Tuesday, May 25, 2010

What pencils can teach us about health care

I have not yet heard the comparison made between health care markets and the production of pencils, and surely I don't expect it any time soon. Yet I will argue this comparison is not only valid, but is essentially critical at this current point in time. Before you disregard me as crazy, off-base, or otherwise misguided, please – allow me to explain.

Two years ago President Obama's nominee to serve as the Administrator of the Centers for Medicare & Medicaid Services, Donald Berwick, made the following statement regarding health care in an article in the British Medical Journal:

"Please don't put your faith in market forces – It's a popular idea: that Adam Smith's invisible hand would do a better job of designing care than leaders with plans can. I find little evidence that market forces relying on consumers' choosing among an array of products, with competitors' fighting it out, leads to the healthcare system you want and need."

Furthermore, at a speech delivered in Wembley, England that same year, Berwick also said the following:

"I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do."

According to Berwick, any health care system is immensely so complex that it must necessarily involve a vast bureaucracy of government officials to plan, coordinate, and deliver health care services to consumers.

But here's the deal: Berwick has it exactly backwards. It is precisely because health care markets are so complex that it necessarily requires the absence of central planning in order to efficiently and effectively deliver service to consumers.

Which brings me to the pencil. Over fifty years ago, Leonard Read published his thought-provoking essay, "I, Pencil." If you have never read it, I would strongly urge you to take the ten minutes to do so.

At the beginning of his essay, Read states his purpose:

"I have a profound lesson to teach. And I can teach this lesson better than can an automobile, or an airplane or a mechanical dishwasher because – well, because I am so seemingly simple. Yet not a single person on the face of this earth knows how to make me."

Read points out that while "millions of human beings have had a hand in my creation," that "there is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being… Instead, we find the Invisible Hand at work."

And this is where Read, and current bureaucrats and politicians like Berwick, are completely at odds with one another. But I ask you: Read what Leonard Read has written. Read further about what Donald Berwick has written and said. Make your own conclusions. Are you in agreement with Berwick that "leaders with plans" can do a better job of coordinating products, care, and delivery, at the right time, to the right place, in the right quantities at the lowest possible cost? Or are you in agreement with Read that the best way to achieve this is through "the configuration of creative human energies.. configuring naturally and spontaneously in response to human necessity and desire and… in the absence of governmental or any other coercive masterminding"?

Health care markets are immensely more complex than the production of pencils. Yet Read successfully shows how trying to centrally plan the manufacture and distribution of even simple pencils is essentially futile. And if it can't be done for the simple pencil, how could it possibly be successfully done in health care?

A simple pencil – but a profound lesson: "If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing."

Thursday, May 6, 2010

The “war on drugs” in action

I'm afraid I'm going to ruffle some feathers with this one, getting some significant agreement and disagreement from various folks, but this needs to be seen. But first a warning: This video contains graphic and objectionable content and material, as well as foul language. Do not watch it if you are not comfortable with that.

I certainly don't advocate smoking marijuana – especially when one has children to care for. But I also don't advocate having SWAT teams storm residential houses terrorizing the family inside, firing shots, and killing the family dog simply because the father has a little bit of pot on hand – a drug 42% of Americans have tried.

Agree with me or disagree with me, these are the facts: This is what the war on drugs looks like, and you need to be aware of it.

http://reason.com/blog/2010/05/05/video-of-swat-raid-on-missouri

Is $12,000 enough?

"You hear a lot of stuff about how we need to run the district more like a business, but the school district doesn't sell a product for a profit. We rely on government money."

Toledo school board President Bob Vasquez, after voters overwhelmingly repudiated a tax hike to maintain funding to the city's public schools


Sit and think about that quote for a minute. Certainly, public schools are not run like businesses. But, ask yourself this: What if they were?

  • What if schools had to please parents in order to stay in business?
  • What if schools had to properly educate kids, and show progress over time, or risk going out of business?
  • What if schools were forced, like any business, to run efficiently and maintain a cost structure that is sustainable?

In short, what if all public schools had to behave more like most private and many charter schools do already? Would these be bad things? Certainly not, in my book. But if you're still uncertain, let's turn the tables.

Take your local grocery store. What if grocery stores were run by the government and funded by taxes? In this scenario, would you expect to see better service from the government grocer than you get from your local for-profit grocer, or worse? More importantly, would you expect to see lower prices from your government grocer, or higher? Would the store hours be more consumer-friendly or less?

Most of us realize turning over our grocery stores to the government would not be a good thing. So why do we accept it for the far more important job of educating our children?

We need to realize that government funded does not have to mean government run. After all, that's how the food stamp program works. In essence, food stamps are a "voucher" that poor people can use to buy groceries at the store of their choice. Yet when it comes to the more important matter of educating their children, politicians refuse to give these same parents vouchers to select the best school for their child. Where is the common sense?

It seems to me the best way to improve our education system would be if they were actually run like businesses – or at least non-profits that couldn't use state coercion to raise ever increasing amounts of money. In fact, most private schools are run as cost-efficient non-profit businesses, knowing full well that they need to sell a product at a reasonable price that satisfies the consumer in order to stay a viable concern.

Toledo voters feel the $12,000 they spend per student each year should be enough to ensure a high quality education. And given the right education structure, laden with choice and competition, it certainly should be. But until politicians get the courage to change the system, our only choices will continue to be more and more spending, or unfortunate cuts for students. It is time to change the system.