Yunus is in all respects an amazing pioneer who earned his Nobel Prize. I first heard of him when Bill Clinton would scold anyone in earshot that "this guy deserves the Peace Prize". What I had not understood until today was that as Governor of Arkansas in the 1980's, Clinton had persuaded Yunus to help him set up microlending programs in Arkansas. 

Like most Nobel Peace Prize winners, Yunus has plenty of critics and detractors, but what he has done is astonishing. Having earned a doctorate in economics from Vanderbilt University as a Fulbright Scholar, Yunus decided to loan 42 families $27 during the terrible Bangladesh famine. While many of us were paying roughly this price for George Harrison's three-disk Concert for Bangladesh album, Yunus helped women to create small businesses by underpricing the local loan sharks. As a well-trained economist, he believed that the availability of reasonably priced credit would enable women to lead their families out of the pervasive poverty of rural Bangladesh. The loans were part of a research project that Yunus was conducting for the central Bangladesh Bank. 

When the experiment worked, Yunus founded the Grameen ("Village") Bank, which specialized in microcredit loans to rural women to create small scale enterprises. The loans were informal, unsecured, and undocumented. Interest was about 25%, which reflected both the cost of administering small loans and the underlying credit risk. Grameen provided many other services, including higher education loans for the families of borrowers. 

To date, the Grameen Bank has made nearly $10 billion in loans. Most of their capital has come not from deposits but from outside organizations. Early on donor agencies provided most of the capital at very cheap rates. In the mid-1990s, the central Bank of Bangladesh provided funding. Today, part of Grameen is publicly traded and the company sells bonds at above the bank rate. Overseas deposits also provide capital; Grameen now has operations in 43 countries including China, East Timor, Indonesia, India, Lebanon, Pakistan, Philippines, Saudi Arabia, Yemen, Bolivia, Dominican Republic, El Salvador, Haiti, Honduras, Mexico, Peru, Cameroon, Egypt, Ethiopia, Ghana, Morocco, Nigeria, Rwanda, Tunisia, Uganda, and the USA. Grameen has opened three branches in New York and one in Omaha, Nebraska. Yunus announced that they will open a branch in San Francisco and Washington, D.C. soon. (To be sure, the bank extends microcredit to poor American families as well and Yunus denounced pawn shops and payday lenders as "a scar on the face of your nation").

Grameen vigorously promotes a Bengali version of the Protestant ethic with "16 Decisions" that each borrower learns to recite:

1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work – in all walks of our lives.
2. Prosperity we shall bring to our families.
3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest.
4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus.
5. During the plantation seasons, we shall plant as many seedlings as possible.
6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.
7. We shall educate our children and ensure that they can earn to pay for their education.
8. We shall always keep our children and the environment clean.
9. We shall build and use pit-latrines.
10. We shall drink water from tubewells. If it is not available, we shall boil water or use alum.
11. We shall not take any dowry at our sons' weddings, neither shall we give any dowry at our daughter's wedding. We shall keep our centre free from the curse of dowry. We shall not practice child marriage.
12. We shall not inflict any injustice on anyone, neither shall we allow anyone to do so.
13. We shall collectively undertake bigger investments for higher incomes.
14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her.
15. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline.
16. We shall take part in all social activities collectively.

It would be interesting to hear how these decisions evolve in different countries, but you have to imagine that the recent financial crisis might have been reduced had our bankers practiced "solidarity lending" backed by a borrowers' pledge to "minimize expenditures and collectively undertake bigger investments for higher incomes". 

Grameen requires each borrower to not only recite the 16 decisions regularly, but to belong to a five-member borrower's group. Neither the group nor its members have joint liability —  they don't guarantee each other's loans. Grameen insists that each loan is an individual member's responsibility. But group members often help out those at risk of default because Grameen has a policy of not extending new credit to anyone in a group with a member in default. The groups also create emergency reserve funds, not unlike the tradition of tanomoshi in some Japanese and Okinawan families or Mujin in Korea (it is no accident that Grameen is absent from both of these countries). 

Yunus did not discuss these principals or anything else about solidarity lending even though both are at the core of his approach to microcredit (but hey, he is crowding 70 and this was his eighth city in ten days). One can only imagine being in a borrowing group with someone earning $20/hour who announces his intention to borrow $700,000 for a new home (as happened more than once during the housing credit bubble). When banks are sworn to responsibility along with their borrowers, nobody should be surprised that things work a lot better (Grameen appears not to have felt the financial crisis). I would love to have heard Yunus speak candidly to the question of whether groups of poor women are better credit risks than groups of poor men, but his life testifies to the answer.

