Why the U.S. spends more money for worse outcomes

Discussion in 'Economics & Trade' started by kazenatsu, Jan 11, 2019.

  1. kazenatsu

    kazenatsu Well-Known Member Donor

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    Some have pointed out that the U.S. spends more money for worse outcomes than other countries, in areas such as healthcare and education.
    I think I've figured out why this is.

    You see, the U.S. is like a First World country joined side by side next to a Third World country.
    Not surprising when you look at the demographics of the country, very big and diverse, much more so than any other country.

    When it is said that the U.S. "spends more money for worse outcomes", that usually is carrying the implication that the money is not being used as effectively as it is in other countries. But that's not necessarily the case.

    If we are to judge by most effective use of money for outcome achieved, then most Third World countries would beat First World countries. There's simply the law of natural diminishing returns. If you spend double the amount of money on healthcare, the healthcare will improve, certainly, but it won't be quite twice as good. Third World countries are getting a better "value", simply because they're compelled to focus on the cheapest and most basic treatments.

    The reason (or at least part of the reason) the U.S. is spending more money on healthcare is because it is wealthier.
    But this doesn't carry on to all members of the population, because all of the population isn't wealthier. You just have a portion of the population spending a lot more money on healthcare.

    I don't think this phenomena would be much different than if you joined a country like Australia to a country like Guatemala, and looked at the spending and health outcomes in aggregate. Australia would raise the total amount of spending while Guatemala would pull down the averages in health outcomes.
    Trying to compare this conjoined heterogenous union of two countries to another single homogenous country that compared to it wouldn't exactly be fair.

    The simple truth (or at least a big primary cause of it) is that the U.S. spends more money overall because a section of its total population is wealthier, and achieves worse outcomes overall because a section of its total population is poorer. So it's not necessarily lots of money being spent on poorer outcomes, not on an individual level.

    Since the relationship between spending and outcomes isn't a completely linear one, it's not like this all just averages out.
     

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