Wednesday, 22 April 2015

Dunning Kuger, Adam Smith, Competition and the NHS

We had an interesting debate on here recently which drifted into a discussion about the efficiency of NHS and related matters.

At the time one of my antagonist quoted Adam Smith. And at that time I did not have the facts to hand although I was sure that he was wrong and therefore I did not engage in that piece of the discussion. This is the Dunning Kruger effect.

The quote concerned was the one where AS states something on the lines of "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

This is often used by lefties to justify that regulation of free enterprise is necessary as otherwise 'market failure' will ensue and capitalists will compound to overcharge by creating monopolies and cartels.

I returned to Wealth of Nations to remind myself why this was not what AS had in mind. In fact this is part of his argument against regulations. In that what these businessmen are seeking is for the State to erect rules and regulations to protect them from competition.

Which brings us back to the NHS. Efficient it may or may not be. Personally, I think that measuring how 'efficient' it is in comparison with other probably inefficient health care systems proves nothing. AS would argue that what is need to make health care 'efficient' is less special rules favouring special interest groups, doctors say, and more competition. In other words it is not money, it is structures that are holding back efficient heath care.




Antisthenes said...

Having had considerable experience of two national health care services one that is arguably the best in the world the French one and one that is amongst the worst the British one. I perceived what makes the one much better than the other was in fact a high degree of competition which the French one enjoys. Coupled with which funding is quite different as in the French one an element of personal responsibility is involved (despite which because of the way this element is structured the less well off are not disadvantaged).

The Stigler said...

the waste is obvious in the NHS - processes and decisions that anyone with half a brain would change. I was involved in a process improvement project for district nurses and almost nothing we proposed was done.

What's the one piece of equipment that all people on the road (salesmen, service engineers, delivery and taxi drivers) now have? A GPS mapping system, right? Preferably one hooked up to traffic data, yes?

The guy I was working with didn't even think it needed a cost/benefit analysis as it was such a no-brainer, but we did some sums based on visit data and worked out that it would conservatively pay for itself in 2 months.

Most businesses would bite your hand off over a 2 month payback on an investment. But the people we dealt with didn't. "oh, well, that'll be a non-standard item and will take a lot of work". In most businesses, they're either organised to give local managers a bit of financial autonomy (so, the boss can go to his boss and he approves it) or their attitude is "bah lots of bureaucracy" but they get on wade through it because it's still worth it.

I had to laugh as people were interviewing David Nicholson as though he's an expert on running anything, the man who presided over the £12bn screw-up that was Connecting for Health. I've worked on £20m computer systems that had careful control, where the board wanted to see things being completed. Both went a bit over budget - to around £25m, but if, during the project, nothing good was being delivered, they'd have started cracking skulls.

DP said...

Dear Lola

"In other words it is not money, it is structures that are holding back efficient heath care."

The people in the NHS just love the money, the more the better. Since only a small percentage can be 'legitimately' skimmed off in extra salary, they have to find innovative ways to waste billions to justify a small percentage rise in their own salaries because of the 'added responsibility' of wasting the extra billions.

Competition would make some wealthier - because they are better - but it is unlikely to be the current beneficiaries, who are the ones who make the decisions, so it won't be allowed.

This may have been touched on in the Daily Outrage recently.


Bayard said...

"In other words it is not money, it is structures that are holding back efficient heath care."

Very bureaucratic structures at that.

However, I've given up with the NHS, ever since I read that, in a poll, more people wanted the NHS to remain in the public sector, than wanted it to be in whichever sector allowed it to work best (i.e. it should remain public no matter how crap it was). So public ownership of the NHS has become an article of religious faith and no longer amenable to any form of reason.

Lola said...

B. Yeah. This is part of the 'agenda' of the authoritarians - capture health and education.

paulc156 said...

Hello Lola. Further to that telling but none too complementary assessment of business owners [which is exactly what it was] and that was the sole point of my quoting the Smith passage, not to make any point about Smith's position on regulations one way or the other. I just looked back to check my post to you and there is no point at which I make any claims regarding Smith's position on such matters, nor were we discussing such matters. You seem to have got yourself into a bit of confusion. Smith just made the point that businessmen routinely gather together for one purpose that being to rip off the public.

However since you just now bring the matter of regulation and it's merits or dangers in to the discussion it's worth pointing out there was one industry that Smith especially singled out as being ripe for 'regulating'. Banks. I can imagine he'd have broadened that to finance more generally if were around today.

The Stigler said...


I think you're right.

The public just didn't seem that bothered about mid-Staffs. People only seem to wake up to problems in the NHS when their relatives have been killed or badly treated. It's like if a plane crashed because of negligence, but people kept flying with the airline.

Mark Wadsworth said...


I think we understand the Smith quote perfectly well, the argument here is about whether doctors (who have several lobby/professional bodies) are "of the same trade" and thus likely to try and rig the NHS or whatever healthcare system or regulations or whatever in any particular country to suit themselves.

I say "Yes, they do", PaulC appears to be saying "No they don't".

Lola said...


Nope. He wasn't asking for the regulation of bankers either. He was again cautioning that giving them special privileges would end in tears. As it did in 2008 for precisely that reason.

Lola said...


I should also say that I have absolutely no problem at all with your posts or arguments. It is precisely from such arguments that truths emerge. I was not having a pop at you per se.

Unlike most web commenters I try and remember that I am talking to someone and try and adopt the tone one would expect in a civilised debate.

Except when dealing with or commenting upon anything involving the utterly corrupt wankers at the Financial Catastrophe Authority, of course. Or pretty well any of the current crop of quangoista fuckers, when even English cannot supply all the required vitriol.

Robin Smith said...

Surely its people not being very nice to each other that holds back the NHS? "structures" are not sentient beings unless you are a friend of David Icke.

I like the bit about how businessmen are always seeking protection from competition. So these entrepreneurs are socialists then? I agree. I've never met a true capitalist nor free trader.

paulc156 said...

"Nope. He wasn't asking for the regulation of bankers either."

Lola. As I understand it he definitely did. I read something on this from Krugman but to be fair I imagine you wouldn't accept Krugman's [not a strict libertarian I suppose] interpretation or reading of Smith. But I think it's pretty widely accepted that Smith did indeed favour regulation of private banks. See first paragraph; "the actual regulation of private banks of which Smith approved..."

Discussed here;