Is public healthcare more efficient in terms of allocation of resources?
Healthcare is a public good, and there are some reasons why it should be funded by public spending. Firstly doctors in a private system may have perverse incentives to increase costs over and above that which is necessary for patient care. This form of 'over-treating' could be either due to the profit motive in private clinics or at a systemic level, where instead of competing on price, treatments that are most costly become prevalent over equally-effective cheaper versions. These costs would ultimately result in higher insurance premiums or costs which are then passed on to patients.
This is a theory that can been seen in reality. Healthcare spending in the United States, which is supposedly exposed to competition, is vastly higher than any other country and makes up more than 16% of GDP. Are we too assume there are many more health problems in the USA as a percentage of population, or could privatisation play a role? Private systems may escalate costs where there are incentives to do so. A form of monopoly, as described by Adam Smith, can theoretically occur when pharmaceuticals exert power through promotional spending and influence on regulators.
Perceptions and actions of the economic actors also play a role. Cost does not equal quality, but patients and doctors could get duped into thinking a particular treatment is more effective when it is more costly. Especially when the potential for profit has led to increased promotional spending. The placebo effect can be effective and could be potentially manipulated. Privately-funded researchers also have an economic incentive to 'massage the figures' during trials.
Arguably this all depends on the actions of individuals and their motivations. There could be some evidence that doctors working in public system, where they are paid less, are likely to be motivated more by their social conscience than by a profit motive (or some combination of both). Choosing between treatments may not be clear-cut and there might be reasons for choosing particular treatments over another. It depends on motivations of actors, which we cannot easily discover. It could also lead to over-treatment of symptoms rather than causes, where there are incentives for increasing the numbers of patients return visits (and thus increasing business).
Extreme cases result in cases like Micheal Jackson's death, where a doctor trained in medicine was inventivised to over-medicate with powerful mind-altering drugs on a regular basis, and paid well to do so.
We could argue some of these criticisms apply to public systems too, mainly where medical research is privately financed. Especially this can occur when companies enforce long patents, a form of monopoly on intellectual property, which extract capital from medical products in the long term, rather than enabling generic versions to be developed. This is said to be justified by enabling companies to reap back their initial investment, but it might have been better to use public investments and patents for new medical research and innovations.
In the past, before healthcare was well-regulated by public bodies (and medicine was advanced) doctors often had a bad name as draining con artists, as described by Charles Dickens in the "Tale of Two Cities", where unscrupulous doctors would travel around selling dubious wares. Superstition was rife and it was difficult to find a good doctor. The best way to do this was by reputation. However, lack of public regulation or funding may lead us back to this.
David Cameron speaks of 'choice' but do really want to choose between doctors in a time of sickness? This might just add to stress. Choosing on price may lead to inequity in service and it's so hard to choose on 'quality' when there's no point of reference!
Competition on 'cosmetic' factors, like how good the hospital looks, won't necessarily lead to effective or efficient healthcare.
Infact having a 'marketplace' implies a variable service that, instead of leading to healthy competition, undermines trust (both for patients and between medical professionals!!).
Tuesday 6 March 2012
The Profligacy of Today: Can we save our finances and the planet?
[Original Date of Posting: January 26th 2011]
We are hearing a lot at the moment about the reducing the government's deficit and the national debt. At the heart of this is a moral and ethical problem: excessive borrowing and spending builds up the burden and cost on future generations, in terms of the repayments and interest payments that build up.
Borrowing and consumption could be seen as the opposites of saving and conservation; whether that be conserving economic or natural resources. In our culture of consumption, many people have the urge to use their credit card to buy a bigger TV's or cars, or borrow more to buy a larger home. What is the impact on the world's resources of this consumption driven by debt? It has now become so easy to buy items, like mobiles, that will be thrown away after a short time. In fact many items are not 'built-to-last' but are actually built with 'inbuilt obsolescence' which encourages us to buy more!
We have a situation where we are rapidly using up many natural resources, with barely a thought for future generations who may have to suffer the repercussions. Once we have used up most of the oil; what then? Will we still be able to make cheap plastics for food storage and pharmaceuticals? When we have used up the earth’s phosphorus, can we easily make the fertilisers that we use for crops? What about when we can only find exotic animals in zoos, since we have destroyed their natural habitat? It is possible that future generations (if they exist at all) will be extremely angry about the lost opportunities that have been taken from them.
Therefore debt is much like unsustainable consumption; it is effectively stealing from the future. When politicians enter massive debt to provide services or infrastructure for the populace, if they do not do this in an economically sustainable way, they are simply deferring problems for the future. When banks started creating toxic debt to help home-owners gain excessive mortgages, we ended up with the financial crisis. Our economic calculations must look further into the long-term, and be more prudent. For example, if bee populations around the world collapse because farming with pesticides appears “cheaper” than organic farming, we could end up with a situation where one third of the food we eat cannot be pollinated! The network Avaaz recently launched a petition highlighting this ‘Global Bee Emergency’.
Proudhon once said: “property is theft” but perhaps also “debt is slavery”. Once you are in debt, you have no choice but to attempt to repay, and you can be drawn into a spiral of debt where you lose your will to be sensible. For instance, in the debate about student loans in the UK, we have not fully considered the mental pressure upon students who will forced to shoulder the burden of repayments for many years. Students may be sucked into a system which reduces their ability to pursue alternative or lowly-paid careers.
In terms of energy resources, we are rapidly burning up the finite fuels that fuel our whole economy. Solar and wind power may appear “expensive” today; but not if you look further into the future. If you build renewable power, at some point in the future you will still have that power source and it will become cheaper as we learn how to improve it. Whereas if you build a gas or coal power station, at some point, that source will run out.
