Noahlogic

My fiddling foray hither into the blogosphere sometimes leaves me inwards slack-jawed amazement at the leaps of illogic inwards the commentariat.

Such was the illustration terminal week, when recent postal service of mine about nutrient stamps. 

My postal service was most nutrient stamps, too most the linguistic communication that people occupation to enshroud agendas inwards the policy debate. Scott Simon at NPR thought he had a big gotcha past times repeatedly quest Congressman Adrian Smith "Is every American entitled to eat?" because the budget proposal reduces nutrient postage payments. The championship was "single payer food," as it seemed Scott's stance of nutrient was similar many people's stance of wellness care. 

This sent Noah on a tear most "free marketplace purists" who disdain "single-payer" wellness care:

In a recent spider web log post, Hoover Institute senior beau John Cochrane likens single-payer wellness aid to single-payer food:
...
past times drawing an equivalence betwixt wellness aid too food, Cochrane is ignoring the long history of economical enquiry showing that the health-care marketplace is real dissimilar from others.  

Here I am left scratching my head. I did not, inwards fact, "liken unmarried payer-heath aid to single-payer food." I didn't advert wellness aid at all. How tin a postal service most nutrient stamps "ignore" enquiry on wellness economics? And if y'all pass 10 seconds googling y'all volition honour I receive got addressed all these arguments inwards other writing that is truly on this topic. You mightiness non concord amongst my answers, but I don't "ignore" them.

A bit of advice to Noah: OK, y'all can't hold upward bothered to do whatever existent enquiry earlier mounting a personal assault on  Bloomberg.com. But effort to arrive all the manner through a blog post before writing a takedown.

(Or, dorsum inwards the old days, earlier writing that "Cochrane is ignoring" something, basic journalistic ethics would demand that y'all contact Cochrane for comment, at which signal Cochrane could signal out that no, he is quite aware of Ken Arrow's piece of work too has responded to it inwards detail, especially when truly writing most wellness care, non food. Or an editor or fact checker would require that. Some intelligence media soundless practise this sort of basic journalistic ethics. Bloomberg, nosotros see, does not.)

***

However completely unrelated to the discipline at hand, though, Noah does choose upward some interesting issues regarding wellness care. I'm grateful for the chance to rebut, because, as a thing of fact, I receive got written most wellness care,  and the assault gives me an chance to recycle some bully old prose to evidence that point.

The number at hand: Can markets piece of work for wellness aid too wellness insurance? Noah:

There are thence many problems amongst the health-insurance too health-care markets that it’s fiddling wonder that they operate differently from the markets for nutrient or prison theatre mobile telephone phones. 

That's a misleading comparison. Health aid is a complex personal service. The right comparing is lawyers, accountants, revenue enhancement preparers, contractors, machine repair shops, architects, gardeners, interior designers, bankers, brokers. These are all cases inwards which people deliver a complex service, too they know a lot to a greater extent than than nosotros do. We hire their expertise as much as a product.

Health insurance is insurance. The right comparing is machine insurance, dwelling insurance, personal liability insurance, life insurance, disability insurance, too to a greater extent than complex insurance associated amongst businesses, such as managing director liability insurance, production liability insurance, freight insurance, too thence forth.

All of these nosotros to a greater extent than oftentimes than non leave of absence to somewhat gratuitous markets. Nobody thinks at that spot needs to hold upward a single-payer contractor. (Well, maybe Noah does. I can't hold off to watch what kinds of bath tiles ContractorCare volition pay for.) Just what is it most wellness aid too insurance that receive got an essential marketplace failure, too these do not?

Noah summarizes a 1963 Ken Arrow essay about wellness care, which Noah cites as enquiry showing that markets cannot mayhap work. The objections:

.. the importance of moral norms.  People receive got all kinds of moral considerations associated amongst wellness care. They aspect doctors to human activity honestly too selflessly, too non merely seek profit

Any fourth dimension economists start telling y'all to top complex regulations to enforce morality, run inwards the contrary direction. The Obama management had something amongst the thought of "science-based" policy. At to the lowest degree let's larn the drive too final result scientific discipline right earlier nosotros start making moral claims.

