Only a few miles separate the Baltimore neighborhoods of Roland Park and Upton Druid Heights. But residents of the two areas can measure the distance between them in years—twenty years, to be exact. That’s the difference in life expectancy between Roland Park, where people live to be 83 on average, and Upton Druid Heights, where they can expect to die at 63.
Underlying these gaps in life expectancy are vast economic disparities. Roland Park is an affluent neighborhood with an unemployment rate of 3.4 percent, and a median household income above $90,000. More than 17 percent of people in Upton Druid Heights are unemployed, and the median household income is just $13,388.
It’s no secret that this sort of economic inequality is increasing nationwide; the disparity between America’s richest and poorest is the widest it’s been since the Roaring Twenties. Less discussed are the gaps in life expectancy that have widened over the past twenty-five years between America’s counties, cities and neighborhoods. While the country as a whole has gotten richer and healthier, the poor have gotten poorer, the middle class has shrunk and Americans without high school diplomas have seen their life expectancy slide back to what it was in the 1950s. Economic inequalities manifest not in numbers, but in sick and dying bodies.
On Wednesday, Senator Bernie Sanders convened a hearing before the Primary Health and Aging subcommittee to examine the connections between material and physiological well-being, and the policy implications. With Congress fixed on historic reforms to the healthcare delivery system, the doctors and public health professionals who testified this morning made it clear that policies outside of the healthcare domain are equally vital for keeping people healthy—namely, those that target poverty and inequality.
“The lower people’s income, the earlier they die and the sicker they live,” testified Dr. Steven Woolf, who directs the Center on Society and Health at Virginia Commonwealth University. In America, people in the top 5 percent of the income gradient live about nine years longer than those in the bottom 10 percent. It isn’t just access to care that poor Americans lack: first, they are more likely to get sick. Poor Americans are at greater risk for virtually every major cause of death, including cancer, heart disease and diabetes. As Woolf put it, “Economic policy is not just economic policy—it’s health policy.”
Tracing health disparities back to their socioeconomic roots adds context to growing calls for pro-worker policies like raising the minimum wage and providing paid sick leave. Lisa Berkman, director of Harvard’s Center for Population and Development Studies, presented a range of evidence indicating that policies supporting men and women in the labor force—particularly low-wage and female workers—lead to better health for themselves and their families.
From the AP –
Democratic candidate for governor Donald Berwick is pushing Massachusetts to take a second look at creating a truly universal health care system.
The former top Obama administration health care official said Thursday that the state should “seriously explore the possibility of a single payer system in Massachusetts” – a system which would effectively guarantee health coverage for all residents.
Massachusetts currently has the highest percentage of insured residents, but the system relies on a patchwork of private and subsidized care and falls short of universal coverage.
Many liberal Democrats have long said the best way to fix the health care system is to essentially offer Medicare to everyone, arguing that it would provide more coverage and is less cumbersome.
Berwick formerly headed the federal Centers for Medicare and Medicaid Services.
By Ralph Nader –
Costly complexity is baked into Obamacare. No health insurance system is without problems but Canadian style single-payer full Medicare for all is simple, affordable, comprehensive and universal.
In the early 1960s, President Lyndon Johnson enrolled 20 million elderly Americans into Medicare in six months. There were no websites. They did it with index cards!
Below please find 21 Ways the Canadian Health Care System is Better than Obamacare.
Repeal Obamacare and replace it with the much more efficient single-payer, everybody in, nobody out, free choice of doctor and hospital.
In Canada, everyone is covered automatically at birth – everybody in, nobody out.
In the United States, under Obamacare, 31 million Americans will still be uninsured by 2023 and millions more will remain underinsured.
In Canada, the health system is designed to put people, not profits, first.
In the United States, Obamacare will do little to curb insurance industry profits and will actually enhance insurance industry profits.
In Canada, coverage is not tied to a job or dependent on your income – rich and poor are in the same system, the best guaranty of quality.
In the United States, under Obamacare, much still depends on your job or income. Lose your job or lose your income, and you might lose your existing health insurance or have to settle for lesser coverage.
In Canada, health care coverage stays with you for your entire life.
In the United States, under Obamacare, for tens of millions of Americans, health care coverage stays with you for as long as you can afford your share.
In Canada, you can freely choose your doctors and hospitals and keep them. There are no lists of “in-network” vendors and no extra hidden charges for going “out of network.”
