Home > Economics - General > An ounce of inefficiency (Crossposted at CT)

An ounce of inefficiency (Crossposted at CT)

January 24th, 2006

This post by Belle Waring at CT, on the fact that the US appears unlikely ever to go metric prompted me to try and put together some thoughts I’ve had for a long time.

When I lived in the US around 1990, I was struck by all sorts of minor inefficiencies that seemed to be sanctified by tradition. In addition to its unique system of weights and measures (similar to, but confusingly different from, the Imperial system I had grown up with), there was the currency, with no coin of any substantial value, thanks to inflation (this particular inefficiency was subsequently enshrined in the Save the Greenback Act), and the practice of quoting prices net of sales tax, so you always had to pay more than the marked price. And then there was a huge, but ill-defined, range of activities where tips were expected, apparently regardless of the quality of service. In all of these cases, Americans seemed much more willing to put up with day-to-day inefficiency in the name of tradition than Australians would be, and much more resistant to government action that would sweep such inefficiencies away in the name of reform.

Bigger issues like creationism can be fitted into this picture. As far as I can see, very few supporters of creationism (or intelligent design or what have you) have any desire to see it taught in university biology departments [there are a handful of exceptions, like Bob Jones, that are resolutely stuck in the pre-Civil War era on most things] or applied by oil geologists. Their big objection is seeing evolution stated as fact in museum displays or taught in high schools. Broadly speaking the position seems to be like that with the metric system – scientists are welcome to be evolutionists as long as they don’t try and ram it down the throats of our kids. Obviously, this is costly; as with metric and traditional measures, the two systems are bound to clash from time to time.

Then there’s the inefficiency that seems to be built in to the US system of government. When I lived there, I was subject to four different levels of government (town, county, state and federal) with multiple overlapping responsibilities, and procedures that seem designed to achieve maximal inconvenience for citizens (not to mention resident aliens!).

All of this of course, was set against the background of a general level of technology in advance of very other country in the world, and an economic system in which the pursuit of efficiency wasn’t much hindered by concerns about equity. At least for the upper-middle class to which I belonged, these things produced a very high standard of living.

How much do these minor inefficiencies matter? In one sense, I think, quite a lot. In another, they don’t matter very much at all, and can in fact be defended on cultural grounds

The direct costs of the inefficiencies I’ve mentioned are all small, but taken together I wouldn’t be surprised if they added up to several percentage points of national income, or hundreds of billions of dollars per year. I think, for example, that a payment of a dollar a day would be a bargain for an average American adult if it could deliver a sensible coinage and posted prices that actually corresponded to the amount to be paid. Multiplied out, that’s around $60 billion a year or 0.5 per cent of national income. And requirements for goods to be made in non-metric measures amount to a kind of trade barrier which seems likely to have a similar cost.

Even more than this, the attitude underlying the adherence to traditional measures is that the US is rich enough and important enough to do what it likes, and the rest of the world can like it or lump it (an attitude not unique to this issue). There’s a lot of truth in this, and it helps to explain why the US is pretty much self-sufficient in a wide range of cultural services. On the other hand, it’s not conducive to success in export markets for goods. Now that the US no longer has a big technological lead, the lack of interest in what foreigners think is one of the factors explaining big trade deficits with almost every other country in the world (Australia is one of the few exceptions).

So, in these ways, adherence to inefficient traditions matters quite a lot. On the other hand, taking the long-term historical view, they scarcely matter at all. Suppose inefficiency costs 6 per cent of national income. With productivity rising at a rate of 2 per cent a year, that means that the average living standard that might have been reached in 2006 will in fact be reached in 2009. For any given person, this trend effect will be swamped by year to year fluctuations in income and expenses. And in most households, there are probably inefficient arrangements that cost a fair bit, but are maintained because that’s the way things have always been done in the family.

Moreover, looking around the world it seems that nearly every country has its sanctified inefficiencies. France has its heavily protected agriculture, as does Japan, and Britain has a whole set of hangovers from the class system and reactions against it. I don’t buy general claims about Eurosclerosis, but there are clearly plenty of features of European social welfare systems that don’t stand up to close scrutiny. In Australia, although agricultural protection is pretty much gone, we spend a lot of money ensuring that much the same bundle of services is available everywhere in the country at the same price, regardless of the cost of delivery.

In a world where the level of technological development and the basic pattern of consumption are much the same in all developed countries, such idiosyncratic differences between countries that are an important barrier to a completely globalised uniformity.

BTW, if you want to comment on this post, you might be better off at CT which is currently leading JQ 92-0.

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  1. avaroo
    January 28th, 2006 at 10:49 | #1

    Persoanlly I agree with you. We should refuse to seel drugs to Canadians at pices lower than Americans are charged for them. That way the price would fall for Americans. If Canadians couldn’t afford them, they could simply do without.