Yunus also avoided discussion of microlending default rates (maybe this was his polite payback for the Commonwealth Club twice asserting that he had received the Nobel Prize in Economics instead of the Peace Prize). In truth, lending to poor people is risky (hell, lending to rich bankers is risky — just ask the Federal Reserve). Grameen says that its payback rates are over 98 percent, but in 2001 the Wall Street Journal claims that a fifth of Grameen's loans were more than a year overdue (both statements are unlikely to be true unless Yunus insists that the old loans will eventually be repaid — as US banks do when they wish to avoid marking down their toxic assets). Besides, if default rates are really only 2%, how does Grameen justify 25% interest rates? Another mystery: Grameen Bank is 94% owned by its poor borrowers, most of whom are women. Why aren't the depositors the owners? They are bearing the risk. Or does the 25% interest rate include an implied warrant?). 

Grameen has expanded well beyond banking. They initiated a hugely popular Village Phone Program, through which women entrepreneurs can start a business providing wireless phone services in rural areas of Bangladesh. By serving as the local payphone, thousands of women have built businesses that not only raised their families from poverty but improved the ability of small farmers to discover price information and other critical market news that was previously not available. The Bank now sponsors more than twenty additional enterprises in energy, telecom, education, fisheries, software, internet access, knitwear, and fashion. Then there is the Grameen Struggling Members Program, which targets desparate, homeless beggars (not a priority segment in traditional commercial banking, I assure you). Basically, the bank turns beggars into sellers of trinkets, which is a step up in both livlihood and self respect. These loans are tiny ($10) and about half default, but still… 

Today Grameen has more than eight million borrowers, 80% of whom are women. They loan $100 million dollars every month and the average loan is now $200. More than 50,000 children of poor women are today in college thanks to the student loan program. But w

ill Bangladesh have jobs for these college graduates? Yunus reminds them that this is the wrong question — they are the job creators. 

"Money is not the problem. Come up with good ideas for businesses that solve important problems and we will get you the money. 

"Remember", he admonishes the children of once destitute women, 

"your mother owns a bank".

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Gawwande is a cancer surgeon in Boston. A Rhodes Scholar and the recipient of a MacArthur "genius grant", he trained at Harvard, and Stanford and grabbed a Masters in Public Health along the way. He has a sharp sense of public policy and worked for the
campaigns of Gary Hart and Al Gore, on
the staff of Congressman Jim Cooper (D-TN), and as Bill Clinton’s
health care lieutenant during the 1992 campaign.

More importantly, Atul Gawande writes. He writes so well that he has become a staff writer for The New Yorker — as unlikely for a full-time physician as for a full-time CEO or lawyer. His writing is stunning. Says fellow writer Malcom Gladwell: "Every subject Atul
Gawande touches is probed and dissected and turned inside out with such
deftness and feeling and counter intuitive insight that the reader is
left breathless.” 

Son of an immigrant pediatrician and a urologist, Gawand wanted to be a rock star in college (he still performs surgery with the Decemberists, Tom Petty, and Springsteen on his iPod). He soon gave up his guitar for a word processor however and did something few doctors would ever consider
doing: he published a collection of his medical mistakes in Slate, where Gawande
first emerged as a major writing talent. He has published three booksThe Checklist Manifesto (2009),Better: A Surgeon’s Notes on Performance (2007), and Complications: A Surgeon’s Notes on an Imperfect Science (2002).

But this year Gawande broke loose. He has become hugely influential because of three articles he published on health care reform in the New Yorker. Each has caused a national sensation. The first two were required reading in the Obama White House. Not suggested reading — Obama expected everyone working on health care to know these articles cold. I have no question that the third and in many ways most subtle article, just published, will enjoy the same status.

All three articles are brief and a delight to read.  I will summarize them here and comment on them briefly, and link to them. Read them — they are educational,  insightful, and important.

