Jonathan Gruber and the Wisdom of Crowds

Posted in: Politics

Many remember Judge Robert Bork as the federal judge whom President Ronald Reagan nominated to the Supreme Court. The U.S. Senate rejected him after a lengthy confirmation battle featuring televisions commercials with Gregory Peck intoning against the Judge. However, “Bork” is more than a person; it has become a verb in the English language. “To Bork someone” means “to attack (a candidate or public figure) systematically, especially in the media.”

“To Gruber” is not yet a verb, but it may become one. I suppose it would mean something like calling people stupid while bragging how you put one over them. “Gruber” would be named after MIT economist, Jonathan Gruber, whom the media has describes as “the Obamacare consultant” who “helped write the Affordable Care Act” and “one of the law’s best known advocates and architects.” Gruber bragged about how the supporters of the Affordable Care Act (often called Obamacare) took advantage of “the stupidity of the American voter” and “lack of transparency” in financing the law in order to get it enacted. Notably, he said “If you had a law which explicitly said that healthy people pay in and sick people get money, it would not have passed.”

In one videotaped speech (of many), he said, “This bill was written in a tortured way to make sure C.B.O. [the Congressional Budget Office] did not score the mandate as taxes.” The, “[l]ack of transparency is a huge political advantage. And basically, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.” He iterated and reiterated that refrain in a series of videotaped speeches he delivered over a long period.

On December 9, 2014, he testified before Congress and apologized, sort of, for his remarks. Actually, he apologized more for the tone of his remarks. He said, before the House Committee on Government Oversight and Reform, “I sincerely apologize both for conjecturing with a tone of expertise and for doing so in such a disparaging fashion.” Then, as if to explain to those of us who do not know what “disparaging” means, he added, “It is never appropriate to try to make oneself seem more important or smarter by demeaning others.”

Then he swore, under oath, the he did not remember making his comments! Apparently, seeing the series of videos over several years did not refresh his recollection. This is from the transcript of questioning by Rep. Trey Gowdy (R-SC):

Gowdy: [I]t took you [Prof. Gruber] about a year to apologize, so I’m trying to figure out if you realized sooner that they [the remarks] were inappropriate, or was it just the morning before you went on MSNBC that you realized that it was inappropriate? When did you realize that these comments are indefensible and inappropriate?

Gruber: I honestly didn’t remember making them.

Gowdy: You didn’t remember calling your fellow citizens stupid and you didn’t remember saying that you’re the only person who cares about the uninsured and that the rest of your fellow citizens don’t give a damn about the uninsured? You don’t remember saying that?

Gruber: I don’t because they were really glib and thoughtless comments that I made. [Emphasis added.]

That is hard to swallow, unless you believe the professor (who collected over $400,000 from the Department of Health and Human Services for providing computer models to measure the impact of the Affordable Care Act’s insurance expansion) is very absent-minded.

There is something else that Jonathan Gruber, the economics professor forgot—what economists call the Wisdom of Crowds. A large group of people is more likely to come to a better solution than any one person would. A random group of 800 people is smarter than the smartest person in the crowd, even if that crowd includes Jonathan Gruber.

Empirical studies show that groups, as a whole, are smarter than the smartest people who are in them. For example, the TV studio audience of Who Wants to Be a Millionaire guessed correctly 91 percent of the time, while the “experts” guessed correctly only 65 percent correctly.

Another example—Sir Francis Galton was a nineteenth century polymath and statistician. He marveled at what he saw at a country fair. About eight hundred people participated in a contest to guess the weight of an ox, slaughtered and dressed. No one guessed the exact weight, 1,198 pounds. However, their median guess (1207 pounds) was within one percent of the true weight. The mean guess (1,197 pounds) was even more

The CIA & other government agencies now use crowd sourcing—the wisdom of crowds—to predict. Question: How many states will report at least one case of West Nile virus by August 1, 2014? The crowd said between 10 & 12; the answer turned out to be 11.

It is because of the wisdom of crowds that democracies make, overall, better decisions. That is why, in the twenty-first century, democracies are on the top of the food chain. People strive to enter democracies while trying to escape dictatorships. More North Koreans seek to go to South Korea than vice versa. Ditto for East and West Germany.

When we think of democracy, nowadays, we think of majority rule subject to individual rights and liberties. We often call this liberal democracy, which has nothing to do with liberals or conservatives. Dictatorship by the people is mob rule. Plebiscites, historically, are the tools of dictators, not of democracies. Individual rights, such as free speech and free exercise of religion, protect minorities and reduce the danger of slipping into dictatorship and acting like the herd. This how we control what we would call “bubbles” if we were talking about the stock market.

People like Professor Gruber do not respect the wisdom of crowds. In his view (and the view of others like him), he knows what it is best, and hiding facts in order to get a law enacted is justified because others do not know what is best for them. Representative Issa asked Gruber at the hearing, “Are you stupid?” “I don’t think so, no,” Gruber responded. Indeed, Professor Gruber may think he is very smart—smart enough to know what is best for the rest of us. If so, that is a fatal conceit.

Frederick A. Hayek (unlike Gruber a Nobel Laureate in Economics) wrote a book he called the Fatal Conceit. It is about the conceit of those who think that they know best how to organize society and how we should live. Hayek took his title from a passage in Adam Smith’s A Theory of Moral Sentiments. (“The man of system . . . is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it . . .”) It is a belief of intellectuals who think that they know best what is good for the rest of us.

Hayek and a series of experiments conclude that the Platonic Dictator will not organize society as well as society will organize itself no matter how benevolent this dictator is. The smartest person in the room, even if that person is Professor Gruber, is not as smart as the entire group of people taken as a whole.

What does this mean for health care for those who cannot afford it? One suggestion is that Congress should not conceal the true cost of the program. People will eventually figure it out no matter how much Congress tries to hide the ball. Another suggestion is that rather than create a one-size-fits-all system, Congress should allow each of the states to serve as laboratories of experimentation. Each state (helped, perhaps, by federal subsidies) can fashion its own statewide health care program. We will learn, over time, what systems work better than others do. States can then modify their programs to take into account what they learn through experimentation. Programs that might work well in an industrial state may not be ideal for an agricultural state.

I know that there are those who insist, even today, that the Affordable Care Act is a good thing. The goal, to insure the uninsured, is certainly a good thing, but the people still do not support the Affordable Care Act as a means of reaching that goal. The Washington Post reports, in August 2014 that 53 percent of Americans now have an unfavorable impression of the law. “That’s the highest on record and an increase of eight percentage points in one month.” By December 2014, those who said they would repeal it were up to 58 percent.

Maybe all these people are wrong, but that is not the postulate on which we base democracy. Democracy believes in the wisdom of crowds.