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A New Golden Rule: “What’s In It For Me?”

By Shlomo  Maital      

 It would be nice if each of the world’s 7 billion people followed the Golden Rule (do unto others..) and acted selflessly like Mother Teresa.  But in reality most of us do what benefits us, our wallets, and our egos.  That’s life.

   Why then do so many policymakers screw up, by ignoring this simple fact of life?  Why do we fail to create incentives for people to do the right thing, instead of trying to create laws and regulations that try to force them to do so – laws that never work? 

  Here are some how-not-to examples of policies that do huge damage, by screwing up the incentive systems, in absurd stupid ways.

* By 2021 U.S. health spending will be 20 per cent of GDP!  At the same the standard of care will decline, because most of that increase will be health-cost inflation.  Why? In the present system, doctors and hospitals are reimbursed in large measure according to the procedures they carry out (tests, MRI’s, etc.).  Result: Numerous expensive tests and procedures, many of which are superfluous.  Some specialties like pediatrics are poorly paid, because procedures done on kids are cheaper than those for adults. (I heard this from a medical student, about to choose his specialty). 

   * The State of Lousiana pays local sheriffs per head, for each prisoner they incarcerate!  Guess which U.S. state has 26 per cent more prisoners than the next highest state (Mississippi)? 

   * The new Prime Minister of Thailand, Yingluck Shinawatra dramatically raised the salaries of teachers, after a campaign promise, and began giving students tablets. Yet the performance of Thai kids on international standard tests has fallen.  Why?  The added pay for teachers came with no type of performance or success measure.  They get the extra money, all of them, whether they’re good or bad.  Nice work, PM! 

   Teachers, doctors, police —  there are numerous examples.  Let’s rethink policy. Let’s ask two simple questions.  What do we want people to do?  What will get them to do it?  It’s that simple!


Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2012
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