There is one thing I have learned in my years in academia – you are the company you keep, or to be more specific you are the people you published with. There are important reasons for this – because academia is very much dominated by tribalism (individuals offer jobs and opportunities to those who agree with them the most not to those who make the best arguments, and very mentor driven, it is very important to choose the individuals you publish with based on what you see as your core career trajectory. Doug Elmendorf has published with a number of individuals, but perhaps his most important collaborators on a macro-economic scale are Greg Mankiw and Martin Feldstein.
These are dyed in the wool, neo-classical, the market should always dominate decisions economic thinkers. They are about as far to the right as you can get on macro economics and still be in the mainstream. Elmendorf is going to be a natural skeptic then of any reform beyond a generalized tinkering with market forces. This brings up the question, why was Elmendorf chosen as director of the CBO. The question becomes far more sanguine as we begin to notice that Elmendorf is almost constantly setting the economics equivalent of road side bombs along the route of the health care reform process.
There are those individuals who will say that as a "scientist" that Elmendorf would not let his personal ideas enter in to his CBO predictions. This is, not to use too fine a phrase, pure bullshit. Economics is a social science, it is not a hard science. This means that biases and prejudices enter in to any formulation of consequences of actions. There are no concrete observations, or in the case of the CBO even preliminary studies, that are used to support these projections of consequences. They are at essence philosophical speculation (and it doesn’t matter how many mathematical models you use, it is still philosophical speculation). Elmendorf must be working from a set of assumptions, and these assumptions are critical. I started thinking of this over the last few weeks when Elmendorf was making a number of assertions that were detrimental to health care reform. The other day, looking for something else I found Elmendorf’s list of publications on scholar Google. His most referenced paper is with Mankiw and is a working paper on debt reduction . His first major economics paper, appearing in the American Economics Review and is also on debt reduction So Elmendorf is both a denizen of debt reduction and probably an intense free marketer. In other words he believes very much in a non-regulatory model combined with the idea that any government intervention will more than likely be counter-productive. To repeat, Elmendorf by nature and inclination is going to be very much against the type of health care reform that Obama is suggesting.
What finally let me to write this diary is yesterday’s new that Elmendorf said that there would be only about 2 billion dollars in savings from MedPac. This goes against almost every health care economist and this morning I saw Paul Krugman opining about how this could be. Krugman is a great spokesman, but he is an academic first and therefore a tribalist – especially when it comes to economists. The reason Elmendorf most likely came up with the low number is he believes this type of intervention will not work – borrowing from Arrow he believes this type of intervention is impossible (never mind that Arrow himself did not believe his impossibility theorem was applicable to healthcare – the modern neo-classical economists are simply too conservative and paradigm driven to take that in to account). My guess is that Elmendorf’s estimation is that too many people will think that their needs are not being met (both doctors and patients) and rebel against the system creating a type of chaos – and chaos usually reverts to the status quo. Elmendorf is making projections based on a set of assumptions that even the person who developed the original assumptions says does not work with healthcare.
The question I have though is why is Elmendorf the head of the CBO? Who made this decision? He already has been one of the biggest road blocks against healthcare reform, as he obviously would be against any social welfare reform. There is something very wrong here.