Journal of Health Economics 5 (1986) 367. North-Holland

EDITORIAL

Physician-indmced Demand: A Parable

Victor R. FUCHS Stanford University, Stanford, CA 94305, USA

National Bureau of Economic Research, Stanford, CA 94305, USA

Received July 1986

The paper by Cromwell and Mitchell, ‘Physician-induced demand for surgery’, provides additional support for the proposition that physicians have some power to shift the demand for their services and that they are more likely to exercise that power whei) a high physician-population ratio results in low work loads. As with a_?y econometric study, there are shortcomings with this one, as noted by Charles Phelps in his critique, ‘Induced Demand - Can We Ever Really Know its Extent? Whether these shortcomings lead to an over-estimate or an under-estimate of the ‘induce- ment’ effect is not certain. What is certain, however, is that many economists will react to the study and the critique as they have in the past on this issue, with the fervant hope that maybe there is no inducement.

This reaction has always reminded me of the story of the Frenchman who suspected that his wife was unfaithful. When he told his friend that the uncertainty was ruining his life, the friend suggested hiring a private detective to resolve the matter once and for all. He did so, and a few days later the detective came and gave his report: ‘One evening when you were out of town I saw your wife get dressed in a slinky black dress, put on perfume, and go down to the local bar. She had several drinks with the piano player and when the bar was closed they came back to your house. They sat in the living room, had a few more drinks, danced, and kissed.’ The Frenchman listened intently as the detective went on: ‘Then they went upstairs to the bedroom, they playfully undressed one another, and got into bed. Then they put out the light and I could see no more.’

The Frenchman sighed ‘Always that doubt, always that doubt.’

0167-6296/86/$3.50 0 1986, Elsevisr Science Publishers B.V. (North-Holland)