Per Bylund Commentary

I recently had the opportunity of visiting the emergency room at a big university hospital close to where I live (as a “customer,” unfortunately). It is safe to say that I was positively surprised by this experience. Of course, being from Sweden I expected something similar to the emergency rooms back home; Sweden is a socialist country, but it is not a backward, third world kind of place – the quality of health care is generally the same as in the US.

Since I have experience from visiting a big university emergency room in Sweden as well, this is the perfect opportunity to tell the world of my experience in a comparative case study. Both visits are from college towns, which should mean that a lion’s share of the population is very young and, one would presume, healthy. (For the sake of clarity: neither of the case studies involve ambulance but only walk-in emergency care. And in neither of the cases was for very serious medical problems, so don’t worry – I’m fine.)

The university hospital I visited here in the US is part of a very big, public university, so the comparison is not one of purely private vs. public. But it is safe to say that the differences between the two cases is primarily due to institutional differences: health care in the US is to a large extent paid for via [private] health insurance whereas all emergency care in Sweden is legally a public monopoly. There may be differences due to regional factors, traditions, culture, etc too – but since I have experience of both systems and it is easily shown that the quality of care in Sweden and the US is basically the same, I would say one can be fairly certain that the general differences shown in this case study are typical.

Let me first briefly tell you about my experience here in the US. After entering there were two desks with friendly ladies immediately greeting the care-seeker and asking what’s wrong. To the right, there was a small waiting room with probably 15-20 nice chairs for relatives and others who wait for their loved ones. One man was there playing with his child, probably waiting for the child’s mother (or sibling), despite it being around lunch-time.

After asking a few short questions and getting insurance information, a nurse appeared from the door three feet away with a wheel chair and I was immediately taken into a room with three nurses hooking up whatever machines they believed they needed, taking tests, etc. I also had to put my signature on two papers, the purpose of which was explained clearly by one of the nurses.

A physician came in and asked several more questions and took some more tests while looking at one of the flat screen monitors showing heart rate, blood pressure and numerous other things. Ten minutes later a nurse came by to take an X-ray, and some more tests were taken. And then, as seems to always be the case no matter what country one is in, I was left on my bed waiting for test results. There were frequently nurses checking in on me to see that I was alright.

Two hours later I was released with a prescription and advice on how to get well and with printouts of instructions what to do if there are further symptoms, when and where to make appointments for follow-ups etc. What is striking about this visit is that they asked for my ID (and insurance card), but nobody asked for payment or even discussed coverage etc.

The Swedish case is quite different. Instead of entering into a foyer with nurses greeting you, you step right into a waiting room with numerous people in it (Swedish emergency rooms are for some reason always packed with people). The first thing you do is take a ticket from the machine with your number on it, and then you go to the desk in the far end to register with the receptionist. Note that the purpose of a receptionist in this “free” public health care system is to receive payment for the visit or get your personal information for billing (the out-of-pocket cost would be approximately $45, but depending on what regional political unit you are in) and make sure you await your turn.

Next to the receptionist’s desk there is a closed, wheel chair approved (extra-wide) door next to a window covered with drapes on the inside. Behind that door is the screening room with a nurse seeing one person at a time trying to make a preliminary diagnosis in order to establish priority. You may speak to the nurse when it is your turn (that’s the number on your ticket!), but until then you will have to sit down if there are available chairs or otherwise stand waiting.

My experience is that most people in the waiting room are not seriously ill. In fact, I’ve seen retired people munching on cookies and drinking coffee from thermoses while talking to their friends. (You would not often find vending machines in these kinds of places in Sweden – I don’t think I’ve ever seen one.) It has seemed to me that they are in the ER to socialize with their friends rather than seek care; my guess is that they are feeling lonely or that they may have a headache or something that a Tylenol would take care of (old people’s common headaches is a real problem for ambulance emergency care!).

If you are in serious pain you will need to call an ambulance, even if it is not life-threatening or even urgent. Why? Because the wait in the emergency room could take hours – several hours. Without revealing too much about my own or my loved ones’ medical conditions, let me assure you that I’ve been in the emergency room at this Swedish university hospital where the the person seeking care has been in tremendous pain – but we have still been directed to sit down and await our turn (the receptionist makes the call, it seems).

When it is finally your turn, you may enter the room with the screening nurse. If it is serious, as it was in the case I’m describing, he or she will pretty soon realize that urgent care is necessary and then immediately notify a physician and the patient to a room (the rooms, I’ve noticed, are the same in Sweden and the US: they are basically rooms with three walls with the fourth wall being a curtain or glass door). The care is basically the same, even though you would likely experience more wait time in Sweden and you would not see as many people checking in on you.

