Friday, January 27, 2023


 This is Joseph

I wanted to highlight this recent article by Chris Dillow. He doesn't use quite the examples that I would but it is very much a critique of how we have ended up creating a rather fragile system. 

The auto industry was a pioneer of just in time inventory, which was a major savings and a notable improvement in efficiency. But the global shortage of computer chips for cars was a clear example of that system not building in redundancy for a slowdown in sales nor could it pivot quickly when there was a supply interruption. 

Medical systems in Canada experienced a great deal of cuts over the years, to try and save on costs. Health economists convinced premier Bob Rae that you could save costs by reducing capacity, a goal continued by many left of center successors.  This worked well, at first, by increasing efficiency and forcing the health care system to focus on priority cases. But it was left mortally vulnerable to a demand side shock (like a pandemic). It is also notable that they kept this process up even as the large baby boom cohort aged, creating exactly the inverse age pyramid that accelerates a crisis. 

Chris Dillow's conclusion is exactly right:

This issue is, however, off the political agenda. One of the many defects of our political debate is a belief that things will be tolerable if only we could find the right people; this is Bonnie Tylerism, holding out for a hero. This, however, is the wrong question. We should be looking not for good people but for the right institutions, selection mechanisms and processes - devices which would make our economy and politics more resilient to idiots or crooks

In many ways this is also a critique of the general culture of needing "the right people" or the "lone genius" model of success. Mark has been discussing a famous businessman lately, and part of what makes that situation so clearly tragic is that good business plans should still work if the leader is distracted by acquiring a social media company. The corporate plan should also include the real world challenges that arise, when considering realistic targets.  The same way that people say that a policy would have worked had it been "done right" need to accept human fallibility as a design constraint for a good plan. 

None of this is to say that efficiency is bad or that we need to guard against every conceivable tail risk. But I suspect the last few years would have gone better in Canada if there had been a modicum of planning around "what if something goes wrong?".

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