Re: ECON: Rebuke my TA!

carl feynman (
Mon, 27 Oct 1997 15:02:51 -0500

At 10:27 AM 10/27/97 -0800, Geoff Smith wrote:

>Especially, how do I argue against his statement that public healthcare is
>40% cheaper than private!?!

In this case, the government is a monopsony (a market with only one buyer)
rather than a monopoly (a market with only one seller). The government
buys services from millions of doctors and thousands of hospitals at a
price it can dictate. Just as monopolies drive prices above their
open-market value, monopsonies drive prices down. Whether this is a good
thing depends on whether you are a buyer or a seller, but the net result
for buyers plus sellers is a loss, called the 'deadweight loss' in Econ 101.

Government monopsonies in agriculture were responsible for the collapse of
much of Africa's agricultural production in the '70s.