New institutions for a new day

In Oct 1957, the Soviets shocked the world (and the Americans) by launching Sputnik. There was one important consequence of this action: The United States setup the Advanced Projects Research Agency (ARPA, later renamed as DARPA for Defense ARPA).

In previous diaries, I have discussed the perils of globalization with special emphasis on how the strong tend to exploit the weak using the very pillars of globalization. In this diary, I will discuss ways in which the act of becoming strong unleashes the creative potential, and increases the quality of life for everyone ... even the weak. Unfortunately, the argument I am making is that global warfare, and conflict in general, does have a practical purpose. This is unfortunate from my viewpoint ~ I am a peacenik at heart, and would prefer not to believe the argument I am going to make.

This is also extremely unfortunate for another reason... as I hope you will discover if you read onto the end.

Initial attempts by the US to respond (or to preempt) the Sputnik was a dismal failure (Project Vanguard run by the US Navy). Following this, an older program (Project Orbiter) was revived at NASA JPL as the Explorer Project, which was then launched with an Army Ballistic Missile Defense rocket (the Jupiter). The first Explorer launch was on Febuary 1 1958. ARPA was created in the same month.

The formation of ARPA was motivated by the realization that the Soviets had caught (or perhaps even surpassed) the US in technological prowess as applied to military needs, and that this situation posed a grave and gathering danger to the US. A need was felt to increase the technological prowess within the US, and it was felt that an agency dedicated to this purpose would be useful. DARPA is currently setup with about 150 technical employees who direct about 2 Billion dollars of research every year.

Therefore, the agency offers a useful case study as to the interplay between technological prowess for military needs, and general economic development. Let us consider some examples.

(a) The first program initiated by DARPA was the Saturn rocket engine program (staffed by Werner Von Braun's crew in Huntsville, AL), which led to the moon landings less than 10 years later. Let us ignore the rocketry itself as relatively inconsequential to global economic development (aside from the economic impact of having communications satellites), and discuss the specific subsystems on the satellites and moon rockets.

(b) Rocket science is about a lot of things, but weight reduction is close to the top of the list. In the 1950s, the semiconductor had not yet been commercialized, and electronics was dominated by the bulky vacuum gates. DARPA realized that weight reduction was critical, and invested heavily in the semiconductor technologies of the day. Fairchild Semiconductoes (which led to both Intel and AMD) and other icons of today were nurtured by DARPA during the early years. While it would be an exaggeration to say that DARPA created the semicoductor revolution, they did foster it along with amazing skill

(c) The US entanglement in Vietnam brought some more interesting examples. There was one particular bridge which was of strategic importance to the North Vietnamese, and the US had tried (repeatedly) to bomb that bridge. Unfortunately, that bridge was surrounded by high mountains, and had survived multiple bombing raids. It was thought that destroying that bridge from the air was impossible. DARPA was tasked with finding a solution, and the laser guided bomb was invented. And what does a laser guided bomb have to do with economic development ?, you may ask. The answer is simple: it was the first significant market for any laser.

(d) We all know about the ARPANET, which is now the internet. It was developed so that various DoD entities could talk to each other securely.

(e) A significant advantage in warfare is knowing where you are with respect to a detailed map ~ hence the global positioning system.

(f) Another significant advantage in warfare is knowing where you are when you are moving very quickly and where satellite navigation is of limited value for other reasons ~ hence the inertial navigation systems

I can go on and on, but I hope you get my point. Each one of these specific technologies was developed to make the US military more competitive, and has had the trivial consequence of unleashing tremendous economic development. None of these developments happened by accident ~ they were fostered for a reason. Absent that reason, they were less likely to happen.

Let me restate that for emphasis: absent that reason (i.e., warfare), all those technological innovations that have so improved the quality of life in the last 50 years would have been less likely to happen.

That is quite a chilling thought, actually. Why ?, you ask. Let us consider the challenges that we face today, and the answer will become apparent.

What are the challenges that we face today ?

Let us forget minor problems like terrorism, the economy and health care, and concentrate on the big challenges that we face. These include: not enough energy, not enough water, not enough food, and too much CO2. If you have accepted my thesis so far, then you will agree that each one of these problems is more likely to be solved if solving them affords us an advantage in warfare. If they don't afford an advantage in warfare, then the funding to pursue solutions to them simply do not exist.

Some of you might argue against this statement, and point to agencies such as the National Science Foundation, and to private companies. The NSF does fund basic research. Unfortunately, the budgets for NSF is miniscule compared to DARPA ~ technologies that give you an advantage in warfare have always been preferred. And private companies simply do not fund research and development with more than a 5-10 year outlook.

