Economic Rationale for Public Policy to Address NCDs

The economic rationale for public intervention in health can be formulated on both efficiency and equity grounds: the former, when private markets fail to function efficiently; the latter, when the social objectives of equity in access or outcomes are unlikely to be attained. This view does, however hinge on

three critical assumptions:

(i) this decision making is based on accurate—or “perfect”—information about the consequences of the decision

(ii) all the costs and benefits associated with the decision are carried by the person making the choice

(iii) people act “rationally”—that they will always (consciously or unconsciously) weigh the costs and benefits of each decision they are to undertake and then choose the course of action that maximizes their expected net benefits (or “utility”).

However, a traditional welfare economics’ perspective also acknowledges that there may be exceptions if one or more of these assumptions are do not hold, which may result in market failure.