Sunday, April 1, 2012

Obama Care’s Commissar’s Conceit

As a writer on  Soviet planning, I am struck by its parallels with Obama Care.  Both believe their planning is “scientific” and executed by “the best of the best,” who know what is best for ordinary people. Both types of planning commissars suffer Hayek’s “fatal conceit” – the belief that they can plan incredibly complex economic systems. Their “scientific” plans, however, fall apart under the weight of unintended consequences as ordinary people circumvent their genial rules and instructions.

The New York Times’ Mr. Health Care Mandate features economics professor cum scientific planner, Jonathan Gruber. After the Supremes’ brutal questioning, the Times probably felt that Obama Care needed a boost from Gruber, who, by his own admission, “knows more about this law than any other economist.” It was to Professor Gruber that the White House turned to design its new health care law.

The Times reassuringly describes Gruber as “the numbers wizard at MIT,” who has “spent decades modeling the intricacies of the health care ecosystem.”  Gruber has “brought a level of science to an issue that would otherwise be just opinion.” The Soviets reserved such praise for their planning commission, Gosplan. I draw little comfort from Professor Gruber’s scientific-planning credentials, especially when I learn “he’s the only person you can go to for that kind of thing.”  Gruber, aided by his MIT graduate student assistants, is a one-man Gosplan. Science is better served by competing ideas not by monopoly.

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  1. Three issues---all fixable, but were is the incentive?:
    (1) majority of healthcare institutions are led, managed and administered by the 'former medical doctors' without any formal or informal economic, and business and management training. So, output suffers and input thrives. Keeping everything else constant, comparing hospitals run by the 'professionals' with management training and those run by the 'medical doctors' may prove this point.

    (2) Academic economists also follow similar path. A lot of economic departments are run by "narrowly" focused professors, who lack any leadership and managerial experience, and have questionable judgement (including, rewarding what they narrowly understand, and those who socially or physically click with them). A skewed organization cannot be expected to generate balanced views of the economy and train the clients (students) they ought to serve. Comparing how an economic department ranked nationally under the management of those known to have had broad knowledge of economics (say, if they authored papers in various sub-fields of economics, or authored principles of economics)with how it is ranking now may enlighten us in this case. Top 30 economic departments in the nation are chaired (by rotation) among those with broad knowledge of the field.

    3) While teaching principles of economics, Professors do not 'require' reading the essential works of Adam Smith, Friedrich August Hayek, Milton Friedman, and Julian Lincoln Simon. At best, only the names and conclusions are mentioned. In most cases, students turn to parrots with no depth whatsoever. At leas, to get a (B.S.) degree in economics, reading the major works (and not extracts) of Adam Smith, Friedrich August Hayek, Milton Friedman, and Julian Lincoln Simon should be required.

    p.s., I bet that not even 1% of students of economics have read this (& especially, the last sentence):

    "As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other eases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

    1. Milton Friedman's 1978 lecture on healthcare is as if it was delivered yesterday!