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Edison in reverse

September 13th, 2016

The takeaway from my latest piece in The Guardian on the failure of for-profit provision of services like health and Education

Blair, and like-minded reformers throughout the English-speaking world, have delivered an Edison in reverse. Edison experimented with many things that didn’t work, but ended up with a light bulb. Market-oriented reforms, particularly in the provision of human services like health, education and public safety, have begun with a working system and replaced it with a string of failed experiments.

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  1. GrueBleen
    September 13th, 2016 at 12:08 | #1

    Well, not quite, ProfQ. Edison built on a long, and famous, history of development of incandescent globes many of which worked but weren’t commercially viable at the time – for lack of a decent vacuum pump in making the globe able to last, for instance, or in a domestic electric supply – which was sorted out by Tesla and his AC, not Edison and his DC which was only really any good for electric chairs (and for long range electricity grid transmission, naturally).

    The simple lesson is that it takes the human race a long time, and many failed or only partially successful trials to get anything much right.

  2. Ernestine Gross
    September 13th, 2016 at 12:27 | #2

    The takeaway point is possibly the most succinct summary conclusion, even w.r.t. who really invented the light bulb.

  3. Troy Prideaux
    September 13th, 2016 at 12:39 | #3

    @GrueBleen
    DC was good for powering almost everything. It was AC that was needed for long distance grid transmission as it allowed easy transformation of voltage from high (which is good for transmission) to low (safer for user exposure).
    These days, the problems of converting HVDC to LVCD are well solved and HVDC actually provides less energy loss over long range transmission than HVAC.

  4. Jim
    September 13th, 2016 at 12:53 | #4

    Market-oriented reforms, particularly in the provision of human services like health, education and public safety, have begun with a working system and replaced it with a string of failed experiments.

    Yes John. But one of those experiments may end up being….. a working system! Imagine that…. or remember that if you are old enough…..

    And those failed experiments has only come at the cost of a good education and health system for those pesky people who can’t afford a private school education and top-notch health insurance. Surely they don’t matter do they?

  5. GrueBleen
    September 13th, 2016 at 13:25 | #5

    @Troy Prideaux
    Your #3

    Yes mate, and most of Australia’s grid is, in fact AC. But DC is used where high current over long distances is required to reduce power loss in the lines. It’s called HVDC (High Voltage DC).

    Below is what ABB say about it. And you will notice that I clearly used the words “long distance” in my statement that DC is used for ” for long range electricity grid transmission,”

    “High Voltage Direct Current (HVDC) power electronic systems allow bulk power flow across regions (typically several hundred miles using either or both overhead lines and sub-sea cables) without troublesome ‘loop flows’. Loop flows are a characteristic of interconnected AC systems on which there is always a challenge to synchronize currents and loads without causing an outage. Loop flows can unsettle grids.”

  6. GrueBleen
    September 13th, 2016 at 13:39 | #6

    @Ernestine Gross
    Your #2

    But that, Ernestine, is precisely what I am getting at. The point – well, my point, anyway – being how long and how many failed and/or partially successful trials by how many different people in how many different countries it took for Edison to finally arrive at a usable, commercially viable incandescent globe. Though Edison’s persistence was, as usual for him and cohort, exceptional.

    I’ll repeat myself:

    “The simple lesson is that it takes the human race a long time, and many failed or only partially successful trials to get anything much right.”

    Is that a fair point to make in the circumstances ?

    Furthermore, the invention wasn’t wholly, or even mostly, by Edison. He had a large team of very able “assistants” who did much of the real work. Especially, in this case, Francis R Upton, of whom it was said: ” Upton’s understanding of mathematics and physics was of critical assistance in the development of the light bulb, the dynamo, and other elements of Edison’s system. ”

    So: long time, lots of failures, many very talented assistants, critcial supporting work done outside the team (eg improved vacuum pumps to provide sufficient vacuum for the globes), and extraordinary persistence by a dedicated leader. Do we see any of that around here ?

  7. paul walter
    September 13th, 2016 at 14:36 | #7

    The Guardian is a bit like the ABC has been over much of its existence (less so lately).. It does do broadsheet, but the masses lazily go along with oxymoronic “reality” TV or the Telegraph.

    I read it myself at the Grauniad and was disappointed as usual with some of the stuff in the comments section, as denialism akin to the philistine reaction to global warming proclaimed this aspect of neoliberalism as successful despite the sample of abject failures over time pointed out by Prof. Quiggin.

    Would some of these people understand reality, if it jumped up and bit them in the face?

  8. September 13th, 2016 at 15:23 | #8

    John, I found your reverse Edison comment quite brilliant.

