Crises and Political Possibilities

My friend Jon Shayne (AKA Merle Hazard) recently remarked that the U.S. was likely on the brink of serious social unrest a year ago. I think he is right. My fear is, we need that threat (or reality) of crisis to make possible the political changes we need. But if we have patched up the system just good enough now, it makes those decisions more difficult, if not impossible. I am thinking particularly of the balance between self- interest and common goods that needs to be recalibrated, which will require the promotion of civic virtues--and what the Germans would term solidarity--that are difficult in wild-west free markets in mature economies. Yesterday, David Brooks (in one of his most insightful columns ever) wrote that we have to decide if we are going to be an unforgiving but highly dynamic economy/society or a more staid, secure, and in his word civilized, society.

Self-Image and Ethical Consumption

I have argued elsewhere that buying organic and green products feeds into consumers’ self image. Alex Rehding asks if that means there aren't any extrinsic benefits. Sure, image can come to overshadow the substance (and our hyper-capitalism seems to encourage those sorts of perverse incentives). But, like buying a BMW, say, one cannot really fully disentangle the luxury/status angle from the more or less objective mechanical and engineering qualities. And since self-image w organic is tied to making real changes, I actually see some political potential there.
In fact, at the wider level of promoting civic virtue (I know, I know, it sounds so 19th century, but a modern, tolerant, multiculti version of civic, not religious, virtues) it can be powerful. We need to recalibrate the societal balance between self-interests and common goods, and that will require such new civic virtues, even if their privatized consumptive aspect is troubling

Handelsblatt on German Eggs and Consumer Desires

See Germany's Handelsblatt coverage of my recent talk on "German Eggs and Consumer Desires"

World's Most Powerful People?

Forbes, the People magazine of Ayn Randish executives, and so fond of lists, has a new ranking out: "The World's Most Powerful People"

There are the obvious picks (Obama comes in first, Putin third), but the meshing of economic, political, and cultural power makes for some odd pairings: Sergey Brin ranks nine places above Angela Merkel, and 5 places above the Pope; Oprah Winfrey places 11 slots up from Nicolas Sarkozy and eight spots down from Osama bin Laden.

BMW Management Salaries

BMW recently announced that it will peg all of its management salaries to worker wages to ensure the two grow at the same rate and that a large gap does not appear. At BMW a board members earns about 25 times average wages, and that will now be the established ratio. (See Deutsche Welle article

The gap between executive compensation and average worker wages has skyrocketed in the U.S. since the early 1980s. Today CEOs on average earn more than 300 times average worker wages. The comparable figure for Germany is less than 20 times average wages, and for Japan less than 12 times average wages.

Somewhat socialized medicine

A recent article in Forbes ("the Capitalist Tool") gave high marks to Germany's hybrid public/private health insurance scheme:
http://www.forbes.com/forbes/2009/0921/health-obama-germany-health-care-model-that-works.html

The German system costs about half as much as ours (as a percentage of GNP per capita) and by many measures it delivers better care.

The German system has its virtues, and I think it is superior to what we currently have in the U.S. It is more rational, which involves some rationing, but when done in a judicious manner rationing provides overwhelming positive benefits for society as a whole.

But the German system is far from perfect. Doctors receive low wages--a fraction of what their counterparts make in the States--and they have been agitating for more pay over the last several years. And, personally, I'd rather have a well-paid, happy doctor looking down at me as I lay on the operating table.

After a playground accident a few years ago, my daughter Rebecca spent a few days in a German hospital. In many ways, it was much better and much more rational and professional system than is the norm on the side of the pond. We were never asked for insurance information; meals were cooked on the floor and customized for kids' individual tastes; bottle of alcohol and peroxide were not thrown out at regular intervals but shared between patients in a room.

On the other hand, we did not speak to the surgeon before our daughter's operation, and only just briefly afterward. It seemed that we were expected to trust the doctors to do their job and not interfere. It worked out fine, but I like the illusion (if nothing more) of being informed and having a say.

