On Gruber: I Don't Want Apologies. I Want Independent Analysis.

Between the auto show and the Prop 8 trial and associated travel, last week was tremendously exhausting for me and it will take me several days to actually report on those two events. But it seems one thing hasn’t moved on very much since last Sunday–the reporting surrounding Jonathan Gruber’s role in pitching the Administration’s health care. Gruber’s defenders are still falsely claiming I accused Gruber of tainting his analysis for pay (I said, “I don’t doubt he believes all this stuff”) and suggesting that I’m ignoring Gruber’s qualification for the HHS contract (I wrote an entire post affirming that the sole source on it made sense). Now, the debate has ratcheted up as some very able commentators call for apologies.

Unfortunately, that debate–like Gruber’s failure to reveal his conflicts in the first place–has supplanted what is really long overdue in this policy debate: real analysis of the assumptions behind the $850 billion plan about to be enacted by Congress, the assumptions that Gruber had a key role in formulating.

Gruber’s public claims delayed real analysis of the claim that the excise tax would raise workers’ wages

To explain why this is important let me make a suggestion that I can’t prove, but which is the reason I started looking at this in the first place: because someone as credible as Gruber made certain claims about the excise tax, others in his field did not examine his claims in timely fashion.

Gruber, in conjunction with the Joint Committee on Taxation, has long been claiming that the excise tax would raise workers’ wages. I first started challenging that claim in October, in response to an Ezra Klein post that relied on Gruber’s faith-based claim that the excise tax would lead to higher wages. On November 5, Gruber quantified the benefit as $74 billion in 2019. And by December, I was in full panic mode, given that no economist could point me to a study proving the point, even in the face of benefit consultants’ surveys refuting it. Economists kept pointing me to Gruber’s papers and telling me not to worry my sweet little non-economist head about such matters.

Perhaps because of the work of the Economic Policy Institute, people finally started looking at this key claim in the last two weeks. No lesser economist than Gruber’s chief defender, Paul Krugman, judged that those making the claim (Krugman implied, but did not say explicitly, that this criticism was directed at Gruber) were exaggerating. And Gruber, who backed off the claim slightly after having had his conflicts exposed, has since admitted privately that he “over-reached” in his earlier statements.

So to review what happened: for a number of months, unions and benefits professionals and dirty fucking hippies like me challenged this assumption, but no one in Gruber’s field appears to have done any independent analysis of his claims. As a result, the excise tax was passed by the Senate based on at least one erroneous assumption. But now, either because economists have weighed in or because Gruber’s conflicts have been exposed, a key part of those assumptions has been challenged (and, in a perhaps not unrelated development, unions have been able to negotiate a palatable deal on this issue).

This kind of analysis should have happened last fall, but it did not, at least partly (I would argue) because someone of Gruber’s prominence had strongly made the claim. His colleagues didn’t do what scholars normally do, regardless how prominent the scholar, which is to check his work. And again, none of this is meant to say Gruber “over-reached” with this claim intentionally. Rather, because the normal peer review of Gruber’s claims didn’t happen, he (and with him, the Administration and the Senate) made a mistake, one that has already had real policy implications.

The entire basis for the excise tax remains unexamined

Now, this matters to me not because a bunch of prominent people are accusing me of being a scandal-monger, but because I believe some more key assumptions about the health care reform have not been adequately examined. In fact, there are two key claims about the excise tax that have, at the least, gotten far too little scrutiny.

Start with the revenue model. Here’s how Gruber very helpfully explains the revenue model the Joint Committee on Taxation used to come up with revenue estimates that will be raised through the excise tax.

This analysis relies on three documents issued by the JCT. The first is their October 13, 2009 memo which provided the score of the revised High-cost insurance tax as in the Senate Finance Committee mark. This memo shows the year-by-year revenues raised by the High-cost insurance tax. Importantly, the memo highlights the two different ways the High-cost insurance tax raises revenues. The first is through actual excise tax receipts paid by those high cost plans that remain above the High-cost insurance threshold. The second is through the fact that firms will spend less on health insurance – and this reduced spending will be shifted to workers in the form of higher wages. This conclusion of wage shifting is supported by both economic theory and evidence, and is assumed in modeling by both the JCT and the CBO. This division is very informative: the JCT estimates that about 80% of the revenues raised by the High-cost insurance tax will come from revenue from higher wages, not from the excise tax itself. [my emphasis]

To lay out what Gruber says the assumptions he (along with CBO and JCT) make:

  1. The excise tax will lead employers to switch from “gold” to “silver” insurance plans
  2. This will mean “reduced spending” as “firms will spend less on health insurance”
  3. Those companies will pass those savings onto employees in the form of higher wages
  4. Employees will pay more taxes on those higher wages which will lead to higher tax revenues

80% of the revenues raised under this tax, Gruber and JCT estimate, will come from higher wages.

Now, we’ve already seen Lawrence Mishel and Krugman and even Gruber challenge or rethink assumption 3, the claim that employers will pass on savings to employees. So there is already a clear problem in the revenue model JCT used to assess this plan.

But (as some economists reassured me when I was having my December panic) if the other assumptions remain the same, it wouldn’t necessarily be a problem, because employers would simply keep the increased profits they got from those savings in health care, and pay higher taxes on them.

Which brings us to assumption 2, that “firms will spend less on health insurance.” Note what this claim implies. It argues that companies will not just aim to keep their health benefit spending constant over time (that is, move from a gold plan, which had been $700/mo but had been raised to $750/mo by the insurance company and therefore fell into the excise tax, and switch to a $700/mo silver plan to stay under the excise tax level). Rather, Gruber describes the JCT as assuming that companies will “spend less” on health insurance, implying a switch from a $700/mo plan to a $600/mo plan as the plan began to hit up against the excise tax.

And that must be what the JCT assumes. If there weren’t either increased profits or wages to come out of this, then profit and or wages would remain the same, and tax receipts would not go up at all (except through companies actually paying the excise tax itself, which JCT says will only account for 20% of the revenue). Yet the only way there would be actual savings (as opposed to flat spending over several years) is if companies dramatically cut back health care (from a Platinum to a Silver plan, or a Gold to a Bronze plan) or if they stopped offering health care altogether (which, given that there will be no employer mandate, they may well do).

Now, I’m fairly sure that Krugman, at least, believes this to be an erroneous assumption. He says,

Maybe it will help the plausibility of this case to notice that we’re not actually asking whether a fall in premiums would be passed on to workers. Even with the excise tax, premiums are likely to rise over time — just more slowly than they would have otherwise. So what we’re really asking is whether slowing the growth of premiums would reduce the squeeze rising health costs would otherwise have placed on wages. Surely the answer is yes. [my emphasis]

But, as Gruber’s language clearly suggests, he and JCT do appear to have assumed that there would be “a fall in premiums,” they do appear to have ignored that “premiums are likely to rise over time.”

And as one example of why this is probably another erroneous assumption, take this story on Safeway, which has been celebrated for the kind of innovative cost-cutting that policy makers would like to see come out of the health care reform. As the WaPo reports, after Safeway made some fairly aggressive insurance plan changes, their costs did drop; but costs have already climbed back up to where they were after the reform.

But a review of Safeway documents and interviews with company officials show that the company did not keep health-care costs flat for four years. Those costs did drop in 2006 — by 12.5 percent. That was when the company overhauled its benefits, according to Safeway Senior Vice President Ken Shachmut.

The decline did not have anything to do with tying employees’ premiums to test results. That element of Safeway’s benefits plan was not implemented until 2009, Shachmut said.

After the 2006 drop, costs resumed their climb, he said.

Even as Burd claimed last year to have held costs flat, Safeway was forecasting that per capita expenses for its employees would rise by 8.5 percent in 2009. According to a survey of 1,700 health plans by the benefits consultant Hewitt Associates, the average increase nationally was 6.1 percent.

Today costs are slightly higher than in 2005, Shachmut said.

So when Safeway said it had flatlined costs since 2005, “we defined that, you might say, loosely,” he said. “Perhaps a more precise way to say it is that our costs today on a per capita basis are essentially the same as they were in 2005.

So even in the case of a fairly radical change, a company only got savings (and therefore only paid higher taxes) for a few years, at which point their costs returned to the same levels. More moderate changes, it seems, may well result in no savings and therefore no revenue gains. And if companies don’t actually spend less–if they instead simply spend the same but get less health care in return, as seems likely–then 80% of the presumed revenue tied to the excise tax would fail to materialize.

In other words, it appears that economists, if they looked at Gruber’s and JCT’s claims closely, would challenge the entire revenue model to the excise tax, which would surely change the debate about the tax. But that hasn’t happened.

And will the excise tax even “bend the cost curve”?

But then there’s the really troubling unexamined assumption: that it will “bend the cost curve”–that is, make costs go up more slowly over time.

Picture 179Now, curiously, all the justifications for this claim speak abstractly of the benefit of forcing employees to pay for more of their health care costs themselves, which will result in them choosing which care they need, using less care, and therefore saving money. I’ve yet to see any analysis of what happens in real life when this happens.

The thing is, though, it has happened in real life.

A lot.

It has been happening for decades.

And yet no economists that I’ve seen have argued that such switches have led to a slow in the rise of health care costs. If, as companies have tried to trim health care costs over the last several decades by making precisely the kind of changes that excise tax boosters envision incenting in the future, but those changes haven’t already slowed health care costs (not to mention resulted in increased tax revenues), then there is zero reason to expect it to work in the future. Zero.

Let me go back.

In 2003, Jonathan Gruber actually studied the degree to which employers were shifting some of their health care costs onto employees. He and his study co-author, Robin McKnight, found that “in 1982, 44% of those who were covered by their employer-provided health insurance had their costs fully financed by their employer, but by 1998 this had fallen to 28%.” Gruber and his co-author attributed the shift to the following factors: 32% to the rise of HMOs, 9% in employees becoming newly eligible for Medicaid, 14% due to changes in taxation, and 47% to the rise in medical spending. Significantly, part of this cost-shifting was already a response to taxation changes, but even the shift because of rise in medical spending would look–in practice–precisely like what excise tax boosters want to see happen in response to the excise tax. The cost to employers goes up, and as a result employers make employees pay more of their own health care out-of-pocket.

In other words, over the last thirty years, employers have already been shifting costs onto employees. As long ago as 1998, fewer than 30% of employers were shielding their employees from the rising costs of insurance. And surely those numbers are far, far lower now. So if the excise tax were going to work, then the “cost curve” would already be bending; health care cost increases would already be slowing in response.

Now, frankly, I’m less sure this assumption is totally bogus. For example, employer supplied health care costs increased more slowly last year (though analysts have suggested that’s just because fewer people have it). But still–since we’ve seen 30 years of employers shifting costs onto employees, shouldn’t there be data–and therefore a testable argument–that shows that all that cost-shifting has resulted in decreased costs?

Because if it hasn’t worked over the last 30 years, there is absolutely no reason to think it will happen in the next ten. And this, of course, is the big “cost savings” that bill proponents point to to excuse the abandonment of a public option or drug reimportation.

More analysis, please, not more defensiveness

Now, we don’t really know what role Gruber played; we don’t know why the White House sold his pieces as “objective” analysis justifying their own policy decisions. The Gruber story may or may not end up being a scandal. We don’t know whether or why yet.

But what we do know is that the guy we all thought was conducting independent analysis of these policies was in fact just affirming policies he conducted the analysis for the Administration on, the same analysis the Administration used in selecting this policy.  We do know that on at least one count, Gruber (by his own admission, as well as Krugman’s) overreached in his defense of the Administration’s favored policies. And we know that all those other policies Gruber was pitching remain largely unexamined–at least, unexamined by Gruber’s colleagues, the ones with the ability to identify other problems in his assumptions. And the risks are real. The entire revenue model may be (and I suspect is) based on a faulty assumption. And the claim that the excise tax will slow cost increases may (I’m less sure about this one) also prove to be based on a measurably wrong assumption.

So rather than defending Gruber for what his colleagues judge to be a mistake, can they (I’m looking at you, Krugman) start checking some of his work? As I’ve said, this country is about to make an $850 billion bet on Gruber’s analysis and assumptions. And yet rather than doing what all scholars do–check each others’ work–Gruber’s colleagues would prefer to spend their time focusing on me, rather than on Gruber’s analysis.

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    • bmaz says:

      You know, I guess I did mention apology, but I meant it in more of a generic sense somehow. Paul Krugman is a brilliant man and is quite entitled to his opinion, whether I or anybody else agrees with it or not (and I usually do by the way). I simply wish he would knock off the belittling of those that actually think there should have been full disclosure and want to insure that the public has the full facts from which to evaluate Gruber’s work and opinions. Lack of transparency by Gruber and the Administration is NOT a “fake scandal”, and Krugman’s own newspaper makes the case convincingly along with many others. I fully appreciate Krugman’s defense of Gruber; I don’t appreciate his tarring of others for fully informing the public.

      • Leen says:

        as a peasant activist I so appreciate your efforts as well as Ew’s and many others to clarify where these conclusions/reprots about health care etc are coming from. Am so surprised that Gruber or any of the other “experts” would not expect this kind of scrutiny given the manipulated environment during the last eight years that we have all been praying, hoping and pushing to come through. Really surprised that Krugman would refer to these efforts as trying to create “fake scandals” instead of what they are. Sincere efforts to support and fuel a more informed electorate.

        • qweryous says:

          “Am so surprised that Gruber or any of the other “experts” would not expect this kind of scrutiny given the manipulated environment during the last eight years that we have all been praying, hoping and pushing to come through.”

          The difference here is that the misleading, deception and debate about the exposure have all occurred before it is history.

          It is the fact that the process may be influenced by the exposure that has surprised them.

          edit somehow lost this from post:

          “Sincere efforts to support and fuel a more informed electorate.”

          These folks think they are the ones charged with executing these efforts.
          Hence the current situation is disagreeable to them.

            • qweryous says:

              Thanks for the links.

              Will be spending some more time on this.

              I am fairly well convinced that there has been some research done with conclusions contradictory to what Gruber’s been citing lately.

              Interestingly enough, some appears to be by Gruber.

              Looking at the data and assumptions to be sure that apples are compared to apples is time consuming.

              • selise says:

                thank you, thank you, thank you!

                i just included the links to the source material (gruber’s and cbo reports) rather than rehashing my argument because i thought it would be best if you could take a look first, unencumbered as much as possible by my pov. after you’ve taken your own look, i’d love to discuss.

                thanks again!

                • qweryous says:

                  Concerning the issue with nov 2 and nov 27 links, and your statement at 46 in the thread:

                  I’ve seen this somewhere else. Have you posted about it before?

                  The reason I ask: want to know if someone else has seen something.

