ABSTRACT
Nobel laureate Kenneth Arrow maintained that when markets fail to achieve an optimal state, society will to some extent recognize the gap, and nonmarket social institutions will arise to bridge it (1963, p 947). Furthermore, he contended that the special structural characteristics of the medical-care market in the US were largely attempts to overcome the lack of optimality, due to the lack of a market for taking suitable risks and the imperfect marketability of information. As a result, there was an overwhelming predominance of nonprofit over proprietary hospitals in the US. In 1958, only 3 per cent of hospital beds were in proprietary hospitals, compared with 30 per cent in voluntary nonprofits, while the remaining two-thirds were in federal, state and local hospitals (ibid., p 920, fn no 20).
