A Comment Worthy of a Post

In a comment to my “Two Paths for America” post, a friend made some interesting observations. Two of the points raised in those observations are worthy of this separate post.

“. . . the argument [whether collectivized healthcare is good or bad] will never be settled until America universalizes healthcare and we find out what happens here and in the rest or the world.”

There are two reasons this is incorrect. First, no matter what happens, there will be no counterfactual against which to measure irrefutably “what happened.” There will be no agreement as to what was proved by the experiment. [i] But, second, there should also be little doubt that if America “universalizes” (I prefer the term, “collectivizes”) healthcare, the rate of innovation of medical treatments and drugs will slow. [ii]  How much faster healthcare would have improved had America not collectivized healthcare would be the subject of interminable speculation; and multiple bias driven and confirming “empirical research.” (If sound theory and history tell us anything, however, the truth is that the rate of innovation will slow.) Similarly, if America does not collectivize there will be no way to measure how much more slowly healthcare would have improved had it been collectivized. Either way, we would see endless “studies” purporting to prove each side of the argument. This is why sound economic theory is the only way to make a reasonable judgment about how to proceed. The economic theories are good enough now to justify minimizing the degree to which the healthcare system is collectivized to the greatest extent politically possible. (This is not to say that there should be no collectivization. As I’ve conceded in prior posts, that bird has flown.)

“. . . that America subsidizes all the other ‘model’ countries universal health care programs, if true, is an unfair situation.”

Yes, it is unfair. Much of life is unfair. So what? The choice before America is whether to continue to reap the advantages of inventing new and better medical treatments and drugs at a fast pace or to slow the pace of improvements to medical treatments and drugs. Collectivizing healthcare would also mean forestalling the benefits of the advances that would be built on top of the deferred advances. I urge the country not to slow the pace of healthcare improvement any more than necessary despite the fact that it is unfair that other countries will not carry their fair share of the burden[iii]. (I don’t get the logic of pointing a loaded gun at my foot and declaring, “If you guys don’t do your fair share, I’m going to pull the trigger.”[iv])

Unfair assumptions of burdens are ubiquitous (check out the discussion at 52:25 of THIS OUTSTANDING TALK) and unavoidable if progress is to be made.  Consider what life would have been like had Steve Jobs never lived. His influence on the advancement of smartphone technology was tremendous. To be sure, had he never lived, smartphones would eventually have acquired features very similar to those that we enjoy today–but probably many years from now. It is probably fair to say, that had Jobs never lived, smartphones today would be comparable to those we had five years ago. (Compare specs[v], and consider all the apps that were not invented five years ago—and how many of today’s apps would be unable to function on an iPhone 5 had those apps been nevertheless invented.

Steve Jobs became fabulously wealthy. But consider the raw deal he got in return for the joy and productivity he bestowed on humanity. All inventors of today stand on the shoulders of all previous inventors in their fields. (For example, high-efficiency fuel injectors could not have been invented to replace carburetors had the internal combustion engine not yet been invented.) Jobs and Apple Inc. received a fraction of the income made by creators of all of the iPhone apps that were made possible by the platform his company created. But he received little or nothing for all the apps on other platforms that were inspired by his creations. Apple received only a small fraction of the value of the customers’ enjoyment of their phones—and most iPhone customers would have paid more if they’d had to. How much would someone have to pay you to forevermore use a five-year-old phone? Multiply that number by the number of smartphones in the world and figure out the percentage of that amount Jobs got paid. Outright piracy of Jobs’s innovations was commonplace around the world.

The innovations made possible by Steve Jobs rendered obsolete generation after generation of smartphone. Millions of those no-longer-cutting-edge phones wound up in the hands of much poorer people around the world, to their great benefit. Jobs and his company received none of the value of the entertainment and productivity that those people have enjoyed.

It is unfair that Jobs did not receive a greater share of the wealth he bestowed on the world. It is also unfair that America should foot most of the bill to fund innovation of medical treatments and drugs[vi] while also being the most charitable provider of foreign aid the world has ever had.

This is the tradeoff, however. Either America continues to bestow those benefits from the faster pace of innovation on its own citizens and all citizens of the world, or no one will. It is unfair. But we should do it anyway because no one else can, and it needs to be done. The more collectivist America becomes, the less able it will be to fill that role.

________________________________________________________________________________________

[i] It would be much like the continued debate about the effects of minimum wages. The weight of evidence against collectivized medicine could be as overwhelming as the weight of evidence against minimum wage, but the debate would go on.

