Valerie Vaz: idiot

Labour MP Valerie Vaz, who sits on the health select committee, said the revelation should prompt second thoughts by ministers: \”It is difficult to comprehend how Circle can maintain a proper standard of healthcare while maximising profit; as a company they would have to make a profit, but that can only come if costs are cut – such as a shorter stay in bed to recover, one less nurse. That must compromise patient care,\” she said.

It is actually possible to make things \”more efficient\” in their use of inputs.

It\’s one of the ways that the economy grows you know, we find out new and interesting ways to do things that require fewer resources than the previous methods.

An example for you in health care….and I\’ll make it a simple one for you are a Labour MP and thus require simple examples….curing headaches.

There was a time, a century or so ago, when the only cure for a headache was a comely maiden bathing your forehead with a damp cloth. Didn\’t work very well, took a lot of inputs (not least the labour of said maiden) but that was the best we had.

Now we\’ve got aspirin at 50p a hundredweight. Suck one of these and the headache goes away. We now have a better treatment for headaches which uses fewer resources. It really isn\’t the distressing shortage of maidens, comely or not, that has led to our changing the method of treating headaches.

In the jargon this is known as an improvement in total factor productivity. Human progress depends upon it.

Now what we want to know is what sort of system increases tfp the best? Excellent, that\’s a question we can answer: the 20th century provided us with a natural experiment. The Soviet system, one which had no markets, did not, according to several well known and proficient economists, manage to increase tfp at all. Some 80% of the growth in the market economies was however as a result of increases in tfp (the other economic growth, both the remaining 20% and all of the Soviet Union\’s, was from increases in resources used).

Excellent, so, to increase tfp we want to change the last remnant of Stalinist central planning, the NHS, from the USSR style no markets and no tfp improvements into the markets and tfp improvements stylee thing.

Which is how a company can make profits: by increasing tfp, by just doing things better than they were done before.

24 thoughts on “Valerie Vaz: idiot”

  1. I recently fell seriously ill and spent some time in both an NHS hospital and a private hospital, St Anthony’s (thank God for BUPA, eh?) The difference was honestly like night and day, and it was naturally in favour of the for-profit option.

    One example: ring the bell asking for a glass of water or a change of IV in the NHS hospital, and in about 10-15 minutes you get a “nursing assistant” who isn’t qualified to do what you ask but promises to pass it on.

    In the private hospital, ring the bell and you get an actual nurse straight away.

  2. Richard Allan – isn’t your example more likely to be based on the private hospital being better resourced/more expensive rather than more efficient/productive? (I’m not ruling out that the latter might play a part, just that BUPA vs NHS comparison may be missing the point.) The reason Circle is causing alarm is the fact it’s not going to get more resources but is going to take a profit margin and the likes of Vaz infer that the margin will be achieved by the diversion of resources rather than, as TW proposes, better use of resources.

    What I find bizarre about Vaz and similar, is their belief that certain sectors of the economy are ‘too important’ to be left to the market. There are arguments that can be put forward for limiting markets in areas they are believed to be ineffective or counterproductive in but the idea that areas like healthcare are just ‘too vital for anyone to profit from’ is less convincing to me… Especially as we don’t build hospitals using a nonprofit NHS Construction Ltd, manufacture all the surgical tools and drugs at state-owned NHS Factory, and a myriad of other examples. I suspect it’s a manifestation of the ‘sacred NHS’/’national religion’ thing.

  3. “a shorter stay in bed to recover .. that must compromise patient care” . Really ?

    She can’t even have read what she was saying before she said it.

    One other thing Tim – just getting rid of the organisation opposed to improving TPF is probably a really good start.

  4. “Keith’s younger sister”: pity. I had hoped |Keith had gone trannie. P.S. Is she a person with flexible notions of propriety too?

  5. Single Acts of Tyranny

    It maybe instructive to compare the quality of East German state cars that did not have to make a profit, say the Trabant with West German cars that did, say Mercedes.

    I would prefer to stay in a Mercedes run hospital if I was ill, but all Valerie can offer me is a clunky plastic Trabant. Oh and she puts a gun to my head to force me to pay for it.

  6. It’s one of the ways that the economy grows you know, we find out new and interesting ways to do things that require fewer resources than the previous methods.

    That’s actually the only way the economy grows, isn’t it?

    Tim adds: No, we can also do it be inputting more resources.

  7. Ian B – no don’t think so. One of the reasons mercantilists favored population rise was so that all the land could be farmed and all the mines manned, with the aim of increasing the resources extracted – but they had no clue about productivity. Might seem a bit odd or irrelevant to us on our crowded isles but the colonisation of the Russian Empire-USSR-Russian Federation is an ongoing project that’s taking centuries and many groups of people (from German Mennonites to Cossacks and now increasingly Chinese in Siberia). They’ve still got great big empty spaces, sitting un- or under-utilised.

  8. MyBuringEars,

    None of that is growth, because it doesnt’ raise GDP/capita. 200 farmers producing 100 bushels of grain each are in the same economic condition as 100 farmers producing 100 bushels each.

  9. Dingbat Vaz can only see Socialist economics.

    If Circle are paid according to an agreed scale, that would include a daily bed occupancy rate, so Circle would not make money on empty beds, so no point in cutting short a patient stay unless there is another to occupy the bed.

    In fact in other countries with mixed public/private provision it is often the case that patients are kept longer if a replacement bed-occupier is not apparent to get the daily fee.

    In the NHS of course patients are kept in beds by the little Hitlers known as Consultants, to prevent one of the other feudal barons ‘stealing’ it by putting one if his/her patients in it.

