Problems of Quantifying Public Goods in the Healthcare Sector

Abstract

A market system does not automatically lead to an optimum allocation of public goods. Market-based exchange will always lead to a deficit of a public good compared with the socially optimal level. We argue that public goods in each sector of the economy constitute an isomorphic, socioeconomic system that is not a “black box.” Thus, in order to determine the deficit of public goods, it is first necessary to investigate the available quantities versus the quality of those goods, because their performance is not only a function of public spending. There is no generally accepted methodology for doing this and there are no universal methods for quantifying public goods. The aim of this work is to develop a universal methodology for the quantification of public goods in ordinal categories, taking into account both the amount and quality of a good and budgetary valuing. In the empirical part, the authors identify various models (assets structures) of healthcare financing, using a set of OECD countries as an example. The authors also investigate to what extent these models influence the value of public goods in that sector. Composite measures have been computed for both the amount and quality of public goods. Subsequently, an agglomerative cluster analysis and a multifactorial analysis of variance are performed. Although the studied systems are diverse and reflect different social choices, the analyses show that the effectiveness of a healthcare system depends not only on the level of public financing, but also on its structure.