The physician and nurses will take tests, check your heart rate and blood pressure etc. It is unlikely that you will be hooked up to a digital screen showing all this, but if you are (perhaps if your condition requires continuous control of values) it will not likely be a flat screen but one of those old green-and-black computer screens mounted to the wall or the ceiling.

One obvious difference is that comfort is not a priority in Swedish care; whereas nurses will frequently ask you if you are okay and adjust your seat or bed or whatever in the US, you will most likely be left alone on a rather uncomfortable bunk in Sweden. Also, you will notice that physicians and nurses in Sweden wear their own clothes with a white robe on top (some nurses do wear the white pajamas-like health care suits seen in the US), while in the US everybody seems to wear the pajamas-looking suits in different colors (green, blue, etc).

As I said earlier, the quality of care is about the same. It is a myth that public systems necessarily have lower quality care; they don’t always, and the reason for this is probably that poor quality is easily seen and will be “fixed” by politicians seeking reelection (through legal guarantees or whatever). But anyone with a little economics understanding knows that if quality is the same while out-of-pocket costs basically approach zero, it will shift (increase) demand. Supply, on the other hand, will not increase and is even likely, due to the empirically established law of sky-rocketing costs in public bureaucracies, to decrease.

The result is, of course, excess demand or shortage; in other words, health care is of good quality but is generally less accessible. In this case study,the inaccessibility of health care through the ER is due to the long waits in the waiting room (and also why you won’t see that many people checking up on you while admitted) – and the reason for this is characterized by the elderly having an ER picnic (which is, I must emphasize, something I have experienced myself).

So what do we learn from this case study? Well, first we need to stress that neither system is private – they are both shades of public. Furthermore, health care culture is not very different in terms of how and and what quality of care is given. The major difference is that there is less public bureaucracy in the US case (and, consequently, more of private market) due to private insurance financing. Therefore, the differences between the cases are due to these institutional differences: the level of reliance on political vs market solutions.

The funny thing in this is that one cannot conclude that emergency care in the US is better because it costs more. This is not true; Swedish health care is among the most expensive in the world, as is US health care. Any differences are marginal and the differences are not seen across the board: Swedish health care is more expensive in certain kinds of care whereas American ditto is more expensive in other kinds. No conclusions can be drawn due to costs or availability of capital (even though, of course, insurance companies try to keep costs down in the US while this role is taken on by the political system in Sweden).

It is also interesting that the obvious differences so easily can be explained by economic reasoning. Taking a principles course in micro economics gives us all the tools necessary to explain and understand the differences between American and Swedish health care – and economics perfectly predicts the outcomes of the systematic difference.

What we should learn from this is not, however, to always ask economists for advice. It is true that economics provides the tools to identify and assess pros and cons, but there is a lot of bullshittery going on by economists. One has to be open-minded and realize that institutions and context matter – and need to be considered in an economic analysis. Krugman-type economists would consciously overlook certain obvious problems/costs of public bureaucratic organization while they would over-emphasize semi-relevant benefits. So when asking economists, one must know what to expect.

What we can learn is what is strikingly obvious: artificial incentives created by a public system with no access to [internal and/or external] prices and not subject to competition cause problems due to the inability (indeed, impossibility) to calculate the best use of resources. The effect is higher cost and lower output, hence the inaccessibility of Swedish health care.

The general conclusion at the moment seems to be that there is a need for a new set of theories of the market and economics – “crisis economics.” The reason for this need is the fact that “no one” predicted the current downturn and crisis, and that the predictions made turned out as wrong as they could possibly be. In fact, many economists predicted increased growth and continued prosperity while the true future held an economy in freefall with a number of imploding industries and sectors. 

In an opinion piece in the National Post the obvious question is asked: Why Do We Have Economists? The question had to be asked, especially since there has been no real “blame game,” no real and public debate on why all predictions turned out wrong, and no consequences for the economics profession. After all, economists often stress the fact that action is taken under rational assumptions of consequences and that all actions have consequences of some form. The army predicting economists is obviously an exception to that rule.

As some sociology professors frequently joking: say what you will about economists, but you will always get a straight and precise answer – and you always know that it is wrong. So the question asked by the editor of the National Post should be well taken; it is an important one. Why do we have economists?

But there is a question that is more important, especially for the professional economists who make all these “always wrong” predictions, and that is what makes the predictions always turn out wrong? The answer to this question lies in the error of Milton Friedman in his now famous (should-be infamous) article “The Methodology of Positive Economics” and the people who followed him (and still do).

