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An interesting convergence took place in the pages of The Jan. 12th New Yorker where the famed author Malcolm Gladwell reviews Steven Brill’s tome on health care and its reform. (Brill is the guy who started Court TV and the magazine American Lawyer.) Unfortunately, it uncritically accepts the premise the government should be trying to fix what has already been broken by government interference. That caveat aside, this long article is worth reading because he will introduce you to David Goldhill’s “Catastrophic Care” which asks the questions we might wish were more central to Gladwell’s piece and to the whole debate itself.

… Near-history, the journalistic reconstruction of contemporary events, has come to be dominated by two schools. The first is represented by Michael Lewis. Lewis wrote about the 1996 Presidential election through the story of a Republican candidate no one had ever heard of, the eccentric millionaire Morry Taylor. “The Big Short” was an account of the financial crisis told through the eyes of four obscure short-sellers. Lewis’s interest is psychological and moral. His books have won him many admirers (including me) because they offer deceptively simple narratives in the service of a grand canonical theme. “Liar’s Poker,” which recounts the young Lewis’s stint in the Wall Street of the nineteen-eighties, is Daniel in the lion’s den. “Money Ball,” about the strategies of small-market baseball teams, is David and Goliath. “The Blind Side” is the Good Samaritan. “The Big Short” is Noah’s Ark, and “Flash Boys” is Jesus casting the money changers out of the temple.

The second school is associated with the Washington Post reporter Bob Woodward. Woodwardian history is kaleidoscopic. The reporter makes many telephone calls and office visits, and reads many documents. All key players are represented and events detailed. The approach is sociological: the great theme of the Woodward school is the interaction of institutions and vested interests. In a Lewis, if you remove the titles of the characters and simply identify them by their first names, nothing is lost: an individual’s character, not his position, is what matters. In a Woodward, the opposite is often true. Names may be irrelevant; titles tell you what you need to know. That is what makes Woodward and Carl Bernstein’s “All the President’s Men” a masterpiece: its great achievement was to show how the institutional power of the White House led to the President’s personal corruption. The Lewis brings drama to what we thought was prosaic. But when the underlying subject is inherently dramatic, and when the heart of the story lies behind doors that only dogged reporting can unlock, the Woodward is what we need. You don’t want Michael Lewis on Watergate. He’d get distracted by Rose Mary Woods and would never make it into the Oval Office.

“America’s Bitter Pill” is Brill’s attempt at a Woodward. …

… Brill devotes fifty pages to another Obamacare shortcoming, the early malfunctioning of the Web site. He originally thought that the site would be a showcase for what government could do. But, on the train back from his initial round of interviews in Washington, he glanced at his notes and realized that he had been given seven different answers to the question of who was in charge of the launch of the federal exchange, including an “incomprehensible” organizational chart with four diagonal lines crossing one another and forming a “lopsided” triangle:

“Should we be amazed, and disappointed, at how Obama treated the nitty-gritty details of implementing the law as if actually governing was below the pay grade of Ivy League visionaries?

Absolutely. This failure to govern will stand as one of the great unforced disappointments of the Obama years.” …

… It is useful to read “America’s Bitter Pill” alongside David Goldhill’s “Catastrophic Care.” Goldhill covers much of the same ground. But for him the philosophical question—is health care different, or is it ultimately like any other resource?—is central. The Medicare program, for example, has a spectacularly high loss ratio: it pays out something like ninety-seven cents in benefits for every dollar it takes in. For Brill, that’s evidence of how well it works. He thinks Medicare is the most functional part of the health-care system. Goldhill is more skeptical. Perhaps the reason Medicare’s loss ratio is so high, he says, is that Medicare never says no to anything. The program’s annual spending has risen, in the past forty years, from eight billion to five hundred and eighty-five billion dollars. Maybe it ought to spend more money on administration so that it can promote competition among its suppliers and make disciplined decisions about what is and isn’t worth covering. …

… Goldhill takes a far more radical position than the economic team at the White House does. He believes that most of our interactions concerning health care are actually no different from our transactions concerning anything else: if we trust people to buy cars and houses and food and clothing on their own, he doesn’t see why they can’t be trusted to do the same with checkups, tonsillectomies, deliveries, flu shots, and the management of their diabetes. He thinks that the insurance function—inserting a third party between patients and providers—distorts incentives and raises prices, and has such an adverse impact on quality that health insurance should be limited to unexpected, high-cost occurrences the way auto insurance and home insurance are. These ideas are unlikely to make their way into policy anytime soon. But, in elaborating the market critique of the health-care status quo, Goldhill helps us understand what the argument we’re having right now is about. It is not just a political battle over Obama. It’s a battle over whether health care deserves its privileged status within American economic life. …

Matt Lewis in Daily Beast wonders if Chris Christie will regret being in Jerry Jones’ box when watching Detroit lose to Dallas last Sunday. Next Sunday Dallas will be at Green Bay. Will Scott Walker sit in the cold with the folks, while Christie sits in a luxury box?