    Uninsured does not mean no care. You can ask the millions of Mexicans who land here every year. They are certainly uninsured, but they still receive medical care. At taxpayer expense.

    In the US’ case, life expectancy is not an accurate measure. Now if you can find a nation that has people entering it at the rate the US does, then we could compare. But there isn’t such a nation. When Greece and Portugal take in the immigrants we do, then we’ll do a comparison.

    Do you not find it amazing that even with our “subpar” healthcare, that people come from all over the world to get US healthcare? They’re not, uh, going to numbers 1-28 on the UNDP’s index. How do you explain that? People just like second rate healthcare?

    If you’re happy with what you have, I’m delighted.

  2. avaroo
    January 28th, 2006 at 11:06 | #2

    Perhaps it would be helpful to explain something to our non-American friends. While some of you think it’s awful that the US spends more than the GDP of quite a few nations just on our healthcare alone, we don’t see that as a bad thing. Healthcare is extremely important to Americans, we want the very best, we want the latest pharmaceuticals, we want every test and procedure there is for whatever is suspected to be wrong. And we’re willing to spend more than others are for healthcare, surely a choice we should make for ourselves.

    We wouldn’t accept being sent home with a magnifying glass at the age of 70, as my mother-in-law was in Germany, deemed too old by some government bureaucrat for cataract surgery. It may seem selfish to some of you, but we want it all. We’re not happy getting less simply because everyone else in the healthcare system is also getting less. That appears to be the feature of nationalized care that appeals to people in “tall daisy” societies. We’re not a tall daisy society.

    Universal insurance is NOT the same thing as universal healthcare. Canadians, who enjoy universal insurance, often cannot even find a physician. What good does insurance do you, if you can’t access a doctor? Same thing in Britain, we’d never wait the incredible amounts of time Brits wait, suffering lesser quality of life in the bargain. Quality of life is a huge factor for Americans. We wouldn’t accept the cancer survival rates Brits suffer.

    Now, can we be accused of doing too much? Probably. There are all sorts of end of life care issues we grapple with. Because we can do more to extend life in the US, we often do. That’s a choice we seem to have made as a society, again, surely we should be allowed to make the choice for ourselves. Not for us the euthanasia of the Netherlands, choices made based on the cost of care.

  3. Ian Gould
    January 28th, 2006 at 11:11 | #3

    >In the US’ case, life expectancy is not an accurate measure. Now if you can find a nation that has people entering it at the rate the US does, then we could compare. But there isn’t such a nation.

    Tell you what go check the immigration rates fro Canada, australia and New Zealnd then come back and talk.

    I think it might be pleasant novelty if you based your argumentsd on facts rather than assertions for a change.

    >Do you not find it amazing that even with our “subpar� healthcare, that people come from all over the world to get US healthcare?

    By that reasoning, India, the Phillipines and Thailand which have huge “medical tourism” industries must have top-notch health systems too.

  4. Ian Gould
    January 28th, 2006 at 11:21 | #4

    http://news.bbc.co.uk/1/shared/spl/hi/world/04/migration/html/migration_boom.stm

    Oh look in 2000, Europe had accepted 60 million immigrants while North America (which included Canada and Mexico) had accepted 40 million.

  5. avaroo
    January 28th, 2006 at 11:23 | #5

    “Tell you what go check the immigration rates fro Canada, australia and New Zealnd then come back and talk.”

    surely you are joking

    “By that reasoning, India, the Phillipines and Thailand which have huge “medical tourismâ€? industries must have top-notch health systems too.”

    India’s is actually not bad and not in the least because many of its doctors are US trained. How do you explain the nuber of people coming to the US for healthcare?

  6. avaroo
    January 28th, 2006 at 11:23 | #6

    ah, the bbc, paragon of accuracy and objectivity….

  7. Ian Gould
    January 28th, 2006 at 11:28 | #7

    http://www.pstalker.com/migration/download/International%20migration%20data.xls

    Total percentage of population born overseas – 2001 (except UK (1990)).

    Netherlands 33%
    UK 21.3%
    Australia 23.1%
    Canada 18.1%
    New ZEaland 19.5%
    Switzerland 11.5%
    United States 11.1%

  8. avaroo
    January 28th, 2006 at 11:33 | #8

    and the US has HOW MANY people, versus the Netherlands?

    and HOW MANY people versus the UK, Canada, Australia? Switzerland?

  9. avaroo
    January 28th, 2006 at 11:37 | #9

    And, of course, the reason the Netherlands has such a high foreign born PERCENTAGE of the population isn’t because there are so many immigrants. It’s because native born Dutchmen aren’t having children. Not really a problem in the US.

  10. Ian Gould
    January 28th, 2006 at 12:13 | #10

    What does absoute population have to do with it?

    You claimed that the lower US life expectancy was due to a higher proportion (not a higher absolute number) of immigrants.

    I’ve shown that claim to be blatantly false.

