The American Health Paradox: What Causes It?

Americans spend more on health care than people in 29 other rich countries but our health is near the bottom of the list. Shouldn’t more money buy better health? This is the American health paradox. What causes it?

In the latest issue of The New Yorker, Atul Gawande, in an excellent article, tries to find out how the money is wasted. He visits a small Texas town where he finds an entrepreneurial attitude among doctors — a tendency to order more tests and do more procedures because doing so will generate more revenue. (A weakness that my own surgeon may have succumbed to.) Gawande does his best to figure out how things could be better but comes up short. He finds better systems of care — but they seem to be losing rather than winning. I think Gawande is too close to the problem he is writing about to see the really large forces at work.

In The Economy of Cities, Jane Jacobs pointed out that Marx got it wrong: The fundamental conflict in society isn’t between owners and workers, it’s between those who benefit from the status quo and those who benefit from change. There are plenty of owners and workers on both sides. The balance — or rather imbalance — of power determines what happens. The more powerful the status quo, the less change. Lack of change means lack of innovation; lack of innovation means that problems build up unsolved.

If the status quo is powerful enough, the problems get worse and worse, remaining unsolved — until the whole thing collapses. (This is what Jared Diamond failed to understand in Collapse.)  A city economy relies heavily on a single product; the resources to make that product run out (Jacobs often pointed out that nothing lasts forever), often suddenly; and the whole city dies. Manchester (cloth) and Detroit (cars) are modern examples. Was the current financial crisis due to reckless lending? Not really. That was an opportunistic infection. It was due to a problem building up unsolved: lack of affordable housing, which was due to lack of innovation in the housing industry. Lack of real solutions made room for a phony solution that, funny coincidence, benefited the powerful: rip off poor people by lending them too much money. (A new form of predatory lending that took advantage of the human tendency toward speculative bubbles.) Just like resource depletion, the phony solution worked and worked and worked, until, all of a sudden, it stopped working and the whole giant structure fell down, hurting the poor and powerful alike.

The cause of the American health paradox is American inequality. America is more unequal than other countries. Everywhere, in every country, the powerful prefer the status quo but in America the rich and elite are especially powerful relative to the poor, so the status quo is especially entrenched and innovation especially well-squelched. America has a lot of health problems building up unsolved. Perhaps the most obvious is obesity, which affects the poor far more than the rich. The further the rich from the poor — that is, the more inequality — the more the rich can ignore it. And they have: The healthcare establishment’s record on prevention and treatment of obesity is terrible. Staggeringly bad. In one tiny example, when I proposed a rat experiment to test an idea behind the Shangri-La Diet, I was denied permission by the UC Berkeley Animal Care and Use Committee: My idea couldn’t possibly be true, I was told. Had there been plenty of poor people on the committee, instead of none, I think the outcome would have been different. Problems such as depression, allergies, autoimmune disorders, and autism are likewise building up with no real progress being made. An example of a real solution is home glucose monitoring for diabetes. This came from outside the healthcare establishment — from Richard Bernstein, an engineer with diabetes.

Although The Economy of Cities was published in 1969, it has not received the attention it deserves. Lots of well-read people dislike inequality, and the connection between inequality and poor health has been documented many times, especially by Richard Wilkinson, but the Jacobian point that more inequality means less innovation means problems stacking up unsolved is not widely appreciated. In a whole book about the badness of inequality (Inequality Matters, 2005), I didn’t see this point made even once. In his New Yorker article, Gawande fails to understand Jacobs’s point that farmers didn’t invent tractors; the big improvements to American (and world) health are not going to come from doctors or anyone now powerful in healthcare. They are too wedded to the status quo. (Notice that this recent innovation in affordable housing, the nano home, comes from a car company — an Indian one.) Gawande, being a doctor, surrounded by the powerful at Harvard (where he teaches), is in a poor position to figure this out. Where will the big improvements in health actually arise? From people who benefit from change. A reasonable healthcare policy would try to empower them.

13 Responses to “The American Health Paradox: What Causes It?”

  1. MC Says:

    Tata Motors is an Indian, not Korean, company.

  2. Charles Says:

    Great essay, Seth. It really ties together a lot of the things you’ve been discussing over the past few months.

  3. Anthony Says:

    I was with you until this part:

    “Was the current financial crisis due to reckless lending? Not really. That was an opportunistic infection. It was due to a problem building up unsolved: lack of affordable housing, which was due to lack of innovation in the housing industry. Lack of real solutions made room for a phony solution that, funny coincidence, benefited the powerful: rip off poor people by lending them too much money.”

    IMO the housing bubble was basically a transformation of the NASDAQ (tech) bubble into the housing market. Easy borrowing was mostly engineered by the Federal Reserve in an attempt to prevent a recession (encourage economic growth). I.e., it was *innovation* on the part of the ruling class aimed at solving their own problems that caused the problem.

    To the extent it was specifically about housing, you’re right that it was abetted by government policies aimed at increasing “affordability”, but these in turn were innovations to again solve the same problem: how to maintain or increase their own power by ingratiating themselves with certain constituents and so on.

    That is to say, lots of problems are caused by *too much* innovation to solve problems (problems such as “How do I increase short-term profit?” or “How do I get elected again?”) by people who will stand to benefit against an often larger group who will stand to lose, where the second group’s losses are too diffuse or obscured to adequately motivate sufficient counter-actions.

  4. seth Says:

    Well, yes, there is innovation in crime, innovations in gaming the system, as well as innovation that solves real systemic problems, such as poor health or lack of decent housing. I completely agree.

