Centralization and decentralization: will Bernie Sanders save money while saving health care?

this is going to be a somewhat brief but
deep video about political science I think that the whole sphere of politics is really still being haunted by this question of centralization and decentralization and it's haunted by it partly because it was a major point of political contention about twenty years ago but it remain in this strange gray area where it was never really examined properly by economics as a discipline like as a discipline alone it's also never really handled by politics as a discipline it's in this dangerous gray area where it's partly within the domain of economics but the economists don't really want to think seriously about the political and ethical aspects and then it's partly in the domain of politics where everyone is inclined to lie in their self-interest so in the discussions about Bernie Sanders and his proposed transformation of the American healthcare system one of the questions being asked is could Bernie Sanders really achieve a dramatically more efficient system in America through the reforms he's proposing could he achieve greater efficiency through any method other than lowering the salaries of doctors and nurses there is pause efficiency is not the only consideration here right efficiency is one consideration fairness is another consideration if you want to take the position that you know what it's okay if the American healthcare system becomes less efficient like it can cost more money and so on if poor people are really able to have equal access to cancer treatment along with rich people that morally that's an objective so important that that's that's going to justify some inefficiency so very often in politics efficiency is not the most important thing poor people in rural areas do they have access to the same quality of education as rich people in major cities if you want to provide that you're gonna have to embrace a certain level of inefficiency and and that's that's okay you can decide democratically even though that's good that's something else is you're already other than efficiency however politically right now Bernie Sanders is encouraging Americans to imagine that through the centralization of medical services of medical administration and of health insurance sort of exists as a shadow of the medical system I mean you could say he wants to eliminate the health insurance industry or he could say he wants to centralize all the charts you can express enough ways but basically through centralization trillions of dollars will be saved in greater efficiency now again one really brief thing I need to pause to clarify in my earlier video I showed you on Stewart screen just how astronomical the average wages for American doctors were primary care doctors and also specialists in a Germany right now the average salary for a nurse is thirty-eight thousand six hundred dollars these are US dollars Germany is not a third world country Germany is not providing medicine at third world standards Germany is an affluent first world country with generally people consider to have excellent health care or at least very good health care the nurses are being paid thirty eight thousand six hundred dollars in average salary okay in the United States of America the equivalent average is seventy three thousand five hundred so nurses making seventy two thousand five hundred now I think that that average is kind of low if you break it down category by category you get much much higher numbers so you know if you look at sorry the term nurse covers a wide range of things are you looking at registered nurses or you looking at nurse practitioners and the different states have within the united states different regions have different definitions so it's a little bit complex however yeah a nurse in California is likely to make over 100 thousand US dollars I have one friend who is a nurse in California he says everyone is making a hundred thousand or one hundred and fifty thousand dollars in up as a nurse out there again his definition of nurse I think he's not including the less qualified nurses who just work in retirement homes so it's a little it's a little bit complicated nevertheless my point is here the most obvious way the United States of America could achieve greater efficiency in health care would be dramatically reducing the salaries being paid to doctors and nurses so as soon as Bernie Sanders creates this federal government system of providing health care there will be the temptation for whoever is in charge of the government to save money by providing doctors and nurses with a salary that is similar to the salaries paid in France paid in Germany paid in countries other than the United States of America right and of course the same question is also being asked about pharmaceuticals drugs why should Americans pay more than people pay for the same drugs in other countries well the question deserves to be asked why should they pay more for doctors and nurses for the labor that they do in other countries and that that's gonna have profound political patients so the ghost haunting mainstream political discourse here is the question of what advantage is to be gained from centralization itself and I think the best example I can give you here is imagine the beer industry all right let's imagine the beer industry in a medium-sized country like Japan and throughout Japan there are little craft breweries okay so there are little small privately owned businesses scattered around and then let's say there are also sort of medium sized factories throughout Japan producing beer for this whole population let's say someone decides to run for government with the promise if they are elected they will real organize the beer industry to be centralized and achieve greater efficiency they're looking at the beer industry and say look there's this whole mess of little local privately owned companies doing this and beer is much too expensive the whole process is much too inefficient fundamentally be a bottle of beer should be just as cheap as buying a bottle of soda pop or a bottle of water let's centralize this whole industry into just a few enormous highly efficient factories and then the price of beer will drop dramatically there'll be greater efficiency achieved through economies of scale through centralization itself now I'm using this example because I think it's very easy in this case for people to imagine step by step to think through what are the advantages of centralization and what are the advantages of decentralization and why is it that in most countries that drink beer like Germany or like the United States you actually have a mixture of a centralized and decentralized beer production right so there are smaller companies that generally charge a higher price that produce beer locally and that will generally have more variety and more innovation again it's important to keep in mind here there's a sense in which beer hasn't changed in 1,000 years right and yet if you're someone who cares about beer I'm not I don't drink alcohol but you know it's advertising surrounds me I'm aware that small craft breweries are coming up with new ways to make beer and new flavors of beer and new ideas they're innovating and responding to local interests they're producing new products and finding new markets and so on all the time on a tiny scale there are these craft breweries taking these kinds of risks also of course craft breweries they don't have to transport their goods over such a huge distance right they may have a local clientele and they can produce for that so on and so forth whereas if you have one huge factory in one location then you need an army of truck drivers to distribute the beer and beer beer bad the passage of time matters for beer doesn't go bad as rapidly as something like baked bread or something but nevertheless how you transport beer the temperature you keep it at in the passage of time those things all matter to so what you normally end up with under free market conditions so to speak is not the dominance of the centralised mass manufacturing model but you have both in competition with each other and each has its own advantages and disadvantages however let's go back to Japan and say we have this political party that's promising you they will dramatically reduce the cost of beer by