16 December 2009

Madman Theory and Health Reform

This post at LGM made me think about how madman theory, or the theory of rational irrationalism, might be relevant to understanding the current negotiations over health care reform in the Senate.

When Thomas Schelling won the Nobel Prize for Economics, the Swedes said this:

Against the backdrop of the nuclear arms race in the late 1950s, Thomas Schelling’s book The Strategy of Conflict [1960] set forth his vision of game theory as a unifying framework for the social sciences. Schelling showed that a party can strengthen its position by overtly worsening its own options, that the capability to retaliate can be more useful than the ability to resist an attack, and that uncertain retaliation is more credible and more efficient than certain retaliation. These insights have proven to be of great relevance for conflict resolution and efforts to avoid war. . .

Tyler Cowen puts it in layman's terms:

Ever see Dr. Strangelove? [Schelling] developed the idea that deterrence is never fully credible (why retaliate once you are wiped out?). The best deterrent might involve pre-commitment [e.g., the Doomsday Machine], some element of randomness [e.g., ambiguity about one’s deterrent strategy], or a partly crazy leader [e.g., a madman such as General Ripper]. I recall Tom telling me he was briefly an advisor to Kubrick.

Here's where health care comes in. Progressive legislators would like to see "optimally" progressive legislation passed, but they, at the same time, actually care about the uninsured, insurance company abuses, and people losing their insurance when they lose their jobs. Since Lieberman doesn't really give a damn about any of these factors and is really only concerned with extracting concessions from those darn liberals that were mean to him in '06, his bargaining position is strengthened to a significant extent. As Lemieux puts it:

The dilemma facing progressives on health care is simply that the indifference in the face of suffering that the Joe Liebermans of the world have greatly increases their negotiating leverage. His threats to blow up health care reform are simply going to be more credible than those of people who actually care about whether people have access to health insurance.

Since progressive members actually want something to pass because of their real concerns about actual outcomes, they are much less likely than Lieberman to simply blow up the whole process in return for a public option or a Medicare buy-in.

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