Authority is conserved. For any possible action that affects multiple people, some one (or some group) must have the ultimate decision making authority. Good governance is thus a matter of putting the decision making authority in a chain of accountability that ends with people who have the personal incentive or disposition to make a just decision. From the study of history, formalists have observed the following general truths about how this is to be done:

• Rulers chosen by a lawful process have far better records than rulers who take power through violence or fraud.

• Fixed share systems (like joint stock corporations) are more efficient and less prone to conflict than non-fixed distributive systems (like when voting blocks can organize and vote to transfer slices of the national pie to themselves).

• popular democracy is a destructive form of government because factions and parties form that expend all their energy engaged in destructive conflicts over dividing the pie, rather than figuring out how to grow the pie.

• managed democracy is not a responsible form of government, because the media, academia, and civil service are not held accountable for their decisions. Plus it still has the problems of popular democracy, only in a less virulent form.

• A government is a property owner, it owns an alloidial title to a very large territory. If you wish to deny its legitimacy or redirect its flow of rents (taxes), expect violent resistance from the beneficiaries/controllers of the government.

• If you have a good government, you also want that government to be a strong government.

• Coherent governance structures are generally more responsible than fractured structures, since in a fractured system each faction will enrich itself at the expense of the whole.

• Property rights and simple, negative law are essential, because they bar people from getting wealthy by stealing the pie, and therefore force people to grow the pie in order to better themselves.

• The best governments have been strong enough to enforce property rights and rule of law over a large territory, but possessed enough wu wei to not inflict large amounts of oppressive positive law.

• A constitution cannot enforce itself, and therefore must be designed to be a stable Schelling point for the military.

If I really stretch myself, perhaps I can get the summary down to four sentences: "The state's ownership of its country should be legitimized. The benefits of the state converted into shares. Only the responsible should get voting shares. The state is thus converted from a destructive roving bandit to a stationary bandit that will act out of enlightened self-interest."

Heck, let's try for one sentence: "The ruling elite should be converted from a destructive roving bandit to a responsible, property owner acting out of enlightened self-interest."

Hey, I'm on a roll. Let's go for four words and alliteration: "Sovereignty should be securitized"

That one sentence is not perfect though. So if you're going to criticize my Finbarrian Formalism, attack the sixteen sentence version, or even my 2,500 draft of the principles of formalism.

While we're defining "formalist", I should briefly talk about the word "reactionary". Being hardcore property rights and against democracy was the conventional wisdom hundreds of years ago, but is considered evil and anti-progressive today. Since the formalist reads and learns and derives many principles from these past thinkers, a formalist is thus a reactionary. Not all reactionaries are formalist, but all formalists are reactionary.

For myself, I consider my reading of history and of the present to be reactionary. I consider my prescription for the future to be formalist. I don't like to use the word reactionary for my prescriptions since I tend to propose an amalgamation of past ideas plus the best of the present, with some modern twists. Calling my prescriptions reactionary can be a little misleading, although not entirely inaccurate. I don't advocate a straight up restoration of the Stuarts (although it is possible that restoring the Stuarts would be better than the existing rulers in Britain).

Both IQ and the Flynn Effect are very poorly understood. The first point to correct is this piece of conventional wisdom, repeated by Aretae: "On every test we've got...and every way we know how to measure things, IQ has been going up for at least half a century, and probably a lot longer than that." This is wrong.

The gains in scores vary enormously by particular test. For instance, picture arrangement has gone way up, while arithmetic has barely budged. See this chart:

Let's step back a moment and think through what IQ and intelligence mean. To do so, we will discard imprecisely defined words, and introduce three new terms. We can define three aspects of what we commonly call "intelligence":

cognitive power - the ability to solve novel problems involving abstract reasoning. What we commonly mean when we say, "he is sharp, he understands everything we explain to him really fast".

specialized cognitive skills - a specific skill involving abstract symbol manipulation - computer programming, calculus, writing poetry, etc.

base cognitive skills - a skill of abstract symbols that form the base of more complex skills - arithmetic, vocab, reading comprehension, etc.

Cognitive power is really hard to measure directly, because you have to control for how much the person already knows. The art of designing an IQ test is to create a test of a skill that most people have roughly equal exposure to. If everyone has roughly the same exposure to a cognitive skill, then differences in ability will tend to be a function how quickly each person learns - cognitive power.

In general, then there are two ways to design an IQ test: a) give a base cognitive skill test for a common skill that everyone in the group has large amounts of exposure to (vocab, arithmetic, word matching) b) give a base cognitive skill test for a skill that no one really practices (raven matrices, block manipulation).

Thus an IQ test is a test of a base cognitive skill, that proxies as a test for cognitive power. It will be a better or worse proxy, depending on how even the exposure to the cognitive skill is. If we give an English vocab test to both Americans and Japanese, that test will be a horrible proxy. But if we give a game of Tetris to both Japanese and Americans, it might be quite a good proxy. If we give that game of Tetris to Americans from 1950 and Americans in 2010, then it will suck as a proxy.

I don't think the Flynn effect represents a real rise in cognitive power. a) the rise in scores varied greatly by test, we'd expect the opposite if cognitive power rose b) for the scores that rose the most, I can think of plausible explanations. There is much greater test awareness today, I grew up playing block matching games both on paper and on the computer. But since knowledge of basic English and arithmetic were already saturated, there has not been much change on those tests. c) from talking with family members, I think my parents and grand parents were every bit as quick as my siblings and cousins d) if you look at the speeches and newspapers from 50+ years ago, they are just as sophisticated as our modern papers.

So my conclusion is that Americans of 50 or 150 years ago had similar cognitive power, and similar cognitive skills in the areas that matter (literacy and basic math). Thus they were able to create high levels of governance and growth.

As for Africa then, we have no idea how much of the 30 point IQ differential is due to lack of education in cognitive skills, how much due to environmental deficits lowering cognitive power, and how is due to genetic differences in cognitive power. But it is quite clear that, unlike 1850's Americans, Africans have substantial deficits in very relevant cognitive skills (literacy and math), not just test taking skills (like the Raven's matrices).

From the perspective of good governance and growth, the exact reason for the 30-point differential doesn't really matter. Whatever the reason, finding an internal elite to govern the country wisely and drive entrepreneurial and technological growth will be extremely difficult. The problem is made much more difficult by various historical events and the introduction of forms of government entirely unsuited to Africa's demographics and culture.

A government is the organization that the people with the most guns declare loyalty to. The government thus is the organization that exercises authority over a territory via the threat of the use of force. A system of government is a set of norms for selecting elites and delegating to them authority. All systems, even democracy and monarchy, are really oligarchical in the sense that power is held by an elite. The Iron Law of Oligarchy explains why. So when we categorize governments, we are essentially categorizing them by the process by which the elite are selected. A pure absolutist monarchy is a system in which a king is selected by inheritance. The monarch then selects the ruling elite ministers. A populist democracy is a system in which the masses use elections to select the ruling elite.

We can divide systems of governments into two basic categories - legitimist versus lawless. In a legitimist government, the rulers are selected by a transparent, commonly agreed upon process (written or unwritten). In a lawless process, the rulers come to power via corruption or violence.

