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Health, government, and Irving Fisher

American Journal of Economics and Sociology, The, Jan, 2005 by Victor R. Fuchs

In the 50 years since the death of Irving Fisher, the U.S. government's role in health has expanded enormously. Fisher would have approved; indeed, he devoted an enormous amount of time and energy to advocating such expansion. His perceptions and recommendations about health were often on the mark, but some strayed from the theoretical and empirical rigor one would expect from the foremost American economist of his time. Some of his writings about health can serve as an object lesson of what can go wrong when a brilliant analyst and keen observer becomes a crusading social reformer. This paper also illustrates the strengths and the limitations of economics in explaining such a complex phenomenon as government's role in health.

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I begin with a few historical notes on government involvement, followed by a summary of the theoretical arguments that economists offer in its support. I then consider several of Fisher's health-related "enthusiasms" in the light of today's perceptions concerning health, health economics, and health policy. The wide variety of roles that the U.S. and other governments currently play in health is reviewed, and the ability of economics to explain these roles is assessed. This is followed by an examination of the consequences of government involvement for the health of populations, for expenditures on health care, and for political and social stability. The paper concludes with an overview of new worldwide trends in health policy and some probable explanations for these trends.

Historical Notes

ALTHOUGH GOVERNMENT INVOLVEMENT IN HEALTH ON A LARGE SCALE is largely a 20th-century phenomenon, some precursers can be traced back for thousands of years. One of the earliest interventions for which we have written record is the Mosaic prohibition on the eating of pork and shellfish. There are also references to the construction of hospitals in India by an emperor who ruled three centuries before the birth of Christ. In the Western world prior to the rise of nation-states, religious institutions tended to dominate health-related activities, especially the construction of hospitals to provide the poor with a place to die.

In the 17th century the king of Sweden built several hospitals to house soldiers returning from European wars. Many of these soldiers had contracted the "French disease," as syphilis was commonly known. (In France it was referred to as the "Italian disease.") Inasmuch as there was no effective cure for syphilis at that time, one possible motivation was the state's desire to isolate these soldiers from the rest of the Swedish population. A similar goal may have motivated one of the first major forays of the U.S. government into health, namely, the construction of merchant marine hospitals in major ports in the early 19th century.

In the mid-19th century there was a strong public health movement in England led by Sir Edwin Chadwick, a follower of Jeremy Bentham. Chadwick, along with Nassau W. Senior, produced a report in 1834 that led to increased government supervision over health and safety.

Throughout his life, Chadwick gave particular emphasis to improvements in sanitary conditions and other reforms designed to reduce the toll of communicable diseases. Although not an economist, he welcomed the application of economics to problems of health policy, writing: "When the moralist and the sentimentalist fails, he will have as a last resource to call on the aid of the economist."

In the late 19th century, Bismarck introduced national health insurance to Germany. Although this event is much celebrated today among enthusiasts for national health insurance, it was not Bismarck's original legislative objective, and he thought so little of it that he failed to mention it in his autobiography. Bismarck's original objective was insurance for workers who were injured and disabled in industrial accidents. He was frustrated in this attempt by a coalition of liberals (free market advocates), conservatives, and organizations that were already in the business of selling such insurance. As an alternative, he accepted health insurance even though there was little reason to think that medical care had much to offer the population at that time in terms of improved health. Several years earlier, a prominent American physician had asserted that if the entire pharmacopaeia were sent to the bottom of the sea, it would be so much the better for mankind and so much the worse for the fishes. Indeed, most medical historians believe that at the time of Bismarck's initiative and for several decades thereafter, a random patient with a random disease consulting a random physician had no better than a 50-50 chance of benefitting from the encounter.

Two political imperatives undoubtedly fueled Bismarck's desire to achieve some kind of social legislation. First, he was continually trying to consolidate allegiance to the German nation-state, which he had created out of an array of smaller kingdoms, principalities, duchys, and other political units. Second, he wished to blunt the political appeal of the socialist and working-class parties that were regaining strength after the abortive uprisings in the middle of the 19th century.

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Health, government, and Irving Fisher

American Journal of Economics and Sociology, The, Jan, 2005 by Victor R. Fuchs

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