                  I remember there was more descriptive detail about what you said in 46?

                  If not you- where else is this (EW?)?

                  Don’t even need the details just curious.

                  • selise says:

                    Have you posted about it before?

                    yes, it was me. and it has been discussed in the threads, but always i think at my instigation (in other words, i don’t know if anyone else has actually read the reports in an attempt to independently, at least as much as possible, confirm or deny my take — if it has, i haven’t seen it.).

                    will give you links to those discussions later, but thought the absent of more details (as you note), would be better. don’t think i need you to even come to some definitive conclusion, but would appreciate your reading of the gruber and cbo reports prior to reading (or rereading) the discussion threads. i think/hope my comment @46 in that thread is sufficient.

                    trying to balance the issue of sending you in the right direction without overly biasing you. sorry if i’m getting it wrong.

                    • qweryous says:

                      Yeah thats fine.

                      I remembered about someone providing Gruber links, didn’t remember what about.

                      Was then surprised it was something I remembered from somewhere.

                      I am also curious to see where people actually report reading his papers, or the in the weeds documents.

                      Very little of this seen so far.

                      Most of it here:hence.. it’s ew’s fault! ( and she reads and analyzes them!)

                    • selise says:

                      Most of it here:hence.. it’s ew’s fault! ( and she reads and analyzes them!)

                      LOL. peons are not supposed to do that!

                      p.s. none of the reports i gave you links to is horribly long. (more than a page, but iirc the longest is thirty something. sorry, too lazy to make the cat on my lap move so i can go check).

                    • qweryous says:

                      Need to work it all over, will be a while.

                      Had already read the first two prior to your linking.

                      Will post when I decide what if anything I see.

                    • selise says:

                      great. happy to wait. thanks again!

                      and i know i can count on you to give it to me straight. if i’m wrong, i’d seriously appreciate a good argument telling me so. reality based community and all that…..

                    • qweryous says:

                      A preliminary look at these 6 documents and what in the world is going on?

                      I could be wrong but one example:

                      which comes from the nov2 2009 Gruber Link:
                      http://voices.washingtonpost.com/ezra-klein/2009/11/massachusetts_provides_evidenc.html

                      “And the results have been an enormous reduction in the cost of nongroup insurance in the state: The average individual premium in the state fell from $8,537 at the end of 2006 to $5,143 in mid-2009, a 40 percent reduction, while the rest of the nation was seeing a 14 percent increase.”

                      Is the average after Mass reform the result of all the health young now being required to buy insurance? If so it’s a fallacious comparison.
                      You’d have to compare similar cohorts, and the premium cost net of state subsidy in MA.

                      It also seems this same situation applies to the first paragraph in ‘background’ of Gruber’s Nov 2 paper.

                    • selise says:

                      You’d have to compare similar cohorts

                      ding! ding! ding!

                      and likewise, as you note, in first paragraph of the ‘background’ section of the nov 2 paper. in fact, gruber writes (excuse my typos please), “they estimated the cost of an individual low-cost plan in the exchange to be…” and “…the CBO projected that, absent reform, the cost of an individual policy in the non-group market would be…”

                      then in the first paragraph of the ‘example’ section (again please excuse my typos, i’m not cutting and pasting so please refer to original docs in case of gross typo error), gruber writes, “…the CBO has not released information on the age to which their “typical” exchange or non-group premiums refer, so I assume for now that they both apply to 40 year olds.”

                      but in the referenced cbo reports, they write (nov 2, first page, second paragraph), “…the table shows the approximate national average for that lower-cost reference plan…” and (sept 22, page 5, paragraph 4), “Under current law, average premiums for nongroup coverage….”

                      all bolds are mine.

                      …….

                      skipping the bit where i don’t see how the cbo should be using averages (are the cost distributions normal? i don’t think so) because that is a gripe i have with the cbo…..

                      the cbo gives cost numbers for “approximate national average” and gruber is pretending they are giving cost numbers for a “typical” premium (hello? typical isn’t average — maybe median, but not mean — unless the cost distributions are normal and i HIGHLY doubt that is so). and then he assumes that the “typical” premium refers to the exact same aged person (which he even admits elsewhere we don’t know — they are two different cohorts after all! they could and probably would have different age distributions as well as healthcare cost distributions). and these are the numbers he uses as inputs to his model.

                      i don’t care how good his model is. i think that’s a bogus use of the cbo numbers as inputs.

                      and here is what the cbo says in their own reports, in the sept 22 report for example:

                      (page 3, last paragraph), “However, making appropriate comparisons is difficult because insurance premiums can vary under current law — and thus can differ from premiums under a proposal — for many reasons, including the etent of the coverage that is provided; the rates and methods used to pay providers of health care; the quantity and intensity of services used; the insureres’ administrative costs; state regulations of the insurance market; employment status adn employers’ decisions about offering coverage; and the underlying health of the enrollee pool. How much of each of those factors would contribute to a difference between premiums under current law adn premiums under the proposal is difficult to ascertain.”

                      and later (page 7, top paragraph), “Further, the characteristics of people enrolled in the proposed exchanges would differ from teh characteristics of people enrolled in employment-based coverage or the individual market under current law, so differences in average premiums would not equal the differences in premiums faced by a given group of enrollees across those different settings. In light of those complexities, quantifying the net effects of the Chairman’s proposal on the amounts paid by individuals and fmailies to obtain health care is very difficult. CBO has not modeled all of those factors and is unable to quantify them or calculate the net effects at this time.”

                      my bold.

                      as far as i can tell, gruber is using the cbo numbers in a way even they say the numbers shouldn’t be (bolded part of the quote immediately above).

                      there’s more, but this seems like a big one to me.

                      ……

                      hope i didn’t screw anything up in a big way in the above, it’s late and i’m tired, so it’s extra likely. hopefully will be back tomorrow am after sleep and coffee to check. but just couldn’t help myself from replying right away. i’ve been so looking for someone willing to read the papers and check my thinking….

                    • qweryous says:

                      This gave me a headache.

                      Caused by the difficulty in keeping the discrepancies straight.

                      The previously noted recursion is noted here.

                      It seems like there are a number of problems here.

                      I noticed the same things you list here.(and several more)

                      Need to develop a ‘Gruber glossary’ to compare to the normal/cbo glossary.

                      I too will probably leave it for tomorrow

                    • papau says:

                      spot on analysis –

                      there are more assumptions that are not justified, from 1982 Rand on value to health outcome of “free” care to mid-90’s HMO conversion health cost stabilization and the same years wage increases.

                      But your points are spot on.

                      I do not love to reference myself – but I posted this before http://mountainsageblog.com/2009/07/02/the-health-care-industry-vs-health-reform/

                      “Ed Bartleson and Jim Olsen adding a few items to the amazing accomplishment that was their paper on “Reserves for Individual Hospital and Surgical Expense Insurance”, a paper that put on solid footing a new industry (late 50’s/early 60’s) and ended the need for massive “claim variation” margins in premiums that was the standard causality approach.”

                      That data behind that paper detailed the by age by sex by type of medical problem by procedure cost (albeit data was sparse when finely broken down)- and surprise – pregnancy type costs end with increasing age while cancer and heart problems increase Now at that time only in research was there any attempt to convert the above into premium while I was working with Ed (about a year only)- but it was used in “claims underwriting” and in setting reserves for uncompleted claims (obviously) – and premiums, while being set and reset on aggregates from the current insured populations for each policy form issued by the company, were reviewed with an eye on that paper. – – 50 years later we should have much better data – but I have missed any research paper that turned current data into premium setting data.

                    • papau says:

                      The reduction in average Mass premium is the new (younger and poorer) policyholders plus the choice of crap policies so as to reduce the cost – the result is a reality of no change from 2005 in the health of the population because 21% are choosing to avoid the health care system when sick and needing care (the same as in 2005), despite the subsidies, so as to avoid the out of pocket expense – and we still die 3 years earlier than folks in other countries.

          • Leen says:

            “it is the fact that the process may be influenced by the exposure that has surprised them.”

            Yeah 30 million people marching in the streets worldwide did not influence the “process” in the run up to the immoral war in Iraq…questioning the validity and sources of that fixed intelligence.

            Would really be something if this “process” is influenced.

            O.K. I have repeatedly said I am a peasant and I am. What I just do not get if Gruber and the White House were so convinced that his analysis/report was so spot on why hide this alleged conflict of interest. Why not expose that yourself and then have all of those other “independent analysis” come and back up Gruber’s conclusions?

            Are they blind to the lack of faith that the American people have in our government? Have they forgotten that this was the well marketed package that Obama ran on? That every move they make would be under intense scrutiny?

        • Neil says:

          surprised that Krugman would refer to these efforts as trying to create “fake scandals” instead of what they are. Sincere efforts to support and fuel a more informed electorate.

          and an informed policy!

      • selise says:

        i meant it specifically (the bit about the apologies to marcy). but she’s right — the best thing that could happen for the country is some independent analysis.

      • robspierre says:

        Ms. Wheel is being the bigger man here by not demanding an apology. But Mr. Krugman still owes one–and he’s the loser if he doesn’t supply one.

        Stooping to ad hominem attacks is not only Bush league: it automatically undermines your credibility as a scholar. That Mr. Krugman is a specialist professional engaged in a debate with a layman makes this doubly inexcusable. Charlatans attack non-experts personally. Real scholars stick to the issues and explain the technicalities in layman’s terms. Essentially, they do exactly the analysis that Ms. Wheel asks for. Since that analysis is Mr. Krugman’s job, he ought to be ashamed of himself. And the only way he can reclaim his self respect is to apologize and get down to the proverbial brass tacks, as he should have in the first place.

        Professional courtesy only goes as far as using respectful language. It doesn’t cover lack of facts or sloppy analysis. When it comes to those–to truth–the academic profession should be no respector of reputations. On the contrary, it should be ruthless (just as it is when their grad students have to face them during orals).

  1. Fenestrate says:

    Are the economists seeing health care as a commodity and not a service? That is, as demand falls commodities become cheaper, but services can become more expensive. I’m not sure to what degree health care falls in these two categories.

    • robspierre says:

      That seems like a very, very good question. Everything seems to be thought of as a commodity these days.

    • Nathan Aschbacher says:

      That’s not quite correct. The thing that causes some services to increase in price as aggregate demand collapses is the inelasticity of the remaining individual demand; that of the people who are left who need the service, they need it very badly. This can also be true of commodities (think collectables, etc).

      • Hugh says:

        The thing that causes some services to increase in price as aggregate demand collapses is the inelasticity of the remaining individual demand; that of the people who are left who need the service, they need it very badly. This can also be true of commodities (think collectables, etc).

        Well said. There are also information asymmetries and structural obstacles that make it essentially impossible for ordinary consumers to price discover or price shop.

  2. Peterr says:

    . . . others in his field did not examine his claims in timely fashion. . . .

    . . . His colleagues didn’t do what scholars normally do, regardless how prominent the scholar, which is to check his work.

    Why does this remind me of the last several years and folks like Alan Greenspan, Helicopter Ben, and the MOTUs? “If AIG says things are fine, what’s the problem?” or “If the banks say there’s no need for concern about a bubble in housing, let’s not worry about it” or . . .

    When people start believing their own PR and belittling those who question their assumptions, there’s a serious problem waiting to explode.

    • Mauimom says:

      When people start believing their own PR and belittling those who question their assumptions, there’s a serious problem waiting to explode.

      As I remarked on another thread, even if it’s just the youngest kid in the back seat, when he yells, “Dad, look out for the tree!!!,” you’d better listen, not just tell him to shut up.

      [Rahm, do you see yourself anywhere in this picture?]

  3. Leen says:

    Thought we had had enough of the fixing the intelligence or reports around what an administration wants? One would think these folks would learn.

    “independent analysis” what a concept

  4. earlofhuntingdon says:

    Whether the outcomes of Gruber’s advocacy – including the non-examination of his assumptions and conclusions – are “unintended” or planned outcomes for this administration is a thought worth pursuing.

    Obama takes pride in his chessmanship, Rahm in his ability to persuade with a two-by-four. If coyly hiding Gruber’s possible conflicts led to taking his work at face value for six months or more, I’d say the administration received the usual lobbyist’s return on payments to Congresscritter coffers – multiple orders of magnitude more than was actually spent.

    • emptywheel says:

      Agree it bears more investigation. All I’m saying is we don’t know yet.

      What we do know, though, is that his work has not and continues to not be analyzed. And that has already arguably affected policy.

      We can go back and unpack what Gruber’s role was and whether it was intentional (on his part, or just as likely, the Admin’s). But for now, I’d like to see the analysis done right away.

      • earlofhuntingdon says:

        Agreed. One would think that spineless Harry Reid or the occasionally straight-backed Ms. Pelosi would like to have that economic analysis done, in hand, analyzed and critiqued before they sign off on an $850 billion program that the Republicans and the left will skewer them on for a generation.

        A consequence that may well be lumped into the administration’s Plan B is that we’ll end up with the usual, tradmed style of talking heads. If others disagree with Gruber, Obama can then advocate for what he’s wanted all along and call it “splitting the difference”.

        • Arbusto says:

          One would think that spineless Harry Reid or the occasionally straight-backed Ms. Pelosi would like to have that economic analysis done, in hand, analyzed and critiqued before they sign off on an $850 billion program that the Republicans and the left will skewer them on for a generation.

          Why would they, when their and Obama’s pay masters like the current analysis?
          Remember, our taxes only pay their salary, not their current and future life style. Especially Harry, since his Senate days appear numbered.

        • Mauimom says:

          Agreed. One would think that spineless Harry Reid or the occasionally straight-backed Ms. Pelosi would like to have that economic analysis done, in hand, analyzed and critiqued before they sign off on an $850 billion program that the Republicans and the left will skewer them on for a generation.

          Oh, I dunno.

          The TARP was only slightly less expensive [$700 billion], and look how little “paperwork” they asked for for it.

          And what a great deal IT turned out to be!!!!

    • Gitcheegumee says:

      Do we know if Krugman and Gruber have collaborated on economic models in the past? Any other collaborative efforts?

      I don’t know-just askin’.

      • earlofhuntingdon says:

        I think their specialties are actually far apart, so I doubt if they’ve collaborated on substantive economic analysis. They do view the world from the top, though Krugman is quite capable of viewing as if he were at the bottom, a rarish commodity these days and I hope he won’t shelve it for ambition.

  5. earlofhuntingdon says:

    Switching from “gold” to “silver” insurance policies. My, how Orwellian phrases carry their political load.

    We are not discussing coinage or jewelry or wedding anniversaries. We are discussing a policy intended to force employees to accept less access to health care, because in the intentionally poorly reformed and regulated insurance market, lower cost policies inevitably yield less coverage for health related expenses and, consequently, less health care.