  9. Ikonoclast
    September 13th, 2016 at 16:56 | #9

    A good article, it makes the main points succinctly and well. I’m prepared to ignore the quibble about Edison and the full provenance of the light bulb. It’s not the main point of the article and it suits standard mythology about the invention. Remember, we can only overturn one myth at a time. It’s too much to expect the modern dumbed-down citizen to challenge two myths in his-her mind at the same time. 😉

  10. GrueBleen
    September 13th, 2016 at 17:39 | #10

    @Ikonoclast
    Your #9

    Boy, I read your stuff, but you won’t read mine. The issue here has almost nothing to do with “who invented the light bulb” and everything to do with “how the light bulb was invented”. I will repeat my comment to Ernestine:

    “So: long time, lots of failures, many very talented assistants, critcial supporting work done outside the team (eg improved vacuum pumps to provide sufficient vacuum for the globes), and extraordinary persistence by a dedicated leader. Do we see any of that around here ?”

    So would you like to put your simplistic assumptions aside and talk about what, if anything, could be enough in common between the two processes to see whether ProfQ’s charming parable informs or confuses.

  11. rog
    September 13th, 2016 at 18:35 | #11

    I’m not sure the analogy is valid; if public education = the light bulb why has it been necessary for it to evolve over time?

    The public schools today are nothing like the schools 100 years ago; they have adapted to new conditions and expectations. The public system in NSW has seen a number of reforms, in more recent history Wyndham for one and Metherell for another. Federally Gonski laid out a new way and in NSW Piccoli has shown that he has been influenced by these directions.

  12. Bobby W
    September 13th, 2016 at 18:45 | #12

    I like Quiggin’s books – they’re well thought through and researched (and fun)… This article though?

    So many jumbled fragments of arguments. So many poor references. Reads like a rushed OpEd. Quite disappointing.

    Is profit (for redistribution) a prerequisite for competition?

    He’s hating on the player, when the focus should be on the game.. at the crux of it is something the UK (and we have similar things in AUS) call ‘MEAT’. All tenders are won on the basis of the Most Economically Advantageous Tender. Unfortunately, while there’s still stuffy politics-promoted mandarins, refusing to proactively engage and expose themselves to risk on the ‘what’ side of the ‘for how much’ equation, then we will continue to have a race-to-the-bottom, contracting of social services and programmes based on cost-minimisation rather than a concept of value (a negotiated balance of bang & buck), that ticks broader societal and operational goals.

    This does not mean that the equation is invalid.

    I laughed at Quiggin’s characterization of PFIs in the NHS – the issue is not the ‘perverse competition’ or ‘failing markets’ but rather the laggard remnants of uncompetitive, unskilled and down-right corrupt bureaucrats who sign unfavorable 20-year long contracts (where the risks are clearly spelled out), because they’ll be able to smile in the paper tomorrow and gain a promotion far-away from home the day after. They sell out. Not because the market is imperfect, but because they’ve worked all their lives to make sure that it can’t be improved at a local level, just long enough for them to get up/out.

    The solution to the problem of politics infiltrating operations, is not to enshrine it as part of the technical process like Quiggin suggests.

    We might need better regulation, monitoring and enforcement – but politically derived operational plans that occur in a vacuum and/or pass through a black box is not the answer.

    I’m probably with Blair policy of old, and would like to see the extension of the payer(be it governments on behalf of a population, insurers, or individuals)/provider split, with improved social institutions that are held to account on clear and demarcated roles and responsibilities. We can’t plan and execute rigid specifications for how our services should be… no one is on top of the detail and only ever plans things based on their own perceptual biases – we need to instead relinquish individual decision-makers planning powers and harness all of the social and technical complexity that goes into services, to steer them in the direction of incremental improvement, based on agreed principles and parameters.

    Markets don’t have to be perfect for the principles to be relevant. Sure – consumer choice doesn’t work for complex services and there are systematic biases which pervert what is and isn’t valued .. but end-user preferences and their flexibility/freedoms are still what we should strive for when providing services (because they are so complex).. otherwise planning is held hostage by well-meaning, but shortsighted (some sometimes downright bigoted) know-alls… I mean, did Quiggin really suggest a return to church-run hospitals?

    I’m also not sure why he’d single out the Uni of Phoenix – I mean Harvard and Penn are for profit too.. just not for redistributing to shareholders on a stock-exchange. I should say – his concept of ‘not-for-profit’ seems a little outdated to me, particularly when most new and successful providers of services in the UK that see themselves as aggressive market participants are secular Community Interest Corporations and Trusts who are definitely aware of a need for nominal surpluses to reinvest and cross-subsidise..

    If he really wants to go after something, Quiggin should have gone after price-gougers and the market failures that allow it.. but it’s a fallacy to dismiss the whole competitive separation of the payer and provider.

    It’s a hard conversation to have publicly, with an uninformed electorate.. but how is it different from the concept of the separation of powers?

    I wonder if Quiggin would throw Hawke & Keating in the same ‘reformers’ pot as Blair?

    OK – so box profits for redistribution (and the politics that surround market expectations on margins) off as a separate issue – I reckon the act of competitively exploring options and negotiating policy/operational positions, is a prerequisite for integrated, nuanced services that are sensitive to end-user needs.

    I also reckon the more people actually work in services reform (rather than just writing opeds), the more they know this.

