Entry from August 22, 2009

Inevitable Schadenfreude at what is beginning to look like the spectacular failure of the Obama health-care initiative should not prevent us from contemplation of the puzzle of why it has happened, if it has happened. It’s not enough to blame the intrinsic deficiencies of the legislative program itself, still less the “lies” and “misrepresentations” allegedly brought up against it by its Republican opponents. The puzzle consists in the question of why Americans have so willingly swallowed all the rest of our President’s guff about his failed “stimulus” to the economy or fashionable anguish about global warming and the absurd, job-killing “cap and trade” legislation designed to deal with it. And what about his grandstanding over Guantanamo and the coddling of terrorists or his taking over those other large sections of the economy — banking, insurance, car manufacturing — before he ever got around to health care?

How is it that we have accepted all this, most of it much more obviously likely to take us on the high road to disaster, only to jib at the promise of universal health care, whose shortcomings will not be visible to the naked eye for some time to come? I’d have thought that, of all these misconceived policies, the health care legislation would have been the most plausible, and the most likely to be accepted by the non-Obamolatrous general public. It may be true that, as John C. Goodman writes in today’s Wall Street Journal, “the single biggest reason” for the largely spontaneous protests at town-hall meetings “is the arrogance of our elected officials in Washington,” but that arrogance has not been limited to the unseemly haste with which those officials have tried to push through their fundamental changes to the nation’s health care system. We see it everywhere.

The difference is that, when it comes to health-care reform, the government’s arrogance touches us directly and immediately in a way that it otherwise doesn’t. This is the insight that lies behind the more persuasive explanation of the popular anger that has been offered by Daniel Finkelstein in The Times of London in the course of tackling the question of why both Britons and Americans seem equally eager to hang on to their respective health care systems, even though these are polar opposites of each other. His argument is based on an analogy with the highly competitive annual lottery for basketball tickets at Duke University.

In 1994 the behavioural economists Dan Ariely and Ziv Carmon decided to exploit this ritual to conduct an experiment. They called up students who had camped out but failed to obtain a ticket, offered them admittance and negotiated a price. On average, respondents were willing to pay $175. Next they called up the lucky winners and made bids to buy a ticket. The average price demanded? A huge $2,400. Remember that both sets of students wanted the tickets badly in the first place. The value they both put on admittance should have been, at least roughly, the same. Instead they were separated by a factor of about 14. Ariely and Carmon present this finding as corroboration of what is known as the endowment effect. Once someone owns something, once it is theirs, they value it more. This is closely allied to another effect beloved of behavioural economists — loss aversion. People much prefer avoiding losses to making gains.

Mr Finkelstein then goes on to point out that the Conservative Euro-MP Daniel Hannan’s criticisms of Britain’s National Health Service as a relic of the post-war vogue for central planning and an un-American choice for the U.S., for which he got into so much trouble from his party colleagues, are in fact correct. Yet

neither of Mr Hannan’s observations mean either that the NHS will be replaced, or that it ought to be. To argue that since it would be a bad idea for the US to create the NHS, it must therefore be correct for the British to abolish it is to ignore the endowment effect and loss aversion. The debate about American reform begins with the American system. The debate about British reform begins with the NHS. Voters in both countries fear what they stand to lose more than they look forward to what they stand to gain. Since they fear losing different things — in the US case, for instance, they fear loss of choice and control, while in the UK we fear losing universality — the debates in the two countries will always be different.

I would only add that this phenomenon is also a reminder of the importance in politics generally of fear — which President Obama only seems to be able to treat as the discreditable, even shameful antithesis of his glib promise of “hope.” His subsequent success or failure in office may depend on whether or not he learns the lesson of the failure of health-care reform — always assuming that it happens. Again. The lesson is one of the healthy respect any politician owes to people’s fears. Anyone who tries to accomplish things by making people ashamed to fear more than they hope is bound to come up against the natural limitations of that strategy — and, it seems, sooner rather than later.

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