To an engineer, the Law of Supply and Demand...Free Enterprise...Capitalism...are essentially all the same thing: a Closed-Loop System. As engineers, we know that properly tuned closed-loop systems are inherently stable and...for those who are not engineers...that is a Good Thing. On the other hand, closed-loop systems which have a broken feedback loop, are running open-loop. That is generally a Bad Thing.
You wanna know a secret? Healthcare is broken because it is running open-loop. You know what else? College tuition is increasing at roughly 200% the rate of general inflation, because it is also substantially open-loop. Did I mention that open-loop is a Bad Thing?
I am going to make a very broad statement, and I may have to eat my words, but here goes: Almost everything wrong in America is a function of a broken control loop, and almost everything right in America is a function of a well controlled loop. *ducking under my desk*
You're thinking: 'Ducking under the desk? Why would I throw something at you when I have no idea what you are talking about. By the way, what in blue blazes are you talking about?' Excellent question, thanks for asking!
Let's have a simple example. There are 10 employers in a community. If one of those employers pays poorly or treats their employees badly, they will be unable to keep good employees since those employees will leave to work for one of the other nine employers. In time, they will either start treating their people well, or go out of business. Either way, problem solved. In a closed-loop system, problems fix themself...Good Thing.
On the other hand, if there is just one employer in town, the closed-loop process cannot function properly, and that employer may get away with abusing their employees indefinitely. Open-loop...problems cannot fix themselves...Bad Thing.
In truth, the only difference between those two examples is competition. Competition is the primary way that the loop gets closed. So what breaks a loop? There are a few things, but in general, anything that eliminates competition, or anything that isolates the customer from the buying decision.
Buying decision? When I buy a car, I am intimately involved with the buying decision. I know exactly what I'm paying, and exactly what I'm getting. I make the decision how important something is to me, and make the decision whether it is worth the money. There is a direct linkage between cost and value, and that tends to close the loop and keep things under control.
On the other hand, when I go to the doctor, I make almost none of the decisions and have very little say in what gets spent. The doctor makes the decision, based largely on how well insured you are, and the insurance company pays your bill. Automotive price inflation is subject to some debate, but clearly is nowhere near as bad as medical inflation. Autos = Closed-loop. Healthcare = Open-loop.
I'd like to say that was the bulk of the problem...but it isn't. Lack of competition is, and the competition loop gets broken in some very ugly ways. This is the part where I go from economics professor to political meddler. Contrary to what some on the Left and some on the Right would have you believe...both sides are at fault. There are entities on both sides of the political spectrum that benefit from eliminating competition, and those entities are largely responsible, either directly or indirectly, for almost everything wrong in America. To make matters worse, those entities use the political system to ensure that the loop remains open, and I would venture to say that our elected officials are complicit.
So who are 'they'; who are these entities that you speak of? In general, any entity that grows big enough to stifle competition and break the loop. Specifically? The federal government, state governments, corporate monopolies and oligopolies, the legal system, and labor unions...to name a few.
Wait a minute...labor unions? I thought they were part of the solution. Well, they were, and in some cases still are. In the example above, a union is a great way to influence or balance a monopoly. But what happens when the union grows to control all of the labor of a particular type? It becomes a monopoly of a resource, and prevents the normal closed-loop process to work, at least until it manages to kill a company or industry. You wonder why certain companies or industries struggle to compete with foreign competition? In many cases, unions play a major part in that. Unions will violently argue the point, but history and statistics back my position.
So where does that leave us? No clue. It concerns me. Until we move back to smaller, competitive, accountable companies, governments, and organizations, the problems will only get worse. The federal government's power grab over automotive, banking, and healthcare is particularly troubling because they are already the worst monopoly of the bunch. The only thing that has kept them in check is a robust two party system, but even that is starting to show signs of breaking. To make matters worse, politicians themselves are foxes guarding the hen house...and we the people...are hens.
We really need a revolution...
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