Thursday, February 10, 2011

Kathleen Sebelius is ignorant of network theory

And states' costs of designing their exchanges will be fully funded by the federal government through 2015, with additional funds available to help determine which residents are eligible.
A Wa Post editorial

Translation, Obamacare allows small states to attempt transfers from the large bankrupt states. The result will be the sudden hysteria of Rogoff as he discovers California has gone belly up in 2015, and Congress defaults without subsidies. Naturally Ezra Klein screws this up:
Replacing the individual mandate wouldn't be particularly hard. All we need is another policy that does the same thing -- specifically, discourages free-riders who don't want to buy insurance until after they get sick and thus leave the rest of us paying for them. 
From a rush to defend Obamacare.

Here Ezra doesn't realize it, but the free rider problem gets gets carried into the network as redundancy is  minimumized. It get passed up the chain from the individual to the network defined by Senate mal proportionism. What Ezra is asking is that we need another method to force the sudden bankruptcy of the subsidizing states. because he is not aware of the skew problem, he is under the Keynesian delusion that economies of scale do not exist, and prefers not to do the work, he will be surprised when Levine chain risk causes a break.

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