In the United States, under Obamacare, the in-network list of places where you can get treated is shrinking – thus restricting freedom of choice – and if you want to go out of network, you pay for it.
In Canada, the health care system is funded by income, sales and corporate taxes that, combined, are much lower than what Americans pay in premiums.
In the United States, under Obamacare, for thousands of Americans, it’s pay or die – if you can’t pay, you die. That’s why many thousands will still die every year under Obamacare from lack of health insurance to get diagnosed and treated in time.
In Canada, there are no complex hospital or doctor bills. In fact, usually you don’t even see a bill.
In the United States, under Obamacare, hospital and doctor bills will still be terribly complex, making it impossible to discover the many costly overcharges.
In Canada, costs are controlled. Canada pays 10 percent of its GDP for its health care system, covering everyone.
In the United States, under Obamacare, costs continue to skyrocket. The U.S. currently pays 18 percent of its GDP and still doesn’t cover tens of millions of people.
In Canada, it is unheard of for anyone to go bankrupt due to health care costs.
In the United States, under Obamacare, health care driven bankruptcy will continue to plague Americans.
In Canada, simplicity leads to major savings in administrative costs and overhead.
In the United States, under Obamacare, complexity will lead to ratcheting up administrative costs and overhead.
In Canada, when you go to a doctor or hospital the first thing they ask you is: “What’s wrong?”
In the United States, the first thing they ask you is: “What kind of insurance do you have?”
In Canada, the government negotiates drug prices so they are more affordable.
In the United States, under Obamacare, Congress made it specifically illegal for the government to negotiate drug prices for volume purchases, so they remain unaffordable.
In Canada, the government health care funds are not profitably diverted to the top one percent.
In the United States, under Obamacare, health care funds will continue to flow to the top. In 2012, CEOs at six of the largest insurance companies in the U.S. received a total of $83.3 million in pay, plus benefits.
In Canada, there are no necessary co-pays or deductibles.
In the United States, under Obamacare, the deductibles and co-pays will continue to be unaffordable for many millions of Americans.
In Canada, the health care system contributes to social solidarity and national pride.
In the United States, Obamacare is divisive, with rich and poor in different systems and tens of millions left out or with sorely limited benefits.
In Canada, delays in health care are not due to the cost of insurance.
In the United States, under Obamacare, patients without health insurance or who are underinsured will continue to delay or forgo care and put their lives at risk.
In Canada, nobody dies due to lack of health insurance.
In the United States, under Obamacare, many thousands will continue to die every year due to lack of health insurance.
In Canada, an increasing majority supports their health care system, which costs half as much, per person, as in the United States. And in Canada, everyone is covered.
In the United States, a majority – many for different reasons – oppose Obamacare.
In Canada, the tax payments to fund the health care system are progressive – the lowest 20 percent pays 6 percent of income into the system while the highest 20 percent pays 8 percent.
In the United States, under Obamacare, the poor pay a larger share of their income for health care than the affluent.
In Canada, the administration of the system is simple. You get a health care card when you are born. And you swipe it when you go to a doctor or hospital. End of story.
In the United States, Obamacare’s 2,500 pages plus regulations (the Canadian Medicare Bill was 13 pages) is so complex that then Speaker of the House Nancy Pelosi said before passage “we have to pass the bill so that you can find out what is in it.”
In Canada, the majority of citizens love their health care system.
In the United States, the majority of citizens, physicians, and nurses prefer the Canadian type system – single-payer, free choice of doctor and hospital , everybody in, nobody out.
Rush Limbaugh’s take on the disastrous rollout of the Affordable Care Act could, ironically, warm the hearts of those at the other end of the political spectrum. He contends that President Obama knew all along that the Affordable Care Act would crash and burn, but pushed it through so that the conflagration would clear the way for single-payer health insurance.
The conspiracy charge sounds deranged, but problems with the new health insurance system may indeed revitalize demands for more substantive reforms, which many policy makers and voters set aside in the putative interests of political pragmatism. Whatever the advantages of a single-payer system such as that currently administered by Medicare, one view held, American voters were unlikely to get behind it.
Yet one of the greatest advantages of a single-payer system — its relatively low administrative costs — has been thrown into sharp relief by problems registering with the new health exchanges. Andwhile Republicans despise the Affordable Care Act despite its conformity with many of their earlier proposals, their proposed changes (other than simple rollback) look complicated, kludgy and costly to administer.
