Industries afflicted with Baumol's Disease have slower productivity growth.

Cheesecake Medicine?

Aug 7, 2012 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic Thinkers, Government, Households, Innovation, Labor, Macroeconomic Measurement, Regulation, Thinking Economically, Uncategorized • 103 Views    No Comments

Could Cheesecake Factory help us fix our healthcare system?

Touring the kitchen of a Cheesecake Factory restaurant, you would see arrival, refrigeration and storage areas, and cutting, mixing, chopping and combining zones. Preparing the 308 dinner choices that their menu offers, chefs use recipes that specify ingredients and amounts but exclude seasoning and timing details. Essentially divided between prepping and cooking, the kitchen is reminiscent of a well-organized factory.

In a wonderful New Yorker articleAtul Gawande tells us that the people who run the different parts of our healthcare system might learn a lot in a Cheesecake kitchen. Cheesecake and the US healthcare system both offer a vast array of goods and services that are individually produced. Cheesecake has a standardized backend and efficient friendly service. Its prices are relatively low and its consumers appear happy. Meanwhile, the US healthcare system is coping with escalating costs, mediocre service and inconsistent quality.

In his article, Dr. Gawande takes his readers from his dining experience and subsequent research at Cheesecake to one family’s calamitous hospital visit and his own mother’s well-coordinated knee replacement. Successfully, he demonstrates that coordination of many individuals and services is tough, doable and crucial for a restaurant chain that serves 80 million people and also for a medical system.

Dr. Gawande’s suggestions took me to economist Randall Bartlett and his Teaching Company course, “Thinking Like an Economist.”  Discussing Pareto optimality, Dr. Bartlett said that a policy improves social welfare if it makes even just one person better off without making anyone worse off. I wondered whether the suggestions for improving our healthcare system can ever achieve sociologist Vilfredo Pareto’s criteria.

You can read more about Vilfredo Pareto here. I do recommend listening to Dr. Bartlett’s lectures and reading the New Yorker article.

 

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