Why Profit Is Our Best Friend
By John C. Goodman
Many liberals think of profit as evil. They see it as the product of “corporate greed,” something that needs to be harshly taxed. Yet the desire to earn a profit is what impels innovators to solve some of our most important social problems.
I don’t think that getting rich is the main motivation of entrepreneurs — the possibility of changing the world may be an even stronger desire. However, you can almost guarantee there will be no entrepreneurship if you do two things: (a) eliminate all possibility of getting rich, and (b) make it impossible to change anything without the approval of an intractable bureaucracy.
That in a nutshell is my explanation for why our two most visibly dysfunctional social systems — health care and public education — remain so dysfunctional.
I meet entrepreneurs in health care almost every day. Their novel ideas are invariably focused on helping some entity — a hospital, insurer, employer, etc. — solve a problem. They are rarely focused on how to solve an overall social problem, however. Because our health care system is so dysfunctional, in solving the problem for a client, they may be making our social problems worse than they would have been.
Solving social problems in health care with innovative policy proposals is what I do. It is a lonely field. But it would be a lot less lonely if we allowed people to get rich doing it.
To take one example, it is often asserted that one-third of all health care spending is wasteful. Suppose Bill Gates was able to write a computer program that would find the waste and eliminate it. Society as a whole would save more than $800 billion. So how much should we be willing to pay Bill Gates? A tenth of the overall benefit he creates ($80 billion)? One-half the benefit ($400 billion)?
Perhaps you’re thinking that we shouldn’t pay Bill Gates anything. Maybe you think he should give us the program for free, as an altruistic gesture. Or, maybe you think the most he should get back is a 1% or 2% return — something close to the return paid by government bonds. If this is your viewpoint, welcome to the world of health policy. You will find all kinds of people who think just like you do.
http://townhall.com/columnists/johnc...ur_best_friend