The malfunctioning website has magnified problems inherent in coordinating enrollment across many different companies in many different exchanges in cooperation with many different government agencies. The harmonization challenges are orders of magnitude greater than those faced by a single company or a single state, making streamlining difficult. Improved software can do only so much.
In theory, competition and choice should increase efficiency. In practice, health insurance companies are able to take advantage of the complexity and uncertainty surrounding health care choices to make comparison shopping very difficult.
Lack of clear information about the prices of medical procedures, combined with a proliferation of insurance options whose potential benefits will be strongly affected by unpredictable events (such as being involved in an automobile accident or developing cancer), put consumers in a weak position.
The process of negotiating relationships with new health care providers because old ones are “out of network” is physically and emotionally exhausting. Insurance companies benefit from promoting policies that are difficult to understand and make consumers fearful of any change in their coverage. That fear and aversion has spilled over into the transactions required for many people to benefit from the Affordable Care Act.
David Himmelstein and Steffie Woolhandler, co-founders of Physicians for a National Health Program, regularly assert that elimination of the huge paperwork and overhead imposed by private insurance companies could save enough to cover the estimated 31 million of Americans who will remain uninsured under the Affordable Care Act.
My fellow Economix blogger Uwe E. Reinhardt, expanding on this theme, notes that the Institute of Medicine of the National Academy of Sciences recently estimated excess administrative costs of $191 billion, again more than enough to attain truly universal health care coverage.
Most such estimates are limited to the monetary costs incurred by insurers, doctors and hospitals and don’t include the value of the time that health care consumers must devote to managing a torrent of inscrutable paperwork that can become truly frightening for the critically ill.
Even if its rollout becomes more expeditious, the Affordable Care Act does little to reduce the incentives that companies have to barricade themselves behind high information and transaction costs. In the financial sector, I previously noted, this perverse incentive is described as “strategic price complexity.”
A complicated new program applied to a complicated old industry makes it hard for everyone to figure out exactly what they will be getting relative to what they are paying. As a result, many ordinary people and small businesses fall prey to redistributional paranoia.
Accusations of ripoffs proliferate, along with assertions that the Affordable Care Act is unfair to young people or that it simply represents transfers from the affluent to the poor, or from whites to people of color.
The program clearly has redistributive impact, but much of it will be muted over the life cycle. People who pay more for their insurance will get more benefits in return. The biggest transfers will go from the healthy to the sick (who are sometimes poor precisely because they are sick) and from one part of the health care system (emergency room care) to another (insurance-covered routine care).
But the structure of the program seems unintentionally designed to intensify distributional conflict. Its highly means-tested subsidies create strong political resentments and contribute to very high implicit marginal tax rates on lower-income families.
A single-payer insurance system, whether based on an extension of Medicare or on the Canadian model, promises many profoundly important benefits. Right off the mark, it promises simplicity.
No wonder conservative pundits are afraid of it.
Uber Now Delivering Kittens For 15-Minute Cuddle Sessions Gizmodo Australia
Australia’s sea of crimson claws BBC
* * *
What We’ve Learned From Nafta: It Successfully Undermined Regulations Yves Smith*, Room for Debate, Times. “‘[I]nvestor-state’ arbitration panels … give foreign investors greater rights than those of home country citizens and businesses.”
* * *
$13 Billion, Yes, but What Took So Long? Gretchen Morgenson, Times. “Had the Justice Department aggressively investigated the banks’ practices using its full array of powers, who knows how much more it could have generated?”
Shadow Banking and Systemic Risk Regulation Board of Governors of the Federal Reserve System
If this is “secular stagnation”, I want my old job back Crooked Timber
A Temporary Deal With Iran Moon of Alabama
Follow the money: How lobby interests are spinning Iran nuclear deal Pepe Escobar, RT
Now for the Hard Part Foreign Policy
The Geopolitics of a US-Iran Détente The Diplomat
World recognizes Iran’s nuclear rights: Rouhani Teheran Times
Iran sanctions deal to unleash oil supply but Saudi wild card looms Ambrose Evans-Pritchard, Telegraph
Learning to Live in the Anthropocene Truthout
The federal health-care exchange’s abysmal success rate WaPo. Keen interactive charts.
In rural Kentucky, health-care debate takes back seat as the long-uninsured line up WaPo. Note that Medicaid expansion requires neither the Exchange nor the mandate. It would have been just as simple to lower the eligibility age for Medicare and call that ObamaCare as it was to raise the income eligibility for Medicaid.