In general, history teaches us that legitimist governments are far, far, far better than lawless governments. In a lawless government the corrupt and violent are rewarded with power, so of course, the rulers are generally evil and bloodthirsty. The Yeats effect applies. The only reason a person should ever throw his support toward a movement promoting lawless government is if the alternative is an even worse form of lawless government. Note that lawless governments can turn into lawful government as they evolve a non-violent succession process. China under Mao was lawless - he took power through violence. But China today is in the legitimist category, as leaders are selected through a non-violent process.

Since I think everyone agrees that lawless government is not a good goal, we will not discuss it much further. We'll focus our discussion on what is the best form of legitimist governments.

To make the thought experiment more concrete, imagine that we are part of some small committee, lawfully tasked with creating a new government for a country. Maybe we're Madison in Philadelphia, the U.N. designing post-colonial governments, Lessig working with post-Soviet Georgia, or Bremer in Iraq.

To understand what kind of government we should want, we must first understand the past. The modern political thinker lumps all historical governments into two forms - democratic and autocratic. This is an egregious oversimplification, a reflection of just how ignorant the modern intellectual establishment is of history and philosophy. The modern intellectual is like the devoted Christian who divides the world into only two religions - Christian and Pagan. I used to commit this same sin. I now feel shame that I put structures like the French Ancien Regime in the same bucket as revolutionary tyrannies like Maoist China.

So our the first task as part of our quest to discover the best government, is to define the forms of government in a more coherent way. Here's my best shot; I encourage all comments:

Legitimist Governments

Open Aristocracy (Merchant Aristocracy)

A very limited subset of the population has the power to select the leaders. This aristocracy is selected by some method that allows for upward and downward mobility. Usually the selection is wealth, sometimes it is combined with education/breeding.

Examples: most cities in the Hanseatic League, Venice, Britain 1690-1833, Dutch Republic, Hong Kong, Singapore, colonial Virginia, Liberia pre-1970's

Timocracy

A larger subset of the population has the power to select the leaders. But there is not universal suffrage. The subset is usually selected by a property requirement, or maybe a property and literacy requirement.

Examples: colonial America, U.S. 1789-early 1800's, Rhodesia pre-1980, Britain 1833-1887, various Greek cities, early Roman Republic

Absolutism

Vast authority is vested in a king, emperor or viceroy who comes to power via legal means. Usually the king receives power via birth, but adoption is not too uncommon. The king then selects the ministers who he delegates authority to.

Examples: Louis XIV, Elizabeth I, Marcus Aurelius, Ivan IV, Peter I, Frederick II, Caligula, Petillon in the Belgian Congo, MacArthur in Japan

Hereditary Aristocracy

Authority resides in the hands of nobles who were born into power. There may also be a king, but he does not hold great authority over the nobles.

Examples: Feudal Europe, Manorial England, mid-late Roman empire, 19th century Spain

Mixed Bureaucracy

Unfortunately, this category is a bit of a catch-all. A mixed bureaucracy is a government where various factions share power. These factions may include a hereditary aristocracy, the priests/ideological authorities, civil servants, wealthy merchants, and military generals. Mixed Bureaucracies are hard to generalize about as they can behave very differently depending on the particular elites and the mechanisms by which power is allocated.

Modern China is a good example, as power is shared by the party oligarchy, civil servants, military, and a plutocratic class. France under Louis XVI, with its power sharing based on estates, is another good example.

Examples: European Union, China for most of its history, France under Louis XVI

Ideocracy (Theocracy)

More commonly known under the term theocracy, but the ruling ideology does not always have to involve a deity. The state is controlled by a caste of people who control the ideology. The current ruling elite selects the succeeding ruling elite based on ideological conformity.

Examples: Byzantium Rome, the Papal States, modern Iran, Ottoman Empire, late Soviet Union, East Germany

Popular Democracy

Authority is allocated by universal or near-universal suffrage elections. The power of the elected officials is only partly checked by other elements, such as a limited monarch or bureaucracy.

Examples: U.S. 1776 to 1789, U.S. from 1830 to 1932, Britain from 1887 to 1945, Wiemar Republic, France from 1870 to 1914, 1918 to 1945, modern Iraq, modern Afghanistan, Congo for one day in 1960, Liberia from 1978 to 1980, South Africa post apartheid, Palestine,

Managed Democracy

The ultimate authority of the state is still nominally vested in an elite chosen by universal suffrage elections. But the populism is greatly tempered by a) a state controlled system of education, run by unelected civil servants b) a bureaucracy run by unelected civil servants c) a court system that is mostly unresponsive to elections.

Examples: the modern western nations - U.S., Japan, Britain, most of western Europe,

Tribal/Clan

The defining factor of a tribal/clan system is that the unit of governance and law is based in a group that shares kinship. In some larger clans, the kinship may be more distant, and some very large clans may have sub-clans which are each extended families sharing the same ethnicity. The details of how tribal leaders are chosen varies. Birth, military prowess, age, and popular acclaim are all common selection methods. Justice between members of two clans is decided by the two clans figuring it out, peacefully or violently.

Examples: pre-colonial Africa, most North American Indians, medieval Ireland, medieval Mongolia, Germanic Tribes, modern Somalia

Lawless Systems of Government

I want to briefly want to go over common forms of unlawful governments. This will aide us in our categorizations of historical regimes.

Counter-Revolutionary

A violent overthrow of the political system that aims to remake society in a right-wing direction.

Examples: Meiji Restoration, Hitler, Sulla

Revolutionary

A violent overthrow of the political system that aims to radically re-make society in a left wing direction.

Examples: Mao, Lenin, Pol Pot, 80's Iran, Gaius Marius

Degenerate Democracy

A nominally democratic government, but in reality the elections are rigged. Politicians use a combination of violence, bribing judges, ballot stuffing, etc to win elections.

Examples: Late Wiemar Republic, Mexico, many African and Latin American countries

Unlawful Autocrat

This is my catch all for any autocrat or junta that takes power illegally, but without a mission to radically remake society. The autocrat may take power by killing the rightful king, military coup, rigging an election, etc.

Examples: Burmese junta, Augustus, Pinochet, Oliver Cromwell, Pertinax, Septimius Severus, Vespasian

Civil War

Multiple factions violently fight for control of the nation.

Examples: Congo in the late 90's, Nicaragua in the 80's, Spain in the late 30's, Russia in the 1920's, etc.

Which historical form of government was best?

After defining the forms of government, and matching historical regimes to the forms, we'll be able to answer the questions about which form is best.

A government can be bad in two ways:

a) it directly provides bad quality of service (infringes on liberty, strangles growth, abuses its citizens)

b) it predictably degenerates into a form of government that provides bad government.

But before we try and answer this question, I want solicit feedback from my esteemed intellectual sparring partners. Do the above categories make sense? Did I mis-categorize any regimes?

I could also use help brainstorming and categorizing historical regimes. Only when we have collected and categorized the data points from history, can we make a strong judgment about which government governs best.

There are a few regimes in particular that I don't know how to place. Napoleon - revolutionary, counter-revolutionary, absolutist? Kim Jong-il - Absolutist, Revolutionary or Theocracy? Leopold in the Congo - unlawful autocrat or Absolutist?

Is the U.S. of 1890 best considered a managed democracy (due to its very strong court system), a popular democracy (due to its wide open elections), or a degenerate democracy (due to the large amount of corruption)? I'm leaning towards popular democracy, because I think the populist element was strong than the courts and corruption, but I could be convinced otherwise.

