Chap_15 - Chapter 15 The Environment, Health, And Safety...

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Chapter 15 The Environment, Health, And Safety Purpose: To show how the principles of economics can be used to analyze and understand real world problems relating to health care, the environment, workplace safety, and the security of public officials. The chapter is based on ramifications of the cost-benefit principle, the low- hanging fruit principle, and the logic of equating marginal costs to marginal benefits in non- market situations. Length: 21 pages Time required to read : One hour. The narrative is generally easy since it builds on familiar issues. Some of the problems, especially those in the section on environmental issues, are quite difficult and will require additional time. Number of lectures required for understanding: This chapter can be presented and discussed in one 50 minute lecture. Additional time will help students understand the important lessons relating to the environment. Summary The chapter opens with a reference to the oil embargo that occurred as the 1970s were coming to a close. The arguments for and against a fuel-saving tax program are presented to show how simple tools used in economic analysis can be used to shed light on a real-world problem. Health care delivery is used as an example of a delivery system that has been taken out of the hands of consumers. The result is gross inefficiency and waste. The tools of supply and demand are used to show how the waste arises. Waste is further documented by reference to HMO programs that have altered the nature of the incentive systems among consumers and among health care workers. The section ends with a proposal that uses the principles of insurance to
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alleviate some of the problems associated with the production and delivery of health-care services. Environmental regulation is posed as a second theme in which the public might want a different collection of outcomes than would be provided in an unregulated market. Tax programs and pollution permits are introduced. The section shows how either a regulation or a permit can work through the price system to help eliminate some kinds of pollution without squelching incentives. Workplace safety is defined and documented. The public’s interest is contrasted with the individual’s interest. Individual interest is cast in terms of a prisoner’s dilemma. “Safety” is posed as a sometimes-expensive activity. Increased safety is explained with the regulations being examined through the eyes of a market-oriented consumer. Public health and safety are explained by examining vaccination programs and protection of high-ranking public officials. The chapter shows that vaccination has individual attributes as well as public attributes. The public frequently takes over the provision of vaccination for dread diseases in order to consume the public attributes. Protecting a public official is based on and justified by an estimate of the dire consequences that might follow from the assassination or terrorist-incited death of a high-ranking public official. The end-of-chapter materials include
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This note was uploaded on 03/30/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Summer '08 term at Penn State.

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Chap_15 - Chapter 15 The Environment, Health, And Safety...

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