    From the public’s perspective, the purpose of this debate and any legislation that results because of it is to increase access to health care. This administration is paying for its reform legislation by making one group of employees pay more out-of-pocket for whatever health care it can get in order to expand health insurance only for other Americans. Meanwhile, this administration is shoveling taxpayer money into private insurers’ pockets as if it were shoveling coal into a ship’s boiler.

    A more regressive, less efficient and less transparent maneuver – under the Orwellian banner of taxing Chevy plans as if they were a CEO’s Cadillac plan – is hard to imagine. And this we get from Democrats?

    • Peterr says:

      We are discussing a policy intended to force employees to accept less access to health care, because in the intentionally poorly reformed and regulated insurance market, lower cost policies inevitably yield less coverage for health related expenses and, consequently, less health care.

      And those most devoted to this policy appear to take great pride in that consequence.

      • earlofhuntingdon says:

        That would go hand-up-backside with the universal business meme – and we all know how much government wants to run itself like a business – that employees are their least important asset.

        The health and productivity of employees, and the contributions they make to their community, are unimportant if the most important item on your HR team’s agenda is how to unemploy as many Americans as possible and replace them with dollar-a-day substitutes from China, Indonesia or Haiti.

        Government by oligarchy, naturally, would share that agenda and that priority.

        • Peterr says:

          File this in the “running government like a business” folder . . .

          From the Wichita Eagle blog last Tuesday:

          State budget cut effects reflected in Sedgwick County District Court outgoing message

          If you call Sedgwick County District Court, you might get a message that apologizes for how long you have to wait on the line to talk to someone.

          Court employees answer phones from 8 a.m. to noon and 1 to 5 p.m. Monday through Friday.

          But callers “may experience extended wait times due to the state cuts and the judicial branch staff shortages,” a telephone message says.

          The KS GOP, having found it kind of hard to outsource the local county court to somewhere overseas, seems to be trying to drown it in the bathtub as a fallback option.

        • robspierre says:

          Once, for mostly chance reasons. I was one of the last remaining members of management from a high-tech company that had just been taken over. Arbitrary and insulting behavior by HR types was causing so many resignations that we were dwindling away by the day. In desperation, I told my new VP that his company’s investment would soon be lost. “The assets [the engineers] are walking”, I said. He looked puzzled and replied, “but we OWN the PCs.”

          • PJEvans says:

            Idjit.
            Mine refers to people as ‘resources’ – we have value as long as we’re actually useful.
            PCs are assets (and get tags), just like the coffeemakers on each floor.

            • robspierre says:

              Resources? You mean like mountain top coal?

              At my current job, I have an asset tag, complete with embedded RFID. I hang it on my collar.

              Hard to say which is more depressing.

            • Rayne says:

              What, you didn’t get a tag, too?

              Ours had bar codes and embedded chips for the proximity readers at the gates, and when you were terminated, they took your tag.

              We did the same things to the PCs, too, when we terminated them — removed their little bar codes and said goodbye.

              • PJEvans says:

                Our tags are called ‘badges’. If you’re not a regular employee, it has to be renewed every six months. Takes about thirty seconds, once you get hold of the security person.

                I don’t know what they do with assets – there was a paper-cutter (roller cutter, not guillotine-type) I wanted to sneak out, but it was all of a meter long and wouldn’t fit in my bag. *g*
                (Could have gotten away with it, too, because they’d forgotten to tag it; it had been stashed in a corner for ten years and only about three of us knew where it came from.)

          • earlofhuntingdon says:

            Congratulations, I guess. Actually, I think your experience is common. Acquiring companies don’t want inherited employees for any longer than possible. Getting rid of them is much easier than integrating them.

            The whole notion is fundamentally at odds with acquiring a “going concern” as opposed to a block of assets on the curb, but it’s the mindset American managers have adopted.

            I suspect it’s a subset of the idea that only managers count. A variation is the belief that only the guys on the bridge count. We don’t need no stinkin’ guys on deck cleaning or raising or lowering anchors. We can automate the control room and engine room and outsource the guys and gals that give the ship offensive capability instead of making the ship a floating target. Narcissism run amok is what it looks like to me, not management or even greed.

            • PJEvans says:

              Not to mention the idea that someone with an MBA is qualified to manage any business, regardless of how much (or how little) they actually know about the field it’s in.

              (One of the things I like about the place where I work is that they expect people to know about their field of work; you can move around, but if you don’t know enough, or are limited in some way, you won’t go far up. The managers are competent.)

    • bobschacht says:

      Switching from “gold” to “silver” insurance policies. My, how Orwellian phrases carry their political load.

      We are not discussing coinage or jewelry or wedding anniversaries. We are discussing a policy intended to force employees to accept less access to health care, because in the intentionally poorly reformed and regulated insurance market, lower cost policies inevitably yield less coverage for health related expenses and, consequently, less health care.

      This is the Orwellian truth. It perhaps is not about “death panels,” but in effect it is about rationing health care. In essence, is this not the monetization of health?

      Bob in AZ

      • skdadl says:

        This is the Orwellian truth. It perhaps is not about “death panels,” but in effect it is about rationing health care. In essence, is this not the monetization of health?

        What do I know about economics, but I think that is well put.

  6. ezdidit says:

    Is this all just trickle-down, supply-side economics that they are concealing??
    ————————————————————————————————
    Marcy, you did not start this fight – the administration did by following the Cass Sunstein thesis about covert insurgent disinformation from 18 months ago.

    But you ended it with a daunting challenge to experts – a Nobel Prize winner – for substantive, independent analysis!

    Economists are paid well, whether they are right or wrong. You have laid bare the unproven assumptions that have been taken on little more than faith – and the more I read, the more it sounds just like trickle-down, supply-side Reaganomics.

  7. Frank33 says:

    This is “Psyops” by the health insurance companies to get taxpayer subsidies. Gruber says labor union plans are just too darn generous and those ungrateful workers do not deserve good health care. As the 3rd or 4th greatest health care economist, Gruber should understand our corporate health care is a disaster. Instead, he wants more of the same.

    Also, Krugman and his corporate employers failed to properly “attribute” the source, Mote Dai at Kos. Their disrespect of citizen activists is also quite revealing. Krugman and the Times fails Journalism 101. They are shills.

    Mr. Krugman I suggest your credibility is sinking as fast as Gruber. Krugman you need to apologize. Better yet Krugman, you should be investigating the many genuine scandals created by your bankster friends such as Bernanke.

  8. ezdidit says:

    It should also be noted that Krugman received most of his awards for international trade analysis of expanding open markets, not closed economic systems that depend on finite variables.

    Successful trickle-down economics like Gruber merely claims – without proof – is just as much fraud as I can stand. That Krugman would seek to dismiss you as a mere troublemaker makes me pause and wonder just how much outrage really ought to be poured on him. My guess is no limit.

  9. scribe says:

    You note the first three of thre four assumptions which Gruber relies upon to be:

    1. The excise tax will lead employers to switch from “gold” to “silver” insurance plans
    2. This will mean “reduced spending” as “firms will spend less on health insurance”
    3. Those companies will pass those savings onto employees in the form of higher wages

    For all his economic distinction, it would appear Mr. Gruber has overlooked even basic knowledge of corporate (and business) law. The basic principle of corporate law is that management owes a fiduciary duty to shareholders (the owners of the corporation) to maximize the value of the shareholders’ investment, i.e., maximize share price. Share price is increased by increasing profits, returning profits to shareholders in the form of dividends, etc. The same principle obtains in regard to all forms of business entities.

    OTOH, management owes no fiduciary duty to employees. The company’s duty to the employee is to pay the agreed-to salary on time, to provide the agreed-to benefits, and to otherwise comply with the law as pertains to contracts with workers. To the company, labor – employees, their pay and benefits – are a cost. (Otherwise, why have we seen endless examples of companies’ share prices going up on news they were laying off workers? The layoffs were cutting costs and, by extension, returning more money to the owners/shareholders.) If the company can cut the cost of one aspect of labor (in this instance, by buying less-expensive health insurance), management’s duty (as defined by law) is to return that money to the owners of the company, not to raise the wages of the employees.

    Indeed, any company managment which took it upon themselves to raise wages in response to getting a lower-cost deal on employee benefits would, in short order, find itself defending innumerable shareholder lawsuits (because they didn’t maximize shareholder value), getting its head handed to it by competitors (who, if they got the same cut-rate insurance deal, would be able to lower prices rather than pass it on to employees), and then be looking for new employment.

    The idea Gruber relies upon is that there is a pool of money in businesses which is allocated to employees to be disbursed in different flavors (pay, benefits, etc.) to them but to remain a constant-sized pool regardless. In making this assumption, Gruber is spouting nonsense. For businesses to act in compliance with his assumptions, they would have to violate the principles of law.

    I’d like to believe that Gruber was merely mistaken, or simply overlooked the principles of fiduciary duties owed by management to ownership, but I have to set that wishful thinking aside though I’m sure Gruber and his paymasters would surely encourage it. One does not get to be a renowned MIT professor by overlooking basic principles of law which govern the situation he’s modeling. Ordinarily one would not get paid hundreds of thousands of dollars by the government for work containing such an omission – unless that omission was part of the design.

    I’m compelled to believe Gruber’s failure – failing to incorporate in his model the real world and the laws that govern it – was not a bug. It was a feature. In so many words, he was paid to sling bullshit and use his prominent name and reputation to sell it. And the blogosphere’s calling him out on it (EW primus inter pares) is why the violent reaction.

    FWIW, EW, if they’re coming after you personally for your reporting (as they are) it means you’re hitting home and making an impact.

    • quake says:

      FWIW, EW, if they’re coming after you personally for your reporting (as they are) it means you’re hitting home and making an impact.

      Even more importantly, they are implicitly acknowledging that EW is correct, as they can’t attack her on the substantive issues.

    • Jeff Kaye says:

      Spot on, Scribe, as is EW’s excellent disassembly of Gruber’s pathetic shilling, and takedown of the entire field of economics, where the good old boy, in-crowd, ivory tower system has shielded economists from Friedman to Gruber and Krugman for quite some time now. I say Krugman, because where was he when the call of independent analysis was called for? Trying to bring down the one noteworthy and public critic with a cascade of invective, and btw, tarring the entire site she is affiliated with claims we are a bunch of carping loonies.

      Classy and correct to forego bmaz’s gentlemanly call for apologies, and zero back in on analysis and an emphasis on truth-telling.

      Unfortunately, I don’t foresee the establishment politicos and their academic servants taking up your call for independent analyses. The fix is in now, and the reliance on old “trickle-down” theories carries the day (H/T ezedit @21 above).

      Others have noted — and it can’t be emphasized enough — that this reliance on paid experts, and the putting forth of their “analyses” as professional opinions, is the same thing we saw with the build-up to the Iraq War, and for that matter, with all those national security “experts” who have hyped the “war on terror,” the “surge” in Afghanistan, etc.

      Nor is this new. It’s the same thing Jack Kennedy suffered when the “best and brightest” shoved him in deeper in Vietnam. Too bad his attempt to negotiate a U-turn in later 1963 was, uh, interrupted.

      We must fight the good fight because… well, because you never know. I might be wrong, for instance, and those independent analyses may yet begin to surface. But I’m not sanguine. The rip-off of the American people at home is the domestic corollary to the expansion of empire abroad, with a bloated “defense” budget holding down the nation like a cement block tied around the ankles of a tough-luck mafiosi.

    • Rayne says:

      Most excellent, scribe. That’s what they taught us in business school: corporations exist to make a profit. They didn’t teach us that corporations exist to pay wages or provide insurance, let alone improve those things.

      But I’ve also said before that Gruber doesn’t appear to have applied other fundamentals from business school. They taught us that wages are sticky — and frankly, wages are sticky in both directions.

      They resist going down because of infrastructure; just because an employer wants or needs to pay less doesn’t meant that workers will accept this, because employees have costs like rent which are locked in, and other expenses which typically do not go down like fuel and food. The only time that wages will go down readily is during a market collapse, when demand shifts dramatically.

      And wages are sticky, resisting upward pressure, when a market is still in collapse or only trending slowly upward. After a collapse of demand, business owners are going to attempt to extract more profits for a number of reasons — twitchiness about market conditions, carrying costs for loans to cover fixed costs, recapitalization if capital has been drawn down during the collapse, so on. Any reduction in expenses whether from insurances or other factors will not translate into improved wages.

      There are also many more people in the market for work than businesses had forecast a decade ago. When things were going well, it was expected that Boomers would begin to retire and a smaller number of Gen X workers would demand higher wages to do the same work as the larger number of Boomers. Not so, since many Boomers are now compelled to stay in the job market because of job losses before they were ready to retire and because of depletion of savings due to the financial crisis and earlier market downturns. The shift of manufacturing, IT and service jobs overseas also structurally reduced domestic jobs, increasing competition for the jobs which remain. Add in the larger number of Gen Y workers who have been entering the workforce and wages are depressed and not going to trend upward for some time.

      I’m sure if I dig through my business and HR management as well as my econ texts I will find even more examples of what we learned in biz school that seems to be at odds with Gruber’s model.

      I’d like to know what it is that makes Gruber’s modeling that it can ignore business fundamentals; what makes it so exceptional that nobody else can replicate it?

      Are we really supposed to simply roll over accept, like credit default swaps, that Gruber’s model is secure and unquestionably right, even though we can’t see in it, can’t duplicate it, while it appears to discard business basics?

      • scribe says:

        I don’t dispute that wages and benefits are “sticky”, as you note. The rub is, though, that so long as unemployment can be kept at, say 8 or 10 percent, there is no limit to the amount of wage-cutting which management can impose upon labor. Not for nothing, if Obama and his crew wanted to eqase the path to health insurnce, they could have worked toward enhancing employment (just tossing a dart at the wall, there’s a lot of deferred maintenance in the national parks, if nothing else). Better employment (i.e., less unemployment) would necessarily encourage the employers who got a less-expensive health plan for their employees into complying with Gruber’s assumption by shiftng the money they would save on insurance into wages. But, when there are a couple qualified people lining up for the job, taking the money saved on insurance and putting it in ownership’s pocket is rational. After all, the employer will tell the employee seeking the raise: “Go ahead. Quit. I’ve got 10 guys lined up who will gladly take your job for less. As a matter of fact, you’re insubordinate for efen asking for a aise. You’re fired.”

        So, count on permanent unemployment staying high for years to come, too.

        • Rayne says:

          And semi-permanent unemployment is BAD policy, because it does two things: it reduces the number of people paying taxes while increasing the number of people who need services, and it foments discontent with the status quo.

