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Market failure

Written By: - Date published: 8:11 am, September 5th, 2008 - 27 comments
Categories: health, wages - Tags:

An article on Stuff today shows “Social injustice is killing people on a grand scale”. It’s based on research by Dr. Jamie Pearce and indicates that those who live in poor areas are more likely to die early than those in wealthy areas.

Dr Pearce said the changing social and political environment disadvantaged poor people and areas, as well as Maori and Pacific people. Healthcare reforms which required people to pay more for their treatment led to poorer people making less use of health services, and unequal rationing of primary healthcare had affected some regions more than others

Labour has done some good work in health but they have still failed to address the root cause of this problem. As with the loanshark issue the answer is to make sure people have enough money. We need a population that is financially healthy to have a population that stays in good health and that means higher wages, higher benefits and better education.

And before our right-wing commentators get all excited I’ll remind them that the answer isn’t more tax cuts for the rich and it’s not increasing profit-driven healthcare and it’s certainly not telling people they can “go down the road“.

The market has failed and it’s costing people their lives.

27 comments on “Market failure ”

  1. RedLogix 1

    An imbalance between rich and poor is the oldest and most fatal ailment of all republics.


  2. insider 2

    I don’t think the answer is giving people free money with no counterveiling responsibilities. Give them access to services by all means.

    So how far up the OECD ladder have we climbed recently? How has productivity improved?

    If you accept that better health and wellbeing comes from financially healthy population, then the country needs to start getting richer, quicker as a whole. Redistribution won;t work. There has been no sign of that happening even though we have had some of the best economic conditions in a long time.

  3. IrishBill 3

    insider, business profits have increased something like 250% in the last eight years but wages have not increased at anything like that rate. We have got richer, quicker but that wealth has not been shared. Your answer seems to be the “trickle down” model that has resulted in exactly the market failure my post covers.

    You should also consider the fact that a healthier and better educated workforce is more productive but despite immensely profitable years business (and the government) have squandered the opportunity to invest that profit in workers and society. In fact business has even squandered the opportunity to invest in R&D, and productive capital. Why should that failure be rewarded with more of the same?

  4. Daveski 4

    If the problem is the market, then it would logically follow that the health of the general population will be better in every communist country. Clearly, this is not the case and as insider notes, we have to do more to improve the financial health of the whole country.

    I have no doubt that health problems are linked to financial problems.

    Regrettably, and this is where the left strong differs from the right, there is also an element of individual responsibility that is overlooked in some, not all, cases.

    The other issue that will emerge out of this is generational. Significant amount of health dollars now go into older patients who with medical advances now receive treatment that wouldn’t have been offered in the past. As any medical professional who will tell you of major operations on people in their 80s.

    I accept that there is an issue. However, simply giving people more money is not an answer unless we accept the need to grow the economy first.

    Again IB another excellent post on a meaningful topic without taking simplistic positions and looking for cheap points. Well done.

  5. insider. the population is getting richer as a whole, and the quickest percentage increases have been in the lower incomes deciles. you saw the graphs.

  6. Camryn 6

    In general, good points here. Health is very important morally and it does flow to productivity. Should point out, though, that some of the poorer members of our society are poorer because they make bad choices. Many also make bad health choices even within their means and with regards to services they can afford. So, there will always be some health gap… the issue is making it as small as possible while allowing that as long as people can make their own choices, some will make bad ones.

  7. Matthew Pilott 7

    Irish, I feel you have it backward – a healthy population can work more and have a better quality of life. Having money to access healthcare is the wrong way around. Better provisioning of access to healthcare would have two broad advantages – preventative healthcare reducing incidence of severe health problems for individuals later in life, and a healthier population that can afford to maintain a effectiv, functioning health system collectively.

    I don’t think it’s people not having money, it’s access to healthcare affecting their ability to make money, prepetuating their inability to access a required standard of healthcare, and, more importantly, to live healthy lifestyles. If money weren’t the requirement for healthcare and to live healthily, the problem would be reduced.

    The real market failure here is that it costs more to live a healthy lifestyle. As always, the market fails to pay for its negative externalities, so what can be done? Government intervention, regulation – if we tax nicotine for lung operations, and alcohol for the general mayhem caused, we should tax fat for heart ops.

    A carrot approach (almost literally) would also be beneficial – offset and costs in bad food increases by reducing the cost of good foods.

