Industry Sans Management and the Healthcare Debate

In a short exchange discussing my incomprehension of a leftist blogger’s claim that management was unnecessary. I have come up with a possible answer as to why a person might consider this reasonable and it ties in with notions of why the left might find government healthcare more palatable than the right. The offending quote, as a reminder was as follows:

It quickly became clear that I was the only person even remotely on the left. And it wasn’t simply that the others disagreed with me; they couldn’t even understand me. I remember us discussing a scene in Invisible Man where a factory worker brags he’s so indispensable that when he was out sick the boss drove to his house and begged him to come back, agreeing to put him in charge. When I suggested Ellison might be implying that labor, not management, ought to run workplaces, the other students (and the teacher) didn’t just disagree—they found the idea incomprehensible. How could you run a factory without managers?

As I pointed out in my original essay a realistic business that employs more than two to five people requires management. Many firms, HR service companies and general contracting firms for example, in fact are nothing but management. One way out is the model implemented by the Leninist implementation of Marxism, i.e., the state solution. Government, somehow, is seen as the organ supplying the management functions. A kinder, more modern, way of phrasing that term is that the left prefers statist solutions. Mr Swartz, I suggest, doesn’t suggest that management not occur. But instead prefers that all of management, namely HR, sales, procurement, and capital management be done by the state. This, I suggest, was why he discovered, he was the only one “remotely” on the left. Most on the left I presume in the US would balk at having the state take up all of these roles for all private industry. The eastern bloc experiment showed that giving that much power to a state, ignoring the asymmetries of the locus of information, and removing personal incentives to personally garner the fruits of one’s labour was a recipe for disaster.

Public healthcare moves us further in this direction, increasing the power of the state, ignoring asymmetric of information pools, and lessens the already too weak personal incentives in the medical industry complex replacing it with even weaker political incentives (which it might be added in actuarial situations never reliably calculate risk always preferring diminish risk to lessen costs today pushing the burden of the payment to the future). Public healthcare is not, by definition, socialism nor communism. It is an explicitly a big government, statist, solution, and shares that feature with the assumption of management by government noted above.

The “public option” version being touted by the Democrats right now isn’t even single payer. However, it is disingenuous to argue that is ultimately what many of them, including the President desire and in fact likely feel that this step will move them closer to their goal. The “keeping the private insurance companies honest” rhetoric is merely cover for what, I suspect, is their aim and the likely result. That is that the public healthcare option, which will receive much of its funding from a levy on private contributions to healthcare, will be in a position to provide unfair competition that will ultimately force the private healthcare industry out of the market and to eliminate them and thus arrive at single payer via acquisition of a monopoly.

Ultimately, if there is to be a solution to the healthcare cost situation it is my belief that it will in fact require large scale changes in how healthcare is provided. Increased bureaucratic and state involvement is not the route which will lead to more flexible and innovative approaches to how medicine is practised. Instead it will more likely entrench those practises which are now in place. Right now, medical insurance and practise is heavily regulated as it is, which in turn stifles innovation itself. It is unclear how cementing and fixing the processes more tightly to bureaucratic reigns will spur innovation, which should be a primary goal.

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3 comments

  1. Even single-payer healthcare is not government-run health care. It’s merely government-run health care coverage. Clearly, it would put the government in a position of somewhat greater power over health care… but not literally in a managerial position, unless you consider all clients managers.

    As you point out, single-payer isn’t on the table anyway. The public option is on the table but may not even make the cut. I don’t think fears of a slippery slope are warranted — the only way we’ll get single-payer coverage in the future is if the voters desire it. We should therefore make this decision based on what’s best for the country now and not based on overreacting to our worst fears about what may happen a long time down the road.

  2. Boonton says:

    Well actually we do have single payer healthcare, it’s called Medicare.

  3. Boonton says:

    Also Medicare might be seen as an extreme type of ‘public option’. As you may not be aware, Medicare is not free or automatic. When you turn 65 you ‘enroll’ in it and the premiums (I think they are about $65 a month) are deducted from your Social Security check. In theory if you could buy private insurance for less than that you might choose not to enroll (and some people do not enroll).

    Now obviously this premium is heavily subsidized. No private company could ever provide coverage for those over 65 at so little a month. Nonetheless, a market does exist in supplemental coverage (so-called Medigap). From this example we can conclude the following:

    1. A public option would not preclude private insurance.

    2. A public option could only preclude private insurance if voters opted to massively subsidize it so that its premiums could be far below market value such as Medicare….even then private insurance still would exist as a supplement.

    3. Since cost is a major concern in the current bill, it seems that the plan will NOT be subsidizing the ‘public option’ to Medicare levels (Medicare is so subsidized because of payroll taxes from workers). It’s existence, though, would test a pretty plausible theory about how health insurance markets work and would provide the option to either kill the public option in the future (by denying it subsidy) or expand it depending upon how well it works out.

    The management concern is a bit over the top. The original post about ‘running factories without managers’ didn’t seem to be taking the idea very seriously (it’s main focus was about the media, no economic organization). Let’s hope cap-n-trade doesn’t get passed or else Mark might have to start paying for all the straw men he likes to burn.