Two golden summers at the American Institute for Economic Research gently reshaped my philosophical outlook and personal life forever—much for the better. My 1981 and 1982 summer fellowships helped instill a deep appreciation for the intensely personal nature of economic markets, and they steered me toward a long and happy marriage.
Quite a good deal, I’d say.
Metaphorical and Literal
As a doctoral student in economics at Columbia University, life was urban, noisy, and hectic. At AIER, summer life was bucolic, soft-spoken, and serene. Columbia’s formal, technical studies helped me hone the mathematical tools of neoclassical economics. AIER’s organic, impressionistic curriculum examined the same questions through a soft-focus lens. At Columbia, we reduced humanity to algebraic artifacts.
At AIER, we appreciated the ineffability of individualistic motivations and actions. A single shady walkway bisected Columbia’s imposing campus. AIER hid among sylvan hills, with luminous white birches ringing the hushed reservoir below. Metaphorically and literally, Columbia provided trees and AIER offered a forest.
Colonel E. C. Harwood had passed away just months before my first visit to AIER, and his absence was palpable. Mrs. Harwood was still very much a presence, along with their children and grandchildren.
AIER’s scholars ranged from highly intelligent to brilliant, but they weren’t particularly well-versed in the formal methods of mainstream economics. Some had rather caricatured views of the state of economics nearly half a century after John Maynard Keynes. Around the 1930s, the Institute and mainstream economics, I thought, had gone their separate ways, to the detriment of both.
However, the more I interacted with AIER, the more I felt its culture had preserved some insights long sidelined by the mainstream. Reducing human desires and interactions to mathematical abstractions is indispensable, but it comes at a terrible cost. It’s easy to lose one’s grip on the concrete—on the flesh-and-blood humans who are the subjects and purpose of economics. Whatever shortcomings I saw in AIER, this was not among them.
Knowledge and Society
For AIER’s summer fellows, readings were eclectic. They included a heavy dose of Austrian economics—especially Hayek and Mises—economists who were largely absent from my university studies. Other readings were drawn from psychology, pedagogy, sociology, biology, philosophy. From these seemingly disconnected readings emerged a clear narrative—the strengths and idiosyncrasies of individuals and the inability of planners to discern and manipulate those qualities.
The blend of formal and informal, mainstream and heterodox, metaphorical and literal defined my subsequent work. I should note that my prior life helped prepare me for this dichotomy. As an undergraduate, I majored in literature and nearly finished a second major in government. While I read a great deal of Faulkner and Hobbes, Borges and Locke, I never took a single course in economics or business.
After college, I worked briefly as a small-town newspaper reporter and quickly concluded that lacking an economics background is a profound shortcoming for a journalist. (Watching and reading the news today painfully validates this impression every day.) In 1978, I interviewed a Virginia U.S. Senate candidate, Richard Obenshain, and asked him to name his personal hero. His response, which puzzled me at the time, was “Friedrich von Hayek.” Tragically, Obenshain died in a plane crash two or three days later, and the haunting circumstances led me to explore Hayek’s writings. In “The Use of Knowledge in Society,” I found perhaps the single most sublime piece of economic writing that ever came my way.
I soon left the newspaper to study for a master’s in government, intending to catch a course or two in economics along the way. Over the next year, the subject seized my imagination, and my economics load expanded to eight courses (along with seven government courses). My thesis concerned the public choice literature of Anthony Downs, James Buchanan, and Gordon Tullock. The next year, I headed to Columbia.
Africa and Banking
Skipping forward, in my first big job post-Columbia and post-AIER, I served from 1983 till 1988 as Chase Manhattan Bank’s economic specialist for Sub-Saharan Africa. (I also did risk analysis on the bank’s overall asset portfolio.) A key quality that landed me the job, curiously, was the fact that I had no prior experience in Africa. My boss was seeking a fresh perspective on the continent.
The job took me all over Africa. Comfort with formal and informal methods was vital, as the quality of data on those countries was poor. My appreciation for markets gave vital insights on countries where markets had been paralyzed—often on the advice of European academicians, intent on experimenting with their collectivist theories. My colleagues at Chase were uniformly market-oriented and amenable to the ideas I had developed at Columbia and AIER.
Loving the job but not loving New York, my wife and I, infant son in tow, relocated to my native Virginia, where I spent twelve years as an economist at the Federal Reserve Bank of Richmond. Fortunately for me, Richmond was the most anti-inflationary of the twelve Federal Reserve Banks, and its researchers had a powerful preference for markets over central planning.
Midway through my years at the Fed, my wife noticed that my interests lay far more with health care than with monetary policy. On her recommendation, I redirected my career toward the question of how best to bring the advantages of markets to health care, where paternalism had a millennia-old tradition and where central planning was growing increasingly popular.
In 1998, I earned a master of science in health administration and soon began teaching health economics in master’s and doctoral programs at Virginia Commonwealth University. In 2002, I left the Fed to become a full-time economics professor at the University of Richmond. At various times, I also taught health economics at the University of Virginia, George Mason University, and The George Washington University.