UPDATE: I just missed a comment by Aretae on his original post: It's back to the key to government...and my claim is that Moldbug's off on a wild goose chase. The issue is what the government doesn't do...not how it's organized.

Having just gone off on this wild goose chase, let me defend myself. As Aretae says, the feeback loop defines the system. Government cannot be constitutionally limited, because, by definition, there is no higher authority that can enforce that law. So there are only three levers through which we can achieve limited government in practice a) by designing the feedback/selection process by which the people running the government are selected, b) by widely distributing guns, c) secession/fragmenting the territory over which a government rules. This post is concentrating on method a) of ensuring limited/good government. Perhaps another time we can discuss methods b) and c).

The Race Between Education and Technology epitomizes everything that is wrong with social science. The modus operandi is to pull together a series of charts showing correlations, assume that the correlation is due to causation, and ignore any discussion of alternative explanations of the trends.

Goldin-Katz spend the bulk of the book hammering away on two points that everyone already knows: years of schooling on a national level correlates with industrialization, and years of schooling on a personal level correlates with income. Goldin-Katz spend precious few pages actually dealing with the causation issue, and never address any of the best arguments against their thesis. Nor is there any attempt to actually talk to people working in technology in order to understand more deeply why the correlation exists.

Let's examine in detail some of the flaws.

a) Goldin-Katz's base hypothesis is that years of schooling should continuously rise over time, as technology increases. But the very definition of technology is that you get more output for a given amount of input. Thus we should not expect a proportional increase in education to take advantage of new technology. Indeed, this is what we see on the ground. As a web programmer in 2009, I no longer need to learn a huge amount of information that my father needed to know. For my job, I do not need to assembly language, register hacks, memory allocation, pointer arithmetic, etc.

b) Goldin-Katz's hypothesis is at odds with the experience of all the recent college graduates I know. No one believes that education teaches job skills. A quick check of the top 10 most popular college majors shows that these majors have little to do with technology. Clearly if there is an income bonus from college education, it cannot be from teaching technology, because colleges do not actually teach technology.

c) Goldin-Katz's hypothesis is at odds with the life experience of most engineers I know. If you ask the typical, engineer, "How many years would it take, starting from the beginning of high school, and working efficiently, to reach an amount of knowledge where you could be a productively employed?" the answer is usually something like 1 to 3 years. If you look at the actual skills to do high tech jobs, you simply notice that very few require 8 years of full time schooling. You'll also notice that engineers universally deride schooling, and that they learn most of their skills by avoiding school work (this is especially true in high school). For more details Google the essay "Why nerds are unpopular" by Paul Graham.

d) The standard government economic growth statistics have so many methodological problems that's it's impossible to draw any conclusions from them (for more details, Google "Economics needs a divorce" ). It's unclear both a) that growth has actually been declining and b) that the decline has to do with lack of technological innovation ( it might have a lot more to do with the increasing portion of the GDP taken up by bureaucratic sectors that are impervious to technological change - like the education sector itself!). Chinese, Japanese, and Korean mercantilism have also played a great role in the decline of America's technological-industrial base. Never do Goldin-Katz address either of these points.

e) I do agree that 19th Century America derived great benefits from its strong primary schools and high literacy rates. But I believe this is primarily a threshold effect. After students have the tools to find books and self-educate, further formal schooling has diminishing returns. So I might agree that 19th century America derived an advantage from averaging something like 5 years of schooling rather than the 0-2 years of schooling that was common in other countries. But it does not follow that modern America would derive an advantage from raising the average years of schooling from 13 to 15. In fact, 13 is almost certainly above the point where opportunity costs exceed returns to schooling.

Goldin-Katz never address any of the competing explanations for the correlation between industrialization and education or income and schooling:

a) Richer countries can afford more years of schooling. The experience of my peers and I in college is that college is primarily a luxury good.

b) Academics have greatly increased their influence on politics in the past century, first with the Wilson administration then with FDR's brain trust. Prior to 1900 academics had neither involvement with politics nor control over policies. Today, virtually all major policy advisers are academics. Not coincidentally, there has been a concurrent increase in government money spent on schooling and on total years of schooling. Thus part of the rise in education over the last century was likely simply two unrelated but concurrent events - the continuing industrial revolution, and the increasing political power of the academic class.

c) On an individual level, selection effects play a major role in creating the link between college and income. Completing college requires a threshold level of intelligence and diligence. Colleges select for people with high earning potential, because such people are more likely to make money, and donate it back to the school. I was talking to my friend who does hiring for Bain Consulting: "Bain likes to recruit econ majors from top schools, but because they learn anything valuable in the major, but because it means the person is smart and care about business." I hire programmers at a startup, and I care little about the degree, and a lot more about how smart the person is and what they have done. This does correlate with college and major, but the actual knowledge gained in the college major is a tiny portion of what is needed to be a successful engineer.

The selection/signaling effect is even more important considering the that the 1971 Griggs Supreme Court case made it illegal for employers to use IQ tests for hiring purposes. As a result, companies have to rely more on educational attainment as a proxy for IQ.

d) Finally, and perhaps most importantly, Goldin-Katz completely ignore the impact of credentialing laws. There are now legal degree laws for professions such as: lawyers, architects, doctors, teachers, civil servants, military officers, nurses, and education administrators. These professions receive relatively high salaries because they have either direct government subsidies, or they have monopoly rights to perform certain tasks (prescribe medicine, defend the accused in court, etc). Yet there is no evidence that requiring a degree is a credential is a greater indicator of ability than simply using a test or requiring apprenticeship. Most architects of the 19th century learned via apprenticeship, yet the quality of the buildings was much higher back then than today.

Searches of the book for "signaling", "credentials", "credentialing", "Spence" return zero hits. To write a book about the school about the education wage premium and not discuss these issues is completely egregious. In a just world this failure alone would be enough to ruin the reputation of Goldin and Katz as being serious scholars and to impugn the reputations of the academics who offered such fawning reviews.

Goldin-Katz's book is fundamentally about policy. It is about how to manage a countries economy to maximize technological growth. You would think that the first thing that anyone would do when writing such a book, is to talk to dozens of people in high technology. You would talk to engineers, entrepreneurs, workers at high tech firms, current college students, recent college graduates. Yet Goldin Katz do none of this. They sit in their ivory tower, plot some regressions and engage in chart-ism of the worst sort. Their statistics add nothing to the stock of knowledge that already exists about the correlations between education and income. And they ignore addressing all the possible arguments against their case. This book is only interesting the way that a car wreck is interesting.

The problem is that Aretae leaves federal power in the hands of those who wish to expand federal power. He just tries to tie their hands to prevent them from doing anything. He does so by repealing the 17th amendment, rephrasing the commerce clause, requiring a balanced budget, and limiting laws to a single page.

I don't think this will hold up. A popularly elected House and President still a huge incentive for a scholar caste, interest groups, and demagogues to decipher the public into granting the federal government more power. The average voter still has the incentive to support tax and spend schemes that transfer money from the rich to themselves. Judges will reinterpret the "living" constitution to justify new actions. If judges can reinterpret the commerce clause to justify controlling elementary schools, then they can reinterpret anything to say anything. Some justices even go so far grabbing the mantle of executive power. Check out this description of Israeli justice Aharon Barak.

