Monday, July 9, 2012
Public (and Semi-Public) Goods We Can't Afford to Lose
This post will start by picking up on a belated exercise from my days as an undergraduate philosophy major, which Jackie Sparrow and I touched upon over the course of Jimmy P's thread last week. It will conclude with an open question that is more relevant to contemporary political economy in the US. The whole thing is open to debate though, of course.
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Jack previously asked for a more detailed description of what sort of "minimum decency standards" I had in mind when mentioning the critical public goods which merit protection at a macro level through government-designed, programmatic treatment. I don't want to venture into a discussion of how such programs should be structured; in fact, there are live examples for many of them, so it makes more sense to analyze (and criticize) those existing programs rather than immediately jumping to Corporate Citizen-crafted, theoretical solutions. Furthermore, for the record, I don't think these public goods necessarily merit government action across the board, and I personally favor market-based mechanisms for most of the more controversial ones.
Whatever the case, here is a simplified list of what I think those goods are, and why they deserve public protection:
Tier 1: National defense (both international and intra-national, i.e. military and police), rule of law. This tier goes without saying; it establishes the most basic framework upon which an economy is built, involves protection of property rights, enforcement of contracts, and insurance of personal safety, and isn't usually contested by either side of the free market/interventionist debate.
Tier 2: Environment, science. This tier is somewhat controversial. Both are true public goods that have been proven to be inadequately provided for by free market forces on their own; moreover, to me both have to do with survival (at the aggregate, planetary level), and therefore cannot afford to be left to standalone market whim.
Tier 3: Healthcare, education. This tier is very controversial. Neither are true public goods, and the numbers aren't clear on how well the market provides for them. I tend to believe these goods are more public than private, and that they are insufficiently provided for by purely free market forces.
Tier 4: Food, clothing, shelter. I'm gonna guess this one is off the table for at least half our squad. To be clear, I don't think these private goods should just be doled out ad infinitum. However, a minimal safety net makes sense to me, given that these are the most basic human necessities and, again, have to do with survival (although at the private level).
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Question for debate: Do you guys think that companies of a given size or greater should have to provide some form of healthcare for their employees?
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Definitely not. I think the burden is on the other side of the discussion, so I'll hold off further comment until others weigh in.
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ReplyDeleteJon, great concluding question. I spun off a response to some of the premises before reading the concluding question- as a result I wandered off course, this being a forum on ethics in business rather than on political philosophy.
ReplyDeleteThat being said, I question whether the term 'public goods' is apt here. As I wrote in my previous response, the issue is generally not whether or not things ought to be done, but rather by whom, and how, and why.
In this case, we are posed a specific question on health care. I will agree with Jack to an extent that companies should not be forced to provide health care. However, in a developed and free labor market, employers may have to provide a certain level of health care as a service in order to recruit and retain high quality employees.
In absence of a health insurance mandate (which artificially drives demand up) and in a more deregulated insurance market (which limits competition), primary insurance or emergency medical insurance would be far more affordable and the same ends of a mandate could be accomplished in a more efficient manner, with private voluntary buying groups filling the gaps for small businesses and those that weren't otherwise eligible for a large group plan.
Again, to paraphrase Bastiat, the issue is not what should be done, but whether wanting to have something done and wanting to have that same thing done by the Government are one and the same.
If companies decide to do it, great. Obviously that wasnt the question. By the way, just in case this was the point you were making: a health insurance mandate does NOT artificially drive up demand for healthcare (unless you mean peeps are more likely to see the doc if it's covered). It only drives up demand for insurance. An important distinction.
ReplyDeleteI'm totally cool with dipping into political philosophy. Economic ethics ultimately underwrite the claims we are respectively making about business ethics. It's no coincidence how often this forum has been about libertarianism vs. socialism, free markets vs. intervention, etc.
ReplyDeleteTo your point about not using the term "public goods" here, I presume you are talking about healthcare only? Tiers 1 and 2 are definitely “public goods” by textbook definition. Assuming we are on the same page then, I'd probably agree in that I should have posed the question around "universal healthcare" , which begins to sound more like a public good, rather than just "healthcare". See this article for more detail:
http://www.economist.com/blogs/democracyinamerica/2009/10/universal_health_insurance_is
To your points about free labor markets and the efficiency of free market forces in determining healthcare quality and distribution, we once again find ourselves divided over theory and reality. In theory, I agree with you; neoclassical economics makes it clear that in free market conditions, intervention in the provision of this good would lead to suboptimal results. However, in reality those free market conditions don't exist. Corporations wield significant market power, labor cannot move freely (even within borders labor is particularly sticky, let alone across national borders), and information is far from perfect (i.e. employers have no incentive to provide perfect open-access transparency into their benefit packages, so they don't).
