Elizabeth Warren -- Public Choice Posterchild

Elizabeth Warren is an outspoken critic of big business. She believes that businesses and the rich should pay their fair share. She is a proponent of Obamacare, which included many anti-business cost savings measures. ...Except when that business is from Massachusetts, whose Senate seat she is hoping to fill.

In her op-ed for Mass Device (a trade publication for medical device manufacturers), Warren comes out in favor of repealing the medical device tax, a major cost-savings measure included in Obamacare, and increasing government handouts to those companies for R&D. She proposes nothing to offset this large government giveaway to big business. The reasons she gives for her position sound as though they are taken from industry lobbyist boilerplate.

Not only is it fun to watch hypocrisy in action, but it is such a crushingly potent argument for public choice theory. One of the main objections I hear to the idea that politicians are generally self-interested and only motivated by increasing personal wealth and power is that we need to elect the right people who will not fall victim to these incentives. What Warren's op-ed so potently points out is that no one, not even a severe (to use RMoney's word) Progressive like Elizabeth Warren, is immune from promising handouts to major industries in her home state.

What does it say for the prospects of Obamacare's cost-savings measures when even Warren is coming out against them? I disagree with her on everything, but in this case, you would at least expect her to stand on principle. Unless, of course, you are a student of public choice and you realize that she does not do it from avarice, malice, or personal corruption. She is merely a state actor acting in her own best interest, according to the incentives within the system.

Incentives

As a social worker, I do not feel I have done my job properly until my client has all of the resources to which she is entitled. But is my job also to gauge whether or not a person truly needs those resources? For instance, should I help a person in poverty whose depression is not very severe apply for SSI monthly income (which is based on a mental health diagnosis) while they look for work in this terrible economy? Is it my job to advocate as forcefully as possible to assist that person in getting whatever income and assistance I can? Or is it my job to use my clinical judgment to asses what they truly need?

The answer to me and all others I have spoken with about this is that it would be immoral to not inform or not assist someone regarding a program that could potentially help them, even if their eligibility for that program is suspect. The burden for judging whether that person is deserving of aid or not is made by someone far away in a government oversight office. Their determination, in turn, is based on an application I fill out with that client. If my incentive is to get them as much as possible, I am going to make them look as needy as I can (without lying) in order to ensure that they receive assistance. If I don't do this, I risk making that same immoral mistake of not helping them as best I can.

In the current system, the people who are judging whether or not to administer aid to a person knows almost nothing about them, has never met them, and only has a minimal amount of information colored by the bias of self-report and my incentive to assist the consumer. In the case of SSI, most of the questions are the forms are irrelevant to people with mental illness as they have to do with physical limitations. Some questions are more specific and the 3rd party reporting form for psychiatrists definitely goes into some detail; however, the information given is cursory, based on self-report or biased report.

The assistance that is offered (with notable exceptions) is largely an all-or-nothing proposition. A social security administrator cannot, for instance, provide greater assistance based on financial status. There are some gradations in difference between housing status and health status, but generally there is only one fixed amount that is given to the lion's share of mental health consumers. Bureaucrats must then judge whether a person meets the minimum requirements (whatever those are, as they are not published), and then say "yes" or "no."

Their incentives are to deny as many people as possible to contain costs. My incentives are to get as many people on assistance as possible (otherwise, life gets REALLY hard). The client has similar incentives but very little agency throughout the whole process. Once received, the client has little motivation to look for work. Working part-time will reduce your SSI payment by an amount dictated by some arcane formula. Working full-time will eliminate it. Both of these will adversely impact other entitlements such as Medicaid status and Food Stamps. SSA, meanwhile, often will not react to changes in work status quickly, leaving clients with overpayments (which have to be paid back later) or underpayments (which clients have to lobby forcefully to rectify).

Because these programs are administered so far from the individual, they adjust poorly to changing conditions. They cannot be tailored to the client's individual needs which change over time. They incentivize individuals to be dishonest in order to receive help. They put up barriers to self-sufficiency. Are the incentives in these programs really the ones that we want for our clients and social workers?

What is social justice?

Let me start off by saying that this is a preliminary post. My concept of social justice is not fully formed. I have yet to see a definition or operationalization of social justice with which I fully agree. However, in thinking about the issue further (thanks to Jacob, my first non-friend commenter) I reflected on what the modifier "social" means. I believe the process of determining social justice first involves classifying people by group. When we say that, for instance, the drug war is unjust because it disproportionately affects African-Americans, we are making a social justice argument. Though libertarians are repelled by the idea of divining rights based on group affiliation, this does not preclude them from using social justice arguments in critiquing policy, as evidenced above.