    What a laugh.

  13. Ernestine Gross
    September 13th, 2016 at 18:59 | #13

    @GrueBleen

    My #2 was a comment on JQ’s post. By restricting his argument to the English speaking world, JQ could exclude Italy and therefore Volta – how more succinct can one be?

    Yes, you are making a fair point – and I learned about some names I’d never heard of. However, I don’t believe it is a substantive criticism of JQ’s article in the Guardian (not in a History of Invention journal, if such a publication exists, or a Business Economics journal).

  14. Ikonoclast
    September 13th, 2016 at 19:11 | #14

    @GrueBleen

    Sorry, I scanned too quickly. Just testing a new PC I “built” today, meaning I put a few components in slots, connected cables and did up a few screws. Now, what’s this last loose screw? Ah, that’s the one from my head! 😉

  15. Ikonoclast
    September 13th, 2016 at 19:26 | #15

    @Bobby W

    Well, that’s combative. I don’t agree with you at all but I will let J.Q. answer if he wishes. One point I will comment on though; “did Quiggin really suggest a return to church-run hospitals?”

    I didn’t read it like that. I took it to refer to church-run schools and church-run aged care but neither are modern church-run hospitals a particular problem. Church-run schools have had some issues, I won’t broach that here. But as non-profits they do seek quality education outcomes with a service rather than a profit motive. Some church-run Aged Care Homes are among the best around and though expensive, they are not the most expensive. I say all this as an agnostic existentialist and former militant atheist, so I carry no brief for Church institutions.

  16. Julie Thomas
    September 13th, 2016 at 19:37 | #16

    “we need to instead relinquish individual decision-makers planning powers and harness all of the social and technical complexity that goes into services, to steer them in the direction of incremental improvement, based on agreed principles and parameters.”

    That sounds good but the “agreed principles and parameters” bit is the problem don’t you think? Who gets to decide these principles and parameters and through what process? Meetings?

    The “steering” bit is problematic also because then the questions is who or what is doing the steering or the nudging?

    it seems to me that it is more efficient to attract people to a preferred way of behaving than to try and steer them. Some people are steerable but others are not. It is important to remember that people are different and behavioural psych studies provide information only about the average person. These studies provide no information about the way people become not average or above average – seriously it is not just high IQ – and how and under what circumstances groups of people interact with each other to produce something.

    GB says;

    “So: long time, lots of failures, many very talented assistants, critcial supporting work done outside the team (eg improved vacuum pumps to provide sufficient vacuum for the globes), and extraordinary persistence by a dedicated leader. Do we see any of that around here ?”

    But that is just one view of what happened in the process of Edison inventing the lightbulb or not inventing it. Another story is that Edison stole ideas ripped people off and was not a nice man at all. Some people even say that Edison was the same sort of person as Steve Jobs.

    I did see something like that – but where is here? did you mean Australia? – on iview tonight. It was about a young man who produces a bee hive from which honey flows by turning on a tap and the story of how he turned his good idea into a business seemed to me to be a case of a lot of people working together, but maybe not with any dedicated leader. I suppose it depends on what you think a leader should be.

    Anyway here is the flow hive family

    http://www.abc.net.au/news/2016-09-12/australian-story-flow-hive-family-talks-about-life-now/7828436

  17. Ernestine Gross
    September 13th, 2016 at 19:46 | #17

    @Bobby W

    Talking of referenced work, which article did you read Bobby W?

  18. GrueBleen
    September 14th, 2016 at 00:13 | #18

    @Julie Thomas
    Your #16

    I come to bury Edison, not to praise him.

    Yes, he was an outright bastard as far as I know, and quite a few (eg Tesla) simply couldn’t abide him. But I think his dogged persistence (in just about everything he ever did) was an important factor. However, if he hadn’t had such persistence and had given up, would somebody else have created a commercially viable incandescent globe ? Of course.

    But experiments on incandescent globes are simple compared with ‘experiments’ in services provision – hundreds of globe experiments can be conducted in a year, but in service provision ?

    The point about Edison’s leadership I think is just the outright determination to get a successful result combined with the authority to command ongoing effort directed at that end. We don’t get that from politicians, and nowadays we don’t get it from public servants either (if we ever really did). We only seem to get it from so-called ‘entrepreneurs’.

    Anyway, you reckon “steering people” might just be like herding cats, but robbing bees for a living is easy.

  19. GrueBleen
    September 14th, 2016 at 00:21 | #19

    @Ikonoclast
    Your #14

    Oh, so now you’re going to claim that you are really Gyro Gearloose ?

  20. jrkrideau
    September 14th, 2016 at 04:08 | #20

    @ 12 Bobby W

    why he’d single out the – I mean Harvard and Penn are for profit too

    Where did that idea come from? Uni of Phoenix is a for-profit organization. Harvard (and Pen?) is a private university. I am pretty sure that Harvard does not pay dividends to its shareholders. On the other hand I think UPhonex is expected to do so https://en.wikipedia.org/wiki/University_of_Phoenix.