Under Aretae's system it would only be a few years until laws are passed with a 1,000 lines that then authorize an agency to write 100,000 lines of regs. Washington's accounting is already so fudged that a balanced budget amendment will spring a hundred leaks. There are infinite opportunities for recognizing fake revenue or profits.

The original constitution lasted for ~120 years before succumbing to the FDR coup. But remember this was best case. Most copies of the British and/or American political system have done much worse, the worst cases like the Congo lasting no more than a day.

The factors that made the constitution last for 120 years are no longer in play. The voters are no longer libertarian. There is no frontier. No state militias. Powerful interest groups and parties are now well organized and embedded. Even conservative justices now think the commerce clause allows the Feds to regulate elementary education. If you could roll back the constitution to 1790, it would not be more than a decade before it returned to its current state of bloat.

So how do we actually cast Washington's ring into Mount Doom? Here is my answer, based on formalist principles:

Putting government control in the hands of those who wish to limit its power

A core formalist principle is that: Government acts in the interest of those who control it. If we want government to remain anti-federalist, we must put the reins of power in the hands of people who have the incentive to minimize federal power. The masses do not have such an incentive. Justices appointed by a popularly elected president do not have such an incentive. But the state governments do.

The aim of the Finbarrian Federal Constitution is to preserve the only two jobs the Federal government has done reasonably well (continental defense, and preventing wars between the states). Every other power gets delegated to the state level. Ideally existing states would be broken up into even smaller units, each no bigger than a metro-region.

a) Eliminate Congress entirely, both the House and Senate. Eliminate all the cabinet agencies, and all the administrations. Everything gets delegated to the states.

b) Keep only two branches of the government a) a supreme court b) a continental defense force.

c) The Continental Defense Force is managed by a board of trustees. The board can a) approve treaties b) appoint the commander in chief of the military c) carry out other general board duties (approving promotions to general, approving major purchases, etc). The board has no general legislative powers. It cannot regulate interstate commerce, much less education.

d) Taxes are voted on via the ancient principle: "No representation without taxation". Any new tax, or tax increase, is voted on by the states. Each state's vote is weighted by the amount of tax it will pay. States that do not pay the tax thus get no vote.

e) The supreme court is appointed by the states. Any state can nominate a justice, and then the state governments vote on the choices. The states votes are weighted by population. Nine justices sit on the court. Their tenure lasts 15 years, at which point they receive a life pension.

Once again, there is no power of federal legislation. States must make their own free trade agreements with each other. If Cleveland is polluting Lake Erie and dropping acid rain on New York, then New York brings a suit in the Supreme Court. The Supreme Court makes a decision and assigns damages to Cleveland. The government of Cleveland pays, and it is up to Cleveland to regulate its own factories to prevent further fines.

Since the court and board of trustee are appointed directly by the states, there is zero incentive to appoint a justice or a trustee who will reinterpret the constitution or encroach state sovereignty. Control of Federal government is placed directly in the hands of those who wish to limit Federal power.

Aligning physical power with formal power

There is a second key principle of formalism that needs to be observed: Formal power should be aligned with physical power

In law, Britain had the power to tax American colonies. But it did not have the armies present to enforce the law. The disparity between formal power and actual power was unstable and ended in war.

The most basic way of aligning actual power with formal power is to a) write up a formal charter that is largely acceptable to the military b) make the military swear an oath to uphold that charter c) make key controllers of the charter approve all promotions in the army, so that the entire command and control hierarchy is filled with faithful adherents to the charter.

If you want to make the alignment even more powerful, the charter could stipulate the continental defense force be not allowed to have an army on the continent itself. The defense force would have a navy, nuclear missiles, cruise missiles, and an air force. But each state would have its own ground forces and fighters.

I'm not sure if the above is actually a good idea. On the plus side, it makes the federal government less likely to abuse the constitution. On the down side, it increases the chance of civil war.

Getting There

Obviously this plan is ridiculously unrealistic at this current juncture. But I always find it most useful (and entertaining) to come up with the best solution, and the work backwards to the most possible solution for the given circumstance. In a future post maybe I'll discuss how we can get Frodo going on his little journey.

To the libertarian, democracy is an unsatisfactory form of government that ultimately fails to solve the problem of bad government. At first democracy was an improvement over monarchy/aristocracy, but over time it decayed.

To the formalist, democracy was a giant step backwards from monarchy/aristocracy at the very moment mass elections were introduced. Democratic governments have continued to decay to a point where it threatens western civilization itself. Simply re-introducing aristocracy/monarchy/colonialism would be a huge improvement. But these governments had their problems too. So as long as we're making radical changes the Formalist wants to introduce a much improved form of elective monarchy/aristocracy.

There are two main points of evidence for the libertarian case:

a) Democratic countries tend to be much more properous than non-democracies.

b) As the world moved from aristocracy/monarchy to being more democratic, the world got much richer. The commoners under Louis XIV were really poor, the commoners under President Sarkozy are much better off.

The formalist has two counters to the above data points.

On point A) the formalist believes that democracy is poison. Only the richest countries with the strongest culture and institutions can survive party politics. Weaker polities succumb very quickly to tyranny or civil war, and thus are no longer democracies. And unforunately, the Wilsonian reformers of the 20th century did not think to leave a control group of Western countries that remained monarchical. Except perhaps for Lichenstein which is doing quite well for itself.

On point B) the formalist believes that democracy came to power just as technological growth was going exponential. Democracy did not make growth go any faster, and in many cases made it go slower.

The above points are about as opposite conventional wisdom as you can get. It opposes Libertarian, Conservative and Progressive history.

To really understand the formalist point, you need to understand the formalist (reactionary) version of history. So here is a very brief formalist history of the modern world:

a) The aristocratic and monarchical regimes that reigned in Europe and colonial areas usually provided a quality of government that ranged from poor (Tsarist Russia) to very good (Colonial Pennsylvania).

b) People were poor in France because the population was at Malthusian limits. The government of France was not great, but the France of Louis XVI was no more oppressive than the U.S. government of 2010.

c) The legal reforms and innovations of the feaudal, aristocratic and monarchical era set the stage for rapid industrial growth. From 1000 through the 1800's the west developed strong property rights, contract law, banking systems, joint stock corporations, stock markets, rule of law, and jury trials. English common law, the Napoleanic Code, the Austrian Code, Penn's Charter of Privileges, and Prussian Civil Code all established englightenment era rule of law. These laws enabled entrepreneurship, capital formation, and industrial growth.

d) Concurrently, innovations in firearms resulted in mass, peasant armies becoming the most unstoppable military force. As a result, either by choice or by force, rulers began acceding to democratic elections to build the legitmacy needed to rally mass conscript armies.

e) Universal suffrage elections acted as poison. In the country with the strongest polity (the U.S.) the poison has weakened us over time, but has not been fatal. The quality of U.S. government went from exceptional in the early aristocratic republic of 1800, to good, to its current state of mediocre or poor.

f) Mass elections selected for increasingly jingoistic politicians. This jingoism exploded into the great, total wars of democracy: the Wars of the French Revolution, the U.S. Civil War, World War I and World War II. The wars between monarchs (for instance the 1870 war between France and Germany) were usually fought by professional armies and were limited affairs. But in the democratic wars the entire nations were locked into an insane, bloodthirsty, jinoistic frenzy, and the mob refused to allow politicians to surrender at anything less than total victory or total defeat. The democratic wars only ended when the U.S. and the USSR conquered almost the entire world, and then deadlocked in nuclear stalemate. The victors installed education systems in Germany and Japan that indocrinated the citizens into a docile pacifism.

