Blaming “Distressed Babies”? A Real Economist Agrees With Me On Tim Armstrong

I don’t always agree with Megan McArdle, but I certainly do appreciate her when she agrees with me. I wrote about Tim Armstrong (and related matters) yesterday. Tim Armstrong, the CEO of AOL, made changes in the way 401(k)s were handled (he has since reversed the decision). He explained the changes by mentioning two “distressed babies.” This produced a lot of anger. The mother of one of the “distressed babies” wrote an article about it at Slate.com. The article, I wrote,

… described all the heroic and expensive measures that were taken to save Fei’s premature and underweight daughter. The theme is that all this heroic care should just happen and be paid for by someone as if math isn’t real. (I’m thrilled that infant girl had access to these resources, but the idea that mentioning the costs and trying to accommodate them is blameworthy strikes me as an exercise in escapism. Armstrong’s crime according to the response seems to me to be that he acted as if expenses had to be paid rather simply that he said something rude.)

McArdle also blogged about the article. And when I later read her words I was gratified because it felt like a confirmation.

She writes of Tim Armstrong’s explanation for why they needed to save money due to the expense of the distressed babies,

The explanation of the decision-making process seemed basically fair to me. AOL probably self-insures, as most large employers do, though it was clear from the Internet commentary that most people aren’t aware of that fact. If there were two “distressed” babies who cost $1 million apiece — easily possible, as neonatal care, along with transplants and cancer, regularly tops the list of high-cost claims — then AOL could very well have paid every dollar of those claims, even though the plan is probably administered by an insurer such as Aetna Inc. or Blue Cross Blue Shield.

I will add something I didn’t have space to include in my earlier post. Why would Armstrong even know about these babies and what they cost if it wasn’t actually an expense that AOL incurred? Are people going to seriously suggest that Armstrong just started making things up and spontaneously decided to blame two “distressed births” that had nothing to do with expenses? A much more plausible answer is that Armstrong came from a meeting with his accountants and advisors where he had been told that the company had bled higher-than expected amounts of money through their employee benefits.

Which leads to another question: Aren’t the people getting mad at Armstrong for mentioning the distressed births because they were already mad at him for changing the way the retirement plan worked? Are not they basically communicating that they want Armstrong to shut up about making choices and simply give them everything they want? Which could mean, merely, that they want to live in a fantasy where “distressed births” don’t use limited resources. Or it could mean something much worse: that they think whether or not babies get heroic care should be decided out of sight just so long as their retirement benefits stay plump.

McArdle again:

The mother of one of the babies wrote a moving piece for Slate about her daughter’s “catastrophic birth,” which went viral even though it didn’t actually seem to rebut anything Armstrong had said. Fei’s baby is beautiful, and all of us are very glad that modern medicine was able to give her a shot at life she wouldn’t have had 20 years ago. But Armstrong didn’t say that he wished the babies weren’t alive; he just said they were expensive.

[…]

Myself, I think AOL made absolutely the right choice: saving Deanna Fei’s baby, not 401(k) matches for job-switchers. But people seem mad at Armstrong for saying that this is a choice — that the resources to pay for such babies do not just materialize out of some primordial miasma surrounding the maternity ward but must be redirected from something else.

It is this will to fantasize that goods, whether health care or anything else, are “just there” that frightens me. It is the same kind of delusional thinking that leads people to declare we live in a post-scarcity age. It also leads to the incredible idea that government knows how to deliver health care in society better than free people trading with and/or helping out one another.