The Relative Importance of Physician-Induced Demand in the Demand for Medical Care

N MOST MARKETS, CONCERN OVER LARGE INCREASES in the supply of manpower would focus on expected declines in earnings, difficulties in securing steady employment, and lower prices for consumers. While this describes many labor markets, it does not describe expectations about the market for physicians in the 1980s. Among the various explanations for this discrepancy is the lack of appropriate consumer information entailing reliance on providers as suppliers of information which is thought to produce an interdependence between supply and demand. This is in addition to the predominance of third party payments which shelter both providers and consumers from concerns about the costs of medical care. As a