2015-06-23

We Want What's Good For Us

Tyler Cowen makes his point with a headline and a citation. His point is that Republicans have shifted to where they don't want to become the party that takes away a welfare payment, whereas they previously opposed Obamacare wholesale. Hence, there is a "new political equilibrium" on the matter.

Politically, though, the only thing that matters is that we perceive Republicans to be opposed to Obamacare and that we perceive Democrats to be in favor of it. I hate to sound cynical, but what happens with the law itself is in fact irrelevant to the "political equilibrium."

What happens to the ACA really comes down to whether people can extract more rents with Obamacare or without it. If the former, the law will stay; if the latter, the law will change in a way that pays more rents. (That's a meta-pun for the LessWrong crowd, wakka wakka...)

What the (ordinary) people need is an argument that shows them they will benefit from Policy X. Obamacare supporters - and fans of socialized medicine in general - do a good job of this by citing shotgun theories comprised of loose correlations that feel true. Commentator "rayward," for example, says, 
Supporters of intervention on the supply side point out that, contrary to the popular misconception, the health of Americans (other than the financial health of providers) is actually worse than the health of people in those other advanced countries.
That point is actually a dumb canard. Americans aren't less healthy because we're uninsured, we're less healthy because we eat fried chicken by the literal bucket-load. No amount of health insurance is going to counteract the All-You-Can-Eat Pizza Buffet Effect. 

But even if it could, Amy Finkelstein would call it "ex ante moral hazard." You're morally culpable if you live like you have a "Cadillac" health insurance plan, as Americans have been doing, and you're morally culpable if you oppose the government provision of "supply-side intervention" into health care.

It was a subtle, but important, shift in language. I tried to document this as it happened (see here and here, for example), but now the damage is done. Economists can use market language - and mathematics - to evaluate business decisions, but the minute we're no longer interested in concrete mathematical facts like how much things cost and how to supply costly services to many people, we enter a parallel universe. In that parallel universe, the facts of doing business are no longer binding constraints, but rather "problems" that can be "addressed" with "policy." If "we" run out of money while trying to "address" "problems," then we simply need to adjust "policy." 

And policy debate is decidedly different than the evaluation of a business decision. Policies are not evaluated on costs and benefits. Policies are proposed and then debated. While for any business decision, we do due diligence and make the case for the most profitable outcome, for any policy debate, we measure how badly various demographics want something. Policy debate can include a cost-benefit analysis, but that's really just one piece of a "multifaceted" issue. One must also account for morality. One must account for politics.

So, here we are, discussing the "political equilibrium" of a policy that apparently supplies health insurance to people who don't have it, but that in reality adjusts the costs of various aspects of the system while chasing a poorly defined benefit in the form of making health care "affordable." Is it any reason the debate is so unsatisfying?

One way to make health care more affordable is to prescribe a teaspoon of salt water to treat everything that people go to the doctor for. Salt water is cheap, and if that's the only treatment option, medical expertise is irrelevant. You could argue that this policy isn't medically sound, but who are you to deny health care to those in need? You could argue that salt water can't cure medical problems, but if I find a population that does better on average with a strict salt water therapeutic regimen, then your case evaporates.

Economic debate, or any discussion that relies on concretely defined facts and figures, can easily make short work of claims about salt water. Policy debate cannot. An economic treatment of the health care issue would be short and sweet:
  • How can we get state-of-the-art health care in America? - Charge customers the correct price.
  • How can we ensure that the costs of treatment are accurately accounted for? - Charge customers the correct price.
  • How can we supply the most health care to the most people? - Charge customers the correct price.
  • How can poor people be given that which they cannot afford? - Transfer payments.
  • How can we design a welfare system that will not be corrupted by rent-seeking? Sorry, you can't.
In that scenario, some people have to walk away despite being partially unsatisfied. In economic debate, the fact that no one can be completely satisfied is obvious and known. We find solace in the fact that we have come to the best possible decision.

In policy debates, we find solace in the team. Your team might lose this round, but they'll be sure to stick it to the other team when they next win a round. So long as we can't all have our medical bills paid for, we can at least delude ourselves into thinking our impotent votes hold the key to changing our lives at some point in the future.