photo: ::ZEN:: via Flickr

photo: ::ZEN:: via Flickr

Democrats have made it plain to progressives that they agree with Charles Krauthammer: America is the “quintessential center-right nation.” Over and over they have willingly capitulated to the most conservative members of the party. The policies of the conservatives have failed the nation, causing grave damage to our economy and our international reputation, but that doesn’t seem to matter. Let’s compare this year’s legislative failures with the bank bailout from last year.

When the financial markets imploded, Henry Paulson came up with a solution: throw $700bn at the problem, and get Ben Bernanke to throw more trillions at it. The conservatives of both parties complained bitterly, but the grown-ups in Congress of both parties voted it through. They added some bells and whistles, something that looked like oversight, and some ineffective limits on compensation, but they didn’t try to second-guess Paulson, reasonably believing (and no doubt praying) that he knew what he was doing. It more or less worked.

The Obama administration started the stimulus bill with a number, and then bargained downhill until they got the vote they wanted from a Republican. That meant that the number would be small, too small to accomplish the goal of dramatically reducing unemployment and restarting the economy. The same thing happened on health care. The Obama administration started with a centrist proposal and bargained downhill to the most that the 60th democrat would accept.

Suppose Democrats had done the same thing on the bailout. They would have told the Republicans they would have to turn out all their 49 senators and then bargain down from the Paulson $700bn to the highest number 11 Democratic senators would accept. That number would have been a lot less than $700bn, and there would have been a host of pork and special breaks for those 11. It would have been a horrible disaster, just like the underfunded and pork-laden stimulus bill, and the minimal health care bill that forces millions to buy crappy insurance.

Was it Mencken who said that some ideas are terrible, and the only solution is to crush them? The idea that this kind of bargaining down produces good outcomes is that kind of terrible idea. It puts power in the hands of people who are intellectually handicapped by what Nicholas Taleb calls “epistemic arrogance” in his book, The Black Swan.

Ask each person in the room to independently estimate a range of possible values for that number set in such a way that they believe that they have a 98 percent chance of being right, and less than 2 percent chance of being wrong. In other words, whatever they are guessing has about a 2 percent chance to fall outside their range. For example:

“I am 98 percent confident that the population of Rajastan is between 15 and 23 million.”

P. 139. Before you use the google, try it on the other example he gives: a range for the number of lovers of Catherine the Great of Russia.

Note that there is no limit on the range. You might have said the population of Rajastan is between 5 and 75 million. These are questions that no one would really know, so the results can be interpreted as an estimate for self-certainty, their “evaluation of their own knowledge.” It turns out that plenty of people score higher than justified on this scale, but among the top scorers are politicians, the worst examples of epistemic arrogance.

How does this relate to the stimulus and health care reform? Well, Olympia Snowe, the Republican vote on the stimulus, doesn’t why she thought she was right about the amount of stimulus needed. There is no reason to think either Ben Nelson or Joe Lieberman are likely to be right about the best way to reform the bloated health care system. That didn’t stop any of them from imposing their views on the other members of the Senate and on the nation.

The size of the needed stimulus has an answer. It isn’t quite like the Rajastan answer, which is merely the result of a census, but economic theory can be harnessed to give a pretty good guess. Krugman took a shot here. This looks to me like a back of the envelope calculation, which tells me that he and other experts could have sharpened the estimate considerably, and with very convincing theoretical explanations. So, why would we agree to be governed by the epistemic arrogance of Lieberman, Nelson and Snowe?

We didn’t agree to that, and given the Democratic majorities in Congress, it didn’t have to be that way. It’s that way only because Congress and the Administration agree with Krauthammer that this is a center-right nation.