          Shit, add one more factor: at 8-10% semi-permanent unemployment, there is stickiness to labor. People remain entrenched in jobs because of benefits they receive from employers, which may be far better than government programs. The best employees don’t move to where they are needed, staying instead where they feel secure. It’s grossly inefficient and it makes us second-rate in terms of innovative output.

          The administration needs to push for 5-6% unemployment (4% is about the rate of attrition, when wages really move upward and increase inflation).

          • selise says:

            The administration needs to push for 5-6% unemployment (4% is about the rate of attrition, when wages really move upward and increase inflation).

            don’t think so. went lower in the late nineties, iirc. imo we should shoot for full employment and only stop/back off if/when inflation becomes a problem.

            • Rayne says:

              It went lower in the 1990’s because of the dot.com boom — a bubble.

              And we all know how that turned out.

              [edit: Let me point out that the rate of attrition is full employment. At 5%, that allows for 1% of people to be in temporary state of flux, not long term unemployment. As the percentage falls to 4%, then we have inflationary pressures. Even at 5% that pressure will begin because there is no long term unemployment.]

              • selise says:

                As the percentage falls to 4%, then we have inflationary pressures. Even at 5% that pressure will begin because there is no long term unemployment.]

                are you referring to NAIRU, natural rate of unemployment, or something else? (just trying to get an idea what system, you are thinking in. especially if it’s something i haven’t heard of or don’t know about yet).

                i’m thinking (or trying to at least) in the MMT system (randall wray, for example)

          • scribe says:

            There you go again – thinking in terms of the greater, common good.

            You have to get in the heads of the financial elites and governmental elites to understand why there will be no appreciable reduction of unemployment for years to come.

            1. the real money is being made in the financial industry, not in any old-fashioned thing like manufacturing. No one cares about manufacturing except insofar as it produces data for the financial gamesmen to play with in the casino they call Wall Street. And because no one cares about manufacturing – there’s a surplus of people available to work in factories worldwide and a glut of factory capacity, too – no one will do anything to promote it. WE get more casino games, not fewer.

            2. The shortage of “real” jobs for the Joe Sixpacks of this world is a source of social stability and a deterrent to dissent. If you have a job, high levels of unemployment mean you are instantly replaceable. To avoid that, you will toe whatever line that might be drawn regardless of how silly or inimical to your own interests that line might be. And, the same Joe Sixpacks who used to work in the factories will now have three main careers they can aspire to, when (and because) there are no factory jobs: being a cop, a prison guard, or a soldier. And all of those jobs exist to be used by the elites to maintain social control and eliminate dissent. And the same sort of “you can be replaced” situation will enhance both discipline in those jobs and the willingness of the cops, guards and soldiers to violate any norm of civilization. They’ll do what they’re told to keep their families from having to starve while living in a junked car.
            3. Making it easy for people to change jobs – by reducing unemployment – will vitiate the societal control that ruining people by firing them provides the elites.

            Once you remember that things are run by and for the elites and the “Common” good be damned, you’ll get it a lot more quickly.

            • robspierre says:

              “The shortage of “real” jobs … is a source of social stability and a deterrent to dissent.”

              Only up to a point. Big money is being made in high finance, but finance is a zero-sum game, not a real economy. It doesn’t grow like a real economy and doesn’t actually produce wealth. It just transfers shares of existing wealth from one player to another. For one to gain, others have to lose. Over time, with no new production, a larger and larger share of the wealth gets concentrated in fewer and fewer hands. So depending on finance for economic prosperity is thus like depending on cannibalism for food: it works up to a point, but sooner or later there is not enough to go around. At that point, some very basic economic realities reassert themselves.

              Our conservatives seem to think that the game’s losers will always agree to starve quietly in keeping with the supposed rules of the game. But, historically, the people without either wealth-producing work or a share in old wealth start getting very unreasonable, non-compliant, and destructive when the real starvation starts. The result is seldom pretty, efficient, or fair. But it does tend to radically alter the economic landscape for awhile. Think 1789.

            • bobschacht says:

              1. the real money is being made in the financial industry,…

              Except that, as the recent financial crisis shows, it wasn’t real money. It was funds that have a “notional value” on paper. Just look at the huge literature on the mark-to-market controversy over the past year.

              Bob in AZ

              • scribe says:

                Please know that when I said “real”, I meant “Substanial”.

                The amounts of money being made in the not-finanical sectors are, by comparison, chump change.

    • KyLafG says:

      Thank you, scribe.

      Absolutely no one but an airhead academic (and I say this as an academic with airhead tendencies) could believe for a minute that cost savings on health care would be passed on to labor in the form of higher wages and salary. It is entirely possible that at MIT, or any number of non-profit institutions, this would be the case. But at the local textile mill (are there any left?) or the chain department store in the mall, the money would be retained by the company and accrue to the bottom line. Period. Aside from being a well known economist at one of the best institutions of higher learning on earth and a well-paid consultant (can’t have the latter without the former, btw), Gruber is also apparently just not very bright.

  10. ezdidit says:

    Gruber is dead wrong. The strategic goal for all for-profit corporations is enhanced shareholder value. This REQUIRES that corporations that save money from cheaper health insurance policies return the savings to investors as higher share prices and/or bigger dividends. It’s so simple.

    But why would Krugman wreck his reputation & back up Gruber on such sloppy analysis?

    • scribe says:

      You ask:

      But why would Krugman wreck his reputation & back up Gruber on such sloppy analysis?

      Like I said in the earlier thread, here, Krugman is joining in the piling on so as to show he can be a team player on Rahm’s team, because he’s smart enough to realize that he’s going to be left on the outside looking in if he doesn’t sing the Rahm/Bama tune.

      As to his reputation, he already has a Nobel, so he can spout nonsense all he wants and point at the Nobel to shut up anyone who’d talk about his reputation.

      • skdadl says:

        … he can spout nonsense all he wants and point at the Nobel to shut up anyone who’d talk about his reputation.

        Anyone? It’s just a Nobel in economics, after all.

        Sorry if that sounds a bit snobby, but my tolerance for credentialism is, like, very low and currently sinking.

  11. emal says:

    Marcy, class act and smartly turning this back onto the issue at hand here. Yes the 850 billion dollar question here, is the analysis and work that the policy is based upon sound and accurate when reviewed by a peer group. Thanks.
    I’ll admit after reading d-days link filled post today, I was pretty amazed and alarmed at Gruber’s own walk backs and frank admissions. I like your laser beam focus on the real issue. That said, I’m gonna use this term, You’ve essentially issued a throw down here, and there was no trash talk. Let’s see if anything happens.

  12. JTMinIA says:

    I would still like to know if Gruber has been advising anyone on how to get a better CBO score. I’d be especially interested in knowing if Gruber has used any inside information he might have as to what goes into a CBO score to advise anyone how to repackage their proposal in a way to get an *undeserved* CBO score.

    • qweryous says:

      That’s a question that should be answered.

      Explicitly: I haven’t seen it documented (yet?).

      Practically: After consulting with all the people he has over the last few years, including specifically political campaigns (specifically Mitt’s)what was the casual discussion about?

      Gruber might be different from the average academic: he might not be interested in talking about his area of expertise,not interested in making predictions on how if the black box inputs were varied the results would change.

      It could well have happened whether or not he knew it was happening.

      It is a question where the answer could have some consequences.

  13. klynn says:

    Marcy, I do hope we get answers to your questions.

    Thank you for a great post.

    A pivot of intelligent questions that need to be assessed. This. Is. Not. Polemic.

    It’s about $850 billion.

  14. klynn says:

    I posted this earlier today over at FDL:

    I just want to share a personal experience that happened to me yesterday. I was talking with a friend who is a teacher. The friend shared about the teacher union’s health insurance company re-enrollment period presentation. The company rep explained that premiums would be going up and explained it in a way to beg a question from the listening audience, “Why?”. Of course someone asked, “Why are they going up?”

    The rep explained, in a very rehearsed manner, that claims rose by $800,000 dollars the past year, also in a way to lead the audience to ask, “Why?”

    Again, the rep explained in a nice practiced delivery that approximately 80% of the claims were due to three people.

    The teachers all looked at one another, they knew who among them had fought critical illnesses the past year. They became resentful of the presentation. It was delivered in such a way as to try and “turn the crowd” on the older and sick peers among them. A manipulation of the masses to perform “death panels” so the insurance companies come away with clean hands and more money. The union voted to find a new health insurance company.

    I pointed out, that unfortunately, the teachers were put into a “loose-loose” because now the three peers were “pre-existing conditions” and were probably denied coverage by the new company.

    I shared the story at a larger family birthday dinner later the same day. My father then repeated countless similar stories from associations that he sits on the boards for. He said in their cases, the board committed to funding the difference in costs for those fighting health issues and were equally disgusted by the inability for the provider to present from the perspective of equity of care. Often, the board sought new insurance with inclusion of those with preexisting conditions.

    My father agreed that insurance companies are death panels but they want to pass the actions onto the policy holders as a way to wipe their hands clean.

    The friend who is a teacher stated, “I resent a presentation that attempts to make me think pure evil thoughts about others.”

    Then fatster wrote in another comment:

    It is true that a small percentage of patients accounts for a large chunk of health care expenditures, and for reasons that are unsurprising:

    • Five percent of the population accounts for almost half (49 percent) of total health care expenses.
    • The 15 most expensive health conditions account for 44 percent of total health care expenses.
    • Patients with multiple chronic conditions cost up to seven times as much as patients with only one chronic condition

    I highly recommend fatsters comment and links.

    Perhaps I am misunderstanding the concerns hear. In the end, it appears the excise tax will push us, the citizens, to be the death panels if we do not push for a better plan.

    • skdadl says:

      To klynn and fatster, whose interesting exchanges I did read:

      I think that part of the problem arises from the stubborn refusal of some to accept that universal health insurance is, y’know, insurance, and works the way that all insurance does.

      A lot of people seem to think of their health insurance as if it were a bank account, entirely individualized and current. But that’s not how, eg, insurance on your house works. If your house didn’t burn down this year, do you demand that your insurer return that portion of your fees to you?

      Insurance only works for a large pool of people over an extended period of time. With health especially, we have to expect that some people are always going to cost more than others this year, but we also have to know that one day, each of us will be expensive that way (unless we’re lucky enough to be hit by a laundry truck while we are still hale and hearty at 95, which has happened, but not to many).

      People need to understand. This is not just a political battle. People are struggling to understand, and our politicians are not helping them.

      • fatster says:

        “People need to understand. This is not just a political battle. People are struggling to understand, and our politicians are not helping them.”

        And we can’t help but wonder why, huh? Medicare for All–what a concept! And one so easily understood, too.

        Rather than subject you to another one of my annoying outbursts, I think I’ll just go grab a beer.

        • skdadl says:

          Oh, just you wait. Right after universal health care, we’re gonna do … GAI (guaranteed annual income)!

          Never let it be said that our reach wasn’t exceeding our grasp … for the time being.

          I am so glad to have met y’all. You give me faith. I think you are very brave and steady people, to stare down the rich and the powerful and the forces of conventional respectability, and just keep on testifying to the naked truth.

          The emperor has no clothes. Pass it on.

          • Petrocelli says:

            Echoing Skdadl the Wise … reading Teddy & Marcy’s coverage of the Prop8 trial, I was dejected that America was still not past this blatant disregard for equal rights. But as I continued to read, the power and conviction of the writers came through to me and I felt that, more than ever we have to stand united.

            If the most powerful person in the World cannot live up to his promises, together we can peel away the many layers of distortion and let him & Congress see the reflection of their shameful actions.

            Keep revealing the truth … the Emperor has no clothes !

            • bmaz says:

              What is going on in San Francisco is really special; I think very few people understand the import of it. This is a modern day equivalent of the Scopes Trial with discrimination substituted for creationism. I simply do not know of another case that has literally put such an issue to such a full evidentiary presentation.

    • Rayne says:

      Yes, health care expenses for an entire business can hinge on a few individuals. My spouse’s business this past year has had someone with cancer and another with heart problems and another with a head trauma, all of which we can imagine (without violating HIPAA) costing more than the rest of the needs of the other 80% of employees’ health care costs combined. And yet without these three people, the business would not have been successful this past year; I can’t imagine anyone in the business saying they want to cut them off because their own livelihoods and insurance depends on the work these three people did during the course of their careers with the business. These three people are also like family; the rest of the employees couldn’t imagine not caring for them, and I’m sure they’d have the same reaction to any suggestion that the three people were a potential drain on the rest of them.

      And there, but for the grace of the cosmos, go any of the other members of the business. Next year it could be any one of them to go through the same health care crises, and over time, it probably will be.

      But what the insurance company failed to mention in its presentation is that even though a small percentage of people in a group represent the largest amount of costs at any time, there is no competitive pressure to drive ANY of the costs down. None.

      Worse, there’s no competitive pressure to improve outcomes, which is just as deplorable. Those of you who’ve read “Blink” by Malcolm Gladwell are acquainted with the improved outcomes at Cook County Hospital which changed its procedures on chest pain assessment, reducing testing and other info gathering and concentrating instead on a few strong indicators, ultimately resulting in improved patient outcomes that other hospitals can only envy. There are NO market drivers to encourage a similar change in methodology at other hospitals — none — because the insurance companies only concentrate on covering their expenses and making a profit, not on improving care while reducing costs. This would be antithetical to their business model.

      What we are seeing right now is not really health care reform; we’re really just kicking the can down the road.

    • papau says:

      “• Five percent of the population accounts for almost half (49 percent) of total health care expenses.
      • The 15 most expensive health conditions account for 44 percent of total health care expenses.
      • Patients with multiple chronic conditions cost up to seven times as much as patients with only one chronic condition”

      GOOD GRIEF

      1 to 2% of the life insurance population die each year – if we could exclude these folks, life insurance would be so much cheaper. /s

      • klynn says:

        You got me! I was raised with black humor!

        That was the point fatster was trying to make.

        We all end up in that 1-2% eventually.

  15. orionATL says:

    let’s see now:

    1. employer heath cost don’t drive wages says mishal.

    2. personal income (or is it family income, or some such economic measure) of members of the middle-class have been described as rising insufficiently (or stagnant) for some recent period of time ( a decade? since the mid-1990’s?). (krugman has written a lot about income distribution and the small rise-in-income potatoes being served to the middle class).

    so why in the world would anyone well-trained economist argue that an economic phenomenon (employer health costs) that is too small to affect employer wage decisions,

    affect employer wage decisions – ever?

    repeat, ever?

    model or no model?

    does gruber really believe this? does lawrence summers really believe this? does nancy de-parl really believe this? does orzag really believe this?