g) In states with weaker polities the poison of elections wreaked massive damage. Russia's republic lasted all of eight months. The quality of government went from mediocre/poor under the Tsar's to disastrous under the Bolsheviks. German government went from pretty good under Meternich to poor under the Weimar Republic to catastrophic under Hitler. Mexico went from being ahead of the U.S. in learning and the arts to being a violent, anarchic, and impoverished mess. Bourbon Naples went from being one of the most glorious cities in the world to the most trashy. Italy went from elegant to fascist. Spain went from sleepy to civil war. The Congo went from one of the fastest growing countries in the world to the world's worst basket case.

h) In the Western countries, the introduction of universal suffrage lowered the trajectory of growth, but usually it did not impede the natural progression of technology.

i) Technology has a natural exponential curve to it. Once you discover a new energy source like oil, it makes a gazillion other technologies possible (mass scale fertilizers, automobiles, etc). And once you free up agriculture labor to become engineers and machinists, you get far more inventions.

j) As a result, technology growth accelerated, even as the legal structures which enabled technology growth decayed due to the democratic influence. The technology growth exceeded the decay in western countries.

k) Of course in other countries the decay exceeded technological growth. The introduction of the electoral poison in the Congo, Liberia, Rhodesia, etc, brought instant ruin.

l) The poison of democracy is running so deep now, that even the western countries will not survive the century unless the poison can be expelled. California turns into Brazil, Brazil turns into South Africa, South Africa turns into the Congo, and the Congo continues to be hell on Earth. Detroit remains in ruins. The industries are artrophy as the U.S. survives like late imperial Spain, by exporting its own currency. An ever increasing regulatory state is choking off economic growth. And the progressive elites of the western are actively pursuing a program of population replacement, by importing millions culturally alien people who will vote the correct, left-wing way.

m) Simply restoring the Belle-Epoque era aristocracies, monarchies, and colonial governments would ignite a massive rebirth of good government. Putting Evelyn Baring in charge of the middle east, Petillon in charge of the Congo, Peter Romanov in charge of Russia, Peel in charge of England, Louis XIV in charge of France, Frederick the Great in charge of Germany, United Fruit in charge of Guatemala, Porfirio Diaz in charge of Mexico, Washington in charge of the U.S., etc, etc, would lead to a massive and glorious restoration. The whole world would feel like it was waking up from a long nightmare. The gangsters waging war across Mexico would be brought to heel, the 50's style brutalist buildings that scar Germany would be torn down and replaced, the Congo would return to its status as one of the fastest growing countries in the world, the third world as a whole would disappear into a bad memory.

n) The first goal of the formalist is to convince people that democracy is the problem. Despite the devastating impact democracy has had on every country of the world, the elite still believe it is the best (least worst) form of government. They keep inflicting it on countries like Palestine, South Africa, Iraq, and Afghanistan, with disastrous results. Simply putting a general or king in charge of Iraq would be a massive improvement.

o) The second goal is to design a better system of government for the modern world. The monarchies cannot be restored. And for all their good elements, monarchies also had a lot of bad parts. So the formalist learns from history and learns what worked and what failed. The formalist takes lessons from the structure of modern corporations. Finally, the formalist pays attention to local situation, history, and culture. From these elements the formalist tries to work on the design for a government that could be as far ahead of monarch, as monarchy is ahead of democracy.

p) The third goal is to figure out how the hell to actually establish the new, reformed government. We are still many years away from working on that problem. But we cannot wait too long, the hour grows late.

The Roman model is top-down, and has appealed for centuries to the Intellectual Elites who see themselves as potential Imperators, or at least Equites, fit by birth or by Class to instruct the Lower Orders. Palin is through and through representative of the Germanic/Celtic bottom-up system, where talent and determination is more important than Class membership.

But recently I came across a passage from Carroll Quigley's superb history, Tragedy and Hope, that argues a very different view. Quigley's passage sounds a bit like a "just so" story, and I'm not really sure what his evidence is. I personally know very little about German history, and so I cannot really take one side or the other. But on every topic in Quigley's book that I do know a lot about, Quigley is better than almost any other history I've read. So I do find the passage quite intriguing. Here it is:

The fate of Germany is one of the most tragic in all human history, for seldom has a people of such talent and accomplishment brought such disasters on themselves and on others. The explanation of how Germany came to such straits cannot be found by examining the history of the twentieth century alone. Germany came to the disaster of 1945 by a path whose beginnings lie in the distant past, in the whole pattern of German history from the days of the Germanic tribes to the present. That Germany had a tribal and not a civilized origin and was outside the boundaries of the Roman Empire and of the Latin language were two of the factors which led Germany ultimately to 1945.

The Germanic tribe gave security and meaning to each individual's life to a degree where it almost absorbed the individual in the group, as tribes usually do. It gave security because it protected the individual in a social status of known and relatively stable social relationships with his fellows; it gave meaning because it was all-absorbing— totalitarian, if you will, in that it satisfied almost all an individual's needs in a single system. The shattering of the Germanic tribe in the period of the migrations, fifteen hundred years ago, and the exposure of its members to a higher, but equally total ... social structure—the Roman imperial system; and the subsequent, almost immediately subsequent, shattering of that Roman system caused a double trauma from which the Germans have not recovered even today. The shattering of the tribe left the individual German, as a similar experience today has left many Africans, in a chaos of unfamiliar experiences in which there was neither security nor meaning.

When all other relationships had been destroyed, the German was left with only one human relationship on which he turned all his energy—loyalty to his immediate companions. But this could not carry all his life's energy or satisfy all of life's needs—no single human relationship ever can—and the effort to make it do so can only turn it into a monstrosity. But the German tribesman of the sixth century, when all else was shattered, made such an effort and tried to build all security and all meaning on personal loyalty. Any violence, any criminal act, any bestiality was justified for the sake of the allegiance of personal loyalty. The result is to be seen in the earliest work of Germanic literature—the Niebelungenlied, a madhouse dominated by this one mood, in a situation not totally unlike the Germany of 1945.

Into the insanity of monomania created by the shattering of the Germanic tribes came the sudden recognition of a better system, which could be, they thought, equally secure, equally meaningful, because equally total. This was symbolized by the word Rome. It is almost impossible for us, of the West and of today, imbued as we are with historical perspective and individualism, to see what Classical culture was like, and why it appealed to the Germans. Both may be summed up in the word "total." The Greek polis, like the Roman imperium, was total.

We in the West have escaped the fascination of totalitarianism because we have in our tradition other elements—the refusal of the Hebrews to confuse God with the world, or religion with the state, and the realization that God is transcendental, and, accordingly, all other things must be, in some degree, incomplete and thus imperfect. We also have, in our tradition, Christ, who stood apart from the state and told his followers to "Render to Caesar the things which are Caesar's." And we have in our tradition the church of the catacombs, where clearly human values were neither united nor total, and were opposed to the state.

