The fundamental economic problem confronting us all is that while we have insatiable wants and desires, we only have limited resources (time, energy, expertise, and money) at our disposal to satisfy them. Economics is founded on the premise that there will never be sufficient resources to completely satisfy human desires and the use of resources in one activity means that they cannot be used elsewhere.20 How society's scarce resources are, could, or should be allocated among the infinite variety of competing activities provide the rationale for an economic perspective in setting priorities. The extent of the gap which exists between the demand for commodities and the level of resources available to meet them continues to frustrate politicians, professionals, and policymakers alike, and the range of economic systems which have existed and evolved over time have all attempted to address the basic economic problem of allocating resources in such a way as to maximize the benefits for society. This situation has become particularly evident in health care and has been compounded by factors such as the increasing expectations of the population as to what can be delivered by healthcare services, the continuing advancements in health technology and medical science, and the increasing health needs and demands of an ageing population.
However, it should be remembered that more does not necessarily mean better health care, and diverting additional resources into facilities and services will not automatically generate an improvement in the health of the population. It is far too simplistic to argue that in order to improve the health of the nation and reduce inequalities, additional resources need to be channeled into healthcare services. The USA spends over 2.5 times the average health expenditure of the other 29 OECD countries (Organisation for Economic Cooperation and Development) and yet is one of the least healthy of these nations.21 The issue of whether health care and the availability of healthcare facilities are the most important determinants in securing good health for society has been widely challenged,22, 23, 24, 25 and it has been shown that there is a level of healthcare expenditure, where maximum benefits are produced, and beyond which extra health gains cease and patients may actually be harmed.26,27
Another facet to consider is whether the distribution of any additional resources provided for healthcare services could be regarded as being fair. An increase of resources may simply reinforce existing inequalities and inequities between groups within society, and do nothing to reduce differences between them in terms of life expectancy, health status, or access to treatments and facilities.
The two concepts of "efficiency" and "equity" are fundamental in economics, and together they combine to form, what has been termed, the social welfare function. In constructing policy decisions, there is a broad consensus that both of these aspects of social welfare should be considered in the location, method, and degree of government intervention in health care and there is general agreement on the need for a trade-off between achieving an efficient allocation of resources and ensuring that the resulting allocation is equitable.
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