Thoughts on the New Commanding Heights

If we insist that organizations in health care and education must be government-run or non-profits, we are sentencing those sectors to inferior quality and stagnation. The battle over the New Commanding Heights is crucial for our economy.

Arnold: I agree that we should not limit organizations in health care and education to being government-run or non-profits. But I could see competitive sectors emerging with a mix of for-profit and fee-for-service non profits. Do you see anything wrong with fee-for-service non profits as a concept? Do then prevent the formation of a competitive industry (meaning one that continually finds faster, better, cheaper ways of doing things).

Once "A Means A" is up and running, it will be a start on breaking down the accreditation barrier that prevents new models in education.

Dr. Kling -

I thought 'Commending Heights' was originally a military metaphor. It was then applied to steel production and heavy industry manufacturing because those industries provided a military advantage.

Are you arguing that health care and education provide a military advantage? Or, did I miss an earlier post?

"But with the new health reform law, BlueCross would have to rebate its 33% profit to enrollees in the form of lower premiums. Thus, neither BlueCross nor any other insurer will be able to profit from cost-reducing discoveries like this one. Nor will any insurer even try. Instead, insurance companies will function like utilities, taking no real risks and making no radical changes in their current business model."

I find this Goodman quote to be even more powerful. This is why the Soviet economy collapsed - there is only a downside, never an upside, to innovation.

My understanding is that the employment growth and the related lack of increased efficiency in service delivery in government/medicine/education is largely driven by the government involvement.

For example, we don't know how many fewer employees it would require to run a hospital because it's mostly illegal to run one a different way.

Medical expert systems are great... and it's only really legal for a certified expert to run them, defeating most of the efficiency gains.

We do know that it can be much less expensive to produce many of the same surgical outcomes, because that's the basis for medical tourism. Who stands in the way of migrating entire clinic full of health workers from other countries to the U.S.?

In education, there is plenty of hard evidence that large class sizes aren't an issue, so why the focus on small class sizes, literally making teachers less efficient in terms of number of students taught?

Why don't we have an H1B equivalent system for medical professionals and educators?

Can you name the top 10 groups for political contributions again? Maybe there is a correlation...

Jeremy, "The Commanding Heights" refers to a Lenin quote on the dominant industries in any economy. It's also a decent Daniel Yergin book.

It's interesting that health care inflation and educational inflation are the two most stubbornly high items in the CPI--consistently 2% above headline CPI, year-in, year-out. And this was true in the '50s and '60s, before third-party payment was typical for health care. It's also true for educational spending (tuition), which is not third-party.

If these are the new loci of innovation, I say, it can't come too soon.