There is no rush to get patients out quickly, and while contact with surgeons is minimal, there is a much more intimate and sustained relationship between patients and nurses.

Germany's system, with its predominant public option and explicit rationing of services, is both more economically rational and more humane than our unwieldy and impersonal system. There is a lesson to be learned from Old Europe.

Ration My Healthcare, Please!

In the odd world of political linguistics, the word “ration” has, over the course of a few short months, taken on the meaning of a pejorative of the worst sort when paired with “healthcare.” And, through Sarah Palin’s exegesis, healthcare rationing has taken on the menacing specter of “death panels” that will decided when to pull the plug on a beloved relative.

We need to better ration healthcare in this country, and disregard the political hyperbole. I say to “better ration” because we already ration healthcare through an imperfect market in insurance and hospital and physician services. You get the healthcare you can afford, be it through insurance payments or out of pocket expenses, or you rely on the regulated charity of hospitals and caregivers. Since most American have adequate health insurance subsidized by their employers, we don’t generally think of this as rationing, but it certainly is. And within the insurance system, rules about what is and what is not covered more clearly reveal the rationing going on.

Because of various incentives built into our healthcare system and how it is financed, we end up spending enormous amounts on unnecessary tests and procedures. We also spend a huge amount on end-of-life procedures—30% of Medicare spending is on patient in their last year of life.

The emotionally fraught immediacy of medical emergencies leads us to make irrational decisions, especially when they are unwritten by insurance. We should have panels to evaluate the efficacy and costs and benefits not of individual patient cases (the apocryphal “death panels”) but of treatments.

In our 30s we might rationally decide that it would not be worth a $300,000 treatment to extend our life for 4 months when we are 79, but come our 79th birthday we would likely feel otherwise. Thus, the distance of panels to weigh options more distantly and more rationally.

The philosopher John Rawls presents a thought experiment: how would we distribute resources and rewards in a society before we knew what role in that society we would fill. The idea is that behind this veil of ignorance, we could act most justly. Panels that would regulate health treatments could not exist behind a veil of ignorance, but the distance and scientific guidelines would provide a more rational basis than the distorted insurance market for the rationing that we do anyway.

A More Stimulating Stimulus

While the stimulus package is throwing billions and billions and billions and billions to keep folks off the unemployment rolls, state and local governments are laying off workers at unprecedented rates. It strikes me as odd for the newspaper headlines to trumpet the extent of stimulus spending while under the fold is news of the latest state budget cuts and firings. The New Yorker's excellent economics correspondent James Surowiecki attributes this to the emphasis we place on state autonomy in our U.S. flavor of federalism and on fiscal conservative activists efforts over the last couple of decades to impose legislative constraints on state and local spending--see his convincing argument in this New Yorker article. We should use a big chunk of the stimulus money to prevent government lay offs--this would be the quickest and easiest way to save jobs.

Indeed, I don't understand why we did not put more of the stimulus money into WPA-style programs. I read recently about what terrible shape the National Mall in Washington is in, and that Obama was going to ask for a couple of hundred million to spruce it up. Why not just hire a thousand gardeners and masons to start work on that tomorrow? San Francisco Bay being clogged up by a new invasion of Asian kelp? Hire a thousand workers to pull it up. And let's put a lot more money into moving professionals that now find themselves unemployed (from the tech, financial, and other sectors) to teaching.

Hot new video out from Merle Hazard: Bailout

The most financially savvy country crooner in Nashville, Merle Hazard's other incisive critiques of the economy may be found at www.merlehazard.com.

Economic Crises and Anthropological Interventions

The current economic crisis comes as no surprise to many anthropologists. That doesn’t mean we were clever enough to protect our retirement accounts, but that we have long been talking about what now seems so revelatory to pundits and policy makers: that markets are social constructions that can create their own realities; that market transactions are laden with moral implications that go far beyond the material and financial; and that markets are instruments, to be formed and regulated as we see fit.

