It’s Time to Release the Kraken … of Competition

It’s Time to Release the Kraken … of Competition

Repeal? Replace? How About Step Aside and Let Entrepreneurs Work? Especially in Healthcare.

Do you remember the great chewing gum crisis of 2005? When chewing gum cost $367 a pack on average, was only available in two inconveniently located stores, and tasted like sawdust? Of course you don’t, because it never happened. That is because the production and sale of chewing gum is left largely to market forces: supply, demand, innovation, and, ultimately, consumer choice.

Healthcare and health insurance are more complex than chewing gum to be sure but that is an argument for decreasing the government’s role in it, not turning it over to distant, unaccountable bureaucrats and, perhaps worse, politicians jockeying for position in the next election.

I am already on record with my own business plan, a mutual insurer offering combined life-health-disability policies that can begin in utero. I think it will work, but I do not know for certain. Other social entrepreneurs, like the trio of Amazon, Berkshire, and Bank of America, have their own plans, equally uncertain. Health insurers and healthcare providers, like Sanford in the Midwest, also have ideas percolating. The only real test is to offer rival plans to consumers and see which they prefer.

Right now, health insurance entrepreneurs are almost completely stymied by the dictates of the Affordable Care Act (ACA). Idaho is attempting to sidestep ACA but potential insurance entrepreneurs know that a state government cannot readily protect them from the federal government. (Look at how the Feds stomped on Colorado marijuana sellers by denying them access to the banking system.)

What entrepreneurs need is a credible commitment by the federal government to allow them to experiment with health insurance and healthcare delivery systems for the next 10, 15, or 20 years. That would require passage of a law requiring healthcare organizations to pay the same taxes on the same basis as their peers but otherwise giving them free reign to experiment in an environment that no longer favors employment-based group health insurance. 

Releasing the Kraken of competition will allow providers, insurers, and consumers to negotiate with each other directly, rather than via the government. If market forces are truly allowed to determine the results, they will almost certainly be better than ACA or any single payer or universal health system. If they are not, the political path to some system of socialized medicine in America should be clear. Before America goes down that likely irreversible path, however, it needs to do something that it hasn’t done since World War II, allow consumers to decide what type of healthcare and health insurance they want without distorting markets in favor of the largely pernicious employment-based variety.

What about the impoverished? It is quite possible that (social) entrepreneurs will find a way to adequately meet their healthcare needs, just as they do their needs for clothing, entertainment, food, refrigeration, transportation, and, yes, chewing gum. If not, the proper policy is to provide vouchers and let them decide which healthcare and insurance plans work best for them.

I call my proposal the Kraken, a mythical sea monster of mammoth proportions, to invoke the power of markets to destroy the old and thereby make room for the new. The Kraken of competition is indeed scary but it never destroys wantonly or capriciously. Rather, it directs its wrath at the weak and inefficient, at the institutions and practices that have made our healthcare and insurance system the wreck it is today.

Let's Value Quality Activist Scholarship as Much as the Traditional Variety

After the Great Debacle of 2008, I decided to connect my scholarship more deeply to the real world because the people in charge, who ranged from close to clueless to utterly useless, clearly needed help. I left the Stern School of Business for a more policy-oriented position in South Dakota, began writing policy history, and joined the board of Historians Against Slavery (HAS), an international NGO dedicated to using scholarship to help reduce the number of people enslaved in the world today. Subsequent events, including the Citizens United decision in 2010 and the 2016 election results, have only strengthened my conviction that America’s policy-making apparatus bears a striking resemblance to a toxic stew of incompetence and venality.

Other scholars have also decided that they can no longer remain on the sidelines. Joining the hundreds active in HAS are hundreds of others affiliated with the Tobin Project, “an independent, non-profit research organization motivated by the belief that rigorous scholarship on major, real-world problems can make a profound difference” and “improve society.” Named after James Tobin, recipient of the Nobel prize in Economics in 1981, the Tobin Project won the McArthur Award for Creative and Effective Institutions in 2013.

My goal is not to lure out researchers who desire to remain in their ivory towers conducting traditional forms of scholarship because I, like most scholars, believe that the pursuit of knowledge for its own sake is a noble endeavor. Rather, my goal is to induce ivory tower-types to: first, not stand in the way of those of us who would like to address real world problems in direct, yet scholarly, ways; second, ask themselves if they actually pursue knowledge for its own sake or if they merely engage in intellectual self-titillation.

On the first point, I have heard too many promising scholars say that they would like to try to improve the world but they cannot work on that right now because their chairs, deans, or provosts expect them to push out articles or books if they want tenure. If they dare push back, they are met with malarky about metrics, standards, and other bureaucratic detritus. If department chairs and other campus administrators cannot discern the quality of their own faculty without outside crutches like ‘journal ratings,’ they ought to step down, or at least aside, and leave the decision to those who are unafraid to make difficult judgements.

