Arrow a Uncertainty and the welfare Economics of Medical Care 851 THE AMERICAN ECONOMIC REVIEW VOLUME LIII DECEMBER 1963 UNCERTAINTY AND THE WELFARE ECONOMICS OF MEDICAL CARE By KENNETH J. ARROW* I. Introduction: Scope and Method This paper is an explorator and tentative study of the specfc is contended here, on the basis of comparison of obvious characteris- tics of the medical-care industry with the norms of welfare economics as adaptations to the existence of uncertainty in the incidence of dis- ease and in the efficacy of treatmen It should be noted that the subject is the medical-care industr health. The causal factors in health are many, and the provision of medical care is only one. Particularly at low levels of income, other commodities such as nutrition, shelter, clothing, and sanitation may e much more significant. It is the complex of services that center about the physician, private and group practice, hospitals, and public health, which I propose to discuss The focus of discussion will be on the way the operati of th medical-care industry and the efficacy with which it satisfies the needs of society differ from a norm, if at all The "norm"that the econo- mist usually uses for the purposes of such comparisons is the operation of a competitive model, that is, the flows of services that would be The author is professor of economics at Mushkin, and C. R. Rorem. This paper Foundation as part of a series of papers on the