To paraphrase the flipside of an old adage, if it's broke, fix it. Our healthcare system is the most expensive in the world after Malta according to the CIA World Factbook, and yet we rank #50 in the world in terms of life expectancy by the same source. OECD studies have similarly found our system to be both the most expensive and least effective in comparison with our industrialized peers, almost all of which have universal healthcare. Sources below, if you care to check:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2225rank.html
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html
http://en.wikipedia.org/wiki/Health_systems#International_comparisons
A good question remains as to the best way to achieve universal healthcare under REAL world conditions in the US. The answer is almost certainly through government mandate, but I'm running out of space and so I will hold off from substantiating that opinion.
Jon, to say that we have the second most expensive health care system in the world is a misleading statement, because that ignores that in our system payments are primarily private and private through insurance, with the balance being through Government programs.
ReplyDeleteThe CIA Factbook defines Health Expenditures as follows:
"Health expenditures are broadly defined as activities performed either by institutions or individuals through the application of medical, paramedical, and/or nursing knowledge and technology, the primary purpose of which is to promote, restore, or maintain health."
In short, private moneys spent on health care or health insurance count as health expenditures. Likewise, medical research would qualify as health expenditures. There is no discussion of who spends the money and how among that broad definition. It's a fluff statistic that sounds ominous but doesn't hold up under scrutiny.
In addition, most of the countries with longer life expectancies than us are either tiny islands with wealthy ex-pat populations, or are social democracies on the verge of going bankrupt and have a higher debt to GDP ratio than our staggering numbers. So I'm not sure that is the best bellwether for success in health care design.
Health care is a service rendered by a professional to a consumer. Sometimes ethical obligations require the service to be offered pro bono, but that does not make free health care for all a desirable goal, unless you want to punish those with resources simply for having the good fortune of having them.
If that is not your goal, you will always have a multi-tiered system and a multi-tiered system administered by the Government is called discriminatory. Therefore we will, as a matter of practice, either be explicitly offering superior services to those with money (which flies in the face of nearly every principle of representative government that I can think of), or we will be lowering the standard of care available to all to a sufficiently low level that it can be universally and sustainably applied.
Insurance is a risk management tool, not an essential human right. Again, there are some cases where medical care becomes an essential human right, and figuring out if/who pays is a secondary concern- however, the doctors involved should be allowed to render professional ethical judgment in those cases and respond appropriately.
I don't see how your analysis of the statistics stands up to scrutiny. There's nothing in the CIA Factbook definition that identifies Health Expenditure as being explicitly from private money-- it says that health expenditures are activities performed by institutions or individuals. This statistic pays no attention to whether the money that pays for these activities is from public or private sources, and since GDP is inclusive of both private and government spending, both public and private healthcare expenditures are captured in the ratio. Further, if you look at the OECD figures, the US still has the highest % of government revenue spent on health, even among other countries with more publicly oriented (and government mandated) systems. This is despite the fact that less of US overall health expenditures come from government than these other countries. In other words, under the current US system, our government has to pay more $ to cover less of the overall healthcare burden than our peers.
ReplyDeleteThe unmistakable conclusion here is that our health system costs the most amount of money, no matter where that money comes from, no matter which way you slice it. And it's not like we are paying for higher quality. Again, the results of our healthcare system are clear: we not only have the lowest life expectancy, but the highest child mortality rate among industrialized countries.
It goes without saying then that the claim that universal healthcare would "lower the standard of care available to all", is baseless. Our privatized system yields worse results on basic human development metrics than those of our peers with universal healthcare.
On the topic of discrimination and equity in healthcare service, I'm shocked that you'd equate a government administered system with higher discrimination, when it is private systems that treat healthcare as a matter of private consumption rather than public well-being, and which by definition favor the wealthy over the less wealthy. I'm also confused by your reference to systems that "explicitly offer superior services to those with money", and how this "flies in the face of every principle of representative government" that you can think of. I couldn't agree more; yet that is exactly what our system does.
Healthcare in our country is designed to favor those with wealth over those without it, and plays directly into other factors of systemic inequality in the US. I won't go on an inappropriately placed rant on inequality here, but it's no surprise that all of the above statistical comparisons fall in line with our Gini Coefficient standing, which puts us woefully closer to Iran and Cambodia than any of the usual folks we like to benchmark ourselves against.
