Market Power and Resource Misallocation in Medicine: The Case of Neurosurgery

This article concludes that substantial excess neurosurgical capacity exists. Neurosurgery like other specialties has permitted almost free entry and as a result of such factors as high earnings and status, excess capacity has developed and because of insufficient competition it has not been eliminated. The costs of excess capacity include idle capacity and an alleged reduction in skill levels. The neurosurgery market's performance is evaluated and it is found that while relative income has declined, entry has continued at a high rate; excess capacity is therefore not being eliminated. Policy recommendations of a pro-competitive variety are suggested to improve the market's performance instead of regulation (whether governmental or by the profession itself).