I have been reading Abhijit Banerjee and Esther Duflo's book, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. They look at what they call the rich economics of the decisions that poor people in poor nation make. Their book is notable not just from the depth of analysis into the microeconomic conditions of poor people in developing nations, but also for their reliance on good research methods, so I will have much more to say about their work in the future.
However, one thing struck me early on in their discussion of the healthcare decisions of poor people in poor nations. Banerjee and Duflo note that, abjectly poor as they are, these folks spend a goodly portion of their income on healthcare, even when the government provides it free of charge. However, they often spend their money on unqualified practitioners, such as the so called Bengali Doctors in India.
The authors also discuss the difficulty of getting poor parents to have children for immunized. Free monthly immunization camps set up near rural villages only get a 7% participation rate and offering incentives to parents only raises the rate to 36%.
It is easy to respond to observations like these with derision for the behavior, or the decision making involved in it. Indeed, when I mentioned the immunization numbers to my wife, she had the understandable reaction of asking aloud "what type of parent wouldn't immunize their child?"
While Bannerjee and Duflo analyze these seemly bad decisions from a variety of perspectives, one thing they discussed particularly resonated with me. In a later chapter on education, they noted that the patterns of rules, beliefs, and expectations in developed nations differed greatly from those in developing nations in such a way that people in developed nations don't have to devote much thought or effort to doing the things that we might deride poor people in developing nations for not doing. Though they were talking about parents sending their children to school, I thought this applied very well to their earlier healthcare examples.
For instance, think about the question of immunizing your children from the point of view of what you would have to do to avoid immunizing you children in the US. While not universal, most states mandate DPT vaccination for children attending secondary school, and many mandate it for enrollment in primary school and daycare. More informally, but perhaps more importantly, the overwhelming majority of healthcare providers will emphatically encourage parents to get their children immunized whenever they see the child. Of course, there are personal belief exemptions to many of the legal mandates, but the overarching point here is that most parents would have to work harder to keep their children from being immunized than to allow them to be immunized. Therefore, higher immunization rates in developed nations may not reflect better thinking or more informed beliefs among parents than that the path of least resistance (and, therefore, of less thought) for parents in developed nations is to have their children immunized.
This is probably even more true in the case of choosing to go to a qualified healthcare provider. In the US, our choices are highly constrained by several factors. The government and professional organizations have established rules about what constitutes a qualified healthcare provider and an approved treatment for any given illness. These rules are enforced not only by direct government action, but also through health insurance providers (who will not pay for unapproved treatments or visits to unqualified practitioners) and the threat of civil litigation for malpractice (which produces another layer of enforcement from malpractice insurers). Therefore, when we in the US get sick, we really don't have much choice as far as seeing a qualified doctor or an unqualified one goes.
This dramatically simplifies our healthcare decisions. When I go see a healthcare provider, I don't have to directly assess their qualification and the effectiveness of their services (which I am really not qualified to do being the wrong type of "Dr." for that) to be assured that they aren't quacks. If the doctor or clinic I patronize is openly doing business as a healthcare provider, if my insurer ( BC/BS) has approved them to receive payments, and if my pharmacy will fill their prescriptions, then it is a good bet that they are at least minimally competent. Furthermore, if my doctor prescribes a test or a treatment, I can be reasonably sure that it is appropriate if my insurer is willing to pay for it. I can also be somewhat confident that their treatment won't make cause me any great harm because I (or my heirs) will own them in court if they commit malpractice. Because of this, they have to get malpractice insurance and that insurance company has probably done its homework regarding the practice of the doctor or clinic that I visit.
Of course, there are many lapses in the system and being entirely careless or sanguine can lead to a lower quality of care. The point is that, given that I bother to seek treatment in the first place, the path of least thought and resistance is going to lead me to a healthcare provider who is minimally qualified and faces incentives to do at least minimal testing and prescribe the standard course of treatment. I am not going to end up with someone who will use crystals or prayer to heal me, or is going to give me an unneeded shot of anti-biotics or steroids from an unsanitized needle.
In contrast, poor people in developing nations face a much more difficult situation. Take the case of India with its free healthcare for the poor and competing private system of unlicensed Bengali Doctors (ignoring the higher cost system of qualified doctors that are priced out out of reach for the impoverished). Banerjee and Duflo note that in India, the government healthcare system is plagued by absenteeism (with primary clinics as likely as not to be closed during stated operating hours) and a poor quality of care. They cite research that shows that government doctors spends less than two minutes with their patients, generally ask the patient for their own diagnosis, and then prescribe treatment based on the self-diagnosis. Thee doctors typically do not touch their patients and rarely give any advice about administering the treatment or following up.
In contrast, the private sector Bengali Doctors, who can have as little education as a high school diploma, tend to observe a 3-3-3 rule: they spend 3 minutes with the patient, ask 3 questions, and prescribe 3 medications. They also generally lay hands on the patient and often administer medications as a shot (which patients generally perceive as more effective than oral medication). Of course, being self-employed, Bengali Doctors are generally at work when they say they are going to be there. The point here is that, based on the most easily observed criteria, the Bengali Doctors appear to be giving higher quality care and, apparently for this reason, the poor are willing to pay for it.
Therefore, the existence of an unregulated market for low cost healthcare alongside a perceptibly low quality free government healthcare system forces the impoverished in India to make choices that are more challenging than those facing people in wealthier nations. They are implicitly forced to make judgments about the efficacy of different types of practitioners and courses of medical treatment that are, for better or worse, kept beyond the scope of choice for healthcare consumers in developed nations.
This is on top of the fact that the poor have much less information and education to help them do so. For instance, Bannerjee and Duflo argue that it takes a junior high school knowledge of biology to understand how the gastric and circulatory systems work and, thus, to understand that oral medication will get to your bloodstream about as well as an injected medication will. The same can be said for understanding the need for, and proper means of, sterilizing needles. This all means that the poor in developing nations need to think harder about a wider range of choices and have less resources to do so than most people in developed nations.
This seems to me to be an example of how institutions, using Douglass Norths' broad definition of institutions as the formal and informal rules of the game in a society, can lead people to better or worse outcomes. The formal and informal 'rules of the game' for healthcare in the US create a situation where little or no thought will lead people to make better choices (if they can be called choices) than poor people in India make after putting much more thought into the decision.
As Banerjee and Duflo point out regarding education, there is a decidedly paternalistic quality to the rules of the game in developed nations. Postmodernists and Critical Theorists would be quick to point out that such paternalism is likely to herd people's choices in a direction that serves the interests of the powerful in the society. Thus, it constitutes a potent means of oppression that renders "choice" an illusion. Milton Friedman, who argued in Capitalism and Freedom that the government should not regulate healthcare but allow consumers to decide what was most effective, would argue that such paternalism constrains individual choice, stifles innovation, and produces inferior outcomes. Douglass North himself would caution that more developed institutions, especially formal ones established by the political system, do not necessarily lead to better outcomes and can lead to persistent inferior outcomes.
Still, I think this is an example of the potency of institutions (again in their more broadly defined sense) and the role they play in affecting the outcome and efficiency of individual choice.
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