The Germans, as later the Russians, escaped the full influence of these elements in the tradition of the West. The Germans and the Russians knew Rome only in its post-Constantine phase when the Christian emperors were seeking to preserve the totalitarian system of Dioclesian, but in a Christian rather than a pagan totalitarianism. This was the system the detribalized Germans glimpsed just before it also was shattered. They saw it as a greater, larger, more powerful entity than the tribe but with the same elements which they wanted to preserve from their tribal past. They yearned to become part of that imperial totalitarianism. They still yearn for it. Theodoric, the Ostrogoth (Roman Emperor, 489-526), saw himself as a Germanic Constantine.

The Germans continued their refusal to accept this second loss, as the Latins and the Celts were prepared to do, and for the next thousand years the Germans made every effort to reconstruct the Christian imperium, under Charles V (Holy Roman Emperor, 1519-1555) as under Theodoric. The German continued to dream of that glimpse he had had of the imperial system before it sank—one, universal, total, holy, eternal, imperial, Roman. He refused to accept that it was gone, hating the small group who opposed its revival and despising the great mass who did not care, while regarding himself as the sole defender of values and righteousness who was prepared to sacrifice anything to restore that dream on earth. Only Charlemagne (died 814) came close to achieving that dream, Barbarossa, Charles V, William II, or even Hitler being but pale imitations.

After Charlemagne, the state and public authority vanished in the Dark Ages, while society and the Church survived. When the state began to revive at the end of the tenth century, it was obviously a separate entity from the Church or society. The totalitarian imperium had been permanently broken in the West into two, and later many, allegiances. During the split in the Dark Ages of the single entity which was simultaneously Holy Roman, Catholic, Universal, and Imperial, the adjectives became displaced from the nouns to leave a Universal Catholic Church and a Holy Roman Empire. The former still survives, but the latter was ended by Napoleon in 1806, a thousand years after Charlemagne. During that thousand years, the West developed a pluralistic system in which the individual was the ultimate good (and the ultimate philosophic reality), faced with the need to choose among many conflicting allegiances.

Germany was dragged along in the same process, but unwillingly, and continued to yearn for a single allegiance which would be totally absorbing. This desire appeared in many Germanic traits, of which one was a continued love affair with Greece and Rome. Even today a Classical scholar does more of his reading in German than in any other language, although he rarely recognizes that he does so because the appeal of Classical culture to the Germans rested on its totalitarian nature, recognized by Germans but generally ignored by Westerners. All the subsequent experiences of the German people, from the failure of Otto the Great in the tenth century to the failure of Hitler in the twentieth century, have served to perpetuate and perhaps to intensify the German thirst for the coziness of a totalitarian way of life.

This is the key to German national character: in spite of all their talk of heroic behavior, what they have really wanted has been coziness, freedom from the need to make decisions which require an independent, self-reliant individual constantly exposed to the chilling breeze of numerous alternatives. Franz Grillparzer, the Austrian playwright, spoke like a true German when he said, a century ago, "The most difficult thing in the world is to make up one's mind." Decision, which requires the evaluation of alternatives, drives man to individualism, self-reliance, and rationalism, all hateful qualities to Germanism. In spite of these desires of the Germans for the coziness of totalitarian oneness, they have been forced as part, even if a relatively peripheral part, of the West to live otherwise. Looking hack, it seemed to Wagner that Germany came closest to its desires in the guild-dominated life of late medieval Augsburg; this is why his only happy opera was placed in that setting. But if Wagner is correct, the situation was achieved only briefly.

I have never been to Germany, and no little of the German character. I know even less about German history. Quigley's passage is fascinating, but I'd want to read a lot more before trusting it fully. Anyone have any good sources about German culture and history?

Zweig writes:

---

Thanks to the constant accumulation of profits, in an era of increasing prosperity in which the State never thought of nibbling off more than a few per cent of the income of even the richest, in which, on the other hand, State and industrial bonds bore high rates of interest, to grow richer was nothing more than a passive activity for the wealthy. Not yet, as later at the time of the inflation, were the thrifty robbed, and the solid business men swindled; and the patient and the non-speculating made the best profit. ... I never loved that old earth more than in those last years before the First World War, never hoped more ardently for European unity, never had more faith in its future than then, when we thought we saw a new dawning.

It may perhaps be difficult to describe to the generation of today, which has grown up amidst catastrophes, collapses, and crises, to which war has been a constant possibility and even a daily expectation, that optimism, that trustfulness in the world which had animated us young people since the turn of the century. The cities grew more beautiful and more populous from year to year. The Berlin of 1905 no longer resembled the city that I had known in 1901; the capital had grown into a metropolis and, in turn, had been magnificently overtaken by the Berlin of 1910. New theatres, libraries and museums sprang up everywhere; comforts such as bathrooms and telephones, formerly the privilege of the few, became the possession of the more modestly placed, and the proletariat emerged, now that working hours had been shortened, to participate in at least the small joys and comforts of life. There was progress everywhere.

The mountains, the lakes, the ocean were no longer as far away as formerly,; the bicycle, the automobile, and the electric trains had shortened distances and had given the world new spaciousness. On Sundays thousands and tens of thousands in gaudy sports coats raced down the snow banks on skis and toboggans; sport palaces and swimming pools appeared everywhere .. None but the very poorest remained home on Sundays, and all youth hiked, climbed, and gamboled.

---

Up to that time the erroneously denominated "universal suffrage" was only permitted to the well-to-do, who had to submit proof of ability to pay a set minimum tax. The advocates and landholders chosen from this class truly and honestly believed they were the spokesmen and representatives of "the people" in parliament. Because of their liberal belief in the unfailing progress of the world through tolerance and reason, these middle-class democrats honestly thought that with small concessions and gradual improvements they were furthering the welfare of all subjects in the best way possible. But they had completely forgotten that they represented only fifty or a hundred thousand well-situated people in the large cities, and not the hundreds of thousands and millions of the entire country. In the meantime the machine had done its work and had gathered the formerly scattered workers around industry. Under the leadership of an eminent man, Dr. Viktor Alder, a Socialist Party was created in Austria to further the demands of the proletariat, which sought a truly universal suffrage. Hardly had this been granted, or rather obtained by force, before it became apparent how thin though highly valuable a layer of liberalism had been. With it conciliation disappeared from public political life, interests hit hard against interests, and the struggle began.

... The Christian Social Party, a lower middle-class party throughout, was actually only the organic counterpart of the proletarian movement and, like it, was fundamentally a product of the victory of the machine over the manual crafts. The large department stores and mass production were the ruin of the bourgeoisie and the small employers and manufacture by hand. An able and popular leader was Dr. Karl Lueger, who mastered this unrest and worry and, with the slogan, "the little man must be helped" carried with him the entire small bourgeoisie and the disgruntled middle class, whose envy of the wealthy was markedly less than the fear of sinking from its bourgeois status into the proletariat. It was exactly the same worried group which Adolf Hitler later collected around him as his first substantial following. Karl Leuger was also his prototype in another sense, in that he taught himself the usefulness of the anti-semitic catchword, which put an opponent before the eyes of the broad classes of the bourgeois, and the same time imperceptibly diverted their hatred from the great landed gentry and the feudal wealthy class.

