Integrated View for Health Economics as Applied by the Work of Alfred Marshall
In 1920, Alfred Marshall wrote the famous economics book entitled by “Principles of Economics” which he defined economics as a study of mankind in the ordinary business of life and it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being.
We now closely examine the related concepts on the creation of wealth and goods to understand the substance of economics. The satisfaction of human wants is usually directed from the basic needs such as food, clothing, shelter, health and etc. In the Maslow’s Hierarchy of Needs, we consider this as the physiological needs as the basic components for survival. However, we always need money to buy things we want in the society which is considered as consumers’ good. Marshall explained that "money" or "general purchasing power" or "command over material wealth," is the centre around which economic science clusters; this is so, not because money or material wealth is regarded as the main aim of human effort.
In producing what we want, it is either material or non-material goods. The material goods consist of useful material things, and of all rights to hold, or use, or derive benefits from material things, or to receive them at a future time. They include the physical gifts of nature, land and water, air and climate; the products of agriculture, mining, fishing, and manufacture; buildings, machinery, and implements; mortgages and other bonds; shares in public and private companies, all kinds of monopolies, patent-rights, copyrights; also rights of way and other rights of usage. In health profession, the material goods are hospital buildings, medicines, laboratory equipment and facilities, and all tangible things that are used in medical care.
A man's non-material goods are the internal and external non- material goods. The former consists of own qualities and faculties for action and for enjoyment. While latter, consist of relations beneficial to him with other people. The professional services of physicians, nurses, attendants and caregivers are the examples of the non-material goods. On the substance of economics, it is the physical gratifications and pleasures to enjoy the existence of life. This is usually the basis of utility which directed to the things we want to buy for personal enjoyment.
The areas of economics may be classified in various ways, but an economy is usually analyzed by use of microeconomics or macroeconomics. In microeconomics, it examines the economic behavior of agents (including individuals and firms) and their interactions through individual markets, given scarcity and government regulation. This is usually applied in the operation of private and public hospitals and other medical care services. On other hand, macroeconomics examines the economy as a whole "top down" to explain broad aggregates and their interactions.
General Purchasing Power and Creation of Wealth
Marshall pointed out that man cannot create material things. In the mental and moral world indeed he may produce new ideas; but when he is said to produce material things, he really only produces utilities; or in other words, his efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants. All that he can do in the physical world is either to readjust matter so as to make it more useful, as when he makes a log of wood into a table; or to put it in the way of being made more useful by nature, as when he puts seed where the forces of nature will make it burst out into life .
Marshall defines economics s a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being.
Consumers' goods (called also consumption goods, or again goods of the first order), such as food, clothes, etc., which satisfy wants directly on the one hand.
Producers' goods (called also production goods, or again instrumental, or again intermediate goods), such as ploughs and looms and raw cotton, which satisfy wants indirectly by contributing towards the production of the first class of goods.
You cannot buy consumer goods without “money” that is why it is considered as general purchasing power. Therefore, you can buy or purchase goods with the use of money. Thus though it is true that "money" or "general purchasing power" or "command over material wealth," is the center around which economic science clusters; this is so, not because money or material wealth is regarded as the main aim of human effort, nor even as affording the main subject-matter for the study of the economist, but because in this world of ours it is the one convenient means of measuring human motive on a large scale. , when the motive to a man's action is spoken of as supplied by the money which he will earn, it is not meant that his mind is closed to all other considerations save those of gain.
For even the most purely business relations of life assume honesty and good faith; while many of them take for granted, if not generosity, yet at least the absence of meanness, and the pride which every honest man takes in acquitting himself well. Again, much of the work by which people earn their living is pleasurable in itself; and there is truth in the contention of socialists that more of it might be made so. Indeed even business work, that seems at first sight unattractive, often yields a great pleasure by offering scope for the exercise of men's faculties, and for their instincts of emulation and of power. For just as a racehorse or an athlete strains every nerve to get in advance of his competitors, and delights in the strain; so a manufacturer or a trader is often stimulated much more by the hope of victory over his rivals than by the desire to add something to his fortune.
Human wants are simply those things you want to buy through “money” or this is your “wealth”. These are the things which you think are pleasurable to satisfy your human need such as food, clothing, shelter and etc. Take the case of food or clothing, you don’t simply buy it must take your utility ( Satisfy what specific food or clothing you want).
Material and Non- Material Goods
Marshal explained that all wealth consists of desirable things; that is, things which satisfy human wants directly or indirectly: but not all desirable things are reckoned as wealth. The affection of friends, for instance, is an important element of well being, but it is not reckoned as wealth, except by a poetic license. Let us then begin by classifying desirable things, and then consider which of them should be accounted as elements of wealth. In the absence of any short term in common use to represent all desirable things, or things that satisfy human wants, we may use the term Goods for that purpose.
1. Material Goods
Material goods consist of useful material things, and of all rights to hold, or use, or derive benefits from material things, or to receive them at a future time. Thus they include the physical gifts of nature, land and water, air and climate; the products of agriculture, mining, fishing, and manufacture; buildings, machinery, and implements; mortgages and other bonds; shares in public and private companies, all kinds of monopolies, patent-rights, copyrights; also rights of way and other rights of usage. Lastly, opportunities of travel, access to good scenery, museums, etc. are the embodiment of material facilities, external to a man; though the faculty of appreciating them is internal and personal.
2. Non- Material Goods
A man's non-material goods fall into two classes.
1. Internal Non- Material Goods. It consists of his own qualities and faculties for action and for enjoyment; such for instance as business ability, professional skill, or the faculty of deriving recreation from reading or music.
