Saturday, September 27, 2008

Medical spending and positional/context/prestige externalities

With regard to Mark Thoma's post on Uwe E. Reinhardt's recent column:

The general idea that it's good for a wealthy society to spend a large percentage of it's income on smartly run health care and medical research (and it will be far smarter under Obama and the Democrats) is true.

So much more money could be spent on this with very little or no loss of utility in other areas by essentially taxing positional/prestige externalities. This is a gargantuanly important issue for economic well being that's given far too little attention.

Mark, and the readers, I ask that if you haven't read it, please read Cornell economist Robert Frank's book on this, Luxury Fever. If you don't have time for that now, he has a very good summary op-ed from the Washington Post.