  21. paul walter
    September 14th, 2016 at 05:41 | #21

    Exactly, Gruebleen.

    Essential srvices are too important to be the subject of flawed “ëxperiments”carried out by the self serving, on half baked theories/alibis dished out from paid-off hacks at rightist think tanks.

    Like Deepwater “Horizon was un-thought through “experiment” driven by greed less than science and the resultant mess stlll with us according to scientists in the Caribbean.

  22. Greg McKenzie
    September 14th, 2016 at 06:38 | #22

    Economic theory treats goods and services in an identical manner. The profit motive is used to create supply in response to effective demand. This can cause the supply of collective services to be a simple matter of supply matching demand. Unfortunately, this is a unique event and the supply of collective services, that actually satisfies collective wants, rarely matches demand. This unsatisfied demand then puts pressure on the provision of collective wants. One case in point is the new hospital being built in Sydney. It will be run as a private hospital but is going to replace two public hospitals. The two public hospitals have a combined supply of 300 public patient beds, but the new private hospital will only have 100 public patient beds. In a city that is expected to see a net increase of its population by over 2 million residents, to reduce the suppy of public patient beds seems shortsighted.
    Now isolated cases do not prove anything but they can suggest a mindset that is unrealistic. In Sydney, the big supply issue is housing. Yet the current government sees it only as a supply deficiency issue. As housing prices continue to rise, the price mechanism begins to exclude mainly young people from the housing market. At one and the same time, hoarding of housing properties continues. Houses in Sydney are perceived as assets that can be held in idle asset balances. This is the big failure of the profit motive. It can lead to a decrease in effective supply.
    To suggest that the provision of services is the same as the provision of goods seems inappropriate. The supply of Collective services, in particular, deserve a more insightful approach.

  23. Julie Thomas
    September 14th, 2016 at 07:27 | #23

    @GrueBleen

    Thing is that we have gone past judging someone to be “an outright bastard”. Have you heard the lightbulb joke. How many psychologists does it take change a lightbulb? Only one but the lightbulb has to want to change.

    It is possible that Edison could have lived a life in which he would not have been a bastard; there could have been a universe in which Edison could have been a real ‘leader’; that is, one who leads from behind and in a way that does not leave a trail of unhappiness and distrust among his fellow humans.

    What were the unintended consequences of his inability to cooperate with the minions he bossed around, like Tesla? How much better could it have been if he had been a supportive leader?

    What would have been the consequences for the world if he had the ability to see all his fellow human as just as valuable as he was with the ‘personality disorder’ that drove him to abuse and belittle his colleagues?

  24. GrueBleen
    September 14th, 2016 at 10:11 | #24

    @Julie Thomas
    Your #23

    Well you might have gone past it, but to me “outright bastard” is still a very succinct summary for people like Edison (and Jobs). But otherwise, what are you telling us: “I’ve got to follow them, I’m their leader” ?

    Also keep in mind that Tesla wasn’t exactly a delight to be with either – perhaps he (amongst others) didn’t get on so well with Edison because they were too much alike. As to leaders who “do[es] not leave a trail of unhappiness” I would refer you to Joe Stalin and Mao Zedong – both of whom were spontaneously mourned and subsequently heroised by large numbers of populations that one might have thought had had their fill of “unhappiness” And also Hitler and Mussolini in their day.

    Lots of Edison’s minions “liked it” the way it was (eg Francis R Upton amongst others) and stayed with him basically until the end, and he was certainly no worse than Jobs – but both were about equally convinced of their own, personal infallible righteousness to which you could only object if you were a total deadhead. My objection to Edison was largely his bastardry in relation to the Westinghouse-Edison “war” over AC versus DC. To quote the Smithsonian blog in an article titled “Edison vs. Westinghouse: A Shocking [haha] Rivalry:

    “Edison set out to ruin Westinghouse in “a great political, legal and marketing game” that saw the famous inventor stage publicity events where dogs, horses and even an elephant were killed using Westinghouse’s alternating current. The two men would play out their battle on the front pages of newspapers and in the Supreme Court, in the country’s first attempt to execute a human being with electricity.”

    As a certain now elderly ALP politician once said: “Whatever it takes”.

  25. GrueBleen
    September 14th, 2016 at 15:45 | #25

    @Ernestine Gross
    Your #17

    As I expect you’ve already worked out, Bobby W was referring to ProfQ’s Graudian Opinion article: Face the facts: competition and profit don’t work in health, education or prisons” which was linked to at the top of ProfQ’s leadin.

