The final report considered a tax on antibiotics at a country level and suggested that while it could raise revenue, it probably wouldn’t lead to behaviour change in patients that are unlikely to be ‘price sensitive’. This was an option recently explored by the review on AMR chaired by the economist Jim O’Neill. The main theoretical approach to correcting this failure would be to impose a tax on antibiotics that increases the private cost of consuming them and brings it into line with the cost estimated to society. This is a ‘market failure’ because resources are being allocated inefficiently from a social benefit perspective. This social cost is bigger than the private cost to consumers and we would expect to see higher levels of consumption than is socially optimal.Įssentially, people will consume more antibiotics than society as a whole would want because they fail to recognise the costs of doing so elsewhere. Antimicrobial resistance (AMR) means each dose of antibiotics consumed breeds more resistant bacteria, which is a negative externality causing a cost to society. ![]() These are described as ‘externalities’ and are used to identify any positive or negative effect from a market transaction to people other than the consumer or producer.Īntibiotics are a useful example to demonstrate this concept. ![]() This balance of private gain versus private loss is crucial to understanding free market behaviour, yet it naturally omits benefits and costs to the wider society. ‘Perfect’ in economics relates to markets in which buyers and sellers have complete information about easily comparable products or services, so much so that it allows economists to accurately predict their price.Įconomic theory assumes individuals in a perfect market will engage in activities if benefits to them are more than the costs they incur. This isn’t a judgement on the quality of care provided, rather an academic reflection of the nature of its supply and demand. Healthcare is almost always an imperfect market. occurring in economics when a free market allows for an inefficient allocation of resources due to a number of factors.
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