I know these things are meant to be inflammatory (pun intended), but there are some good economic reasons to be concerned about the economics of the healthcare industry:

  1. Asymmetric Information: there is a gulf of knowledge gap between doctors and patients.
  2. Agency Issues: often, the person receiving the treatment is not the person paying for the treatment (at least, not directly).
  3. Captured Regulators: at worst, doctors are meant to be impartial regulators of medication (it’s why they prescribe it); in most cases, you expect them to be on the patient’s side. But their position makes them targets for financial capture by pharmaceutical companies.
  4. Captured Markets: when it comes to your health, most patients will just do what they’re told.
  5. Misaligned Incentives: patients want cures, pharmaceutical companies do not (because that would mean the end of revenue streams).

So this:


And this:


And this:


Rolling Alpha posts about finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.