    3. a very interesting phenomenon shows up in gruber’s economic history.

    ew writes

    “… He and his study co-author, Robin McKnight, found that “in 1982, 44% of those who were covered by their employer-provided health insurance had their costs fully financed by their employer, but by 1998 this had fallen to 28%.” Gruber and his co-author attributed the shift to the following factors: 32% to the rise of HMOs, 9% in employees becoming newly eligible for Medicaid, 14% due to changes in taxation, and 47% to the rise in medical spending. …”

    o.k.

    4. how does the the rise of international competition for u.s. companies and for the u.s. economy in general affect companies willingness to pay generous health insurance benefits.

    so a phenomenon that has only a small impact on employer wages decisions,

    combined with increased competent business competition from all over the globe

    combined with an extended period of little or no increase in personal or family income of middle class or blue collar workers

    will, in the near future, result in wages going higher

    because the president and congress imposed a health-insurance-cost excise tax to pay for the reform by forces employers to make their insurance plans less generous there by raising middle and blue collar income?

    this is magic folk. economic magic.

    some commenter here, not sure of the name, detailed some months ago how her husband had a business in ohio that is being strangled by health care costs.

    i don’t doubt for one minute that the leaders of this company will make every effort to cut their health insurance costs,

    but for the life of me i can’t see in what way those cuts will will boost the income of workers whose company is struggling anyway.

    the more likely effect is that it may keep them from losing their jobs.

    in this case, health care costs may be seen as the final straw, not a powerful fundamental driver of wages.

    (my apologies for messing up someone’s story, as i may well have done. but it is such a good story to illustrate what small and medium businesses are up against and deserves telling again here.)

    by the way, what proportion of the national work force are employed by small and medium business? i had the impression it was a large %?

    NOTE: i am an alchemist, not an economist.

  16. klynn says:

    skdadl,

    Insurance only works for a large pool of people over an extended period of time. With health especially, we have to expect that some people are always going to cost more than others this year, but we also have to know that one day, each of us will be expensive that way (unless we’re lucky enough to be hit by a laundry truck while we are still hale and hearty at 95, which has happened, but not to many).

    People need to understand. This is not just a political battle. People are struggling to understand, and our politicians are not helping them.

    Exactly.

    fatster also posted this:

    From the longer view, of course, there needs to be vigorous efforts to keep facts such as these before the US public:

    Per capitl health expenditures by country, 2007 (in US dollars)

    US = $6,096
    Luxembourg = $5,178
    Norway = $4,080
    Switzerland = $4,011
    Austria = $3,418
    And so on.

    • klynn says:

      Rayne @ 53

      I can’t imagine anyone in the business saying they want to cut them off because their own livelihoods and insurance depends on the work these three people did during the course of their careers with the business. These three people are also like family; the rest of the employees couldn’t imagine not caring for them, and I’m sure they’d have the same reaction to any suggestion that the three people were a potential drain on the rest of them.

      That’s how the teachers felt. They were disgusted and resentful of the presentation which tried to put them in the position of denying care.

      BTW, the friend did call me to clarify. They did negotiated to make sure the three were still covered and not denied care with their new carrier. It is clear to they teachers that one day, it will just be three more peers.

  17. robspierre says:

    “telling me not to worry my sweet little non-economist head”

    Lady, you may not have a degree in same, but you are clearly an economist.

  18. orionATL says:

    The proper response to the insurance rep is this:

    Insurance is a group phenomenon, not an individual one.

    An Insurance policy is an effort by a group of people to reduce the effect of catastrophy on any one of them.

    The insurance company makes a bet on the amount of claims versus the likelihood of an event occuring.

    So you and I and dick and tom and jane all have state farm home insurance. Will it be my home that catches fire? Or yours?or some poor family in

    Penn?

    We don’t know who

    Will experience misfortune and neither does the insurance company.

    That’s why they hire actuaries to collect and analyze the stats on house fires, auto accidents, heart attacks.

    When the insurance company offers a group of teachers insurance for a price, they are supposed to have had their actuaries make reliable estimates of the insurance co’s costs BEFORE they quote.

    I have always been deeply suspicious of statements like the insurance

    Rep made.

    I suspect he was

    – trying to rationalize an increase in policy prices to justify

    More income for the insurance co

    Or

    – trying to convince the teachers they should cover insurance co incompetence in failing to do their actuarial work before they offered the premium to the teachers at some earlier time.

  19. person1597 says:

    Krugman has a little blog…

    More on Jon Gruber

    Yes, Gruber has been commenting on health care while doing technical consulting for the administration. But there is nothing wrong with that. More disclosure would have been a good idea — but there is no scandal whatsoever.

    Emptywheel has a Big Blog!

    Here’s bmaz’s comment (As published by Krugman)

    I see you still do not have the common decency to admit and retract the unfair and scurrilous singling out and tarring of Marcy Wheeler you did in your last Gruber column. Instead, this time you simply frame it as “the people at FDL” and disingenuously act like they are all the same. They are not all the same, and your personalized attack on Marcy Wheeler was unsupported by the record, contemptuous and beneath you. It still is; you should make the honest and professional step to correct that.
    — bmaz

    Was this disclosed earlier?

  20. person1597 says:

    Is there a Noble prize for missing the point?!

    One of these days, perhaps soon, we’ll have a genuinely corrupt administration again — but when whistleblowers try to call attention to the misdeeds, you can be sure that there will be claims that “even liberals said that Obama did things just as bad or worse.”

    So now we can’t protest because someday, someone else will say we protested.

    Hello Huxley!

    “History is the record of what human beings have been impelled to do by their ignorance and the enormous bumptiousness that makes them canonize their ignorance as a political or religious dogma.”

  21. bobschacht says:

    EW,
    This is a most excellent diary! I agree 100%! You wrote, for example, that

    In other words, over the last thirty years, employers have already been shifting costs onto employees.

    You bet your sweet bippy they have. I know that from first hand experience with my university employer during the past 5 years.

    What I especially like about your diary is that it shifts the focus to where it should be: to the evidence, openly discussed and independently analyzed. I was SO tired of the chorus of “Well, Dr. Gruber is the expert, you know, and he has this wonderful simulation model, and he says it says that {fill in the blank}. So we don’t really need to know anything else.” IMHO, results of secret simulation models is a rather weak form of evidence.

    The value of your challenge to Dr. Gruber’s independence is that it has encouraged people to take a closer look at Gruber’s arguments.

    I just wish that in addition to your quick reference to Mishel’s diary here at FDL, you would have drawn more of the substance of his argument into your own. The clarity of your logic, and the identification and analysis of the 4 main “assumptions” (does he really call them that?) is a solid basis, but reinforcement by an economist with an established record of expertise on wage trends would bolster your argument.

    I’ve been absent from FDL’s pages for several hours, as my wife lured me into viewing “All the President’s Men” with her. {sigh} Lo, how the mighty WaPo has fallen from its halcyon days as an independent source of real journalism!

    Now to read the comments…

    Bob in AZ

    • skdadl says:

      MrWhy, even though I disagree with them, and even though that isn’t a real complaints choir (they seem to be missing the point of complaints choirs), that made me laugh. They’re not bad as a group, and I guess if you work for the Grope and Flail, you need a hobby.

      I don’t recognize any of them; do you? Some Grope reporters are really very good, and to be fair, once they get a story going, the paper supports them.

  22. Rayne says:

    scribe (71) — I wasn’t thinking about the common good at all. I was thinking in terms of benefit to the ownership class, because they had it pretty f*cking good when employment approached full but just shy of inflation. And I was thinking about sustaining these conditions for the long term since innovation here keeps employment higher and improves aggregate demand. In some respects it’s a national security issue since we should not be a net importer of innovation, rather a net exporter.

    (I rather liked high single-digit to double-digit yields on investments, which coincided with some of our highest rates of employment.)

    selise (86) — NAIRU — in fact, at 4% I’m rather aggressive (using my libertarian econ prof’s preferred number) since a number of economists including Krugman lean towards 5.5 – 6% as NAIRU.

    • selise says:

      thanks for the reply. i guess we may just have to agree to disagree (although i may change my mind tomorrow – am on the steep part of the learning curve for all this stuff), because i’m off the NAIRU reservation (in other words, don’t buy it means anything) — although would be very happy to read any links you might have to convince me otherwise. seriously — v happy to. i’d like to know the counter arguments i’m missing.

  23. WilliamOckham says:

    If Marcy and bmaz are going to keep going after Krugman and the NYT (and I think they should), they need to deal with the misinformation that’s emanating from the front-pagers at FDL. On 1/12/2010, I got an email blast from Jane Hamsher that has as a number of inaccuracies and distortions as bad as anything that Krugman has said.

    Hamsher claims that the Obama administation paid Gruber $780,000, “as Firedoglake revealed on Friday”. Really, where did that number come from? The most charitable explanation is that she misread Marcy’s post (which referred to $392,600 contracts) and inadvertantly doubled the amount. Hamsher goes on to claim, without any factual basis, that “this huge ethical violation undermines the entirety of health care reform”. That is just nonsense. Hamsher then dubs this “the Obama Administation’s $780,000 “buy-an-economist” scandal”. There is no evidence at all that the Obama administration bought Gruber’s opinion. This sort of hyperventilating outrage is very stupid from the perspective of political strategy. It’s playing into the hands of the people who want to make politics about anything but the facts at hand. The facts are on our side. We don’t need to manufacture b.s.

    • bmaz says:

      Meh, I am likely done. Quite frankly, I probably would not have revisited it again last night but for the strong statement by the Times Public Editor that failed to address something that should have been and that I know for a fact they were aware of. But at this point, Krugman, and even Gruber’s failure to disclose for that matter, is not the issue; that has been exposed. Now it is simply about the numbers and what they really mean to the public and their future.

      • selise says:

        Now it is simply about the numbers and what they really mean to the public and their future.

        it always has been and there’s nothing “simply” about it or we’d already have those numbers and know what they really mean.

  24. WilliamOckham says:

    What Marcy wants to happen is unlikely to happen. The idea that a worker’s total compensation package is essentially fixed by the market and that it is tax policy that determines the relative mix between wages and benefits really is accepted more or less as an article of faith by the economics profession. So, as Marcy points out, the real issue is whether the excise tax will “bend the cost curve”.

    Gruber absolutely believes that most people in the U.S. are overinsured and everyone but the very poor should encouraged to take on more out of pocket expenses. He makes that point very explicitly in some of his papers available on the web. The primary (but not only) piece of evidence that he uses in the Rand Health Experiment in the late 1970’s. There are a lot of reasons that Gruber is wrong about all this, but none of them have to do with whether he is independent of the Obama administration.

    Nobody’s going to look very hard at the excise tax now because the political deal has been cut. The economic analysts are going to wait and see what happens and then argue over whether it worked or whether it didn’t work because it was eviscerated by the political compromise.

  25. perris says:

    Gruber’s public claims delayed real analysis of the claim that the excise tax would raise workers’ wages.

    I keep pointing out, the very claim is “trickle down economics” and it can’t work

    there is a small chance some wage might increase but there is no question it will not be the comenserate differance between the added health care costs when taking a smaller plan and adding that to the excise tax

    here’s what grober seems to be missing;

    we are in a negative phase when it comes to wages, pressure is for give backs from labor, pressure is for lower wage

    right now most companies will enjoy the cost savings to stay in business, they’re not going to give any money to the employee that they are not absolutely forced into giving

    but the main point is the very concept grober is proposing is in fact “trickle down economics”

    • temptingfate says:

      “trickle down economics”

      The justifications for the Wall Street financial bailouts are very little different. Essentially the defenders argue we need a powerful elite in order to have a financial system that will provide benefits the rest of the economy. The fact that this demonstrably nonsensical will have no effect on policies. Even most of the pork laden stimulus and of course HAMP are based on the idea that making teetering institutions profitable in-spite of potential past fraud is the only way to fix current problems. Every proposed solution is seems to be about making the corporations stronger in the apparent hope that these business will have so much taxpayer created money they will forget that their reason for existence it to make more profit and allow the spillage to slip farther down the economic ladder.

      Standard Chicago School economics through and through.

      • perris says:

        The justifications for the Wall Street financial bailouts are very little different.

        I’ve been beating that drum for quite some time now

        how rediculous the concept;

        “if we give the wealthy 100 dollars they will then put into the economy 110 dollars”

        obsurd yet there obama is doing it time and again

  26. Rayne says:

    selise (96) — I’ll dig around and look for some links on this, but I’m afraid I haven’t really looked at unemployment for a while; what I learned about the rate of attrition goes back to my Econ 101 and 201 about two decades ago, before we even had the dot.com bubble.

    Keep in mind that full employment does not mean all adults working, rather all adults who want to and are able to work are employed. There will always be some residual amount of churn — should be, actually, in a healthy economy, as several percent of people will leave a job to move to another one while companies may have just enough slack to shuffle personnel without feeling pressure to retain all regardless of quality.

    There are also groups which have had higher rates of unemployment due to less-than-happy factors like racism. At full employment, even drag on these groups has been reduced and there’s over-employment in others — so 100% employment is not realistic. Not happy, but not realistic.

    WilliamOckham (104) — if Gruber is assuming most Americans are overinsured, he’s failing to take into consideration the number of businesses which are self-insured. They pay what they consume, and the consumption is often pressed down not by the insurer but by the employers who may either increase out-of-pocket amounts, increase co-pays, decrease coverage in order to manage the amount the business pays. If there are any cost controls in the system it’s been this dynamic at work.

    My spouse’s business paid $6 mil for coverage this past year — that is what they consumed, plus some margin for Anthem to process the claims, payments and make their cut of profit. Did his business over-consume? Highly doubtful; I’m sure we’d notice somebody walking around with a new pair of fake boobs or a nose job. But Anthem might have over-consumed; how does this particular business get a grip on that?

    • bobschacht says:

      Keep in mind that full employment does not mean all adults working, rather all adults who want to and are able to work are employed.

      Yes, definitions are important. For example, oddly enough, the rate of employment does not equal 100% minus the unemployment rate, because these two rates use different definitions of the labor market.

      To show how tangled things can get, consider persons with disabilities (an area of professional concern to me during the second half of my career). Some Census categories include “unemployed because of disability.” However, these same people may not be included in the unemployment rate because they may not be considered part of the labor market. Yet, the field of vocational rehabilitation is explicitly concerned with assisting people with disabilities to find employment. So by definition, these people want to work. When you go into the weeds in this area, things can get confusing.

      Bob in AZ

    • selise says:

      Keep in mind that full employment does not mean all adults working, rather all adults who want to and are able to work are employed.

      that is the def i am using also.

  27. JTMinIA says:

    I see one danger of asking Gruber and people like him to provide more analysis: they’ll give you more of the same.