Let's read economists most economics:

...incomplete markets. Can people truly know all of the possible wellness weather condition they mightiness get, including how much they would pay to cure or process each one? ... The reply is sure no. 

...uncertainty -- inwards wellness care, people don’t know what they’re buying until it’s already besides like shooting fish in a barrel to brand a dissimilar choice. Unlike food, which y'all purchase over too over, open-heart surgical operation tends to alone arrive at off once.  

...adverse selection. People amongst wellness problems are to a greater extent than probable to effort to purchase wellness insurance; too since insurance companies know this, they receive got to accuse everyone more. 

....moral hazard. After you’ve paid for insurance, the insurance companionship has every incentive to deny as many claims as it tin larn away amongst denying

These are all the criterion objections to markets. They are all theoretical possibilities, echoed inwards every econ 101 textbook. But are they truthful of wellness aid too insurance? And thence much thence that the evident pathologies of a authorities run arrangement is better? (Remember, the gratuitous marketplace illustration is non that markets are perfect. It is the long too sad experience that governments are worse.) And are they thence much to a greater extent than truthful than they are of all the higher upward listed complex personal services, that the latter tin hold upward left to markets but a vast authorities bureaucracy must non alone supply for all but outlaw the private option?

As it turns out, I receive got written most these things, inwards "After the ACA" easily available on my website too rather relentlessly promoted on this blog, especially p. 184ff,

B. The Straw Man 

...Critics adduce a hypothetical province of affairs inwards which i somebody mightiness hold upward sick served past times a straw- human being completely unregulated market, amongst no charity or other aid (which nosotros receive got had for over 8 hundred years, long earlier whatever authorities involvement at all), which nobody is advocating. They conclude that the hypothetical justifies the thousands of pages of the ACA, tens of thousands of pages of subsidiary regulation, too the bulk of additional federal, state, too local regulation applying to every unmarried somebody inwards the country.

How is it that nosotros choose this deeply illogical argument, or that anyone making it expects it to hold upward taken seriously? Will non i somebody autumn through the cracks or hold upward sick served past times the highly regulated system? If I honour i Canadian grandma denied a hip replacement or i elderly somebody who cannot larn a medico to choose her as a Medicare patient, why do I non larn to conclude that all regulation is hopeless too that alone an absolutely gratuitous marketplace tin function? Both straw men are ludicrous, but somehow smart people brand the get-go one, inwards print, too everyone nods wisely


C. Adverse Selection

We all took that economic science course of teaching inwards which the professor shows how asymmetric data makes insurance markets impossible due to adverse selection. Sick people sign upward inwards greater numbers, thence premiums ascension too the salubrious larn without. George Akerlof’s justly famous “The Market for Lemons” proved that used cars cannot hold upward sold because sellers know to a greater extent than than buyers.

Yet CarMax thrives. Life, property, too auto insurance markets at to the lowest degree exist, too portion reasonably good despite the similar theoretical possibility of asymmetric information. Life insurance is also “guaranteed renewable,” important y'all are non dropped if y'all larn sick.

Is the even out fifty-fifty true? Do most people, amongst cognition of aches too pains, truly know thence much to a greater extent than most probable cost than an insurance companionship armed amongst a total laid of computerized wellness records, actuaries, wellness economists, too whatever battery of tests it wants to run? Or is asymmetric data marketplace failure inwards wellness insurance merely a myth passed from generation to generation, despite performance markets inwards front end of our eyes?

Now the existent Blue Planet does watch a big “adverse selection” phenomenon. Sick people are to a greater extent than probable to purchase insurance, too salubrious people forego it. But the insurance companionship does non accuse people the same charge per unit of measurement because it can’t tell who is sick or probable to cost more— the fundamental, technological, too intractable data asymmetry posited inwards your economic science class. The insurance companionship charges the same charge per unit of measurement because police too regulation forcefulness it to do so. The insurance companionship is barred from using all the data it has.

