Enlightened self-interest propels a free society

"... Americans are becoming increasingly dependent when it comes to making the decisions that most affect their [well-being].... We must find a way to return to our citizens more control over their lives."

In THINKING ABOUT what kind of society is good for business and investing, we need to remember two things. First, enlightened self-interest is a powerful and positive force for good in a free society. As economist Adam Smith said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest," In this light, it is a worrisome fact that Americans are becoming increasingly dependent when it comes to making the decisions that most affect their interest--e.g., decisions about caring for their health, educating their children, and spending their earnings. If we are to keep the U.S. and its economy on the right track, we must find a way to return to our citizens more control over their lives.

Second, the love of neighbor is the most powerful means changing things for the good. It was with this in mind that Pres. George W. Bush asked each of us in his 2001 inaugural address "to do small things with great love." Too often we create and depend on grandiose bureaucratic programs to address social problems and, in the meantime, allow ourselves to forget about real people. For those of us with faith, it is enough to remember that we are called on by the Lord not to eradicate poverty, but to help our neighbor. For all of us. it should be clear enough by now that bureaucratic programs, such as the 40-year-old War on Poverty, tend to be counterproductive, whereas private and local efforts--what what I call lighthouse missions--bear real fruit.

Let me tell you a story to explain what I mean by lighthouse missions: An elderly couple living in a small coastal village approached the lighthouse keeper one day and explained, "We are out of oil for our home, and it is cold." He gave them oil. The next day, a young couple petitioned for oil for their lamps so their children could study after dark. He gave them oil as well. As a result of these and other well-meaning deeds, he ran out of oil. and without the light that it was his duty to provide, two ships crashed on the rocks, killing hundreds of sailors.

It is not good or productive to allow ourselves to lose focus on our individual lighthouse missions, no matter how well meaning the thing that distracts us. The same general principle adheres politically: Our local, state, and national governments have lighthouse missions--responsibilities or duties that they are best suited to perform. and on which they should focus. In the case of the national government, these responsibilities are assigned by the Constitution. For instance, it is charged with providing the whole people a defense against foreign threats, for which it is uniquely suited. It is not, on the other hand, tasked with providing individuals with their various unique needs. When attempting to do the latter, it usually makes things worse.

Let me speak of just two examples of this--health care and education--before returning to the idea of individual responsibilities. Our current health care system is neither efficient nor cost-effective. To fix it, we must cease to treat patients as captive victims. Instead, we must allow them to be informed and independent consumers. The first step toward this goal is to restore the direct connection between the recipient of health care and the doctors and hospitals delivering the service. Physicians should not be paid by an agent who did not receive the service. Nor should recipients of service be limited in selecting where or from whom they receive it.

Second, the idea of health insurance must be divorced from the idea of prepaid health care. If car insurance operated on the same basis as health insurance, we would be reimbursed for windshield wiper blades, headlights, tires, oil changes, and gas.

Not surprisingly, we find that the source of much of the difficulty with health care reform exists at the national level, where individual needs are not--and cannot be--best understood. Changing a single line of the Internal Revenue Service code would allow the needed reform to proceed. That one line would permit individuals, rather than employers, to deduct health care benefits. Instead of sending money to HMOs, employers would deposit money into employees' individual health care accounts, where it would be nontaxable and portable from one job to another.

These accounts could be called "Spend-It-or-Keep-It" (SIKI) to emphasize their key feature: They encourage individuals to capitalize on health care savings generated through increased exercise, healthier diets, etc. The SIKI would be similar to an Individual Retirement Account, providing a means for tax-free investment and becoming part of a person's estate. Once a certain level of health care security is reached, the excess could be spent for any purpose. Shifting control of health care spending to the consumer in this way would create millions of cost control centers--individuals in charge of themselves and their health care accounts. At the same time, it would increase productivity by freeing companies to focus on their own lighthouse missions: producing goods and providing services.