A Very Unstable Equilibrium

I recently wrote my first high level reaction to the recent election in Election Reflection. It seems I have a lot more thoughts bouncing around in my head, some deeper than others, and I need to figure out a way to get them out. I keep waiting until I have time to write some Grand Canonical Blog, but GCBs take a lot of time and energy and I have neither so instead I’m going to just puke out some random ideas every now and then. All of the ideas waltzing in my brain have a common theme:  I think we have entered into a very dangerous and unstable equilibrium in this country with a large group of takers voting over and over for a much smaller group of payers to pay for more and more goodies for them while simultaneously disdaining the payers instead of thanking them. I don’t see how that can last.

I want to start today’s mental regurgitation with a story that happened to me during my time at that great bastion of capitalism and free markets, the Harvard Business School. When I was a student at HBS, our class was given the opportunity to vote, as a class, on whether we would be allowed to disclose our grades to prospective employers when we were looking for jobs. I need to pause and explain the HBS grading system. It is a forced curve where the top 10-15% of any particular class gets a grade of 1. About 5% gets a grade of 3, which is essentially a failing grade. Everyone else, 80-85% of the class, gets a grade of 2. To summarize, most everyone gets the same grade, but for the few insane students who want to work their arses off to be in the top 10-15%. If you are in the top 5% of the class at graduation, you earn the honor of Baker Scholar. I did, so you will understand my bias.

Back to the vote. As you can see from the system I just outlined, grades are a non-differentiating factor in hiring decisions for about 85% of HBS students. For 10-15% (those that have a preponderance of 1’s on their transcript), it is tremendously beneficial to disclose grades to employers. We voted. The 2’s won. In the final analysis, it was about 20% of the class in favor of disclosure and 80% in favor of hiding our grades from employers. But wait, don’t free markets require full information disclosure to function properly? Of course they do! And, seriously, isn’t the Hahvahd Bidness School the single #1 defender of free markets on the face of planet Earth? I thought so. But, there you have it, when given the choice of voting for free markets or their personal interests at the expense free markets, the HBS majority voted against free markets (and the minority of top performers in that market) so as to defend their personal benefit. And, as a side note, it was very common for students to slack off in all their classes, knowing that there was no particular benefit to working harder than the next guy. Seriously, pause and reread that sentence in the context of our current tax code.

The exact same situation has evolved in the United States as fewer and fewer top performers are asked to pay more and more taxes so others can take more and more for themselves. The important distinction in the real world is that, in the long run, even the takers get screwed by their own system. If you doubt me, please Google “unemployment rate, United States” and, as I pointed out last week, if you want to see the long-term implications, Google “unemployment rate, France.” I am going to explore the unsustainable payer/taker problem in a lot more detail (maybe, possibly, depends on my time and energy) in the coming weeks/months, but for today, I just want to share one little story that is such a great microcosm of the bigger problem, I just had to get it down on paper.

I stopped at the Corner Bakery today to pick up lunch for my daughter. Behind me in line were a mother, grandmother, and child. I am guessing the mom was late 30s, grandma was mid 60s and the boy was about 9 or 10. Both mother and grandmother were obese (I am guessing BMIs in the low 40s)*. The child was perfectly thin; in fact, he was very fit and athletic looking, with soccer shorts, a tee shirt and sneakers. As we waited, the mom said to the kid, “If you weren’t such a finicky eater, I could have made a meat sandwich** for you at home.” The young boy replied, “But, I don’t like meat.” The mother snapped back, “Well, you’re going to have to start to eat more things because you are way too skinny.” The grandmother piled on with her concurrence. I turned my head around again to confirm what I had seen before. This kid was a specimen of healthy physique. The mom then proceeded to buy 6 cookies, each about 6 inches in diameter.

Now, let me tie these two stories together in my payer/taker model. Based on the location (Montgomery County, Maryland – voted 72% for Obama) and a variety of demographic factors, there is a near 100% probability these folks supported Obama and, thus, implicitly voted for Obamacare. So, when you boil it down, here’s what you have. They are obese, they are encouraging their next generation to be obese, yet they expect me to pay their super sized medical bills, which inevitably accompany obesity, from now til they all die. Any serious analysis of Obamacare makes it clear we are on a path to socialized medicine. Private insurance cannot survive under Obama’s plan and he’s made it clear he has no interest in its survival. Therefore, all healthcare will soon be the ward of the state and the small minority of us who pay all of the taxes for the country will soon be paying for all healthcare too. So, here you have people who cavalierly don’t take care of themselves and encourage their children to be obese. And, all they have to do is vote for Obama and I pay for it. Unsustainable.