Obamacare Ain’t Lookin’ Too Caring Economic Populist
Chief of Hawaii’s O-Care exchange to resign The Hill. Finally. A scalp.
Big Brother Is Watching You Watch
US spying fuels popularity of secure messaging app Wickr FT. Funded by a VC late of In-Q-Tel? Gee, I’m not so sure about this…
Shaken NSA Grapples With an Overhaul Online WSJ
NSA deputy director skeptical on sharing data with FBI and others Guardian. So Feinstein’s “reform” bill would let the FBI and DEA search NSA’s data? Alrighty then.
Cryptography Part 1: Drunken rambling introduction Self Evident (parts 2, 3, and 4).
Multi-term Synonym Mapping in Solr Another Word for It. Whatever tool the NSA is using for data mining, it’s not stock SOLR or anything like it.
How word targets help creative procrastination John Quiggin
Swiss Voters Reject High-Pay Initiative Online WSJ
Questions raised about role of British company in South African mining massacre The Bureau of Investigative Journalism
Black Magic, White Soul The New Enquiry
I is for Ideology Michael Hudson. “Ideology: A set of assumptions so appealing that one looks at their abstract logic rather than at how the world actually works. (See Insanity.)” I love this series.
Antidote du jour (From Mexico). They promised me a pony and now my pony is here!!!!!!
NOTE * Yves apologizes for the lack of an original post; she’s been doing a lot of work back stage for the site relaunch.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
France’s government is struggling to stay relevant. François Hollande has become the most despised president since comparable polls started in 1958. To save his skin, Prime Minister Jean-Marc Ayrault proposed a total tax reform by shuffling around who pays what, an impossible undertaking, fraught with strive and protests. He didn’t even inform Economy Minister Pierre Moscovici. Blindsided, Moscovici decided to not let himself be “buried alive,” as he said….
The struggle in this administration to somehow come out politically alive is in full swing.
On the far right, Marine Le Pen, head of the National Front, has been clamoring for years to “let the euro die its natural death.” Getting France out of the Eurozone is part of her solution to the economic quagmire. But since it’s her idea, the political elite that have taken turns governing France for decades have to brush it off.
Suddenly, there’s the next solution. This one is attractively presented with graphs and in simple economic terms that even a politician might understand. It’s seemingly well-reasoned and has no visible partisanship attached to it. And it came from one of the largest megabanks in France, Groupe BPCE, that hardly anyone knows.
It was established in 2009 through a government bailout and a near-simultaneous merger between the Caisse Nationale des Caisses d’Épargne and the Banque Fédérale des Banques Populaires. These vast cooperative bank networks continue to exist with their separate brands. And that’s what consumers see. BPCE has €1.15 trillion in assets and owns about 20% of the retail banking market. It’s huge.
And now, its asset management and investment banking subsidiary, Natixis, released a zinger of a study designed to influence policy. It’s titled, “On a purely macroeconomic basis, Germany should leave the Eurozone.”
Germany should get out of the way so that the remaining countries can devalue in a big way what would remain of the euro. France, Italy, Spain, Greece, etc. have always done that, one way or the other, before the euro took that nifty tool of sudden money destruction away from them. It would be the ideal solution for France.
After conceding that there may be non-economic reasons to form a monetary union, the report lays out five reasons why Germany needs to exit. But it offers an alternate solution: if Germany wants to stay, it needs to pay.
1. Asymmetries in the economic cycles.
While Germany was stagnating between 2002 and 2005, the rest of the Eurozone was growing. Since the financial crisis, the opposite has been happening. Same with unemployment. Between 2002 and 2005, it shot up in Germany but declined in the rest of the Eurozone. Since 2008, it dropped in Germany while it skyrocketed in the rest of the Eurozone to a record high of nearly 15%.
This asymmetry is based on credit. In Germany, growth or lack thereof is largely independent of credit. But in the rest of the Eurozone, growth is predicated on massive credit expansion, so when credit ballooned before the financial crisis, the economies grew. When credit collapsed afterwards, the economy sank into a quagmire. Due to this asymmetry, the report argues, a common monetary policy is not appropriate for the Eurozone.
2. Weakening economic ties between Germany and the rest of the Eurozone.
After the financial crisis, German exports to the rest of the Eurozone dropped. But Germany didn’t just throw in the towel and sink into a long recession. Instead, it pushed hard to export to other parts of the world. So 2012 was a record year for German exports, but the share of exports to the rest of the Eurozone dropped from around 45% before the financial crisis to about 35%. These weakening trade ties indicate apparently that Germany is more attached to the rest of the world than the Eurozone.
