Question

Consider the following quote from an article in New York Times Magazine: “Economists seem always to talk about the cost of medical care, as if that kind of spending is a bad thing. After all, where does the money go? To doctors, nurses, and the makers of medical supplies. Don’t they buy diapers and pasta and cars? Would the nation be better off with more boom boxes and less penicillin, more nail polish and less antibacterial ointment? What difference does it make how money is spent, as long as it changes hands and results in employment?”

            A.        Do economists view spending on health care as a “bad thing”?

B.         The last sentence in the quote suggests a criterion for evaluating spending on health care. What criterion would an economist use?

Answer 1

A. Economist does not treat spending on healthcare as a bad thing. It is because human capital in the sense of its labour ability depends on its physical and mental health. It can positively affect the productivity of a person. Thus spending on health is not bad and waste.                                                                                

B. An economist will encourage maximum spending since it can generate income and employment to various sections in the society by enhancing aggregate demand. Increased transaction velocity of money and money multiplayer can bring the economies economic activity to a higher level and create more income and employment in the society and thereby raise the GDP of the nation. Thus an economist will support maximum spending in all sectors including health care sector (Again health care sector can positively affect the productivity of a person).