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In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.
When the plant was finally finished, however -- three years after World War I had ended -- it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.
Gordon goes on to list 7 major reasons why it is this way. There's an 8th reason that could be added to the list, brought out by the Obamacare debacle, as pointed out today by law prof (and liberal) Jonathan Turley: government employees don't get fired. Sebelius, you're not fired! Column
This really hit home with me because at my job, we just had a good employee fired. He had been with the company for over 20 years, but committed a 'cardinal sin' on the job, and so he's gone. And you can bet that every other employee in the shop is going to remember the firing, and bend over 360 degrees backwards to avoid making the same mistake.
It's not the same in the public sector. As Turley points out, people can literally die due to your incompetence, and you still won't lose your public sector job. What happens when bad actors can't be fired? Good actors look at it and ask themselves--why am I killing myself to get the job done? For what? And then the good actors become bad, or at least mediocre. It's why the USSR collapsed, it's why Amtrak loses $7.65 on a cheeseburger it sells for $9.50, and it's why Obamacare is doomed to failure.
Nice theory. But then communism was also a nice-looking theory that a lot of people fell for.
When I was young in the 70s, communism was a fashionable theory. Asking its adherents why it never seem to work out in practice never made them foam less around the mouth though. There was some kind of mental shutter that never let real-world experience interfer with their pet theories.
But, lets submit this theory tot he reality check: Other governments do run healthcare systems. How do they perform when compared to the US system?
They cost half as much.
On the average, people living in government run UHC systems live longer than Americans.
On the average, people living in government run UHC systems spend more years out of that lifespan in good health. This is a measurement called HLY.
On the average, people living in government run UHC systems lose fewer years to ill health. This is a measurement called DALYs.
On the average, fewer people living in government run UHC systems die as a result of inappropriate, late or complete lack of healthcare. This is a measurement called Amendable Mortality.
When the efficiency of healthcare systems are compared in Public Health, large, over-arching measures are used. Measures that involve as many factors as possible. This is to even out the confounding factors introduced by some countries having particular competencies or challenges. More people die from malaria in Nigeria than in Iceland, but that says nothing about how their healthcare systems perform. Cuba is pretty good on preventive medicine, Norway on resuscitating people who has been under snow or ice, America does well on many cancers. And systems have their areas where they do badly as well.
But the measurements above are highly appropriate for measuring the performance of a healthcare system across all levels of a population.
Additionally, they have a lower rate of infant mortality. More children born there survive birth. A lower rate of maternal mortality, more mothers survive giving birth. And a lower rate of under-5 mortality.
This is worth keeping in mind when remembering that for every dollar spent on healthcare in the US, for example the UK spends 40 cents. Per person. And gives healthcare to all.
So in conclusion, we can say quite certainly that this theory does not work out in real life. At all.
At least in respect to healthcare systems. Of course there are a lot of basic economic reasons why healthcare systems are badly unsuited to being run as a business in the first place.
Also, competition matters. The American government has grown up in a very competition-light environment compared to the governments who survived the last 4-500 years in Europe. You don't see Burgundy; Bjarmland, Flanders or Austrohugary around much as countries these days.
it really hit home to me that government should stay out of business, and stick to governing when the debacle with the mustang ranch in nevada happened. the IRS took over the ranch for unpaid back taxes. they decided to run the ranch themselves instead of getting someone to run it for them. now you would think that it would be easy to make money at a place that sells sex and booze, and yet the IRS ended up having to close the place because THEY WERE LOSING MONEY. yes we should have the government running our health care system.
Nice theory. But then communism was also a nice-looking theory that a lot of people fell for.
When I was young in the 70s, communism was a fashionable theory. Asking its adherents why it never seem to work out in practice never made them foam less around the mouth though. There was some kind of mental shutter that never let real-world experience interfer with their pet theories.
But, lets submit this theory tot he reality check: Other governments do run healthcare systems. How do they perform when compared to the US system?
They cost half as much.
On the average, people living in government run UHC systems live longer than Americans.
On the average, people living in government run UHC systems spend more years out of that lifespan in good health. This is a measurement called HLY.
On the average, people living in government run UHC systems lose fewer years to ill health. This is a measurement called DALYs.
On the average, fewer people living in government run UHC systems die as a result of inappropriate, late or complete lack of healthcare. This is a measurement called Amendable Mortality.
