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Financing Health Care in the United States and Abroad: Current Challenges and Opportunities Ahead

The Costs of Health Care
Christina Paxson

Christina Paxson is the nineteenth president of Brown University. Prior to her appointment in 2012, she was dean of the Woodrow Wilson School of International and Public Affairs and the Hughes Rogers Professor of Economics and Public Affairs at Princeton University. Paxson also served as associate chair (2005-2008) and chair (2008-2009) of Princeton University's Department of Economics and was the founding director of a National Institute on Aging Center for the Economics and Demography of Aging. In 2000, she founded and directed the Center for Health and Wellbeing, an interdisciplinary research center in the Woodrow Wilson School, until 2009. Paxson has been the principal investigator on a number of research projects supported by the National Institutes of Health, the most recent of which is a study of adversity and resilience after Hurricane Katrina. She was elected vice president of the American Economic Association in 2012 and is a member of the Council on Foreign Relations. Brown Journal of World Affairs: In the past, you have said that you have thought of economics as having a social purpose and that its main goal should be to improve human welfare. As such, how do you believe economics can help solve the challenges of financing health care? Christina Paxson: Economics is about the allocation of scarce resources. That's a formal definition. Health care is probably one of the best examples of why we worry about the allocation of resources across people. We're facing two big dilemmas right now in the United States. One is how much of our overall budget we should allocate to health care as opposed to other goods and services. The other is, even within a health care budget, how do we ensure that that money is used as efficiently as possible, and how do we allocate it across the age spectrum. Financing health care encounters all these allocation problems. I think what makes health care so interesting is that, unlike many goods and services, health care markets tend to not work well on their own. They are not efficient markets. Therefore, there is much more scope and need for public policy to make a big difference. This is one of the most interesting and fundamental problems that an economist could think of dealing with.