Efficient Self-Protection and Progress in Curing-Technology

Gilad Sorek

No auwp2013-07, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: The direct medical costs associated with obesity, smoking, and other non-healthy habits are estimated to account for more than 20% of U.S. health spending. Hence, poor health choices induce significant aggregate shift in spending away from treating competing?non preventable?medical risks and from nonmedical consumption. Such a shift in spending distorts relative incentives to innovate in different sectors, through market-size effect. As consumers fail to internalize these aggregate-level externalities, private-prevention is generally inefficient. We show that private prevention is insufficient compared with social optimum, unless technological opportunities to develop cures for preventable diseases are sufficiently superior. Furthermore, under multiple preventable-risks, prevention efforts are biased in favor of the risk with higher potential for curing advances.

Keywords: Self-Protection; Efficient Prevention; Medical Innovation (search for similar items in EconPapers)
JEL-codes: I18 O31 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-hea and nep-ino
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