Ignoring problems of aggregation, probably so.

Mickey Kaus writes somewhat confusingly this morning that:

I'm for universal health care in large part precisely because I think the government will be less tough-minded and cost-conscious when it comes to the inevitable rationing of care than for-profit insurance companies will be. Take Arnold Kling's example of a young patient with cancer, where "the best hope is a treatment that costs $100,000 and offers a chance of success of 1 in 200." No "rational bureaucracy" would spend $20 million to save a life, Kling argues. I doubt any private insurance company is going to write a policy that spends $20 million to save a life.  But I think the government--faced with demands from patient groups and disease lobbies and treatment providers and Oprah and run, ultimately, by politicians as terrified of being held responsible for denying treatment as they are quick to pander to the public's sentimental bias toward life--is less likely to be "rational" than the private sector.

That is to say, the government's more likely to pay for the treatment (assuming a doctor recommends it). So it's government for me. 

Huh? Kling’s point is that because the government is subject to interest group pressures (from the sick) it is likely to spend more on healthcare than individuals would choose to spend if they they actually paid the cost of the care out of their own pockets or through insurance policies that they purchased. Why would we want to spend more than this?

Absent a postulate of market failure in the insurance market, the reason insurance would not cover this procedure is that ex ante, is that the purchasers of the insurance policy would rather spend their money on other things than buy insurance to cover this type of treatment (i.e. one that costs $20 million per life saved). If consumers did value having a right to such a treatment, a well functioning insurance market should be able to provide insurance that covers it for a competitive price. If consumers didn’t really value this right, insurers would not provide it and their not providing it would be evidence of how little consumers valued the right (a revealed preference!).

I agree that controlling the cost of healthcare is not inherently desirable. For largely the reasons explained by Megan McArdle and Mickey Kaus: we’re rich, why shouldn’t we spend more on healthcare? But we don’t place an infinite value of healthcare. At some point the marginal value is less than the marginal cost. We should stop buying it at that point and have a system that let’s us do that. Private insurance is such a system as long as we have a well functioning market.

It is likely that we don’t have a perfect market for health insurance and I am open to arguments that there might be superior systems (including tweaks to the current one), but I have seen no proposed changes involving universal coverage (or even a significantly greater government role) that I think would actually be an improvement on the current system that would make people better off in any concrete way.

Universal coverage could make everyone more equal, but at the cost of making them worse off (at least in terms of satisfaction of concrete revealed preferences). I think that is a tradeoff Mickey would be willing to make, but I remain skeptical.

Mickey Kaus responds to my defense of Samuelson saying “aspirational preferences” sound pretty good to him and that “It seems like it would be hard to achieve any desirable form of equality--equality before the law, equality of opportunity, or social equality--simply by aggregating the choices of individuals spending their own money.”

Perhaps, but here are a few caveats:

• Going back to the context of Samuelson’s post, even if those are desirable things it is hard to see how increases in types of equality are signs of economic growth or economic progress. His point was that a number of Obama’s plans involve sacrificing economic well being to pursue aspirational preferences.
• It is hard to know how to value aspirational preferences about people want their society to look because talk is cheap. We know how much I value a new car by the amount I’m willing to pay for it. Not so with aspirational preferences which are mostly expounded rhetorically rather than revealed by the cold hard test what people are willing to forgo to satisfy that preference. Aspirational preferences are mostly satisfied by spending other people’s resources.
• Aspirational preferences have been used as an excuse for lots of bad policy. Welfare for example: people don’t want to live in a world where single mothers and their children go wanting.

None of this is to suggest that there should be no weight given to aspirational preferences, but I would probably accord them less weight than Mickey and remain highly suspicious of them as justifications for policies that make people economically worse off.

Mickey Kaus takes Robert Samuelson to task for seeming “to argue that because health care is not "material" it isn't a valuable service and can't be the basis for capitalistic economic growth.”

I think that misreads Samuelson, but then Samuelson is not being very clear on this point. I suspect Samuelson would agree with Kaus’ broader (correct) point that a significant part of increased health spending is due to the fact that we are richer and other desires are more easily satisfied with a smaller portion of our income, leaving more to spend on the more labor intensive business of keeping us healthy.

Samuelson's point is he believes Obama's world in which everyone is insured doesn't really make people as a whole better off because the moral hazard associated with health insurance encourages wasteful spending on things someone else is paying for. The cost of that wasteful spending is that resources have been used on healthcare rather than things people really want like bigger houses or leisure.