[ii] See PART I and PART II of my posts about repealing and replacing Obamacare. Also note that Germany was the leader in medical innovation before it collectivized its healthcare systems.

[iii] It is equally unfair that other countries do not bear their share of the burden of defending Western (liberal) ideals. That does not mean that America should not continue to defend those ideals.

[iv] It strikes me this as similar to the logic people use to defend imposing tariffs on less expensive goods from other countries. “If you (foreign country) do not quit subsidizing our purchases of your goods (making the things we want and need less expensive), we’re going to pull the trigger.”

[v]

iPhone 5 iPhone 7
CPU         1.3 GHz dual-core 32-bit                              ARMv7-A “Swift” CPU                         2.34 GHz quad-core (two                                      used) 64-bit[3]
GPU         PowerVR SGX543MP3 GPU                         Custom PowerVR Series 7XT GT7600 Plus
Memory  1 GB LPDDR2-1066 RAM Memory 7              2 GB LPDDR4 RAM

Memory 7 Plus     3 GB LPDDR4 RAM

Storage   16, 32 or 64 GB Storage                  32, 128 or 256 GB

[vi] The same is true with respect to defense and disaster aid.

4 thoughts on “A Comment Worthy of a Post”

  1. Much of your argument rests, at least to me, on the premise that the pace of innovation will decrease if the USA does this. Is that actually true?

    Even accepting all of your assumptions, why would the epicenter of health care innovation not just shift to China and India? Both of those are developing countries with huge population bases and, for the most part, government structures set up more friendly to innovation than America is. Why not just let American citizens be the beneficiaries of this than the subsidizers? Obviously there will be a transition period when things may be less than ideal, but would not eventually be the outcome?

    The second objection I would raise is that the profit motive is not the sole driver of innovation. Humans are also motivated by charity, love of knowledge, and power; among other things. Most of the great advances in human history were achieved by individuals who were not motivated solely by the money they would make from it. As you say, Steve Jobs became ‘fabulously wealthy’. So the question becomes, would he have accomplished any less if he knew upfront that he could only have become half as fabulously wealthy? I mean, you did list a number of examples where Jobs did not benefit personally from his own inventions. Had he done so, he might have become twice as fabulously wealthy. Yet that did not stop him from innovating.

    Less profit = less innovation is a seductive assumption that is wholly unproven. Yes, zero profit = no innovation. But as long as innovation allows the inventor to achieve a greater level of fame and fortune than otherwise, or at least a greater level than the average in his society, I believe he/she will keep inventing and innovating. The actual examples of a proto-inventor saying, “yeah, I didn’t bother because I could only make 1 million instead of 2 million” are non-existent.

    As long as the health care system, whatever it is, allows for a certain above average level of profit, why will there not always be the same drive to innovation?

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    1. “why would the epicenter of health care innovation not just shift to China and India?”

      That is definitely conceivable.

      Which is the safer bet: America continues is long and proven ability to excel with respect to innovation and development (i.e., it does not completely communitize its healthcare systems) or China or India prove they are sufficiently stable enough and equally capable of replacing America in that role? More important, 1) why roll those dice, and 2) why shouldn’t we and the rest of the world want the innovation of three creative and productive players rather than two? The competition of three players will spur improvement better than the competition between two.

      It is pleasing to see that both China and India are making some of their markets more free and that they are reaping the rewards of doing so. Yes, “for the most part, government structures set up more friendly to innovation [than America is].” (I’m not aware they are more friendly to innovation than America is.) Their track records, however, are short and their internal problems are far greater than ours. There is little reason to rely on the assumptions: 1) They can step up, or 2) even if they were to step up, that they will remain standing, much less excel.

      “The second objection I would raise is that the profit motive is not the sole driver of innovation.”

      Not only do I agree with this statement, you could have copied and pasted similar comments from my previous posts. Theory and history reveals that when the opportunity for great profit is added to all the other human motivations to invent, people not only tend to invent more than they otherwise would, they gain the wherewithal to develop those inventions which they would not otherwise have. I concede that I cannot cite a particular study to establish the particular factoids you would want to see before you accept what appears to me to be so obvious. Hopefully you will find the factoids which will satisfy you on these points.

      “Why not just let American citizens be the beneficiaries of this than the subsidizers?”

      Because our attitudes, philosophies and morals tell us that freeloading is a bad idea. As JFK put it (during a visit to Houston, “We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”

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