Shadow Profit Maximization and a Generalized Measure of Inefficiency

Determining the profit maximizing input-output bundle of a firm requires data on prices. This paper shows how endogenously determined shadow prices can be used in place of actual prices to obtain the optimal input-output bundle where the firm.s shadow profit is maximized. This approach amounts to an application of the Weak Axiom of Profit Maximization (WAPM) formulated by Varian (1984) based on shadow prices rather than actual prices. At these prices the shadow profit of a firm is zero. Thus, the maximum profit that could have been attained at some other input-output bundle is a measure of the inefficiency of the firm. Because the benchmark input-output bundle is always an observed bundle from the data, it can be determined without having to solve any elaborate programming problem. An empirical application to U.S. airlines data illustrates the proposed methodology.

The Dental School Applicant Pool and the Oral Healthcare Workforce

One of the major challenges faced by the dental profession today is the recruitment of the most qualified dental school applicants who are capable of serving the nation’s future oral healthcare needs. The Association of Schools of Public Health (ASPH) also recognizes this challenge, describing one of the three core functions of public health as “assuring that all populations have access to appropriate and cost effective care, including health promotion and disease prevention services.” To achieve this core function, the ASPH cites “a competent public health and personal healthcare workforce” as one of the ten essential public health services. Unfortunately, the goals of both quality and equality in terms of the dental workforce and access to oral healthcare have yet to be realized. When considering access to oral health services on a national or state level, a thoughtful and thorough consideration of the dental school applicant pool is essential. According to a recent study published in the Journal of the American Dental Association, the annual number of retiring dentists will exceed the number of newly licensed dental practitioners in 2009, a trend which is projected to continue throughout the next decade. The approximately 4,400 dentists produced each year from the nation’s 57 accredited dental education programs are charged with the responsibility of meeting the oral healthcare needs of the population at large.