    But now, if I may, could I please dispose once and for all with Edison in this “narrative”. ProfQ presents Edison as having “invented” a commercially viable incandescent globe after 10,000 failures. Well, maybe … Edison was given to romanticisation, especially about himself. But let us just compare ProfQ’s parable with the analysis by historian Thomas Hughes:

    “The lamp was a small component in his system of electric lighting, and no more critical to its effective functioning than the Edison Jumbo generator, the Edison main and feeder, and the parallel-distribution system. Other inventors with generators and incandescent lamps, and with comparable ingenuity and excellence, have long been forgotten because their creators did not preside over their introduction in a system of lighting.
    —?Thomas P. Hughes, In Technology at the Turning Point, edited by W. B. Pickett” [You can Google Thomas Hughes historian for some background. He was a UPenn, MIT and Stanford man.]

    So, it wasn’t just a globe which “Edison” (and his sizable team) invented, it was an entire domestic lighting system ! And how many ‘failures’ in addition to the globe itself did that take ? Well, Thomas Hughes omits to tell us, but surely given the total system complexity compared with the relative simplicity of the globe, it must have been millions, mustn’t it ?

    So surely Nick Gruen’s whole thing about “how can we work out how to improve services and their delivery” becomes ineluctable. And maybe we should pay more attention to Bobby W when he pronounces that:

    “I reckon the act of competitively exploring options and negotiating policy/operational positions, is a prerequisite for integrated, nuanced services that are sensitive to end-user needs.”
    [Whatever it is that he means by that].

  26. Ikonoclast
    September 14th, 2016 at 19:12 | #26

    Good link.

    http://www.usnews.com/opinion/articles/2013/03/21/why-thomas-edison-isnt-the-inventor-of-the-light-bulb

    Actually, the story is more correctly “why Thomas Edison isn’t the sole inventor of the light bulb”.

    Best comment by Ernest Freeberg “… a lot of what I look at in the book is trying to show that invention is a very complex social process.”

  27. Ernestine Gross
    September 14th, 2016 at 22:16 | #27

    @GrueBleen

    Analogies are never perfect and I assume you know this. Therefore I don’t understand why you spend so much time on Edison rather than on the main topic of the thread, captured in the title of JQ’s article, “Face the facts: competition and profit don’t work in health, education or prisons”

    I had read JQ’s article before posting #17.

    As to the topic of the thread, I’d like to remind of ABC Learning – an early disaster of the corporate finance (my mode 2 in an earlier thread) provision of child care services.

  28. Ikonoclast
    September 15th, 2016 at 06:48 | #28

    @Ernestine Gross

    Ah, ABC Learning and Eddie Groves! I remember it like yesterday. I have a little inside knowledge about this. Now, how to tell it without breaking any laws? I have to be brief and circumspect. Perhaps I can put it this way. I had second hand evidence (related to me by the person working on my floor who had the first hand experience of it) of ministerial office* interference in the matter of ensuring payments to Eddie Grove’s ABC Learning were expedited and made when (at a time and in a way I can’t or won’t disclose) the criteria for payments laid down by law first and policy second had not yet been met though there were expectations, but not complete certainty, that the criteria would soon be met, probably in a matter of days.

    One can possibly surmise that mere days mattered when a business was at a juncture where it had serious cash flow problems.

    *Note that I say the “minister’s office” which of course does not name any person nor imply who knew what in the minister’s office.

  29. rog
    September 15th, 2016 at 08:30 | #29

    @Ernestine Gross On prisons, in NSW efforts to decrease prison numbers through recidivist programs have been hit by 1) funding cuts (budget repair etc) and 2) vox pop pressure.

    Ray Hadley, from Macquarie Media 2GB, put sufficient pressure on the relevant minister (“soft on crime” etc.) to have recidivist programs closed down.

    Reducing prison numbers would reduce costs to both the State and society.

  30. GrueBleen
    September 15th, 2016 at 15:47 | #30

    @Ernestine Gross
    Your #27

    Oh goodo. Though I do wonder why ProfQ included the Edison allegory in the first place. There really was no there there. On the other hand, maybe the fable of nuclear fusion power could be invoked: 60 years of publicly funded multinational experiments costing many $Billions – involving a good old (almost) famous Aussie too, by name Peter Thonemann – which has achieved about as much in physics as private colleges have achieved in education.

    Can we then conclude that, comparing the total non-achievements of public research with the Edison inspired achievements of private research, public research doesn’t work ? Otherwise, we all seem to be in agreement with ProfQ’s proposition – except for the free market ideologues, of course – so there doesn’t really seem to be much to discuss.

    However I was going to see your ABC Learning and raise you TaylorsCollege … except that when I went looking, I found that TaylorsCollege, proudly founded in Melbourne in 1920, no longer appears to have a presence here. In Sydney, Perth and Auckland, yes, but no longer in Melbourne. Sic transit gloria mundi.

  31. Ernestine Gross
    September 16th, 2016 at 08:00 | #31

    @GrueBleen

    Would you say ABC Learning is an example of the corporate finance model (mode 2 in my post in an earlier thread) and TaylorsCollege is an example of mode 1?

