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The Rising Price of Physicians’ Services: A Comment
The Review of Economics and Statistics (1972)
  • Douglas M. Brown
  • Harvey E. Lapan, Northeastern University

In a recent  article in  this REVIEW,   Martin  Feldstein  (1970)  attempted  to  explain  the  
pricing  of physicians'  services  in  the  United  States  between 1948 and  1966.1  In his 
attempt to measure the de­ mand  for  physicians'  services,  Feldstein  found  a positive price 
coefficient which led him to conclude that ". . . the aggregate pricing and use of  physi­ cians' 
services can be understood best by assuming that permanent excess demand prevails." 2  Further, 
since his estimates imply a backward-bending sup­ ply  curve  for  physicians'  services,  he  
infers "... that government  policies to restrain price inflation may increase excess demand but 
will not decrease and may  even increase the quantity of physicians' services  provided." 3   We 
intend  to  show  that  ( 1) the positive price elasticity Feldstein obtains in try­ ing to 
estimate the demand curve might result from difficulties in defining his price variable  (and from 
the  fact  that  insured  and  uninsured  pay  different prices), and ( 2) his supply estimates are 
biased be­ cause  of  his  use  of  a  dependent  variable,  inputs (paramedical personnel, 
equipment, etc.), as an in­ dependent variable in his supply equation.4

Publication Date
February, 1972
Publisher Statement
 © 1972 The MIT Press
Citation Information
Douglas M. Brown and Harvey E. Lapan. "The Rising Price of Physicians’ Services: A Comment" The Review of Economics and Statistics Vol. 54 Iss. 1 (1972) p. 101 - 105
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