3. Structural asymmetries.
There are a number of them. For example, 35% of GDP in Germany is associated with manufacturing and industrial services, compared to 20% for the rest of the Eurozone. The labor market in Germany is more flexible than in some of the rigid situations elsewhere. The poverty rate in Germany is rising faster than in the rest of the Eurozone – from 11% in 1999 to 16.1% in 2012, as opposed to the rest of the Eurozone, where it rose “only” from 15.7% to 17.6%. And the savings rate in Germany, with its rapidly aging population, is higher than in the rest of the Eurozone. (This is a particularly spurious argument: with the exception of France, most Eurozone countries have rapidly aging populations, Italy faster than any other.)
4. Different needs in exchange rates.
Germany “prefers” a strong euro, the report finds, and the rest of the Eurozone needs a week euro to become competitive in the export markets.
5. Incapacity in the rest of the Eurozone to impose “internal devaluation.”
“Internal devaluation” has been the hallmark of efforts to get the southern European economies off the ground: slash wages to make production more competitive. Cutting household income was supposed to resolve the crisis. This happened in Spain in a huge way, to the detriment of Spanish workers, and with at best mixed results for the economy. But this cannot happen in France, where the cost of labor, mostly due to taxes on labor, has reached extremes. The people won’t sit still and allow their wages to be slashed, and the government can’t live without the cash flow it siphons off from payrolls. So for France, the only solution forward would be a massive devaluation.
But it’s not hopeless, the report concludes. To save the Euro as it is, with Germany in it, three things must happen: accept the growing concentration of industries and services in Germany; accept the migration of workers from other countries to Germany (already in full swing); and impose transfer payments – “correcting transfers,” the report calls them – from Germany to other Eurozone countries to keep them afloat. Taxpayers in Germany would subsidize governments elsewhere. The French would love that.
The report seems to have two goals: get the French political establishment to give serious thought to the euro, and give the German political and business establishment, where the euro remains unquestioned, a choice: either accept to subsidize the rest of the Eurozone or get out.
Surely, this will go over very well in Germany.
If Germany were to leave, Austria, economically joined at the hip, would form a currency union with Germany. Other countries might join. This would be the northern euro, drawn up by France!
But the French government is desperate. Hopes that the economy would miraculously turn around have evaporated. Pressures are mounting. Unemployment keeps rising. Businesses are bailing out. No one has any other solutions. And someday, this idea, proposed by a non-partisan entity, the largest retail bank in France, might gain some traction within the political establishment, and when it does, the results will be unpredictable and very messy.
“Insurrection” is showing up in the French media, though it’s still more an exaggeration than a description. “Fiscal discontent” is better, but not broad enough. Now President Hollande is going to turn this debacle around. Read…. The Most Despised Tax-And-Retreat French President Sinks Deeper Into Economic Quagmire
By Bob Goodwin, an investor and medical device entrepreneur who lives in Mercer Island, Washington
Several bellwether software initiatives have gone off the rails over the last five years. I am going to focus on one, because I learned about it on Naked Capitalism, and is where I first saw the expression “Code is Law”. I hope when history is written, this example will stand out on how the anarchist nerds that we call software engineers inadvertently started to hijack public institutions. More cynically we could believe that the software engineers where just useful idiots to corruption. But conspiracy theories are not necessary for this story, and given the pace of events, I doubt there were smart enough conspirators anyways.
Before we dive into this story, we should keep perspective, as the history of early industrialization is also filled with anecdotes about the overreach of engineers and their subsequent failures. I doubt these stories were widely reported at the time, and I like how industrialization has turned out.
In this story, software engineers summarily rewrote policies that had been in place for centuries, and arbitrarily replaced historical procedures run by clerks, land offices and judges with a buggy central data-base. This is the story of the software used for mortgage securitization leading up to the credit crisis. Property ownership is fundamental to money and credit, which in turn is fundamental to capitalism, and therefore should be treated with great care. There are many examples of societies tinkering with property ownership, only to see their economy damaged in predictable sequences of setbacks involving money, credit, trade and investments.
