Friday, September 25, 2015

When Asymmetric Service Formation is Not Enough...

Asymmetric services formation, i.e. the compensation of high skills levels through the transfer of wealth from resources other than human capital - just became more difficult. How so? As monetary conditions continue to tighten, the ramifications are already being felt in healthcare, where further consolidation is underway. According to Scott Gottlieb at AEI in an article entitled "As number of insurers shrink, patients face dwindling choices"
When it comes to the mergers among health plans, the bigger issue isn't the consolidation of the nation's five largest insurers into three. It's the fact that far fewer new health plans are forming to replace the plans that have been acquired. New regulations, many of which were ushered in along with Obamacare, have made it too hard and too costly to start a new plan...around 40 plans have also left the market over this same stretch of about seven years.
This is not a good moment for the government funding of many forms of time based services - only consider John Boehner's pending resignation from Congress. Even so, services formation needs to exist in balance with other forms of production, in order to maintain economic stability for the conditions of the real economy. While asymmetric service compensation will continue to apply to the spontaneous equilibrium which supports the elite and some of the middle class, its viability for everyone else is threatened - given the dependence of governments on a vast array of resource capacity which has recently lost value.

While consolidation in tradable goods sectors can often lead to greater production efficiency, consolidation in the non tradable sector of time based healthcare, just means a smaller marketplace than would otherwise be possible...period. Much as consolidated schools have forced long commutes for students in recent decades, consolidated hospitals and physician locations now mean extensive traveling for many whose health is often not in good enough condition to be doing so - particularly when chronic illness means having to travel to healthcare facilities repeatedly. It is time to generate services creation where people live, instead of forcing them to rely on the already stretched capacity of still prosperous regions.

Symmetric time coordination - on the part of local corporations - would do far more than just generate new wealth. This form of organization would reduce the burden of time and resource investment constraints, which have been necessary for services formation in today's prosperous regions. When services formation is asymmetric, individuals often spend decades preparing for economic entry, in multiple disciplines. Even so, many professionals cannot always pursue their own knowledge based priorities, or help those they had hoped to assist in the first place. In the early stages of symmetric services formation, participating individuals would still need to travel to cities for advanced healthcare options in some instances. However, the overwhelming majority of healthcare needs could be organized in the heart of places where people seek to live and work.

I felt more positive about the significance of "under one roof" services formation, after watching the Dani Rodrik live interview with Tyler Cowen, at the Mercatus Center on September 24th (here's Tyler's link to the discussion). "Just in time" knowledge use and application, would mean greater flexibility for divisions of labor: something often not possible in traditional services formation. The same monetary rigidity of price structures which exists for high skill services, has also meant labor rigidity which has negatively affected the real economy.

In his interview, Dani Rodrik spoke of the difficulties for transferring or generating services capacity for developing nations, because of the multiple systems which need to work in (fortuitous) sync with one another, in order for the process to occur. Whereas, traditional manufacture has been easier for the "blank slate" of simple organizational circumstance, because of the "under one roof" coordination which allows flexible division of skills sets. Further, tradable goods production did not need a local market for product, to be able to contribute to local economies.

Non tradable service sectors - by definition - are all about potential production and consumption for local economic conditions. The slow adaptation of services systems in the places they are needed most, is all the more problematic, now. At a historical moment when populations seek greater participation in services markets of all kinds, nations are increasingly compelled to cut back services without an adequate response from private industry for innovative services capacity. Were it not for this fact, there would be a (somewhat) limited "need" for my blogging in the first place.

One of the best aspects of local corporations, is that they would be able to coordinate what are normally multiple systems into single coordinated local networks. Not only would this make complex service organization possible in rural regions, local corporations could also provide growth options for developing nations. When the process of high skills formation involves too many different logistics to work effectively at the margins, it is time to provide better wealth options for the margins of existing equilibrium.

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