    JQ uses the legal status of enterprises, namely ‘for profit’ and ‘not-for-profit’. I don’t think these legal categories correspond to the distinction between mode 2 and mode 1 because a ‘not-for-profit’ enterprise can operate as: Max P=Revenue-Costs-CEO-CFO-CMD = 0, getting tax benefits, social status for top management, and top dollars for top management. Mission and vision (or the other way around) statements in many words can look identical.

  32. Ernestine Gross
    September 16th, 2016 at 09:02 | #32

    @Greg McKenzie

    Your description of economic theory seems to me to capture the IPA’s knowledge (or its choice) of economic theory very well. But that is not all of economic theory. For example, lets look at your information on changes in hospitals in Sydney:

    “One case in point is the new hospital being built in Sydney. It will be run as a private hospital but is going to replace two public hospitals. The two public hospitals have a combined supply of 300 public patient beds, but the new private hospital will only have 100 public patient beds.”

    Setting aside the question of the management of the hospital regarding profit motive (a serious simplification), the reduction in the number of public patient beds would correspond to the observation that the income distribution in the catchment area of the new hospital has changed such that a lot more people are now in an income bracket much above the average (higher and or less unequal) and this change is expected to continue in the next 20-50 years with a high degree of confidence. Is there any evidence in support of this minimal economic theory based condition? If not then the suspicion of the change is driving by blind belief in IPA type ‘economic theory’ (dogma) cannot be dismissed lightly.

    Who will own the new hospital? Is it a local enterprise that is small enough and modest enough to not go onto a corporate finance type expansion (debt fuelled) like ABC Learning with earnings being spent in the local economy or is it a ‘world class’ international organisation where nobody knows where the earnings will end up? (Balance of payments, national debt, local income distribution effects.) And so on.

    Over the years I’ve reached the possibly temporary conclusion that the public’s opinion on what is ‘good’ and what is ‘bad’ policy tends to correspond to very advanced economic theory and empirical evidence, relative to the IPA’s mental model or dogma.

    Thank you for the information on the hospitals. I was not aware of it.

  33. Ernestine Gross
    September 16th, 2016 at 09:06 | #33

    @Ikonoclast

    The information set, which is dispersed among people, is larger than that captured in official statistics. Talking over the fence will never be replaced by electronic communications – IMHO.

  34. GrueBleen
    September 16th, 2016 at 09:24 | #34

    @Ernestine Gross
    Your #31

    To be quite sure I’d need to know more about TaylorsCollege’s setup and how it changed over time, but having reviewed and revised your prior posting I’d say that, on the face of it, yes. Your Mode 1 and Mode 2 distinction looks very relevant here.

    Hmm, CMD or COO or both ? Is, for instance, the IPA a mode 1 or a Mode 2 or a ‘not-for-profit’ of the CEO-CFO-CMD/COO benefit society kind. Or maybe Nick Cater’s Menzies Research Centre ? Or Crikey ? Or Getup ? Now that’s again something you’re making me try to think about.

    But on the other hand, if we do try to consider Nick Gruen’s thesis – and I really think we should be doing that regardless of any public/private or Mode 1/Mode 2 considerations – then we’d surely be asking: “How come everything operates so badly ?”

    So I would again try to turn your attention to the Stumbling and Mumbling blog’s post titled “On Incompetence” and it’s theme question: “Should ineliminable incompetence play a bigger role in economic and political thinking?”

    I always assumed, re ABC Learning (and others too numerous to mention) that although ‘greed’ in all its various aspects (money, kudos, influence etc) is always a factor, plain old-fashioned incompetence is also a major factor too.

    I think, now and then, about Pan Am – once upon a time one of the most ‘prosperous and recognised’ airlines in the world – enough to be immortalized in Kubrick’s 2001 (of 1968) anyway, but gone a decade before 2001, and barely remembered at all (except by people like me). Now, was that Mode 2 excesses alone, or Mode 2 + Incompetence ?

  35. GrueBleen
    September 16th, 2016 at 10:37 | #35

    @Ernestine Gross
    Your #32

    Over the years I’ve reached the possibly temporary conclusion that the public’s opinion on what is ‘good’ and what is ‘bad’ policy tends to correspond to very advanced economic theory and empirical evidence, relative to the IPA’s mental model or dogma.

    Oh my, my – if only I could believe that was even marginally true. The contributions I read in the local Murdochratian press (aka the Hairolied Scum) indicates that “the public’s opinion” is based on the most simplistic “intuitive” apperceptions. Much like the old – and unfortunately still widely current – “intuitive apperception of science – before the likes of Galileo showed otherwise, anyway.

  36. Ernestine Gross
    September 16th, 2016 at 13:13 | #36

    @GrueBleen
    Your 34

    It seems to me there are separate but possibly linked or overlapping notions in your post.

    The role of errors does play a role in chaotic system simulation models (not ‘mainstream’ as yet – to the best of my knowledge).

    ‘Incompetence’ is a difficult one. In some sense, ‘incompetence’ makes sense in specific contexts but not in others. Now I am about to stick my neck out by saying the ‘corporate finance model’ belongs to accumulated incompetencies on a high level, which could be equally well be described as extreme naive market economics.

