Kaun, D.E. (2015). Seeing the Future While Blinded by the Present. Solutions 6(2): 72-75. https://thesolutionsjournal.com/article/seeing-the-future-while-blinded-by-the-present/
Reviews Book Review
Seeing the Future While Blinded by the Present by David E. Kaun REVIEWING The Cost Disease by William J. Baumol
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hen browsing among the shelves at the local book store, The Cost Disease is apt to be a turnoff for those looking for an upbeat read. In a sense, this would be a serious error, and a daring reader would soon discover that in less than a century, “the amounts we can consume of virtually everything will have gone up about 700 percent.” Real income per capita in 2010, the time the book was written, was a bit over US $49k, implying a real income for our nottoo-distant ancestors of close to US $350k. Per capita! No, The Cost Disease (hereafter, CD) is not located in the Science Fiction section. Indeed, its primary author, Willam J Baumol, is a distinguished economics professor, currently at NYU, professor emeritus at Princeton, and come every October, among those mentioned as deserving of a Nobel Prize in economics. If, in fact, this were to come to fruition, then one of the major preoccupations in the advanced economies would be, namely, whether the cost of health care and other services would bankrupt governments and overwhelm their societies. On the face of it, no one is more qualified than Baumol in regard to the subject matter of CD. It was his pathbreaking 1966 work in cooperation with William Bowen that provided the basis for today’s CD. In the former, the authors presented what was an inherent dilemma across the industries in our society. Simplifying, if one
compares a live string quartet with the production of an automobile, pretty much the same number of players were on the stage over the past 150 years, while the number of workers on the “assembly line” has declined dramatically. That is, the productivity of the auto worker has increased dramatically, while the violinist’s not at all. If workers were paid on the basis of their productivity, auto workers would be doing extremely well, while string players not so well. Indeed, there would be none of the latter. The only way the violinist can afford to continue to perform is with an increase in pay. End of story in a sense. The cost of the automobile will decline over time and the concert ticket will rise inexorably. While an obvious simplification, this is the essence of what was then called a “dilemma,” and has now morphed in to a “disease.” Professor Baumol, along with several others, has returned to the subject he so significantly raised more than half a century ago. Sadly, anyone familiar with the earlier work will find little of value in the “new” venture. For those new to the subject, the authors provide an excessive and overly detailed discussion of the health care industry, both in the U.S. and abroad (61 percent of the text). Given the discussions dealing with business services, terrorism, and the environment, there is little more than passing mention of both the arts and education, industries subject to the
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Yale University Press
dilemma, and both of core significance to the nature and well-being of our society. In a sense, the authors alert the reader to this situation in the subtitle, “Why Computers Get Cheaper and Health Care Doesn’t.” Alas, even accepting the alert provided by the subtitle, I found the work problematic in a significant number of ways. In addition to the incomprehensibly sanguine prediction about the future noted above, the book is rife with problems that distract, divert, and delude, far too many for the space allotted here. But by way of example, among the most problematic include the following:
Reviews Book Review 1. If I may coin a phrase, the book suffers from a Citation Disease. Thirty percent of the book is devoted to references, this for example in contrast to 13 and 21 percent respectively for two major, widely reviewed and extensive works, The Holocaust (Gilbert) and Fields of Blood (Armstrong). 2. There are several tables and charts throughout the book, a number of which are labeled either in a confusing or contradictory way, or simply not the actual table referred to in the text. The former include Figures 1.2 with the labels reversed; Figure 1.5 with health expenditures for the six countries virtually impossible to identify, and as listed, totally inconsistent with the text regarding relative growth rates; Figure 3.1 has the key in opposition to the data shown on the graph, and worse yet, its description has nothing to do with the reference in the text itself. 3. Chapter 11, written with Monet Malach, a clinical professor at NYU, is perhaps a classic in its specific detail per page. The chapter discusses 25 particular ways to reduce health care spending, often using technical jargon, all in the space of 24 pages, with the assist of 114 footnotes. 4. Finally, it’s almost as if the different authors weren’t quite on the same page, as the following vivid example suggests. Chapter 11 ends as follows: “…no matter what measures we take to improve efficiency and reduce waste in health care, we can expect medical care expenditures to continue to rise rapidly, as the cost disease mechanism grinds on.”
With the very next sentence opening Chapter 12 suggesting: “The picture that emerges in not so daunting. We can have it all: better health care, good education, and even more orchestral performances.” The list goes on, but I think the reader understands my frustration with the book. And it’s not as if Baumol seems totally devoid of realistic possibilities. Indeed, in the introduction, he does question the plausibility of the rosy scenario just introduced, recognizing that events, “wars, earthquakes, and a myriad other things that cannot be foreseen by anyone…” may significantly dampen such prospects. But if we can avoid the latter, as noted above, our descendants are going to have it seven times rosier than do we. It’s the seven times that I would argue is patently ridiculous. And, I’m pleased to say, I think I’m in good company. Not that long ago, a rather well-known economist, John Maynard Keynes, saw that same growth possibilities in a capitalist system, assuming the avoidance of wars and other unforeseen distractions. In his short but well known essay, “Economic Possibilities for our Grandchildren,”written in 1930, Keynes took on precisely the issues under discussion in the CD. That is, the implication for the future of continued economic growth, unimpeded by wars and other unforeseen external intrusions. As is the case with Baumol and company, Keynes saw the very positive benefits of even modest but compound economic growth. He writes that for the sake of argument, assume that we are all of us “eight times better off in the economic sense than we are today.” After some
discussion about the implications of such a situation, Keynes assumes that for the vast majority of us, our material needs will be satisfied. He writes: “We shall be able to rid ourselves of many of the pseudomoral principles which have hag-ridden for two hundred years by which we have exalted some of the most distasteful of human qualities…we shall be able to afford to dare to assess the money motive at its true value….a somewhat disgusting morbidity…which we hand over with a shudder to the specialists in mental disease… …We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the filed who toil not, neither do they spin. But beware. The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair, and foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.”1 For Keynes, the date when we will have in a significant sense solved the “economic problem” is on the horizon, in 2030- only another 15 years from now. As noted, he did offer a similar set of qualifications regarding war and other unforeseen events as is evident in Baumol’s writing today.