Many tenured professors also feel pressure to conform to the dictates of administrators and churn out ‘scholarship’ that few will read but that will raise their department’s ‘ranking,’ as if a number based on essentially nothing matters while people needlessly suffer and die, the environment deteriorates, and institutions of higher education degrade. Again, almost everyone values those seeking knowledge for its own sake but I would like to see scholars who want to improve the world not be punished professionally for doing so, i.e., to enjoy the academic freedom they once did. As John Stauffer noted in a recent speech at the International Slavery Museum in Liverpool, the best historians long engaged in activist scholarship, as have important scholars in other disciplines, including John Dewey, the Lynds, and Robert J. Lifton, among many others who conducted research before the professionalization virus struck the academy, like the swine flu, several generations ago. In short, those who like the ivory tower should by all means stay up there but out of the way of scholars-activists like Sara Goldrick-Rab, who makes a telling distinction between scholarly activism and political advocacy.

I would also enjoin traditional scholars to introspect and ask themselves if they truly seek knowledge for its own sake or if they merely amuse themselves and a few acolytes. Veteran economist Steven Payson raises the same difficult question in How Economics Professors Can Stop Failing Us (2017), a scathing indictment of academic economics. The economics journal ranking system, he argues, is rigged in favor of the students and friends of superstars, most of whom simply churn out derivative mathematical models too abstract to represent any real economy, past or present. (Little wonder, then, at the events of 2008.) The emperor of economics has no clothes, Payson explains, because he is actually buck naked, not because non-economists lack the mathematical prowess to see his highness’s resplendent garb. Based on personal experience, casual conversation, and discipline-specific critical literature, I believe that Payson’s critique of academic economics also holds to some degree for other social science disciplines, history and the humanities, management, and even science and engineering fields.

Acknowledging the shortcomings of traditional scholarship, however, should not be taken to imply that all activist scholarship is worthy. The new subfield called the ‘history of capitalism’ is particularly suspect. Most historians of capitalism have an activist agenda, whether they openly admit it or not. They want to expose the flaws of capitalism (which they never define but basically equate with the status quo) to pave the way for financial reforms and reparations for the descendants of slaves. Their activist impulse is not the problem, though, their poor scholarship is. Most of the subfield’s canonical works have been heavily criticized by economic historians, like myself (The Poverty of Slavery, 2017), and economist historians, including most recently Eric Hilt (“Economic History, Historical Analysis, and the ‘New History of Capitalism’,” Journal of Economic History, 2017).

Contrary to common assumption, scholarship with any chance of improving the world has to be better, much better, than traditional scholarship. That is because its audience, so to speak, is reality, not a handful of self-appointed experts or the friends of the author’s dissertation adviser. To have any chance of improving the human condition, activist scholarship has to address real world problems rather than traditional academic questions, follow the rules of logic, and ground itself empirically as well as theoretically. (For an excellent recent example, see the 2017 Tobin Project volume attacking the Citizens United decision edited by Naomi Lamoreaux and Bill Novak, Corporations and American Democracy.) Even the best activist scholarship probably will never help anyone or anything, but it is far more likely to improve the world than is careerist work, like proposing marginal tweaks to some arcane ‘literature’ and getting it published with help from academic nepotism.

So let’s all endeavor to start valuing quality activist scholarship truly aimed at improving our deeply troubled world as much as we value scholarly work performed for its own sake, self-gratification, or professional advancement.

A note to my "progressive" friends ...

Progressives, lend me your ears!

Yeah, you have every right to be upset with the state of the nation and the world and kudos for trying to change it. But here's the thing. Waiving your arms at "capitalism" isn't going to accomplish anything useful. For starters, nobody agrees what capitalism even means. It has become a catch all for "scary stuff I don't like," much the way that "Glass Steagall" became some kind of supposed super regulation after the Panic of 2008. Most of you have no idea how financial markets and intermediaries work and hence have no clue about which regulation(s) might be better than others and you wouldn't know adverse selection from moral hazard.

To have any chance of changing the world for the better, you have to understand it first! If you blog, tweet, even snap, crackle and pop to the same few (hundred, thousand, million) like-minded people, you're just pandering to a base, not effecting positive change. If you don't have the analytic skills and knowledge base to critique a system in concrete terms, you have no intellectual basis for calling for the eradication of this, or the regulation of that.

Until you understand some economics (theories as well as institutional details), please stick with human rights issues. I hate to have to criticize the thoughts of friends and colleagues but feel I must when they start talking out their you know whats. If you agree and want to learn more about economics, the financial system, public policy, and so forth, feel free to start here.