Regulation seems to experience that nosotros receive got the contrary data problem; insurers know besides much. The centerpiece of the ACA, afterwards all, is banning the occupation of information, that is, preexisting conditions, non a bully regret that insurers cannot tell who has preexisting weather condition inwards monastic enjoin to accuse them more.

 [Like many others Noah took both sides of this. People know to a greater extent than than doctors thence the is adverse selection. Doctors know to a greater extent than than people thence at that spot are incomplete markets, too people can't shop.]

This source of adverse selection is the legal too regulatory problem, non the data job of economical theory, too easily solved. If insurance were freely rated, nobody would hold upward denied. Sick people would pay more, but “health status” insurance or guaranteed renewability solve that job too eliminate the preexisting weather condition problem.

Adverse selection due to key data asymmetry inwards an unregulated marketplace is, as far as I tin tell, a cocktail-party marketplace failure. It is a squeamish story, but does non quantitatively concern human relationship for the existent world. Furthermore, the ACA is non a minimally crafted regulation to solve the job that people know to a greater extent than than their insurance companies tin know most their health. Once over again nosotros are discipline to the logical fallacy of accepting the entire regulatory construction because of i alleged failure
of a hypothetical gratuitous market.

D. Shopping Paternalism

Defenders of regulation reiterate the stance that markets can’t mayhap piece of work for wellness decisions:

“A guy on his manner to the infirmary amongst a pump assault is inwards no seat to negotiate the bill.”

“One signal I cannot concord amongst is that contest tin piece of work inwards healthcare, at to the lowest degree as it does inwards other markets. I cannot fathom how people faced amongst serious disease volition ever brand cost- based decisions.”

“What most those who currently don’t receive got the background and/or the economical circumstances to swallow healthcare, (e.g. choose anti-hypertensive medicine instead of [buying] an iPhone)?”

Ezra Klein trying to empathise why healthcare prices are thence high too thence obscure, writes:

"Health aid is an odd production inwards that it is difficult, too sometimes impossible, for the client to say “no.” In sure cases, the client is passed out, or otherwise incapable of making decisions most her care, too the decisions are made past times providers whose mandate is, correctly, to salve lives rather than money. In other cases, at that spot is to a greater extent than fourth dimension for loved ones to consider costs, but fiddling emotional infinite to do so— no i wants to remember at that spot was something to a greater extent than they could receive got done to salve their nurture or child. It is non similar buying a television, where y'all tin easily comparing store too walk out of the store, too fifty-fifty forgo the purchase if it’s besides expensive. And imagine what y'all would pay for a idiot box if the salesmen at Best Buy knew that y'all couldn’t leave of absence without making a purchase." 

 [Noah is also non beingness especially original!]

New York Times columnist Bill Keller seat it clearly, inwards “Five Obamacare Myths:”

"[Myth:] The unfettered marketplace is a improve solution. To the extent at that spot is a profound divergence of regulation anywhere inwards this debate, it lies here. Conservatives debate that if y'all give consumers a voucher or a revenue enhancement credit too laid them loose inwards the marketplace they volition do a improve chore than authorities at finding the services—schools, retirement portfolios, or inwards this illustration wellness insurance policies— that jibe their needs.

I’m a pretty devout capitalist, too I watch that inwards some cases private responsibleness helps incorporate wasteful spending on wellness care. If y'all receive got to percentage the cost of that extra M.R.I. or elective surgery, you’ll remember hard most whether y'all truly demand it. But I’m deeply suspicious of the claim that a wellness aid arrangement dominated past times powerful vested interests too mystifying inwards its complexity tin hold upward tamed past times consumers who are strapped for time, oftentimes poor, sometimes uneducated, confused too afraid."

“Ten per centum of the population accounts for lx per centum of the wellness outlays,” said Davis [Karen Davis, president of the Commonwealth Fund]. “They are the real sick, too they are non truly inwards a seat to brand cost- witting choices.”

