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Tag Archives: Government

Healthcare: Ask The Wrong Question, Get The Wrong Answer

“There’s a sucker born every minute.”
-P. T. Barnum

Engineering Thinking teaches us to challenge our assumptions, because if they are wrong, then our subsequent analysis and decisions will be wrong.

The healthcare challenge — it is commonly assumed — is this: how can the government best ensure that the weakest members of society receive adequate health care?

This is the wrong question. The reason it is wrong is that it is based on the flawed assumption that the government should be making our health care decisions. As discussed previously (see “Feedback, Prices, And Sullen Spouses“), the government is inherently inefficient, and is therefore the last organization that one should ever select to provide a service.

But what is the alternative?

First, remove health care from the tasks assigned to governments at all levels: federal, state, and local. This will substantially eliminate the tremendous waste of dollars caused by having inefficient bureaucrats positioned between patients and their doctors, and — just as importantly, if not more so — eliminate the moral hazard created by providing “free” services to those who may not deserve them, at the expense of diligent and hard-working taxpayers.

So who takes care of the poor, the unlucky, the out of work?

We do. But we do it through our local communities, through our churches and charities and civic associations. This was done before the advent of Big Government and worked well (see “What Would Happen If The Government Didn’t Take Care Of Us?“), and it can work well again. Local communities will be able to evaluate best who deserves help and how much and on what terms, eliminating the moral hazard. The rest of us will continue to pay for our own medical coverage. Government’s function will be reduced to its proper function, that of ensuring that insurance companies operate transparently and honestly in a competitive environment.

Does this sound simple? It is simple. Politicians and their special-interest allies (whose prestige and livelihoods depend on fooling you into providing your tax dollars for their grand and impractical ideas) would prefer that you think that all of this is too complex for you to understand, and that fairness can only be assured by putting your faith in the government.

Are you not yet convinced of my analysis? If so, I doubt I can change your mind, and respect your right to your opinion. But I would ask you one question:

Have you ever been asked by a relative or a friend for a favor, such as loaning them some money? If so, I’m sure that you based your decision on your personal knowledge of that friend or family member. But what if someone on the other side of the country that you don’t even know asked you for a loan? Would you give it to them? No? Then why on earth are you so willing to give your tax dollars to anonymous bureaucrats to give to anonymous people who may or may not deserve those hard-earned dollars?

-Ed Walker

 

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The Economic Literacy Of The GOP Presidential Primary Candidates

As mentioned previously (It’s Just A Systems Thing: An Engineering Thinking Review Of Government As A System), there are compelling scientific reasons to minimize the size and functions of the federal government. Which of the GOP presidential primary candidates best seem to appreciate this?

(Quotes paraphrased):

Newt Gingrich: “I’m a really fascinating and smart and brilliant guy.” Newt thinks he can dream up unique ways to make the federal government run better.

Mitt Romney: “I’m a really fantastic business manager.” Mitt thinks he can manage the federal government better.

Rick Santorum: “I know how to work with Congress to get things done.” Rick thinks he can get congressional representatives to work together to better run the federal government.

Jon Huntsman: ” — おれや分からないスよ.” (Jon likes to speak Mandarin; not sure what he thinks about the economic role of the federal government.)

Rick Perry: “My goal is to make the federal government as inconsequential in your lives as I possibly can.” Rick wants to shrink the size and power of the federal government.

Ron Paul: “The federal government is out of control and we must cut its budget by a trillion dollars.” Ron wants to shrink the size and power of the federal government.

There are many issues to consider when electing a president, but if the economy were the only one, then Rick Perry and Ron Paul are the only candidates who have clearly expressed an understanding of the inherent limitations of government. The other candidates, typical of those with over-sized egos and/or a lack of understanding of basic economics, suffer from the delusion that — if only they were in charge — the federal government would finally be able to do grand things.

-Ed Walker

 

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What Would Happen If The Government Didn’t Take Care Of Us?

As discussed previously, (e.g. “Feedback, Prices, and Sullen Spouses“), the federal government is not, and cannot be, an efficient provider of goods or services. Yet, some folks ask, what would happen without it? Wouldn’t the poor starve?

No. And here’s one of the best and most concise summaries of why this is so: “America Before The Entitlement State” (by Yaron Brook and Don Watkins, 18 Nov 2011 Forbes.com).

Excerpt:

“After all, the world before the twentieth century–before the New Deal, the New Frontier, the Great Society–was a dark, dangerous, heartless place where hordes of Americans starved in the streets.