  5. Darrin Thompson Says:

    I think you are painting with too broad a brush. I thought that one of the key points of Jacobs in the Economy of Cities is that cities are the most important economic unit to reason about; problems in cities are concrete; they are actionable; with study and leadership and effort they can be solved. There are economic entities that are too large to reason about or fix, like regions and nations. Solve problems at the city level was what I got out of reading it.

    When you criticize the American health care system it’s like you are criticizing California. It’s epically gigantic and you come to conclusions like “inequality is the root problem.” Nobody is going to fix health care any more than they are going to fix the state of Florida.

    I have three kids with autism and I had a pediatrician who was completely bought into mainstream dogma. All she could do for us was miss the initial diagnosis (by years, tragic), prescribe antibiotics like candy, and berate us for not wanting to vaccinate our kids who were constantly suffering cold symptoms.

    We left her for a very pragmatic doctor with extensive autism experience. Our kids have improved a great deal in both language and behavior with her help. One is reading even. No clue about the story mind you, but he likes the words.

    There are pockets of innovation within the monster that is the whole of health care. It’s not a whole and can’t be addressed as a whole. Those pockets are separate entities and need to be understood as separate. That leads to far more actionable stuff like promoting self-experimentation and pragmatism.

    Another pocket of innovation you might care about… You might add to your catalog of current events, that a few doctors are discovering the “lean” quality movement. There is a lot of literature coming out and the results of of applying it are often positive in terms of cost and mortality. If that idea manages to spread it could take out a big part of “inequality” in it’s wake.

    Anyway, all my blathering to say, I think you missed the root cause, and this inequality you speak of is a false dichotomy.

  6. seth Says:

    Darrin, I don’t grasp your main point. What is the “root cause” that I missed?

    Jacobs really did say what I have her saying. Look on pp. 248-9.

  7. April Says:

    Lots of thought provoking points in here Seth. I think some of them though are worth pulling apart just a bit.

    I think there are a number of things that cause our “high spending” “relatively poor health” paradox.

    Much our our relatively poor health relates to lifestyle factors more than health system or healthcare problems – poor diet, and lack of exercise being the leading contributors. You suggest that we’d be doing more about these problems if we were a less unequal society – it’s an interesting hypothesis. I don’t believe though that the more equal societies in Europe have been much more active or successful than we have in this arena. It’s turning out to be very hard to change peoples’ behavior in desirable way.

    On your point about the narrow range of criteria for allocation of research funding you see in the US – I’m sure you are right, that it is too narrow. From talking to researchers who have sought funding in the US and in Europe though (again, more equal societies) – I have heard only that research funding there is even more conservative…tending to fund research that looks at the same range of questions, uses the same methodologies over and over. Outside of the box researchers often move over here for this reason.

    On innovation – my sense is that the very pluralistic, and decentralized, US health system probably generates significantly more innovation than other OECD countries. Unfortunately because of our funding system, almost all innovation is focused on new drug or treatments or new ways of delivering care that can generate higher revenue for the provider/ innovators, not save anyone money. India, as you’ve mentioned, is an engine for generating innovations to bring costs down precisely because 85-90% of payment is out of pocket. When patients pay out of pocket, they tend to do more research on prices – when able. So, bringing down costs is a real market advantage.

  8. Adam Says:


    *There is a growing appreciation of small homes/living spaces. Affordability and sustainability are motivating factors, but some of these homes are just plain cool. No reason small can’t be stylish.

    *Scroll through the shackitecture page at or try gorilla designs post Katrina work at For the uber trendy there is the luxury steel cabin on stilts


  9. Darrin Thompson Says:

    Not my best attempt at arguing. My tone sounds like the opposite of I love your writing when in face, I love your writing.

    Ok, having slept on this, I think I can explain myself.

    The American health care system is a work place. In that way it’s like any other real estate brokerage, factory, software shop, or retail store. It’s a system that does work and makes some money and spends some money.

    The thing about most workplaces, and this is world wide, is most are completely broken with regard to quality of work produced. They are 19th century in terms of efficiency at best. That’s true worldwide, even Japan. Japan has world famous pockets of quality but they are poorly understood and from what I’ve seen they don’t represent the state of the nation.

    Focusing specifically on America, what I’ve seen is management recognizes that there are problems with quality, and things cost too much, but they hold tight to the reins of power and behave in a lot of incompetent ways. They encourage everyone to “do their best” and motivate and set up processes which need to be complied with, blah blah.

    And here it sounds like I agree with you, but I think this is just a symptom and not the root cause.

    Most people in the whole world have never even seen a workplace that understands how to build quality into whatever they do. Even fewer have worked in one and could actually understand what they see in a quality minded workplace.

    Quality, when you sit down to study it, is beautifully counter-intuitive, highly experimental, rigorous, and respects the humanity of all it’s participants.

    What’s even more pertinent here, is that quality provides a back door where management begins to gracefully relinquish power.

    So the root cause, as I see it, is that Americans’ view of quality is distorted from reality. A few anecdotes from clueless business press writers about “the Japanese” is about where most of us stand.

    There are a few pockets in the Medical industry where people are discovering that they can push costs lower than they thought and reduce medical errors and of course deaths a lot lower than they thought at the same time.

    Finding and promoting those stories seems like something that can be done to address the true root cause of the American paradox.

    And what if Americans just spent less on medical care and nothing else changed? Wouldn’t we just be as bad as anyone else, unremarkable? Sounds like there’s a ton of waste to be eliminated.

  10. Stephen M (Ethesis) Says:

    I’ve really enjoyed looking at Ikea’s small living spaces designs. If nothing else, for the SF (science fiction) applications and considerations.

    But there is a world of innovation out there that is still yet to be done.

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