Now, “dominated past times powerful vested interests too mystifying inwards its complexity” is a goodness point, which I also merely made. But why is it so? Answer: because police too regulation receive got created that complexity too protected powerful interests from competition. And is the ACA truly creating a unproblematic clear arrangement that volition non hold upward “dominated past times powerful vested interests?” Or is it creating an absurdly complex arrangement that volition be, completely too intentionally, dominated past times powerful vested interests?

But the heart number is these consumers who are “passed out, or otherwise incapable of making decisions most [their] care,” “strapped for time, oftentimes poor, sometimes uneducated, confused too afraid,” too “not truly inwards a seat to brand cost-conscious choices.”

Yes, a guy inwards the ambulance on his manner to the infirmary amongst a pump assault is non inwards a goodness seat to negotiate. But what fraction of healthcare too its expense is caused past times people amongst sudden, unexpected, debilitating weather condition requiring immediate treatment? How many patients are literally passed out?

Answer: adjacent to none. What does this even out hateful most handling for, say, an obese somebody amongst diabetes too multiple complications, needing decades of treatment? For a cancer patient, facing years of choices over multiple experimental treatments? For a family, choosing long- term aid options for a grandmother amongst dementia?

Most of the expense too job inwards our healthcare arrangement involves handling of chronic weather condition or (what turns out to be) end-of-life care, too involve many hard decisions involving course of teaching of treatment, extent of treatment, method of delivery, too thence on. These people tin shop. Our healthcare arrangement truly does a pretty decent chore amongst pump attacks.

And fifty-fifty thence . . . receive got they no families? If I’m on the manner to the hospital, I telephone telephone my wife. She is a heck of a negotiator. Moreover, healthcare is non a spot market, which people remember most once, at fifty-five, when they larn a pump attack. It is a long-term relationship. When your machine breaks downwards at the side of the road, you’re inwards a misfortunate seat to negotiate amongst the tow-truck driver. That is why y'all bring together AAA. If you, past times virtue of beingness human, mightiness someday demand handling for a pump attack, mightiness y'all non purchase wellness insurance, or at to the lowest degree store ahead of fourth dimension for a long-term human relationship to your doctor, who volition aid to suit infirmary care?

And what choices truly demand to hold upward made here? Why are nosotros fifty-fifty talking most “negotiation?” Look at whatever functional, competitive business. As a thing of fact, roadside machine repair too gas stations on interstates are remarkably honest, fifty-fifty though most of their customers run into them once. In a competitive, transparent market, a infirmary that routinely overcharged cash customers amongst pump attacks would hold upward creamed past times Yelp.com reviews, to say zilch of lawsuits from angry patients. Life is non a one-shot game. Competition leads to clear posted prices, too businesses anxious to give a reputation for honest too efficient service.

So this is non fifty-fifty a realistic situation. To hold upward sure, some weather condition truly are unexpected too incapacitating. Not everyone has a family. There volition hold upward people who are thence obtuse they would non larn around to thinking most these things fifty-fifty if nosotros were a lodge that allow people drib dead inwards the gutter, which nosotros are not, too maybe some infirmary somewhere would pad someone’s neb a bit. (As if they do non now!) But straightaway nosotros are dorsum to the straw human being fallacy. Once again, the thought that ACA is a thoughtful, minimally designed intervention to solve the remaining job of misfortunate negotiating powerfulness past times people amongst abrupt unexpected too debilitating wellness crises is ludicrous. As is the declaration that nosotros should choose the entire ACA because of this issue. 

