Posted tagged ‘Markets’

By The Way, David Brooks Is Still Always Wrong

November 13, 2011

I know this is already long since fishwrap, but amidst the many disembowelings of David Brooks discovery that he has always been at war with Eurasia   always  loved Mittens, I have to rage, rage, at the relentless, endless, fetishization of the deepest, most degrading fantasy of the right.  No, not that one.  Nor that one either.  Nor this.

No it’s the almost touching faith evinced by Mr. Brooks and the entire GOP presidential field in the existence of a free market in health care.  So, just to flagellate a truly dead horse, let’s take a look at one specific passage from Our Lady of Perpetual Broderism’s Romney tongue-bath:

True Medicare reform replaces the fee-for-service system with premium support. Government gives people money, rising slowly over time, to shop around for their own private insurance plans. The system would reward efficiency and quality, not just quantity. Competition between providers would unleash a wave of innovation.

The only problem is that the marketplace for health care that exists in the world real people inhabit bears little or no resemblance to Brooks’ pleasant vision of informed consumers, with full information in hand, shopping around for the perfect combination of benefits and price they need — not just now, but through the life (and death) cycle all of us endure.

 

That is: most evocations of the free market in just about anything call up spherical cows, simplified (and dangerously convincing) models of what actually happens in the world.  But to imagine a genuine Ec. 101 free market in health care — and to praise someone as “serious” for building policy on the assumed reality of such delusion — that takes real effort, a true commitment to avoid knowing inconvenient facts.

At least, so says such a DFH as Daniel McFadden.  That would be the 2000 Nobel laureate in economics who has taught at such dens of raving lefty lunacy as USC, UC Berkley, and (ahem) MIT.  And that would be the same fellow who has spent quite a bit of time analyzing the notion of consumer driven health care.  Here’s what he had to say in 2008 in a working paper co-authored with Joachim Winter and Florian Heiss:

Most, but not all, consumers are able to make health care choices consistent with their self-interest, even in the face of novel, complex, ambiguous alternatives. However, certain predictable irrationalities appear – excessive discounting of future health risks, and too much concentration on dimensions that allow easy comparisons, such as current cost and immediate net benefit. Some consumers are inattentive, particularly when prior choices or circumstances identify a default “Status quo” alternative.

These behavioral shortcomings imply that some degree of paternalism is essential if Consumer Directed Health Care is to allocate resources satisfactorily. Health care markets need to be regulated to keep out bad, deceptive products, particularly those that offer “teaser” current benefits but poor longer-run benefits. Consumers need good comparative information on products, and they need to have this information brought to their attention. Consumers appear to underestimate the probabilities of future health events, [or] anticipate the resulting disutility, and as a result they systematically underspend on preventative or chronic care. Socially optimality will require that these services be subsidized, or choices regarding them be framed, to induce desired levels of utilization.

[From the second paper listed on McFadden’s website, linked above: “Consumer-Directed Health Care: Can Consumers Look After Themselves?” pp. 19-20]

Note what McFadden et al. do not say.  They don’t say market mechanisms can’t work.

They do say that human beings display predictable behavior that makes it impossible to rely on an unregulated market to deliver health care.  They point out that those irrationalities fall most heavily in the area of guessing what you or I might need some years down the road…i.e. when we are likely to need good care the most.*

Hence, the need for what the authors above call “paternalism,” and what I would term the normal function of the concept of universal insurance — mandated if necessary under the particular policy choice — against risks all members of a society face.

McFadden and his colleagues are hardly the only ones who get this.  This paper is exemplary, not determinative.  And again, it’s not that these writers represent some radical wing of anti-classical economics clinging to the margins of the profession.  In fact, McFadden and his co-authors display some familiar, reflexive thinking.  I’d argue with the Nobel laureate in his offhand dismissal of a different approach, what he terms “a government single payer/single provider program.”

Partly, the difficulty I have with the expert here is that single payer is not the same as single provider.  Conflating the two allows one to damn one with the flaws of the other — which is hardly cricket in a serious policy discussion.  And when anyone — even a distinguished fellow like McFadden — says that he “believes” the problems of such a system will be the same as for private plans, then I become an honorary Missourian: “Show me.”

But that’s an aside.  The core point is that even folks with a deep institutional and disciplinary engagement with the idea of markets understand that you can’t run health care on the principle that the customer knows best.  We don’t — we can’t, really.  And that’s why Romney, and Ryan, and all the other GOPsters trying to transfer risk to the American people and profits to American insurers are never, ever “serious.”

Which is just another long way round to repeating the obvious. David Brooks is always wrong.  He kind of has to be, given how he has dedicated his career to the notion that Republicans belong in power, no matter what.

*Brooks — like the GOP candidates — might argue at this point that they never have contemplated an unregulated private market in health care.  Which may be accurate, but not true (to channel my inner Sally Field).  That is — the degree of regulation in the market to which all calls to repeal Obamacare would return us was the one in which a host of problems along the lines McFadden et al. point out, and many more besides.  More broadly — even if you take the GOP as sincere in its stated principles, they oppose “paternalism” in individual decisions.  Which means they oppose exactly what is needed in the delivery of health care.

Images:  Edouard Manet, The Dead Bullfighter, 1864-1865

Pompeo Batoni, Time Orders Old Age to Destroy Beauty, c. 1746

Can Anyone Tell Me What John McCain Is Saying Here?

September 18, 2008

Further to the thought in this post:

There are plenty of folks taking note of John McCain’s scramble to come up with a rhetorical response to the ongoing adventures on Wall Street — see this for a good rundown on the difficulty Straight Talk John has in remembering what it is he actually believes on a minute-by-minute basis.

