Guest Post at Miles Kimball's on Wallace Neutrality in Theory and Practice

University of Michigan economist Miles Kimball was kind enough to ask me to comment on a recent Twitter discussion he had with Berkeley economist Brad DeLong and Stony Brooke economist Noah Smith on Wallace neutrality. He was specifically concerned with how I would answer the question, Does Wallace neutrality result from (in theory) fiscal policy canceling out the Fed, or many private agents (the minnows) canceling out the Fed (the whale)? My answer, and more, is here.

Am I taking crazy pills?!

In 2010 I first asked publicly what I thought was a crucial question on health care, that I thought was not that unobvious, that no one was asking. Since then, I've periodically re-asked it (recently at Noah's), and not only has no one answered it, no one else anywhere ever asks it! I read widely and deeply the economics and politics blogosphere and other media almost every day, thousands of pages per year, from Paul Krugman to Stephen Williamson, the Atlantic, the New Republic, Fed websites, major newspapers, Jonathan Chait, Jonathan Cohn, the links in Economist's View, the links in the Plum Line, on and on. And no one, no one, ever asks it! Why? Why does no one else ask this?!

Am I taking crazy pills?!

Here it is, reprinted from a January, 2010 post; maybe you can tell me if I am:

We spend about $100 billion per year on medical research, public and private combined (see here).

We spend about $2 trillion per year on health care delivery, the doctors, hospitals, administration, etc. If we adopted a European style system, cutting our spending per person in half, as in European countries (that I think the evidence shows have about as good or better health care and results anyway; see for example here), then we would save about $1 trillion per year.

Now, what if we spent that $1 trillion in savings on medical research? It would increase medical research spending more than 10 fold.

Even if delivery did get a little worse, even if we did get a little bit less of our brightest and best becoming doctors due to lower pay, it seems like this would be totally outweighed over the long run by tremendously more advanced medical understanding and treatments due to the 10 fold increase in medical research spending (or more, as some advanced universal healthcare countries provide comparable health care to the US at about a quarter of the cost per person) .

So it looks like if you want better medical results, better treatment, breakthroughs in rejuvenation, better odds of surviving cancer, you name it, you should support going to a European style system, and using the immense savings to increase medical research more than 10 fold.

So if our health care system really is more efficient than the Europeans, then why is it possible to make such a vastly favorable trade?

If the Republicans really care about our children and grandchildren so much why don't they do this, so in 50 years they could have medicine as advanced as it would take perhaps 150 years to achieve with our current system. I don't care how bad you imagine European health care to be, you cannot think a European medical center of today is less effective than even the Mayo Clinic of 100 years ago, when penicillin and polio vaccines hadn't even been invented.