    Gruber and his ilk work with regression equations. Yes, they are quite large and usually hierarchical, but they are – when you boil them down – regression equations. These are developed using existing (i.e., past) data. They are tweaked to provide the best fit to previous trends, but they do not provide any direct evidence as to the causal relationships.

    Why is this a problem? Because – like any other form of correlational work – they live and die by the variables that are included and excluded, with the key being the latter. For all we know, many of the relationships that are being used to make the critical predictions are technically spurious (i.e., driven by an unmeasured third variable) and, therefore, while being quite good at retrodicting the past, are awful at predicting what would happen if you manipulated one or more of the inputs.

    Easy example: you note the negative correlation between dog-ownership and depression (i.e., people with dogs are less depressed than those that don’t have a dog). From this correlation, you jump to the idea that depressed people should be given a dog. Unfortunately, the direct relationship between owning a dog (or canine American, if you wish) and depression is actually weakly positive when you partial out exercise and going outside. (It turns out that the way in which dogs reduce depression is by making you go outside and get exercise plus sunshine; the actual owning of the dog is – on its own – a slightly bad thing.) If the people you give these dogs to are not about to walk the dog themselves, you’ve caused more problems by giving them dogs.

    Another example: you note the negative correlation (in the past) between taxes and revenues – i.e., lowering taxes paired with increasing tax revenues. From this you infer that you can always increase revenues by lowering taxes. (Sound familiar?) Unfortunately, the direct relationship between the two is the opposite: lowering taxes actually decreases revenues. The reason why there has been negative correlation in the past is that taxes have been lowered at times of growth in GDP and the growth more than made up for the lower tax rate when it comes to revenues. If you lower taxes while holding growth (and others things) constant, revenues go down, instead.

    So, even if it is true that there have been modest gains in wages at times when benefits have been reduced, for all we know, this was also due to some third variable. And if said third variable is not being included in the regression model, then the predictions being made will be faulty and possible even backwards.

    There is no guaranteed-to-work solution to the third variable problem. As I teach my students, when someone proposed a third-variable explanation for your favorite correlation, the only thing that you can do – as a scientist, not politician or economist – is to measure the third variable and conduct the appropriate analysis (i.e., a hierarchical regression with the third variable as a covariate). This presupposes that you know what variables are already in the model and to which any shared variance was being given (i.e., in what order the predictors are entering the regression). And this is where we hit a bit of a snag. Gruber isn’t telling us what his model is. It’s a secret, it seems (which is one of the reasons for the sole-source, non-competitive grant). So we can’t suggest alternative causal pathways, since we have no idea what pathways he has in the model that is making these predictions.

    ps. the general problem of third variables could be why some people like Gruber and Krugman have changed their minds about certain relationships over time; when they added the new variables on early layers of the model, the relationships that they were jumping up and down about (which parallel things that would suggest you should give dogs to depressed people) have weakened and/or reversed.

    • emptywheel says:

      Wow. Thanks for that. Especially the part about the dog (says the girl whose dog can count to to, the morning walk plus the evening walk, and the added benefit that we often walk along the beautiful Huron).

      What you describe is basically what happened to the excise tax raise myth. Now, when I first beat up Ezra over it, I pointed out that tightness of the job market. What Larry Mishel did–besides talking about that in real terms, with actual data–was point out that since half of all employees DON’T get insurance from their employer, and that wages rose during the period in question most for those least likely to get insurance, it means health care couldn’t have been the factor.

      And yeah, I’m not asking him to use more data. Though I do find the absence of consideration of all this previous cost shifting to be notable, as well as Gruber’s earlier failure to look at real MA data to consider affordable/

    • Petrocelli says:

      Great analogy, thanks !

      *twould be great if Krugman and/or Gruber could stop by and read all these comments*

      • Adie says:

        oh surely they “have people” who do that for them. Nevertheless, I like a fella who reads more than just his/her own copy, and admits it. Don’t you? ;->

          • Adie says:

            Hi, belatedly. We’re doing relatively well, and hope you are likewise. We’ll be doing a w.h.o.l.e. lot better if we can find our house a new owner. nasty market, in case u hadn’t heard… heh/groan

            Almost missed your howdy – just spent an hour [ felt like several ] reading the piece on gitmo intrigue linked by Fenestrate at 107. sickening, awful bidness.

            • Petrocelli says:

              Expect Barbara Bush to pop up any time now and declare that GITMO is waaaay better than Haiti, so people shouldn’t complain …

              • Adie says:

                oooh yeah.

                “well then. you folks are doing pretty well for yourselves here, aren’t you.” THAT barbara, a delite to be beholden to. always wondered how that fambly managed to turn out so well. class-ick war-unfair.

                ouch!

                memories i wish i could forget, but refuse to.

    • WilliamOckham says:

      I wholeheartedly agree with everything you say except the bit about why Gruber’s model being proprietary is a problem. He’s published enough that we can tell what what his parameters are and at high-level what his model looks like. There are two big problems with a proprietary model. First, no one can check his software code for bugs which is a fairly significant issue for an econometric model that’s reputed to be 15,000 lines of code. That’s not a huge program, but that stuff is devilishly hard to test to make sure it’s doing what you think it’s doing.

      Second, because his model is proprietary, it’s impossible to get a feel for how sensitive it is to initial conditions.

      • temptingfate says:

        I hadn’t read that the model was only 15,000 lines of code.

        While you make that sound like a lot that last project I work on had 150,000 line of code, three programmers and the first 50,000 were done by me as I built the concept up with no testers besides myself. Black box testing to prove the accuracy of the output to the input, using specified parameters would probably be all that was necessary for such a small project. White boxing the code is for internal validity might be a nice to have.

        • WilliamOckham says:

          No, that’s not a lot of code for a typical line of business app, but think about how econometric models are constructed. Unless you exercise a lot of discipline in the way you put functions together, the model quickly becomes untestable. Unlike a business app, there’s generally no way to predict the exact output of the model in response to changing the inputs to a single function.

    • klynn says:

      Thank you for your comment.

      Do you have suggestions for us here, as to a strategy to take to for analysis and development of affordability for the consumer policy and policy affordability for a consumer-affordable policy?

      • JTMinIA says:

        Mr Razor (Will o’ O, that is) identified the problem a few posts before yours. Gruber’s model is a secret. (And here you were thinking that Obama was into transparency and all. Ha!) So, Step One, IMHO, is to start asking why we – as in the taxpayers – are paying for it.

        Now, I know what the initial response will be (assuming that they don’t ignore the question). They will say it’s like Windows. The gov’t pays for the use of Windows but never insists that Microsoft give us the source. My reply to this is equally simple: using Windows isn’t determining policy, so it really doesn’t matter very much how it works (other than the outrageous security concerns). But the hidden things inside Gruber’s model have direct consequences for policy, so how it works is entirely germane and the gov’t should never have made the deal that it did.

        At a minimum, Gruber should be asked to list the predictor variables (i.e., let him keep the weights hidden for now). He should also be asked for the order in which the variables enter the regression and which interaction terms are also included.

        • WilliamOckham says:

          I think their response is really more like this. About the only real requirement Obama laid down for HCR was that it had to be deficit-neutral. “Deficit-neutrality” is defined by the CBO score for the legislation. Everybody knows that CBO scoring is far from perfect, but the process has political acceptability in “The Village”. Seemingly small legislative changes can have a huge impact on the CBO score, so Obama and congressional leaders needed a way to anticipate the CBO score that would result from the normal legislative horse-trading process. Gruber really was the only game in town for that. His model may not be accurate at forecasting reality, but it’s excellent at forecasting the CBO score. That’s what they were buying, pure and simple. If you look at it like that, you can argue that they got their money’s worth.

          • JTMinIA says:

            Yes. We’re both said this before, but it cannot be repeated enough. That Gruber could advise the Admin as to how to express the proposal in a way that would get an undeserved positive CBO score is huge. Anyone who knows the CBO’s model (and has decent training in regression analysis) could easily game the CBO system.

    • perris says:

      while being quite good at retrodicting the past, are awful at predicting what would happen if you manipulated one or more of the inputs

      the variable grober is clearly missing, we are in a depression where there is more qualified personel then there are positions, and those not in positions are willing to work for a fraction of those already working

      in that scenario only a fool would increase wages voluntarily, when they are given the chance they will keep as much of the delta as possilbe

      • temptingfate says:

        While I don’t disagree that we are in a papered-over depression, I doubt that if things were only as bad as three years ago that employers would just give employees money they had been obliged to remove from their insurance plans either. Only some unions in the past that could get to see real company bottom-lines would have a chance to negotiate from strength. Every place I’ve worked compensation was never willingly improved for employees unless there was a large improvement in overall profitability. Those days are not just around the corner.

        Right now no employee, union or otherwise can negotiate a better deal in part because no business (baring those bailed out by the government) is doing anything but hoping the downturn only lasts a few more years when their own massive debt comes due.

        • perris says:

          that’s point is absolutely correct

          my point is this;

          what you posted is even more exacerbated by the current economic situation and the hunt for jobs

    • behindthefall says:

      That was very helpful.

      It also explains to me why I always looked for “mechanism” and did not find “correlation” alone a certain indicator of “truth”. Someone who analyzed outcomes said to me in a meeting once that he did “real science”, and I let the remark pass, but I didn’t like it, though I couldn’t give the precise reasons. You put your finger on some of the big ones, I think.

      • JTMinIA says:

        Any time that a person tests a theory by comparing the predictions of the theory to data they are doing science. It is quite possible to spend your entire career never once conducting an experiment and still be a scientist. The key issue is what you do when someone presents an alternative interpretation.

        In the case of a theory that is entirely based on correlational data, alternatives often come in the form of a suggested third variable (i.e., the alternative says that a key correlation is spurious, instead of causal). This is the moment of truth for the correlational scientist. If the response is to talk, then said correlational scientist just failed the test, since there is no way to talk your way out of this. If the response is to get some data with the putative third variable included and run the appropriate hierarchical regression, then the correlational scientist passes.

        But, again, we can only do this if we know what variables are already in the equation and in what order they were entered.

        • behindthefall says:

          Wish I had bumped into a course like yours when I was growing up. Popper was about the extent of what was lying around, and he never seemed to be much help. Kind of made it up as we went along …

  28. klynn says:

    But Anthem might have over-consumed; how does this particular business get a grip on that?

    This is a great quote. Thank you.

    There is someone we know who is a doctor who tends to soapbox about Americans wanting too much insurance/having too much insurance and using too much insurance — that we are afraid to just stop our use of medicine and die. This same doc also happens to reap the benefits of research for new treatments which could save lives. I found the dialectic in his life tragic. In his view, his patients must not receive the “new treatments” he was being paid to research, yet it was fine for him to research them and be paid to do so.

    The insurance companies tend to take a similar position on the pull between policies, new treatments and funding research.

    This is all murky. Especially when all parties are pointing the finger at over-consumption.

    • Rayne says:

      Well, there is some amount of truth to what he’s saying. My mother, who has been a nurse her entire career and worked in Ob-Gyn, ICU, Peds and ER, must have had an example every single week of her working career where people refused to accept the limits of science and instead demanded more of what was available to defer the inevitable. Like the children of elderly parents who arive in ER with DNR instructions, who override the DNR and demand that their parent with a massive stroke/heart attack/terminal illness be resuscitated and kept on life support until resuscitation no longer works. Or “million-dollar babies,” as my mom calls them, which are born far too early and are permanently and profoundly disabled but are kept alive for months in NICU, sometimes even beyond when they would otherwise have been born if they’d been carried to term.

      As my mother has said, nearly every parent expects and demands a perfect baby, in spite of the fact that neither nature nor medicine can assure this all the time. How frustrating to health care professionals who are forced to allocate resources on hopeless cases because many Americans do not understand and accept reality.

      • klynn says:

        And yet, what would happen if the expedited decision were made?

        It’s a Schiavo experience every time.

        I will not deny that there is some truth to what he is saying. Unfortunately, on the whole, many are barely using their benefits due to affordability and are also foregoing effective treatments due to affordability. That is not “over-consumption.”

        • Rayne says:

          Yes, exactly. Schiavo at one end, lack of care at the other — and we’re supposed to be a shining example of the benefits of capitalism and democracy.

      • PJEvans says:

        A lot of people see the stories in the news about ‘miracle babies’ and cures for usually-incurable conditions and people coming out of comas after months or years, and think that that’s the way it’s supposed to work all the time; they don’t see that those are the one-percent cases, where the rest have died.
        And then they expect the miracle in their case, and refuse to believe it isn’t going to happen on demand.

    • bobschacht says:

      There is someone we know who is a doctor who tends to soapbox about Americans wanting too much insurance/having too much insurance and using too much insurance — that we are afraid to just stop our use of medicine and die.

      Decades ago Dick Lamm, after being Governor of Colorado, made some controversial comments about end of life decisions:

      In 1984, Democrat Governor Dick Lamm made his Orwellian “we have a duty to die” comment. His actual statement was “We’ve got a duty to die and get out of the way with all of our machines and artificial hearts and everything else like that and let the other society, our kids, build a reasonable life.”

      Lamm’s philosophy has been resurrected today in the Obamacare debate. There is substantial truth in the claim that Obamacare will at the very least create de facto, if not de jure “death panels.” This is because any socialized medical care system must perforce ration medical care, because with government-controlled and funded medical care there is simply never enough to go around at any sort of reasonable cost to the economy.

      The calculus of who lives and who dies is a cruel one, because the non-productive always, inevitably, lose out….

      (Source: Governor Gloom, the duty to die, and Obamacare, by Seth Richardson, January 16th, 2010.)

      It is well known that health care costs increase, perhaps exponentially, in the last 6 months of life. Lamm was concerned that “keep them alive at any cost” medical care would bankrupt public health funds.

      That this is a real current issue in Obamacare was illustrated by the debate over mammograms, and whether they were appropriate for younger women. As with many screening tests and interventions, the risk level varies with age and circumstances. Any health care system needs to confront the issue of under what circumstances should the public pay for a given test or intervention? “Bending the cost curve down” might require rationing of health care under some circumstances.

      We already have this kind of rationing. For example, Medicare pays only for certain health care costs (i.e., they ration health care). This creates a large national industry for “Medicare supplemental insurance.” I’m on Medicare now, but I have to pay Blue Cross/Blue Shield for the health care I need that Medicare won’t cover. In fact, right now on my TV, an AARP ad just finished that focuses on this theme, selling the Medicare supplemental insurance that they support.

      Bob in AZ

      • klynn says:

        I’m on Medicare now, but I have to pay Blue Cross/Blue Shield for the health care I need that Medicare won’t cover. In fact, right now on my TV, an AARP ad just finished that focuses on this theme, selling the Medicare supplemental insurance that they support.

        (my bold)

        Now, for the person with the same health concerns as you but cannot pay for the supplemental insurance?

