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.
Space scientists can launch a manned aircraft on a trajectory to a space station that arrives on the minute. They use laws of physics in their real “scientific” planning. They do not need to worry about how the space station will behave when the space ship approaches, and their task is specific and well defined.
Scientific-planner Gruber, however, must write software codes for an entire healthcare ecosystem of hundreds of millions of patients, millions of health-care providers, thousands of insurance companies, and hundreds of state and local governments. Unlike space scientists, Obama Care planners must predict how patients, physicians, businesses, nurses, insurers, state officials and other actors will react to thousands of rules, instructions, mandates, incentives, and penalties in a newly-minted health system.
Professor Gruber must use “behavioral assumptions” to guesstimate, among thousands of other things, how many young people will ignore the mandate, how many employers will drop coverage, and how providers will react to new incentives and compensation schemes.
Do not worry, says the Times. Gruber’s behavioral assumptions are “based on past experience and economic theory.” But where is “past experience” when we entirely revamp our health-care system? Economic theory, at best, may give us the first-order directions of change, but it is helpless to account for the all-important higher-order effects and feedbacks. We economists hold the secret of how little we really know close to our vests.
Gosplan’s “numbers wizards” could not program the over demanding, capacity understating, false reporting, and side-deal-making machinations of planned enterprises. Likewise, MIT and Washington elites cannot imagine themselves in the shoes of “ordinary” patients, nurses, drug manufacturers, or small businesses. They always underestimate how smart people are, how easy it is for them to game the system, and how sensitive they are to incentives. If individuals are trapped in a system they do not respect and that offends their values, there are no limits to Obama Care’s unintended consequences. How many middle-income households will suffer mysterious income losses to qualify for Medicaid? How many businesses will shed employees to escape mandates? How many voluntarily uninsured will simply disappear from the radar screen?
The politics of NASA’s scientists and engineers do not affect manned space flights. Obama Care’s behavioral assumptions, intended or not, inevitably reflect political biases. Although a “card carrying democrat,” the Times assures us that Gruber is trusted by both political parties “because he was seen as an econometric wonk, not a political agent.” (Even after he wrote opinion pieces supporting Obama Care without disclosing his role and authored a comic book to explain the law?) Gruber’s own characterization of individual insurance markets as “unfair” tells us where he stands. Would his model conclude that we are best off with unfettered private insurance markets?
There’s more to worry about: Gosplan’s “scientific” plan set only a few macro parameters. The real producing, delivering, and selling at the enterprise level was dictated by faceless norm setters, rate engineers, and other rule makers. What went on after the plan was finished was much more important than the plan itself. Obama Care will be no different and perhaps worse. The “tutelage” of the “non-partisan” expert commissions and Health and Human Services bureaucrats will be as “petty” as they write their gobbledygook rules behind closed doors. The public will have no clue, and favored interest groups will be in hogs’ heaven. Professor Gruber may not even recognize his handiwork after the HHS bureaucrats are through with it.
My comparison of Obama Care and Soviet planning reminds me of an old joke: Men dressed in suits carrying brief cases march alongside tanks and missiles at the May Day parade. A boy asks his father: “Why are those men in a military parade.” Answer: ‘Those are the economists; they are the most dangerous of all.”
I would expand this joke to include all technocrats who think they can develop models of complex economic systems. They have given us the MIT-Club of Rome 1972 prediction that the world would run out of resources by 2010, the OMB’s July 2000 forecast of trillion dollars surpluses as far as the eye can see, and Al Gore’s 2006 An Inconvenient Truth, which sent school children to bed with nightmares of drowning in tidal waves.
Why should Obama Care be any different?
Paul R. Gregory is a Research Fellow, Hoover Institution Cullen Professor of Economics, University of Houston. Gregory has a regular blog //blogs.forbes.com/paulroderickgregory/at Forbes.com