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
Systemic inequality, yes. Expensive healthcare, sure. And if I sound as though I'm arguing for the existing system, I apologize. The existing system is an insurance cabal writing legislation and regulations with their checkbooks- as is so often the case.
ReplyDeleteYou're getting hung up in a statement that statistics, particularly those assembled by the Government, often seem to imply things that are politically advantageous and that deconstructing the statistics often doesn't reveal the mechanisms that a logical observer would expect. In short, if you think that is an unbiased study that points to socialized medicine being so much better for society, and which implies that the quality of life in countries whose economies are almost uniformly unsustainable (nearly all of the Eurozone has higher debt to GDP ratio than the USA), I have a bridge to sell you.
In any case, let's assume for a moment that your statistics support your argument and that the statistics themselves are sound; what, then, is your proposed system? Who pays? Who researches? Who sets salaries for doctors, nurses, etc.?
There are many possible renditions of socialized medicine, and nearly all of them are bad; yet until you propose a concrete, tangible system with actual mechanisms to deal with the realities of economics and medicine, it's awful tough to identify the inherent problems.
It also bears noting that a large majority of medical research in the world as measured by actual technological contributions occurs in the US. There is a reason that people of means fly into Rochester, MN from all over the world to get treatment at the Mayo Clinic.
Finally, using life expectancy and child mortality as the sole indicators of quality of healthcare ignores other factors that affect these statistics, such as the degree of mobility, frequency of chemical dependencies, gang violence, and the political and socioeconomic factors that affect each of these, common modes of transportation and their relative safety, etc. There are an awful lot of reasons why kids in America might have higher mortality rates and likewise any factor that results in premature deaths adversely affects both data sets.
So it's not like we can point at those two statistics and say that we should scrap everything we have been doing because our healthcare sucks. It's a weak argument, and this is what I was trying to avoid having to explain. Statistics are point samples. They don't give you a picture of the whole, even when a large group of statistics is used to draw conclusions. It's like drawing conclusions about who can play a sport from the boxscore without watching the game. Lots of knowledge gaps.
Alright, we’re agreed that the existing system is bad. Awesome. So, assuming we are trying to work out a conceptualized ideal, without diving so far into theory that we abandon real world relevance and start talking about free market healthcare (which doesn’t exist, and probably never could) or fully planned healthcare (which, like Communism, has never worked and probably never could), the question is: what sort of hybridized system would work best?
DeleteThat’s a question for a different thread. As mentioned, my purpose here was not to take stabs at system design.
Nevertheless, I don’t want to let the point slide that our system, which leans toward private, works worse than systems that lean toward public. This lends itself to the conclusion that government-underwritten, universal healthcare is a worthwhile direction.
1) The point about our peers with better healthcare having worse balance sheets is well-taken. However, as indicated previously, the US spends more on healthcare as a percentage of government revenue than any of the countries in comparison, so it probably isn’t healthcare which is breaking their books. Not to mention the fact that we’ve already seen that our healthcare system is more expensive than theirs. From a cost control perspective, why not switch?
2) I should amend my earlier claim about child mortality: it’s actually infant mortality rates that are higher in the US than our peers. This should help clear out some of the statistical noise.
3) Infant mortality and life expectancy are not the entire story; they are indeed just data points, as you mention. However, they do illustrate a human development trend vis-à-vis healthcare in the US versus comparable nations. Another data point at which the US comparatively fails is “mortality amenable to healthcare”, i.e. deaths that are considered preventable with timely and effective health care. That’s 3 strikes, which doesn’t necessarily make a ballgame, but does mean we’re out for this at bat.
4) It’s funny that you should mention people “of means” flying to Minnesota. I’d point to this as another clue to our healthcare question. People of means fly to where their means will get them the best treatment, which is what our money-centric system provides. Why else wouldn’t they fly to say, Germany, where much of the top medical technology in the world is produced? It’s the other side of the same coin which compels top American surgeons to fly away from the US to places like China to perform cutting edge experiments in reproductive surgery (i.e. cloning). These are just two forms of regulatory arbitrage.
As to the weakness of a statistically based claim, would it help that stats from the OECD, World Bank, and CIA all corroborate toward the same conclusions? If numbers won’t do it, I guess we settle at another impasse. I have to say though, at some point the counter-position begins to sound like a leap of faith, or maybe a leap of denial.