Taken to a higher level of abstraction, we will have succeeded in satisfying an aspirational preference (something about which we would say "gee wouldn't it be nice if...") for everyone to be insured at the cost of satisfying the actual preferences of people revealed by how they spend their own money in the absence of compulsion by the government.

Samuelson is saying satisfying aspirational preferences for things like green energy, universal insurance or limiting greenhouse gasses as the expense of revealed preferences is not economic progress because we will not be better off. My sur-response to Mickey is here.

Two fine paragraphs from Will Wilkinson responding to a silly post by Matt Yglesias:

Now, I am willing to say that, ceteris paribus, a certain kind of grasping, unprincipled pecuniary self-interest is a destructive quality. If that’s greed, then I’m against it. But I’m not willing to say the same thing about the pursuit of wealth generally.

I think we have recently punctured some dangerous misconception about the real value of certain kinds of “financial innovation,” and so we should reconsider how much those who have become wealthy in these fields have actually enhanced general welfare. I think a lot of execs basically failed to do their primary job: to manage their firms’ assets responsibly on behalf of the owners of those assets: the shareholders and creditors. This makes them justifiable targets of outrage. We’ve learned a lot of lessons. I think we’ve been given reason to think much harder about the principal-agent problem — the mismatch of incentives between owners and managers — at the heart of corporate organization. I think we’ve learned just how “socially responsible” maximizing long-term value really is, and how anything that distracts from focus on long-term value creation (whether it be myopic bonus systems or irrelevant-to-the-business “corporate social responsibility” initiatives) is a potentially hazardous nuisance. The Smithian congruence between self-interest and the general welfare is not a natural fact of the world, but is mediated by social norms and the structure of institutions. We need to make sure the desire for wealth takes the right shape, and that the institutions within which people pursue wealth tend to actually work to convert “low” aspirations into real social benefits. But we’ve been given no special reason to second-guess the general utility of the desire to become wealthy. It is a crucial and necessary resource. And it remains a much more likely engine of utility than the desire for political power — a truly dangerous motive Matt tends to ignore.

The Economist asked David Frum this question and it was striking how much his answer reflected what I had been thinking:

Democrats in Congress have said "No" to organized labour on its demand to eliminate secret ballots before union certification. To date, the Obama administration has brushed off demands from its angrier constituencies to impose some kind of legal sanction on those in the Bush administration who made national security decisions with which Democrats have disagreed. They have not acted precipitately in Iraq, they have not granted a blank check to the auto companies, and they have shown impressive open-mindedness and adaptability in addressing the crisis in the banking sector—even if they have been awfully slow to arrive at a credible final policy. And, of course, President Obama himself has shown great calm, reassurance, and dignity in office. The "reset" of tone in US foreign relations is a great service both to America and the world.

Those are all good things. Not sure they're worth $800 billion in wasteful stimulus spending though.

There is a deeper problem as well: a naive trust in the ability of government action as an antidote to unwelcome results in the market. Unfortunately it is a problem that seems to be shared by Republicans.

To be clear, it seems likely that many markets can be improved. But most of that improvement seems likely to come by making changes that eliminate distortions, which is wholly different that change inspired by unwelcome results.

After updating the firmware in of the OCUR CableCard tuners in my Vista Media Center PC, I noticed that it would only tuner clear QAM channels, which in my case limited it to cable channels that had over-the-air counterparts, e.g. NBC, CBS, PBS.

I was able to solve this problem just by removing the CableCard from the OCUR tuner and reinserting it.

Noam Scheiber writes of AIG in the current issue of The New Republic that:

The real problem was more fundamental: Companies that deal in risk have a natural tendency to take on too much of it, whether they're arranging homeowner's policies or elaborate arbitrages. Over time, a steady march of profits desensitizes them to the dangers they once sweated; even institutional checks begin to weaken.

Which is why the difference between a successful risk enterprise and an unsuccessful one often has less to do with the complexity of its schemes than with its leaders' fanaticism about discipline. It was, among other things, the lack of such leadership at AIG in recent years that made the company a ward of the state.

This seems plausible with respect to AIG. And probably even more true with respect to governments. Has anyone else noticed a lack of sensitivity to risks and dangers of new policies and the weakening of institutional checks on the actions of the federal government recently? Where is the fanacticism about discipline with respect to risky new schemes in the current administration? No, really, where?

In fact, for all the reasons identified by the public choice economists, the government is likely to be even worse at running things than the private sector. That’s why institutional checks and institutional modesty should be the order of the day when it comes to government initiatives. Too bad Barack Obama does not appear to understand this.