    I can’t figure out what Nicholas Gruen’s thesis is, not that I have read him widely.

  37. Ernestine Gross
    September 16th, 2016 at 13:16 | #37

    @GrueBleen
    Your 32

    I was talking about people not about the Murdoch press. IMHO, the influence of the media on people is overrated. Don’t you speak with people and observe what they do?

  38. Peter T
    September 16th, 2016 at 13:39 | #38

    @Bobby W

    Bobby W – the alternatives to competition as a mechanism for improvement are well-known, in use every day, and quite effective. They include audit, managerial intervention, encouragement of incremental process improvements, systematic review and so on. A good many were developed in the public sector (eg reviews and audit), but any large company applies the repertoire all the time.

    Public sector performance improved markedly over the C19 and C20, without competition. There’s no reason to believe it alone provides any special sauce.

    It’s not profit or competition for that differentiates the public and private sectors. The key difference is that the public sector is concerned with provision of essentials – goods and services that cannot be permitted to fail. Defence, education, health, utilities are examples. If the whole system cannot afford a component to fail (locally or nationally), then it ends up either in the public sector or so regulated that it might as well be.

  39. OM
    September 16th, 2016 at 14:29 | #39

    @GrueBleen
    Why ignore Europe where e.g. Swan also invented and patented and commercialised an incandescent light globe?
    Edison was indeed not the only inventor.

  40. GrueBleen
    September 16th, 2016 at 15:59 | #40

    @OM
    Your #39

    Umm, I think that we’re ignoring Europe because ProfQ’s allegory was couched totally in terms of Edison and his “10,000 failed experiments” (Or 3000 or however many you want to imagine). Now if you’re prepared to write a different allegory with the same key points, but starring Joseph Swan, go for it.

  41. GrueBleen
    September 16th, 2016 at 16:21 | #41

    @Ernestine Gross
    Your #37

    Goodness me, no Ernestine; I am a total recluse who never talks to anybody, except you and Ikono, of course.

    But as far as I can tell, the influence of “the media” on people is both over-rated and under-rated. Just as the influence of “people” on the media is both over-rated and under-rated.

    But you see, the Hairoiled Scum likes to quote numbers such as these:

    The Herald Sun brand – in print and digital formats – is now consumed each week by 2.5million Victorians (Roy Morgan, Apr 10-Mar 11) highlighting that the Herald Sun’s relationship with its readers has never been higher.

    And:

    Latest readership figures confirm the Herald Sun is Australia’s favourite daily newspaper, read by 1.3 million Victorians every weekday and 1.4 million people every Sunday.

    But then, that was about 5 years ago, and it’s probably a lot fewer now. So tell me, how many different people do you talk to, face to face, in a week ? And for those who aren’t economics professionals, where exactly do they get their “… very advanced economic theory and empirical evidence” from ? And what techniques do they employ to analyze it in order to come out in agreement with the IPA.

  42. GrueBleen
    September 16th, 2016 at 17:12 | #42

    @Ernestine Gross
    Your #36

    “…separate but possibly linked or overlapping notions in your post.”

    Well I certainly hope so. I wouldn’t want to be thought to be just simple and linear in my rambling.

    But I did think of something today that may illustrate your Mode 1/Mode 2 model: Murray Goulburn Co-operative: once upon a time a large and successful Mode 1 co-operative transformed into a half Mode 2 corporation. Thus managing to achieve the worst of both worlds. But I’m not sure that the CEO who managed to pocket Au$10 million in his time there would think that either incompetence or error were involved.

    I think that “incompetence’ can sometimes be just a little subtle – not necessarily straight out ‘error’ but continuous suboptimality – so an organisation may have only ‘survived’ which should have, with greater competency, ‘thrived’. But I don’t think ABC Learning was like that.

    Perhaps you could be prevailed on to expand on this a bit:

    the ‘corporate finance model’ belongs to accumulated incompetencies on a high level, which could be equally well be described as extreme naive market economics.

    I’m not sure I grok you on that.

    Otherwise, well the Nick Gruen thesis to which I refer is his theme in the Club Troppo post that ProfQ linked to in the post wherein you initially articulated the Mode 1/Mode 2 dichotomy. Basically, and perhaps simplistically, no matter how we set up and establish human services, how do we improve them – which is why he was plainly annoyed at seeing his nice, straightforward managerialist techno-issue transformed into an ‘ideology’ debate.

    Nick does approvingly quote, for instance, the Toyota mass production improvement process involving ‘worker committees’ dedicated to improving how things are done (W E Deming stuff) and others who try to reduce costs – eg by kanban JIT and by mutual benefit teamwork with suppliers to improve overall quality and reduce cost of supplied components.

