Atlas Shrugged: The Mocking

Tuesday, November 3, 2009

Failure: The Preamble

I'm going to go out on a limb and guess that this...:
Prices [for health care] really are pretty great, for all that we resent them when they signal variations in the demand for human labor. When you break the price signal, you get all manner of bad outcomes. Price signals are already pretty bad in the private insurance market, but at least they're set by negotiations between employees and employers, employers and insurers, insurers and providers . . . rather than by lobbying.

is just as wrong as this:
Interestingly, this [Ezra Klein post] seems like a variation of my argument about tipping points in markets when governments start to dominate them. I was talking about this in the context of pharmaceuticals and medical devices, where I worried about ham-fisted price controls destroying much of the incentive for efficient innovation.

Megan McArdle seems to be taking a Economics 101 view of price signals that ignores the actual market in favor of a fantasy free market, but that's based on past experience with McArdle, not exhaustive analysis, which I'm too exhausted to do.

She's freaking amazing. My admiration of her sheer gall knows no bounds. I guess she really does believe that "failure is the key to success." God knows it's worked for her.


Ken Houghton said...

How is the McMegan position in any way "a[n] Economics 101 view of price signals"?

I haven't taught 101 (only midlevel classes), but there is nothing in any of the basic texts that I can see that says that an "incentive coefficient" suddenly becomes zero at any point other than 100% taxation--or even approaches zero with an incremental change.

If that were true, the markets would by no means be describable as "rational," since the essence of rationality is that there is a range and that marginal utility changes, not absolute values.

McMegan's Economics, as presented, are worse than her English.

Susan of Texas said...

Where did she get this? Is it just an assumption that our free market is never manipulated by anyone?

Downpuppy said...

2 commenters - Tory & Jorge - seem to have done what neither Megan nor Ezra did, i.e. read & understand the subsidy provision.

This is about the 55th consecutive time Megan unquestioningly quoted a secondary source that is fundamentally wrong, and the 55th consecutive time she's failed to admit their wrongness.