Our current financial woes offer a singular opportunity to introduce anthropological considerations into the making of markets and economic policy.

Markets are contrivances, as James Ferguson recently remarked. They are constructions, built upon particular political orders and social conventions. And while to anthropologists this might seem apparent, the prevailing popular and political discourse over the last couple of decades speaks of markets as something apart from human control.

Economist Timothy Taylor asserts that “markets are a force of nature--like a river, when there is an obstacle they will move around it.” Markets are even endowed with animate powers: Caitlan Zaloom found that commodities traders in Chicago speak of the market as a moral arbiter, rewarding and punishing depending on how it is engaged.

Adam Smith serves as the unwitting patron saint of free-market economics, his Wealth of Nations its often quoted Ur-text. Smith brilliantly argues for an invisible hand in free markets, showing how competition between actors pursing their own self-interests can better provision everyone. Smith was writing against monarchical, monopolistic power, yet belief in the powers of the invisible hand has led self-interest to become the secular ethic of our time. It has, until recently, been called upon unflinchingly by corporate executives and the editors of the Wall Street Journal not as a justification of last resort but as a badge of piety and fealty, a virtue as unassailable as the Golden Rule. This is an incredibly liberating and optimistic ethic–through the mystical transubstantiation of the invisible hand one’s personal greed coverts into the collective good. As a hegemonic ideology it is brilliant, no matter that Smith would have been appalled at the disregard for his concern with “fair” profits and sympathy for others.

Inspired by Ayn Rand as much as Smith, an exaggerated view of H. economicus driven by greed and self-interest and a belief in the power of markets to best provision the common good have had enormous influence in public discourse and policy.

Implicit in neoclassical utility functions is the notion that efficiency is “better”—if one’s goal is to maximize utilities, then one should try to do that most efficiently. As Weber foretold, judging economic behavior and public policy from this perspective becomes not a question of good or bad, but rather of efficient or inefficient. Efficiency is championed as the ultimate moral practice—producing the most goods for the most people (even if distribution is seen to be handled by the fundamental fairness of a free market). Efficiency itself becomes the greater good, the ends rather than just a means to an end. Yet, cautions Michael Sandel, economics is “a spurious science in so far as it is used to tell us what we ought to do” since such questions “are unavoidably moral and political.”

There is a self-fulfilling prophecy function to economic views of rational actors pursuing their self-interests. The discourses of rationality and efficiency have entered the public dialogue to an extent that economists can “discover” effects derived from their very postulates. Economics students, for example, compared to others cooperate less and more aggressively pursue self-interested maximization in economic games.

The current crisis pulls back the curtain of mathematical and ideological obfuscation of market workings. Warren Buffet now warns us to beware of “geeks bearing formulas” and even the likes of Alan Greenspan, Richard Posner, and other true believers are expressing their doubts in the power of free markets.

It is but a small step from such doubts to the realization that markets are cultural, social, political, economic constructions that have emerged of out of particular histories of property rights, monetary regimes, intellectual property recognition, tolerance for inequality, and social institutions that produce “rational” subjects to pursue certain ends and work out the “correct” solutions to cost/benefit analyses. Seeing markets as social constructions, rather than as the product of natural forces, allows us to treat them as such.

All of the “laws” and rules of thumb about the economy or the market are predicated on a particular political and social order that may not endure. In fact, history tells us that it will not. That doesn’t mean we are on the verge of Marxist revolution (despite what Rush Limbaugh may fear), but just that the order of things will change. If I had to bet, I would put my money on private property rights enduring through my lifetime, and that of my kids, and maybe even longer.

But all markets are contrivances, not natural outcomes of truck and barter. And there are other sorts of contemporary capitalist formations with different balances between private gain and public goods. Take Germany, Sweden, and the northern European model, or China with its hybrid economy. Clearly, there are many possible ways to construct market economies.