Gawande opened the year with Getting There From Here: how Obama should reform health care a mildly heretical essay on how to think about health care reform. The not obvious idea: health care systems evolve and are highly path dependent. Where you end up, depends hugely on where you have been. Gawande does a wonderful job of summarizing the impact of specific social reforms on the health care systems of Germany, France, and England. He argues that

"accepting the path-dependent nature of our health-care
system—recognizing that we had better build on what we’ve got—doesn’t
mean that we have to curtail our ambitions. The overarching goal of
health-care reform is to establish a system that has three basic
attributes. It should leave no one uncovered—medical debt must
disappear as a cause of personal bankruptcy in America. It should no
longer be an economic catastrophe for employers. And it should hold
doctors, nurses, hospitals, drug and device companies, and insurers
collectively responsible for making care better, safer, and less costly."

He spelled out the message to policymakers: you cannot remake a sixth of the US economy from scratch — you have to build on what has worked to date. Sound obvious? Tell it to Hillary Clinton or to the dozens of elected officials dreaming about legislating single payer health care in 2009.

In June, Gawande published The Cost Conundrum: what a Texas town can teach us about health care. He reports on McAllen, Texas, the town with the distinction of having the highest health care costs in America. Were they healthier for all the spending? No, they weren't. Were they spending because they were unhealthier — perhaps the Tex-Mex diet and nearly 40% obesity rate? Nope, El Paso is next door and just as fat, but spends a lot less. Did they have better technologies?

"there’s no evidence that the treatments and technologies
available at McAllen are better than those found elsewhere in the
country. The annual reports that hospitals file with Medicare show that
those in McAllen and El Paso offer comparable technologies—neonatal
intensive-care units, advanced cardiac services, PET
scans, and so on. Public statistics show no difference in the supply of
doctors. Hidalgo County actually has fewer specialists than the
national average.

Nor does the care given in McAllen stand out
for its quality. Medicare ranks hospitals on twenty-five metrics of
care. On all but two of these, McAllen’s five largest hospitals
performed worse, on average, than El Paso’s. McAllen costs Medicare
seven thousand dollars more per person each year than does the average
city in America. But not, so far as one can tell, because it’s
delivering better health care.

The article was smashing because it was so careful. It looked at the problem from the perspective of a physician, a patient, and a payer. Take this conversation:

"One afternoon in McAllen, I rode down McColl Road with Lester Dyke,
the cardiac surgeon, and we passed a series of office plazas that
seemed to be nothing but home-health agencies, imaging centers, and
medical-equipment stores.

“Medicine has become a pig trough here,” he muttered.

Dyke
is among the few vocal critics of what’s happened in McAllen. “We took
a wrong turn when doctors stopped being doctors and became
businessmen,” he said.

We began talking about the various
proposals being touted in Washington to fix the cost problem. I asked
him whether expanding public-insurance programs like Medicare and
shrinking the role of insurance companies would do the trick in McAllen.

“I
don’t have a problem with it,” he said. “But it won’t make a
difference.” In McAllen, government payers already predominate—not many
people have jobs with private insurance.

How about doing the opposite and increasing the role of big insurance companies?

“What good would that do?” Dyke asked.

The
third class of health-cost proposals, I explained, would push people to
use medical savings accounts and hold high-deductible insurance
policies: “They’d have more of their own money on the line, and that’d
drive them to bargain with you and other surgeons, right?”

He
gave me a quizzical look. We tried to imagine the scenario. A
cardiologist tells an elderly woman that she needs bypass surgery and
has Dr. Dyke see her. They discuss the blockages in her heart, the
operation, the risks. And now they’re supposed to haggle over the price
as if he were selling a rug in a souk? “I’ll do three vessels for
thirty thousand, but if you take four I’ll throw in an extra night in
the I.C.U.”—that sort of thing? Dyke shook his head. “Who comes up with
this stuff?” he asked. “Any plan that relies on the sheep to negotiate
with the wolves is doomed to failure.”

Gawande concludes

"Providing health care is like building a house. The task requires
experts, expensive equipment and materials, and a huge amount of
coördination. Imagine that, instead of paying a contractor to pull a
team together and keep them on track, you paid an electrician for every
outlet he recommends, a plumber for every faucet, and a carpenter for
every cabinet. Would you be surprised if you got a house with a
thousand outlets, faucets, and cabinets, at three times the cost you
expected, and the whole thing fell apart a couple of years later?
Getting the country’s best electrician on the job (he trained at
Harvard, somebody tells you) isn’t going to solve this problem. Nor
will changing the person who writes him the check."

This week, Gawande came out with what may be his finest piece yet: Testing, Testing: The health-care bill has no master plan for curbing costs. Is that a bad thing? He begins where my post this afternoon left off (I read his article an hour after the post on the current state of health care reform).

