A Union of Selfishness

The teachers’ unions are once again on the defensive, following the recent release of the much lauded movie, “Waiting for ‘Superman.’” The film, made by the same people that created “An Inconvenient Truth,” has fomented a surge of discussion on the woes of the American education system and, in particular, the dastardly effects of teachers’ unions.

The documentary highlights Michelle Rhee, the chancellor of the Washington D.C. public school system, as a paragon of what is right in education reform. Rhee, who recently sat down with The Washington Post for an interview, underscores human capital as the number one issue facing the system. In particular, she emphasizes teacher evaluations, pay-for-performance metrics, and tools to attract competent principals as key factors in improving underperforming schools.

Rhee could not be more correct in focusing on what are essentially competitive, free-market solutions to education’s woes. Unfortunately, as America is starting to realize, the teachers’ unions are standing in the way of the reform needed to help the country’s children. This battle has been all too clearly demonstrated in New Jersey, where the endearing Republican Governor, Chris Christie, has taken on the egocentric teachers’ union, heaping much deserved shame upon them for their inordinate selfishness. In a rousing speech (see video below), Christie bluntly countered the all-too-common argument that the unions add any value to society. The interest of the unions is not that of the teachers, who as he admits are mostly well intentioned, and certainly not that of the students, but solely of the union as a vested interest. Christie has continued his campaign against the obdurate unions in a recent political speech in Iowa, where he mocked the unions for their power hungry nature.

The issue is systematic of the market distorting effects that unions – or any consolidated power – have in industry. They often are founded with the notion of protecting a specific marginalized group, but quickly devolve into powerful and obstinate special interests that rarely help those they purportedly represent and always disrupt the industry in which they operate. Unions played a significant role in destroying the Detroit auto industry and have continued to drag America’s education system through the mud.

The problem is that the teachers’ unions not only prevent the best teachers from being favorably compensated and encouraged to excel, but also protect those “teachers” who are utterly useless. The infamous “rubber rooms,” which have been eliminated in New York City largely in name only, are a prime example of the harmful effects of these unions. Likewise, unions are often opposed to such logical and widely accepted business models such as merit-based pay. As The Economist points out, the DC teachers’ union turned down an offer from Rhee to double teachers’ salaries if tenure was removed and merit-based pay instituted. How such a refusal by the union helps the teachers – particularly the good ones – is questionable, but the harm done to students is palpable. A mock discussion, articulated by Christie, between a child and a parent sums up the foolishness of the unions,

To believe that, this is what you have to believe: Let's say your son comes home and he says, "Mom, Dad, I can't study. I can't study, I can't work, my grades are suffering, because you know, Mrs. Smith, she's not getting her pay raises. And it gets worse," he said, feigning whines. "She actually has to pay 1.5 percent of her salary for health benefits. I cannot focus. I cannot focus with that knowledge. Mom, Dad, stop the madness. Give this woman her raise and her free health benefits and I'll get all A's."

Ultimately, it is the schools and the students – and hence America – that suffer. The backward, selfish, and short-sighted policies of the unions sap resources that could otherwise help students. Instead, these resources aid the institutional structure of the union and the worst-of-the-worst teachers. If America wants to continue its growth and not see our children and economy continue to fall behind those of China and India, it is time to break the stranglehold that these partisan interests have on our schools.

It's a Jungle Out There!

The left – environmentalists in particular – have long had an affinity for the jungle. The majesty and biodiversity of unmolested nature have inspired generations on the left to protect the jungle from man’s adulterous hands. In response, the right has often scorned such appreciation as the sentiment of mere hippies and tree-huggers. The jungle becomes a battleground between conservationists and capitalists.

But while the left claims the ‘righteous path’ of stewardship of the jungle, there is a lesson found in there that offers profound support to the beliefs of the right. If one spends a small quantum of time in a jungle, it becomes apparent that it is a prime metaphor for capitalism.

