Public Interest and Special Interest Theories
Question 1
Public interest theory describes regulations that protect and benefit the general public (Berry, 2015). Public interest is the efficient allocation of limited resources as well as collective goods among people. Nowadays, the market is the one that allocates and coordinates resources. An important notation is that public interest theory entails welfare economics (Berry, 2015). The theory holds that regulations are required to promote social welfare. The government uses public interest theory to intervene in the health care market. The government ensures that the health care market operates as per strict rules and laws the government enforces to safeguard and benefit the public (Berry, 2015).
On the other hand, special interest theory is used by companies sharing common political goals. A good example is pharmaceutical companies. These companies compete economically. However, they desire to achieve common political interests. Special interest groups are very powerful due to their wealth (Berry, 2015). They take advantage of their power to influence elections. They achieve this through advertising together with taking part in political campaigns. I think that public interest theory is the most accurate. The reason behind this is that it plays a great role when it comes to solving problems facing the public (Berry, 2015). The government uses this theory to solve problems in the health care market.
Question 2
Imperfect information is a crucial element when it comes to a perfect competitive market. The health care industry is an excellent example of a perfect competitive market. For instance, health insurance providers utilize this aspect to ensure that they have enough information regarding the health status of their customers (Sta, 2017). This assists them in charging premiums based on their expected costs. In real-world, transactions are done using incomplete information. The truth is that people have more information regarding their health compared to potential insurers. The disadvantage of having incomplete information is that it contributes to market failure (Sta, 2017). This is because the party with sufficient information obtains a competitive advantage. The health care insurance market greatly experiences market failure due to having imperfect information. When health care providers have perfect information regarding their clients, they gain a lot of market power (Sta, 2017). This enables them to gain a competitive edge. As a result, insurance providers and other health caregivers tend to over-insure as well as over-charge health care services. This brings the need for the government to intervene in the health care market.
References
Berry, J. M. (2015). Lobbying for the people: The political behavior of public interest groups. Princeton University Press.
Sta, H. B. (2017). Quality and the efficiency of data in “Smart-Cities”. Future Generation Computer Systems, 74, 409-416.