For those of you unfamiliar with the lingo: WAFF = Warm And Fuzzy Feeling.
So, I struggling to stay awake about 80 minutes through an economics of health class (it's hard to doze when you're the only student in the class) when the professor mentioned something about a 'caring externality'.
The idea is that utility functions are interdependent, and that I derive satisfaction from seeing other people not dying on the streets, or more formally, from seeing them consume health services.
I am sorely torn on whether this is a legitimate externality. From basics: an externality is when the marginal social benefit does not equal the marginal private benefit, or vice versa for costs. In this case, it does seem equality does not hold, because someone I know who consumes health care also confers benefits on me, because I prefer seeing them healthy than ill.
BUT! Doesn't this argument extend to everything? Food? Video games? Should the government subsidize Halo 3 because then I'll be able to play with more people, and more people I know will be able to enjoy the game, which subsequently makes me happier?
This clearly is leading us into a minefield. If we accept the 'caring externality' for health care, we accept that every good has such a positive externality attached. I have not legitimately heard this suggested by anyone, and nor would I take seriously anyone who suggested it.
Thus, I reject the concept of the 'caring externality' until I can think of a more cognet argument in its defense.
POSTSCRIPT: I do not plan on purchasing Halo 3.