        Rationed care based on social standing? Where is the care in that?

        It seems to promote the “I’ve got mine,” attitude.

        All persons are not created equal when it comes to health care.

        (And I am not trying to be critical of you. I am simply using you as an example.)

        • bobschacht says:

          Klynn,
          You are actually re-stating my point. We are witnessing the monetization of health. Those who can afford it, get it. Those who can’t, don’t. We ration health care by ability-to-pay.

          Bob in AZ

          • Petrocelli says:

            I was “lucky” to meet a HoJo supporter at a party over the holidays, who touted the “Amurkah has the best Health Care in the World” line.

            [un]Fortunately, I’d had generous servings of Single Malt, which I call “Thinking Juice”, so I said to him, “Health Care in Canada gives peace of mind. Should you suffer a serious ailment, like a Heart Attack, is the affordability of your coverage guaranteed and with that, peace of mind ?”

            He glared as if he did not understand the question, and kept on with his “Amurkah has the best Health Care in the World” line. The onlookers – Canadians, all – had a great deal of pity for him and his pov.

          • Adie says:

            do they think we won’t notice them trying to squeeze us non-zillionaires out of the system with their rapid-fire rate increases zipping in under the wire?

            we hope you’re doing o.k. bob.

            • bobschacht says:

              we hope you’re doing o.k. bob.

              Thanks. I’m doing OK for the time being, as long as Social Security and my retirement payments hold up. I consider myself quite fortunate, with adequate resources. But I am close enough to the wire to feel considerable empathy for those who don’t have the resources that I have. My political activism is fueled by a feeling of solidarity with them.

              Bob in AZ

  29. Cynthia says:

    Here is living proof that Chris Hedges’ liberal conscience outshines Paul Krugman’s by several solar masses:

    http://www.democracynow.org/blog/2009/12/18/chris_hedges

    And I must say that if there were more Christians like Chris Hedges around today, I’d be more than willing to give up my atheist ways and become an honest-to-God, card-carrying Christian. But I doubt I ever will given that most Christians like him died shortly after the death of Christ, leaving only a handful of them around today to expose the fact that the Christians who are now in power are colluding with powers-that-be in Washington and in the Pentagon and on Wall Street to make America into a bipartisan, corporate-led, inverted totalitarian state. Here is how Hedges describes inverted totalitarianism:

    “The political philosopher Sheldon Wolin uses the phrase inverted totalitarianism to describe our distorted system of power. Inverted totalitarianism, unlike classical totalitarianism, he writes, does not revolve around a demagogue or charismatic leader. It finds its expression in the anonymity of the corporate state. It purports to cherish democracy, patriotism and the Constitution while cynically manipulating internal levers to subvert and thwart democratic institutions. Political candidates are elected in popular votes by citizens, but are beholden to armies of corporate lobbyists in Washington or state capitals who offer the legislation and get the legislators to pass it. A corporate media – in fact about a half dozen of them — controls nearly everything we read, watch or hear and imposes a bland uniformity of opinion or diverts us with trivia and celebrity gossip. In classical totalitarian regimes, such as Nazi fascism or Soviet communism, economics was subordinate to politics. ‘Under inverted totalitarianism the reverse is true,’ Wolin writes. ‘Economics dominates politics-and with that domination comes different forms of ruthlessness.’”

    • WilliamOckham says:

      And I must say that if there were more Christians like Chris Hedges around today, I’d be more than willing to give up my atheist ways and become an honest-to-God, card-carrying Christian.

      Yeah, and if there were more Christians like Pat Robertson, I’d probably give up Christianity and become an atheist.

    • Watt4Bob says:

      “You’ll have pie in the sky bye and bye …”

      Gruber seems to be one of those guys who doesn’t mind living for the most part in an abstraction.

      Most people are uncomfortable with such a sparse reality.

      It’s reminiscent of the situation with Bush and John Yoo.

      These guys are valuable to their bosses because they are rare because so few people can spend an entire career doing nothing but talking out their asses.

      What we have to keep firmly in focus is that what they are providing with their ‘analysis’, and what their bosses are paying for, is actually plausible deniability.

  30. Adie says:

    Thank you EW.

    Yeah yeah, I know. You’re not an economist.

    Nevertheless, my scientific training tells me I can sleep better with you at the wheel.

    Stay safe and well, dear lady. You have loyal fans in high and in low places, and everywhere in between. ;->

  31. oldhippiejan says:

    Has “over-reached” become the new euphemism for “lied”?

    The bottom line is the man was paid $780,000. So he said any fucking thing they wanted him to.

    • WilliamOckham says:

      Where’s your source for the amount $780,000? I have assumed that Jane Hamsher just made a simple mistake with that. The figure that Marcy Wheeler came up with is $392,600. If I’m wrong, I’d like to be corrected.

      • PJEvans says:

        I’d also like to know where that number ($780,000) came from.
        (I think someone misread or misinterpreted the contract information, but it needs to be either corrected or verified.)

        • WilliamOckham says:

          So, FDL is counting an NIH contract (to assess some Medicare program) that was awarded before Obama was president as part of the Obama administration’s “buy-an-economist” program. That’s worse than making a simple mistake. That’s actively misleading. [Just to be clear, my problem is with how Rayne’s research was apparently used, not with how Rayne presented it.]

          • KyLafG says:

            Absolutely freakin’ not! Damn, I get tired of this. Gruber’s NIH GRANT was awarded during the Bush years, and it is to study Medicare Part D. This peer-reviewed award has nothing to do with Gruber’s sole-source CONSULTING CONTRACT, which was awarded by HHS last summer. Which was during the Obama Administration if I am not mistaken. It makes no difference that both awards are from HHS. The first is a legitimate award for legitimate research. The rest of Gruber’s support (which was awarded directly to him and not to the National Bureau of Economic Research, which is the recipient of the GRANT with Gruber as Principal Investigator) is for CONSULTING, not research. There is a world of difference between the two. That is all.

            • orionATL says:

              Moving up, up and away from the gruber bog,

              There are two ways health care can be allocated to individuals:

              – let the market place dictate prices for insurnce and med services

              – nationalize health care

              I’m all for nationalizing health care.

              Health is like education, it is an essential need in an advanced society.

              It’s an indication of how successful the right wing have been in limiting our public discourse that the idea of some form of nationalization is forbidden as part of the health CARE discourse (of which health insurance debate is a subset).

              Marketplace capitalism won’t work eqitably for Individuals nor will it effectively meet society’s needs for a healthy populace.

              • PJEvans says:

                Apparently they haven’t – or maybe can’t – think through this policy to its logical conclusion. (Or what passes for a logical conclusion, in this country.)

                They’d have rich people, who could buy whatever medical care they want, being waited on by servants, who are sick much of the time because they couldn’t afford a doctor even if they could get time to see one.

              • JTMinIA says:

                Have you pondered the link to Blackwater? The one thing that we used to be able to count on was the idea that the Right would be in favor of nationalization when it came to the military. They (or, maybe, just Cheney) tried to take this away with Blackwater. Thank goodness that was as much of a failure as we know about. We really dodged a bullet there. (Too bad the same can’t be said for those Iraqis.)

                • Gitcheegumee says:

                  On the issue of contractors and health care, I posted some links to an article by Propublica about the costs associated with the Defense Base Act,on an earlier EW thread -some time back.

                  This DBA requires the government to pay healthcare for civilian employees of wartime contractors. In light of the recent news that evn more contractors will be dispatched to war theaters, the implications are obvious.An overhaul of this system would provide enormous savings. AIG and ACE are two of the insurers used by the government.

                  ( Hank Greenberg’s(formerly of AIG) son is CEO of ACE insurance,btw,last time I checked.)

                  Pentagon Study Proposes Overhaul of Defense Base Act to Cover Care …Sep 15, 2009 … Congress could save as much as $250 million a year through a sweeping overhaul of the controversial US system to care for civilian …
                  http://www.propublica.org/…/pentagon-study-proposes-overhaul-of-defense-base-act-915 – Cached – Similar

            • WilliamOckham says:

              Look, I’m just trying to figure out where the $780,000 figure in Hamsher’s email blast came from. Before I was pointed to Rayne’s Seminal diary, the only number I’d seen was Marcy’s. I agree with you about the NIH grant. But the question still remains.

      • Frank33 says:

        If I’m wrong, I’d like to be corrected.

        Gladly. You are wrong. Gruber is a neo-con selling disaster capitalism, while stealing health care. His “proprietary kompooter simulation” is a myth, a puff of smoke, that no one is allowed to check. It was paid for by citizen taxpayers, to persuade citizens to give tax money to corporations. Gruber is a LIAR.

      • emptywheel says:

        Gruber got something around a million last year, between a State contract, a NIH contract (which wouldn’t be a problem but it was on Medicare Part D, so again, part of this HCR, though it is, legitimately, an academic grant AFAIK), and the HHS contract. I’ve only reported on the HHS contract, because I’m not sure what the others are.

  32. oldgold says:

    There is no answer to this.

    We live in a world where accurate prediction is rarely possible, where history isn’t a reliable guide to the future and where the most important events can’t be anticiapted.

  33. orionATL says:

    You are wrong wo, go back thru the columns. You’ll find at some point that gruber’s total haul for the year was greater than the one contract –
    or at least the claim is that…

  34. browngregbrown says:

    “and dirty fucking hippies like me”

    Good grief! Who said that?

    Thanks for continuing to shine light on this issue. I think it’s painfully obvious that there is corruption here whether conscious or unconscious.

    BTW, it seems to me that health care costs are being confused with the costs of insurance. These are two very different things.

  35. orionATL says:

    Bobinpacifica @138

    If one of those lid.calif Dems is Feinstein, sign me up for a 1k donation to her opponent, no matter how crazy a republican he/she may be.

    There is only one quick way to clean out the senate of it’s corporate democrats –

    Use the republican party as your pitchfork.

  36. SueTheRedWA says:

    Hi All,

    We’ve had a bussiness for 16 years and have seen health care cost keep rising and have done all the things to decrease the expense, pass on costs to the employees, increase the deductable, etc. My husband figured it out that at no time has any employee gotten use of all the money put into health insurance premimums. We won’t have a business later this year, most likely, but would not have been able to keep health insurance even if we do. There is no actual proof that Obama’s plan to lower the value of the plan will save any money. It hasn’t for us in 16 years and I can’t see anything they are doing with the health care bill that would cause it to happen.

  37. parzival says:

    No one in Gruber’s field appears to have done any independent analysis of his claims.

    Like corruption and collusion, incompetence knows no bounds.

    Thank you so much, Marcy. Keep them honest! Or at least make sure they feel the heat for their inability to be honest at all…

  38. orionATL says:

    It’s time for strategy scenario building.

    Of what tactical or strategic use would gruber have been to the white house.

    – convince or give cover to senators

    -serve as a fake solution to the how-the-f-do-we-pay-for-this problem

    – make the excise tax more palatable to hoi polloi by telling them a fairy tale about “the magical tax that made wages rise”

    It is simply not credible to me that the folks on the white house team would believe gruber’s thesis, especially the numerous economists among them.

  39. Hugh says:

    Excellent post. I was just writing something similar this morning that Gruber is an example of how we can be distracted or our recongition delayed of what fixes have been put in and how they work. What he does is not a bug, it’s a feature.

    Now, curiously, all the justifications for this claim speak abstractly of the benefit of forcing employees to pay for more of their health care costs themselves, which will result in them choosing which care they need, using less care, and therefore saving money. I’ve yet to see any analysis of what happens in real life when this happens

    If employees have to bear more of the costs of their healthcare, it will simply increase the financial pressure on them. I too have never seen any data that the costs of healthcare correlate with people’s ability to pay for it. But all of this misses the point that all of this is about the money and none of it is about actual health.

  40. BayStateLibrul says:

    I support EW’s points.

    Independent analysis is what’s needed.

    It brings up a larger issue.

    Debating 101…

    Human dignity and respect gets lost in the struggle.

    The Mass senatorial debate is another issue.

    Many food fights…

    The only allowable Trash Talking is at Bmaz’s sports extravaganza.

  41. JTMinIA says:

    One last thing (that’s slightly OT) and then I need to – of all things – write the syllabus for my Methods course.

    I know that I’m coming across as a bit naive, thinking that we can demand to see the actual predictors, weights, and order. That’s because that’s the way we do it in psychology. No reputable psych journal would accept a paper without these. But things are different in economics (and any other area linked to business schools). They are so desperate to keep people in academia, as opposed to in business (where they could make an order of magnitude more money), that they have to have different rules. You can publish a secret model in those fields.

    What truly annoys me is when they allow people to have it both ways. They allow them to publish secret models AND also make money off those models by hawking it in the private sector. Even worse, when hawking it, they refer to the fact that its been published in peer-reviewed journals and, when trying to get the latest version published, they refer to the fact that it’s used in the private sector.

    • montanamaven says:

      Psychology appears to me to be an actual science. Economics is just voodoo and the MBA degree should be abolished. These professions just seem to be made up to make “salesmanship” sound high falutin’. Political science is another department I would get rid of or at least rename. Politics is not a science. We did better when philosophy was hitched to both psychology and to the study of how we live together in a civilized way aka politics. It was the wonkish middle class reformers of the early 1900s that stuck “science” on the end of “political”. We’ve been in trouble ever since.

      I believe “economics” means “household budget” in Greek. That’s why we are all smarter than the smarty pants’ economists. We work on household budgets and try not to take risks with our ability to feed and clothe our families.
      That’s why Elizabeth Warren is worth ten Grubers and at least five Krugmans.

      • bobschacht says:

        Psychology appears to me to be an actual science. Economics is just voodoo…

        This makes me laugh. First of all, it avoids recognition of the gulf within psychology between experimental psych (which used to be based on lab rat experiments), and, say, transactional analysis. In most of the social and behavioral “sciences,” there is a split between the “wire heads” (experimental orientation, favoring data collection and mathematical analysis) and the touchy-feely folks, who are math-phobic. This is also true in my own field, anthropology.

        It is true that since Freud and Jung, there has been an attempt to make psychology more “scientific,” but, in this post-Einstein age, everything is “relative.”

        Bob in AZ

      • PJEvans says:

        ‘Political science’ is possibly better called ‘political philosophy’, or ‘political thought’, but we’re kind of stuck with the name now.

  42. JTMinIA says:

    I can’t name anyone who would qualify as a “political scientist,” but there are plenty of scientific economists. Again, all you need to do is make predictions from your model and compare them to data in order to “qualify” as a scientist. Experiments are the most straight-forward way to eliminate the possibility of third variables (which are called “confounds” in the context of experiments, but are really the same thing), but you can do science with correlational data.

    ps. I am not just saying this because I like teaching Methods and don’t want the social and health psychologists in my dept to get me removed; I really believe this. With that said, the people who got me removed from teaching Methods at my previous school really were doing crap and I would point this out again (and again) if I had to.