“Except it wasn’t and they didn’t. The actual history of America shows something else entirely: picking your neighbors’ pockets is not a necessity of survival. Before America’s entitlement state, free individuals planned for and coped with tough times, taking responsibility for their own lives.”

-Ed Walker

 

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More Thoughts On Forcing The Rich To Pay “Their Fair Share”

As mentioned previously, the quality of our decisions is largely dependent upon their underlying assumptions (see “Why Can’t We All Just Get Along“). If our assumptions are wrong, then any subsequent analysis will very likely be incorrect. This post examines assumptions about wealth, and suggests how popular notions based on incorrect assumptions can yield grossly incorrect conclusions.

A lot of folks today (based on sensational news reporting of the Occupy Wall Street “movement”) seem to think that it is morally wrong and unjust for some of our fellow citizens to have more income (or more wealth) than we average folks do. So let’s apply some engineering thinking and see just how upset we should be at the rich, and whether or not we should make them our slaves. You can do your own analysis, but here are some things for the Wall Street Occupiers to consider:

1. Do you understand the difference between income and wealth? Income is the flow of money to an individual based on their work (or from investments, which flow from prior work effort, or perhaps due to inheritance or luck). Income does not stay resident in a rich person’s home (assuming they don’t burn their money or stuff it under a mattress), it largely flows through them to other folks who provide goods and services. This is why average folks like to be located near wealthier folks; so they can be closer to the flow of money.

Income, if not squandered, can also accumulate through savings and investment in wealth (real estate, money in the bank, autos, jewelry, etc.). Wealth can also be inherited, or obtained by luck (Wow! I won the lottery!), but wealth is much more likely to be obtained by many years of sacrifice and hard work.

Okay, so if you want life to be “fair,” what would be a fair way of taking the extra wealth or income from those folks who have more than you or me? How do you account for the effort and risks they have applied to their lives? What if they were just lucky? (If you won the lottery, would you like the government to redistribute it to everyone else who was not as lucky as you?) If you have a student loan, should wealthy folks who paid for their loans also pay for yours?

2. Do you understand that rich and poor people, for the majority of cases, are not stuck in those positions? Rich people frequently lose their wealth through bad business decisions or bad luck, while poor people frequently obtain great wealth due to hard work or luck. The important point is that “rich” and “poor” are typically not static; they change dramatically with time. Someone rich (or poor ) today is often poor (or rich) tomorrow. So how do you define “rich”? Is it someone who today has more than you or me, or should we take into consideration how long they’ve had their wealth? After all, we should be careful to be completely fair before we make someone our slave.

3. With regard to forcibly taking money from the rich to give to ourselves (via the federal government), how do we justify this? As described previously (“Why PIzzanomics Is Immoral“), government services are no different than any other service. But if we decide that rich people should pay more than you and me, then why shouldn’t they always pay more? When a wealthy person hires a plumber, shouldn’t they pay two or three or more times as much for having their leak fixed? But if so, who should determine the added amount, and how much should it be?

The decision to make someone our slave should be carefully considered, because — at least for now — they aren’t completely our slave, because they can leave. And (although the government doesn’t publicize it) this is happening: millions of Americans are leaving, fed up with being slaves, and they’re taking their money, talent, and job-creating abilities with them.

So who do we get to make our slaves, once they have all gone?

-Ed Walker

 

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ET EXTRA: Is Social Security A Ponzi Scheme?

fire Engineering Thinking Extra Is A Short Review Of A Current Hot Topic
 
 
 
Analysis: Using the generally-accepted definition of a Ponzi Scheme from this article…

The Williams plan to avert Social Security disaster” by Walter Williams, 10/03/11, washingtonexaminer.com

…and considering the following data from the article…

According to a 2002 Congressional Research Service report titled “Social Security Reform” by Geoffrey Kollmann and Dawn Nuschler, workers who retired in 1980 at age 65 got back all they put into Social Security, plus interest, in 2.8 years.

Workers who retired at age 65 in 2002 will have to wait a total of 16.9 years to break even. For those retiring in 2020, it will take 20.9 years. Workers entering the labor force today won’t live long enough to get back even half of what they will put into Social Security.

…then yes, it is reasonable to refer to Social Security as a Ponzi Scheme.

-Ed Walker

 

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Paying Their “Fair Share”: Should The Rich Be Our Slaves?

As mentioned in a recent post (“Where Is Eliot Ness?”), making decisions based simply on public pronouncements is extremely difficult, because such pronouncements are often false and misleading.

