Common Goods for Health: Economic Rationale and Tools for Prioritization

Abstract

This paper presents the economic rationale for treating Common Goods for Health (CGH) as priorities for public intervention. We use the concept of market failure as a central argument for identifying CGH and apply cost-effectiveness analysis (CEA) as a normative tool to prioritize CGH interventions in public finance decisions. We show that CGH are consistent with traditional lists of public health core functions but cannot be identified separately from non-CGH activities in such lists. We propose a public finance decision tree, adapted from existing health economics tools, to identify CGH activities within the set of cost-effective interventions for the health sector. We test the framework by applying it to the 2018 Disease Control Priority (DCP) list of interventions recommended for public funding and find that less than 10% of costeffective interventions unconditionally qualify as CGH, while another two-thirds may or may not qualify depending on context and form. We conclude that while CEA can be used as a tool to prioritize CGH, the scarcity of such analyses for CGH interventions may be partly responsible for the lack of priority given to them. We encourage further research to address methodological and resource challenges to assessing the cost-effectiveness of CGH intervention packages, in particular those involving large investments and longterm benefits.

When Both Markets and Governments Fail Health

“…10 And economists argue for them as public goods with large social externalities that require public action. 3 The direct human cost of Ebola and other communicable disease outbreaks is the appropriate focus for most research and media coverage, but we should not ignore other costs associated with, and directly related to, failed health system investments. The estimates of the economic costs of the West Africa Ebola outbreak have ranged from $3 billion USD to over $30 billion USD.…”

“…As is described in more detail in the next article in this issue by Gaudin and colleagues, the field of public finance economics describes a number of reasons markets fail. 3,28,29 CGH, on the other hand, only tackle two specific market failures: public goods and large social externalities. This does not mean that other types of market failures are not important to core health system functions, but they are outside this specific construct.…”

“…The next article, "Common Goods for Health: Economic Rationale and Tools for Prioritization" by Gaudin, Smith, Soucat, and Yazbeck, provides the theoretical constructs that underpin the definition of CGH in two ways. 3 First, the article tackles the traditional approach to public finance economics through market failures in the health sector, building on the principles and definition presented above. It furthers proposes a functional approach to CGH by reviewing and identifying CGH functions among the larger list of essential public health functions.…”

“…These de-prioritized functions and services, as we discuss in the next section on Ebola and other communicable disease responses, suffer then from a double failure: market failure and government failure. Market failures, described in more detail in the next paper in this issue, 3 motivate the need for public action including, in many cases, public financing. Public action and financing, however, are lamentably not automatic, 4 especially when no pressure is exerted by citizens on government policy makers.…”

Why Do Societies Ever Produce Common Goods for Health?

“…The papers argue that societies underinvest in CGH for behavioral reasons, such as underestimating risk and shortterm thinking 1 ; as well as economic reasons, such as externalities and free-riding (which create incentives for people to act without regard to the full social costs and benefits of their decisions). 2 With all of these factors conspiring against the production of CGH, it is a wonder that they are produced at all. In this commentary, I argue that we need to be clear-eyed about the history and motivations that led societies to invest in the CGH that we take for granted today.…”