At first this may seem contradictory. After all, the common understanding the jungle is the epitome of nature, while the market is the embodiment of man’s conquest of nature. However, the fact often overlooked is that the market-system is nature. Men, in their hubris, often try to separate the world of mankind from the natural, forgetting that although humankind certainly has an inordinate power to alter his landscape, it still operates within the system of nature.

The beauty and biodiversity of the jungle arise from the same source that fosters the market-system – competition. Every actor in the jungle, whether plant or animal, is operating in its own self-interest, for its own survival. And while many environmentalists attempt to hang their hats on the concept of balance-of-nature, what is missed is that this balance comes spontaneously and is in no way planned. The panther is not a noble creature that consciously oversees the inner workings of jungle, but a selfish individual that takes what he can to provide for his own survival. If he fails, he dies; if he succeeds, someone else dies. There is no concept of justice, simply a self-correcting balance.

This leads to a high level of competition and subsequently specialization. This becomes abundantly clear if one looks at the profusion of wildlife and the niche roles that each species plays in the jungle system. Not only does competition develop this specialization, but it leads to a tangible wealth. The wealth of the jungle is a rich mosaic of life, of colors and of activity. In practice, the world of Charles Darwin is not that far from the market system of competition as elucidated by Adam Smith.

What is striking is that so many environmentalists stand against the notions of capitalism and never realize that they grow from the same source. This does not mean to disregard the natural competition in which environmentalists and capitalists engage over the use (or lack of use) of natural resources – which obviously puts them at odds. However, what is significant is that many can recognize the beauty of this natural, competitive process in the environment, while simultaneously dismissing it in the human environs of the world. In truth, those that appreciate this magnificence in nature should, at least in a philosophical sense, fall closer to the capitalists of the right, than the socialist planners of the left.

The Morality of Profit Competition

So as I'm sure you all know I'm a little interested in politics and policy and I could use 30 seconds of your time to help me in a competition. I have recently submitted an essay to the Morality of Profit competition. An excerpt of my essay is posted here http://www.moralityofprofit.com/the-river-of-humanity-you-have-to-harness-human-nature/. If you could be so kind to quickly take a look at the link, it'd be a big help. The excerpt that gets the most hits will have the option of being published in an upcoming book. If you REALLY want to help, you can look at it on multiple computers and pass it along to friends and family that might be interested. And if the topic interests you, write comments and engage - I always love discuss.

For those of you that are interested in the policy issues - it is a very interesting discussion - take a look at the Seven Fund website.  The Seven Fund aims to help developing countries using free-market solutions.  Their goal in this project is to foster discussion on profit and morality.  Is profit moral?  Why? How?  Is it a means or end?  This is a particularly relevant topic given today's economy and issues such as BP's oil spill.

My take is that it is necessary and moral, not only as an organizer of society but as a method to obtain the best for everyone.  It is futile to fight against human nature, so we might as well harness it.  Check the link for my excerpt and other submissions!

Thanks.

The Right Medicine for Healthcare – Part II: A More Competitive Market

Any successful healthcare reform needs to formulate a more competitive health insurance market. A more competitive market will drastically alter the cost structure for health insurance. In order to remain in business, insurance companies in a competitive market will need to drive costs downward. A multitude of new insurance products will be offered which will provide consumers with an array of choices with varying levels of amenity and price. There are at least three ways in which the markets can be made more competitive.

The first, and easiest, step would be to allow insurance companies to compete across state lines. The current, useless restrictions only serve to drive costs upwards. By allowing cross-border competition, the number of insurance providers available to any one individual will immediately increase. Companies will then have to compete with more market participants in order to capture a sufficient segment of the now larger pool of potential clients. This will force insurance providers to develop new types of insurance products and cut their own costs to improve margins.