… Christie has problems, and they begin with the fact that photos and videos and memes can haunt us. You don’t have to go back too far to find examples … Joe Lieberman “kissing” George W. Bush or Barack Obama hugging Charlie Crist … or, for that matter, Chris Christie “hugging” Barack Obama. (Maybe the guy is just a hugger?)

In each scenario, it matters greatly whom you hug. And let’s be honest, while the Dallas Cowboys might represent America’s team, Jerry Jones represents the worst qualities about the one percent. I mean, if you were casting a villain, he’d be on your short list. This is a guy who has his son-in-law clean his eyeglasses, for crying out loud. The man makes Dan Snyder almost seem likable. In other words, being pictured hugging him—in the owner’s box—works to undermine Chris Christie’s Springsteen-esque image as a blue collar working man’s Republican. (The fact that he was celebrating another loss for the star-crossed city of Detroit only enhances the symbolism.)

Now, I don’t want to make too much of this. Christie may have his faults, but he oozes the everyman persona. His hero, Bruce Springsteen, is a gazillionaire, but he still manages to come across as a regular guy, so perception is reality. Mitt Romney seemed like a rich guy. Chris Christie seems like a Joe Sixpack. It’s really hard to undermine our perceptions about someone’s natural temperament, but it is possible—and that’s why this is potentially dangerous for Christie. The most dangerous attacks are those that undermine your perceived strength. …

When it comes to colds, turns out mom was right. Real Clear Science article shows that we’re more susceptible to cold viruses when we’re cold. Florida anybody?

If your parents or grandparents were like mine, you probably heard this as a child heading out to play in the snow: “Put your hat and scarf on. If you don’t, you’ll catch a cold.” Years later, all grown up with a microbiology doctorate hanging on my wall, I know that viruses cause colds, not chilly weather. Their admonitions, while well-intentioned, were based on nothing but folklore and superstition. Right?

Perhaps not. New research published in PNAS shows that colder temperatures may make your immune system more susceptible to rhinoviruses, the most common cause of colds. …

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Craig Pirrong looks at low oil prices and sees, not Machiavellian machinations, but simple supply and demand.

… Instead, the most likely explanation for the price decline is a decline in demand. The fall in price parallels quite closely declines in world GDP forecasts. Chinese manufacturing in particular has slowed. This has been reflected in other commodity prices which are driven by Chinese industrial demand, most notably iron ore, which has fallen almost 50 percent over the last year, and copper, which has fallen by about 15 percent since June. And somehow I don’t think the Australians or Chileans are attempting to punish their economic rivals or geopolitical enemies. They are just along for the ride on the demand train.

The biggest price daily oil price decline occurred the day after Thanksgiving, when OPEC announced it would not cut output. Prices have also declined on days when the Saudis or other Gulf states reiterated their intention to maintain output. But maintaining and increasing output are two different things. The Saudis didn’t announce that they were opening the taps, like they did in 1986. They are just saying they won’t shut them. And as I argued in an earlier post, given their market share and the elasticity of demand for oil, that’s a rational thing to do without having to resort to predatory explanations. …

… Recent academic research shows that most of the price variations in oil over the past decades have been demand driven, rather than supply driven. This most recent decline is just another example of that.

Conniving oil ticks and outlandish Texas oilmen make colorful copy , but usually the world is much more prosaic. Oil supply is very inelastic in the short run, so when demand declines even modestly, prices can plunge. This is counterintuitive to most: how can small changes in demand have such huge effects on prices? This leads to speculations about conspiracy, especially when the price changes can shake nations like Russia to their cores. But such speculations are idle. The normal operations of commodity markets routinely produce such price movements. Which is precisely why subjecting grandiose ambitions for geopolitical power to the vicissitudes of commodity prices is the strategy of fools.

And yeah. I’m looking at you, VVP. (Vladimir Vladirimovich Putin)

Putin may not be having a happy New Year, but I close this post by wishing all my readers all the best for 2015. Enjoy the schadenfreud!

Victor Davis Hanson explores the ironies of low price oil.