So let us examine our problems, and discuss if solving them provides an advantage to the military

The energy crisis We need a source of economically feasible renewable energy if we are to avert global warming. The metric associated with economic feasibility is $/watt of installed generating capacity. Unfortunately, the US defense department is not cash starved, and does not care about the $/watt metric ~ they care about lbs/watt metric (they have to lug things around, and do not like the idea of lugging a heavy photovoltaic system), and the $/watt and lbs/watt metric do not point in the same direction. Largely as a consequence of this, there is relatively few dollars that supports economically feasible renewable energy sources. The military does have limited motivations to further biofuels, but that is solely due to their own needs (even the shiniest tanks need fuel). Once again, they are not concerned with the economic feasibility of the biofuel.

The water crisis Some of you may have read that global warming has caused a permanent change in the weather patterns. Historic population centers have typically been built around sources of clean drinking water (Los Angeles, where I live, is an obvious exception), and as the weather patterns change, the population centers will be deprived of their water. This has already happened in Australia, for instance. The solution to this is "reverse osmosis" of sea water, but the process is expensive (both in terms of capital and in energy requirement). Fortunately, the US military has a strong motivation to find a solution ~ an Army in the desert needs lots of water, and shipping drinking water can be expensive (in dollar terms, and also in terms of the number of casualties associated with it). It would be so much better if each soldier could take brackish water (which is readily available) and purify it, instead of shipping a bottle of Fiji water to him/her.

The food crisis Unfortunately, the military does not have any motivation to solve this issue. While it is true that an Army marches on it's stomach, it is also true that an Army can commandeer as much food as it wants. The challenge for the Army is not that the world does not make enough food, but how to transport the food to it's soldiers.

Global warming Once again, the military has no motivation here. As discussed previously for the energy crisis, they have plenty of $$s, and developing an economic source of renewable energy does not have any priority.

I hope you can see where I am heading:

(1) The institutions that are responsible for the breathtakng technological innovations of the past 50 years are not designed to address the challenges that we face today

(2) It behooves us to create new institutions specifically designed to face the challenges we face today... just like ARPA was created in response to Sputnik

(3) It behooves us to choose our leadership that understands this issue.

Pl-480

PL-480, or Public Law 480 is a law signed by President Eisenhower in 1954. It is also known as "Food for Peace" because it is the funding avenue by which US food can be used for overseas aid. I am willing to bet that most readers of this blog have never heard of it.

I grew up with it.

I was born in 1968 in a small town in a very backward region in India. India, under the British, was always hungry ~ my Grandparents spoke often about a perpetual state of famine. In the 1960s and 1970s, India underwent a "green revolution", whereby the country transitioned from a net importer of food to a net exporter of food. I was born at the tail end of that revolution ~ the country was still somewhat reliant on food imports to feed it's people.

Unfortunately, the country was also dirt poor at the time. It did not have enough money to import all the food it needed to feed it's citizens. Consequently, food shortages were commonplace, and a "rationing" system was introduced by the government. Everyone was allotted about 4 pounds of rice, 1 pound of sugar and wee bits of other foodstuff every month. You were given a "ration card" by a government agency, and you took that card to officially sanctioned (but privately held) "ration shops". Naturally, the process was very corrupt: acquiring the ration cards was a monumental feat, the "ration shops" were seldom open, and they would run out of food very quickly when they did open. Those with plenty of time on their hands (e.g. children) were tasked with waiting outside ration shops in case they opened.

In the end, the ability to procure foodstuff at an affordable rate is governed by the demand-supply equation. The government can try to distribute subsidized food at reasonable rates (such as with the rationing system), but the task becomes harder as the difference between the perceived market rate and the subsidized rate increase. The perceived market rate is a function of perceived shortages, and the ability of price manipulators (and hoarders) to manipulate prices ~ prices tend to skyrocket when their is an expectation of shortage or when their is an expectation as to the ability to create a shortage. The Indian government was doing all that it could possibly have done to mitigate against this ~ food hoarding was a serious crime, for instance; and the airwaves was flooded with public service announcements about staying calm. But, in the end, when supplies get tight, prices tend to skyrocket.

It is here that PL-480 came in handy. I grew up listening to stories told by my parents and grandparents about the "PL-480 ships" carrying rice from the United States. The passage of these ships was headline news on the airwaves ~ because their arrival would coincide with millions of people being able to eat. Magically, when the Pl-480 ships docked, the market prices for rice and wheat would ease, and the "ration shops" would open. PL-480 made the difference between food riots and dinner for everyone.

It is for these reasons that, even today, as a grown man, when I think of "PL-480", I have a hard time controlling my tears. I can never get too angry at the United States for that reason. I strongly suspect that it is largely for this reason that the United States is not a dirty word in India.

Why am I mentioning all this today ? The reason should be obvious. The world is experiencing another food shortage. Even if you are not motivated by any sense of goodwill towards your fellowmen, you should grab this opportunity to help yourself by helping them.

Those that you help today will be greatful to you for several generations.