The second step would be to end the employer-based system of the provision of health insurance. Many Americans currently get their health insurance as a fringe benefit from their employer. However, there are a number of problems with this method of provision. First, those that cannot get insurance through their employer often have to pay exorbitant fees in the private market. Second, health insurance is contingent on employment. When an individual loses his or her job, it becomes a double hit with the elimination (or increased cost) of health insurance. Third, employer provision necessarily limits an individual’s options. Most companies only offer three or four options – all generally from the same insurance company. The individual has little say in terms of picking an option that suits his or her financial and medical needs. Insurance companies therefore only need to offer plans that appeal to a few Human Resource managers, and do not need to offer specialized coverage for unique requirements.

All of these issues can be resolved if individuals or families obtained health insurance on the free market. Like auto, homeowner, or other forms of insurance, health insurance should be an individual’s personal decision. If insurance companies competed for individual policyholders, rather than for corporate HR managers, they would be forced to diversify products to meet individual needs. Insurance policies that ran the gamut from expensive with maximum coverage to limited cost and coverage would be widely available for individual purchase. This would help lower costs as individuals would self-segregate into policies that better meet their needs and budgets [for instance why does a single man need health coverage for an OB/GYN?]. Likewise, entrepreneurial insurance providers will be able to successfully target niche markets that formerly went uncovered.

The end of the employer-based system can be easily achieved through simple legislation. A law that requires employers who provide health insurance to offer an employee opt-out clause would allow individual employees to select their form of compensation. If the individual chose not to receive his employer’s health insurance policy, he would receive the money which the employer would have spent on health insurance. The employee could then turn to the private market to purchase his own policy.

This coincides with the third step: ending tax exemptions for employers. This will further facilitate the transfer from an employer-based system to a free-market system. Not only will this end the incentives for employers to provide insurance, but it will also increase revenues (or allow tax cuts) for the government. Employees will naturally receive higher salaries as their compensation switches from a fringe benefit to direct pay.

All of these steps will facilitate a more competitive environment. Insurance companies will need to compete with a larger number of competitors and for a larger number of potential customers. This will help force costs downward, as only the most efficient and cost-effective insurance companies will be able to survive. Consumers will be offered a wider array of choices, with varying degrees of price and services. Customers will therefore be better able to afford, at least, minimal coverage. A increase in competitiveness would drastically alter the health insurance landscape and promote free-market reform.

The discussion continues with Part III: Lower the Costs.

The Right Medicine for Healthcare – Part I

With the Senate now beginning debate on a healthcare bill, it is time to step back and really think about where America could end up. The bills – and ideas – that are prevalent in Congress are devoid of commonsense. Under the current system of thinking, any bill, such as the current one on the Senate floor will be disastrous.

No one disagrees with the fact that American healthcare is in desperate need of reform. However, the current proposals do not offer good solutions. They attempt to patch a broken system without understanding what is not working. Like a charlatan doctor peddling a homemade cough syrup, they offer the wrong medicine.

The essential problem with America’s healthcare system is cost. Some may frame it in terms of accessibility – too many people do not have health insurance. However, accessibility is, in essence, an issue of cost. People that want, but do not have, insurance are precluded due to prohibitive prices. However, the present top-down approaches advocated by Congress do not address the fundamental cost issues. Instead, they attempt to make healthcare “more-affordable” by redistributing costs between different parties - whether taxpayers, the young, insurance companies, the poor, etc.

Not only is this a divisive and politically-charged (as we all know) approach, but it ultimately will fail to make substantial, lasting change. For instance, if insurance companies are simply forced to ignore pre-existing conditions, they will need to find ways to pay for these more expensive patients. This means either increasing premiums for everyone or lowering services across the board. In essence the current Congressional proposals create a zero-sum game, with clearly defined winners and losers.

What needs to be done is to develop a solid system of proposals that counter the inanity in Congress. America needs a reform that fixes the system and benefits all. The fundamentals of any successful reform rely on the mechanisms of the free market to create a cost efficient system. As Soviet Russia has shown us, centrally planned economies end in dismal failures. Regulatory bodies that determine maximum prices, public-options, individual mandates, and outrageous restrictions on private enterprise will not solve the problem, but exacerbate it.