But the attention being paid to the implausibility of Commerce Committee Chairman and deregulation stalwart suddenly turning into the Scourge of the Robber Barons is missing another element of the story that in governance terms is more serious.  That is — I think there is a growing consensus that the McCain campaign has a deeply conflicted relationship with the truth (i.e. the candidate lies a lot, as does his Veep selection, as does his campaign as a whole).

But what is only just starting to get noticed is that McCain does not appear to think very well — certainly not on his feet, and maybe not under any circumstances.  And by this I mean he has a hard time assimilating information, analyzing it accurately, and coming to conclusions that he can then express in a clear and coherent fashion.

Now the links above mostly lead to stories about McCain’s difficulties with the location, leadership, and ally-status of Spain — the gaffe du jour.

But as the financial markets continue to play their lethal version of musical chairs, and as McCain hones his populist lines, I thought it would be useful to look at what he had to say when first confronted with the fact that the worldview of his economic stump speech had moved so far into fantasy land that not even the 2008 GOP could maintain the fiction.

Recall that on Monday morning, McCain famously repeated his standard line that whatever turmoil there might be in the markets, “the fundamentals of our economy are strong.”

With even the White House declining to endorse that view (and ever more Federal action putting ever more tax dollars at risk in the still-uncertain-of-success rescue efforts), it became quickly clear to the candidate and his brain trust (an interesting phrase, don’t you think…) that Sen. McCain had to get back out there, and fast.

So out he duly went, a few hours later, to a town meeting in Florida.  There he made another statement, acknowledging that the fundamentals of the economy were at risk — and much other verbiage, which is where my real concern comes in.

I’ve now listened to the clip of John McCain trying to communicate his views and intentions about this imperiled economy four or five times now, and it’s not that I disagree with what he is saying.

It’s that I cannot make sense of his statement.  It’s astonishingly incoherent, so much so that I transcribed it for all to read.

I’ll post the transcript below in two versions:  one that matches the way it was delivered, just a single almost breathless block of words; and another in a somewhat easier to read and more charitable form, paragraphs and emphases broken up in my guess as to how McCain’s staff might have circulated a text.  I’ll comment a bit, and then post the Youtube for all to judge for themselves.

But my basic question remains:  can this man actually perform the mental operations  required of a president on the time scales that the office of President imposed on its incumbents?

So here goes:

And this is a unique and diverse state and it’s a wonderful state and it’s what America is all about.  And I want to say again I know Americans are hurting now and the fundamentals of our economy are at risk.  They’re at risk.  The great workers, the great innovators because of the greed of Wall Street and the greed and, and the abuse that has taken place which has put our very economy at risk.  Our economy is at risk today.  Have no doubt how serious this problem is.  And we Americans will get through it.  But we have got to reform, we’ve got to reform the way the government does business.  I want to promise you that my whole life I have reached across the aisle, and I’ve worked with Democrats, and I know how to do that and we must do that, because we have got to fix this economy which the fundamentals are at great risk right now.  And those are the American workers and these are the American workers who deserve far better than what they have gotten recently, and I want to promise you that it’s my highest priority:  we’ve got to get our economy going again. We’ve got to create jobs and keep this nation safe.

And again:

And this is a unique and diverse state and it’s a wonderful state and it’s what America is all about.  And I want to say again I know Americans are hurting now and the fundamentals of our economy are at risk.  They’re at risk. The great workers, the great innovators because of the greed of Wall Street and the greed and, and the abuse that has taken place which has put our very economy at risk.

Our economy is at risk today. Have no doubt how serious this problem is.  And we Americans will get through it.

But we have got to reform, we’ve got to reform the way the government does business.  I want to promise you that my whole life I have reached across the aisle, and I’ve worked with Democrats, and I know how to do that and we must do that, because we have got to fix this economy which the fundamentals are at great risk right now.

And those are the American workers and these are the American workers who deserve far better than what they have gotten recently, and I want to promise you that it’s my highest priority:  we’ve got to get our economy going again. We’ve got to create jobs and keep this nation safe.

Hello?  Anyone home?

It is possible to parse this and come up with a somewhat sympathetic reading:  McCain knows there’s a problem; knows that government action is required; and he is willing to work across the aisle for solutions.

But read it — or, given that no spoken remarks have the same quality transcribed as they do uttered, look at the clip below — and tell me that this is the likeliest interpretation.

What you see is a man grasping for some complete thought, and missing.  Listen to each sentence and fragment; try to follow the bouncing ball, and see the connection from one idea to the next.  I can’t.  It’s just: “situation bad; workers good; greed bad; situation bad; things must change; I can change; I promise change;…..”

In the end, this may just be another case of eastern elitist intellectual snobbery.

But the premise of my real fear here is that words uttered are a mirror of the mind behind them — never more so than when someone is under pressure to compose and speak an important thought whilst naked on the island:  no teleprompter, no prepared speech, just what you think at that moment.

If I’m right, then John McCain is an even worse potential President than I had thought (and that’s going some).

Update: It does occur to me that we have already tried a President with difficulties in this direction.  Doesn’t seem to have worked out so well.

But come to your own conclusion.  Here’s McCain’s clip, and as a lagniappe, a much longer video, an (almost)* complete speech from Obama delivered a day later touching on the same issues.

McCain first:

And now Obama:

*The clip I choose cuts off the boilerplate with which Obama begins many speeches — thanks to the local politicians and organizers and so on.  There are other versions easily to be found on Youtube if you want to catch that preamble.