2 : Microeconomics and Market Failure in Health

The discipline of economics is built upon two immutable facts: that the wants of mankind are considerable, perhaps unlimited, while the resources available to satisfy them are scarce. The study of economics is concerned with way in which resources are used to satisfy wants. It has been described succinctly as the science of scarcity. At one level economics is simply the study of what is which goods are produced, what methods are used and to whom are they distributed this branch of the discipline is known as positive economics. Economics is, however, also concerned with what should be. This known as normative economics. Here the starting point is an ethical objective perhaps translated into policy judgements that can be implemented. In this case the task for economic analysis is to show how these objectives can be met in the most efficient way possible. A by-product of this process is that the implications of policy statements are clearly described. Although these implications may lead policy-makers to change or adapt policy, the role of the economist is not to dictate what the objectives should be, merely to show the consequences of the policy for the objectives that have been described.