight should be given to promoting equal access to health care and education? But once the objectives are set the method should be chosen mainly on the technical grounds discussed (in the paper).”

“Markets are neither good nor bad; they are enormously useful in well-known and widely applicable circumstances, less useful in others. Where the necessary conditions fail, carefully designed intervention, for example through regulation, may improve matters. The real issue is the design of that intervention. For example, policy might be more effective in some areas if the state’s role changed from that of provision to that of regulating private providers. Policy is assisted by open and clear-minded discussion ...”

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