Economics prides itself of being a deductive science, i.e. that new knowledge is deduced directly and logically from true premises or assumptions. Friedman argued that it doesn’t matter if the assumptions are wrong as long as one can extract general rules from which one can make predictions that are somewhat reliable and come close to the truth. What he spelled out was a theory of economics aiming to be a natural science, where exactness is both important and possible. In economics, however, we should learn that exactness is neither important nor possible.

In order to provide a positive, rigorous science that can produce exact predictions, one has to through out all understanding (in the Weberian verstehen-sense) and rely solely on cold data. One cannot make predictions unless that which is studied is perfectly observable and with clear boundaries. But what if we apply this line of thinking on human action, which is the core of what is studied in economics. Are the causes, nature, and consequences of human action perfectly observable and have clear boundaries? How do we measure the causes of an individual’s actions? His choice of action? The action itself? Its consequences?

The latter comes closer than the former, but it is still not even close to having the properties of the objects studied in the natural sciences. Mixing x grams of A with y grams of B may always create the substance C, and exposing D to E or F may always show exactly z – but doing m to one individual does not necessarily create the same effect as doing m to another. People are not simply responding perfectly and blindly to exogenous influences, there is a whole lot of other things going on that are at least as important as certain influences. Some call it “free will,” but you don’t have to go as far into metaphysical or religious pondering to realize that people are neither rocks nor [simpler] animals.

The problem of economic prediction is just that underlying assumption that we can “easily” predict the outcome of numerous people through meddling with some of the variables that affect people’s choices. It is simply not the case that different individuals choose to act the same way when exposed to (or influenced by) the same stimuli. Our bodies may – may – react in the same way, but our minds do not. 

To this some might retort: thanks to the law of large numbers we can generalize our conclusions despite individuals not being alike. When the law of large numbers is applicable, we can simply assume that if we just have a sample large enough all potentially skewed or unrepresentative data will even out and we will find The Truth about human beings. But this does not change the problem at hand – we are still generalizing in the same way, but only with more data and more individuals. 

Even if we accept the law of large numbers as a sufficient reason to use statistics to understand people, we will have to face the problem with their not being the same. That people, being boundedly rational, would always choose more over less (which necessarily follows from the definition of choice) does not mean they will choose a particular outcome over another in every situation. Each individual will make a subjective assessment of his preferences and rank them, then make a choice based on what he knows of his ranked preferences (this is the decision process, whether it is carried out consciously and reflectingly or not). But the ranking may change depending on circumstances as well as what the individual has learned.

Making perfect predictions the way Friedman proposed means we must take the quality of being human out of every individual, or at least “even it out” in order to calculate precise predictions. What do we learn by knowing that people without personalities and without “inner depth” (some call it soul) would necessarily act according to our the predictions? Probably not much.

Furthermore, the predictions are based on extrapolating well beyond what is reasonable. Establishing one person’ s assessment of everyday risk and the costs he accepts to take care to avoid this risk, and translating it into dollar amounts, does not necessarily give us monotonous knowledge of this individuals preferred choices. It does not follow that he would accept a high risk to lose his life if he was paid some muliple of the cost he was willing to take on for smaller risks.

Predictions simply do not cut it. So why do we have economists?

The answer to this question is that we do not need most economists, but we do, at the same time, need economists more than ever. The reason for this is that the economists working on predicting the exact outcome of hundreds or thousands (or millions or billions) of individuals’ simultaneous choices are worthless, their methodology is fundamentally flawed and they are nothing but frauds. And they should be treated accordingly.

While we think of what to do with the predicting economists we need to find the real economists, the people who understand the market and can tell us how it functions and what is required for it to function well. Very few economists understand what the market is about and how the emergent order arises, subsists, and what it effectuates. These economists were able to say a long time ago that we were heading towards a meltdown, and they did. They even published these warnings, but nobody listened or wanted to hear about it. “Nobody” here denotes the prediconomists and the political elite that [usually] hire them. 

Economists need to do what businesses did a long time ago: go back to basics. There is no need for armies of economists trying to predict the exact results of public policy, of interest rate changes, or monetary policy, etc. The use of prediconomists is not to learn about the future or politics, but as “useful idiots” disguising blind, naive, and ignorant attempts to regulate people’s choices through granting the commandeering of society an air of scientificity. And they serve well as scapegoats when their predictions turn out to be wrong and the people in charge can hide behind their “good intentions.”

What there is a need for is real economists who do not engage in futile attempts to “scientifically” make exact predictions of people’s future choices. We need people to tell us how the market works so that we can reap the full fruits of our hard work and profit from the risks we take.