What does economics have to say about health policy anyway? A comment and correction on Evans and Rice.

We have been asked to write a commentary on the articles on market reform appearing in this volume. Since we are economists, we concentrate on the articles by Evans and Rice, which directly address the application of economics to health policy. The Evans article attacks marketoriented reforms of health care systems. There are four elements to his argument: (1) A redistributive “rent-seeking” agenda lies behind support for market-oriented policies; (2) markets are not optimal for the production and distribution of health care; (3) government is; and (4) economic analysis is not applicable to health care, hence it is not useful and is actually harmful. Rice’s article contains two intertwined but distinct themes. The first of these is an attack upon the application of a textbook model of perfect competition to the health care sector. The second is an attack upon several of the tools used by economists to study markets in general and health care markets in particular. The articles by Evans and Rice, while different in many ways, do share some important factors. The main themes in both articles are that market-oriented health systems do not work well, that government-run health systems are superior to market systems, and thus economic analysis is not applicable to health care and thus its application can be misleading or harmful. In what follows we comment on the arguments presented in support of these claims. The logical and factual flaws in the articles are too many to enumerate individually here. Instead, we concentrate on what we view as the