    This is called bed-blocking and has a hideous cost to the NHS and patients because it increases waiting lists.

    Vaz might have a point if so much spending on the NHS did not go as waste and not on patient treatment.

    Of course the Circle experiment is only really validity if patients have a choice and they – Circle- will be operating in a competitive environment.

  10. Correct – simply getting everyone to have more kids (or importing them cf Mennonites) then setting them to work extracting nature’s bounty isn’t going to raise living standards. But it’s still growth. Just not per capita growth. And before economists sussed that productivity can change, the main type of growth pursued.

    Of course particularly during colonisation or conquest (Russian south and east, American west) you can discover or acquire more resources to extract. That may even yield per capita growth. You can make the peons work longer hours (more intensive use of labour resources), tricky in agricultural settings prior to artificial lighting but I guess easier in urban society. And even without improving productivity at existing economic activities, we sometimes develop new products or services, and the value of this new activity counts as growth.

    (Is it true that during the Industrial Revolution, most of England’s GDP growth was due to population explosion rather than the rise in productivity? I’ve seen that one banded about before.)

  11. The number of times I have heard some lefty dingbat say “public service x must always be cheaper because they don’t need to make a profit” is depressing. They seem to have no concept of what costs are actually made up of.

  12. MyBurningEars-

    It’s aggregates again, and the total complete uselesness of aggregate statistics. Measuring aggregate growth produces the exact problem you describe; just import more people and the figure goes up, if people leave it goes down. It has nothing to do with “growth” as in improvement in economic conditions. If e.g. Wales left the UK, aggregate GDP would fall but that would have no meaning in reality other than counting tax revenues- which again only matter per capita unless you’re worrying about the one type of spending that doesn’t scale with population, defence. Which of course is why old-fashioned imperial governments wanted more aggregate GDP, to pay for more soldiers and ironclads. But it’s a meaningless figure for anything else.

    In matters like this, only productivity for capita matters in terms of growth. Which of it was which side of some arbitrary line drawn on a map is neither here nor there.

  13. Ian B – oh I agree, the aggregate figures are the correct ones to use if you’re trying to be the predominant power in the region / the world but per capita is better if you think the people matter more than imperial dreams.

    The two things I’m calling you out for are claiming ‘growth’ means ‘per capita growth’ (even if it’s retarded for it do so, it is standard practice for the phrase ‘economic growth’ to refer to the aggregate, and if you want the ‘per capita’ version it is standard to distinguish it by adding ‘per capita’ – not saying anything normative, that’s just the way as far as I can see the terminology is used in practice) and the fact that as Tim correctly says, there are other ways to produce ‘growth’ (in either sense of the term, if I understand correctly) than productivity increases. I don’t think Tim’s answer of ‘use more inputs’ is the only correct one, I’ve seen other reasonable explanations along the line of ‘invent new products’ that don’t seem to imply either productivity improvement at existing activities or more inputs are needed (though inputs would be used in a different way).

  14. The other point is that profit pays the ROI. I find it staggering how many lefties don’t get that. The business was built using owner or 3rd party investment. The people who invested £1000 10 years ago want, not unreasonably, more than £1000 back. The extra is supplied by the profits. You can set up a state equivalent but the money is then borrowed. And the state (and therefore taxpayers) must pay interest to people who expect an ROI. Same thing. So the idea that profit sucks money out of the system that state concerns don’t is daft.

  15. MBE,

    On my first point, I’m just propagating my usual schtick that aggregates are bullshit and lead to all kinds of fallacious thinking. To talk about growth on anything but the per capita level is useless.

    On the second point, my argument is that it all comes down to productivity improvements, and that includes “invent something new” or “use more inputs”. You can’t use more inputs until you can spare somebody to collect them, which means everyone needs to be more productive to free up a resource gatherer. Likewise, inventing new products is a synonym for inventing more efficient products, since only a more efficient product can displace a less efficient one. It’s either cheaper, or better for the same price. You can design a cheaper ZX Spectrum, or you can develop a new 16 bit computer which offers more bang-per-buck. Either way, the bottom line is that the worker manufacturing the computers is now producing more for his labour input- the cheaper Spectrum or the more powerful Amiga.

  16. This is called bed-blocking

    No it isn’t. The term “bed-blocking” is generally reserved for patients (often elderly) who are appropriate for discharge from acute settings – but there’s nowhere to send ’em. It’s not used to describe games of bed chess by different specialties.

    As for Circle – they’re a bunch of freeloading chancers. And their cosy co-op rhetoric makes me want to puke. How ironic that the NHS gets endlessly slagged off in these ‘ere parts – the UK private healthcare sector more than understands its value, not least in terms of workforce training and critical/acute capacity. Pesky overheads that they are.

  17. I’m a voluntary trustee of a charity that reduces staff costs by paying staff more and giving them better working conditions.

    That way we get good staff and have low staff turnover.

    In contrast our public sector competitors, stuck between useless middle management and stroppy unions, have lousy staff relations, lose all their best staff (to us), have high sickness and absenteeism, and to plug the gap have to spend a fortune on training, recruitment and agency staff.

    So we provide a better service, at a lower cost, pay our staff more, AND make a profit.

    (OK, it’s a charity, so that profit stays in the sector, but the basic idea of better service at a lower cost still holds true.)

  18. SAoT “I would prefer to stay in a Mercedes run hospital if I was ill”

    A Volkswagen hospital would be fine for most, also. The TCO over 20 years of a VW (or an MB, for that matter) is probably lower than many a Dagenham Dustbin.

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