Luddites Raid Wash. Post Editorial Page

It's pretty shocking what some people still think. Today, two university professors published their Luddite Manifesto on medical records.  Succinctly, their argument is that since there have been issues with software in the past, and since you can't prove that medical records software can save lives, then all efforts to implement such software are a waste of time and money and that we would all be better off sticking with paper records.

It's as if the last 25 years of history has not happened.  The computer revolution, which has changed the lives of the majority of the world in one way or another has not occurred.  The fact that data sharing has had a major impact on business and commerce has not occurred.

To support their argument, the two authors cited failures or issues with some systems that have been implemented. Most of the systems cited in the article seem to have been designed to diagnose symptoms or prescribe drugs automatically. Given that doctors themselves have problems doing this for more complex cases, it should be little suprise that initial systems developed to do this work do not work as well as hoped. 

I've had experience with this "paper records" system, and it stinks.  Let me tell you a little story.  Unfortunately, I've got a few health issues.  I have several doctors, all of whom treat me for different things.  Despite the fact that I have signed releases, none of them have my complete medical records.  They tend to request them "as needed", and then it takes a couple of days for the records to be copied and sent over. While this system may work for regular checkups and treatment, the one time it won't work is in the Emergency Room.  Fortunately, every time I've been to the ER I've been upright and coherent. I disclose my pre-existing conditions, and I'm asked (repeatedly) what medications I take.  I'm asked repeatedly what I'm allergic to.  All of these pieces of information are usually relevant to treating me and making sure I remain upright and coherent. And, in my experience, the doctors and nurses have always been able to give me excellent care, as I am able to provide them with all of this information. In fact, the last time I went to the ER, I took the liberty of typing up a list of my meds so that there would be no questions (more paper records).

What if I were not upright and coherent?  I'm certainly not an expert in this area, but I can't imagine how not having my records available to consult before treatment would be boon to the doctors.  Furthermore, what if I was away from home and went to the ER in a non-upright and non-coherent state?  Given my health issues, I'd hate for the doctors to have to start guessing what's wrong with me given a lack of information!

I have to say that I find it quite shocking that someone in this day and age would write such an article, and even moreso that the Washington Post would publish it.

Outstanding Article Regarding Economists' Role in the Crisis...

The Economist's View today posted an excellent link to a paper which has caused a good bit of discussion there and rightfully so.  The post, entitled "The financial Crisis and the Systemic Failure of Academic Economics" is simply an excerpt from the conclusion of the document includes this ditty:
Paradoxically self-reinforcing feedback effects within the profession may have led to the dominance of a paradigm that has no solid methodological basis and whose empirical performance is, to say the least, modest. Defining away the most prevalent economic problems of modern economies and failing to communicate the limitations and assumptions of its popular models, the economics profession bears some responsibility for the current crisis.

What makes this paper topical is the current financial crisis, but it cannot be said that this is the first time many of the topics and the general concept of classical economics being out of touch with reality has been broached.  The Real-World Economics Review has as its origin a discussion and petition in France in 2000 regarding how and what is being taught in economics classes. Another site, with more frequent updates, is Real World Economics.

In brief, real-world economists argue that the equalibrium based, economics of maximized utilization is fundamentally flawed.  The thinking stipulates rational behavior and models this mathematically. These models assume a "normal" state of equalibium, which of course cannot be representative in the world we live in, or the people we deal with.  Changes are considered "shocks" or "jolts" which after they occur will simply lead to a new equalibrium. Hence, using this type of methodology, most classic economic thinking has been broken down into economic models, which as suggested above provide questionable utilization.

This particular fact leads us to a fundamental question: "If this methodology of studying economics yields such poor guidance, is it an economical use of our time to pursue this methodology?" 

The "real world" economists don't yet have a cogent theory of their own as they are still in a bit of a self-exploratory phase, however the trait they do posses is the ability to unflinchingly criticize their own thinking.  I'm not convinced we actually will see a theory any time soon as we still grapple with predicting human behavior on a large scale.

While I am not convinced that economists could really have prevented the current crisis, I certainly believe that they could have sounded an alarm that might have caused political figures to look into the housing market and associated financials.  However, even Greenspan believed that the system would sort itself out.  Furthermore, the Bush administration was quite business friendly, and would have been rather adverse to anything that might have slowed down the housing boom, particularly considering that the housing market was driving what little expansion there was in the economy at that time.

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The Financial Mess--Who's Fault is It?-- Part Two

[This is part to of my explanation of the current financial crisis and reasoning behind who I believe the real culprits are for our current financial situation.  Enjoy and feel free to comment.]

Big Bank would then be the Secondary market. While Big Bank certainly can sit back and collect the payments on this loan, they have other motivations and decide to package this loan up with a group of other mortgages, and sell it.  This product it called a Mortgage Backed Security.  In this case, they sell the entire MBS to Bigger Bank. This then becomes the Tertiary Lender. Bigger Bank has some really sharp people on it's team, and they therefore have a more diversified portfolio of securities to offer their customers including something called a Real-estate Mortgage Backed Collateralized Debt Obligation (RMBCDO or just CDO for short).

Big Bank's team takes a number of MBS and bundles them together, and sells them to a paper company specifically created for this purpose (a Special Investment Vehicle or SIV). This SIV will then issue a Bond just like any other company. This bond is given a qualitative rating by one of three major ratings companies, Standard & Poors, Fitch's or Moody's.  Other people and companies can then purchase this bond and expect a certain fixed rate of return for their money over a specific period of time with a known risk level (the reason for the rating).

Several types or organizations would buy these CDOs, particularly those with a AAA rating.  Banks, hedge funds, investment houses, and even mutual funds would buy these.  This was a secure investment, with a fixed rate of return that nicely matched certain types of investment strategies. The real estate market had been booming for years, and there was no reason to assume that anything would change any time soon.

It is through this process that money from private investors eventually made its way back down to the individual to fuel the housing boom and price bubbble.  There was only one thing that this model did not account for.Technorati Tags: economics, banking, real estate, CDO, crisis,

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