Tuesday, November 17, 2009

Dr. Jekyll / Adam Smith

There always seems to be a nasty backlash even to a man's noblest efforts. Perhaps this phenomenon is the evidence supporting the "Law of Unintended Consequences." Few would argue that Alexander Hamilton's "blessing," the Federal Reserve system, has been the enabler of prosperity without peer. But it has an alter ego, or at least an evil twin. Enticing as it is to man's base motives, stimulating the imagination with visions of "magic money," it is also the enabler of a debt burden so inexhorable as to be seen as nothing less than a curse to entire generations, generations which might not even have been born had the "blessing" of prosperity it brought been foregone to begin with. So the blessing has a dark side.

Adam Smith advocated persuasively for an "elastic" money supply, heeded so effectively by Hamilton, even as he did for the "blessings" of division of labor. We have seen the dark side of Hamilton's blessing. Dickens fantasies, along with the realities every assembly line everywhere have illuminated the dark side of Smith's ideas on the division of labor. Great levers of production and prosperity, these, and yet, not without unintended, unwanted consequences of at least equal proportion.

We recently recalled a conversation we had long ago with a truck driver who worked for what is probably the most enduring trucking company in existence -- it's still in existence today. He marvelled at a new set of instructions drivers had been given for handling their rigs. Apparently, running a loaded tractor trailer at low engine speed, in a high gear range -- known as "lugging the engine" -- uses less fuel. However, the practice also has a tendency to snap the engine's crankshaft -- a major repair that would entail a hefty towing expense and substantial failure in service for the on-board freight.

However, the bean counters at the home office had concluded that, given the costs of repairing such a breakdown, and the costs of fuel, driver's labor, etc. etc, against the probability of actually incurring the crankshaft failure to begin with, made economic sense. In other words, when it was all said and done, the data suggested that not enough crankshafts would be snapped to offest the fuel savings of "lugging the engine." This puzzled the driver.

As it would puzzle anyone except, perhaps, Adam Smith and the "learned." Why not? It's a perverse course of action: inviting the risk of destruction of assets and increased emergency repair costs, impairment of highway safety, disruption of employees personal lives, willful abnegation of service commiments to customers. Who benefits here? Who in his right mind would do such things to save money on fuel? A modern economic "thinker," that's who. And that's the dark side of Adam Smith.

And so, with this in mind, we might be able to comprehend just what sorts of ghosts are at work in the recent pronouncement by US Preventative Services Task Force -- whatever that is -- that it's better for women to have mamograms at 50, instead of at 40 as was previously recommended. The explanation was given that "as counterintuitive as it sounds, all the data points to this being better." OK, better for whom? The women in the 40 - 50 age bracket, or the Adam Smith's who work for the entitities -- public and private -- that write the checks for the mamograms?

The dark side of Adam Smith is perverse economic comes out in incentives pitting the interests of collectives -- that's a socialist term -- responsible for paying for services -- against those who receive the services. It's a division-of-labor from hell.

In the US currently, there is a private market for health insurance and so the competing interests of patients vs. payers isn't one of absolute dominance. Competition for customers forces insurers to provide something in return for their premiums. But what happens when the payer isn't just a company, it's also the supreme law of the land? In other words, when government dictates who gets paid what for which medical procedure, where does the patient turn for a fairer shake?

And when the government is forced to be more concerned with aggregates than individuals, with its balance sheet than yours, you can be sure that some pretty bizarre dictums are going to be forthcoming regarding the "efficient" delivery of healthcare, because what's good for the patient isn't what's good for the payer. Doctors will marvel, as they are at the new mamogram "guidelines," -- guidelines for now, but what happens when the government controls the delivery of healthcare? -- just as drivers marvelled at the dictum from on high to "lug the engine" even if it meant ruining a motor, delaying deliveries, reduced efficiency at all levels of service, inconvenience to employees and customers.

Below is the infamous "Complete-Lives" graph, which depicts the "probability" of getting medical treatment for any age, under the vision of government controlled healthcare espoused by Dr. Ezekiel Emanuel, health policy adviser to President Obama, and the evil twin of Adam Smith.

So you see, women over age 50 are substantially less likely to receive an "intervention" -- that's how Dr. Emanuel refers to medical care -- than those in the 40 - 50 age bracket. Fewer intenventions means less money spent. The patients, like the customers of that trucking company, be damned.


Post a Comment

<< Home