30 May 2018

A cancer-detecting robot shows the way forward for the NHS


We’ve just been handed a get-out-of-jail free card over NHS funding. Contrary to recent reports, we just need to be doing more of what we are and she’ll be fine.

That’s the lesson to take from today’s story about how a computer has learnt to identify skin cancers with more accuracy than human doctors.

As long as we set the general system up to allow what capitalism and markets do so well, then our healthcare will continue to get both better and cheaper, for we’re about to have one of those technological revolutions.

This is entirely contrary to the report from the Institute for Fiscal Studies last week, the one which told us every household is going to have to pay £2,000 more per year to be ignored in A&E. Their core point, a correct one, was related to William Baumol’s Cost Disease, which states that productivity tends to increase faster in manufacturing than it does in services.

Despite that discrepancy, wages are set economy-wide by general increases in productivity, meaning the cost of services rises over time even if the people involved in providing them are not much more productive. The NHS, which is largely services, will become an ever larger part of the economy as we all become richer – and older. This is also the foundation of Wagner’s Law, which states that government will become ever larger.

However, the crucial point is that technology does not remain in one static position. Much of technological advance in fact involves converting what was previously a service into a manufacture. This is where the combination of capitalism and markets are really effective at making previously laborious tasks extremely cheap.

The microwave and the washing machine have replaced the housekeeper, drugs much of previous nursing care and or surgery. After that little pain of patent-protected pricing, drugs become ludicrously cheap too. The same will be true of this new computer that can tell us if our skin lesion is nothing to worry about or whether we should be sizing up coffins.

This is where we’ve got to understand the second part of Baumol’s scholarship, which is what creates those technological revolutions that allow the automation and thus the productivity improvements.

He distinguishes between invention – making spiffy new things – and innovation, the use of that spiffiness. Government and planned systems can indeed invent but it is market systems which innovate, something which neatly sidesteps all of Mariana Mazzucato’s insistences on the point. After all, it’s not the invention that makes us richer, but the use of the invention to raise productivity.

Certainly a government-funded university lab can create an AI. But it is the market process, not planning, which spreads that new technology to give us all better, cheaper healthcare.

So the real solution to the funding problem detailed by the IFS is to do more of what we’re already doing, introducing market processes into the NHS. Note that there’s nothing here about private health care, no suggestion of charging patients and most certainly nothing that would lead to an American-style insurance system. The crucial point is that even in a taxpayer-funded, free to use health system, we’ll all be better off with internal markets than without them.

We even have a useful proof of this from that very IFS report:

“One of the great successes of the NHS in England since 2010 is that, despite very tight spending settlements, activity has risen substantially. In other words, productivity has grown and, unusually, since 2010 measured productivity in the health service has been growing faster than productivity across the economy as a whole.”

We’ve been introducing more market mechanisms over this period and we’ve been getting more care for our money, that’s what improving productivity means. You only need to look at NHS England, which has adopted more of those market processes than NHS Wales or Scotland – unsurprisingly productivity has improved more in England than in either of its neighbours.

The conclusion should be clear –  structure the NHS so that we have more of those internal markets and watch as the technological revolution increases productivity and gives us more healthcare for less cash.

The truly interesting part of all of this is that, contrary to popular belief, economists do actually know a thing or two. Maybe they’re not so hot at banking but they do seem to have the provision of ever better healthcare sorted.

If only anyone were to bother to listen to them, of course.

Tim Worstall works at the Adam Smith Institute and Continental Telegraph.