Take a closer aspect at Keller too Davis’s statement: “strapped for time, oftentimes poor, sometimes uneducated, confused too afraid,” too “not truly inwards a seat to brand cost- witting choices.” We are talking most average Joe too Jane here, sorting through the forms on the insurance offerings to watch which i offers improve handling for their multiple sclerosis or diabetes-related complications. If Joe too Jane cannot hold upward trusted to sort through this, how inwards the Blue Planet tin they hold upward trusted to figure out whether they desire a fixed or variable mortgage? Which prison theatre mobile telephone phone or cable programme to buy? To bargain amongst auto mechanics, contractors, lawyers, too fiscal planners? How tin they hold upward trusted to
sign matrimony or divorce documents, drive, or . . . vote?

We receive got a hollo for this province of mind: legal incompetence. Keller, Davis, too companionship are maxim that the bulk of Americans, together amongst their families, are legally incompetent to larn by the purchase of wellness insurance or healthcare. And, past times implication, much of anything else.

Yes, at that spot are some people who are legally incompetent. But—straw human being again—Keller too Davis are non advocating social services for the incompetent. They are defending the ACA, which applies to all of us. So they must remember the vast bulk of us are incompetent.

If non blatant illogic, this is a breathtaking aristocratic paternalism. Noblesse oblige. The misfortunate fiddling peasants cannot mayhap hold upward trusted to choose aid of themselves. We, the bien-pensants who administer the state, must brand these decisions for them.

Let me inquire whatever of y'all who soundless agree, does this hateful you? When y'all are faced amongst cancer, do y'all truly desire to house your trust inwards the authorities wellness panel, because they volition brand improve decisions than you, amongst your medico too family? Or is this merely for the benighted lower classes, too y'all too I, of course, know how to honour a goodness medico too piece of work the system? 

Choice is ever betwixt alternatives. Sure, some people brand awful decisions. The inquiry is, tin the ACA bureaucracy too insurance companies truly do better? Yet y'all would non trust them to purchase your shirts? And in i lawsuit over again does the entire gargantuan bureaucratic apparatus of the ACA follow, non from the suggestion that at that spot is some key economical marketplace failure, but because . . Americans are no goodness at shopping?

No. Health is non besides of import to hold upward left to the market. Health is thence important—and thence varied, thence personal, too thence subjective— that it must hold upward left to the market. If y'all do non trust the vast bulk of people to brand the most of import decisions of their lives, too a authorities bureaucracy tin brand improve decisions on their behalf, y'all are a devout patrician, non a devout capitalist.

Well, that was fun, wasn't it? You may or may non agree. You may remember I larn on besides long. But y'all can't mayhap write that I "ignore" Noah's arguments.

By the way, if we're going to larn huffy most "ignoring" classic writings of Nobel Prize winners on wellness care, Noah truly shouldn't ignore this classic past times Milton Friedman

Noah also starts amongst a logical whopper:

Americans, inwards general, back upward government-provided universal wellness care. Influenza A virus subtype H5N1 Pew Research Center survey taken inwards Jan institute that lx per centum say that it’s the responsibleness of the federal authorities to brand sure that all Americans receive got wellness coverage. 

This should hold upward on the SAT reading comprehension test. "Does the evidence back upward the proposition?" No. "responsibility... to brand sure that all Americans receive got wellness coverage" is non "support government-provided universal wellness care." I back upward the former, too  not the latter. There are lots of ways, including involving extensive deregulation combined amongst robust charity care, to deliver "health coverage" without "government-provided universal wellness care."

So this ends up, really, beingness some other postal service most linguistic communication too rhetoric. What is going on amongst Noah, too amongst Bloomberg, too their beau travelers, that such gaping holes of basic logic top muster? That y'all tin write a personal assault without making it through a spider web log post, allow solitary doing 10 seconds of googling to honour if your allegations receive got whatever footing at all? I'll leave of absence it to y'all to create total out the names too analogies for the rhetorical strategy. I gauge if they remember thence fiddling of American's shopping competence, they remember as fiddling of their critical reading capacity.

Update: Thanks to a correspondent who pointed it out, nosotros tin straightaway add together Brad DeLong to the listing of people who can't fifty-fifty hold upward bothered to link to an article they desire to "smackdown," allow solitary present whatever sign of reading it. This is, however, non news.

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