There is something just not right about our economic malaise. Obviously this economy is different from my father’s economy but just because it is different does not mean it is better. When I went to college in the 1970s my middle class parents cash-flowed my education. Today it is nearly impossible for middle class parents to cash-flow their kid’s college education. Is this progress? The same is true about health insurance. It was such a non-issue in the 1970s that I can only remember that I had it and did not have to pay for it. As a healthy person I get no value from my current health insurance but it has grown to be one of my largest expenses and most of the increase occurred in the last couple of years. Is this progress? We seem to stuck in a loop where we keep spending more money to get the same results our parents got for much less. It is this value proposition that is frustrating and angering the middle class the most. Yesterday I was pleasantly surprised to read a Mauldin Economics newsletter describing “Dillian’s Loop“. Jared described it simply by giving the following example.
- If the regulations work, they are declared a success and they write more regulations.
- If they don’t work, it means they need to have more regulations.
In a way it reminds me of Albert Einstein’s quote, “Insanity: doing the same thing over and over again and expecting different results“. The subtle difference is that “Dillian’s Loop” makes fun of people who continue to propose single factor answers to multi-factor problems despite getting the wrong answer or in some cases the right answer for the wrong reason. In the developed world we still cling to the belief that there are simple solutions to complex problems and we are only one smart administrator away from eventual success. This belief permeates a lot of our policy making. Many of the Affordable Care Act supporters believe that because they expanded Medicaid it is working as intended and the act only needs a little tweaking to bring affordable health care back into the Affordable Care Act. If reforming health care costs was that simple why didn’t the Affordable Care Act supporters start off with that? Do they really believe a few more regulations will fix the health care cost problem? Even if this overly simplistic belief system leads us into making bad decisions on complex problems like the Affordable Care Act, regulations, or quantitative easing, we cling to another belief that there is still time to kick the problems down the road for the next generation to fix. The problem is that our faith in these two beliefs is waning and the clock is ticking on when our problems will spin out of control. If we cannot fake till we make it, we will be screwed.