Friday, July 08, 2005
A Meditation on a Quotation
More often than not I muse about the economic and social system in which I live. What started me this time was a quotation I remembered, ascribed to Cornelius Vanderbilt, the President of the New York Central Railroad. In response to a reporter’s question, he said, “The public be damned. We run our railroads to make money.” I remember wondering about his use of the plural “railroads” rather than the singular. Then I realized that he was speaking for all railroad managers. All railroads were operated to make money for the stockholders. Good service to the public was necessary only as a means of assuring the continuation of the profit.
That is the way all private business enterprises are operated in our system. An enterprise has to make money; it has to make a profit to stay in existence. It doesn’t necessarily have to provide a useful and beneficial public service. An example is the manufacture and marketing of illegal drugs. The business is highly profitable, even though most of us agree that its services are neither useful nor beneficial.
A bit before the quotation of Mr. Vanderbilt came to me, I was reading a short comment about the relationship between premiums for malpractice insurance and medical malpractice and other financial activities of insurance companies. In spite of assertions by medical associations and many Republican politicians, malpractice premiums are not related to the activity of trial lawyers. The writer stated that the average insurance payment for malpractice damages has practically no relation to the premiums charged for the insurance.
It seems to me that the insurance companies charge whatever the traffic will bear in determining the premiums for malpractice insurance. Doctors who undertake risky medical procedures (i.e., surgery) have high incomes and can afford to pay high premiums for their insurance. These doctors treat patients who have the money or insurance to pay their fees. When one reads an occasional news story about a poor man or woman who has received an expensive heart transplant, it is big news because it is such a rare event. In all cases, some generous person or persons have put up the money to pay for the procedure.
And so it is with other business enterprises. Everyone in business, every business enterprises establishes prices for the product or service furnished that will be high enough to make a profit, yet not so high that it will discourage customers from buying. The surprising thing is that there is a general belief that this system based on individual and institutional greed actually produces beneficial results to society. It is argued that scarce resources are allocated efficiently. The resulting efficiencies enable the system to provide a good standard of living. I have not read any convincing proof that any of these desirable results actually must occur. It is as though the philosophers and other learned men and women who write about the system have agreed among themselves to say and write that the system does produce the most beneficial effect of any conceivable way of organizing our society and economics.
It also seems to me that the main beneficiaries of our economic and social system are the persons who have the wealth to pay these scholars for their work. I am reminded of the German philosopher Wilhelm Leibnitz who assured his wealthy patrons that they needn’t feel guilty about their wealth. He used specious mathematical arguments to convince them that this is the best of all possible worlds. Voltaire satirized Leibnitz in his novel “Candide,” as Dr. Pangloss.
I think our system is a rather poor one. If I knew a better one, I would become a revolutionary.
That is the way all private business enterprises are operated in our system. An enterprise has to make money; it has to make a profit to stay in existence. It doesn’t necessarily have to provide a useful and beneficial public service. An example is the manufacture and marketing of illegal drugs. The business is highly profitable, even though most of us agree that its services are neither useful nor beneficial.
A bit before the quotation of Mr. Vanderbilt came to me, I was reading a short comment about the relationship between premiums for malpractice insurance and medical malpractice and other financial activities of insurance companies. In spite of assertions by medical associations and many Republican politicians, malpractice premiums are not related to the activity of trial lawyers. The writer stated that the average insurance payment for malpractice damages has practically no relation to the premiums charged for the insurance.
It seems to me that the insurance companies charge whatever the traffic will bear in determining the premiums for malpractice insurance. Doctors who undertake risky medical procedures (i.e., surgery) have high incomes and can afford to pay high premiums for their insurance. These doctors treat patients who have the money or insurance to pay their fees. When one reads an occasional news story about a poor man or woman who has received an expensive heart transplant, it is big news because it is such a rare event. In all cases, some generous person or persons have put up the money to pay for the procedure.
And so it is with other business enterprises. Everyone in business, every business enterprises establishes prices for the product or service furnished that will be high enough to make a profit, yet not so high that it will discourage customers from buying. The surprising thing is that there is a general belief that this system based on individual and institutional greed actually produces beneficial results to society. It is argued that scarce resources are allocated efficiently. The resulting efficiencies enable the system to provide a good standard of living. I have not read any convincing proof that any of these desirable results actually must occur. It is as though the philosophers and other learned men and women who write about the system have agreed among themselves to say and write that the system does produce the most beneficial effect of any conceivable way of organizing our society and economics.
It also seems to me that the main beneficiaries of our economic and social system are the persons who have the wealth to pay these scholars for their work. I am reminded of the German philosopher Wilhelm Leibnitz who assured his wealthy patrons that they needn’t feel guilty about their wealth. He used specious mathematical arguments to convince them that this is the best of all possible worlds. Voltaire satirized Leibnitz in his novel “Candide,” as Dr. Pangloss.
I think our system is a rather poor one. If I knew a better one, I would become a revolutionary.
