If You’re Marking a Curve, you need to identify an equilibrium point

Via the must-read Susan of Texas, Ezra Klein finally comes to some of his senses:

couldn’t get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I’d be interested in a proposal meant to maximize medical innovation. I’ve not yet seen one.

It turned out that concerns about innovation weren’t really about innovation at all. They were just about attacking universal health care ideas of a certain sort. Which is why I stopped taking them seriously. As it is, I’m less worried about squeezing out medical innovation than I am about rising medical costs squeezing out innovation in every other sector of society.

The final point is a key one; if you’re talking trade-offs and DSGE Models, you better not be looking at an area in isolation. (Or, as I noted earlier, if you’re looking at an area in isolation, you need to be able to explain what “equilibrium” means in context: quadrupling the amount diverted from the alleged business does not count.