In closing, I told my wife this story and she said the real story is the size of the cookie (and the size of portions in McDonald’s or most any restaurant in the United States). This is her crusade, not mine so I encouraged her to blog about it. But, in respect of her opinion, here’s my quick take on that. We can’t legislate what people eat, despite what uber-tool Michael Bloomberg may think. We are a free country and I’m a big fan of personal choice. I know liberals aren’t and we’ll have to agree to disagree on that. But, with personal choice comes personal responsibility. If you choose to eat two 6 inch cookies for lunch, you should be responsible for your medical bills, not me. All that said, in the name of compromise, I am willing to deal here. I would go for some type of government intervention into the front end of healthcare (e.g., diet and exercise) in exchange for lower taxes and greater economic prosperity for everyone. It would have to be incentive-based not mandated, but maybe we can find a deal here that works for everyone. I’ll think about it and puke something out later.


* I don’t want to appear insensitive to the challenges of obesity. I have several family members who have battled weight problems their entire lives. However, I draw a distinction between battling weight problems and deliberately trying to become fat.

**I have never even heard the term “meat sandwich.” Not “ham sandwich” or “turkey sandwich.” Just meat sandwich. WTF?

About Bruce Robertson

Bruce Robertson is an amateur writer and professional provocateur
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3 Responses to A Very Unstable Equilibrium

  1. Bill Miller says:

    I have been using the HBS analogy for several years to explain the absurdity of the payer/taker problem. My personal twist is that I was using grad school to make a significant career change and my performance (I.e., grades) were important in my mind to demonstrate my seriousness and my potential so my classmates vote hurt me in that regard. Similarly, the takers vote makes it hard for a payer wannabe to move up in the world. And why would he if the marginal benefit is consumed by an unambitious taker.

  2. Lots to chew on in this one. In the HBS example, I guess that the problem is twofold. First, the majority is going to look out for the interest of the majority. On the other hand, perhaps that is not a problem, but is just democracy in action. Problem #2 is that your class was given the power to decide such a thing. This seems foolish. Doesn’t HBS think these things through for itself? Either the school decides to release grades or it doesn’t. I bet Yale doesn’t go for such foolishness…

    With your example of the family behind you in line, there is much food for thought (as well as the more literal form of food). It does not strike me that the mindset of the elder generation was, “Well, we might as well become fat and disgusting and unhealthy, because ObamaCare will save our asses (even though they may be gigantic).” Any more than your typical unemployed person says, “Hey, cool, I lost my job, now I get to collect unemployment. I like that better anyway, since I don’t have to work.” You are turning over a rock here and describing the first critter you see under there, but there is a whole ecosystem to contemplate. For instance, why are people eating so unhealthily? Why is shitty food so much cheaper than good food? Indeed, why do we have so many subsidies which make shitty food so cheap? Obama and the Democrats are hardly blameless here, but both parties have completely lost their way. So I’m on the side of your wife. To ascribe the problems of the American diet to the Democrat party (as you Republics call it) is ludicrous.

    I’ll agree with you that, as you put it, “with personal choice comes personal responsibility.” You seem to think that liberals aren’t a fan of “choice,” which I’ll chalk up to your love of mud-slinging. Your proposal that diet and exercise somehow factor into your insurance plan is an interesting one, though, barring tremendous invasion of privacy, I’m not sure how they would be monitored. Indeed, if we have come to a point where a citizen’s attitude toward personal health is shaped purely by market forces (“let’s see, I could eat these M&M’s, but I have to consider how that would affect my financial profile), we’re fast losing our humanity, so I hope you are wrong on that.

    Second to last (yes, I’m almost done): if ObamaCare can really fix obesity, we should all be for it.

    And finally, a road down which we have traveled before. Thank you to you and all your wealthy colleagues for paying a large (though certainly not by historical standards) sum of taxes. It may shock you that I and my colleagues, the university professortariat, also pay taxes. We undoubtedly pay fewer dollars, since we earn substantially fewer, but we pay a rather similar percentage of our income as you. We like to think we are providing a useful service to society (although I am getting the feeling our society begs to differ). I think this is the whole idea of a fair tax code.

    And: Happy Thanksgiving, my favorite holiday.

  3. Pingback: Liberal Hypocrisy Part IV: Liberals’ Secret Love for the 0.01% | Bruce's Blog (til I come up with a catchier name)

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