One of the legs in the credit crisis was how title to real estate, which had served as collateral for individual real estate loans, underwent significant and perplexing changes over time through the process of using large numbers of these loans to create mortgage backed securities. It only became clear after the acute phase was over and more and more homeowners were facing foreclosure that the well established processes for recording and transferring title had become corrupted. This collapse was not due to computer science, nor was the collapse central to the larger crisis. In a normal era, this story might not have gone largely unnoticed. But even with the diligent efforts of lawyers and academics to bring attention to this issue and prevent it from becoming acceptable, official policy was to save the banks from possibly fatal liabilities, which meant papering over problems with mortgage title. Forgiveness was seen as a small price to pay to divert the attention away from the carnage. As a result, the the role of MERS and other “innovations” were never front page news.
But the point of view underlying MERS and the other ways that the traditional, slow, but extremely reliable process of recording title and transferring borrower notes is consistent with widely-held believes in the software industry. Software engineers had long ago decided that paper and humans were inefficient, despite our long history of governments tracking ownership via paper, authority and convention, such that it can be verified by a human judge conclusively later.
I should rephrase this. Software engineers did not know how to control paper, city halls or judges. So they wrote them out of the software.
The consistency of the paper process tended to be a disincentive to bad actors, as they were at risk of being exposed later. Reduction in fraud benefited the regular guy, which is nice, but not the point. Consistency was essential to the capital markets. Moving money is not very profitable per dollar, but is workable purely on the basis of scale. Moving money is also about playing the odds. Some transactions go bad. But the entire waterworks collapses if every bad transaction is contested and inconsistent outcomes occur. Only a nearly frictionless pipeline of money stays open. Twitchy financial types are quick to close pipelines when risks are not understood.
Today if you get a mortgage there is a lien on your house to secure the debt. Every lien is recorded in some government office using paper. Mortgages often change hands because the companies that are best at writing loans are not always the best at managing payments. Other mortgage companies may specialize on troubled loans, etc. Recently there has been an industry of packaging groups of similar loans together to make them marketable as securities.
History may look back on securitization and decide its primary value was to lower transparency and allow the corrupt to sell junk as gold. But at the time they were invented, I am certain there were people who saw the mathematical potential to improve efficiency by creating a secondary market for risk. And just as the mortgage markets needed inexpensive and consistent methods of managing a low margin portfolio, securitization was even lower margin, and relied even more on very high volumes.
The cost of a 19th century paper trail was inconsistent with a high speed late 20th century risk pooling market.
I try to imagine myself in those software meetings that overrode hallowed laws. Triage is a big word in software, because Pareto was taught to us on our second day of work. The 80/20 rule says you get 80% of the benefit from 20% of the work. We only wanted to do 20% of the work. Software types are most gifted and careful in our analysis into costs and benefits, lest we have to start all of our work over again later. The engineer quickly discovers that an individual mortgage has a failure rate of X. And of that X, which is low to begin with, becomes even smaller in practice because only a very few foreclosures are contested, so the requirement for a paper trail is virtually, zero. “Virtually zero” means problems need resolution, people can get on airplanes and negotiate fixes individually for each case. That cost is guaranteed to be far lower than the cost of creating a system that is a complete replacement for the 19th century paper trail. Looking back, I can see an error in the engineer’s analysis. We now know the cost was not anywhere close to zero.
Now the supreme irony is that I’ve depicted the origins of MERS as software engineers gone wild. It’s certainly plausible as history, but what actually transpired is worse. Some people at Fannie Mae, Freddie Mac, Ginnie Mae and the Mortgage Bankers Association looked at how the Depositary Trust Corporation, a system which eliminated the physical delivery of securities on Wall Street by creating a central depository, and thought it would be great to create a version for the mortgage industry. But even though real estate is governed by state law, and has important differences state by state, this group decided they could punt reviewing the state law issues. They’d just go ahead with their new system and the courts would comply. And the worst is that the courts have largely complied, even though the MERS database was built with an absence of protocols considered basic to database integrity, like audit trails and measures to insure accuracy (like dual keying and management oversight). So we got the worst of all possible worlds: management thinking like software engineers (conforming requirements to what looked most useful, rather than replicating an existing process) and whoever did the database part acting like MBAs.
And once this was in place, there was no going back. We are so dependent on software, that noncompliance with software is not an option. As we read the rest of the story, we can see how it came to be that “Code is Law”.
This story is most instructive not on how it happened, but how it was resolved. In the absence of a useful paper trail from mortgage companies, the mortgage companies were found to be retroactively creating a paper trail. Retroactive paper trail is a kind way of saying they forged documents for a court. Sometimes these forgeries were proven in a courtroom to be convenient fictions.