Today, for example, we hear a lot of talk about “the rich” needing to pay “their fair share” in order to reduce the U.S. deficit.  If you accept that statement at face value, it implies:

1. The rich are not presently paying their fair share.

2. Taxing the rich will reduce the deficit.

3. Taxing the rich is acceptable because they have more money than we do, and it is morally okay to take it from them and give it to the rest of us.

Even though all of the above implications are arguable, “the rich need to pay their fair share” is spoken as though it is gospel, a classic example of evoking powerful emotions (primarily envy) that bypass the brain, in order to dishonestly advance a policy position.

What can be done? Demand serious discussion based on evidence and logic. Write your congressional representative, compose a letter and send it to the editor of your local newspaper, stand up during a town hall meeting and respectfully challenge talking-point blather, or express your views (with careful research and analysis) in your own blog.

-Ed Walker

 

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ET EXTRA UPDATE: Man-Made Global Warming? Apparently Not

Scientists at the CERN particle-physics laboratory in Geneva have recently presented results that tend to confirm that the Big Gorilla affecting the earth’s temperature is — the sun. The results appear to be based on good science, and accordingly have created a commotion amongst the “man is causing global warming” crowd that appears to be motivated more by a lust for government money than the search for the truth. (Also see the earlier ET post, “Globaloney Warming,” and “Global Warming” in the 3rd Quarter 2008 DACI Newsletter).

A nice summary of the reactions to the CERN results can be found here: “Sun Causes Climate Change Shock” by James Delingpole, 27 Aug 2011, The Telegraph

-Ed Walker

 

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Where Is Eliot Ness?

Eliot Ness, the lawman best known for his major role (1927-1931) in taking down Chicago mega-gangster Al Capone, was known to be incorruptible, as were his hand-picked team members (known as “The Untouchables” because they could not be bribed). Ness also helped clean out the highly corrupt Cleveland city government, weeding out over two hundred crooked police officers and public officials.

So why is ET talking about Mr. Ness? Because integrity is essential, not only for upholding the law, but also for making good decisions.

IF THE INFORMATION WE USE TO MAKE DECISIONS IS CORRUPT
THEN OUR DECISIONS WILL BE WRONG

Engineers know this. We simply cannot do our work without accurate and reliable data. If it’s discovered that an engineer has falsified data, or engaged in any other deceptive behavior, they are (in my experience) always fired. Integrity is mandatory for an engineering professional.

One of the most important decisions we make is whom to elect to represent us in our federal and local governments. If politicians seeking office were subjected to an engineering design review, it would be a straightforward process; i.e. the “spinners” (liars) would be detected and rejected. Unfortunately, the method we use to select politicians is hugely corrupted by bad data, and here’s a major reason why:

You may be aware, in watching or reading the news, that politicians (or their allies in the media) often use exactly the same phrases. e.g., “taxing the rich,” “shared sacrifice,” “pay their fair share,” “balanced approach,” “drive the economy over a cliff,” “the extreme right wing,” etc. The reason these phrases sound like they are all part of a chorus is that, well, they are. “Talking points” (emotionally-laden and focus-group tested phrases) are distributed to all like-minded politicos and their friends, who repeat them at every opportunity. The idea is that the average person, upon hearing the same viewpoint expressed by many supposedly independent sources, will conclude that the viewpoint must be true.

But talking points are not based on the search for truth, they are based on the search for votes, and are simply propaganda, sometimes blatant, sometimes subtle. To the extent that the intent is to make you believe something is true when the speaker knows it is not, they are lies. Unfortunately, they are very effective, and they are extremely destructive; not just because they are false and misleading, but because they very often appeal to our worst nature (e.g. encourage us to be envious of those who make more money than we do, a position that is neither logical or moral (see “Is The President’s Reason For Taxing The Wealthy Logical?“; “Is The President’s Reason For Taxing The Wealthy Moral?“)).

Can we clean this up? Are you today’s Eliot Ness? Are you an Untouchable, the man or woman who cannot be bribed, who will always tell the truth? When you hear a politician utter an emotionally-laden smear, will you speak up and challenge them? Will you change careers or come out of retirement and run against the liars, so we can rid them from our government?

Please step forward, we need you.

-Ed Walker

 

 

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The Government’s Policies And Our Economic Crisis

Engineers review past evidence and build from there; they try not to reinvent the wheel. As mentioned previously, there is ample historical evidence that indicates recessions/depressions — although they can be severe — typically last no longer than about a year, provided the government does not implement anti-business legislation and regulations.

