Since October 1, Obamacare Has Created Positive Social Value

The best industrial organization economists understand that products have many attributes. Coca-Cola is not simply a substance for quenching consumers’ thirst. Consumers value its brand image, familiarity, packaging, etc., which is why it dominates competing sodas despite tasting the same.

I urge Obamacare critics stick to legitimate critiques rather than fabricating them through economic misunderstandings. For example, healthcare.gov was supposedly built at a cost of over $600 billion. Although I agree that healthcare.gov has delivered hardly any value by enrolling (a handful of) people in health insurance, we cannot conclude that the social value created by Obamacare since October 1 has been negative.

First, the social purposes served by healthcare.gov go beyond enrolling people in health insurance, just as the social purposes of Coca-Cola go beyond quenching thirst. I am no fan of Obamacare and thereby don’t bear the burden of proof of said value, but can point to entertainment value as an example. Many times lousy unknown films make $50 million in a few months, and that understates the social value created because intellectual property like films cannot monetize all of the social value. I’m confident that healthcare.gov has created more aggregate entertainment than, say, The Smurfs 2 or The Last Exorcism Part 2, which, in the span of a few months, each generated social values in the $20-120 million range.

Millions of Americans are chuckling over videos like this:

You might say that the enjoyment is offset by the pain experienced by Obamacare supporters when they view such videos. But as of October 1 there weren’t that many Obamacare supporters, and the few of them who exist can and do choose to ignore the allegedly major problems with healthcare.gov.

Like international trade, farce is usually a positive-sum game. My best guess is that the entertainment value generated by healthcare.gov during October 2013 is about $200 million, with more value forthcoming, albeit at a diminishing rate.

Second, healthcare.gov didn’t cost $600+ million to build. Nobody knows for sure (that’s part of the entertainment value!), but healthcare.gov appears to cost $125-150 million. If healthcare.gov created value only via entertainment, it has already generated a surplus in the neighborhood of $50 million.

As I said, healthcare.gov has still more valuable product attributes. Somebody needs to look at the value of reminding the public (and economists) about “Bright Promises, Dismal Performance” better than Milton Friedman ever did. Who knows what corruption might be uncovered in the Congressional hearings — corruption that would have persisted undetected but for healthcare.gov.

About Casey B. Mulligan 76 Articles

Affiliation: University of Chicago

Casey B. Mulligan is a Professor in the Department of Economics. Mulligan first joined the University of Chicago in 1991 as a graduate student, and received his Ph.D. in Economics from the University of Chicago in 1993.

He has also served as a Visiting Professor teaching public economics at Harvard University, Clemson University, and Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago.

Mulligan is author of the 1997 book Parental Priorities and Economic Inequality, which studies economic models of, and statistical evidence on, the intergenerational transmission of economic status. His recent research is concerned with capital and labor taxation, with particular emphasis on tax incidence and positive theories of public policy. His recent work includes Market Responses to the Panic of 2008 (a book-in-process with Chicago graduate student Luke Threinen) and published articles such as “Selection, Investment, and Women’s Relative Wages,” “Deadweight Costs and the Size of Government,” “Do Democracies have Different Public Policies than Nondemocracies?,” “The Extent of the Market and the Supply of Regulation,” “What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?,” and “Public Policies as Specification Errors.” Mulligan has reported on some of these results in the Chicago Tribune, the Chicago Sun-Times, the Wall Street Journal, and the New York Times.

He is affiliated with a number of professional organizations, including the National Bureau of Economic Research, the George J. Stigler Center for the Study of the Economy and the State, and the Population Research Center. He is also the recipient of numerous awards and fellowships, including those from the National Science Foundation, the Alfred P. Sloan Foundation, the Smith- Richardson Foundation, and the John M. Olin Foundation.

Visit: Supply and Demand (in that order)

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