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Reviews Book Review Based on projections of the Economic Research Service, GDP per capita in 2030 will be US $70,000 in the United States, but for the entire world, a mere fraction, at 15 percent. I think it’s fair to say, that at least for much of the developed world, Keynes is probably closer to the mark than Baumol and his collaborators. However, in considering the realities of our seeming inability to avoid war, the perfectly understandable desire on the part of much of the less than fully developed world to emulate the affluent west, along with what is becoming more and more apparent with respect to the environmental limits to growth, neither of these rosy scenarios should offer excessive optimism for our future. In a sense, given the ever increasing tensions around the world, coupled with our relatively recent understanding of climate change, one might be willing to give Keynes a pass. It’s a good bit more difficult to account for Baumol’s sanguine perspective. Finally, and in an effort to diverge from the “gloomy science” of most of my kin, a bit of “upbeat” optimism can be drawn, ironically, from the excess of our present system. Data for 2011 indicates that total U.S. health expenditure as a percentage of GDP was 17.7 percent, as compared to an average of 10.5 percent for the next nine countries, based on per capita health expenditures. In other words, the U.S. spends about 70 percent more on health needs per citizen than literally every other wealthy country in the developed world. If health standards in the U.S. reflected a similar disparity, one may argue that the price we pay is worth it. The opposite is the case, as indicated in a 2010 study by the Commonwealth Fund:
401(K) 2012
The authors of The Cost Disease discuss at length the rising costs of health care, particularly in the United States.
“Despite having the most expensive health care system, the United States ranks last overall compared to six other industrialized countries— Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom—on measures of health system performance in five areas: quality, efficiency, access to care, equity and the ability to lead long, healthy, productive lives…the U.S. stands out for not getting good value for its health care dollars, ranking last despite spending $7,290 per capita on health care in 2007 compared to the $3,837 spent per capita in the Netherlands, which ranked first overall.”2 The reader might well ask: what is upbeat about this situation? The answer is relatively simple. In the CD, Baumol focuses on changes in spending and not levels. The former
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are indeed destined to rise; it’s the nature of the beast. But with a more rational system, one widely available in nations all around us, Baumol’s projection of a rise in health spending from 15 to 62 percent of GDP over the next century can be significantly moderated. The extent of such moderation is surely unknown. After all, we are dealing with an imprecise as well as dismal science. References 1. Keynes, John Maynard. Economic Possibilities for our Grandchildren. AspenInstitute.org [online] (1930). http://www.aspeninstitute.org/sites/default/ files/content/upload/Intro_Session1.pdf. 2. Davis, K., C. Schoen, and K. Stremikis. Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update. The Commonwealth Fund [online] (2010). http:// www.commonwealthfund.org/~/media/files/ publications/fund-report/2010/jun/1400_davis_ mirror_mirror_on_the_wall_2010.pdf.
Reviews Media Reviews One Woman Greening Fashion by Maisam Alahmed The influence and impact that the fashion industry has on this world is no secret. However, few know the tremendous amount of pollution created by the fashion industry, and even fewer realize its extremely harmful impact on the environment. The industry that dictates the style of this generation is posing a threat to future generations and to this planet as a whole. Regardless of how seriously you take fashion or whether you are against having Vogue magazine and such dictate what styles are ‘in’ and
what are the ‘must-haves’ of the fall collections, our choices of clothing are contributing to the pollution of our planet and we are, sadly, behind it. Goldie Francesca Abony, a woman with a passion for fashion, has found a suitable solution that is green and does not have to cost one their sense of style or their love for trends. With a goal in mind to save the planet and to preserve the fashion world, Goldie has recently launched her own fashion blog, I Love Goldie, to promote environmentally friendly fashion ideas and inspirations. Through her various blog posts, Goldie aims to encourage consumers
to choose brands, labels, and products that are produced by eco-friendly industries, and to force fashion industries, such as modern textile industry—a big source of greenhouse gases—to change their policies. Goldie believes that we consumers can control the promotion of every industry from which we choose to buy. “After all, as consumers we have the power to vote with our dollar and ensure that the right brands and practices are in vogue,” she states in her message to the world. “Choose aesthetics that go with your ethics!” Visit the blog at: http://ilovegoldie .com.
Rainforest Action Network
The fashion industry has a significant negative impact on the environment. Abony’s blog promotes environmentally conscious brands. www.thesolutionsjournal.org | March-April 2015 | Solutions | 75