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Drs. Mark Pauly and John Nyman are at the center of a debate regarding the voluntary purchase of health insurance. Both agree that moral hazard

Drs. Mark Pauly and John Nyman are at the center of a debate regarding the voluntary purchase of health insurance. Both agree that moral hazard is present in the voluntary purchase of health insurance. However, these individuals disagree in relation to the efficiency loss or gain associated with this voluntary purchase.

Conventional Theory:

M.V. Pauly, "The Economics of Moral Hazard: Comment," American Economic Review, 58, no. 3 (1968): 531-537.

New Theory:

J.A. Nyman, "Is 'Moral Hazard' Inefficient? The Policy Implications of a New Theory," Health Affairs, 23, no. 5 (2004): 194-199.

Compose paper comparing and contrasting the views of Pauly (Conventional Theory) and Nyman (New Theory) in relation to the voluntary purchase of health insurance. Respond to the following questions within your response:

According to each theory, why do individuals purchase health insurance?

How is each theory shaped by the concept of moral hazard?

According to each theory, does the voluntary purchase of health insurance make consumers better off or worse off?

For each theory, does going from being uninsured to being insured represent a movement along the demand curve for health insurance or a shift of the demand curve for health insurance?

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