Aside from being truly appalling, the subject of last week’s post is a great example of how traditional economic models don’t work. To recap via the New York Times:
A growing body of evidence suggests that doctors at some of the nation’s top medical schools have been attaching their names and lending their reputations to scientific papers that were drafted by ghostwriters working for drug companies — articles that were carefully calibrated to help the manufacturers sell more products.
If you asked Professor Saviro about the way drug companies infect the information patients and their doctors have to make decisions, I’m sure he’d say yes of course this is bad. But when he and many other smart policy geeks when they write about reforming health care, these appalling facts are never front and center. They’re quietly shoved under the rug.
A good economic framework wouldn’t let that happen. I’m not sure how to diagram this; this is my first draft.
A traditional model emphasizing moral hazard looks like this:
| Market rules |
Government sets taxes to push companies to pay for insurance |
| Organizations |
My employer pays most of my health care costs |
| Individuals |
Should I get this pill? It doesn’t cost me a lot |
The RTE model adds in how drug companies try to shape market rules:
| Market rules |
Government sets taxes to push companies to pay for insurance |
Big Pharma ghosts articles promoting their drugs |
| Organizations |
My employer pays most of my health care costs |
my doctor’s practice is biased towards these drugs |
| Individuals |
Should I get this pill? It doesn’t cost me a lot |
I am biased towards these drugs |
Imagine if any economic discussion of health care was working from a model like this. How much time would these discussions spend trying to come up with ways of jacking up patients to get rid of moral hazard vs. asking how drug companies ended up with this much power and what do we do about it?
More importantly, if every economic argument worked off of a model like this, we might actually be having a debate right now. Because if you’re working from this model, the first question you’re going to ask when “death panels” are injected into the discussion is, which economic actors are pushing the idea of these nonexistent death panels?
Folks like Media Matters, the Rachel Maddow Show, and many blogs are trying to get these facts into the debate, but they dismissed as corporate-hating liberals. Part of the reason the media can get away with this is because traditional models only pay attention to column 2. But with the RTE model, you’re forced also pay attention to column 3.
And as RTE explains, this isn’t about evil behavior. It’s perfectly rational and expected behavior. Unlike lionesses, who can only win by playing by the rules of their ecosystem, corporations can also try to win by changing the rules of their ecosystem.
If policy geeks took seriously the realities that are baked into this model, we’d be looking at a very different kind of discussion.
UPDATE: I’m not naive enough to think that policy geeks determine media coverage. But if everybody who was serious worked from an economic model that didn’t deny reality, I think more reporters — and more importantly, more editors — would have a hard time just running quotes from policy geeks who didn’t use the model. Given the on-the-one-hand, on-the-other-hand style of coverage we’ve got now, the policy geeks who are just shills would still get lots of coverage. But at least the debate would have a little more reality to it.
As 
Two “Smart Choices”: Cocoa Krispies and Froot Loops.
