Zycher on Gruber
By David Henderson
When L’Affaire Gruber began two weeks ago, Tyler Cowen challenged us to stick to discussing Gruber’s economics rather than his personal failings. I took up the challenge here, pointing out that Gruber’s willingness to mislead could explain what looked like some pretty bad analysis that one would not expect a tenured MIT professor to make.
Now Ben Zycher, a fellow UCLA Ph.D., has done so also–and does it magnificently. His piece, “Gruber’s bad political analysis driven by bad economics,” is not long and so I recommend the whole thing. A choice excerpt:
Instead, let us focus on a larger reality: Professor Gruber practices rather poor economics.
Can that possibly be true of a full professor at M.I.T.? Well, yes. Economists may disagree about many things, but absent among them is the central role of incentives as determinants of behavior, an eternal truth that applies fully to government. In the context of ObamaCare, government has interest groups rather than patients, and dollars not spent on a given constituency can be spent on others. Accordingly, government as a buyer of medical goods and services — or as a rule-maker for the ObamaCare exchanges and the insurers participating in them — has incentives to opt for lower-priced alternatives over higher-priced ones in ways that do not reflect the incremental advantages of the latter, if any. In particular, the drive to reduce explicit budget costs — to claim that the ACA is producing efficiencies — biases choices in favor of current budget savings at the expense of benefits enjoyed by the beneficiaries of a given program, even relative to the decisions that patients would make if confronted with the full costs of their choices. That the CBO estimates of budget costs themselves are biased by an expansion of price controls, whether explicit or implicit, makes matters worse by exacerbating the confusion of budget outlays with true resource costs. Nor does Gruber make any adjustment for the inefficiency costs (“excess burden”) of the tax system used to pay for expanded public insurance programs.
HT2 Don Boudreaux.