General equilibrium and marketability in the health care industry

This essay examines nonmarketability in the health care sector. The first section outlines Arrow's notion of general equilibrium in the health care sector and the problem of nonmarketability. The second section examines the markets (and market failures) in the early 1960s and how those market failures can be traced to a lack of markets for several types of products. It concludes with a discussion of how nonmarket institutions could be viewed as filling the gaps for those missing markets. The final two sections discuss how, since 1963, there has been an expansion in markets and an associated change in the role of nonmarket institutions. The central thesis of this essay is that market and nonmarket institutions have a symbiotic relationship, with nonmarket institutions serving to improve resource allocation in areas where markets fail or do not exist. As the role of the market has expanded, the role of social institutions has changed to fill new gaps that have arisen in the increasingly market-oriented environment. (October 2001)