When I teach introductory macro, I like to begin by telling my students that a good framework to keep in mind is these three questions:
- What does the world look like?
- Why does the world look the way it does?
- What can we do to make it better?
This is regardless of the class I’m teaching. If it is undergraduate students, we spend a lot of time on these questions, without getting as much into the intricacies as I would in, say, a Masters programme. But I find the framework to be a very powerful one, precisely because it is so simple.
Another advantage is that the framework can be used to analyze slices of the economy.
Health, for example. Only for the Indian economy, for example.
- What does the market for healthcare in India look like?
- Why does it look the way it does?
- What can we do to make it better?
About three years ago, I learnt that the answer to these questions wasn’t simple at all.
Think about the first of these questions. What do we mean when we say “the market”, for example? Is it the same market if you are a government employee as opposed to a private citizen? Is it the same market if you are a state government employee as opposed to a central government employee? Is it the same market if you are a rich private citizen as opposed to a poor private citizen?
What do we mean when we say “the same market”? Well, can all these categories access the same services, from the same service providers, at the same prices? If not, why not?
Of course, when you ask these questions, you are in Second Question territory. Why are these markets different? What was the reasoning behind making them different? Has that purpose been served, or not? If it has, can we unify these markets? If it has not, should we not be asking why not? Should we not be thinking about how to reform or unify these markets?
Of course, when you ask these questions, you are in Third Question territory. If you agree that the healthcare market in India isn’t perfect just yet, then you should be thinking about ways to make it better. But better might mean different things to different people! Some people might say hey, if only government got the hell out of this market, outcomes would be so much better. Other folks might say hey, if only government stayed in this market, but with the following tweaks, outcomes would be so much better.
Trouble is, both sides of the argument have a point. Some markets do, indeed, function better with minimum government. But that is only under certain conditions. And some markets do, indeed, function better with more government. But that too, is only under certain conditions.
The trick is in getting everybody to agree on what these conditions are, and to get everybody to agree about to what extent they’re applicable for a given economy at a given point of time. I doubt that we will ever get everybody to agree about everything for all countries for the foreseeable future. But then again, if we did, life would be pretty boring, and people like me would be out of a job.
By the way, I asked ChatGPT these questions. Here are its answers.
But for our country (India), and for the circumstances that India finds herself in today, Murali Neelakantan and I have answers to the first and the second questions. And we have a proposal for the third. These answers can be found in a paper that we’ve written, called Unifying India’s Healthcare Markets. Please go through the paper, and I hope you find stuff to disagree with. I also hope you’ll tell us why you disagree with it, and how we might go about resolving these disagreements.
Because you see, our hope is to not win an argument with you. It is to learn how to best answer the third question. Because what could possibly more important for India?
So please, read the paper, and let us know what you think – especially if you disagree with us.
Respectful disagreements are underrated!
As always, thank you for reading.
EconForEverybody 