What libertarians should have a problem with is when people make social justice arguments by only focusing on the intended effects for a given population, rather than on society as a whole (or different groups or individuals). As Bastiat masterfully stated and Hazlitt drilled into my skull, a policy must be evaluated on both its intended and unintended consequences (that which is seen and that which is unseen). While we can say that affirmative action or diversity requirements may help some specific groups on the grounds of justice, we must also examine the policy's unintended effects. A libertarian conception of social justice has a more holistic perspective--one that incorporates the experiences of individuals, all affected groups, and society as a whole. When you only focus on a policy's effects on the target population, social justice is perverted, and groups have the most clout can gain unfair government-induced advantage.

There are many classifications that can include a person in a group. These include certain ethnic groups such as the ADL, La Raza, and the NAACP, age groups like the AARP, or sexual orientation groups such as the myriad LGBT organizations. These group identities are not chosen and are given by accident of birth. Other group identities are chosen to some degree, such as religious affiliation, union membership, and occupation. Like the former organizations, advocates for these groups will often make social justice arguments. Finally, group identity may also be assigned based on life circumstances, including income, employment, and disability, each of which have attendant government programs. The individuals covered under these group labels are part of what I will term the ingroup.

Groups with well-organized and easily defined ingroups (where people will identify the strongest) can exert higher influence. We can see this most clearly when government programs--each subject to overall budget priorities in the federal government--must compete against one another for centrally administered funds. The well-defined, organized, larger, least controversial, and best connected organizations will get the most funding. What is spent in one program, cannot be spent in another. The benefits of that program will only apply to a given population, and its costs will be spread unevenly throughout the other groups. By measuring how the policy affects all other affected groups, one can more broadly understand the overall justice of the policy being debated.

Here are some groups that are often excluded from social justice analysis:

• People from the future. No, seriously. Future people are a group of people who have no true advocates in the policy arena. The incentives for today's social justice advocates and practitioners is to get as many resources as possible. I would never stop until I believed that my client had every resources available to help them. This approach, however, does not include the cost of these services to, for example, the future poor. The future poor are made much worse off by social welfare spending and government spending in general. Their money will likely be worth much less than ours, their debt load will be much higher, and they will not have the money to pay for as many services as we do today. This is true of the "future" version of any group. Today's group takes money away from what could be spent in the future, as we finance more and more of social spending with deficit spending. This is not in the interests of the future group, its members, or society taken as a whole.
• Disfavored groups. Just as often as policies are made to encourage a given identity they are made to discourage another group from expressing itself. People who engage in socially unacceptable behaviors are defended by libertarians, and often only by libertarians. When the majority attempts to ban the activities of a certain group (or groups) of people, it is an important social justice issue. Those who use state power to discriminate against minority groups are acting in violation of social justice. Absent harm, there is no just cause for discriminating against any group, regardless of how they are classified (see above). An example would be people who use or sell drugs and people who engage in prostitution.
• The opposite people. When a policy is designed to help a certain favored minority group it creates another group--everyone that doesn't fit into that group. For instance, policies that are designed to benefit married people discriminate against the single people. Policies to assist homeowners discriminate against those who rent. Libertarians will often make arguments against a given policy based on injustices to the outgroup, or specific groups therein. Outgroups often contain clusters of smaller outgroups that carry additional classifications as part of their identity.

Whether we can't see them, don't like them, or they are poorly organized, minority groups that are left out of the common conception of social justice are included in the libertarian one. The overall point being that (again) just because a policy would benefit one group, does not mean it is socially just. One must look at the ingroup, outgroup, individual, and society before determining the relative social justice of a policy.

Discriminatory policies, ones that have a larger ingroup than outgroup and harm others, abide by the inverse rule of dispersed benefits and concentrated costs. A discriminatory policy will only be continued if it negatively affects a small, poorly organized group of people (or cluster of groups) where the affiliation with that identity is weak. Simultaneously, its positive effect on the ingroup is so small, that few will notice its presene. The feeling that we are not directly getting over on a minority group ensures that these policies will be incredibly difficult to change. Humans are often poor with affective perspective taking, and will have trouble understanding the behaviors, experiences, and motivations of others. By substituting the amount this policy impacts their life in the ingroup instead of appreciating how much it can affect another person's life in the outgroup, social injustice sustains itself.

Social justice, as stated previously, must also include analysis based on individual considerations of justice, but this is generally termed civil rights and is thought of as a separate entity. Finally, social justice must conclude by evaluating all group and individual data in totality, how it will affect the society as a whole in the scheme of history.

Libertarianism is unique in its holistic approach to social justice, and its insights would do a great deal in refining modern conceptions of the term. Social justice necessarily involves grouping people. That process requires the prevention of harm towards any individual or group, with certain moral limitations. So, in a backward way of getting at a definition, social justice is determined by the degree to which the interests of individuals, all groups, and society are served. Advocacy or implementation of these policies the the process of achieving social justice.

That's about as close as I can get.

PS: I agree that the word "social" is used too often. It's getting like "public" which has almost no meaning at all anymore.

