Reader William Eilberg writes in response to this post:
As I read your piece, I couldn’t help thinking about the states of New Jersey and Oregon, which prohibit motorists from pumping their own gas, even when the latest automated gasoline-dispensing equipment has been installed. Last summer, as we were driving through Oregon, I cringed each time I saw able-bodied, competent young people doing jobs, at gas stations, that were totally unnecessary, jobs that existed solely due to legislative fiat. A society that compels its citizens to reject technological advances, in the interest of "saving" jobs, is a society that dooms itself to poverty.
Perhaps Oregon should make it a crime to make a direct-dialed long-distance call. That would certainly increase the demand for telephone operators. And maybe a ban on word processors would make more work for secretaries. The list could go on indefinitely.
I visited Oregon, for the first time, when I was 14, in 1965, and long before I had ever given any thought to the virtues of the free market. I remember touring the state capitol, and was astounded to see a man, obviously a state employee, holding the job of elevator operator, in a fully automated elevator. That is, his job was simply to push the buttons. This is what they must have called a prudent use of taxpayer dollars.
William’s example of the ban on self-serve gasoline reminds me of a story. An economist is visiting China and is given a economic tour of the country. At one point, he’s shown a dam under construction and the economist asks why all the workers are using shovels instead of more powerful equipment. It creates jobs, the Chinese guide says proudly. The economist responds: why don’t you have them use spoons?
The first time I heard this story, the economist was Milton Friedman. Before I interviewed Milton last summer, I asked his long-time assistant, Gloria Valentine, if she had heard the story. She hadn’t, she said, and moreover, she doubted it was true. She didn’t think Milton would ever say anything that rude to a host. I also asked Milton and he denied it as well.
But it’s a good story even if it isn’t true. Opposing technology or trade in the name of preserving jobs is the road to poverty.
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Do you think inefficiencies also occur at the top as well? I wonder if most corporate boards really are worth their cost or if they are "jobs" created by self serving rules.
I look at our health care system and see the only "free market" system run by a developed nation and it cost as much as twice what other countries pay. In big part because of all the administrative costs going to managers who provide no care.
What I always find funny about it is that driving up the east coast, once you get out out Virginia, the next cheapest place to fill up is always New Jersey. I'm sure it has to do with state gas taxes more than anything though.
Muirego states:
“I look at our health care system and see the only "free market" system run by a developed nation and it cost as much as twice what other countries pay. In big part because of all the administrative costs going to managers who provide no care.”
You miss understand the American model of health care. Individuals may pay more for out of pocket expenses, so-to-speak, in this country. But there is the seen and the unseen which you seem to forget. I am sure that these numbers are not correct or have since been updated. But in Canada the wait on average for a surgical procedure is 17 weeks. We don’t wait nearly that long. In the UK there is a board that makes decisions on whether or not you are worth providing health care to, similar to how you make a decision about a dog or cat, “what is their quality of life going to be after the surgery?”
The costs are also spread in countries that provide free or very subsidized medical care. So it is spread out over everyone. But are they worth the typical care that you get? In the UK you can go to a private organization for health care and they are several times better than what the public system provides.
The other issue in the US is the Third party payer system. Employers are given take breaks to provide health care insurance, but when an employee is deciding on a service he doesn’t have to internalize the cost of the procedure. You also have Medicare for the group more likely to use medical care. They too don’t have to fully internalize their costs. Their may be a less costly way of handling the ailment, but why should they consider the less costly way if they aren’t paying for it in the first place. So all these people with third party payers “clog” the system and prices increase because of increase demand.
My experience in health care is that there is management, but not as much as you might believe and their impact on the overall cost should be negligible. Also, when hospitals start cutting costs, the first thing they do is cut none essential jobs. Let’s not confuse the administration of hospitals with the administration of public education.
muirgeo (RE: "free market" health care system):
I have puzzled a bit on our current "free market" health care system and have wonder how "free" it truly it is. It is a highly, tightly regulated system that significantly limits entrants into this market thus creating less TRUE competition that, presumably, would drive those administrative costs (and other costs) down while driving quality up.
Maybe I am mis-analyzing things though.
P.S. I used to be opposed to a free-market in health care considering it to be "special" and "different" and something that shouldn't be subject to the "vagaries" of the free-market. I have change my view.
Muirgeo,
If you want an example of healthcare administrators who provide no care, the best example is probably the U.K.'s National Health Service. It is probably one of the most bureaucratic organizations on the planet. This is one of the reasons that the billions spent by the Labour government over the past decade has done little to improve healthcare in Britain — most of it has been eaten up in administration. If you would like an American example, then it might be worth looking at the number of "administrators" in the public school system vs. the numer of teachers. Your point is valid, there is a lot of administrative cost to our healthcare system, but, as CRC suggested above, I would be more inclined to blame this on forces other than the "free market."
Nobody knows what a truly free health care system might look like. Our health care system has layers upon layers of tax and regulatory interventions that significantly affect supply and demand.
Still, the main difference between us and Europe or Canada, i.e., the single payer, produces huge differences in the relative quality of those systems, as noted by Matt C. How big a difference? How often do you hear of an American leader or celebrity going to Europe or Canada for a special operation?
