Jonathan Gruber, Sorcerer's Apprentice

As reality crashes into Obamacare like a slow motion train wreck, we might ask, “Is there one person who is responsible for this disaster?”

Yes.

J. Robert Oppenheimer.

Oppenheimer, the great physicist who led the development of the atomic bomb during World War II, was an heir of Isaac Newton, who invented modern science.  Newton showed that science could be used to manage nature.  Ever since Newton, fools have believed that, by analogy, social science could be used to manage human nature.  The fact that this has never worked has not diminished the faith of progressives in this idea.

In the 20th century, Robert Oppenheimer made it look like a good idea to assemble the smartest people in the world in a remote location, where they controlled unseen forces with mathematics, and created something new and spectacular.  Ever since, social scientists have imagined that they can do the same thing.  They can’t.  But failures and 100 million deaths in the 20th century have in no way discouraged them.

It was Oppenheimer that we saw on the Gruber tapes.  He took some shots at the public, and opened the progressive kimono by admitting that Obamacare could never have been passed if its supporters had told the public the truth about it, but there was another element there. 

Gruber must think he is an Oppenheimer -- that through his intellect and his academic training, he is in possession of a body of knowledge not available to the public at large and is capable of creating something new and spectacular.   Just as the physicists at Los Alamos manipulated unseen forces with mathematics to produce a desired outcome, so Gruber must think he can do that using economics to manage medical care and come out with a result superior to that produced by the market -- more properly, by the discovery process of the market, which means the discovery process of an unmeasured number of people working for an optimal outcome based on their local and specific, often unarticulated, knowledge. 

The reason that mathematics is the language of nature is that it works in physics, that physical laws are everywhere and always the same and that they have an underlying regularity, an underlying simplicity (if we ignore singularities).  The problem with making an analogy between physics and economics is that while physics deals with underlying simplicity, economics deals with underlying complexity. 

The fundamental force of economics is the subjectivity of value, and the essential character of subjectivity is (a) it is unpredictable and is only revealed in transactions, i.e., in real time, and (b) it is subject to immense change without notice.  The outcome of the subjectivity of value is not stochastically uncertain, but radically uncertain -- it cannot be modeled in any useful way.  That is why the models for derivatives on mortgages blew up in 2008.  Economists, even very accomplished economists such as Gruber very likely is, do not understand this. They do not understand the radical uncertainty of the subjectivity of value unless they have personal experience with markets, which few of them do.  It is possible to simulate apparent-market processes with differential equations, but they are still deterministic.  They only appear to produce the results that a radically uncertain process does; they don’t do it in reality. 

Unlike physics, which is connected to reality through experimentation and observation, academic economics acts within a self-referential universe.  One can be, one usually is, a distinguished economist by virtue of one’s reputation with other economists.  As a social science, economics cannot be an experimental one. One can try and evaluate historical data, but in doing so one cannot hold some variables constant, one cannot really conduct experiments, so observed outcomes are unique episodes. 

Therefore while economics appears to have the results of physics -- numbers from a process manipulated by mathematics -- it does not have the underlying stability, or predictability, of physics.  And that is a big big problem because economics cannot be a predictive science.  If the bomb had been a fizzle when the button was punched for the device on the top of that steel tower at Alamogordo, nobody would know who Robert Oppenheimer was and the country would simply have written off a few billion dollars. 

All economics models fizzle when exposed to the subjectivity of value, but that does not diminish the reputations of those who built them.  That is the difference between physics and economics.  And the difference between the U.S. and the old Soviet Union.  And the difference between success and failure in human affairs.

Why, then, does the market work?  Because it discards failure.  A capitalist economy generates almost nothing but failure.  The wealth that we see around us, that supports us all, is those few things that worked.  Everything that didn’t work, which was most of the things tried, has been discarded. 

But a government bureaucracy rarely discards anything, rarely recognizes failures and rarely changes in light of it.  That is why the societies they rule fail.  The bureaucracy succeeds -- meaning perpetuates itself and its privileged position - and the society fails.  But because the bureaucracy is so entrenched, is so secure in its positions and privileges, it is almost impossible to dislodge it except through military failure.  The collapse of the Soviet Union is another route, but one almost never seen in history.

Gruber imagines that his “microsimulations” simulate, reflect reality.  They don’t.  They may come close for a while.  But in the not-so-long-term they will fail.  If they were not being implemented as a national program, but existed only on Gruber’s computers, they probably would be taught for decades and might get him a Nobel Prize. 

But he has confused himself with Robert Oppenheimer.  That was what we heard on the tapes -- the confidence of a man who thinks he is managing unseen forces with his mathematics for a beneficial outcome.  The only problem with that is that while the math is undoubtedly both sophisticated and correct, the inputs are far more uncertain than he can model.  He doesn’t know that because he has not had to deal with the real world and take responsibility for the outcome. 

If we use a literary analogy and if Oppenheimer is the sorcerer, Gruber is the sorcerer’s apprentice.  Creating chaos by a misapplication of the sorcerer’s powers.