Medical Care and the Economics of Giving.

In a recent article Lindsay [16][2] invented a theory of the National Health Service (NHS), which in its normative form implies the possible Pareto optimality of a nationalized health care system, and in a positive form shows that such a system may be an implication of rational collective behaviour by individuals having certain arguments in their utility functions. In common with other rationales for government intervention in the market for health care, Lindsay's "sharing" hypothesis is based upon the externality relation in health care consumption. The sharing hypothesis differs, however, from more conventional approaches in that the externality-affected parties (e.g. the relatively rich) have their utility levels affected by the quantity of health care each individual receives in relation to others rather than only the absolute amount each receives. The present paper seeks to re-instate the more traditional approach as a "philanthropy" hypothesis in which it is the quantity of "suffering" felt by people rather than the distribution of "suffering" that forms the basis of the externality relation, and which affords a better explanation of the NHS. In this paper the normative interpretation of Lindsay's theory will not be considered since a necessary condition for testing propositions in collective welfare economics (i.e. consensus decision-making) is clearly not fulfilled (Buchanan [2], Buchanan and Tullock [5]). For positive analysis, however, we might proceed faute de mieux on the assumption that collective decisions are made "as if" this condition were fulfilled, or introduce modifications where appropriate. [ABSTRACT FROM AUTHOR]