Over the next few articles I will try to outline a few points that may serve as a rough skeleton for some detailed reform. In particular, (1) greater competition needs to be created between insurance companies by ending the employer based system, (2) medical costs need to be driven downward through tort reform, digitization of records, and realigning incentives, and (3) new financial instruments should be established to cover emergency room visits of the uninsured.

Ultimately, healthcare is a financial not a health-related issue. Insurance is one tool to make healthcare affordable. However, it is not the only, nor always the best way, to pay for healthcare costs. The desirability of health insurance is, and should be, an individual’s decision, based on relative risk and one’s financial situation. By failing to acknowledge and address these issues, Congress is suppressing true reform that could have a lasting impact on America’s future. The government should serve as an impartial referee, not a troublesome participant, in the realm of healthcare.

The discussion continues with Part II: A More Competitive Market.

Give Me Healthcare, Or Give Me Death?

The state of US healthcare system is atrocious. It is in need of desperate reform. Unfortunately, the Republican Party lacks any coherent proposals to fix the broken system. This leaves the American people with a choice between the current unwieldy system or the big government, nationalized, nearly Socialist plan of the Left.

For years, the Democrats have been proposing state control of the healthcare system. They want to offer universal healthcare to every American on the taxpayers’ dime. While seemingly noble in aim, this is absolutely foolish. Not only will a government system crowd out the private industry, but it will be vastly inferior. As most know, the government does a substandard job at providing services, particularly services that can be supplied by the private sector.

Unfortunately, this is where the discussion stops for most Republicans. The criticisms of the Democrats’ model of universal healthcare are solid and well thought out. However, the Republican’s offer little in terms of a solution to the obvious problems in the healthcare industry.

A relatively clear-cut answer is to fall back on the free-market principles that form the base of American conservatism. While unquestioning defense of the healthcare industry often comes hand-in-hand with criticism of universal healthcare, this need not be the case. One of the bases of free market capitalism is the notion of competition. However, the current structure of the health insurance industry limits competition.

Contrary to other, non-health, insurance industries, the health insurance system is an employer-based system. This severely reduces the number of buyers of health insurance. A health insurance company only needs to pitch its product to a few large companies in order to capture a substantial portion of the market. This forces the insurance company to structure products that will appeal to HR representatives, not the insurance consumer. This limits the diversity of the products offered and gives the insurance companies greater market control. Health insurance consumers can veto bad insurance plans only by leaving their jobs. Certainly, this puts some limits on the downward movement of insurance quality- as competition remains at the firm level. However, it drastically reduces the specialization that would occur if each consumer were responsible for his or her own insurance.

The easy solution is to end the employer based health insurance system. Individuals would be responsible for finding their own health insurance. Companies, since they no longer have to pay for insurance, would increase salaries accordingly. This would leave individuals with the same amount of money as they previously had to purchase health care on the free market. Naturally, many new, specialized products would develop. This would allow individuals to spend more or less based on the type of care and services they want. Insurance companies would have to compete rigorously with each other to capture new, separate segments of the market. All this would lead to greater competition, lower prices, and increased services. Insurance companies that fail to deliver would find a swift exit from the market, thereby creating a marketplace of higher quality companies.

Critics of such a proposal argue that health insurance is far too complicated for the average American to purchase on their own. This, however, unfairly diminishes Joe Six-Pack’s ability to obtain the appropriate information that he would need. The average American is capable of doing their own taxes and finding homeowner’s or car insurance. For those that cannot, or do not want to be bothered, there are a myriad of brokerage services available. It is quite likely that insurance brokers would expand in scope as they aided individuals in searching for the right health insurance plan.

The answer to the health insurance issue is not increased consolidation and government regulation, but a move towards greater free market competition. Government controlled, universal healthcare will only deepen the systemic problems that already exist. A greater number of differentiated healthcare providers will facilitate cheaper, more universal healthcare, without sacrificing the quality of healthcare in America.