I hate corporate jargon at least as much as the next person, and Á¢€Å“Think Win-Win!Á¢€ is one of many good reasons to be self-employed. Still, it represents an interesting idea: how do we find solutions to problems that make everyone better off? To too many managers, the phrase means Á¢€Å“IÁ¢€â„¢m going to screw you but will try to convince you that you are now better offÁ¢€, but that doesnÁ¢€â„¢t mean it never happens.

Economics is the study of how to satisfy infinite wants with finite resources. Vilfredo Pareto, an Italian economist who died in 1923, was interested in exposing flaws in the Italian government. He found that about 80% of the land in Italy was owned by 20% of the people. Furthermore, he found that in almost every society, a small percentage of the people have the bulk of the wealth. The exact proportion could vary; in some places, 20% of the people held 80% of the wealth, and in some places, 5% of the people held 95% of it. Pareto developed equations to explain the phenomenon, which look scary (you can take a gander on the Wikipedia page.) The explanation is easier: every time you increase the amount of an item in a distribution, whether it be wealth, population, or catastrophic accidents, its frequency will decline by a set proportion. Hence, fewer people are wealthier than poor, fewer cities have large populations than small populations, expensive car accidents are less common than fender-benders. This is the genesis of the so-called Á¢€Å“80-20 ruleÁ¢€ that is almost as beloved by managers as Á¢€Å“think win-win!Á¢€

Pareto then theorized that the problem with this distribution is that no one can be made better off without someone being worse off. That, he said, was why poverty is intractable. To improve the lot of the 80% of the people without wealth, those who have it would have to give some up, and they wouldnÁ¢€â„¢t like that. Economists say that this type of distribution is Á¢€Å“Pareto optimalÁ¢€. It may not be optimal for society, of course, but hey, there is no free lunch. (Economists like to say that a lot, too.)

Which brings us to the topic of the year, health care. In the United States, access to care is not evenly distributed. In the U.S., approximately 12% of the population is over age 65 and thus eligible for Medicare. These people consume more than 25% of U.S. spending on health care. ItÁ¢€â„¢s not quite 80-20, but itÁ¢€â„¢s not an even distribution, either. These people have the most generous health insurance program in the United States. ThatÁ¢€â„¢s why some of them go to town hall meetings and scream that they donÁ¢€â„¢t want the government to mess with their Medicare. They know that to improve health care for others, they will probably have to give something up.

Those under 65 have been giving up coverage and care for years. ItÁ¢€â„¢s entirely possible to redistribute care to those in the private market in ways that would make everyone there better off. For example, making health insurance a taxable benefit in order to fund new programs for individual coverage might make it easier for people to change jobs or start new companies. Those in employer plans would give up some benefits, but they might pick up others that might offset the losses.

But Medicare remains the problem. ItÁ¢€â„¢s gold-plated; the benefits are extraordinary. True, doctors cannot be paid to give you advice on your options at the end of your life, but they can keep you hooked up to a ventilator until rigor mortis sets in. Those who want there to be a public option look at Medicare and salivate; those who look at the Federal deficit look at Medicare and panic, because we canÁ¢€â„¢t afford it unless we have huge tax increases. Michael Steele, the hip-hop head of the Republican Party, defends and excoriates Medicare evenly, depending on who he is pandering to that day.

There is one aspect of this debate that no one mentions, so I will. Americans really like health care. We like going to the doctor, taking pills, and getting things fixed. No one wants to be told to give up running or skiing, not when there is surgery and physical therapy! Maybe, just maybe, the way to make us better off by giving us what we want is to increase taxes to pay for Medicare for all. That way, no one would be worse off, except maybe for the few diehard Christian Scientists out there.

Current Events, Numberscruncher

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About the Author

Ann Logue

Ann Logue is a freelance writer and consulting analyst who is fascinated by business and technology. She has a particular interest in regulatory issues and corporate governance. She is the author of "Emerging Markets for Dummies" (Wiley 2011), “Socially Responsible Investing for Dummies” (Wiley 2009), “Day Trading for Dummies” (Wiley 2007), and “Hedge Funds for Dummies” (Wiley 2006), and has written for Barron’s, Institutional Investor, and Newsweek Japan, among other publications. As an editor and ghostwriter, she worked on a book published by the International Monetary Fund and another by a Wall Street currency strategiest. She is a lecturer in finance at the University of Illinois at Chicago. Her current career follows 12 years of experience as an investment analyst. She holds a B.A. from Northwestern University, an M.B.A. from the University of Chicago, and the Chartered Financial Analyst designation. How's that for deathly dull?

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