  8. higherstandard 8

    The health or otherwise of a population is multifactorial – purely making a population more wealthy and hoping that will be a cure all for health problems is simplistic and I have no doubt that is not what IB is suggesting.

    Certainly a large proportion of our costs and problems in the health system are due to cardiovascular disease and related problems such as NIDDM and these tend to be more prevalent in lower decile areas, some of the reasons are economic, some are genetic and some are lifestyle.

    None of these can be fixed overnight and in a proportion of the population some are unable to be fixed.

  9. IrishBill 9

    “If the problem is the market, then it would logically follow that the health of the general population will be better in every communist country.”

    I am not a great fan of soviet communism but I do feel obliged to point out that under the soviet regime life expectancy increased considerably from the days of Tsarism and then during the free market reforms of the 90’s it started falling again.

    I’ll also point out that to claim that interference in the market automatically qualifies as “communism” is an act of reductio ad absurdum based on a lack of any understanding of the world economy (or indeed the New Zealand economy) prior to the 1980s or outside of the Anglo nations.

  10. higherstandard 10


    Incentivised wellness – mmm certainly worth a try.

  11. Daveski 11

    IB As you point out, communism initially made a significant positive improvement to Russia. The problem wasn’t communism but the communists!

    I wasn’t inferring at all that market interference was communism – rather, that you can’t blame markets for all health problems.

    Ironically, I think MP’s point about the use of markets to change behaviour – or at least ensure the true cost of products that contribute to poor health is reflected in the pricing.

    I’d also be interested in any statistical link between educational achievement and health.

  12. Bill 12

    Kind of echoes the WHO report really.

    Anyway. Aside from financial capital, social and cultural capital have their impacts too.

    In NZ poverty has become ghettoised. If you look back to the beginning of the state housing programme, the idea was to ‘seed’ financially poor people through wealthier areas. The idea was that through a number of fairly natural mechanisms (peer pressure, effect of ‘good examples)financial and social capital would gravitate to the highest common denominator.

    But now, all my neighbours are poor, many households in the community are dysfunctional, social networks are informal and negative (gangs etc), crime is common ‘ cause poverty is common, drug use is common because the environment offers no hope and too much stress.

    At school, the kids see their own situation replicated in that of the other kids…just a lot of ‘going nowhere’ and community breakdown. Meanwhile the education system that works wonderfully in so far as producing doctors and engineers in well resourced middle class environments further disadvantages us disadvantaged because of it’s inherent bias; it’s inability to be relevant to the lives of us disadvantaged people.

    So my sisters pregnant, mum’s out her tree, dad’s in the jail and me and my brother are in the gang. Why? ‘Cause the system; the government; society had nothing to offer and so we made up our own shit. Given what we had to use to build with, we did okay. We survive, we get by. We get sick more often, we die younger. And what we got is ours and all we can ever expect.

  13. Matthew Pilott 13

    HS, daveski, we do it now, to a degree, with other products. It’s a lot more complicated though, when it comes to food. Easy enough to tax the tar out of ‘diggers.

    A government could ban the worst (fast food cooked in Trans-saturated fats, foods high in partially-hydrogenated vegetable oils), disincentivise the bad (high in sodium, MSG, saturated fats) and subsidise the good stuff (if you need me to tell you, you’re in trouble).

    If you choose to eat badly, you’ll be contributing to your future healthcare – but you’ll be given the option of eating better stuff at a lower price.

    Of course, the same problems with removing GST from ‘good’ food will occur. Do pre-sliced apple segments in a plastic bag count? V8 vegetable juice? Cornflakes? Local produce only (50 km? 150km?)? Organic pasta? You get the drift..

    I think Lynn P mentioned on another thread, the downstream costs of obesity are horrifying. And our kids are the first to have a shorter life expectancy than their parents since the black plague because of it.

    I wonder if a certain government has used up a little too much capital in regulating for issues that are less important than this.

  14. higherstandard 14


    I was thinking more along the lines of incentivising people to stay or become healthy rather than banning or increasing taxation.

    As a simple example why not incentivise people to say stop smoking or loose weight.

  15. Matthew Pilott 15

    HS – there are a few options that could (should) be considered, whatever is more effective should be implemented. If incentives alone could have enough of an effect then by all means, but it’s a weighty problem.

  16. Matthew Pilott 16

    Apologies for the pun – accidental.

  17. Daveski 17

    MP – Another good point – it can be difficult to target good or bad products.

