Young Economics.

President Obama

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I am impressed by what Obama has to say in this New York Times interview.   In particular:

[THE PRESIDENT:] If anything, the only thing I notice, I think, that I do think is something of a carry-over from Bob Rubin — I see it in Larry [Summers], I see it in Tim [Geithner] — is a great appreciation of complexity.

And a willingness to admit what you don’t know, in many cases.

THE PRESIDENT: Yes, exactly. And so what that means is that, as we’re making economic policy, I think there is a certain humility about the consequences of the actions we take, intended and unintended, that may make some outside observers impatient. I mean, you’ll recall Geithner was just getting hammered for months. But he, I think, is very secure in saying we need to get these things right, and if we act too abruptly, we can end up doing more harm than good. Those are qualities that I think have been useful.

It’s easy to show, under well-specified mathematical assumptions, that market failures happen and that there exist government interventions that can increase some measure of aggregate welfare.  In the real world, the economy is so complex that policymakers can never really be sure about whether or not they have identified the ‘correct’ intervention, nor about what the consequences of their actions will be.  I don’t think this means that the government should never intervene, but it is reassuring to see that the president and his advisors are keenly aware of the knowledge problem, and that Obama takes it seriously enough that he brings it up in interviews.

I also like this part from pages 5 and 6:

[THE PRESIDENT:] Now, I actually think that the tougher issue around medical care — it’s a related one — is what you do around things like end-of-life care —

Yes, where it’s $20,000 for an extra week of life.

THE PRESIDENT: Exactly. And I just recently went through this. I mean, I’ve told this story, maybe not publicly, but when my grandmother got very ill during the campaign, she got cancer; it was determined to be terminal. And about two or three weeks after her diagnosis she fell, broke her hip. . . .  And she elected to get the hip replacement and was fine for about two weeks after the hip replacement, and then suddenly just — you know, things fell apart.

I don’t know how much that hip replacement cost. I would have paid out of pocket for that hip replacement just because she’s my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else’s aging grandparents or parents, a hip replacement when they’re terminally ill is a sustainable model, is a very difficult question. . . .  So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right?

. . . I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place. It is very difficult to imagine the country making those decisions just through the normal political channels. And that’s part of why you have to have some independent group that can give you guidance. It’s not determinative, but I think has to be able to give you some guidance. And that’s part of what I suspect you’ll see emerging out of the various health care conversations that are taking place on the Hill right now.

Hopefully the Obama administration’s health care reforms will reflect the ideas he is discussing here.

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Written by Alex

April 29, 2009 at 1:14 pm

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