Showing papers on "Managerial economics published in 1973"

Astronomics: A New Approach to Economics?

Abstract: There is ample evidence that astrology flourished in Babylon during the reign of Hammurabi (1728 B.C.-1686 B.C.), with some indications of its existence as early as 5000 B.C. (Gleadow 1968, p. 152). Since that time, interest in the relationship between the positions of celestial bodies and human behavior has developed to the extent that numerous books and popular magazines are published on astrology and many newspapers print daily horoscope columns. Moreover, \"according to the most reliable estimates, thirty out of a hundred people believe in astrology and [an additional] thirty think there is 'something in it' and know their signs and those of their acquaintances\" (Gauquelin 1969, p. 60). The substantive content of astrology is its predictive ability. For example, given the date of birth of an individual, an astrologer can prepare a horoscope which, in theory, predicts inter alia his personality traits, his physical characteristics, the occupations at which he will be most successful, the types of disease which he is most likely to contract, the foreign countries most favorable to him, and even the direction that his house should face in order to obtain the best exposure to celestial influence (Sepharial 1962). Obviously such information (if accurate) could have an enormous impact on economic theory dealing with occupational choice, health economics, urban economics, and perhaps the balance-of-payments problem. Indeed, one might envision the birth of \"astronomics,\" a new economics discipline which incorporates astrological influence. In view of the potential usefulness of such predictions, as well as the longevity of astrology it is surprising that empirical testing of its predictions has not been extensive. Even the few studies that have been conducted are considered inconclusive due to limited sample sizes of about

Payment Plans and the Efficient Delivery of Health Care Services

Abstract: The purpose of this study is to develop economic incentives for consumers of health care services that will lead to efficient delivery of health care of any specified quality. The importance of this investigation derives from the rising cost of health services and the resulting quest for new organizational structures for their delivery. These new structures are supposed to utilize resources more efficiently than current institutions and thereby make health services available to a broader class of consumers. The authors posit a health care delivery that provides two kinds of services-preventive care and treatment. Provision of each kind of care is costly. The individual selects a level of preventive care that maximizes expected utility, where utility is a function of disposable income. It is shown that the level of preventive care chosen by the individual will not in general be appropriate for the minimization of the total costs of health care. The possibility of selecting a payment scheme for health services is investigated, ranging from full prepayment to fee-for-service compatible with minimization of expected total cost. The main result is the development of such a payment plan. Few issues capture the public's attention more than health care. This is not surprising in view of rapidly rising health care costs and the realization that sooner or later all will need such services. In addition, ghetto dwellers, rural inhabitants, Morton I. Kamien, Ph.D., is Professor and Chairman of the Department of Managerial Economics and Decision Sciences in Northwestern University. He was formerly on the faculty of the Graduate School of Industrial Administration of Carnegie-Mellon University. Nancy L. Schwartz, Ph.D., is Professor of Managerial Economics in Northwestern University. She was formerly on the faculty of the Graduate School of Industrial Administration of Carnegie-Mellon University. Professors Kamien and Schwartz have coauthored articles which have appeared in Econometrica, American Economic Review, Management Science, Journal of Economic Theory, and Journal of Applied Probability. Financial assistance of the Health Services Research Center of the Hospital Research and Educational Trust, and Northwestern University is gratefully acknowledged. The authors retain all responsibility for views expressed. This paper was submitted in August, 1972. and the aged, among others have special concerns regarding accessibility of medical services, apart from and in addition to cost. All this has prompted the government to seek ways of supplementing and improving the present essentially private system of health care delivery. Among the measures already undertaken, the best known provide insurance coverage for a variety of medical expenses for the poor and the aged. More direct measures are contemplated, including Federally subsidized "health services planning and delivery systems." This paper deals with an economic aspect of such a system. There will be multiple criteria in selecting an organizational structure for a health care delivery system. For example, one may ask whether the organizational structure is conducive to providing a mix of services consistent with the needs of its constituency. Will it be able to meet changing needs of its clients? Does it pro-

Discounting Indices Proposed for Capital Investment Evaluation: A Further Examination

Abstract: A recent publication [2] in this journal presented a comprehensive comparison and critique of discounting indices proposed for (i) the examination of whether a proposed independent project should be accepted and (ii) selection of a project from a set of mutually exclusive projects. The present paper examines procedures available in the literature of engineering and managerial economics and in practice for selecting projects from a given number of proposed capital investment projects, if a given capital constraint does not permit the undertaking of all proposed projects. It appears that the present state of the art is subject to much controversy and confusion. The ensuing presentation intends to rectify this situation. In addition, a procedure for the above selection problem is developed. Usage of this procedure is recommended for the many policy makers who are continually faced with the trade-off between elaborate methods on the one hand and cursory /approximations on the other.

The Need for a Dynamic Economics

Abstract: It seems appropriate to take over from mechanics the dichotomy of statics and dynamics. The word statics has already been familiarly used with reference to one part of economics; dynamics less so.1 It is often used in a way that does not correspond to the dichotomy of mechanics.