    • Gitcheegumee says:

      Much of this discussion put me in mind of the ratings used for the bond markets. Some hijinks went on there, for sure.

      Yesterday,there was a Book Salon at FDL with Andrew Sorkin-author of Too Big To Fail-hosted by Felix Salmon.

      Coincidentally,here is an article on economic modeling by Mr. Salmon, himself.

      Recipe for Disaster: The Formula That Killed Wall StreetFeb 23, 2009 … There’s certainly no fixed maturity date: Money shows up in irregular …. Armed with Li’s formula, Wall Street’s quants saw a new world of possibilities. … Using Li’s copula approach meant that ratings agencies like …

      http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?... – Cached – Similar

  43. JTMinIA says:

    pps. to any of my colleagues who are reading this, I have two things to add. First, this counts as “out-reach,” not “wastes too much time on the internet,” since I think I gave a half-way-decent explanation of the issues faced by correlational scientists. Second, if it’s so bad that I spend a lot of time in my office on the web, then why is it OK for you to be doing the same?

    ppps. yes, I’m aware that you have tenure and I don’t, but I still think that that was a valid counter-question.

    • Adie says:

      i’m a sorta partially retired, vaguely scientific-leaning, baroque-music-loving sorta-subsistance farmer one-time wannabe. i know some real-time live, practicing scientists really well. and yes, i’m published in a scholarly journal, a l-o-n-g time ago.

      nice ta’ meet yer acquaintance. but i’m spoken-for.

      p. e. a. c. e. ;->

  44. JTMinIA says:

    I am the academic grandchild of Karl Popper. Bayes and Platt are the antidote, by the way. Worked for me. ;)

    • bobschacht says:

      I am the academic grandchild of Karl Popper.

      Me, too. There’s a lot to respect about Popper, one of which was his admonition of how to critique an opponents position: i.e., state what you are going to criticize in the best possible terms before you take it apart.

      I know that much phil of sci water has flowed under the bridge since Popper, including post-Modernism, Bayes, Kuhn and much else, but I keep coming back to Popper as my model of how science should work.

      Bob in AZ

  45. Gitcheegumee says:

    Emptywheel: @#207

    Could you clarify something for me?

    Does a research grant require full disclosure of how the proprietary model is devised ?

    As opposed to a consultancy contract that allows the model to remain completely proprietary?

    • JTMinIA says:

      I can tell you that this is negotiable. There’s no general rule either way on pre-existing proprietary stuff. (The real question on this front was whether he was under contract when he developed the model.)

      • qweryous says:

        I found and have somewhere an explanation that Gruber gave concerning the development of his model and what it was based upon.

        Will find and post it later.

        IIRC it was quite some time ago (both the statement and the model development).

  46. bobschacht says:

    BTW, I did “Spotlight” this post of EW. I sent it to:
    Jacob Schlesinger : Economic Correspondent : Wall Street Journal
    Steven Pearlstein : Financial Staff Writer – Economics : Washington Post
    Robert Pear : Domestic Policy, Medical Correspondent : New York Times
    Bruce Japsen : Business Health Care Reporter : Chicago Tribune
    Stephen Glain : Economics Reporter : Boston Globe
    Aaron Zitner : White House/ Economics Editor : Los Angeles Times
    John Parker : Washington Bureau Chief : Economist
    Howard Gleckman : Economic Analysis, Trends, Demographics Correspondent : Business Week
    Caren Bohan : Economics Correspondent : Reuters America – Washington Bureau
    Jim Abrams : Congressional Correspondent : Associated Press

    My comment to the addressees:

    An important part of the health care reform debate is the economics of
    it. Most people have been relying on what Jonathan Gruber, who is a paid
    political consultant of the White House, is reporting, based on his
    proprietary analysis using an unpublished simulation model that has not
    been peer reviewed.

    With so much taxpayer money at risk, we need a more open and independent
    analysis of the Senate (and House) proposals. Journalist Marcy Wheeler
    (aka “Emptywheel”), in the attached article, tries to examine Gruber’s
    assumptions, and the related evidence. She cites an important article by
    the economist Mishal, which also deserves examination.

    Gruber’s analysis may be correct, but with so much at stake, we need a
    vigorous and independent analysis of the available evidence, rather than
    an over-reliance on a single, proprietary source. I hope that you and
    your news organization will give full airing and analysis of
    alternatives. We need health care reform, based on the best evidence and
    analysis available.

    Bob in AZ

  47. Gitcheegumee says:

    @210

    Thank you for your reply.

    What I am asking,clumsily, is to what extent is the research data ,subject to research grants, subject to mandatory transparency?

    Let’s just say ,in general, if research monies were used to develop an end product,which then isultimately deemed proprietary, would the earlier data be subject to public review -to determine how the aforementioned resulting proprietary product was achieved?

  48. JTMinIA says:

    A couple of issues are getting mixed up here.

    First, you need to separate data from models from predictions (i.e., outputs from models). The data are rarely kept secret and the predictions are what you publish. It’s the model – which is a bunch of weights for parameters, mostly – that is kept secret.

    Second, you need to keep what the researcher already had from before the new contract kicked in separate from what is created during the contract. Anything you had before is still yours. (I’ve never heard of a contract that forces you to give away stuff you already had, just because you entered a new contract, but maybe there are exceptions.) On the flip side: unless you had some special side deal, anything that you create during the project (germane to the project) must be given to the organization paying the contract. (Relately: anything I create that is germane to my job belongs to a certain mid-western university, not me.) This is why I asked who was paying Gruber for this work when he created the proprietary model. Even if he didn’t have a grant at the time, what deal does he have with MIT that makes it his, not theirs.

    Caveat: as I pointed out earlier, academic economists get much better deals than psychologists (in order to keep them in the academy).

    • Gitcheegumee says:

      Thanks for the detailed answer.

      Evidently, you and I were thinking somewhat along the same lines as to who, when, and where regarding the evolution of this “model”.

      Just as an aside, for the record, Gruber’s Wiki has some additional info regarding the positions he has held over the years, and his academic vitae that may be of interest.

    • bobschacht says:

      First, you need to separate data from models from predictions (i.e., outputs from models). The data are rarely kept secret and the predictions are what you publish. It’s the model – which is a bunch of weights for parameters, mostly – that is kept secret.

      Were you also the one who said that models are based on regression equations?
      I want to issue a slight correction to that statement, as well as the one quoted above.

      Models are not limited to simple linear equations. In fact, an economic model based on a simple linear equation would probably not be very good. Simulation models can also be based on polynomials (this is common), and may involve ratios of variables, not just linear sums. Some models may even incorporate differential equations. Thus, I think it is quite misleading to write that “the model – … is a bunch of weights for parameters, mostly”. I disagree.

      For this reason, I think a good peer review of Gruber’s simulation model needs to include the form of the simulation model, as well as which variables are included, and the coefficients (weights) for each term.

      Bob in AZ

  49. JohnLopresti says:

    I appreciated the level of abstraction in [email protected], something like Fourier transforms. The conversation is interesting as well, for its bordering on bioethics; in the latter regard, I appreciated the understated professor Foland*s comments in a recent thread mentioning practical considerations in research. However, I also would add to JTM*s comments about dog sponsored happiness, that dogs have the ability to smile. I think even labs smile at their owners, smart labs. I found a page of links which Columbia U provides on medical ethics; there are many kinds of quality oversight in the field*s numerous professions, some by design fairly invisible for various reasons.

    On the IT side, 15kLines seem fair. I knew a small shop with a few machines which it sold to archeologists and the like, whose inhouse software spaghettied more than 1,000,000 codelines.

    Farther on the IT side, and OT, BradFriedman today is previewing some of the investigative reporting about the IT person who perished in 2008 around election day, MConnell.

  50. JTMinIA says:

    Just because it’s HLM and not SLR doesn’t mean it isn’t regression, dude. With that said, I agree that the quoted bit is too simplified. But, in my defense, in most other places I mentioned that you need to know the order of the predictors, as well.

  51. orionATL says:

    careful bob,

    – second or greater, aka non-liner, equations are difficult to solve or, more properly, sensibly interpret.

    – “liner” models may in fact involve mathematical simplifications of more complex equations.

    • JTMinIA says:

      Please do not confuse linear models with non-linear transforms of predictors (e.g., Y = b2 X^2 + b1 X + b0) with non-linear modeling. (It’s a common error, but it’s a bad one to make.) You can model almost any non-linear relationship using linear regression (my equation above makes a parabola). Very few people use non-linear regression (for reasons akin to what you suggested).

      Odds are – having not seen it – Gruber uses HLM (which is hierarchical linear modeling). This is multi-step multiple regression where you predict hypothetical variables in the initial steps and then predict the outcomes using the hypothetical values in the final step. Relatively easy to do now that packages like SPSS and such do all the heavy lifting.

      • bobschacht says:

        If Gruber was using non-linear transformations of predictors in his simulation model, I would want to know if I were a peer reviewer.
        If Gruber’s model used HLM, I would want to know. If Gruber’s model uses something other than HLM, I would want to know.

        My point was that you seem to have been trivializing what one would need to know to conduct a peer review of Gruber’s Simulation, and that a decent peer review needs more information (and more transparency from Gruber) than you appeared to think was necessary.

        Bob in AZ

  52. orionATL says:

    JTMinIA

    there was no confusion on my part; i used to do this stuff for a living.

    i think you might have confused me with bob.

    • bobschacht says:

      Thanks for the link. I’ve slogged through most of this publication, and although I don’t see any explicit reference to their model as HLM, that seems probable. To me, it looks like an HLM with a lot of emphasis on a particular ANOVA (analysis of variance) or maybe MANOVA model.

      They do talk a lot about a “difference-in-difference” model. I can’t quite tell if that would be the right description of the entire simulation model, or whether they just use D-I-D models along the way:

      We begin by estimating difference-in-difference models of the form…

      (p.16)

      Their model (and presumably Gruber’s) is described in the middle of the paper, approximately pp. 13-18. Their “results” are presented in the form of a table of means.

      But I’m not sure that I could write out Gruber’s HLM model based on what this article reports, even though he describes many (all?) of the variables, and the means for these variables.

      Bob in AZ

  53. orionATL says:

    Bobschacht @227

    I would indeed,

    and a lot more that you have brought to our attention in this extended discussion.

    Not only that, but the more I learn from this discussion,

    The more dissapointed I am with both krugmam and Obama, though for different reasons.

  54. JTMinIA says:

    It’s HLM where he only shows you the final step. Those “constants” with Greek symbols (see p. 16 of the pdf; p. 14 of the ms) are the magical hypothetical variables produced by the initial set of analyses.

    And I don’t mean to trivialize the lack of detail. I can’t stand that kind of thing and would never allow it in any psych journal for which I’m an editor (at any level). But things are different in business schools.

    • qweryous says:

      Yet another interesting discussion here at emptywheel.

      I’d like to thank those that make it possible.

      JTMinIA in particular for your posts here and the discussion that they facilitated.

      @111 is a classic, both in general terms, and it’s applicability to the
      issues at hand.

      @39 you asked a question that is not answered yet. I wondered this months ago, it was as if the suspense of waiting for CBO scores was contrived. I found it hard to imagine not having lots of ‘preliminary’ or ‘unofficial’ runs done. The disruption of surprising numbers would seem worth the effort to prevent the surprise.

      At the least I would think the insurance industry would have the ability to model the CBO scores fairly accurately. The financial stakes here are high, and there have been years to prepare for this.

    • qweryous says:

      Your question @39 is answered in part here LINK:
      http://krugman.blogs.nytimes.com/2010/01/15/more-on-jon-gruber/

      The quote of interest starts:

      “What was Gruber contracted to do? He emails:

      I was contracted with HHS for technical modeling assistance. When designing a policy like this, policy makers want to consider a million different permutations: different AVs, tax credit amounts, employer assessments, etc.”

      I missed reading this until now.

      Found it at Salon,Glenn Greenwald. LINK:

      http://www.salon.com/news/opinion/glenn_greenwald/index.html

  55. JTMinIA says:

    Actually, my question about whether Gruber was helping to “game” the CBO scores was triggered by that Krugman post. I had never thought of this possibility until I read that.

    Note that doing such – i.e., tweaking the way a proposal is written to get an undeserved CBO score – would be a huge risk, if Gruber or anyone else actually did this. Most of all, if the CBO score is really undeserved, then what happens down the road will not match what was predicted. If anyone keeps on top of this, then they’d have falsifying evidence against the underlying model.

    Of course, what you’d have (at that point) is evidence against the CBO’s model, not Gruber’s. Even worse (if you assume that Gruber did the tweaking) is that Gruber could then come out and say “my model actually predicts what happened,” so he could bill us all again by selling the CBO a new model.

    • qweryous says:

      The propriety of “gaming” scores is one thing, determined perhaps in part by who is doing it. The actual score is a different issue. I doubt that any of the participants see any problems in using the model to construct a proposal.

      If the model is being ‘tweaked’ in any way during this process, then it is a different thing entirely. Then you could de facto score the assumptions along with the proposals; thereby providing counsel on both assumptions and proposals.The implications of doing this are obvious.

      “Note that doing such – i.e., tweaking the way a proposal is written to get an undeserved CBO score – would be a huge risk, if Gruber or anyone else actually did this. Most of all, if the CBO score is really undeserved, then what happens down the road will not match what was predicted. If anyone keeps on top of this, then they’d have falsifying evidence against the underlying model.”

      I think the argument in response would be that numbers are numbers, numbers don’t lie (here I assume that “undeserved CBO score” assumes that only the proposals, not the assumptions used as inputs are subject to ‘tweaking’). I don’t think they (any of the potential participants in generating and/or analyzing the proposals) have any concerns about constructing a proposal to ‘get a score’.

      What happens down the road won’t match the prediction in this case; the assumptions ‘cooked in’ to the prediction concerning the variables are sure to provide the necessary excuse, as the assumptions will not be met going forward.

      No doubt Gruber will have more proposals to do work on this issue!

  56. reader says:

    What you all said.

    And ~ pardon me if someone else has pointed this out … BUT … there is something I keep coming back to and cannot get it out of my head.

    The *argument* that the reform model will *actually* Lead To An Increase In Employee Salaries is a perfectly targetted propoganda point.

    The reaction is OH AND my pay will go up so I am in!!! Pass that sucker NOW.

    This increases the liklihood that the ploy will be embraced by the *little* people.

    And this DECREASES the liklihood that the *research* will be closely examined.

    AND none of that has *anything* to do with economics.