Casey Mulligan Worships Market Icons and Denounces Apostate Health Economists

Casey Mulligan kept repeating “market analysis” and “compensating differential” like an Evangelical minister invoking Jesus, though with less charisma and more of an Aspy affect. Mulligan, a University of Chicago economist, was speaking about the Affordable Care Act at the opening plenary of the American Society of Health Economists conference last week. Despite his audience’s knowledge of both economics and the ACA, Mulligan made few substantive points. In fact, Mulligan behaved like a religious zealot, denouncing many health economists as apostates who ignore “market analysis” and demonstrating his own devotion to Platonic ideals of economics.

Mulligan seemed like a religious zealot first and foremost because he did not bother to engage in real analysis or provide evidence. Obviously, Mulligan is a very smart, highly trained economist, who is more than capable of analyzing the complexities of anything he wants. But at least at this event, he did not do so.

(Caveat: This post is based on my memory, my notes and conversations with others. I will check my memory once ASHEcon posts the video.)

Leaving the plenary furious, I wondered if I was seeing Mulligan through partisan eyes. Although I see the flaws of Obamacare—the avoidable, the unavoidable, and the tradeoffs—I am a supporter. I decided to ask conservative health economists, over the course of the three-day conference, what they thought of Mulligan’s performance. I sought out those who I knew to be or suspected might be Obamacare critics. (Since I did not ask to quote anyone and had not even planned to write this post when I asked, I will not name anyone.) My survey is obviously not representative of audience members, biased towards those I know and happened to run in to—and had a sample size in the single digits.

The consensus was overwhelming: “same stuff over and over again” and “not a lot of content.” The most complimentary responses were: “he didn’t explain very well” and “there was a lot to be conveyed, but it didn’t happen.”

Mulligan was not utterly without substance nor was his substance without merit. In the interest of fairness and to give you a flavor of what he did and did not say, below are all of Mulligan’s points with more explanation and context than he provided:

1. The employer mandate will reduce the demand for labor—employers will hire less.

I doubt there was a person in the room who does not think this will happen to some extent. The question is how much.

Richard Freeman, writing about the minimum wage, provides what I think is the real explanation: Conservative economists believe that people change their behavior a lot in response to price changes. If it becomes more expensive to hire people (due to a minimum wage hike or new employer mandate), conservative economists expect that employers will dramatically reduce how many people they hire. Liberal economists believe people change their behavior much less in response to price changes.

Mulligan could have provided evidence or more detailed analysis for why he expects disastrous labor market effects. But he didn’t. That’s why his faith in big responses to a higher price for hiring seemed to me like, well, faith.

2. Romneycare’s penalty for hiring is ten times larger than Obamacare’s.

This was the only thing that I personally learned from Mulligan. Remember that a lot of people in the audience know a lot about the ACA.

3. Simulations by Congressional Budget Office, Urban Institute, and Jonathan Gruber don’t use “market analysis.”

Mulligan was “facing” Peter Orzag, former CBO head and Obama administration Office of Management and Budget director. When Mulligan slandered CBO, Orzag pushed back, asking how there could be no market analysis when CBO predicts a reduction in employment. (CBO’s prediction is about 3 percentage points smaller than that predicted by Mulligan.) Eventually, it was clear that Mulligan meant the simulations do not explicitly model multiple firms and employees competing. Instead, simulations usually use elasticities—summaries of how price sensitive actors are, estimated from past empirical evidence.

I am not a fan of such simulation models, but Mulligan failed to make a specific case that the elasticities used are so far off. Instead, he accused the simulators of willfully turning their backs on “market analysis.” He also referred everyone to his forthcoming e-book but failed to tell us about its content.

4. There are “100% taxes.”

Mulligan meant, I assume, that some ACA rules have cliffs, where a small increase in, say, earnings or people employed, eliminates benefits entirely.

5. Obamacare rules cause incentives for some existing firms to break up into different firms because incentives to for employees to get employer provided health insurance will vary.

This is the same kind of force that now drives firms to contract out cleaning so they don’t have to pay for health insurance benefits for cleaners even though they pay for it for professionals.

Mulligan made legitimate, potentially important points but failed to back up his contention of catastrophic size labor market consequences. Moreover, when pushed by Orzag to go beyond decrying impending doom and provide some numbers, Mulligan predicted a 4 percentage point drop in employment. Such a drop would certainly be a big, bad deal but (to me at least) not as catastrophic as he implied.

Audience members of all political persuasions complained about Mulligan’s tone, several calling it “obnoxious.” That is saying a lot, because aggressiveness—arrogance even—is common among economists. But aggressiveness is only admired when bolstering impressive analysis.

Mulligan also revealed his dogmatism by failing to engage with others’ views. Mulligan ignored the issues Orzag focused on, particularly the slowdown of health care expenditure growth. Perhaps Orzag’s analysis was not sufficiently pure market analysis. Or perhaps Mulligan doesn’t think expenditures are a proper thing to discuss, since they ought to be whatever the market makes them.

And Mulligan barely bothered to engage with the moderator, the very knowledgeable health policy journalist, Sarah Kliff.  He implicitly dismissed her at one point, saying that that he does not “blame” journalists for “not doing market analysis,” because “their job is to sell newspapers.” I am all for analyzing how the economics of journalism affects journalists’ knowledge and behavior, but don’t ignore the empirical evidence sitting beside you.

Finally, Mulligan’s dogmatism was revealed by what replaced analysis and engagement. Along with repeating sacred economic phrases in an outraged voice, Mulligan did things like quote Adam Smith—a quote whose relevance I could not discern. I overheard someone say afterwards that Adam Smith would roll over in his grave. Smith always had wonderfully specific analysis.

Mulligan was most disdainful of Jonathan Gruber*,  MIT economist, Romneycare architect and Obamacare advocate, with whom he has clashed before—and who was not even at the conference. Mulligan accused Gruber of ignoring economics to “fight the good fight.” Many liberal academics do forsake analysis and evidence to pursue whatever goals they believe are right. Believe me: I have worked in schools of public health and seen it many times. But in this case, it was Mulligan who forsook economic analysis to fight the good fight—worshiping a caricature of economics.

*Disclosure: I know Jon Gruber from grad school and the conference circuit. He helped me (and a co-author) obtain some Romneycare data.

Note: Once the video of this event is posted I will watch it to see if I should modify this post.


3 thoughts on “Casey Mulligan Worships Market Icons and Denounces Apostate Health Economists

  1. Pingback: Avik Roy on Health Care: Faith in Markets, Prejudice Against Government Hurt Otherwise Good Proposal | DahliaRemler

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