Tuesday, June 30, 2009

When Academics Get Catty (Healthcare Edition)

Henry Kissinger is said to have once opined that "academic debates are so bitter because the stakes are so low". I'm not exactly endorsing that view -- wouldn't say much about my career choice, would it? -- but I did think of that quote today, because of this debate:

Greg Mankiw: Blah blah blah health care blah blah blah market best.

Paul Krugman: Meoooww.

Greg Mankiw: Meeeeeoooooowwwwwww.

Ok, ok, that's not actually what they said. But it wasn't far off.

Here's what actually transpired:

If the government has a dominant role in buying the services of doctors and other health care providers, it can force prices down. Once the government is virtually the only game in town, health care providers will have little choice but to take whatever they can get. It is no wonder that the American Medical Association opposes the public option.

To be sure, squeezing suppliers would have unpleasant side effects. Over time, society would end up with fewer doctors and other health care workers. The reduced quantity of services would somehow need to be rationed among competing demands. Such rationing is unlikely to work well.

FAIRNESS is in the eye of the beholder, but nothing about a government-run health care system strikes me as fair. Squeezing providers would save the rest of us money, but so would a special tax levied only on health care workers, and that is manifestly inequitable.

In the end, it would be a mistake to expect too much from health insurance reform. A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.

Krugman's response:

Both George Will and Greg Mankiw basically argue that we don’t need a government role because we can trust the market to work — hey, we do it for groceries, right?

Um, economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either remarkably ignorant or simply disingenuous.

And Mankiw's final word:

On the issue of tone, I again think I understand Paul's point of view. He likely believes that civility is overrated. He seems to think that in the blogosphere, and perhaps in the public debate more generally, you score points simply by insulting your intellectual adversaries. Sadly, I am afraid he may be right.

Right-o. My personal view on Krugman is: great economist, excellent writer, kind of a douche. His commentary during last year's Democratic primaries, when he blindly supported everything Hillary did and said, really got my goat. My personal view on Mankiw is: anyone who thinks the market can provide healthcare adequately in an advanced economy can't possibly be thinking right and being honest at the same time. The healthcare system in America is so broken, it's actually quite funny.

Anyway, here's good ol' Nate Silver adjudicating the dispute.


AKS said...

Krugman looks like such a nice sweet man, which is perhaps why he gets away with saying some really douchey stuff. He's still a lot of fun to read though.

On the topic of health care, I've been dealing with pharmaceutical companies for the past two years and seriously there are such few 'good guys.' They are so good at exploiting the system to ensure a maximum return on profits even while being fully aware that there (at times unlawful) actions are going to screw up poor sick people. The actions, and political reach, of one American company in particular are beyond belief.

At the time when the drones first started firing missiles, the company was able to get the American ambassador to call the Pakistani Ministry of Health (MOH) and 'urge' them to block the registrations of competing products as they violate patents belonging to the company. Mind you, there is no legal mechanism by way of which the MOH can do this. Most damningly the patent position is dicey: 1) the company's patent application is still pending and the patent has yet to be granted; and 2) Indian and Israeli companies have already challenged the patents granted in the company's favour in the US.

That phone call came over a year ago, to this day a number of Pakistani companies have not received drug registration from the MOH - the MOH lists their status as pending and refuses to reject their drug registration applications, knowing that such a rejection would be outside the remit of the law and therefore could be successfully challenged in court.

Now if the company can do this in Pakistan which is a minuscule market compared to the US, imagine the kind of influence they must wield in their home country.

Lorne said...

"economists have known" anybody who says this is automatically disqualified as an economist. nobody knows anything in the economics

and i dont understand how can you call your health care system "market" Aroun 45% of health care spendings is spent by government; in Canada it's ca 70%; that's not such a big difference, is it?