Kick the can

by CarlD

Today on NPR I heard an economist (from the Brookings Institute, if I remember correctly) lament in relation to current attempts to avert the European crisis triggered by the Greek meltdown that this and other various bailouts, reshufflings and austerities were only treating symptoms, while the fundamental problem with the global economy was not being addressed. That problem, he said, was the underpricing of risk.

You may recall previous discussions of source scarcity and sink scarcity. The gist there was that although source scarcity is more immediately visible, we may be in more trouble from sink scarcity. I’ve been thinking that this analysis fits several seemingly disparate current events: the financial meltdown, health care reform, and a swirling mass of pulverized plastic in the mid-Atlantic. They’re all about risk management. Maybe as is so often the case I’m just stretching a metaphor to paper over my ignorance, but let’s see if it holds up.

Source is the stuff you use, and its scarcities are directly managed by whatever the local mode of allocation is, e.g. reciprocity systems or markets. In markets when things we want to use get more scarce they get more expensive, modifying our behavior until demand syncs up with supply – you know the drill. Sink is the other end of the process – it’s where we dump the waste. Sinks are less thoroughly marketized than sources (hence they can be described as ‘underpriced’): we may nominally pay for sewage and garbage disposal, but usually just what it costs to profit from carting it away rather than the longer-term costs of its enduring existence; and as yet we don’t pay in any direct and behavior-modifying way for, e.g., the carbon that comes out of our or our cars’ tailpipes, although we’re dimly becoming aware that this blessed oblivion may be leading to the other kind.

In fact throughout a whole range of activities dear to us, without clear source-to-waste-to-sink throughput we’d end up in the shit – as anyone who’s had a backed-up toilet knows. For example, two small cities in New York generate 13.8 million gallons a day of “domestic sanitary sewage… as well as industrial wastewater from food manufacturers, leather tanning and finishing, metal finishing, textile and other major industries.” Follow the link for a virtual tour of the facility. After treatment, which mostly involves separating the solids and chlorinating the heck out of it all, the liquid goes in the creek and the “dewatered sludge” gets trucked to the dump. Some other places it gets sprayed on cornfields. At that point, if not earlier, we’d like it just to be gone; but no such luck. Landfills refuse to go away by becoming filled up and needing replacements, often in neighborhoods where the folks would rather not have one; by leaking nastiness into the local subsoil; and by exuding earth-warming methane and other stanky joy into the atmosphere. Sludged fields run off into creeks and rivers, joining the other effluent there to create fertilizer soups that bloom up algae and kill fish.

Still, the earth and the waters do take the bulk of the waste away with consequences that are tolerable in the short term. The secret is in expanding the sink, for example by getting the ocean involved. If you dump your crud in a pond in the backyard, your life is going to get nasty in a big hurry. But if the pond outflows to a stream, then a river and ultimately the sea, your crud can disappear without a trace for a very long while. So it is with all our wastes. Concentrating and rebreathing the contents of your own lungs or your car’s tailpipe is an efficient way to commit suicide, but if you can dump that junk into the global atmosphere it spreads so thin you don’t even notice it trying to kill you. There are some recycling processes at work (e.g. plants that enjoy CO2 and oceans that absorb it) further extending sink capacity. Once we tap into the big sinks, at any given moment and for a long time out of sight is legitimately out of mind.

Until, that is, algae dead zones and life-choking pulverized plastic masses the size of nations start to show up in the world’s oceans. If sink capacity and recycling extension are not infinite, eventually the density of crud must become such that its attempts to kill us once again become noticeable and then effective.

It seems to me to require only a very small metaphorical leap to see the current financial crisis in these terms. As I and perhaps that Brookings economist understand it, the essence of the trouble was a saturation and reflux of the sinks into which financial risk was being dumped. Bad bets like subprime mortgages got dumped into the global economy in the form of securitized debts, credit default swaps, collateralized debt obligations, and so on, like so much pulverized plastic or sludged poo – chopped up small enough, washed far enough away from their sources and diluted with enough clean commerce that for a long time they in effect disappeared without a trace. Just like the thin, chlorinated sewage solution most of us call drinking water. In the short term this expansion of sink capacity looks incredibly clever and works great to turn marginal resources into wealth. But their marginality makes their waste-load that much greater, and eventually the solution got saturated enough that the economy tipped over from being clean with some acceptable contaminants to being dirty. All the noses turned up at once, and down we went. At this point governments step in as the big sinks of last resort. The European central bank is currently trying to reclarify the Eurozone by buying up national securities toxified by their bailouts of banks toxified by bad bets on bad debts. There’s only so far you can go with this; it’s not clear how much farther.

