Sunday, May 01, 2016

Wrong Incentives and Public Sector

There are some professions that have a perverse set of incentives. They benefit from things that are bad for people and lose money when people are well off.

One such professions is of course the doctors. The doctor makes money when people get sick. It is in his advantage as a doctor for people to be sick; which is bad for the people, who benefit not from being sick but from being healthy.

Another such profession is the police. The police gain from people being convicted of crimes and going to jail; which once again is not good for the people.

Another is the psychologists. These benefit from people coming back to them for further treatment, which rewards the psychologist to promote an unhealthy dependency and prevent the clients from getting well.

In the cases of these professions, the market system falls short. The market rewards something that's not in people's benefit; which leads me to think that these professions should not fall under the free market umbrella and should be done publicly.

In Florida, where jails have been privatized, the police have an incentive to convict people of anything that they can. The war on drugs and the war on prostitution criminalize things that should not be criminalized because it's in the interests of the police that there be as many crime as is possible so that they could convict and people for them. The pharmaceutical industry gets a windfall from people being diagnosed with all sorts of fictitious disorders, and AMA maliciously attacks all sorts of affordable and intelligent treatments that have helped people for much lesser price than is charged by the AMA doctors.

The market system is brilliant when it produces technology and prosperity. It falls short when it rewards behavior that is not in people's interest. If it's in the interest of your profession that people get sick, you will want to pathologize as many people as you can pathologize. And if it's in the interest of your profession that people commit crimes, then you will want to convict as many people as possible of as many crimes as you can. In neither case is the result favorable.


If it is the incentive of your profession that you produce something valuable, the market dynamics are absolutely right. If it's in the interests of your profession that people get sick or get convicted of crimes, then these dynamics flounder. It is important to know which is which, and out of that calculus to conclude which industries should be private and which should be public.

1 Comments:

Blogger courtneywalks said...

This makes good sense. I hope your words reach many hearts and minds.

9:26 PM  

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