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The dance along the arteries: alignment in medicine, mining and money

19 May 2014

cagRecently I’ve had to have a series of medical tests: I won’t bore you with the details, but suffice it to say that I’m back to my (relatively) normal state. Being a thick-file patient, one thing led to another, so that I’ve been under the care of a number of different consultants and had tests in a variety of different institutions. And while the point of entry was private, in order to get some procedures done urgently I ended up in the NHS stream. A trip to A&E in the middle of all this was inevitably NHS, and although I arrived at the best time of day (before 8am, after the drunks and before all but the most determined hypochondriacs), I was still kept waiting without explanation for hours. (I was reminded of driving from West Germany to West Berlin in the 1970s where a similar imaginary queue was invented by Soviet border guards.) In contrast, however, imaging in the NHS used the latest technology, the same medical staff as in the private stream, and was distinguished only by being faster and free.

What I did note however was that charging in the private sector is now virtually random: you have no idea if a blood test will cost £50 or £500, and an MRI scan offered by one hospital for £800 may be obtained for £250 elsewhere: but because even self-pay patients rarely ask (they are too ill, too distracted or too superstitious to do so), such off-market practices are rampant. This business will never be effectively managed by market forces.

Lying as still as I could in one of the scanners, and running out of lines of T. S. Eliot to reflect upon, I suddenly realised that throughout the whole process, not only had I experienced a wonderful standard of skill and care from each consultant I had seen and all the medical staff involved, but that not once had I doubted that my welfare and safety were paramount in their minds. There may be debates about whether a certain test would be worthwhile, balancing the risks of the procedure against the improbability of the condition, but they are medical decisions. They are completely free from considerations of bonuses or personal remuneration for the doctors. Long may it remain so.

Doctors do not make better diagnoses by being rewarded for success. The very idea is such obvious nonsense in relation to any professional activity that it is astonishing that the myth persists in the world of finance.

The survival of the equally daft idea of “alignment” is just as surprising. A doctor doesn’t need to have cancer to give best advice as to how to treat yours, nor does the scientist need to suffer from it to concentrate his mind into finding a cure. On the contrary, in science such “alignment” would be grounds for concern in case a lack of objectivity arose.

There is also a curious asymmetry in the application of alignment. We don’t want to pay doctors by results when they are successful, although we do want to sue them when they are not: nevertheless we regard it as mandatory that they carry insurance for this – thus destroying the motivational link. With bankers and company bosses, however, we want to pay them too much when they do well, and gullibly believe that we have to keep paying when they don’t.

This central myth of kleptocracy has survived all the evidence. What greater alignment could there be than that of Dick Fuld, CEO of Lehmans who was heavily invested in his firm?

The concept of alignment and perverse incentives arises in many spheres. There are allegations that the pursuit of financial goals resulted in the inadequate safety systems that caused the deaths of the miners in the recent tragedy at Soma. But if you think that could have been avoided by putting the owners themselves down the mine, then you should read Germinal. Miners will not only put their own lives in jeopardy in pursuit of money, they will even strike to protest against a requirement to improve their timbering if it interferes with that pursuit.

From → Ideas

  1. Hugh Arthur permalink

    Much enjoyed the reference to Germinal. By extraordinary coincidence, I had got up to page 219 of the Penguin Edition (in the “40%” area if trying to read it in French on a Kindle at the same time), just an hour or so before reading this Blog. Interestingly, the choice for the Montsou miners seems to be risking death by the inadequacy of their own “boisage” or seeing their families starve to death through the unit-trust type hidden charges levied on the coal through the new payment system which has provoked the strike (“deux centimes par berline dans sa poche…”). Darwin would no doubt have a simple explanation for this potentially fatal altruism.

    • I had rather forgotten that aspect – it’s over 45 years since I read Germinal, and one’s memory is inevitably selective. But then so it seems is that of a major unit trust provider who has forgotten an undertaking in its terms and conditions to treat all customers consistently and manage conflicts of interest so that they do not damage the interests of customers. We’ll see whether the Financial Ombudsman agrees…

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