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.