Economics and Justice
Services without Tears
Jeffrey D. Sachs
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NEW YORK – A famous claim in economics is that the cost of services (such as health care and education) tends to increase relative to the cost of goods (such as food, oil, and machinery). This seems right: people around the world can barely afford the rising health-care and school-tuition costs they currently face – costs that seem to increase each year faster than overall inflation. But a sharp decline in the costs of health care, education, and other services is now possible, thanks to the ongoing information and communications technology (ICT) revolution.
The cost of services compared to the cost of goods depends on productivity. If farmers become much better at growing food while teachers become little better at teaching kids, the cost of food will tend to fall relative to the cost of education. Moreover, the proportion of the population engaged in farming will tend to fall, since fewer farmers are needed to feed the entire country.
This is the long-term pattern that we’ve seen: the share of the workforce in goods production has declined over time, while the cost of goods has fallen relative to that of services. In the United States, around 4% of the population in 1950 was employed in agriculture, 38% in industry (including mining, construction, and manufacturing), and 58% in services. By 2010, the proportions were roughly 2%, 17%, and 81%, respectively. In the meantime, health-care and tuition costs have soared, along with the costs of many other services.
But a productivity revolution in service-sector delivery is now possible. As a professor, I feel it in my own classroom. Ever since I began teaching 30 years ago, it had seemed that the technology was rather fixed. I would stand before a class and give a one-hour lecture. Sure, the blackboard gave way to an overhead projector, and then to PowerPoint; but, otherwise, the basic classroom “production system” seemed to change little.
In the past two years, everything has changed – for the better. At eight on Tuesday mornings, we turn on a computer at Columbia University and join in a “global classroom” with 20 other campuses around the world. A professor or a development expert somewhere gives a talk, and many hundreds of students listen in through videoconferencing.
Information technology is revolutionizing the classroom and driving down the costs of producing first-rate educational materials. Many universities are putting their classes online for free, so that anyone in the world can learn physics, math, or economics from world-class faculty. At Stanford University this fall, two computer-science professors put their courses online for students anywhere in the world; now they have an enrollment of 58,000.
The same breakthroughs now possible in education can occur in health care. The US health-care system is notoriously expensive, partly because many of the key costs are controlled by the American Medical Association and private-sector health-insurance companies, which act like monopolists, driving up costs. Such monopoly pricing should be ended.
Yet there are other reasons for high health-care costs. Many people suffer from chronic ailments, such as heart disease, diabetes, obesity, and depression and other mental disorders. These diseases can be expensive to address if they are poorly managed and treated. Far too many people end up in the emergency room and the hospital because they lacked the advice and help to keep their conditions under control without institutional care, or even to prevent their disorders entirely.
Now information technology is coming to the rescue. Innovative companies like CareMore in California are using ICT to keep their clientele healthy and out of the hospital. For example, when CareMore’s patients step on the scale at home each day, their weight is automatically transmitted to the health-care unit. If there is a dangerous weight swing, which could be caused by congestive heart failure, the clinic brings the patient in for a quick examination, thereby heading off a potentially devastating crisis.
These innovative companies’ approaches combine three ideas. The first is to use ICT to help individuals monitor their health conditions, and to connect individuals with expert advice. The second is to empower outreach workers (sometimes called “community health workers”) to provide home-based care in order to prevent more serious illnesses and to cut down on the high costs of doctors and hospitals.
The third idea is to recognize that many illnesses arise or become worse because of individuals’ social circumstances. Perhaps the patient is isolated, lonely, suffering from depression, out of work, or facing some other personal or family calamity. If these social conditions go unaddressed, they may give rise to an expensive, even deadly, medical condition.
Smart healthcare is therefore holistic, helping people not only as patients arriving in the emergency room, but also as individuals and family members in their own homes and communities. Holistic health care is more humane, effective, and cost-efficient. The ICT revolution provides the means to achieve holistic health care in new and powerful ways.
In economic terms, information and communications technologies are “disruptive,” meaning that they will outcompete the existing, more expensive ways of doing things. Implementing disruptive technologies is never easy. Existing high-cost producers, especially entrenched monopolists, resist. National budgets may continue to favor the old ways.
Nevertheless, the promise of great cost savings and major advances in service delivery is at hand. The world’s economies, rich and poor alike, have much to gain from accelerated innovation in the information age.
Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.