Image: Dali’s “The Average Bureaucrat”

This last statement above is considered by some to be controversial, but to the best of my knowledge it really isn’t: the data are there for everyone to review. The doubters point to the Great Depression (the last one, not this one) and claim that President Roosevelt helped guide the country through the extraordinarily long 10-year downturn. The evidence, however, says that President Roosevelt’s “New Deal” was actually the villain in the story, because his anti-business policies helped extend what would have been a typical downturn of a year or so into ten long years of economic agony.

For an example of this thesis, see “FDR’s policies prolonged Depression by 7 years, UCLA economists calculate,” by Meg Sullivan, 10 Aug 2004. Excerpt: “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

So what’s the prognosis? Based on the historical record — and also on analysis that strongly indicates that governmental attempts to manage the economy are destined to be highly ineffective or even counterproductive — we can expect a lousy economy (high unemployment, sluggish or no growth, an erratic stock market) until the Obama administration reverses its anti-business policies, or until we have a new pro-business administration in 2012, whichever comes first.

The good news is that, once new policies are in place, the economy can recover quickly. If we persist with the present policies, however, be prepared for many more years of economic turmoil.

-Ed Walker

 

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Feedback, Prices, and Sullen Spouses

To ensure that a desired result is achieved, engineers design systems that measure the system output and compare that output to a reference value. If the output does not match the reference — if there is an error — the system adjusts itself to minimize the error. This type of system, one that samples the output and feeds it back to the input for comparison and correction purposes, is called a feedback system.

As an example of a feedback system, consider the system that consists of you and your automobile, zipping along on the interstate with a police cruiser not far behind. To make it in time to a very important interview for a lucrative new job, without getting a ticket, you plan to accurately drive along right at the speed limit. Visual feedback from the speedometer tells you the system output (speed) and whether or not you are traveling above or below the limit. If an error occurs (whoops, going a bit too fast), your brain sends a signal down to your foot to ease off of the accelerator until the speed is reduced to the limit. This feedback loop, from output (as measured by the speedometer) to your brain to your foot to the gas pedal, maintains your car at the desired speed.

Now imagine that the feedback path is broken; e.g. your speedometer suddenly quits working and always reads zero. In this case you rely on a secondary feedback path, the passing landscape, and estimate your speed. Since it’s only a rough approximation, however, you’ll play it safe and drop your speed a few miles per hour to be sure that you are under the limit, although this might make you a bit late.

But what if it’s a dark night with no moon and your headlights fail? You now have no feedback, and are forced to stop, ruining your chance for the new job.

As feedback decreases,
inefficiency increases.

Because of its extreme importance, feedback is used  everywhere. In many cases, as in the example above, sensors provide feedback to human operators, who act on that feedback to achieve the desired results. In many other cases feedback is completely automated, without any human intervention at all.

Feedback is applicable to social organizations as well. Many commercial organizations exist for the purpose of providing goods or services to the population. These companies receive feedback from their output (how much they sell) and then adjust prices accordingly. A “price discount” in this case is analogous to the accelerator in the auto example, and sales is analogous to the speed. If sales are down, a company will step on the accelerator by offering higher discounts in order to increase sales.

Likewise, individuals who work for private companies experience feedback in the form of salaries and promotions based on their work efficiency. Slackers tend not to be paid as well, if they remain employed at all.

At the personal level, a spouse who provides quick feedback about their partner’s perceived inappropriate behavior will reap the rewards of a much more efficient and positive relationship, than one who remains mysteriously and sullenly silent.

Large bureaucratic systems, such as the federal government, are the least efficient organizations for providing services, because (like a sullen spouse) they do not employ effective feedback. In fact (unlike the sullen spouse), bureaucratic systems have no choice — their very nature precludes the existence of meaningful feedback.

In other words, there is no output/price feedback. Consumers cannot chose Federal Government A over Federal Government B because A charges less for services than B; we are all forced to “buy” government services from a single monopolistic federal entity, under penalty of fines or imprisonment if we don’t.

Although governments don’t have output/price feedback, one could argue that they do have feedback from elections (and sometimes in the interim from noisy constituents). However, the time lag between governmental actions and subsequent voter response on election day is so large as to render the normal benefits of feedback almost moot. Indeed, as we’ll show in an upcoming post, a time lag can create system instability, or even the opposite of the desired result.

If one accepts the fact that quick feedback is essential for efficient and accurate results, then an important Engineering Thinking conclusion is this:

 Regardless of the Intentions or Talent or Compassion
or Political Beliefs of the Individuals Involved,
Excellent Results Are Much More Likely to be Achieved by
Individuals or Organizations That Employ Effective Feedback.
Poor Results Can Be Expected from Those That Don’t.

-Ed Walker

 

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