The Failure to Account For Progress

Much of what passes for debate over organization and policy these days completely ignores progress. It is, in effect, debate over what to do if nothing ever changed - if all availabilities remained constant, if prices never changed, if new resources were not developed, if existing technologies were not improved. This is completely irrational - everyone knows that this is an age of change and progress - but yet it is commonplace, yet another aspect of the phobia of change that seems hardwired into human nature.

Take this op-ed, for example:

Imagine that someone invented a pill even better than the one I take. Let’s call it the Dorian Gray pill, after the Oscar Wilde character. Every day that you take the Dorian Gray, you will not die, get sick, or even age. Absolutely guaranteed. The catch? A year’s supply costs $150,000. ... Because the price of these new pills well exceeds average income, it would be impossible to provide them for everyone, even if all the economy’s resources were devoted to producing Dorian Gray tablets.

So here is the hard question: How should we, as a society, decide who gets the benefits of this medical breakthrough? Are we going to be health care egalitarians and try to prohibit Bill Gates from using his wealth to outlive Joe Sixpack? Or are we going to learn to live (and die) with vast differences in health outcomes? Is there a middle way?

This is a nonsensical formulation. It's like thinking about how to survive the endless night that will arrive when the sun goes down, ignoring the obvious and long-established fact that the sun will later rise in the morning - it leaves out the most important and time-proven consideration of time and change. When medicines of engineered longevity arrive in reality, the driving question will not be not how to divide the pie there and then, but rather how rapidly competitive research and development will reduce the price and expand the market of people who can afford this new technology.

Every new medical technology was unaffordable and unreliable at first, and then became reliable and affordable. The incentive for any marketplace is to work to make goods simultaneously more reliable and cheap enough to be affordable to new populations of people eager to buy - selling affordable goods to the masses is how to make serious money, not keeping the price high and the market small. This seems to be one of those forms of change that people like to sweep under the rug and ignore, despite the fact that it takes place right now, all around, and in hundreds of different markets.

This dismissal of progress and unwillingness to look beyond what exists right this instant is, I think, a part of human psychology that greatly enables popular support for government regulation - regulation that has the effect of removing incentives for improvement. So instead of a vigorous marketplace in which improvement and falling prices are the order of the day, we wind up with a stultified and overregulated space in which high prices and poor quality dominate because the rewards of innovation have been squashed.

Comments

The way I read the op-ed, the author was agreeing with you: It would be completely absurd to not make the pill just b/c not everyone could afford it.

Posted by: Dan at September 22nd, 2009 1:41 PM

A better hypothetical would be to imagine a treatment that adds 5 years to your life span. Whatever your life span would have been, spend $150k and add 5 years to it.

From this it's possible to easily imagine 2 scenarios.

Scenario 1, the government appropriates the treatment for the "public good". It doesn't have to pay for the development cost or profit so it is able to give everyone in the US access to the treatment for, say $15k. People of low income get government assistance to pay for the treatment courtesy of higher taxes and giant government bureaucracy.

Great, right? Everyone in the US who wants it gets to live 5 years longer. There's some downside to higher taxes, and the people who spent a lot of money or effort into developing the treatment are pissed off at not making a profit off it, but that's a decent trade off right?

Scenario 2, a lot of rich people pay $150k a pop to live 5 years longer. Eventually, the development cost of the treatment is paid off, so the makers can lower the price while maintaining the same profit. Also, over time various ways of cutting the cost of the treatment become apparent, allowing the makers to give the treatment at lower cost with a smaller profit margin, but available to more people so their total profit continues to grow. Eventually other companies license the treatment and start offering it as well, the price continues to drop until it costs 1/10th then 1/100th the original price, and it continues falling.

Furthermore, spurred by the massive profit of the 5 year extension treatment, the makers and many other companies spend massive amounts of effort and money into improving the treatment and making new, similar treatments. They release 7 year treatments, 10 year treatments, and 15 year treatments. Initially these are incredibly expensive, but just as before the cost will come down as development costs are paid off and improvements are realized due to experience and competition.

The result here is that eventually nearly everyone in the country will be able to afford to pay for their own dirt cheap 15 year life extension.

Scenario 2 has played out in the medical field, and other industries, too many times to ignore. It's how the western world has clawed it's way up to 70 and 80 year long average life spans, and lives of better overall health. And it's how we'll claw our way to 120, 150 year healthy life spans. It's the same process that turned microwave ovens, DVD players, and LCD televisions from expensive, rare luxury goods into commodity goods so cheap and ubiquitous that everyone can afford them.

Don't kill the goose that lays the golden eggs.

Posted by: Robin Goodfellow at September 22nd, 2009 3:55 PM

The article's a joke to begin with. The author's motivation was the statin drugs that he is taking to prevent cardiovascular disease. He suggested that these drugs cost around $150,000 per person per year. Where he came up with this absurd number is incomprehensible to me. I looked up the out of pocket costs for statins and they are around from $700-1400 per person per year. A far cry from the $150,000 he was proposing.

Another point is that statins are not good for you. Look at the reaction chain thats posted on the Wiki about them. They are designed to interact with the reaction chain at the very beginning, where they inhibit the production of CoQ-10, a compound essential for metabolism, as well as another compound that is vital for biological functions. Why the statins were developed to interfer at the front of the reaction cascade rather than past the "Y" where it would only inhibit cholesterol production is incomprehensible to me.

Posted by: kurt9 at September 23rd, 2009 9:03 AM

The things are even worst...
If someone has a miracle pill for 150k that no one can afford and eventually there is a not_so_miracle pill for a $1, such a pill would never be approved by FDA...

Posted by: researcher at September 23rd, 2009 2:25 PM

If we were living in a world of ideals, there would be no need for regulation because pure competition would be the only factor. Unfortunately, a lot of the groups which do the R&D are paid for by corporations that are involved in pure business transactions. These corporations' sole existence is to maximize profits and minimize losses, which also means screwing people out of what they deserve as often as possible. These corporations are the source of the required oversight. Not the R&D / manufacturers of the medical supplies.

The other issue is that health is not a pure business. Hospitals routinely incur financial losses because they are obligated to treat everybody, regardless of insurance (the whole Hippocratic Oath and all that). The growth in demand for more and better health care is constant, regardless of who is funding it. The public will never be content with the current state of health care, because there will always be room for improvement and better drugs / treatments until we achieve the equivalent of immortality. As every person regardless of status is looking to better health care, the government would have a vested interest in continuing funding to R&D, and it would doubtfully limit independent funding when it will also benefit.

This foolishness with the health care reform has blown out of proportion the capability of a government-provided insurance plan and the reform necessary for insurance companies to stop withholding treatments for those who are legitimately deserving according to their own insurance coverage. Our doctors and medical institutions are fully capable of giving us better health coverage. The only thing holding them back is the flow of money. Why are we letting insurance companies control who gets the care they need and who doesn't?

Lets not forget that the pharmaceutical companies are out to make money too, and they are the ones that we should be limiting the regulation on, because it is in their own best interest to do the R&D, and provide cheaper / better products than what are currently available. Who sponsors the big pharma groups shouldn't matter, whether it's the insurance companies or the government. I personally would go with the one that hasn't already been shown to probably screw me over when I need life-saving treatment.

Posted by: Me at October 30th, 2009 5:12 PM

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