We would like to believe that the courts would have followed the letter of the law. But of course that is not exactly what either the courts or the laws are for, at least in America. The highest goal of property law is to keep money and products flowing in the economy, through efficient and consistent resolution of the occasional contract failure. A literal reading of the law, and a literal interpretation of the facts would have gummed up the economy by doing the exact opposite of its primary goal. Many judges saw this immediately. Rather than follow the written law, most courts effectively accepted that software was some form of common law. Even now, if the offending software were discarded, fixed, or laws are changed retroactively, we now know conclusively that software has the power to veto policy.
This is not the only story like this. We know that no customer can negotiate with anyone who accesses their company through a computer, unless they’ve been granted authority to fix certain problems, and then only in specified ways . Computers don’t negotiate. Code is law. We know that companies can create excruciating telephone experiences for customers seeking redress because code is law. But the mortgage detailed above is a really big deal uniquely because the law that was overruled by code was important and well considered, and courts unambiguously codified the primacy of software over law. In order to return the universe to its proper configuration, laws might be used to regulate software.
Over thousands of years, policies have correctly (or not) guided our use of land and water, built cities, and earned security for civilizations. Two policies in the last century have doubled our lifespans and increased our wealth astronomically. The two policies are energy (drilling, processing, roads, industry and utilities) and public health (clean water and food, work environment, health education). As great as the software industry might believe in its power, it is small in this larger context. Law and policy must always win. Law and policy of course can be inconsistent if one is moving faster than the other. But policy is delegated to men and women who are given this authority by traditions of government forged from blood.
Loss of confidence in our institutions comes at great cost, and I see the failure of the failure of Healthcare.gov, and what it means to both software and law going forward, as having the potential to reduce low levels of trust in our government even further.
Keep in mind loss in confidence in our institutions is not that rare. I am barely old enough to remember the campus riots during the Vietnam War, but plenty old enough to remember the malaise that Jimmy Carter spoke of. Three consecutive events occurred in the same decade that each spoke to the incompetence or impotence of the federal government: the war itself that ended in 1973, the oil shock, with America reduced to rationing, and inflation, which brought 19% mortgages and virtually zero improvements or repairs to any asset with a long life.
It is a stretch to impute a line from OmamaCare having problems to a great malaise. However every consequence of the 1970s flowed directly from the inability of our federal government to implement its stated policy. Failure begets failure. The 1970’s object lesson speaks to why we should all be adamant about competency of government to achieve stated policy.
The first casualty of cascading failure would be liberalism. But only temporarily. Even though I am not a liberal, the shining example of liberalism is its tradition of proactively building social institutions, from activism against slavery and before that institutes of education. In this century much of the growth in the federal government was a direct extension from a long history. It is certain that hunger to expand institutions will be diminished when a straight forward policy is achieved at great cost politically, and then cannot be implemented. But while I hope the lesson will shift liberalism toward more competent institutions and away from pure resource diversion, liberalism will likely prosper so long as it adapts. There is no activist alternative to liberalism today (although I see candidates), so the only way liberalism falls is through repeated examples of social institutions that aren’t successful, and are mostly used as organs of corporatism.
The second casualty will be confidence in the public sector, and that has been under long term attack. I fear this outcome the most. We fairly get angered at incompetence in the public sector, mostly because it is funded from taxes without recourse. We also get angered at all other incompetence, but somehow separate the anger into different compartments. And I don’t think viewing the public sector as incompetent is fair.
Public employees are passionate, hardworking and committed. I definitely trust public institutions to collect taxes and fight wars, and prefer to buy commodities from private institutions. Public and private models have different sweet spots. Public employees are my neighbors and friends. I talk to them. I hear about their challenges, struggles, and goals. They seem like passionate, hardworking and committed Americans. Education, crime, and war are managed imperfectly, but better than ever before, and amazingly well considering the obstacles and a lack of money based incentives. But public employees have also seen great improvements in both efficiency and accountability without this mechanism. When there is confidence in an institution, good intentions are transmitted.
Most institutions, public and private have exasperating and obvious failures, due to forces that work in opposition to good management. But the net of all these forces we usually end up with functional public institutions that mostly differ from their private counterparts in their slower rate of adaption, higher expectations of conformance, and greater interest in individual outcomes. Government employees did not mismanage a software project because they had poor skills. Software engineering has always been an obstacle to the top down propagation of policy. It has been hard for every industry that has used it, but government has found it hardest to adapt.