"Cost is the spectre haunting health reform. For many decades, the great
flaw in the American health-care system was its unconscionable gaps in
coverage. Those gaps have widened to become graves—resulting in an
estimated forty-five thousand premature deaths each year—and have
forced more than a million people into bankruptcy. The emerging
health-reform package has a master plan for this problem. By
establishing insurance exchanges, mandates, and tax credits, it would
guarantee that at least ninety-four per cent of Americans had decent
medical coverage. This is historic, and it is necessary. But the
legislation has no master plan for dealing with the problem of soaring
medical costs. And this is a source of deep unease."

Gawande summarizes the paralyzing effect of health care costs on our economy an then proceeds to tell an amazing story about how at

"the start of the twentieth century, another indispensable but
unmanageably costly sector was strangling the country: agriculture. In
1900, more than forty per cent of a family’s income went to paying for
food. At the same time, farming was hugely labor-intensive, tying up
almost half the American workforce. We were, partly as a result, still
a poor nation. Only by improving the productivity of farming could we
raise our standard of living and emerge as an industrial power. We had
to reduce food costs, so that families could spend money on other
goods, and resources could flow to other economic sectors. And we had
to make farming less labor-dependent, so that more of the population
could enter non-farming occupations and support economic growth and
development."

He then makes the case for a lot of testing and for a subtle role for government based on the experience of the Department of Agriculture's Extension Service. The last time I read a plea for a government agency based the experience of agricultural extension agents who tested, learned, and taught their way to high productivity, I was advocating to the Clinton Administration for what became the Department of Labor's Office of the American Workplace. I wish I had known as much as Gawande has learned on the topic however. He not only understands the subtleties of the government role, but of the role of the legislature as well. And he makes a compelling case for learning our way to reducing medical costs and for learning from the astonishing success of our Agricultural Extension agents as we do so.

These three articles, published during Gawande's annus mirabilas, may do more to shape the future of American health care than any others. Gawande has made such extraordinary contributions to our current debate that we should grant the man his life's wish: let's make him into a rock star. He has earned it, he always wanted to be one, and he has a message that will leave all of us much better off.

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A president with a sufficient understanding of the promise of various technologies and the role of the federal government in guiding them can help America cure diseases, develop alternative energy sources, and graduate scientifically
literate children.

Or we could elect a scientific doofus – not for the first time, either.  We can cede our scientific and technological leadership to other countries (OK, we will cede much of it — but we need not cede it all and we need not cede our role as drivers of global innovation).

Three policy areas that will be central to the election require a basic understanding of relevant science and technology: the environment, health and medicine, and scientific research.

On the environment, candidates need to come clean on global warming. Is it an emergency like Al Gore says or is it a long term concern and not necessarily our most pressing one as 400 top scientists recently declared. How will government address abuse of the commons that always occurs when resources are shared, not owned (think fish, water, endangered species, whales, etc.).

On health and medicine, the debate focuses almost exclusively on increasing health care access and affordability. But where would candidates invest in disease prevention? What is their view of government funding for stem cell research (hint: it is unnecessary — private capital is flooding the field and we  Californians borrowed a ton of money to support stem cell research that will turn out to have been largely wasted). What limits should government impose on genomics research and technology? Asian flu: disaster waiting to happen or the government wasting our chicken eggs?

Scientific research is another Washington sinkhole that lives either at the Pentagon, the National Institute of Standards and Technology, especially its Advanced Technology Program, or the National Science Foundation, easily the crown jewels. The NSF spends about $6 billion annually, which makes them bit players in Washington, but they fund 20% of the nation’s basic scientific research. It is a budget that could be very usefully doubled — and you can find the money at DOD and NIST.

I am leaving out space exploration, but we spend a lot of money on that, so it should be a fourth, and scientific education is a fifth, except that I for one could care less if most of our top scientists are born in India and China, so long as come to school here and stick around to invent cool stuff. I care a lot more about the quality of basic scientific education that our kids get, and judging from Mr. Huckabee’s comments on evolution, Hope Arkansas has a ways to go.

A presidential candidate’s debate focused on science and technology issues is a great idea, currently being championed by these folks here. Help ‘em out. Sign their petition. Make a fuss. We should make our candidates debate science and technology issues. Might have saved us a lot of heartache this last eight years.

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