Economic is a science filled with assumptions, which prove false from time to time. American healthcare is an area where theory is particularly inconsistent with the factual state of affairs. President Obama signed the Affordable Care Act, which provided those with low incomes with health insurance. Trump’s intention to replace the Act has caused some economic assumptions, which are not confirmed by the actual reality.
The Pareto criterion is a famous rule for evaluating the outcome of economic activity. In essence, it can be summarized by “there is no alternative allocation in which at least one party would be better off and nobody worse off” (Unit 5 Property and power: Mutual gains and conflict, Evaluating institutions and outcomes Section, para. 10). In order for this rule to work in the case of the Affordable Care Act, there needs to be an assumption that many people can access medical healthcare only through federal programs. Yet, one of the solutions for mitigating the consequences of Trump’s actions is to receive financial aid directly from the company, while the company is being subsidized by a state authority. As a result, the Pareto criterion fails because the regional government has additional expenditures.
Another principle in economic decision-making is that accurate information prevents market failures (Unit 11 Market failure and government policy, para. 1). The subsequent assumption is that the more data are available to an entity, the more prepared it is for choosing the right course of action. When Trump announced his intention to end ACA, his opponents feared that eliminating this program would leave people with low income with no affordable healthcare solutions. However, California showed an example of employers providing employees with individual insurances. As a consequence, despite the calculations, erasing ACA does not necessarily leave people without health insurance.
Altogether, the inconsistency between facts and theoretical assumptions underlines the importance of regularly updating the study of economics. Firstly, the Pareto principle fails when regional authorities are discounted from the equation. Secondly, employees can have individual health insurance despite the replacement of ACA due to regional subsidies. Therefore, the study of economics overestimates the role of government and pays insufficient attention to lesser economic actors.
References
Unit 5 Property and power: Mutual gains and conflict. (n.d.). Web.
Unit 11 Market failure and government policy. (n.d.). Web.