Thursday, July 16, 2009

Misunderstanding Bell Labs

On The Washington Note, James Pinkerton claims that cost control in health-care reform will reduce surpluses and thus hurt the kind of discovery and invention at Bell Labs funded by the AT&T surplus. Except that the generous funding of Bell Labs by AT&T in the monopoly period was a consequence of AT&T being a regulated monopoly. Until the 1984 consent decree, AT&T's surpluses were determined by government tariff regulations, and AT&T's expenditures where substantially determined by political considerations ranging from providing employment where it mattered to state and Federal legislators, to supporting national defense goals through R&D. That same AT&T had the power to control what could be attached to its network, to the point of in effect forcing most users to rent its ponderous devices. Users had little to no choice choice in devices, tariffs, and terms of use. Translated to medicine, that AT&T was like a national HMO with one-size-fits-all treatments and an immovable bureaucracy, and with a gold-plated research arm that looked very good in Washington but did not matter much to everyday quality of care. I doubt that is what James Pinkerton wants to see. And I don't see the substantial private sector surpluses of for-profit health insurers, hospitals, or pharma going to much fundamental research. Instead, all the fundamental biomedical research there is (and there is probably less fundamental reseach than there should be) is paid by our Federal income taxes and by a few private foundations (and thus, indirectly, by the tax deductions on charitable giving).

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