So far so icky but debatable. Now, to get the metaphor to health care I have to do something really ugly, which is to describe human suffering in the same terms as poo, trash, toxic waste, or bad debt. But in terms of creating loads on sinks pretty much any liability, including illness, works the same way. So sure enough, spreading risk around is how all insurance works, including health insurance. Basically, the costs of sickness and injury are spread out and paid by the healthy (through private premiums or public taxation, as we’ve discussed). The mechanism of health insurance is just like bad debt being mixed into good debt and wastewaster being mixed into the ocean. And in the same way, the success of the strategy depends on the capacity of the sink, or ‘pool’, to absorb costs without fatally toxifying. Sink/pool expansion is why the key to the current U.S. reform was pulling in millions of (mostly healthy) uninsured, which then enables toxically-expensive pre-existing conditions to be dumped in. Socialized medicine works the same way while adding the government’s bigger sink.

These dots first started connecting while I was listening to a panel discussion about autism, also on NPR. At one point one of the experts launched into a rant about how those jackals in the insurance industry were attempting to define autism as a learning disorder rather than a medical condition in order to skip out on the costs of lifelong care. And of course this is pretty shady, but why do it? The insurance companies are going to take their profits no matter what. If they have to pay for autism care they’ll just pass the cost along to the pool of healthy payers. What they’re actually doing is protecting the sink from having the toxicity of incredibly expensive long-term care for relatively few beneficiaries dumped into it. That they doubt the pool can absorb that cost sustainably should give us pause. A similar example showed up at Anodyne Lite’s place in relation to new treatments for Fragile X syndrome. One triumph of modern science is that these kids now survive childbirth and so do their mothers. In humane terms this is an unqualified good. In sink terms it’s another load of toxicity to find a way to dissipate.

Of course Malthus fretted about final limits to environmental carrying capacity well over a century ago, and since then we’ve figured out how to kick the can down the road just fine. There are many ways to manage the source-waste-sink throughput, including sink expansion, recycling and other conversions of net liabilities into net assets. What does seem clear is that our existing sinks are filling up, and alternatives are not immediately available. How we ‘should’ react to all of this can’t keep kicking the can down the road forever, most likely.

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3 Responses to “Kick the can”

  1. Thought-provoking, and the imagery conjured up by source and sink appeals to the vulgar side of my imagination. The problem is right there, embedded in everyday life. When we shop for food, we worry about choice and price; not so much when we flush the toilet. Waste is something we tend to ignore until it becomes somebody else’s problem, as well as our own. Then, the finger-pointing and assigning responsibility begin. Is the waste that is fouling the sink and affecting those who live on or beside it the result of malice or negligence? Who is responsible for damage not anticipated at the time the waste was deposited? Who will pay for the clean-up or, better still, the recycling that turns waste back into an asset?

    That said, I’m not persuaded by the application of the model to insurance. It’s a great model if you run an insurance company and make big bucks for raking in as much as you can and paying out as little as possible. By “naturalizing” the process, it makes it seem both inevitable and morally justifiable, like every other defense of elite privilege in human history. Can’t have the peasants poaching on the lord’s forest, you know. Letting their pigs drive out the deer, absolutely shocking!

    The critical issue here is whether health care should be a public or private good, a contribution to the general welfare or a privilege whose purchase contributes to private incomes. And, of course, mixed systems are possible.

    Here in Japan, companies larger than a certain size are required to insure their employees. Everybody else is supposed to join the National Health Insurance scheme, whose premiums are prorated and proportional to income. Private insurers offer supplemental coverage for those who want and are able and willing to pay for it. Is the system perfect? Hell, no. But the world’s longest average lifespans say something about its effectiveness.

  2. I realize the health-care part of the argument is the most counter-intuitive. Human well-being is a sentimental favorite for me too. And your point about naturalizing greed is a good one. But my point is actually mode-independent. The sink costs of supporting the living of many more people at much greater expense are pretty much the same regardless of whether the frontside price is paid as a public good or with a private profit skim, out of public or private pockets. What changes is the size of the sink. So the critical issue is NOT whether health care should be a public or private good, but how much health care the sinks at various scales can absorb before saturating.

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