Fixing Medicine (dailyKos is Right)

GM loss, Wal-Mart, and universal health care,” by kos, Daily Kos, 20 April 2005,

Daily “Screw ‘Em” Kos correctly identifies a serious drag on the American economy

GM and Wal-Mart can be potent allies in a new (and this time successful) push for universal health care. It would be the ultimate corporate welfare, instantly adding billions to the bottom line of American businesses, yet at the same time helping insure the entire nation.

The instincts of the American left is to fight Wal-Mart and demand it cover its workers, when we have an opportunity to perform political jujitsu with the fiercely Republican Waltons and turn the battle for universal health care into a lopsided fight with Big and Small Business, Labor, and the progressive alliance, versus the American Taliban (who in all their supposed compassion would fight this to the end).

I can’t, for the life of me, understand why a coalition hasn’t formed around the issue yet. It’s a no-brainer.

Earlier in the post, kos linked to a story describing GM’s health-care driven troubles. But it’s not just big companies that suffer.

One of my greatest professors is locked into a job against his will. He is a former Consultant and generally a mover-and-shaker. However, it is basically impossible for him to find different work than what he has because of a serious medical condition. His current work insurance pays it, but it is unlikely any other would. This is a broken price system which does not allocate labor efficiently.

We need to fix medicine in the United States. There is a crisis. Hopefully Democrats and the left can be a constructive part of the solution. Sadly, their recent childishness is not a good sign.

Update: Professor Bainbridge calls it a “terrible idea.” But it’s not a terrible opening for a better world.

Bribery as a Form of Horizontal Control

Side Payments in Marketing,” by John R. Hauser, Duncan I. Simester, and Birger Wernerfelt, Marketing Science Journal, Vol. 16, No. 3, 1997,

In Random Regional Business – Reflexions,” by Collounsbury, Lounsbury on MENA, 19 April 2005.

Collounsbury continues to provide the best arguments in favor of bribery (at least in international markets) that I have heard. After discussing impacts of the Sarbanes-Oxley (anti-corruption) Bill, Col writes

One begins to wonder how publicly listed US firms will be able to compete in emerging markets where … ahem standard and legal practice departs from the increasingly absurdly prissy standards in the United States.

In particular, I draw attention to this observation:
“To those tempted to see this as American smugness, she points, in contrast, to sharply lower prosecution rates across much of Europe for similar international bribery cases. The problem is particularly acute in industries or regions of the world where a degree of modest generosity has always been seen as a polite way of building long-term relationships.”

Indeed, emerging US standards are absurd and cold in the context of where I am at

Bribery is interesting in the context of horizontal controls. It is clearly a form of strong (because money talks) explicit (because it is obvious) horizontal control. Becuase horizontal controls are preferable to vertical controls, it is questionable whether bribery should be a crime. Fortunately, a better solution than Sar-Ox may have been form: good horizontal management

Side payments, known politely as gainsharing and pejoratively as bribery, are prevalent in marketing. Indeed, many management schools have added ethics modules to their basic marketing courses to discuss these issues and there is much discussion of side payments in the literature (e.g., Adams 1995, Borrus 1995, Mauro 1997, Mohl 1996, Murphy 1995, Peterson 1996, and Rose-Ackerman 1996). We seek to provide insight with respect to one class of marketing side payments. We hope that our analyses clarify some of the issues and suggest how these side payments affect marketing activities.

We next show that the firm can anticipate these side payments and design a reward system to factor them out at no loss of profit. The intuition is straightforward. The firm first adjusts the marginal returns in the reward functions for sales support and for the salesforce such that they will each take the “optimal” actions even though they engage in side payments. Then the firm adjusts their fixed compensation so that the firm extracts its full profit. The proof is difficult because we must show that adjusted reward systems exist and we must show that they allow the full profit to be extracted.

Market-based solutions tend to be better than government solutions. Col is onto something.

Update: He comments further

Quickly from an internet cafe: I have no problem with sidepayments that are transparent and subject to disclosure. Obviously there has to be a line between criminal behaviour and greasing the wheels. People are people, and trying to run human interaction without a little grease only ends up criminalizing what should be open.

So long as there is disclosure, that should help keep keep distortion to a minimum, without overloading commerce with wrong headed regulation (and as you know, I am not against regulation per se, regulation is good when it is market making – which is more often than market purists admit, far less often than Big Gov people would have it either.)