The Concise Encyclopedia of Economics
FEATURED ARTICLE

Health Insurance

John C. Goodman

In the 1930s and 1940s, a competitive market for health insurance developed in many places in the United States. Typically, premiums tended to reflect risks, and insurers aggressively monitored claims to keep costs down and prevent abuses. Following World War II, however, the market changed radically. Hospitals had created Blue Cross in 1939, and doctors started Blue Shield at about the same time. Under pressure from hospital and physician organizations, the "Blues" won competitive advantages from state governments and special discounts from medical providers. Once the Blues had used these advantages to gain a monopoly, the medical community was in a position to refuse to deal with commercial insurers unless they adopted many of the same practices followed by the Blues. The federal government also later adopted some of these practices through its Medicare (for the elderly) and Medicaid (for the poor) programs....

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ALSO OF INTEREST

Immigration

George J. Borjas

Public Choice

William F. Shughart II

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FEATURED BIOGRAPHY

Ragnar Frisch

(1895-1973)

In 1969 Norwegian Ragnar Frisch, along with Dutch economist Jan Tingergen, received the first Nobel Prize for economics "for having developed and applied dynamic models for the analysis of economic processes." Frisch received his prize for his pioneering work in econometric modeling and measurement; indeed, Frisch invented the word "econometrics" to refer to the use of mathematical and statistical techniques to test economic hypotheses. Frisch founded the Econometric Society in 1930.

Frisch believed that econometrics would help establish economics as a science, but toward the end of his life he had doubts about how econometrics was being used. "I have insisted that econometrics must have relevance to concrete realities," he wrote, "otherwise it degenerates into something which is not worthy of the name econometrics, but ought rather to be called playometrics."...

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