But soon a third flower appeared, the blue cornflower, Bismarck's favorite flower, and the emblem of the German National Party, which -- although not then recognized as such -- was consciously a revolutionary party, and worked with brutal forcefulness for the destruction of the Austrian monarchy in favor of a Greater Germany under Prussian and Protestant leadership, such as Hitlers dreams of. Weak in numbers, it made up for its unimportance by wild aggression and unbridled brutality. Its few representatives became the terror and ( in the old sense ) the shame of the Austrian parliament. Hitler also took over from them the anti-semitic racial theory - "In that race lies swinishness" his illustrious prototype had said. But above all else, he took from the German Nationals the beginning of a ruthless storm troop that blindly hit out in all directions, and with it the principle of terroristic intimidation by a small group over a numerically superior but humanely more passive majority.

Zweig later tells us the story of his travels through back country France. This passage helps explain the psychology that resulted in World War I:

It was a small suburban cinema, utterly different from the modern palaces of chromium and glass; a sparsely fitted hall, filled with humble folk, workers, soldiers, market women -- the plain people -- who chatted comfortably. The third picture was "Kaiser Wilhelm visits the Emperor Francis Joseph in Vienna." The train came on the screen, the first coach, the second, and the third. The door of the compartment was thrown open, and out stepped William II in the uniform of an Austrian General, his mustache curled stiffly up wards. The moment he appeared in the picture, a spontaneous wild whistling and stamping of feet began in the dark hall. Everybody yelled and whistled, men, women, and children, as if they had been personally insulted. The good natured people of Tours, who knew no more about the world and politics than what they had read in their newspapers, had gone mad for an instant. I was frightened. I was frightened to the depths of my heart. For I sensed how deeply the poison of the propaganda of hate must have advanced through the years, when even here in a small provincial city the simple citizens and soldiers had been so greatly incited against the Kaiser and against Germany that a passing picture on the screen could produce such a demonstration.

Understanding the American System of Healthcare

The United States healthcare system is not a free market . Those who call it a free market, lie (well, more likely they are just deluded). The American system is one part socialist and three parts guild and cartel. There is no laissez faire to be found this side of homeopathy. Medical companies and associations have government endowed privileges, rights, and monopolies. For example:

• The AMA has put strict limits on the number of doctors allowed to graduate each year. The American population has grown by ~40% in the last thirty years, yet the number of graduates has remained flat. Doctors have the monopoly privilege of dispensing certain kinds of life saving elixirs and procedures. The supply cap generates a huge transfer of wealth to the doctors and the medical schools. Worse, in America Medical school comes on top of four years of college, which drives the price of creating new doctors far above the cost in other countries.
• "Certificate of Need" laws prevent hospitals from adding new MRI machines. Big urban hospitals lobby Congress to ban startup specialist hospitals. Hospitals lobby cities to ban low cost, Walmart-style walk-in clinics.
• A web of regulations grants privileges to existing insurance companies and make it very hard to compete. Laws prevent health insurance companies from competing across state lines. Government tax breaks and approval processes favor incumbents. Hospitals give discounts to big insurers and charge people paying out of pocket multiples more.
• Many states have mandates that require insurance companies to cover certain treatments. Yet numerous studies have shown that a large amount of healthcare simply has no value-add. A RAND study that compared people who had everything paid for versus people who had to pay for care out of pocket, showed that the people paying out of pocket consumed half as much care, yet had the same health. Cross country comparisons show that Singapore spends one quarter per capita what America spends, yet they live longer. Mandated treatment simply forces higher premiums to cover care people do not need. For instance, a while ago I underwent an MRI that I never would have done if I had to pay the two grand out of pocket.

The various levels of government spend ~8% of GDP on healthcare. This is comparable to many other developed countries with single payer or socialized care. Yet that level of spending only manages to cover 28% of the population. The New Yorker has a great article explaining Medicare's utter inability to control costs and spending. Politically the administrators running Medicare have very little incentive to override a doctor's recommendations for treatment. The money does not come out of their pockets, and no one wants to be the subject of 60 Minutes special about how they denied someone cancer treatment. So Medicare pays for any procedure a doctor prescribes. The only check is Medicare fighting to underpay for the procedure, but that's not much of a check.

Even if the non-government sector operated with Singapore-like efficiency, that would still push total spending up to 10% of GDP. But when you add the supply caps the large amount of government spending simply drives up the cost of care. The other 75% of the population must then buy care at a price that has been bid up by Medicare/Medicaid/VA. And they must buy more than they want, thanks to mandatory coverage laws. They use a system that is designed to produce procedures in order to get insurance re-imbursement.

An analysis of the proposed plans

All the plans proposed by Congress or Obama include a mandate. The mandate is nasty. Massachusetts passed a mandate several years ago. The healthcare industry has lobbied that a "certified" insurance company must cover a huge range of dubious medical procedures. As a result a middle aged, single, freelancer has to pay premiums of around $600 a month. The mandate ends forces me to transfer money from my wallet to healthcare industry's coffers, whether I actually want the care or not. For some families the premiums have risen so high that they have decided to forgo insurance, pay the tax penalty, and pay out of pocket.

On the plus side the plan will help those of the Americans who slip through the patchwork system without being covered. The horror stories are real. But remember, the vast majority of those without insurance end up getting care. The problem is the enormous financial stress it places on them. But if you mandate insurance and do not control costs, as Massachusetts has done, you instead force financial stress on everybody.

The plans also miss the simplest possible change that could make healthcare costs go down: raise the limits on the number doctors that graduate each year. Even better, eliminate medical school requirements entirely. Simply require that doctors pass a rigorous set of tests and undergo a residency. Whether they learn their knowledge from a book or from a professor is up to the prospective doctor. Alas, neither Democrats nor Republicans would dare mention such a measure. The power of the doctors guild waxes strong.

The actual costs savings ideas included in Obama's plan are a joke. Preventive medicine does not save money. Malpractice does not eat up a huge percentage of spending. The Medicare oversight commission the plan would create is completely toothless: "The Commission will not be authorized to propose or implement Medicare changes that ration care or affect benefits, eligibility or beneficiary access to care." The basic problem is basic supply and demand math. As long as the cap remains in place, and the government spends 7% of GDP yet covers only 25% of the people, costs will remain ridiculously high. If the government spends another $100 billion a year, costs will go up even further. This is basic logic. If you want to cut costs, you must start by spending less, not more.

The core problem with American healthcare is cost. With high costs you cannot subsidize care for everyone without driving effective marginal tax rates on the working class through the roof. With high costs, people decide their better off without insurance than paying premiums. Worse, while coverage can always be expanded further, cutting spending is political death, because all spending is someone else's income. The Congressional plans make the spending/cost problem significantly worse, and in a way that will be impossible to reverse. By killing off catotrophic insurance plans, it eliminates any way of controlling spending by allowing consumers to choose which types of procedure are really worth the money to them. Going forward consumers will forever be mandated to throw their money into the coffers of the healthcare industry.

And even if you disagree, and think the pros of the plan outweigh the cons, almost everyone will admit that this plan is far, far away from actually giving America the ideal healthcare system.

The proposed plans are more regulations, subsidies, exchanges, etc, on top of a broken existing system. But the current system is riven by dozens of different factions, thousands of regulations, and layers of legislative gray goo. In a word the provlem is entropy. You cannot defeat entropy with incremental reform.

