We spent on all pharmaceuticals in the United
States last year $260 billion. That means all those vaccinations to
prevent diseases, all those pills to treat diseases, all those pills to
cure them so we don't have to treat them anymore. We spent in all
branches of all our pharmaceutical suppliers, $260 billion. . . . Last year what did we spend in the United States on soft drinks? $121 billion.
You can't look at the problem
and say, "I want them to do more, better, faster miracles—and not
invest in research, not invest in development, and have those miracles
delivered to me free." It's unrealistic. And people know that about
most things. They do. Nobody expects that just because they've made
computers better they're going to give them to you free.
If we want to sit here and keep assuming we
should be fighting, and that we should be striving to spend less of our
intellectual power and our money on great achievements to come in
healthcare—that we should be fighting to make it a smaller piece of our
economy—I want to know what you want to make a bigger piece of our
economy. What do you want to see the future look like?
I think this debate shows a fundamental lack of vision, a lack of confidence, a lack of understanding of what's possible.
As noted earlier, Princeton economist Uwe Reinhardt bemoans the confusion and opacity surrounding health pricing.
Someone is doing something about that. The Surgery Center of Oklahoma has a public schedule of prices for common procedures. Furthermore, it has heard the term "competition."
It is no secret to anyone that the pricing of surgical services is at
the top of the list of problems in our dysfunctional healthcare system.
Bureaucracy at the insurance and hospital levels, cost shifting and the
absence of free market principles are among the culprits for what has
caused surgical care in the United States to be cost prohibitive. As
more and more patients find themselves paying more and more out of
pocket, it is clear that something must change. We believe that a very
different approach is necessary, one involving transparent and direct
Gee, Congress better act quickly, because if this approach catches on it might not be necessary to enact a health care takeover bill that channels vast sums to favored interest groups, and then where would our politicians be?
The discipline of venture financing and the winnowing
process of early stage failure are being skipped as politically favored
projects go directly to large scale project financing. New
constituencies whose survival depends on the uninterrupted flow of
federal largess are sprouting up like weeds, funneling a percentage of
that money back to the Congressmen who keep the whole thing going. The
antiquated theory that in order for a business or industry to be
sustainable it must create more wealth than it consumes is being
discarded in favor of the belief that if you fervently hope for
something good to come true, then it will.
[The FCC's] approach assumes that each customer should have only
one connection to the Internet (or perhaps two, one fixed and one
mobile), and this connection must provide access to everything. Why
should this be so? Perhaps a better model would be for every consumer
to have several connections, and for each of these to carry unique and
Is the FCC seriously thinking of applying openness obligations to
wireless, with its multitude of providers and exploding usage? If so,
why? And if this article were a diagram, an arrow would now point back
to [the] point [above].
In a fascinating article in City Journal, George Gilder describes a different route: how Israel's tech industry was in a decade transformed from a stagnant socialist backwater into a leader in invention:
Israel ha[s] achieved an economic miracle . . . . As late as the mid-1980s, Israel was a
basket case, with inflation rates spiking from 400 percent to nearly
1,000 percent by early 1985. As recently as 1990, Israel was a
relatively insignificant technology force, aside from a few military
and agricultural initiatives. Yet in little more than a decade, the
country has become an engine of global technology progress.
How? Read the article, or the longer version in Gilder's new book The Israel Test. Government policies were important, but not in the sense that the transition was micromanaged. It could occur only because policies that were blocking the creative genius of the society were reversed, largely through the efforts of Netanyahu abetted by U.S. Treasury Secretary John Snow.
It is a great story, and it has profound political implications. Who knew that:
Between 1967, when Israel took over the West Bank and Gaza Strip, and
1987, when the first intifada erupted, those two territories were one
of the fastest-growing economies on earth. GDP surged 30 percent a year
for a decade, the Arab population nearly tripled, six new universities
were launched, and Arab longevity jumped from 43 years to 74.
The article concludes:
[T]rue peace—and the promise of a decent life—lies waiting to be picked
up by those Palestinians and Israelis who are willing, and now
increasingly able, to invest in creation over destruction.
The FCC has followed up Chairman Genachowski's Monday speech on Net Neutrality by creating OpenInternet.gov, a place "to join the discussion about the important issues facing the
future of the Internet. . . . stay connected to all
[FCC] activities on the issue, and share
your thoughts and ideas on open Internet."
Sometimes things work out, usually when a government program such as DARPA is run by dedicated people who manage to stay below the political and interest group radar. But once "innovation" is outed, the results become fit for the Onion. Thus the strategy contains pork for every major interest group -- education, already lavishly funded with steadily worsening results, will get even more. Infrastructure of all kinds is part of the agenda -- roads, bridges, rail. Clean energy. Rural broadband - everyone must have 21st century connections. The government will train entrepreneurs (!!)
Three seems to be regarded as a lucky number. The strategy has three parts; the President wants to invest at least three percent of GNP in R&D; three key science agencies will have their budgets doubled; take three years to double the nation's supply of renewable energy; and so on. If there is any rationale for any of the goals or figures, it goes unstated.
There are no costs, no benefits, no trade-offs, no limits. Nothing about fossil fuels, which must remain the backbone of energy for decades, and of course nothing about nuclear energy! It is a wish list, not a strategy. It would be difficult to dream up a more effective way to stifle
national innovation than to commandeer our resources to promote
arbitrary plans which must be implemented by multiple bureaucracies.
