Arnold Kling  

Today's Tylerisms

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Ruining my Day... Fuzzy Math...

He quotes a comment from David R. Henderson.


I'm reluctantly coming to the conclusion, after having read his site almost daily for over a year, that Tyler is not a free-market crusader.

Henderson is referring to the Freddie-Fannie bailout, which I infer Henderson opposes. Tyler responds,

1. I have very much favored the "bailouts" to date. I don't favor that they were necessary but of course that latter attitude may or may not be libertarian in its derivation.

2. My tone stems from my personality, namely that I rarely get mad. And in any policy debate, I don't assume that the people on my side intellectually are somehow morally superior or more honest. In any particular case I usually give that 50-50. It's also worth noting that perhaps we shouldn't judge partisanship from tone, just as we shouldn't judge linguistic fluency from the quality of a person's accent (which we tend to do).

3. A good blog should be subversive and help you see the faults in the author's own positions. Ask whether the blogs you are reading in fact provide that service. Self-subversion ought also, in the long run, to benefit liberty and other important values.


I am not sure how I feel about the bailouts. On the one hand, I do think that letting Freddie and Fannie go under would be just about equivalent to defaulting on the national debt. As Tyler put it in a previous post, this would produce something like "the end of the world."

On the other hand, the bailouts may merely be postponing the end of the world. In the not-too-distant future, we may see the U.S. government lose its status as a borrower that does not have to pay a risk premium. And the bailouts may contribute to that.

Furthermore, the bailouts in practice are part of a truly horrid housing bill. Instead of trying to reduce the sensitivity of the financial system to Freddie and Fannie, the bill entangles the fate of the government and the fate of those two firms even more tightly.

I also agree with what (I think) Tyler is saying about self-subversion. It is more important to show that you grasp the holes in your point of view than to show that you grasp the holes in someone else's point of view.

Which brings me to another of Tyler's posts, on health care. He offers his views on my debate with Mark Thoma.


It's also hard to argue that a) the really sick people are often denied care or coverage by private insurance, and b) we can pick up those same people and still lower total costs. It's the sick people who account for most of the costs, at any margin, and most of those costs come from medical procedures.

Read the whole thing.

I take Tyler's point about "self-subversion" to mean that it is good to question one's own point of view. I think that those of us who advocate market-oriented health care must be aware of its pitfalls. These include:

1. In an economy where incomes are highly unequal and health care is a large share of spending, access to medical procedures will be highly unequal. Note, however, the careful wording. I said "access to medical procedures," not "access to necessary health care."

A lot of the growth in spending has been and will continue to be on procedures with high costs and low benefits. We can provide everyone with access to necessary health care without providing equal access to medical procedures.

Yesterday, I took my daughter for an endoscopy that seemed very unlikely to show anything, even according to the doctor who recommended and performed it. As an individual, I believe that I am entitled to "waste" money on this marginal test. However, I do not think that giving everyone equal access to such marginal tests is a social concern.

2. Having people pay when they are sick feels exploitative. I think that a big reason that health insurance is so universal around the world is that it relieves this discomfort.

3. In theory, health insurance companies could put a lot of effort into trying to avoid covering high-risk individuals. If you only read Paul Krugman and his acolytes, you would think that this is a major issue in practice. However, in reality, insurance companies put far, far more resources into recruiting consumers than into screening them out. Perhaps it could be that if we took away employer-provided health insurance and put everyone into the individual market, then adverse selection and its avoidance would become more important empirically.

I wish that the supporters of more government health care would talk about some of the pitfalls in their proposals. Instead, when I hear the "free lunch" arguments, my instinct is to resist.

I remember what happened with the Massachusetts health plan. When I said that it would be expensive, the counter was that the savings from eliminating uncompensated care would be enough to cover the costs. In practice, I was right.

Now the "free lunch" crowd talks about administrative cost savings or prevention or just exclaims, "Look at Europe!"

A good general principle is to beware of economists offering free lunches. Be skeptical of those who argue that tax cuts pay for themselves. Or that private accounts for social security will eliminate the long-term deficit without reducing benefits. Or that universal health care will reduce health care spending.


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COMMENTS (3 to date)
Blackadder writes:

It is more important to show that you grasp the holes in your point of view than to show that you grasp the holes in someone else's point of view.

Why is this more important? I don't quite get it. Why wouldn't it be more important to point out the holes in a point of view that is false, potentially harmful, etc., than a view which is basically correct?

floccina writes:

2. Having people pay when they are sick feels exploitative. I think that a big reason that health insurance is so universal around the world is that it relieves this discomfort.

Did the AMA use Government to kill the mutual aid societies, which is a non government approach to this problem?

Marc writes:

Both sides are actually right on the free lunch debate. I have done many process improvement projects in the health care industry and I can say that administrative costs and waste can be cut by in half easily. Coverage could double with the same expenditures we have now (free lunch) or cost could be halved with no loss of care. Unfortunately, I also agree with you that there is no hope of this ever happening on a national level, especially if government is in charge of implementation. We would just get the bridgework to nowhere and the root canals of Venice.

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