centralizing it into one system one public sector sector system the same way Bernie Sanders wants to centralize the medical care all right what would be the savings fundamentally bottle by bottle and leader by leader if you're gonna provide the same number of millions of people with beer you're going to be facing the same costs whether you manufacture that beer on a large scale or a small scale right on a centralized manner or in a decentralized manner if what you want to do is provide medical services which again for the most parts this is doctors Consulting face-to-face with people who have the flu and taking their temperature and taking stool samples and doing medical tests and giving them advice and giving them prescriptions you know this kind of thing again and again that face to face interaction with a doctor the doctor taking your temperature and checking your blood pressure these kinds of routine things there isn't some kind of dramatic increase in efficiency by having an enormous Hospital centralized in one location and centralized administrative Lea under one government's control that were one giant corporations control for that matter doesn't matter as opposed to many small competing locally owned hospitals doctor's offices for-profit medical services soon and so forth there isn't there isn't any self-evident savings in in inefficiency there right now again in a sense with brewing beer and putting beer into bottles even though I'm sure there is some savings in terms of having larger and more efficient equipment you could say that about hospitals - at a hospital the way people share equipment the way people perform medical tests and so on as opposed to a small doctor's office needing to send the stool sample to a lab to have the tests done and have it sent back there are going to be some savings there but leader for a leader in terms of the ingredients that go into a beer and pound for pound what-have-you there isn't some kind of obvious dramatic savings when you centralize as opposed to having decentralized services except the cost of labour when you centralize the manufacturing of beer into one giant factory you get anonymous faceless factory employees all right and then the corporation can pay these people minimum wage they can pay them almost nothing and they can replace them very easily and say hey you don't matter us the small locally owned brewery it's very likely to be kind of one guy who started the business and his wife may be his wife and his son and maybe they have two employees they are almost inevitably going to pay themselves higher wages the business really exists for them they don't regard themselves as nameless faceless easily replaceable employees right the centralization of medical services and the centralization of a factory production it's partly just a kind of change in social perspective that comes about with central planning and the pursuit of greater efficiency it almost always connects to paying lower wages right and again if you imagine yourself in the position of the president the United States of America you would then be asking yourself why would you pay doctors and nurses in the United States so much more than they're being paid in France or Germany and you of a responsibility as the president at states to use taxpayers money responsibly so on and so forth right you're not administering this centralized bureaucracy for the benefit of the doctors or the nurses right so I mean likewise again if you were the government in Japan and they take over the beer industry and centralize the beer industry they're then looking at that from this centralized authoritarian perspective and saying well our job is to produce a large quantity of beer at the lowest prices possible why should we pay these people more or we can pay the minimum wage it's the same as any other factory job and that's it and what you lose is the small amount of innovation that comes about with the locally owned small craft beer factory again I'm not glorifying this but you know there's some guy who sits around and says okay let's come up with a new beer for this summer or this winter and they design a new label and they come up with a new gimmick I remember there was a beer company in Canada that decided they were gonna they were gonna have coffee flavored beer this was gonna be the new thing and that kind of innovation probably fails nine times out of ten no they come up with new ideas but I mean the the people are being paid more I'm not even presuming these are tremendously brilliant and in a fit of people but they do sit around trying to innovate trying to make the most out of out of their little local brewery and the hope is the dream is that with decentralization you're gonna get more innovation of one kind or another um now again I'm using both examples here because I'm not wildly optimistic about that I don't think it's the case that a decentralized medical system results in you having amazing new innovations in how doctors treat heart attacks it may it may well result in a better kind of quality of service for people I've seen that in contrasting the Canadian healthcare systems the American healthcare system I'm amazed at how good the human relations are the service element of the American healthcare system is because what I'm used to is the socialist system can mmm so just in the last couple of years because I have an American girlfriend I've been back and forth across that board I'm really surprised how well the American health care system works on that side but that's I mean that's just sort of how it caters to the individual client which I guess you can say is what's happening in the beer industry also that doesn't represent greater efficiency and it doesn't in and of itself represent a kind of greater quality of service if by quality you mean the real health outcomes like actually saving people's lives are actually performing a better quality of heart surgery or whatever metric you want to use to measure that okay so I think the whole political spectrum less left and right remains a bit mystified about the advantages and disadvantages that are linked to centralization and decentralization um people I think are naturally afraid of centralization because it is opaque it lacks transparency it lacks public accountability however the fundamental advantage of centralization is fairness if you centralize the education system then there's really the potential to provide equal education for all uniform standards for all just even that we write the same exam and we're great at the same way where I feel ok I can compete with you and I know I'm writing the same exam you're writing we don't we have the same opportunity we're great against the same scale fairness is a huge fundamental advantage that means centralization is the way to go with some types of services some types of social functions however yes decentralization gives you a more responsive more kind of adaptive and adaptable more innovative you know more transparent in the sense that local people more transparent system in the sense that local people get to go and scrutinize that doctor's office or that local beer factory and they have a choice they say ok I don't you know I don't like this doctor's office it looks dirty or it looks poorly organized I don't like this craft brewery so I'm gonna choose to go to another place the more centralization you have by definition the less choice you have so that highly centralized education system you can't switch schools or even if you do switch schools the other school you switch to is exactly the same as the school you left because it's a ideally it's a totally centralized totally uniform system all of the options are scary all of the consequences are intimidating but in the year 2020 the United States finds itself in such a dire position in terms of the provision of health care to its people that they're certainly not risk-averse the time has come to the United States of America to try something new I hope they'll engage in a really sincere comparative study of what the different strategies used around the world are in Europe in Japan here in Taiwan and they're gonna make a wise choice that isn't just guided by abstracted e ology but is guided by a nuanced awareness of the advantages and disadvantages of socially provided healthcare as it has been tried and tested in other countries around the world