… The Obama administration never much worried about high energy costs. During the 2008 campaign, Obama promised that “under my plan . . . electricity rates would necessarily skyrocket.” Shutting down coal plants and using higher-priced but cleaner natural gas would pave the way for an even pricier mandated wind and solar generation.

In the vice-presidential debates of 2008, Joe Biden mocked Sarah Palin for the supposedly mindless campaign mantra of “Drill, baby, drill.” Biden intoned that “it will take ten years for one drop of oil to come out of any of the wells that are going to be drilled.”

The energy secretary-designate, the professorial Steven Chu, in 2008 had unwisely voiced a widely held but wisely unspoken progressive belief that “somehow we have to figure out how to boost the price of gasoline to the levels in Europe” — or about $9 a gallon.

Just two years ago, when up for reelection, Obama reminded Americans, “We can’t just drill our way to lower gas prices.”

Obama ridiculed the Republican idea of lowering gas to $2 a gallon through new oil-recovery techniques. “They’re already dusting off their three-point plans for $2 gas,” Obama mocked.  “I’ll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling.”

Such easy rhetoric was backed by action — or lack of it. The Keystone XL pipeline was put on permanent hold. New fracking leases on federal lands were postponed. Huge areas of oil- and gas-rich federal lands were put off limits. Some blue states stopped fracking. Money poured into solar schemes like Solyndra. …

Robert Samuelson writes on five economic stories to watch in 2015. Oil is first on that list. 

The start of a new year is a good time to take stock. For those of us in the news business, this suggests stepping back and asking what’s important. Here are five economic stories worth watching.

1) What happens to oil? Saudi Arabia has helped drive down crude prices from roughly $100 a barrel to about $60 by refusing to cut its production in the face of a global surplus and the unwillingness of other producers to cut their output. The question is whether the Saudis will hold to this strategy until enough high-cost producers — including some U.S. shale oil operators — are driven from the market or whether they’re seeking some sort of production-sharing agreement with major exporters inside and outside the Organization of the Petroleum Exporting Countries. What’s clear is that Saudi Arabia doesn’t want to cut output unilaterally. …

David Harsanyi thinks we should thank gridlock for saving the economy.  

… if activist policies really had as big an impact on our economic fortunes as DC operatives claim, I only have one question: Which policy did Barack Obama enact that initiated this astonishing turnaround? We should definitely replicate it.

Because those who’ve been paying attention these past few years may have noticed that the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. So it’s perplexing how the same pundits who cautioned us about gridlock’s traumatizing effects now ignore its existence.

Here, for instance, is a Paul Krugman column titled the “Obama Bounce.” The problem is that the author fails to justify his headline. It begins like this:

Suppose that for some reason you decided to start hitting yourself in the head, repeatedly, with a baseball bat. You’d feel pretty bad. Correspondingly, you’d probably feel a lot better if and when you finally stopped. What would that improvement in your condition tell you?

Suppose you tell us what the baseball represents? Because spending in current dollars has remained steady since 2010 and spending as a percent of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became, the more the economy began to improve.

Krugman argues that the recession lingered because government hadn’t hired enough people to do taxpayer-funded busy work. The baseball bat. But then he undercuts this notion by pointing out that there was an explosion of public-sector hiring under George W. Bush – the man he claims caused the entire mess in the first place. Krugman also ignores the stimulus, because it screws up his imaginary “austerity” timeline. He then spends most of the column debunking austerity’s success in Britain. …

Adding emphasis to  Harsanyi’s above column, Jim Grant writes on the depression that was solved by the government doing nothing.

To combat the Great Recession and its long-lingering aftermath, leading central banks have pulled some $10 trillion out of thin air. Governments of the world’s principal economies have rung up almost $20 trillion in deficit spending. We often hear that the authorities have done too little. Perhaps they have done too much.

Not so long ago, the authorities did hardly anything. In response to the severe, little-known economic slump of the early 1920s, they virtually sat on their hands. It is an often forgotten episode that suggests the potential for constructive federal inaction—and underscores the healing power of Adam Smith ’s invisible hand.

Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged.

What to do? “Nothing” was the substantive response of the successive administrations of Woodrow Wilson and Warren G. Harding. Well, not quite nothing. Rather, they did what few 21st-century policy makers would have dared: They balanced the federal budget and—via the still wet-behind-the-ears Federal Reserve—raised interest rates rather than lowering them. Curiously, the depression ran its course. Eighteen months elapsed from business-cycle peak to business-cycle trough—following which the 1920s roared. …