Friday, 30 October 2015

Why the flu vaccine illustrates all that is wrong with the NHS

The UK's National Health Service is nudging ever closer to collapse. This fact is blatantly obvious to many. The political will to do anything about it is, however, sadly lacking. It is particularly disappointing that the Conservatives, in a position of strength, seem more interested in tackling the immigration 'problem' that isn't a problem, than getting to grips with the huge and pressing problem that is the health of the nation.
         As I have discussed before in this blog the NHS principle of free health care is simply unworkable in the modern world. That inevitably means some people are going to have to pay for treatment. This is already happening with the slow growth of the private system. Things would be much, much better, however, if the NHS would embrace the willingness of many to pay for better treatment. The flu vaccine provides a small but useful illustration of this issue.
          The flu vaccine is available free of charge on the NHS for young children and people aged over 65. What about the rest of us? More and more people want the vaccine and so a market has emerged to satisfy that demand. Indeed, the jab is now available at most major supermarkets for around £9-12 a shot. This means that many people are paying for a little bit of health care.  
          I don't think anyone sees anything wrong with the fact that some people get the jab for free and some don't. But, here is the crucial point: the NHS is denied the opportunity of making any money on the willingness of people to pay for this service. In our family, for instance, the kids go off to the local GP surgery to get their jabs while my wife and I go off to the local supermarket and pay £9. I, for one, would rather we just pay the NHS £18 and all get the jab at the same time.
        Clearly there is not a great deal of money to be made in flu jabs (although I doubt the supermarkets are doing it for the good of humanity). If the NHS did 1 million jabs at a profit of £1 at time then they still only make £1 million. This is not going to save an NHS short of billions of pounds. It is still, though, extra money that the NHS could make. If there was a willingness to sell other services then we might find the billions that are needed.
          The most common criticism of the NHS charging for some services is that it would create a two tier system. But, what is the problem with a two tier system? The beauty of a two tier system is that it can benefit both rich and poor. The rich gain because they can use their wealth to purchase a better quality service. The poor gain because the extra money coming into the NHS can improve services. Sure, there will be inequality. Everyone, though, gains. 
        As an example, consider waiting times to see a doctor. In the current climate a patient can consider themselves lucky if they get seen within an hour of the allotted time. Some people would be willing to pay to reduce that waiting time. Clearly, an option of fee for timely appointments would benefit the person who gets the 'better' service. The money that person spends can, however, be reinvested into the system to provide a better service to others.
      Indeed, those in the second tier may actually benefit most because they get the improvement for free! For instance, suppose it costs £100 for a timely appointment. Then the rich person gets seen on time but has to pay £100. Suppose that the extra revenue in the system reduces standard waiting times to 20 minutes. Then poor people get a better service and pay nothing for it. Everyone is a winner.
          So, rather than 'accept' that fee for service is 'necessary' for the NHS to survive, why not start to embrace it as something that can reinvigorate health care in the UK for everyone

Sunday, 4 October 2015

Tragedy of the commons and population growth

Garrett Hardin's 1968 Science article on the Tragedy of the Commons can easily lay claim to be one of the most cited 'game theory' articles of all time. According to Google Scholar it has a mighty impressive 27,362 citations, and counting. But, as with all well cited articles, it is not entirely clear how many people have actually read the paper. As someone who has neither cited nor read the paper I thought it was about time I educated myself. And, I was surprised by what I found.
        Let us start with the modern, textbook conception of the tragedy of the commons. The focus is on common resource goods. These goods are characterised by being non-excludable and (to some extent) rivalrous. Hardin, himself, gave the example of pastureland that can be used for cattle. The pastureland is non-excludable - everyone is free to graze their cattle - and rivalrous - the more cattle that graze the less grass available for others. Another example is fishing in the Atlantic Ocean. The Ocean is non-excludable - you cannot stop people fishing - and rivalrous - the more fish are caught the lower are fish-stocks.
        One person's consumption or use of a common resource good creates a negative externality for all other users. This means that common resource goods are likely to be over-used. The cattle grazer, for instance, has no incentive to take into account the harm it will do others if he grazes his cattle. Over-fishing, climate change, depletion of underground reservoirs, long queues at hospital accident and emergency departments, are all commonly cited as examples of the tragedy of the commons. A typical response to the tragedy of the commons is to advocate policy intervention. Elinor Ostrom (and others), however, suggested that groups can often avoid the tragedy, especially when communication between potential users of a common resource is possible. 
        Hardin's article does cover this, now, textbook account of the tragedy of the commons. But, it is only a very small part of his article. The big focus is instead on the problems of overpopulation. Hardin proposes that 'Freedom to breed is intolerable'. In particular he argues:
If each human family were dependent only on its own resources; if the children of improvident parents starved to death; if, thus, overbreeding brought its own "punishment" to the germ line--then there would be no public interest in controlling the breeding of families. But our society is deeply committed to the welfare state, and hence is confronted with another aspect of the tragedy of the commons.
          In a welfare state, how shall we deal with the family, the religion, the race, or the class (or indeed any distinguishable and cohesive group) that adopts overbreeding as a policy to secure its own aggrandizement? To couple the concept of freedom to breed with the belief that everyone born has an equal right to the commons is to lock the world into a tragic course of action.
This reasoning leads to a strong conclusion:
The only way we can preserve and nurture other and more precious freedoms is by relinquishing the freedom to breed, and that very soon. "Freedom is the recognition of necessity"--and it is the role of education to reveal to all the necessity of abandoning the freedom to breed. Only so, can we put an end to this aspect of the tragedy of the commons.
This is pretty extreme stuff! Little surprise, therefore, that modern accounts of the tragedy of the commons completely drop all mention of population. See, for instance, Elinor Ostrom's entry in the New Palgrave Dictionary of Economics.
        But is there any sense in Hardin's argument? In short, no. To elaborate further, it's worth clarifying that Hardin's argument is very different to the well known one of Thomas Malthus. Malthus argued that the law of diminishing returns means planet Earth cannot sustain an arbitrarily large population. This logic is sound. Malthus merely underestimated the huge advances in productivity that have been possible. Hardin's arguments is more one that the poor will 'overbreed' because they can exploit the benevolence of the rich.
         Now it is true that a welfare state creates moral hazard. A poor couple might, for instance, be more likely to have a child if they know there is a free health and education system waiting for their child. This, however, does not generate a tragedy of the commons. First, despite what the Daily Mail may have us believe, the standard of living for those who rely on the welfare state is not high. Few poor people, therefore, desire to rely on the benevolence of the rich. Second, the benevolence of the rich is not a resource that can be used freely. If the rich feel they are being exploited then they have the power to reduce the size of the welfare state. In other words, the benevolence of the rich is an excludable resource.
          This all makes it difficult to fix Hardin's contribution. Mancur Olson's 1965 book, The Logic of Collective Action, for example, provides a far more convincing and rigorous analysis of public goods, including common resource goods. Thankfully, this is just about reflected in the citation counts with Olson's book claiming 31,223 citations.