    Is it really that difficult to accept that there’s ANY asepct of the US which isn’t superior to every single other country in the world?

  11. avaroo
    January 28th, 2006 at 12:16 | #11

    “What does absoute population have to do with it?”

    If you have 33% of your population foreign born because native born people aren’t having children, that’s quite different that having 33% foreign born because immigration in high.

    “You claimed that the lower US life expectancy was due to a higher proportion (not a higher absolute number) of immigrants.”

    Actually, what I said was the we pretty much let anyone in here and then provide them with taxpayer supported healthcare.

    “Is it really that difficult to accept that there’s ANY asepct of the US which isn’t superior to every single other country in the world? ”

    You appear to have quite a chip on your shoulder about the US. And I can’t really see any reason for it.

  12. January 28th, 2006 at 12:40 | #12

    OT, but the US really sucks at cricket if it makes you feel better. When you’re ranked worse than Namibia, it’s gotta hurt.

  13. Ian Gould
    January 28th, 2006 at 12:40 | #13

    Gross birth rates

    United States 14.14
    New Zealand 13.90
    Australia 12.26
    Netherlands 11.14
    Canada 10.84
    United Kingdom 10.78

    Yeah that 1.7% difference in gross birth rates between the US and New Zealand obviously explains the 75% difference in the percentage of overseas-born citizens.

  14. Ian Gould
    January 28th, 2006 at 12:45 | #14

    to summarise:

    Avaroo: America is the greatest coutnry in the world. We are superior to every other country in every conceivable way and you worthless subhuman vermin should fall to your knees and thank us for permitting subhuman vermin such as ytyourselves to infest our planet.

    Me: No, america is not perfect.

    Avaroo: Why do you hate America?

  15. avaroo
    January 28th, 2006 at 12:50 | #15

    “Avaroo: America is the greatest coutnry in the world. We are superior to every other country in every conceivable way and you worthless subhuman vermin should fall to your knees and thank us for permitting subhuman vermin such as ytyourselves to infest our planet.”

    I’m not sure how you get from “I wouldn’t trade US healthcare for healthcare in any other country” to your comment above.

    What is the source of your birthrate data?

  16. avaroo
    January 28th, 2006 at 13:06 | #16

    Actually, I’m quite surprised that the US would even be ranked in cricket, period. I’ve never known a soul who has even been to a cricket game, much less played in one.

  17. January 28th, 2006 at 13:13 | #17

    Avaroo, you are displaying the narrowness of your social circle now, hehehe…………..

    quick google reveals what seems to be MORE cricket clubs than in my area (jealous)

  18. avaroo
    January 28th, 2006 at 13:23 | #18

    My social cricle DOES NOT include many men who like to look as gay as possible while playing sports.
    :)

  19. avaroo
    January 28th, 2006 at 13:34 | #19

    Just a bit of levity….

    “Come on boys, polish those balls and prepare yourselves for a good googly hurtling down your crease. Cricket fever is here, it’s queer and it’s so deliciously strapping!”

    http://www.rainbownetwork.com/Fun/detail.asp?iData=24058&iCat=110&iChannel=20&nChannel=Fun

  20. hirvi
    January 28th, 2006 at 17:27 | #20

    “The law cannot state that you must notive it though”

    Notive?? – what does that mean? All I said was that we pay tax and get a fair deal.

    “It’s one thing to be poor in Chicago, quite another in Khartoum”

    You obviously haven’t been poor in Chicago or Khartoum. For your sake, I hope you never are.

  21. avaroo
    January 30th, 2006 at 06:21 | #21

    “Notive?? – what does that mean?”

    It should have read “notice”.

    “You obviously haven’t been poor in Chicago or Khartoum.”

    If you think being poor in Chicago is the equivalent of being poor in Khartoum, then you have little concept of being either.

  22. wilful
    January 30th, 2006 at 12:39 | #22

    You appear to have quite a chip on your shoulder about the US. And I can’t really see any reason for it.

    You really aren’t winning on the facts, so why not try a new tack?

  23. avaroo
    January 30th, 2006 at 15:44 | #23

    ah, is that what he’s doing? NOW it makes sense.

  24. hirvi
    February 1st, 2006 at 00:34 | #24

    “If you think being poor in Chicago is the equivalent of being poor in Khartoum, then you have little concept of being either”

    Allow me to disagree.

    Perhaps you haven’t noticed the homeless and (often) hungry people in your country, but it doesn’t mean they don’t exist. I’m not saying they’re on the point of starvation, but to think they don’t suffer severe deprivation and therefore “can’t be poor” is to be heartlessly far from reality.

  25. Ian Gould
    February 1st, 2006 at 15:40 | #25

    >ah, is that what he’s doing? NOW it makes sense.

    Yes because if we review the discussion you were the one providing detailed numerical data and I was the one making irrational and bigoted statements.

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