  43. Peter T
    September 16th, 2016 at 20:26 | #43

    A good example of the difficulty competing private providers have with networks is IT. It’s not just that the internet – with its myriad of protocols – was a public invention publically produced, it’s the almost complete ousting of private operating systems for servers with Linux. Quite simply, the continual battles between private providers over operating systems – each trying to tie down some segment of the market – fostered unreliability and costly complexity. After all, the point of servers is that they talk to each other. Which means public standards, publicly agreed and adhered to. So after spending enormous amounts trying to get MS NT to talk to Unix or IBM and each to different flavours of themselves, constant wobbles as various providers upgraded or patched without reference to others, pretty much everyone switched to the public provider.

  44. Ernestine Gross
    September 16th, 2016 at 21:58 | #44

    @GrueBleen
    I’ll meet you on the sandpit, if you wish to continue the conversations for we are getting a bit too far away from the topic of this thread.

  45. Ernestine Gross
    September 16th, 2016 at 22:00 | #45

    @Peter T

    Excellent example, Peter T.

  46. Ikonoclast
    September 17th, 2016 at 06:38 | #46

    @Peter T

    Yep, excellent example. It’s another illustration of the natural monopoly principle. Infrastructures, including communication systems are natural monopolies.

  47. Peter T
    September 17th, 2016 at 09:36 | #47

    “Natural monopolies” is a bit simple. It’s an empirical question of scale, complexity and degree of coordination required. Every company is a natural monopoly – a system that maintains a boundary and strictly limits internal competition (you don’t have two accounting sections – you force the one you have to serve everyone). A US household that goes off-grid can switch to 220 volts, a connected one cannot. You can have multiple rail providers, so long as the line widths, loading gauges, couplings, signals, safety standards and so on meet the same standard and timetables are coordinated. When all this makes public ownership a sensible solution depends on scale – the US can live with private rail, Luxembourg cannot.

    The private urge is to safeguard survival/profitability by setting a boundary – which means creating and maintaining a difference (think Microsoft or Oracle, which both keep tweaking common standards, or, in a different sphere, pre-revolutionary France, where 400-odd law codes kept lawyers busy). The growth of the modern state parallels the shift towards larger, more uniform networks.

  48. Ernestine Gross
    September 17th, 2016 at 10:44 | #48

    @Peter T

    “the US can live with private rail, Luxembourg cannot.” Indeed.

    For a related reason, macro-economic ‘performance’ comparisons, based on the empirical classification of ‘countries’, as well as micro-economic reforms, based on what other ‘countries’ do, may create problems rather than solutions, even if one were to make the outrageously simplifying assumption that the social and cultural histories of all ‘countries’, existing now, are identical .

  49. GrueBleen
    September 18th, 2016 at 14:14 | #49

    @Ernestine Gross
    Your #44

    Yes, there’s a few points I’d like to pursue with you if possible. I’ll get my head into gear a little later and ‘transfer’ some of your stuff into Sandpit and hopefully you will pick it up from there.

  50. GrueBleen
    September 18th, 2016 at 14:30 | #50

    @Peter T
    Your #47

    Right on mate: ” Every company is a natural monopoly…”

    GTell ’em about how in the 1960s and 70s all those “natural monopolies” adopted the IBM 7 – later 9 – bit standard and drives for reel to reel tapes for data transfer between different computer systems.

    But as for Linux, the real explanation is simple: the old world and its “natural monopolies” just faded away. No more DEC, no more Burroughs, no more Honeywell, etc etc and eventually no more Sun. Now there’s just HP, Microsoft (and Lenovo ex IBM, and maybe a residual Fujitsu) in the x86 server arena, only IBM in the midrange (i series) and basically only IBM in mainframes (plus a bit of residual Hitachi).

    So, who wants to waste all that time and money on ‘proprietary’ OS ? Especially given that Linux is basically just the user-visual top end, and the hardware dependent guts is still very ‘proprietary’.

  51. Ikonoclast
    September 18th, 2016 at 14:48 | #51

    The definition of “natural monopoly” seems to be getting terribly broad in the discussion above.

    “A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. This frequently occurs in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market; examples include public utilities such as water services and electricity. Natural monopolies were discussed as a potential source of market failure by John Stuart Mill, who advocated government regulation to make them serve the public good.” – Wikipedia.

    “William Baumol (1977)[2] provided the current formal definition of a natural monopoly where “[a]n industry in which multi-firm production is more costly than production by a monopoly” (p. 810). He linked the definition to the mathematical concept of subadditivity; specifically of the cost function.” – Wikipedia.

    I don’t know what subadditivity is BTW. The word definitions will do for me and as they seem logical it also seems logical (to me) that a mathematical definition could be derived.

  52. Ernestine Gross
    September 19th, 2016 at 10:31 | #52

    @GrueBleen
    # 49

    Yes, I’ll also copy some of your material on the sandpit. There may be some delay in my responses due to some commitments today and tomorrow.

  53. GrueBleen
    September 19th, 2016 at 10:42 | #53

    @Ernestine Gross
    Your #52

    Grazias. But no great haste required, there’s always “Tomorrow and tomorrow and tomorrow” as Willy (and Ikono) remind us.

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