We must recognize the value in market efficiencies—the wealth market economies have produced, the quantity and quality of life they have increased. Yet we should not naturalize or deify markets. Keeping firmly in mind that they are social constructions allows one to see markets not as absolute, omnipotent forces but as tools, instruments, techniques in the social and political project of living together to the greatest mutual benefit (as we define that socially and politically). This means markets can and should be regulated to provide the greatest good for the greatest number. We need not put off difficult social and political questions about the quality of life onto simple material and financial cost/benefit analyses.

We have been too quick in recent years to disavow tough political (and moral) decisions (about who get gets what, what is a ‘just’ wage, and so on), leaving these to an almost religious belief in market forces to work out optimal solutions. Markets do lots of good, healthy market competition increases efficiencies, and we should let them do their work in the contexts they work best. But we should not let a notion of “natural” markets shy us away from making political decisions. The current crisis in the markets forces us—and policy makers—to see them as the contrivances that they are. Markets are neither inherently good nor bad—they are techniques and instruments that we can put to the social and political uses we see fit.

et al.

Many of the ideas I write about here have been inspired by conversations with Peter Benson and the participants in a School of Advanced Research Seminar on Markets and Moralities; and with Jon Shayne and Merle Hazard.

Economic Utilities and Anthropological Critiques

A certain brand of economics (most closely associated with Milton Friedman, Gary Becker, and the Chicago School) posits actors for whom calculations of maximum material utility is paramount: given a particular set of preferences, individuals act (rationally) to maximize their returns. Deirdre McCloskey terms this the Max U. paradigm, and argues for the recognition and inclusion of “S” variables (such as the social and the sacred).

Such neoclassical economics is, at its core, about cost/benefit analyses. In theory, the models are nimble enough to account for any individual decision (if we include cultural, moral, emotional, and other sorts of utilities and preferences). In practice, they reflect a strong, overriding, bias toward material and financial costs and benefits. (After all, this is what can be measured, and the price one is willing to pay for an item is said to reveal one’s true preferences.)

These models make some key assumptions that anthropologists have trouble with: (1) a focus on individual behaviors and decisions—methodological individualism—that diminishes the importance of the social, (2) given the complexity of human behavior, models have to be stripped down, making broad assumptions about rationality and consciously leaving aside crucial areas of motivation because they are not readily measurable or observable; (3) the “self” in self-interest varies substantially across cultures, and indeed the whole notion of a singular, autonomous, sovereign “self” is problematic; and (4) what anthropologists find so interesting is what makes up that black box economists term “preferences.”

Economic modeling is not bad, but it does have some implicit political/moral values. And it could be made more robust by taking into account moral and cultural factors, as a number of economists on the cutting-edge are doing, but they are often hindered in an ideological attachment to key assumptions built up around the neoclassical model.

Relationships, Incentives, Healthcare

Relationships with doctors, nurses, pharmacists, midwifes, and others are key to effective and efficient healthcare. Most folks, I suspect, would love a more substantive relationship with their doctor, but the realities of insurance reimbursement policies, the threat of malpractice, and the commodification of healthcare all work against this.

In terms of quality of care, nothing can replace having a primary care physician or nurse practitioner who knows your medical history well, who knows what drugs you are taking, who gets the whole picture of your life and health and is able to make informed recommendations and decisions based on such an understanding of your particulars.

I get along well with my doctor, we have some common interests we like to talk about, and I suspect he spends a bit more time with me than with some other patients. But the clock is always ticking—he has to cover his costs--and a long time might be 15 minutes rather than 10. He makes himself accessible by email, and he has even prescribed malaria prophylaxis for me for a trip via email. But he doesn’t get paid for doing that, no compensation from my insurance and he doesn’t charge me. He does it because it is the right thing to do, but the incentive structure is set up to discourage such interactions.

(And, why can’t my pharmacist prescribe something like malaria prophylaxis? There is no danger of abuse, no reason someone would want to take it if they didn’t have to. It would be much more efficient to give pharmacists to power to prescribe such categories of medication. And, with an integrated electronic medical record system, one’s primary doctor could be automatically notified, maintaining the holistic view of one’s health and medications.)