ObamaCare may fail, and it is possible that it will cause a chain of other bad outcomes. It seems more likely that any means necessary will be used to avoid that scenario. By placing this principal as first, many possible outcomes can be dismissed as unlikely. Political fix that enables the Obamacare law to achieve the minimal acceptable outcome (large reduction in uninsured, pre-existing conditions cannot prevent insurance) would ordinarily be the obvious remedy, but since this law was voted along party lines, that path may be closed.
Doctors, hospitals, and insurers will all resist disruption. Fixes to the law will impose new costs on all of them, since they’d already planned for Obamacare as first written. The Administration has gone from treating the insurers and Big Pharma as its real clients to being more willing to show some muscle as the possibility of failure looms.
The tough part is patients, or as the Administration likes to call them, consumers. Government cannot coerce the population as easily as it can institutions. ObamaCare is definitely losing ground in public perception. To oversimplify perception, all the opposition needs is for something fundamental to be going wrong that people can easily relate to. Once they have public attention, it becomes a lot easier to drive wedges such as “He lied that I could keep my coverage.” If we ever get to the point where virtually everyone knows someone who has a bad story to tell about the law, then public attention could last indefinitely, a health care version of the Iran hostage crisis, which sapped Carter’s waning credibility. There are plenty more wedges that opposition can drive, such as when a debt ceiling debate includes “He lied to us about taxpayer liabilities from Obamacare.”
My belief is that absent the public attention, Obama could have finessed all the challenges. The perception of incompetence has to be eliminated, preferably by eliminating the incompetence. The perception and the fact of incompetence is attributable to the software. It may be necessary to abandon the website completely, but this really solves nothing. Computers are still needed to determine eligibility, and insurance companies will now have to create the same services from scratch that the government has been working on for years. It seems possible that software is what is preventing the success of the law.
And this is where I get really uncomfortable, because even if we pull this one through somehow, there will be another. As public policy is increasingly dependent on information, large policy changes are becoming harder to implement. Headwinds are growing, it is only a matter of time before big policy will be unable to outrun it.
Perversely, policy is similar to software. Both have never ending dependencies, and tame chaos mostly by creating predictability, and less by creating optimal outcomes. Both are prickly professions precisely because tinkering almost always makes things worse. Both are opaque, and both harden like concrete into odd shapes. Both are managed mostly through small actions at the periphery, and are structurally changed only with vast resources and these changes made are motivated by strange alliances of interests.
What is a deeper observation about the intuition is that policy has always be information bound, even from the beginning of time. And the pressures on policy in an age of exploding information are very large. This is the really good news in this essay. Even if the transformation of our society leads us through a valley of despair, we can still expect the long term competence of government policy to accelerate like other parts of the economy. The promise of the power of government policy can be achieved once new principles of information management become part of the institutions of government policy.
* * *
Perhaps software engineering was right on this point all along. With enough complexity planning becomes impossible. Only if one distributes accountability and constructs from the bottom can there be any hope of rationalizing all the possible outcomes. Stabalizing pockets of complexity is a requirement before planning what to build on top. The problem of course is that the government contractors implemented bottom up management (they had to use the resources they could get), and then implemented a top down cargo cult for the benefit of the government.
To fix this we are going to start to need to implement policy bottom up within the government, and then demand software industries supply building codes and transparency so that the bottom up policy makers are masters of their software rather than victims. If policy really is like software, additional advantages will accrue to the builders of policy. Bottom up policy making allows experimentation, and allows connected branches of policies to adapt to experimentally discovered optimizations. The organism becomes self-correcting in a way top down systems cannot be. Some top-down features are unavoidable, but the interface between top-down and bottom-up needs to be reconsidered. We need funding, for example, and we need an understanding of how to measure success. This is a difficult management problem, but not unsolvable.
But it would represent radical change in the configuration of public and social institutions. Such changes require confidence, and so the loss of confidence at this juncture would be a particularly costly setback.
There are a few of us who have become the scientists and practitioners of the complexity that comes from massive management of information. It is messy, it is imperfect, and it is far more of an art than a science. I sit in on the side as a software engineer, and gently raise my hand and say “Policy always was software”. “Code always was Law”. We just never realized that before there was software there still was code, executed by clerks rather than machines. Let’s adapt to our brave new world, and create an even higher platform for the human experience, by building more powerful institutions and more passionate professions. The consequences if we fail to do so are costly indeed.