In 2007, we moved to the Washington area, where I became senior health care advisor to the National Federation of Independent Business—the small-business lobby—which was fervently opposed to the then-nascent Affordable Care Act (Obamacare). Just after moving to Washington, I reconnected with AIER and spent a week in the Berkshires as a visiting scholar, interacting with the summer fellows and scholars.
In 2013, I joined the Mercatus Center at George Mason University—a university-based research institution devoted to the study of markets. (“Mercatus” is Latin for “market.”) The Austrian economics that occupied so much of our time at AIER is a central component of the scholarship at Mercatus, along with works of the Virginia School (Public Choice Theory) and Bloomington School (New Institutional Theory). GMU had been the home base for some of the greatest thinkers on the role of markets in society. Among them were two winners of the Nobel Memorial Prize in Economic Sciences: James Buchanan (public choice) and Vernon L. Smith (experimental economics).
Fortress and Frontier
Mercatus enabled me to carve out a distinctive niche in health care policy. To most ears, “health care policy” is synonymous with the endless squabble over health insurance that has churned since World War II: employer-sponsored health care, Medicare, Medicaid, managed care, health savings accounts, Obamacare, single-payer. The more I ponder this debate, the more I feel it’s akin to choosing a car’s paint color rather than fixing its engine.
At Mercatus, my research and writings focus on how competitive, decentralized markets can spur technological and managerial innovation in health care—a focus I believe is stunted in the American health care debate and nearly lacking altogether in the European and Canadian systems so deeply admired by many in the United States.
Distilling my work down to a single question, my focus is: “How can we make health care as innovative in the next 25 years as information technology has been in the last 25 years?” In my signature monograph, “Fortress and Frontier in American Health Care,” I argue that health care policies of both the Left and Right have constructed a Fortress, whose dual purposes are extreme risk-aversion and protection of insiders (doctors, hospitals, insurers, drug manufacturers, bureaucrats, etc.). The Left wishes the federal government to crush the life out of health care markets, whereas the Right prefers for states or medical societies to do the crushing.
In contrast, information technology opened its doors onto a broad Frontier, where risk-taking by consumers and producers is permissible, and where outside innovators can challenge traditional inside producers. In 25 years, the digital revolution has changed our world while health care mostly puttered along.
The Frontier is evident in health care these days:
I carry a tiny $99 device on my cell phone that allows me to perform a clinical-quality electrocardiogram on myself in 30 seconds, ending with artificial intelligence advising me whether I’m in normal sinus rhythm or suffering arrhythmia.
A few years back, a Washington State puppet-maker and an injured South African carpenter invented a 3D-printed prosthetic hand that lowered the cost of a workable gripping hand from around $5,000 to around $50.
Telemedicine is bringing care to remote places via tablet or smartphone.
In Tanzania and Rwanda, drones now speed drugs and blood products across vast distances.
A publicly available app now allows one doctor to safely manage one thousand prescriptions per hour.
A for-profit chain of hospitals in India has used Toyota production methods to reduce the cost of a coronary bypass operation to around $1,400 (versus $100,000 in the U.S.), with medical results surpassing even those of top American or European hospitals.
In Texas, a small company is working toward becoming the first to manufacture a human organ for transplantation—using the patient’s own stem cells as material.
In many states, nurse practitioners and other non-physicians can inexpensively perform many tasks that were once the exclusive preserve of doctors.
These are only a few of the miracles the Frontier is tossing up these days. But the Fortress fights back—erecting legal, regulatory, and professional roadblocks to innovation. This is the focus of my research and writings.
In many ways, my career went full circle. The topics of my focus today hark back to the nontraditional strains of thought I debated those many years ago at AIER. And I’m as much a journalist as economist nowadays. In 2014, some of these writings won me the Reason Foundation’s Bastiat Prize—an international journalism competition “which honors the writing that best demonstrates the importance of individual liberty and free markets with originality, wit, and eloquence.”
It has also delighted me to see that since my student days, AIER has re-engaged with mainstream economics, while retaining its outsider perspective. Speakers at AIER have included luminaries like Vernon Smith (who sits on the Mercatus board), Douglass North, and Anna Schwartz. In my student days, I hoped to see this rapprochement between AIER and the mainstream, and it’s gratifying to see it come to pass.
Best of All
Finally, I’d be remiss if I didn’t recount how profoundly AIER affected the course of my personal life. While passing those long-ago summers in Great Barrington, my girlfriend, Alanna, visited frequently from New York, and the Institute’s staff welcomed her as warmly as they did me. We spent many long hours walking the grounds of AIER, getting to know one another better and enjoying the camaraderie of the fellows and the staff. Alanna is a fine artist, and the Institute purchased a couple of her smaller works. (I’m hoping that perhaps they’re still hanging somewhere on the premises.)
The comity of the Institute—not to mention the porcupines, beavers, and foxes scattered about—made AIER an idyllic place for us to begin thinking about building a life together. In the evenings, I played piano and guitar at South Egremont’s elegant and wonderfully quirky Sebastian’s Restaurant—now long-gone. The restaurant became something of an evening hangout for Institute students and staff. The circumstances helped nudge Alanna and me toward the best decision of our lives, and we’re now more than three decades into a happy marriage.
Thank you, AIER.