Monday, June 29

"The Arbiter of Ignorance"

Greg Mankiw counters Paul Krugman:
In his latest post, Paul writes, "the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough."

In my view, these comments are just off point. The Obama administration says it wants a public insurance plan that will compete on a level playing field with private plans (that is, without taxpayer subsidies). Is there any cogent economic analysis that suggests that such a policy addresses problems of adverse selection and moral hazard? None that I know. If it has to stand on its own financially, the public plan has no special advantage in addressing these issues.
"off point", hmm. For my part, I accused Krugman of beating a strawman.

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