As I’ve written before, there are several different reasons to write a post. Posting a hip-shot reaction. Exploring a subject in some depth. Just having a place for handy links is another. This post was written for yet another reason: sometimes there are points of such general applicability it’s nice to be able to return to a specific post for the point.
Here’s the point of this point. Inputs don’t really matter. It’s the outputs that count. When you’re driving between Chicago and Cleveland, how much the car cost or how much gas you used is really just not that important. What’s important is whether you got to Cleveland.
It’s not important how smart the diplomats were or what schools they attended or how hard they worked at negotiating. What’s important is whether they arrived at a worthwhile agreement, whether they accomplished the objective.
It’s not important how smart your economic advisors were or what schools they attended or how wonderful the economic models they used were. What’s important is whether more people got jobs, more wealth was created, more companies were formed and prospered.
Similarly, production costs are only tangentially related to prices. If people won’t buy what you’re selling, it really doesn’t matter how much it cost you to produce it. You either cut your prices or you don’t sell.
When I say that we need to reduce healthcare spending, don’t tell me how much med school costs. That’s only relevant to whether the people who attended med school bet right.
This is the point that underpins what I’ve been saying here about healthcare, about education, about defense, about infrastructure spending, about any number of other subjects.
It’s not the inputs but the outputs. Don’t think that when you add layers of bureaucracy it inherently adds to the value. It’s not the production cost but what people are willing to pay.