Wednesday, January 14, 2009

A Sick Economy Needs Medical Care

In November 2008, the economy lost 533,000 non-farm jobs, but the medical care sector added 33,800 jobs. The medical care sector has been a healthful contributor to our economy. One frequently hears the statement that we spend 16 percent of gross domestic product on medical care. This is not true.

Gross domestic product is not an amount of money. It is not spent on anything. It is the total of the goods and services produced by our economy in dollar terms. It is achieved by the economic activity of the sectors that comprise it. If a sector under-performs, it does not leave unused GDP with which something else can be done. It simply blunts the total performance.

A few decades ago, the medical sector contributed 9 percent to the GDP, but now contributes 16 percent. Were we by some foolishness to push back that contribution, we would have a markedly worse recession. When, for instance, someone pays a doctor's bill, it is not money lost to the economy. Her husband soon spends it on a new digital camera.

Countries that constrain the vitality of the medical care sector with central planning and control tend to have higher unemployment and more sluggish economic growth.

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