Is Our Economy Rigged?

What We've Become

When Bernie Sanders shouts "The Economy is Rigged"  a full throated roar goes up from the crowd. I'm one of those roaring.

Because the Economy is "Rigged"

Why? Because many of us feel that a few have been unjustly and disproportionately rewarded, while the many have been unjustly denied the benefits of a rich economy.

This is called "income inequality," which, if you think about it, is the essence of capitalism and a non communist state.  But the rule is supposed to be, those who deserve more get more, while those who deserve less get less, or to put it as politicians put it, if you play by the rules, work hard, you'll get yours.  

All of this is, of course, so simplistic as to be dangerous. 

Reading about income inequality, there are 6 much discussed hypotheses for why incomes have diverged:
1. Globalization: which subsumes the notion Americans are being driven down by competition with slave wage 3rd world economies, China in particular
2. Skill based technology change: the unwashed, uneducated masses aren't worth much in today's computer driven economy
3. Superstar culture:  which structures all the big bucks going to the star quarterback while the linemen who make his success possible go unrewarded
4. Immigration of less educated workers: who take jobs from uneducated Americans
5. Changing institutions: loss of labor unions to demand a greater share of profits and take them from stock holders and CEO's
6. Policy changes: mostly taxing the rich at lower rates.

Apart from economists, who review big data, most of us have to understand these forces as we see them in our own lives. We have the "worm's eye view" not the eagle's eye view of a Paul Krugman or James Surowiecki.

From my own worm's eye view, I have three stories which appear to be revealing, at least to me:
1. The CEO story:  which essentially means to me the CEO's and their decisions I have seen up close are incompetent and inadequate and yet they get paid as if they were successful.
2. The hoi polloli story: in which the efforts and mindset of the workers at the lower end of the scale are simply inadequate and tend to perpetuate their "loser" status
3. The certificate story: in which the advantages of high levels of education are arbitrary and unrelated to the actual value of these workers--what one might call the "value gap" in economic reward which is built into our corporate, financial and governmental systems.

To describe each of these in detail would entail a marathon blog post, so I'll simply start with the last one, and I'll get to the other two in subsequent blogs. 

In medicine, to make higher levels of income, you need more and more "certification" i.e., you have to pass more and more exams, each of which is claimed to validate your claim that you have a higher level, usually a more specialized level of competence, and this entitles you to more money because you made the investment of the time and effort to become this more finely tuned producer. 

Medicine is set up this way, starting with your organic chemistry certificate and working through your MD.  If you eventually certify in opthalmology, you are ready to start saving eyesight in patients.
Or, you can also do the most profitable of all procedures: laser surgery to correct myopia, LASIK.  When you do that procedure, you do not need any of the stuff you learned over the prior 10 years; you need only to know only how to operate the computerized machine which does the LASIK surgery.

There are many specialties like this:  Gastroenterologists need to progress through the BA, the MD, the basic training in internal medicine before they can be "board certified" in gastroenterology, which allows them to learn colonoscopy, which they learn in about 6 months,( and which a high school graduate or a smart person with no high school could learn in 6 months,) and reap the huge benefits of a procedure which bills at $2500 a pop.

So, you have the Mount Sinai School of Medicine medical student who is called in by the Dean and asked why he turned down the internship at Harvard/Mass General and he says, "In 5 years, I want to be doing 6 colonoscopies from 7 AM until 1 PM and out of there, on the boat with my wife and kids. I don't need to slog through Harvard for that. I can train at Southern Florida community hospital, learn colonoscopy and be there."

What that medical student saw clearly was that all the talk about becoming the best physician you can be, learning as much as you can in the precious years of medical school and post graduate training was hogwash in his value system. He went into medicine to get rich and becoming a good doctor had nothing  to do with that goal. Colonoscopy gets you rich.

Commerce is not about morals. Commerce is about making the most money you can as quickly as possible.

The system supports this thinking.  The truth is, colonoscopies, LASIK surgery, most dermatology procedures can be done by the proverbial "highly trained chimpanzee" but those are where the money is. In medicine, you have to progress through irrelevant steps, earn your merit badges, pay your dues, until you finally can get to the more or less mindless skill which makes you rich.

Medicine has now got the "ROAD" to happiness--jobs which pay $500,000 to $1 million a year for work which is less demanding in terms of time and effort than family practice or primary care--Radiology, Opthalmology, Anesthesiology and Dermatology. 

It's a system which does not reward according to the rules of "talent" or "hard work" but which exploits the  capitalistic reward system on which our  American medical system is based on.

The rich, in this system are not the hardest working, most talented but the shrewdest exploiters. In that sense, it's a "rigged" system. It's also a system which ensures there will be only a few high earners at the top, because there are only so many slots for training programs in the "ROAD" specialties, which ensure the supply of these services remains tightly controlled.

If we had a true "free market" system, then anyone who could master the techniques of LASIK or colonoscopy could set up shop, with or without a MD, and the stranglehold of supply would be broken and you could get your procedures done for $150.  Milton Friedman would likely approve. I heard him interviewed years ago, and he asserted we don't need a FDA monitoring safety of medical products in a free market system. Poor products and poor actors will be sued out of existence.  

Of course, there would be some carnage before the bad actors got eliminated.

But there you have it: A rigged economy, rigged by "certification" and a process which requires irrelevant hurdle jumping by a lucky few, a tightly controlled supply of services,  and disproportionate reward for those who provide those services.