Book of the Month

If you don't fix a problem , the problem doesn't get fixed

by Flavius 2/3/2012 - 12:51 am

 

Dean Baker , Beat the Press Tuesday

                   The piece (in the Washington Post-Flavius) also includes a number of assertions that are unsupported by anything. For example, it tells readers:

"But it is not clear that the measures [those proposed by President Obama]— or any others — could compensate for the factors behind the decline of the middle class, including the rise of nations with abundant cheap labor and the development of new technologies that allow companies to operate with far fewer workers."

Actually, the abundant supply of cheap labor could do much to make middle class workers wealthier if it were allowed to compete freely with the most highly educated workers in the United States. There is no shortage of smart people in China, India, and other developing countries who could train to be doctors in the United States. If we eliminated the barriers that make it difficult for foreign doctors who meet U.S. standards from practicing in the United States, it would  substantially reduce the pay of physicians.

If the salaries of doctors fell to European levels it would mean a dividend for the middle class (in the form of lower health care bills) of close to $100 billion a year, almost twice the amount at stake in extending President Bush's tax cuts to the wealthy. There would be comparable gains from opening up law and other high-paying professions to people from the developing world.

The reason that globalization has put downward pressure on the living standards of the middle class is that it has been deliberate policy under both Republican and Democratic administrations to force middle class workers to compete with their low-paid counterparts in the developing world, while protecting the most highly educated workers from the same competition. The predicted and actual result of this policy has been an enormous upward redistribution of income.

                                         ............................................

 

Kenneth Arrow ,Dec 1963  in the American Economic Review and  excerpted in Dagblog  Jan 23 2011

952

In competitive theory ……supply.is governed by the …return compared with the return …from the use of the same resources elsewhere. There is significant departures .in the case of medical care.   Most obviously entry …..is restricted by licensing. (which) restricts supply and...increases the cost.

A second feature is more remarkable. The cost of medical education …is high and….borne only to a minor extent by the student (The various subsidies which ) should …cause a fall in …price….(are)   offset by rationing through skilled limited entry to schools. …..955

The most striking departure from competitive behavior is restrictions on entry to the field. …

956

There is a second aspect in which the contrast with competitive behavior is…even sharper. It is the exclusion of….imperfect substitutes. The licensing laws ….do exclude all others form engaging in……….medical practice        

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If you don't fix........oops,that seems familiar. Anyway , while I'm repeating......  

Somebody said that it couldn't be done,
  But he with a chuckle replied
That "maybe it couldn't," but he would be one
  Who wouldn't say so till he'd tried

Oh, Lord- Edgar Guest. !

But in fact Guest was sort of right. Rather than saying it couldn't be done about controlling medical costs we shouldn't have said so till we'd tried  what Arrow suggested 48 years ago.

 ..

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This is the most succinct statement defining this issue I have come across:

The reason that globalization has put downward pressure on the living standards of the middle class is that it has been deliberate policy under both Republican and Democratic administrations to force middle class workers to compete with their low-paid counterparts in the developing world, while protecting the most highly educated workers from the same competition.

We continue to seek the lowest price for our purchases, ignoring the 'Made in China' or other country tag.  

(i.e.) Just like a consistent diet of fast food, which we know that by eating regularly will cause us to be overweight, culminating in negative health issues (diabetes, high blood pressure, heart disease, etc.) we don't stop.  

Both will culminate in destroying our bodies and economy. All caused by our choices to either remain ignorant of the facts and/or not putting forth the effort to secure positive change.

'If you we don't fix a problem , the problem doesn't get fixed'

Thanks for this Flavius. 

 

by Aunt Sam 2/3/2012 - 1:46 am

I've been sitting here at the keyboard puzzling over "deliberate".

 My belief about human nature is that we're a mixture of  charitable and selfish impulses.  In my religious youth I attributed the selfish ones to Original Sin from which only the Blessed Virgin Mary was exempt. Now I think no one is exempt, including for sure, me.

But similarly no one is exempt from the temptation to be kind. In The Screwtape Letters an apprentice devil is all pleased with himself when he report to old Screwtape that he's arranged for a couple to have an affair. "You fool" the Devil snaps, "don't you realize that Lust can turn into Love."   

So I found it hard to believe that even Republican leaders intend the disastrous consequences of this  policy. But I accept that the policy itself is deliberate even if it is justified for some of them  by ignorance of its downsides.

So yeah. Deliberate.

by Flavius 2/3/2012 - 11:25 am (re: Aunt Sam)

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