Per Capita Spending Almost Doubled Since 2000...wow!

Asymmetric information is what allows the greed of the health care system to overcharge the consumer, and the fear of the consumer reinforces the effect.
There isn't a consumer who needs a product and negotiates with several providers on issues, including cost (except gypsies who pay cash and do negotiate).
There is a frightened individual and his family that wants to live and a doctor who wants the new Mercedes, and an insurance policy that makes everyone's wishes come true, except the rate payers...

 

Its a problem for all health care systems. And that's the important point. You can't refer to perfect competition to suggest 'this is where markets work' (Indeed, we'd never want perfect competition). You can, however, refer to general problems which can more significantly impact on types of systems (e.g. asymmetric information would have an additional corruptive influence in a market system, given the efforts to use league table to create bogus signals)

 

I can say that markets work pretty well for fruits and vegetables, and for used cars, but not very well for health care, or pensions.

 

Sounds like you're referring to markets in general and telling us what you think works. Your prefect competition comment didn't, however, work, what else do you have?

 

I'm just saying that the closer to perfect conditions, the better a market works, and the further from perfect conditions, the worse it works.
Do you disagree?

 

Yes. As I said, we wouldn't want perfect competition. Its characterised, for example, with insufficient profits to reinvest. Perfect competition, if it was achievable, would be associated with stagnation

 

The difference between rocket science and economics is not the math or complexity. Saying rocket science is just "simple physics" is like saying economics is just "simple financial transactions".

The real difference is accountability. The economist isn't accountable for his predictions. The govt and a lot of thinktanks and academic institutions hire a alot of economists that don't seem to get anything right. Look at the GAO and CBO record on economic predictions. How many of those economists predicted the tech bubble, housing bubble, or the length of this recession? Economists make huge screw-ups and just keep on walking and collecting the pay check and writing op-eds for the NYT. Remember that joke, put 10 economists in a room to solve a problem and you will get 12 answers?

Rocket science on the other hand, is totally accountable. The rocket either works or it doesn't, the result is very clear. Success means personal, corporate, and social gain. Failure means people are out a lot of money, maybe some people are killed or injured, and someone is going to pay the price - and the buck generally stops with the "rocket scientist".

 

It was "Old Physics" which gave orthodox economics a twinned focus on prediction and the belief in the market as ultimately self-correcting. I'm glad that economics is shifting away from the simplicity of such physics

 

If economics was not orders of magnitude more complex than rocket science economists would be just as accountable as rocket scientists because other economists could check their work against the extant body of proven evidence, as rocket scientists do with each other. It is so easy to make mathematical models of rocket trajectories that it was accomplished with slide rules decades before computers were invented.

It is currently impossible to create accurate mathematical models of economic activity because there are no economic axioms, i.e. no proven established base of agreement from which the mechanisms of economic activity can be discovered. This is like mathematicians agreeing that one and two are not always whole numbers.

 

Your undergrad Physics 101 is as representative of "rocket science" as you buying a stick of gum is representative of economics.

And just because satellites go up all the time and missiles hit their target so often that doesn't mean its plug & play.

The simple trajectories a person calculates in college will not get you where you want to go. Before laptops, the calculation of a trajectory suitable for flight was done partly with a slide rule and partly with numerical machines, but over many hours, even days.

And the trajectory is the least concern. The engineering is exceptionally complex. What people do in college (including trajectories) is easy because its linear equations with some small tastes of nonlinear. The real world is nonlinear, and "rocket science" is extremely nonlinear. Gravity for example, is not the simple 9.8 m/s you learned in school, but a spherical harmonic model of order 360. People spend their entire careers just studying and modeling gravity.

For many problems, particularly with the materials science (engines) and the control systems, there is no direct closed form mathematical solution. Throw in the atmosphere and a highly maneuverable missile and the problem is exceptionally complex. Few people can handle the math or the engineering.

And as you wrote, economics is hard because the economy is so large with many variables and no way to do good controlled experiments to develop models. Thats also the economists excuse for failure.

Rocket science also has plenty of unknowns, but unlike economics, the rocket or missile must work and a workable answer must be found. Because economists could not find an answer and a rocket scientist can doesn't mean economics is harder - it means rocket scientists are smarter than economists.

 

No, it means that Economics is more pluralist in its nature. This is a good thing as, through debate between different schools of thought, it is more innovative.

 

Not really, launching rockets into space has been reduced to a highly complex problem of engineering, with a number of known unknowns, i.e. variables that are recognized and have become reliably predictable within certain parameters.

In economics there are still many unknown unknowns, variables that are not yet recognized or reliably predictable. Economics is probably at the state of understanding that rocket science was around 1910 despite far more mathematicians working on the problem with vastly superior computing power for the last half century or so.

Economics is a problem that has proven extremely problematic to model with mathematics, even supercomputer calculations of economic outcomes vary drastically when given vastly simplified parameters with seemingly insignificant changes in initial conditions. Rocket scientists only need to deal with the set reality of the physical environment, economists are working on a moving train of unmeasurable unpredictable human behaviour in an unpredictable physical environment.

It is like asking a rocket scientist to figure out how the rocket works while riding it into space.

 

To a large extent thats true, but that doesn't mean its easy or any mathematician or physicist or engineer can do it. And there are 2 aspects that make it a more difficult task than an economist faces: the result is always measured; and someone is always held accountable. Few can do the math and have the understanding of the technology, and of those only a small subset have the confidence and mental strength to take on the responsibility. Every time a rocket or missile is fired, its not just the "rocket scientists" job and career at stake, its also their co-workers jobs that suffer if there is failure, and other peoples lives may be at risk as well. Thats why there are so few real rocket scientists. There are a lot of people in the industry, but there are very, very few who do the actual design work and sign their name on the dotted line.

Like psychology, economics is not a quantifiable subject, and it may never be. A single individuals actions cannot be predicted reliably, the actions of many people may never be predicatble. Economics may never be anything more than statistics of populations, and broad generalizations such as Adam Smith's invisible hand and the concept of "animal spirits". Beyond gross direction, trying to predict and finely control the economy is exceptionally difficult and probably impossible and for good reason since it involves people with free will. Obviously by removing that free will, more control can be found, but thats usually not the beneficial outcome people want.

So economics is hard, but its because its unknown and seemingly unmeasurable. That doesn't mean economists as a group are smart, or even talented. In some ways they are a group of people floundering in the dark but acting and thinking like they know what they are doing, and when powerful people listen to them a lot of people usually suffer.

You can say that economics is subjective, rocket science is objective, and neither is easy but for different reasons.

 

Wrong on both counts. Both disciplines have vibrant quantitative analysis. Indeed, given econometrics, economics is one of the most quantifiable subjects. This increases its policy usefulness (e.g. optimal taxes) and also ensures an environment of continuous hypothesis testing

 

Completely wrong. Economics is logically deduced conclusions arrived at from a priori axioms, the primary one being that humans act purposely. Human value scales cannot be quantified. You cannot say that buying opera tickets is a 52 while heating a house is a 54 on a person's value scale. All that can be said is that a person values one over the other based on their action of choosing. Considering that humans act to achieve ends is the primary study of economics, and that the value scales of those ends cannot be quantified, economics is certainly not one of the most quantifiable subjects, but quite the opposite.

 

You're going to deny the obvious? Suddenly econometrics does not exist?

Economics quantifies all of the time. Indeed, for good or ill, that is a primary reason why its the dominant social science (e.g. its easy to empirically calculate optimal taxes, ensuring that wishy washy analysis into issues such as negative externalities is avoided)