Efficiency Resilience Systems

The Triumph of Efficiency over Effectiveness

I published this op-ed in the San Jose Mercury News two years ago, in the early stages of the pandemic.  Here’s a link to the original.

If anything, its relevance is even more apparent now than it was in 2020.  Consider the enormous shipping and trucking backlogs that are clogging up our economic system, and you see the dire consequences of recent efforts to optimize economic efficiency over organizational effectiveness.  These efficiency measures — just in time inventories, dispersed global supply chains, and decimated local manufacturing — have played havoc with public welfare and economic health in the interest of saving a buck.  We could learn from the military the value of preparing for disasters and thus making our systems more resilient.

See what you think.

America is paying a heavy price for prizing efficiency

Covid-19 is demonstrating the cost of inadequate preparation for national emergencies

The current covid-19 pandemic has shown a lot of things that are wrong in American society, including terrible leadership, a frail social safety net, and a lack of investment in public goods.  But one that has particularly struck me is the way our socioeconomic structure has been taken over by the logic of efficiency over the logic of effectiveness.  In the name of efficiency, we have focused heavily on keeping costs down in both our economy and our health system.

Industry does this by developing global supply chains that take advantage of cheap third world labor and the low cost of shipping and also by instituting just-in-time delivery of supplies to factories.  The former puts us at the mercy of events on the other side of the world, and the latter leaves us with no inventory to tide us over until supplies resume.  As we have seen, the result is that that production can shut down over night, with no easy way to get it going again any time soon.

There is a similar pattern with health care.  In the interest of cost efficiency, we have reduced the number of hospital beds and the amount of critical care supplies to what is needed during ordinary times.  Excess capacity, in both production and health care, is deemed wastefully inefficient.

The core problem with this strategy is that effectiveness depends on a certain degree of inefficiency.  To be effective, a system of production or medicine needs a cushion of excess capacity in order to tide it over during difficult times.  Both need a store of supplies that is considerably in excess of what is required under more routine circumstances.   And both need a certain amount of redundancy:  multiple suppliers of the same goods, multiple hospitals providing the same service.  For a system of production, health care, or national security to be resilient in the face of extreme demands, we have to be willing to subsidize the kind of excess capacity that we will need in a crisis.

The military has long understood this, so it is continually preparing for war in times of peace.  When a threat emerges, you don’t have time to spend a year of two getting up to speed with training, munitions, transportation, and — yes — hospital beds.  Because of this, we now see naval hospital ships gliding into the harbors of New York and Los Angeles to provide a small assist during our severe shortage of medical capacity.  What have the ships been doing for the last few years?  Preparing for a future emergency.  That’s very inefficient, but it’s also critically important for national survival.

Hospital ship

A healthy society — one with a strong survival instinct — needs to be willing to provide public subsidies for health emergencies that may be infrequent but are totally inevitable.  We need to build up excess capacity in the face of future uncertainty.  Industry already seems to be getting the idea that the fetish of lean productive capacity may be hazardous to the survival of many firms.  It seems likely that in the future firms will recruit multiple suppliers instead of one on the other side of the world and will build up inventory.  They can’t afford another disaster like this one.

What worries me is that our system of health and public welfare may not take the same prudent steps in planning for an uncertain future.  In the last 50 years, our public sector has been hard-wired to the ethic of efficiency, in which prudent capacity building is seen as reckless waste and where major responsibilities of government are outsourced to private providers.

But if we show a little foresight, we might learn the lesson of the current pandemic and shore up our public capacity for withstanding future shocks to our system.

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