The Solution(s)

The easiest solution is to hire the folks managing Singapore's healthcare system. Give them free rein to redesign the American healthcare system from scratch. Then implement the plan exactly. Singapore's system is the best in the world, they spend 1/4 what we spend in America yet live 4 years longer and have the same infant mortality. (source)

Another idea is to adopt Plan Finbarr:

• Create a healthcare exchange. Any insurance company can get listed on the exchange provided it meets the following requirements:
  • it must accept any person asking for care
  • it must publish audited data on customer satisfaction and customer mortality rates
  • it must have a strict, pre-defined separation between profits and reimbursements. So the company must declare up front, "We contractually guarantee that 75% of all premiums are allocated towards reimbursement, while all administration, marketing costs, and profits must come out of the other 25%" This separation eliminates the conflict of interest that exists with most insurance companies. The insurance company does not profit by denying you care, because it must spend the money on reimbursement anyway.

• Take the existing money from the medicare and Medicaid taxes and use it to give every American a voucher. The amount of the voucher depends on age. Young adults might get $500 per year, senior citizens $6K a year. The voucher can only be used to buy insurance from a company listed on the exchange. ( Obviously, this change would have to be phased in over time, current grandfathers would be grandfathered).
• Taxes and spending are both capped. Rather than increasing taxes to meet the rising costs of healthcare, simply decree that whatever the 7% medicare/Medicaid tax buys, it buys.
• People are free to buy any additional insurance or care that they desire, out of pocket
• Require hospitals to have a list price for all procedures. Prices higher than the list price are only enforceable if the customer agrees to the change before the procedure.
• Remove all other mandates and regulations. Insurance companies will be able to offer any coverage they desire, as long as they are upfront about it. It's up to individuals to pick an insurance company that meets their preference. Since everyone has a voucher, and the insurance companies can only compete over care offered, their incentives are exactly aligned with the consumer.
• Remove all supply caps. If you sign a waiver, you are free to get your meds from a witch doctor. Only by allowing a opt-out, can you ensure that licensing really serves the interest of quality care, rather than that of a guild monopoly.

Under this plan, every American gets covered with insurance that exceeds Singapore's insurance in quantity. Supply caps are lifted to allow costs to fall back down. It increases competition among providers. Insurance companies will innovate in coming up with different ways to maximize care for the money spent. And it doesn't require any new taxes. Perhaps Obama would like to hire me as a policy advisor?

There are dozens of different policies that could cover everyone, contain costs, and be acceptable improvements to even hard-core free market types. Megan McArdle offers a plan that's simple genius: "Any medical expenses more than 15% or 20% of income, get picked up by Uncle Sam."

Yet none of these plans are being proposed, and none could pass.

Why the above solution will never happen

Three forces shape the actions of American government: populism, factional interests, and institutional expertise. Populism is generally Republican: Sarah Palin, talk radio, Ron Paul, mega churches and tea parties. Institutional expertise is generally Democratic: civil servants, universities, NPR, the NY Times, MSM, the Hill staff, and the original Brain Trust. Factional interests are cross-partisian: the AMA, the AARP, nurse unions, big insurance companies, Wall St. banks, etc.

Let's examine how each force will react to Plan Finbarr.

We'll start with the institutional experts. The selection process for any official agency ( universities, civil service, NY Times) rewards thinkers who stay close to progressive thinking. People who believe in changing the world via markets do a startup or go into business. People who believe that policy should be managed by a caste of experts go into the official institutions. These people tend to select people who think like themselves as successors. Thus progressive/institutional thinkers rarely generate creative, market oriented solutions as Plan Finbarr. Instead too many official experts busy themselves with proving that the free market cannot work (unless carefully managed by a cadre of official experts) and singing the glories of a European style plan (while somehow leaving out market oriented Singapore).

Plan Finbarr is a simple plan. It has few roles for commissions, agencies, departments, etc. It aims to set a few basic rules that align incentives properly, and then takes a hands off approach. Plan Finbarr wipes out Medicare and Medicaid as they exist. These are deeply rooted Washington programs. Bureaucracies do not commit hari kari. Any simplification or consolidation eliminates both jobs and power for official experts. All the permanent Washington staff operate in a world where these agencies are taken for granted. To abolish them would be unthinkable.

The "populist" forces are either dumb, fickle, impatient, or both. Or at least the people who make noises around election time are both. The populists are the ones uttering phrases like the now famous "I don't want government involved with my Medicare". In general, Plan Finbarr will be a huge benefit to the people. The silent majority - not the experts or the interests - are the main constituents and beneficiaries of the program. But the problem is that the wrenching change happens first, and the benefits only come later. Some, especially those about to retire, will lose out at the beginning (after the payments are cut, but before the costs have fallen). Mishaps will happen in transition. Those mishaps will be exploited by any partisan opponent. The benefits will only be obvious five or ten years later. But by that time, the people who created the plan will have been voted out of office.

Every so often the popular web site Facebook.com dramatically changes its interface. The moment it comes out, people hate it. For weeks they gripe and moan. The facebook.com management assumes the air of Frederick the Great and says, "They are to say what they please, and I am to do what I please." With time the users grow used to it, and enjoy it more than ever. Political decision making cannot operate the same way. The Congressman who votes for Plan Finbarr will likely not make it past the next midterm.

Finally, we get to the factional interests. Any successful plan to reform healthcare by definition will reduce costs. But every cost is another person's income. Plan Finbarr aims to cut healthcare costs by half. The healthcare industry will lose out over $700 billion a year. Obviously, they will not be happy. The insurance companies, doctor's associations, nurse unions, pharmaceuticals, big city hospitals, etc, will all join forces to fight the plan to the death. They will spread FUD ("Plan Finbarr allows tax payer money to be spent on witch doctors!"), spam Congressmen with issue papers, and threaten to throw their vote as a block to eject any politician who supports the plan. Some Congressmen will break out of fear. Others will break because the lobbyists convince him. In American politics, the concentrated interest always defeats the general interest. The concentrated always knows what's at stake. The general interest is disorganized and deceived.

Neither the institutions nor the factions are malevolent or stupid. The experts do not wear hooded black robes and jealously guard their power. Rather there is a selection effect within each agency that rewards people who believe in the mission of that agency. The experts would all sincerely believe that Plan Finbarr would cut essential agencies and lead to ruin. Likewise, the factions do not cackle and laugh as they count the coins they rob from the American people. Rather they simply view it as their job to represent their own constituents in Congress. They believe that if all sides represent themselves, what comes out is a reasonably acceptable balance.

Entropy is the Enemy

There is one commonality among all three forces. All oppose entropy reducing changes. The institutional experts oppose entropy-reduction because it would require cutting jobs and consolidating power. The populists oppose it because the downsides of change hurt more than the upside in the short run. The factions oppose it because it will cost them money.

The Obama plan is all entropy increasing - it adds another commission, more money, and more regulations. Virtually every proposal, from either the right or left, that has ever gotten anywhere in Congress has increased entropy. The key difference between the American system and the European systems is not that the European system is government run and the American system is a "free market". The difference is that the American system is far older and has more entropy. With every incremental reform, entropy increases, the system becomes more complex, the layer of legislative gray goo grows thicker. The ratchet never turns in reverse.

In 21st century American policy, only one final question matters. How can entropy be reversed?

UPDATE: JRobinson on New Mogul pointed out that the number of doctors has actually increased. I was looking at the number of new graduating doctors, which has indeed been capped ( source). I have updated the post accordingly.