Back in the real world: At a health care event a couple of months ago Billy Tauzin, head of Phrma, mentioned to former Majority Leader Dick Gephardt that data must be submitted to the FDA via truckloads of paper rather than in digital form, and that this is both wasteful and slow. Gephardt's response was that Congress is the agency that would have to fix this by allocating the resources, and Congress is very busy and much put upon by people asking for things, so one should really be sympathetic to its problems. He did not seem aware that his answer was ludicrous -- it was in essence that Congress should be allowed to be a bottleneck for everything because it has arrogated to itself control of everything, and that we should all shut up.
Tauzin noted that other nations all love pharmaceutical companies and keep asking "how can we build such as industry?" but even that rather broad hint was not enough to divert Gephardt from his Congress-centrism.
The OSTP strategy document envisions a leading government role in health IT. LOL! I propose that before being allowed to write a grand strategy on innovation, OSTP should be required to make a list of areas in which the government is acting as a drag on innovation -- and fix them. It can start with the FDA data issue. Then perhaps it can progress to more ambitious activities.
The funny thing is, the OSTP people are smart; they know all these problems as well as I do. But the dynamic of government has forced them to produce a distinctly weird document that no one of them would ever sign his or her name to as a serious intellectual product.
To repeat myself, we are increasingly government of the special interest, by the special interest, and for the special interest, and it simply cannot continue for much longer.
While I realize technology
has added many tools to the medical arsenal since the 1940s, the same
tools have been added to the veterinary arsenal, so that can't be all
there is to it. I have not seen any vet bills from the 1940s, but I am
sure that a cursory examination would reveal that the rate of increase
has risen in a normal manner that we would expect, while the rate of
increase for human medical care has skyrocketed.
My youngest son Matthew has a dog named Rusty. When
Matthew takes Rusty to the veterinarian, the vet can take a blood sample from
Rusty, put it in a computer peripheral beside his PC, which costs $1,000, get
the analysis in a few minutes, diagnose Rusty, and go on about his business. It
measures the same couple of dozen things that would be measured if you went to
a physician. Some veterinarians, in fact, send their samples to the local
hospital and put them through the same medical devices used for humans.
any case, the veterinarian can do this for Rusty, but he can’t do this for
Matthew. If he measured Matthew’s sample, that would be unlawful. And, if a
physician had this device in his office, he also couldn’t use it. That also
would be unlawful. The only people allowed to use these devices are working in
approved commercial clinical laboratories, and most of those laboratories would
not measure a sample if Matthew asked them to do it. But, there is an out.
Matthew can measure his own sample. If he does it himself, it is lawful.
Something needs to be done in medicine and the entrepreneurs and technologists
of the Telecosm are the exact people to do it.It involves moving diagnostic medicine into the hands of the
consumers—taking the diagnostic and technological tools of medicine and making
computer peripherals out of them, as well as making on-person monitors and
turning the Internet into an interpretive tool, so that the consumers of
medicine can evaluate the product that they receive and medicine itself could be
turned into a therapeutic industry competing on the basis of quality and price.
I was delighted to learn that Cato has put up on the Web all the past issues of Regulaton, starting back in 1977 when it was published by the American Enterprise Institute.
For all that time, Regulation has been a source of thoughtful analysis of government policy and programs, their successes and failings, and a consistent defender of markets and liberty. This archive is a mine of gold on a topics ranging from environmental policy to the financial crisis.
A legal argument is not the same thing as a policy argument, though, and as advocates become increasingly
concerned with the policy arguments, a problem arises: the principles of legal
advocacy are only partially applicable to policy advocacy, and in places where
they are not applicable
they can be misleading and downright harmful. Even so, when a problem shifts to
the policy arena there is a lawyers' reflex that "advocacy is
advocacy"-and this invites wholesale importation of litigation principles
into that arena.
The article was well-reviewed, as they say, and was at various times used in classes at Yale Law School and at Carnegie Mellon Management School. There are a few things I would change, but it holds up pretty well. What hasn't changed is the millions of dollars that people spend making the wrong types of arguments.
I was in great company, too -- on the cover with Richard Epstein and Timothy Muris:
On October 1, Cato will have a forum on The Criminalization of (Almost) Everything. The focus will be on Three Felonies a Day, a new book by civil liberties attorney Harvey Silverglate which points out the uncomfortable fact that "the typical American professional is likely unaware that he or she
violates federal law each day because of the breadth and dangerously
broad scope of the Code of Federal Regulations. As a result, scores of
people—doctors, lawyers, journalists, businesspeople—are vulnerable to
sudden, arbitrary prosecution."
It is an important topic. I wrote on it a decade ago in The New 'Criminal Classes': Legal Sanctions and Business Managers (1997), and things have certainly gotten worse since then. The problem is not only the criminal law, but the cascade of supposedly "civil" sanctions -- monetary penalties; property forfeitures; treble damages; punitive damages; debarments and franchise revocations; etc.
A point I made in Congressional testimony I gave in 1998 (to absolutely no effect) remains apropos:
punitive impulse is permeating environmental protection,
financial practices, government contracting, employment
relations, civil rights, health care -- every area of
government interaction with the society and the economy.
It is becoming a matter of Congressional habit, as serious
penalties are added routinely to every kind of regulatory