People from countries with socialized medicine thank their lucky stars that the U.S. medical systems exists when they need the latest drugs or procedures. Sure, they carp about the cost of those treatments if they're middle class, including having to fly here, but the fact is that they can't get those treatments at any price in their own countries.
No one will produce something for which they can't make a profit. Socialists wish it were otherwise, and design their systems accordingly.
Actually, Oregonians are economically ignorant in a different way than you suppose. The ban on self-serve is not motivated by the "saving jobs" argument. The line of thought is that if self-service is allowed, the cost savings will not be passed on to consumers; we'll just pay the same old prices and have to pump the gas ourselves. This argument is also fallacious, of course. I ask people, "If the gas stations have so much power, why don't they charge higher prices?" I don't get coherent answers.
There was some concern a few years ago that drive-thru windows (like at McD's or Starbucks) were going to be banned in Oregon too.
You see, they put busboys out of work. So heartless.
I recall from my childhood getting into an automated elevator that had an attendant, and I remember thinking what a boring job that must be.
The interesting thing is that it was not in a government building but a private department store, one of those "high-class" stores with great service and heavy prices.
I imagine the reason that operator kept his job was some combination of a) he has been doing it for 40 years by then, he had become an institution, and b) it was a symbol of extravagence that played to the image the store was cultivating.
So an economic case for such apparent excess can be made, although in Oregon I am quite sure it is not.
Kind of like the current take on minimum wage that has become popular; if a dollar or so is good for the low wage worker, why not give them a $20 an hour raise instead?
Muirgeo: do you think a free market system would tolerate "administrative costs going to managers who provide no care." ? If we really had a free market health care system, those costs would be competed away. That they aren't (and I agree with you that they exist) should tell you worlds about the economics of our health care system. It's practically impossible to defend. Either a free market system, or a state-run single payer system would be cheaper and provide an equivalent level of health.
Russell,
I agree. As a physician myself, (Pediatrician), I think there is an artificial dearth of doctors to my benefit. Drug companies benefit as well.
But a free market system will absolutely "cull the heard" and would be incredibly brutal in my opinion. Not at all what I think of when I think of civilized society.
I'd like to see a single payer system that doesn't eliminate the insurance companies but makes them compete on a level playing field with each other and against a government run program that would typically have only 5-10% administrative cost instead of 15-25%.
Privatization is going to bankrupt Medicare. If theirs one thing worse then government waste its combining it with the private profit incentive….eweeee..baaaddd stuff.
Gassing up in Oregon was an unusual experience, for sure, if you were an out-of-stater.
I recall a department store elevator operator in the late 60s, in Britain. He had lost one arm in WWII and, even though his job could have been automated, the family who owned the store's altruism persisted. He paid them back by being a greeter, from his stool, in the elevator, years before I found these people in Wal-Mart. People liked to travel in his elevator.
Best not to forget these things.
But a free market system will absolutely "cull the heard" and would be incredibly brutal in my opinion. Not at all what I think of when I think of civilized society.
Sorry, is that the free market system delivering such brutalities as Wal Mart, Intel, Google, Siemens, Glaxo Smith Klein, and my local butcher? Call me a sadist, but I am a huge fan such of such inhumanity.
You're pretty vague in what you mean by "cull the heard" (did you mean 'herd'?). Do elaborate.
I dunno. Seems to me that the current system of licensing doctors and the AMA does more "herd culling" than health insurance.
A truly free market system would mean getting rid of the AMA. I come from a family of doctors (mostly surgeons) and they don't seem to believe that the AMA does anything to reduce incompetence but does plenty to keep people out of the profession.
Here's a related letter I sent to the Observer in La Grande, Oregon a few years ago.
To the Editor:
The Observer's April 10 editorial chose to repeat the tired old argument that introducing self-service gas stations will add to the state's unemployment problem.
I suppose by this logic, we ought to require that people take all their meals in restaurants and be prevented from performing any landscaping and home maintenance projects on their own. Through these interventions, we could maximize the employment opportunities for cooks, servers, gardeners, carpenters and other artisans.
While it is true that allowing self-service will reduce jobs for people employed to pump gas, the resulting reduction in gas prices will release money that can be spent on other goods and services by both buyers and sellers of gasoline. These new expenditures will produce new jobs, so who is to say whether employment will increase or decrease?
A narrow focus on immediately visible effects of regulations or policy is illustrative of a type of bad economics that favors special interests at the expense of the whole, and ultimately results in a waste of resources.
You're pretty vague in what you mean by "cull the heard" (did you mean 'herd'?). Do elaborate.
Posted by: ben
OK. Let's say you are a doctor in a small town and the health care system is completely unfettered by government regulation. You are 1/4 th owner of the small hospital and you are the only doctor on call that night. A drug addicted lady shows up to your hospital pregnant and about to deliver a very premature baby. Do you turn her away or treat her?
A truly free market system would mean getting rid of the AMA.
Posted by: Methinks
No right of association humm. I guess then in your free market their would be no patent protection, no FCC and no corporate law right?
"A truly free market system would mean getting rid of the AMA."
Posted by: Methinks
Not necessarily "getting rid" of AMA, for it serves a useful communication function in education of MDs.
But it is endowed by the state with extraordinary power to police its ranks, and exclude interlopers, etc.
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