Saturday, January 12, 2013

Tackling Economism Head-On: Porter in the NY Times

            In The Golden Calf, I discuss how economism has wormed its way into the fabric of what Americans view as “common sense” about public policy, so that most of what we hear and read in the media simply takes economism for granted as gospel. Hence any major media piece that challenges economism directly is worthy of note. Such an article, focusing on health care, appeared recently in the New York Times, courtesy Eduardo Porter:

            Porter begins by talking about how for-profit health care often delivers worse results for patients than nonprofit. In this, had he wished, he could have cited the work of economists at least as far back as Kenneth Arrow in the 1950s who declared that the health care sector represents a market failure, where laws of supply and demand simply fail to operate. In economism, of course, there is no such thing as a market failure; whatever the market determines is simply what’s true and right, as if it were Divine will.
            But Porter actually has bigger fish to fry: These profit-maximizing tactics point to a troubling conflict of interest that goes beyond the private delivery of health care. They raise a broader, more important question: How much should we rely on the private sector to satisfy broad social needs?”
            Porter then goes into a series of analyses that show how much the US suffers in comparison to other nations, through our insistence in turning social services over to the private market. He notes, for example, “Consider bail bondsmen and their rugged sidekicks, the bounty hunters. American TV audiences may reminisce fondly about Lee Majors in “The Fall Guy” chasing bad guys in a souped-up GMC truck — a cheap way to get felons to court. People in most other nations see them as an undue commercial intrusion into the criminal justice system that discriminates against the poor.”
            Porter’s conclusion: Our track record suggests that handing over responsibility for social goals to private enterprise is providing us with social goods of lower quality, distributed more inequitably and at a higher cost than if government delivered or paid for them directly.” Note the “higher cost”—Porter is telling us that the shibboleth that the private market is always and necessarily more efficient than the government is simply a myth (as we have for a long time demonstrated in health care particularly).
            How our love affair with the so-called “free market” snookers us is nicely analyzed: “In a way, private delivery of health care misleads Americans about the financial burdens they must bear to lead an adequate existence. If they were to consider the additional private spending on health care as a form of tax — an indispensable cost to live a healthy life — the nation’s tax bill would rise to about 31 percent from 25 percent of the nation’s G.D.P. — much closer to the 34 percent average across the O.E.C.D.”
            Let me cut away from Porter for a minute to emphasize this point. US health care spending roughly consists of two components—about 55% is government and about 45% is private. If you compare just the 55% government share, you see that it’s about equal, per capita, to what other countries like Canada pay for health care systems that provide universal insurance coverage for all citizens. So then on top of that we pay an extra 45% in private funds, to create a system that excludes 30-40 million Americans from getting insurance coverage. Some single-payer advocates call this “paying for national health insurance but not getting it.” The economism-inspired myth, of course, is that we cannot possibly afford national health insurance because it would add prohibitively to current costs.
After more comments on health care policy, Porter concludes: With both Democrats and Republicans unwilling to raise taxes on the middle class, the discussion is quickly boiling down to how deeply entitlements must be cut. We may want to broaden the debate. The relevant question is how best we can serve our social needs at the lowest possible cost. One answer is that we have a lot of room to do better. Improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation.”
            This article should be required reading for all pundits and politicians. It goes directly in the face of what has passed for conventional wisdom ever since the late 1970s. We have been told ad nauseam that it is precisely by injecting a profit motive into social services, just like everything else in the economy, that we’ll succeed both in improving quality and saving money. Here’s Porter to tell us that that emperor has no clothes.

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