Kenneth Arrow On The Difference Between The Health Care Industry And Public Health

With Paul Krugman reviving Kenneth Arrow’s 1963 classic on the special economics of health care (PDF) I was interested to read this bit of throat-clearing near the beginning of the piece that I’d overlooked the previous time I read Arrow’s piece:

It should be noted that the subject is the medical-care industry, not health. The causal factors in health are many, and the provision of medical care is only one. Particularly at low levels of income, other commodities such as nutrition, shelter, clothing, and sanitation may be much more significant. It is the complex of services that center about the physician, private and group practice, hospitals, and public health, which I propose to discuss.

What’s interesting about this is that in context Arrow is basically offering a hypothesis. Historically “other commodities such as nutrition, shelter, clothing, and sanitation may be much more significant” determinants of public health outcomes. But perhaps things will be different in the affluent society and health care considerations will start to dominate. But looking back 47 years later, we can see that’s not really the case. To be sure, the balance has shifted somewhat from the days when basic sanitation could prevent cholera outbreaks. But fundamentally lifestyle factors are still dominant.

If we ate less sugar and smoked fewer cigarettes while eating more vegetables and exercising regularly, health outcomes would get way way better. In that sense, the biggest problem of the economics of public health has relatively little to do with the economics of the health care industry and a great deal to do with the economics of self-control or inter-temporal trade. If 26 year-old Matt could have offered 16 year-old Matt money in exchange for a credible commitment to not take up smoking, a massively health-improving positive sum exchange would have happened.