2. External Non-Material Goods .They consist of relations beneficial to him with other people. Such, for instance, were the labor dues and personal services of various kinds which the ruling classes used to require from their serfs and other dependents. But these have passed away; and the chief instances of such relations beneficial to their owner now-a-days are to be found in the good will and business connection of traders and professional men.
Marshall explained the term goods and transferable and non- transferable . Among the latter are to be classed a person's qualities and faculties for action and enjoyment (i.e. his internal goods); also such part of his business connection as depends on personal trust in him and cannot be transferred, as part of his vendible good will; also the advantages of climate, light, air, and his privileges of citizenship and rights and opportunities of making use of public property. Those goods are free, which are not appropriated and are afforded by Nature without requiring the effort of man. The land in its original state was a free gift of nature. But in settled countries it is not a free good from the point of view of the individual.
Remember that in economics when you speak of free goods such as wood, climate, light , air and water have no price because it is plenty and enough to use. When you have these that are scarce, you have to buy them such as mineral water, air-conditioned units, electric bulbs and other things that you are buying. This is what you call scarce resources which you need “ money” to buy them.
Wood is still free in some forests. The fish of the sea are free generally: but some sea fisheries are jealously guarded for the exclusive use of members of a certain nation, and may be classed as national property. Oyster beds that have been planted by man are not free in any sense; those that have grown naturally are free in every sense if they are not appropriated; if they are private property they are still free gifts from the point of view of the nation. But, since the nation has allowed its rights in them to become vested in private persons, they are not free from the point of view of the individual; and the same is true of private rights of fishing in rivers. But wheat grown on free land and the fish that have been landed from free fisheries are not free: for they have been acquired by labor.
2 Classes of Goods
Furthermore, Marshall identified 2 classes of goods. When a man's wealth is spoken of simply, and without any interpretation clause in the context, it is to be taken to be his stock of two classes of goods.
1st Class are those material goods to which he has (by law or custom) private rights of property, and which are therefore transferable and exchangeable. This includes not only such things as land and houses, furniture and machinery, and other material things which may be in his single private ownership, but also any shares in public companies, debenture bonds, mortgages and other obligations which he may hold requiring others to pay money or goods to him. On the other hand, the debts which he owes to others may be regarded as negative wealth; and they must be subtracted from his gross possessions before his true net wealth can be found.
These are the things you buy or purchase and own them. If you sell a product it is transferable and exchangeable which can be in the realm of business. They are going to produce things for us to use and for them to own profit. So when you deal with “money” this is the medium of exchange for any goods and services. In short it is more on business and economics as you deal the exchange through the use of money.
The 2nd Class are those immaterial goods which belong to him, are external to him, and serve directly as the means of enabling him to acquire material goods. Thus it excludes all his own personal qualities and faculties, even those which enable him to earn his living; because they are Internal. And it excludes his personal friendships, in so far as they have no direct business value. But it includes his business and professional connections, the organization of his business, and—where such things exist—his property in slaves, in labor dues, etc.
The Concluding Substance about Economics
Finally, Marshall pointed out that economics is a study of men as they live and move and think in the ordinary business of life. It concerns itself chiefly with those motives, which affect, most powerfully and most steadily, man's conduct in the business part of his life. Everyone who is worth anything carries his higher nature with him into business; and, there as elsewhere, he is influenced by his personal affections, by his conceptions of duty and his reverence for high ideals. And it is true that the best energies of the ablest inventors and organizers of improved methods and appliances are stimulated by a noble emulation more than by any love of wealth for its own sake. But, for all that, the steadiest motive to ordinary business work is the desire for the pay which is the material reward of work. The pay may be on its way to be spent selfishly or unselfishly, for noble or base ends; and here the variety of human nature comes into play. But the motive is supplied by a definite amount of money: and it is this definite and exact money measurement of the steadiest motives in business life, which has enabled economics far to outrun every other branch of the study of man. Just as the chemist's fine balance has made chemistry more exact than most other physical sciences; so this economist's balance, rough and imperfect as it is, has made economics more exact than any other branch of social science. But of course economics cannot be compared with the exact physical sciences: for it deals with the ever changing and subtle forces of human nature
Marshall further elucidated in the substance of economics on business wherein you have a motive to earn money by means of “profit”. They produce goods and services for us to pay with a selfish or unselfish end to gain “profit”.It concerns itself chiefly with those desires, aspirations and other affections of human nature, the outward manifestations of which appear as incentives to action in such a form that the force or quantity of the incentives can be estimated and measured with some approach to accuracy; and which therefore are in some degree amenable to treatment by scientific machinery. An opening is made for the methods and the tests of science as soon as the force of a person's motives—not the motives themselves—can be approximately measured by the sum of money, which he will just give up in order to secure a desired satisfaction; or again by the sum which is just required to induce him to undergo a certain fatigue.
For instance the pleasures which two persons derive from smoking cannot be directly compared: nor can even those which the same person derives from it at different times. But if we find a man in doubt whether to spend a few pence on a cigar, or a cup of tea, or on riding home instead of walking home, then we may follow ordinary usage, and say that he expects from them equal pleasures.If then we wish to compare even physical gratifications, we must do it not directly, but indirectly by the incentives which they afford to action. If the desires to secure either of two pleasures will induce people in similar circumstances each to do just an hour's extra work, or will induce men in the same rank of life and with the same means each to pay a shilling for it; we then may say that those pleasures are equal for our purposes, because the desires for them are equally strong incentives to action for persons under similar conditions.