    How does the US school model work with the catered school lunches. Following a similar model in NZ – along with the opportunity for breakfast as well – could address both some of the health issues and improve educational outcomes as well.

  18. rave 18

    This stuff on inequality is so old its embarrassing that each generation has to rediscover the wheel. Muldoon signaled most of this in his “NZ at the Turning Point” around 1976. One could go back to 1876.
    Labour has not redeemed itself for Rogernomics by a long way.
    It should drop GST on food so that people can afford to buy healthy stuff. Make the fag and booze and soda water barons pay their health costs from profiteering in peoples health (oh I love this negative externality stuff its like market collateral). A fat tax on fast food. Fart tax on federated farmers. Tax all the polluters and poisoners and all the unearned capital gains to pay for decent housing, health and education. Put the running of health and education into the hands of the professionals and the consumers.
    Would Labour lose the election as a result? Hardly, it would upset the international financier mates of John Key, and it would upset the righties in NZ – foreign investors would fly away and the export of alpha males would speed up – but it would win the big majority of NZers who owe more to John A Lee than John P Key. He question is where is the loyalty of the Labour Party?

  19. Matthew Pilott 19

    Daveski, my basic understanding with US school lunches is that they are sold at the lowest cost to contractors who, in turn, provide very bad food at the lowest cost – that would be a big risk. If the food had to meet minimum standards and was subsidised so a healthy wrap, for example, was more attractive than the nearest dairy’s pie, then you’d have a plan. You’d also teach good habits from school, a benefit that can’t be overlooked, not to mention that good food = better education, with all the ensuing benefits.

  20. Um righties – I just read the article and a team of three specialised and qualified researchers have said the big issue is the market. I don’t want to sound like I’m questioning your medical credentials but do you think that maybe that kinda means your market-is-better gibbering is a little… wrong?

  21. Daveski 21


    No one is suggesting that markets shouldn’t have some level of regulation.

    Likewise, no one is suggesting we shouldn’t provide some (major) level of public good services including health.

    The fundamental answer is more money within the NZ economy which can only come from growth rather than simple redistribution.

    The area that is missing is around education and personal responsibility – ie prevention.

  22. Daveski 22

    i’m about to head off down the highway …

    A couple of points I’d like to throw in.

    SP has (rightly) pointed out improvements in our economics stats over the last 9 years. He largely credits the Lab govt while I’ll happily point out the easy run they’ve had over that period.

    Yet our health indicators are worse?

    I also look at my own argument about growing the economic pie (intended pun!). Look at the obesity prob in the states to see economics and health aren’t the only factors.

    Again, this is another super topic to debate that has shown ideological beliefs but not simple political posturing. Credit to IB in spades.

  23. ropata 23

    Incentivise locally produced fruit and veges? “Healthy food” vouchers for people with community services card?

    One thing we are doing right ~ TV is so crap that people are motivated to escape the couch! 🙂

  24. Rex Widerstrom 24

    rave: It makes me weep, as someone who’s sick to death of partisan in-fighting and point scoring (as practiced frequently on this blog, amongst many, many other places) to read your comment above and find myself agreeing wholeheartedly with bits of it, partially with most of it, and disagreeing with bits of it.

    Because it’s paradigm-shift thinking like that we need right now, from different perspectives. And we need to think about it with an open mind, not dismiss it because it doesn’t fit the framework to which we’ve chosen to nail our beliefs.

    We’re heading to an election and the fact is most people – aside from the ideologically blind – will traipse to the polling booth and try to decide between the lesser of two bland, out-of-touch evils with nothing new to offer us.

    This close to an election and what’s the big news? Trevor’s released some of National’s policy. Wooo weee. I bet he feels cool. Are the rest of us any better off? No. Does it add anything to the sum total of our knowledge? No, because they were going to release it anyway.

    Reading your blog, there’s lots you say I’d argue against. But at least I’d be motivated to do so. When I hear Clark, Key, Peters et al I just want to put my head under the pillow till the dull buzzing sound stops.

  25. rave 25

    Rex: I look forward to the argument then.
    Meanwhile I save my tears for the subjects of this timely research report(even if its rediscovering the obvious).
    I heard Jaimie Pearce putting up a good defence of ‘politicising’ his study against Michelle Boag on Radio NZ this afto. He actually had to tell Boag that he had a right as an researcher to make the connection between increasing mortality rates and the Rogernomics and Ruthonomics years,and that it was his job to do so, so that people (no doubt Boag) would “understand” why.

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