China, India and other rapidly-growing Asian countries have some of the highest rates of personal savings in the world. In fact, China has a high level of saving in government, as well as households and business savings. Some have argued this culture of saving helps with resilience in the long-term. By contrast, the US now has one of the highest levels of household debt. It seems sensible to encourage saving, which increases resilience to the economic and environmental challenges ahead.
This is not to say that all debt and credit is bad. If lending is well-managed it can help people access opportunities they otherwise would not be able to; but they have to be able to pay off their debt eventually! Microcredit institutions such as the micro-loans in Bangladesh, set up by Nobel-prize winner Mohammed Yunus, can be an immense help for poor people. However, these institutions need to be fair and not become “loan sharks”.
The essence of the problem is consideration of fairness and equity, rather than a problem with credit itself; it is question of morals, not money. Yet the world of politics has hardly connected the dots between issues of ecological and financial debt - the IPCC (Intergovernmental Panel on Climate Change) does not mention the issue of debt and environmental damage. Moreover, the international economic institutions, the IMF and WTO, hardly consider environmental issues or inter-generational equity. We urgently need more intelligent harmonisation of policy.
If politicians want to cut the deficit, what about cutting spending on environmentally damaging activities, as well as improving efficiency? Governments are spending on fossil fuel subsidies amounting to $700Bn per year globally according to the International Energy Agency (IEA), as well as subsidies for intensive agriculture which amount to 39Bn Euros per year in the EU alone! Cutting the deficit may be possible without cutting important public services, but instead by cutting the wasteful spending that damages those in the future. Ultimately, the cost of profligacy can be financial and environmental ruin.
We are hearing a lot at the moment about the reducing the government's deficit and the national debt. At the heart of this is a moral and ethical problem: excessive borrowing and spending builds up the burden and cost on future generations, in terms of the repayments and interest payments that build up.
Borrowing and consumption could be seen as the opposites of saving and conservation; whether that be conserving economic or natural resources. In our culture of consumption, many people have the urge to use their credit card to buy a bigger TV's or cars, or borrow more to buy a larger home. What is the impact on the world's resources of this consumption driven by debt? It has now become so easy to buy items, like mobiles, that will be thrown away after a short time. In fact many items are not 'built-to-last' but are actually built with 'inbuilt obsolescence' which encourages us to buy more!
We have a situation where we are rapidly using up many natural resources, with barely a thought for future generations who may have to suffer the repercussions. Once we have used up most of the oil; what then? Will we still be able to make cheap plastics for food storage and pharmaceuticals? When we have used up the earth’s phosphorus, can we easily make the fertilisers that we use for crops? What about when we can only find exotic animals in zoos, since we have destroyed their natural habitat? It is possible that future generations (if they exist at all) will be extremely angry about the lost opportunities that have been taken from them.
Therefore debt is much like unsustainable consumption; it is effectively stealing from the future. When politicians enter massive debt to provide services or infrastructure for the populace, if they do not do this in an economically sustainable way, they are simply deferring problems for the future. When banks started creating toxic debt to help home-owners gain excessive mortgages, we ended up with the financial crisis. Our economic calculations must look further into the long-term, and be more prudent. For example, if bee populations around the world collapse because farming with pesticides appears “cheaper” than organic farming, we could end up with a situation where one third of the food we eat cannot be pollinated! The network Avaaz recently launched a petition highlighting this ‘Global Bee Emergency’.
Proudhon once said: “property is theft” but perhaps also “debt is slavery”. Once you are in debt, you have no choice but to attempt to repay, and you can be drawn into a spiral of debt where you lose your will to be sensible. For instance, in the debate about student loans in the UK, we have not fully considered the mental pressure upon students who will forced to shoulder the burden of repayments for many years. Students may be sucked into a system which reduces their ability to pursue alternative or lowly-paid careers.
In terms of energy resources, we are rapidly burning up the finite fuels that fuel our whole economy. Solar and wind power may appear “expensive” today; but not if you look further into the future. If you build renewable power, at some point in the future you will still have that power source and it will become cheaper as we learn how to improve it. Whereas if you build a gas or coal power station, at some point, that source will run out.
China, India and other rapidly-growing Asian countries have some of the highest rates of personal savings in the world. In fact, China has a high level of saving in government, as well as households and business savings. Some have argued this culture of saving helps with resilience in the long-term. By contrast, the US now has one of the highest levels of household debt. It seems sensible to encourage saving, which increases resilience to the economic and environmental challenges ahead.
This is not to say that all debt and credit is bad. If lending is well-managed it can help people access opportunities they otherwise would not be able to; but they have to be able to pay off their debt eventually! Microcredit institutions such as the micro-loans in Bangladesh, set up by Nobel-prize winner Mohammed Yunus, can be an immense help for poor people. However, these institutions need to be fair and not become “loan sharks”.
The essence of the problem is consideration of fairness and equity, rather than a problem with credit itself; it is question of morals, not money. Yet the world of politics has hardly connected the dots between issues of ecological and financial debt - the IPCC (Intergovernmental Panel on Climate Change) does not mention the issue of debt and environmental damage. Moreover, the international economic institutions, the IMF and WTO, hardly consider environmental issues or inter-generational equity. We urgently need more intelligent harmonisation of policy.
If politicians want to cut the deficit, what about cutting spending on environmentally damaging activities, as well as improving efficiency? Governments are spending on fossil fuel subsidies amounting to $700Bn per year globally according to the International Energy Agency (IEA), as well as subsidies for intensive agriculture which amount to 39Bn Euros per year in the EU alone! Cutting the deficit may be possible without cutting important public services, but instead by cutting the wasteful spending that damages those in the future. Ultimately, the cost of profligacy can be financial and environmental ruin.
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