Prolegomena to a Post Keynesian Health Economics
Dunn, Stephen P., Review of Social Economy
Abstract Post Keynesian economics has no specific association with, or has made no specific contribution to, Health economics or healthcare policy. In one sense this is perhaps unsurprising. Post Keynesian economics is for many a distinct approach to macroeconomics. Nevertheless, it has always invoked a strong microeconomic supply-side analysis and thus the purpose of this paper is to make some prefatory remarks as to the types of contributions Post Keynesian economics can make to the economics of healthcare and healthcare policy. The relevance of Post Keynesian themes, such as the relevance of history, uncertainty, distributional issues, and the importance of political and economic institutions for healthcare economics and health policy, is highlighted.
Keywords: Post Keynesian economics, health economics, healthcare financing, macroeconomics
PROLEGOMENA TO A POST KEYNESIAN HEALTH ECONOMICS
We have ... to consider the condition on which depend health and strength, physical, mental and moral. They are the basis of industrial efficiency, on which the production of material wealth depends; while conversely the chief importance of material wealth lies in the fact that, when wisely used, it increases the health and strength, physical, mental and moral of the human race. (Marshall 1920: 193)
Post Keynesian economics has no specific association with health economics. In one sense this is perhaps unsurprising. Health economics is typically viewed as a branch of microeconomics. Conversely, Post Keynesian economics is viewed by many as a distinct approach to macroeconomics. It has, however, always invoked a strong microeconomic analysis and many Post Keynesians have begun to make positive contributions to the various sub-disciplines of economics (e.g. Holt and Pressman 2001; Dunn 2000; Downward 2004; Earl 2005; cf. Fontana 2005). Nevertheless, no attempt has been made to consider what Post Keynesian economics might have to offer health economics. This is perhaps even more surprising given that health expenditure has become a prime component of fiscal strategy with its concomitant implications for productivity, employment and income distribution in most advanced industrialized societies. The purpose of this paper is thus to attempt to delineate the elements of a Post Keynesian approach to health economics.
The outline of the paper is as follows. In the next section I summarize the Post Keynesian approach. I then consider, at a general level, the potential theoretical import of Post Keynesianism for the economics of health and healthcare policy. I broadly follow the taxonomy first introduced by Williams (1987) and subsequently used as a frame of reference in the prominent A Handbook of Health Economics (Culyer and Newhouse 2000), and those considering the state of health economics in general (see Maynard and Kanavos 2000; Edwards 2001). I consider the potential Post Keynesian contributions to particular areas of health economics including health and its influences, the demand for and supply of healthcare, and industrial organization in the health sector. I also consider the role of health expenditure as an element of macroeconomic policy. I conclude that Post Keynesian economics has the potential to make useful contributions to the evolving paradigm that is health economics.
WHAT IS POST KEYNESIAN ECONOMICS?
In the early 1970s Post Keynesian economics was identified principally with its critique of orthodox neoclassical theory. More recently it has moved beyond this negative caricature. Post Keynesians are increasingly attempting to develop a more positive and comprehensive approach to the study of economic problems, aligning themselves with other pluralistic approaches (such as institutionalists).
The basic proposition, originating from Keynes and Kalecki, is that in a monetary production economy the level of economic activity is set by the level of effective demand, and that the level of effective demand will not generally be consistent with full employment (Arestis et al. …