We need to set up incentive structures (partly through a public healthcare insurance plan) to nudge (as Thaler and Sunstein use the term) the promotion of relationships with healthcare providers. The new model of “boutique” medical practices is revealing. For annual fees starting at less than $1500, patients get long (and wait-free) consultations with their physician, cell phone numbers and around the clock access for emergencies or even just pressing questions that don’t warrant an office visit. The fee allows physicians to radically reduce their patient load while insuring that their office overhead expenses will be covered. And they provide the sort of care everyone should be getting. With 300m people in the country, paying doctors $1500 per person to be their primary care physician would cost $450 billion—a lot of money, about 3% of GDP, but we spend upwards of 17% of GDP on healthcare now. We could also up the compensation paid doctors for an annual well-patient visit, so that they have time to uncover hidden problems or just get a better handle on overall health.

(Then, let’s also spend a few billion getting healthy school lunches in cafeterias, and a few more promoting bike riding, walking, and public transportation. Subsidizing public transportation isn’t just about getting people from point A to point B, or cutting down on carbon emissions, but also about having a healthier population, who, if nothing more, walks to and from the bus stops.)

Building better relations can introduce more trust into doctor/patient interactions—and this is could not just for the quality of care the patient will receive but also for the system. Malpractice suits are needed to discourage and punish malfeasance. But malpractice has become such an industry, that it now serves private gain much more than the public good. Research has shown that doctors apologizing for their errors cuts down significantly in malpractice suits. Patients want that apology, and if given and take at the level of human, personal interaction, they are often willing to accept and forgive the fallibility of doctors. But the fear of malpractice and subsequent rules imposed by hospitals discourages this sort of interaction. (At the same time, as my colleague Erin O’Hara of the Vanderbilt Law School points out, apologies can also be used cynically to present warranted sanctions or lawsuits, much as abusive spouses might employ apologies.)

But what is we had a Hippocratic Oath in which the patient could look into the doctor’s soul and see that the doctor would rather die than have the patient die, would rather suffer whatever consequences herself rather than have the patient suffer them? Such a bond of trust between doctor and patient would, like the sincere apology, obviate much of the desire for retribution when something does go wrong.

Healthcare and the Public Good

A public option in health insurance is not something to be feared. For many of its critics, the idea seems to be morally repugnant, corrupting the purity of an imagined, natural free market. But, we must keep in mind that markets are what we make of them, and healthcare is already one of the most regulated markets out there. And for good reason: there is a public good and commitment to the dignity of life that we do not want to fully and completely entrust to profit-seeking competition. So we use regulations to produce incentives that hopefully promote a common good.

The incentives don’t always work. They may be ill-conceived, corrupted by self-interested lobbying, or simply produce unintended, perverse outcomes. And often a healthy dose of private sector competition is just what the system needs to weed out inefficiencies and provide better service. But this does not mean we should disavow our responsibility to structure the market in such a way that it produces the greatest god for the greatest number.

So: there is no inherent reason why the government should not participate in the health insurance market (and indeed, it already does), and government agencies and civil servants are not inherently any less efficient than private sector enterprises (as discussed in the previous post about the virtues of civil service). In fact, Medicare has much lower administrative costs than private insurers. (How much lower is a point of contention, but it seems at least ½ as expensive.) There are serious problems with Medicare and how its keeps costs down—reimbursement rates shoved down doctor’s throats, no compensation for communication with patients outside of an office visit, and so on. Yet, there is room to improve in these areas and still do so cost-effectively.

Any government health insurance should promote not just low administrative costs but use incentives to promote general wellness—which will be good for the nation as well as the bottom line. Pay doctors to keep in touch with patients via email, encourage this and other forms of relationship building between a doctor and patient. Perhaps, dramatically increase compensation for an annual well-patient check-up, help doctors meet their overhead while keep patients healthy (as the new breed of boutique practices does) and improve delivery by having a provider who knows one’s whole medical profile. Empower pharmacists to prescribe certain medications for common illnesses; increase the number of nurse practitioners and what they can do; encourage midwifery. Such reforms can be highly cost effective while also improving the quality of patient care.