PS: As an adult, I learnt that 40% of the food aid under the PL-480 program between 1955 (the first year of the program) and 1973 was directed towards India.

Our health care delivery system

Those who live in Southern California are familiar with the 105 freeway, and may also know that this freeway is sinking because of underground water (well, sort of..). Fortunately, our tax dollars are at work, and the government agency responsible for Highway upkeep is aware of this problem. They pump the water out from under the freeway, thereby ensuring that the freeway does not sink like the Titanic.

Regular readers of LA Times may recall an incident reported in 1998 (I think) where the Highway department noticed that the water table under the freeway was rising, so they deployed additional pumps to remove water faster and faster. But the water table kept rising, so they had to deploy even more pumps. Finally, after many rounds of adding more pumps, they were able to stabilize the water table at a "safe" level. The furious pumping went on for months ~ and then they got suspicious: Where was all the water coming from ?

Well, as it turns out, there was another government agency (the water board) tasked with maintaing the water table, and they were worried that the water table was falling. So they were pumping water into the ground. And when the highway department added more pumps to remove water, the water board noticed a decrease in the water table, and added more pumps to bring the water table back up.

Both sets of pumps were working furiously, but all the effort was wasted. A government led by Robert Mugabe, which would probably have totally ignored the problem, would have accomplished the same with 100% less effort.

That, in a nutshell, is the problem with our health care delivery system.

There are 3 parties in this: the consumer (you and me), the noble Doctor (who is never to blame), and the insurance companies (evil). All three of us work very hard to pass on the cost of health care to the other two parties. Consequently, we spend a lot of energy arguing about who should pay for the healt care. And in the end, the energy that we spend arguing about who should pay, also adds to the cost of the health care delivery system, and is paid for by the consumer... in one form or another.

Consider the insurance companies Their main objective is to make money. They do this by transferring some of the cost of health care from the "insured-sick" to the "insured-healthy", and by pocketing some of the money being transferred as a transaction fee of sorts. If they can increase their transaction fee, then they make a higher profit. They can increase the transaction fee by increasing the money they take from the "healthy-insured" and reducing the money they give to the "sick-insured". They can accomplish this only if they setup an elaborate buerocracy that disputes and contests all the payments they have to make.

Let us now consider the Doctors Their main objective is also to make money. They do this by treating their patients, and charging the insurance company for that service. They can make more money if they can charge more for their services. Since the insurance company likes to dispute and contest all claims, and have setup an elaborate buerocracy to do so, the Doctors are forced to respond with their own layer of buerocracy. Thus, we have no setup a duelling layer of buerocrats to contest all the charges.

Now let us consider the consumer (you and I) Our main objective is to pay as little as possible for adequate health care. Since that is not possible, we have settled on the secondary objective: we would like a system where we have the appearance of paying as little as possible, even if we actually pay a lot. We do this by taking out the cheapest form of health insurance (if at all), or by insisting that employers pay for it, or by being uninsured and taking our chances. Since we have the appearance of paying very little, we have no incentive to reduce costs ~ we do not shop around for cheaper Doctors, for instance. This makes the Doctors and the insurance company happy ~ they can make more money.

Thus, the system works for all concerned:
(a) For those that are insured, and get sick, health care appears to be cheap.... for the most part, we do not have to pay for it out of pocket.
(b) For those that are insurced, and never get sick, health care is free because the cost of insurance is paid by the employer
(c) For the insurance company and their employees, this system creates a lot of jobs, and the possibilities of decent profits.
(d) For the Doctor, the system rewards those who can spend as little time as possible with each patient, and charge the same amount of money. Since the customer does not make the payment (which is unlike any other goods/service in the world), there can a dichotomy between the level of service, and the amount of money they can make.

Congratulations, we have created the worst possible health care delivery system.

Consider the alternatives:

(a) The free market system This system would eliminate the insurance company (and any other agency that would serve a similar purpose). Customers (you and I) would directly pay the Doctors for the services they provide to us. This would, inevitably, lead to extreme situations where the rich would get better health care and the poor die for want of prescription medication, for instance. The rich always get more, but a free market system would really bring that to the fore. The advantage of a free market system is that it would reduce the overall cost of the health care delivery system by eliminating several layers of buerocracy, and by incentivizing the customer to shop for "cheaper" Doctors.

(b) The single payer system This system would reduce costs by eliminating the uninsured ~ everybody would pay a little bit, thereby reducing the costs for those who was currently paying. It would also ensure that everyone is guaranteed a basic level of health care ~ fewer people would die because they could not afford health care. However, you would still have those dueling layers of buerocracy (Doctor, consumer, and the "single payer").

The Republican proposal is headed towards a free market solution, and the Democratic proposals are headed towards a single payer system. My personal preference is for the single payer system.

But anything (even the free market approach) would be better than the current system ~ the current system combines the worst aspects of both worlds.

My $0.02