Copyright: Project Syndicate, 2011.
www.project-syndicate.org
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Zsolt 12:20 25 Nov 11
It is very interesting on how many fronts humanity has to fight against the odds these days, especially if we consider that a single attitude change could solve all our problems almost immediately.
We do not recognize that all our calculations, all our action, lifestyle is based on calculating costs and profits.
We simply cannot leave this box, where every breath we take, every move of a finger has to bring us some benefit, otherwise we simply cannot move. We live in a completely subjective, introverted world.
If suddenly all of together decided that my intention, purpose with every thought or action I take is how to contribute to the whole global, interconnected network, how to serve others, we could become completely free and solve our our problems.
Why would I need to worry about myself, when there are 7 billion loyal people around me, only interested in caring about me?
Most of the chronic illnesses, especially depression would disappear almost overnight if we removed self concern from the equation, living a harmonious, balanced life with each other and our environment.
Does it sound like utopia, working for others, serving their needs?
I do not think so. If we honestly examine the world today, and see why we do most of the things in 99% of our time, we will find that even now we only work for others, we only do things in order to become similar to the society around us, to follow the mainstream, the fashion, we chase and fulfill desires which are not our own, we buy, eat, drink, watch, listen to things that is brainwashed in us from others, basically we do not even exist, we are just a product of everything that is around us. We are complete slaves of our societies.
Basically we live all our lives to satisfy the society around us against our will.
So all we need is a simple psycholigical switch, when instead of being blindly coerced to serve others as we do today, we start doing it willingly, happily, understanding that only a mutual, considerate and cooperative, intermingled humanity is capable of caring for each of its members and give them sustainable future.
Our true freedom comes from understanding the system we exist in, how my cogwheel can best contrbute to the perfect function of the machine. The true reward we receive is the proof, that my positive actions make the whole system blossom and develop to its maximum potential.
JullieAnderson 06:02 26 Nov 11
Cost of education nowadays is getting very high. And, if there is a requirement for a private tutor, then the cost become sky-high. I think in this scenario, online education is a better option. There are several sites available to help students getting homework help at a very nominal cost, for instance Tutorteddy
lukehlee 11:22 28 Nov 11
Dear Prof. Sachs,
You said, “But a sharp decline in the costs of health care, education, and other services is now possible, thanks to the ongoing information and communications technology (ICT) revolution.”
I believe this concept has also been possible in the distribution and delivery of real (physical) products and services, but unfortunately, it didn’t happen in the market.
I have discovered a serious mistake made in the construction of numerous market (transaction or supply chain) systems or applications for real transactions through the use of IT and networking technology over the last 20 to 30 years, and it significantly changed the economic environment and created an economic death spiral in the economy. Strangely, our economic experts have not considered this at all in their ruminations about the economy.
What mistake? Please see this article: “The Real Cause of the Current Economic Crisis and a Suggested Solution” http://goo.gl/9y8Uf . If we fix this mistake immediately, I believe we could still save our economy...
I hope to have an opportunity to discuss more details on this with you.
Sincerely,
Luke
Levantine 11:06 24 Nov 11
A professor or a development expert somewhere gives a talk, and many hundreds of students listen in through videoconferencing. Information technology is revolutionizing the classroom and driving down the costs of producing first-rate educational materials.
From my reading, I can conclude the information technology is expanding the classroom; I failed to conclude it's revolutionising it.
The pattern remains unchanged: a person, more skilled than others, gives a talk, and many students are reduced to listeners.
I was emboldened to make this point on the basis of recently having read this article.
....The third idea is to recognize that many illnesses arise or become worse because of individuals’ social circumstances. Perhaps the patient is isolated, lonely,suffering from depression, out of work, or facing some other personal or family calamity. If these social conditions go unaddressed, they may give rise to an expensive, even deadly, medical condition. Smart healthcare is therefore holistic, helping people not only as patients arriving in the emergency room, but also as individuals and family members in their own homes and communities.
Ultimately, the real point seems to be that social engagement is a cornerstone of healthcare. The medical practice, even as holistic, can only be an appendix to the efforts of improving people's social circumstances. To make it clear why such an effort ought to be nothing short of dominant:
Barring obvious physical causes of health failure associated with war and extreme exhaustion, science seems to show "that the next predominant determinant (not just correlate but causal determinant) of individual health is the individual’s real and self-perceived position in the society’s dominance hierarchy." [Source]