We also need to tackle eating (starting with healthy cafeteria food in our schools) and exercise (by making cities more bike-friendly, for example). And we could use a new Hippocratic Oath and new social contract between doctors and patients to reduce lawsuits and improve care. More on those ideas later.

Two Views of Nashville from The Tennessean

On Sunday (6/28/09) The Tennessean's headline article touted Nashville's growing cosmopolitanism, featuring vignettes of immigrants and dispelling stereotypes of "Music City."

On Wednesday (7/1/09) the same newspaper's "Tennessee Voices" opinion piece featured a local man who warned "Bible-believing, Christ-following Christians" (because there are so many corrupt Christians out there) that the current political move toward a global government foreshadows the end days and that "we" would "do well to remember that when the devil comes knocking at our door demanding more tolerance, diversity and unity."

Bureaucratic Virtues

A healthy skepticism toward government bureaucracy may be a good thing. And much of it can be traced back to Robert Michels’s “law of oligarchies.” Inspired by Max Weber’s observations, Michels convincingly argued that organizations (democracies, bureaucracies) inevitably move toward oligarchy. And today, government creep is a common cry against greater government involvement in health insurance.

But over the last two decades, skepticism about the government has grown into a fierce antipathy, and an ideological position often far removed from the facts. The Nashville Tennessean yesterday (6/30/09) morning had a Tea Party protestor holding up a sign stating “Government is the problem, not the solution,” a catch phrase that may be a bit worn around the edges but still has plenty of appeal.

What about the virtues of being a public servant? A public servant, someone serving the public good, sacrificing personal gain to promote a collective interest. What happened to the nobility of the civil service profession? It was not that long ago that these were plum jobs, positions many aspired to. (And perhaps they will be again, with the current economic crisis.)

Now, this isn’t true of popular views of the military. Sure we recognize the need to cut waste and improve the way it works in various ways, but we also acknowledge (and celebrate) the importance of its mission and the dedication of its people.

There are many examples of excellence in government: the Transportation Safety Board (see NPR story), the FDIC team that takes over failed banks (see This American Life story), the Pentagon’s tropical disease drug development program . . . and the list goes on and on.

And it is not just these elite and exotic niches of government that we find the virtue and excellence we more often associate with craftsmen and professionals. Recently I became worried about cars speeding down on a street in our neighborhood with several pedestrian crossings. I called the public works office and left my name and number. Later that day a traffic engineer called me from his cell phone asked me to describe the problem as he drove down that very street. The next day a crew installed several pedestrian crossing signs. The efficiency and professionalism of this public works employee matched the best customer service of the private sector, and in the service of the public good.

Sure, the government has its fair share of bitter bureaucrats (and probably more than its fair share of absurdly rational bureaucratic processes), but it is also full of noble public servants, folks who take pride in doing their job well and in the fact that it is serving a greater good beyond private gain. We need to recognize and celebrate that, and reward it with the honor we bestow upon the military.

Matthew Crawford, in his recent book “Shopcraft as Soulcraft,” argues for the moral and intellectual virtues of (masculine) manual labor. Richard Sennett, is his recent book “The Craftsmen,” similarly highlights the social and personal goods that flow from skilled labor. These and a number of other recent works focus on the moral value and identity formation that come out of productive activities, and this marks a shift of zeitgeist as well as academic interest away from the focus on identity formation through consumption of recent years.

Crawford and Sennett point us to the virtue and honor associated with certain kinds of skilled jobs. Such virtue can also be seen in public service jobs—the virtue not only of doing a job well but also of contributing to a common purpose.

It is also true that to glorify the private sector over the public ignores all of the problems of unfettered pursuit of private gain—the perverse incentives and negative externalities that can be, and sometimes are, produced—and we need look no further than to the recent devastating effects of rampant competition in mortgage products.