When the efficiency of healthcare systems are compared in Public Health, large, over-arching measures are used. Measures that involve as many factors as possible. This is to even out the confounding factors introduced by some countries having particular competencies or challenges. More people die from malaria in Nigeria than in Iceland, but that says nothing about how their healthcare systems perform. Cuba is pretty good on preventive medicine, Norway on resuscitating people who has been under snow or ice, America does well on many cancers. And systems have their areas where they do badly as well.
But the measurements above are highly appropriate for measuring the performance of a healthcare system across all levels of a population.
Additionally, they have a lower rate of infant mortality. More children born there survive birth. A lower rate of maternal mortality, more mothers survive giving birth. And a lower rate of under-5 mortality.
This is worth keeping in mind when remembering that for every dollar spent on healthcare in the US, for example the UK spends 40 cents. Per person. And gives healthcare to all.
So in conclusion, we can say quite certainly that this theory does not work out in real life. At all.
At least in respect to healthcare systems. Of course there are a lot of basic economic reasons why healthcare systems are badly unsuited to being run as a business in the first place.
Also, competition matters. The American government has grown up in a very competition-light environment compared to the governments who survived the last 4-500 years in Europe. You don't see Burgundy; Bjarmland, Flanders or Austrohugary around much as countries these days.
Your premise here is that we have had private-sector health care (as opposed to government run) in America, but we haven't really had it since WWII. What we have is a very messy hybrid system with government tentacles throughout.
What are the "basic economic reasons why healthcare systems are badly unsuited to being run as a business in the first place?"
Your premise here is that we have had private-sector health care (as opposed to government run) in America, but we haven't really had it since WWII. What we have is a very messy hybrid system with government tentacles throughout.
What are the "basic economic reasons why healthcare systems are badly unsuited to being run as a business in the first place?"
Thats a good point. We can compare the US private sector to public sectors in other countries...but thats difficult because the US private sector is mostly composed of people who are healthy enough to work. What we can say is that the US system as a whole is the fourth most heavily privatized system among developed countries.
And the US system has some features that make economists have breakdowns:
The people most in need of healthcare are the least attractive customers to insurers. Information asymmetry is built in, doctors spend years of education just acquiring information. Costs are paid by neither provider nor consumer, but a third party. There is no opportunity to refuse a product that prices itself out of the market. Barriers to entry are very high.
You can also read som Kenneth Arrow, whose work on uncertainty got him the Nobel Prize in economics. His seminal work on health care in the marketplace was part of that, and is available online.
This is basic economics. You don't even have to get into the field of Health Care Economics for this.
The government does not operate on a platform where the customer must come first and there is competition. Their platform is - we are the government, and because we are government there are to be no competitors. Therefore, people's needs are secondary.
There is no incentive to satisfy the public - other than common human decency. Some people are good people and serve adequately... others don't care... it's a crapshoot... but without the accountability that comes with choosing another entity to provide the service, people may be stuck with paying for substandard services.
Thats a good point. We can compare the US private sector to public sectors in other countries...but thats difficult because the US private sector is mostly composed of people who are healthy enough to work. What we can say is that the US system as a whole is the fourth most heavily privatized system among developed countries.
And the US system has some features that make economists have breakdowns:
The people most in need of healthcare are the least attractive customers to insurers. Information asymmetry is built in, doctors spend years of education just acquiring information. Costs are paid by neither provider nor consumer, but a third party. There is no opportunity to refuse a product that prices itself out of the market. Barriers to entry are very high.
You can also read som Kenneth Arrow, whose work on uncertainty got him the Nobel Prize in economics. His seminal work on health care in the marketplace was part of that, and is available online.
This is basic economics. You don't even have to get into the field of Health Care Economics for this.
props for Kenneth Arrow reference. I have read Kenneth Arrow (albeit years ago). But you don't answer my question. What are the 'basic economics' behind why health care should be handled differently from other goods and services. It's not an inherently collective item like roads, bridges, or national defense. It doesn't involve externalities (impact on those who don't agree to the deal) like pollution. It is a necessity, but so are food and shoes. Do you favor applying the Obamacare (or other collectivist) model to the shoe industry?
The government does not operate on a platform where the customer must come first and there is competition. Their platform is - we are the government, and because we are government there are to be no competitors. Therefore, people's needs are secondary.
There is no incentive to satisfy the public - other than common human decency. Some people are good people and serve adequately... others don't care... it's a crapshoot... but without the accountability that comes with choosing another entity to provide the service, people may be stuck with paying for substandard services.
I'm fairly certain most of the problems with our health care system come from government interference, and the mandates forced upon the system by government.
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