I talked at lunch today with a Nobel laureate in Economics (name withheld because he is a friend’s relative; let’s call him “Bob”). Bob is an expert on macro-economics and we talked about unemployment in the U.S. and the high cost of health care, especially government-funded health care such as Medicare.
Like other economists, Bob impressed me with his ability to ignore the details and texture of real life. I reminded him that two years ago I suggested that a lot of the 15 million unemployed folks simply did not have the skills and/or work ethic to be worth hiring in today’s economy, e.g., one where a sloppy worker can ruin a $10 million batch of goods or download a virus and cost the IT department $50,000. I had also suggested that the cost of health care was too high to make it worth hiring Americans in any job where providing health insurance was customary (see this posting). At the time Bob had castigated me for my pessimism and assured me that growth was just around the corner due to the upcoming fiscal stimulus spending.
Two years and about $3 trillion of deficit spending later, the U.S. economy has not responded the way that Bob predicted. I tried to engage him on the skills and education question and he responded that we don’t know how to fix K-12 education so we shouldn’t put more money into it (a fair point, perhaps). Better to spend on physical infrastructure such as roads, airports, dams, etc. He cited a report that showed America’s airports to be in “Grade D” condition. This was a surprise because most U.S. airports (the runways and taxiways, not the terminals) strike me as being in excellent shape. Mostly I was impressed by Bob’s lack of interest in what goes on at the individual level. For example, he hadn’t thought about what it would take for an individual business person to hire a new worker here in the U.S.
The debate over Medicare is very abstract when politicians and economists talk about it. Nobody can quite figure out how we spend twice as large a slice of GDP on health care as other countries. Yet a single conversation with a doctor would add a lot to an understanding of the problem. A friend of mine (“Joe”) is a pulmonary/critical care doctor. An elderly patient comes into the hospital. Dr. Joe tells them “Your father is going to die within two weeks. To keep him alive beyond tonight will require a lot of machines and about $300,000 of Medicare expense. What would you like to do?” The response was “Everything.” Dr. Joe says “It didn’t make a lot of medical sense, but I get paid by Medicare either way so we did everything.”
Reasoning and making decisions from anecdotes is obviously not very sound. On the other hand, it seems that economists are led to a lot of unsound conclusions by ignoring the anecdotes.