EclectEcon

Once the gubmnt gets involved, look out!

There is a shortage of physicians (at P=0) in many places in Canada. In New Brunswick, the gubmnt decided to offer physicians a bounty of $150 for each new patient they took on. Sounds like a good idea for getting physicians to work a bit longer and sandwich in a few more patients, doesn't it. Here are the bizarre results:

New physicians receive a bounty for each new patient they take on. Hence, they are unwilling to buy the built-up good will in the practices of retiring physicians. So as a physician retires or leaves the province, that doctor's patients must scramble to try to find a new family physician. At the same time, new physicians do not fill their practices instantaneously. Consequently, if anything, the match between patients and physicians is imperfect and there remain many patients without a family doctor.

Current physicians nearing retirement age are upset because they have invested so much in building up their practices and now are unable to sell them. Also, taxpayers recoil when they learn that the bounty is not going only to those who have nearly full practices.

As Brian Ferguson is quoted in the article as saying,

Doctors' decision-making is affected by financial incentives to a greater extent than many think, according to a 2002 AIMS report. Dr Ferguson looked at a number of Canadian and international examples and concluded that physicians respond to market forces, including cash bonuses, the same as any other professionals.

But that's a view not universally shared in government circles. "Much confusion and bad policy follows from the inability of many policy analysts to handle the techniques of an elementary economics course," wrote Dr Ferguson in a scathing commentary that now appears prescient.

As Brian has said, if he is so prescient, he is going to start picking stocks.