Why the potential defeat of the PPACA is a good thing

The Patient Protection and Affordable Care Act, known annoyingly as Obamacare, was given a serious constitutional vetting in the Supreme Court this past week. The constitutional objections point to the expansion of the Commerce Clause beyond the odious Gonzales v. Raich and Wickard v. Filburn rulings. That's not really a topic for this blog, but I will generally use any chance I can to talk about them. What I want to address in this blog post are reasons why the repeal of the PPACA should be cheered by both the right and the left and seen as an opportunity to create a much better law.

1) Employer-based healthcare. How anyone can be happy that this vestige of wage controls from WWII is still a main feature of American healthcare is beyond me. This is the primary distortion in our insurance market. It creates a ton of problems and has no sincere reason for its continued existence other than it is the status quo. No proposal from either party, to my knowledge, sought to address this problem after single-payer was taken off of the table. Democrats, with their belief in positive rights (including one to health care), hate the employer-based model because losing your healthcare with your job is a social justice issue. Republicans should see the government distortion in the health insurance market through regulations dating back 60 years and be driven mad by free-market wailing and gnashing of teeth. So, who kept it in there?

2) The individual mandate. The individual mandate is not a feature of this law, it is a cost control measure. Putting aside again the constitutional issues, the intended effects of the individual mandate are to punish people who do not buy insurance until they are sick (likely to be young and healthy) and to offset the increased cost of insuring people regardless of preexisting conditions. Like Obama said on the campaign trail, if mandates could fix social problems, we could eliminate homelessness by making not having a home illegal. An individual mandate would not be part of the perfect Democratic or Republican proposal (though Matt Zwolinski makes a philosophical case for it in "Is the Welfare State Justified"). A single-payer system covers everyone with no need for sanctions if a person does not carry insurance. Mandating that a person buy a certain product as a means of regulating it makes no sense in a free market system. Who actually likes this feature?

3) Insurance companies love this law. Remember the stakeholders when this law was being written? The insurance companies, Pharma, and the AMA. This legislation was passed with their input, assistance, and endorsement. How could you get any better for an industry than if the government mandates each American to buy your product? And further mandate that they buy the most expensive option that, regardless of need, covers absolutely everything? As we have seen most recently with SOPA, industry attempts to collude with government instead of innovating to increase their revenue. Centralizing power with and doling out money to the large insurance corporations are repugnant to both liberal and conservative sensibilities (though practiced by both with astonishing regularity). Why are those industries on the receiving end of these new regulations in support of reform instead of fighting tooth-and-nail against it?

4) We are better off without more federal involvement. Neither liberals or conservatives are going to agree on anything at the national level, and for good reason. Not every model works for each part of the country, each group of people, or each individual. Federal mandates means that the most important regulations and decisions are made far away from the people helping and the people being helped. They are also the most difficult to change for both ideological or practical reasons. Want victory for your proposed solution? There are states with excellent single-payer insurance like Vermont. Move it like right-to-work legislation--through the state legislatures. You can push your solution further if power is retained by the states.

5)It increases the cost of health care. Obamacare was sold as a cost-saving measure. This opinion is not shared by the OMB, CBO, or any serious policy organization. It was made up whole-cloth by the Department of Health and Human Services. By double-counting, the PPACA pretends to simultaneously cover the costs of other mandates and extend the Medicare trust fund (as reported by the OMB). The law does not include the yearly adjustment to Medicare reimbursement to doctors, which this year will top $276 billion and whose annual price tag will only increase for years to come (according to the CBO). Finally, the cost-savings measures and pilot programs built into Obamacare (according to the CBO) have not achieved their goals at all, and those programs that have helped are likely to be snuffed out by the health insurance industry. Dramatically driving up the cost of health insurance makes it more difficult to achieve the ultimate goal of universal coverage.

6)A personal reason. One of the mandates of the PPACA requires electronic documentation of all medical records. This presents an unfunded mandate to health care providers, including my company, who must now upgrade their software. For us, this means compliance with Department of Mental Health specifications. Our software upgrade included two things--a new, attractive visual interface and back-end changes so our program could talk to DMH. The actual acts of writing notes, looking at charts, and updating records became more time-consuming and frustrating as we are straddling between two iterations of the same software. The upgrade has taken money away from the organization, has stretched out over-deadline, and has no other purpose than to conform to this regulation. The upgrade surely was not for the benefit of the end-users.

I have always found it difficult to understand why people who favored health care reform actually liked this law. I understand that it was important to do something about these problems. But that do-something attitude got us a terrible piece of legislation. Just because it may be overturned on constitutional grounds does not mean that supporters should ignore the practical case against it. If the Supreme Court sides with the convincing (to me) constitutional objections to the PPACA, it will likely invalidate the entire law--giving Congress another opportunity to actually address the important problems with health care. People of all ideologies should be happy with that result.