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Sunday, March 6, 2011

RE TALK DOESN'T PAY NYT EDITORIAL INCENTIVES COMPARTMENTALIZATION INTELLECTUAL DRIFT DUTIES VERSUS TAXES

Re this article: Talk Doesn't Pay, So Psychiatrists Turn to Drug Therapy


Another comment on the overwhelming power of incentives (and conversely disincentives), and the suggestibility of all specialized endeavors.


Michael Lewis commented, or one of his subjects in The Big Short, did so, on the power of incentives in the behavior of Wall street denizens, but it applies to everyone.


Interest 'expense', deducted from income in federal income tax calculations, a classic example, having enormous consequences both for private homeowners, and for the structure and directions banks and corporation have taken (debt to equity rations, LBOs, takeovers, mergers, etc.) 


Another critical aspect, historically, of a change in 'incentives', and thus of institutions public and private, is the change from the federal government, and individual state governments, financed largely by duties and other restraints on movements of commodities and imports (including movements of goods across state lines), which was how it had started out, to a system financed largely by federal and state taxation of domestic persons and entities.


Another example, from law: Change how attorney fees are calculated, and experienced lawyers conform their litigation or advisory ways, almost overnight. If 'talk doesn't pay', in calculating attorney fees, say no longer an hourly rate but a flat rate, lawyers may no longer seem to need to do elaborate, time consuming discovery, or have lengthy conferences with their clients or experts.


This idea plays into the comments here about compartmentalization and expertise and experts.


Isolated specializations, sometimes created either by well considered or from odd or porkbarrel incentives whose real or apparent relevance can come and then go over time, once cut firmly adrift from  other fields and subfields of human endeavor, lying around or above or below them, cut free from some overarching notion of a humanities ethic of inquiry, or say a discipline and ethic of craftsmanship, quality, and veracity (related notions), or the subfield technology shifts, or the disciplinary paradigm shifts,  out from under them 


easily become over time doctrinaire little fiefdoms, until say the funding is reduced or cut off, rightly or wrongly,  


and once developed and isolated, are especially susceptible to incentive manipulations ('good' or 'bad') of their operations and their conclusions.


(I once took a course, in the MBA program, taught by Srinivasan Umapathy, Management Control Systems, where the concept of incentives played a major role, and was integrally related to accounting practices.) 

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