Many of the problems confronting the US today involve systems that aren’t working properly. Examples that come to mind include financial services (the banks), the economy in general, American healthcare, the governments in Afghanistan and Iraq, and global climate change.
In the recent past the solutions offered for such problems were simple and straightforward: deregulate, cut taxes, create healthcare savings accounts, change regimes, and…well, the Bush administration didn’t really talk much about climate change. Unfortunately, these solutions didn’t solve these problems. In fact, in many cases the problems only got worse. (A prime example would be Wall Street, in which deregulation enabled the buildup of some of the problems that led to last year’s financial meltdown.)
In today’s world we need to understand that problems with systems cannot be solved by simple-minded solutions that ignore the dynamics of the system. To adequately address such problems, we need to address the system as a system.
I don’t often agree with the NY Times’ David Brooks; I’ve found he can be perceptive in identifying an issue, but then his ideology often steers him away from what I consider to be reasonable solutions. But I was intrigued by an observation he made in today’s Times:
…there are several things the government can do to improve the economic ecology.
I wasn’t intrigued by a conservative columnist actually saying the government can do something – though that can be a bit of a shocker. What I found interesting was his term “economic ecology.” I don’t think he was talking in terms of ecological economics, which focuses on the interrelationship of economics with societies and the environment. I think he was just talking in terms of the economy as a living system.
It’s not clear in Brooks’ column if the solutions he lists are from a report from President Obama’s National Economic Council that he mentioned in the column, or if they are from Brooks himself. But they do appear to be focused on ways to enhance the economy as a system, much the way a farmer might improve his fields to increase the chances of a better harvest. Rather than having to choose between government control and market chaos, the solutions Brooks lists are aimed at letting progress emerge naturally:
This sort of agenda doesn’t rely on politicians who think they can predict the next new thing. Nor does it mean merely letting the market go its own way. (The market seems to have a preference for useless financial instruments and insane compensation packages.)
Instead, it’s an agenda that would steer and spark innovation without controlling it, which is what government has done since the days of Alexander Hamilton. It’s the sort of thing the country does periodically, each time we need to recover from one of our binges of national stupidity.
In a similar vein, the Washington Post’s Ezra Klein takes a systems-based look at one aspect of America’s healthcare system: employer-provided health insurance. Specifically, Klein looks at the relationship between this insurance benefit and employee wages, and how people’s perception of that relationship can shape how they feel about controlling healthcare costs:
But health-care coverage is not a benefit. It’s a wage deduction. When premium costs go up, wages go down. When premium costs go down, wages go up. Yet workers don’t know that. In fact, the information is hidden from them. That means that cost control seems like all pain and no gain, which makes it virtually impossible for Congress to pass. It’s like asking someone to diet when they don’t realize it will help them lose weight.
Like Brooks, Klein presents a possible solution that doesn’t seek direct control of anyone’s behavior, but instead strives to increase people’s understanding of the system:
Perhaps the easiest way to dramatize the issue for workers would be to attach health-care costs to each paycheck. If employers listed the cost of health care alongside the bite taken by payroll taxes, it would be much clearer to workers that health-care coverage was coming out of their wages, not out of their employer’s largess. That, at least, could help them see the costs of the system more clearly, which is, unfortunately, something that all the congressional debate isn’t helping anyone do.
The expectation inherent in Klein’s solution is that an increased understanding of the system would lead people to see their own interest in increasing the system’s efficiency and sustainability.
With so many systems in crisis in our world today, it’s heartening to see that at least some of the solutions being discussed reflect at least some awareness of system dynamics.