I was going to write this as a comment in one of the threads but decided to expand it into a diary.

I think what the Gruber affair shows is that the whole idea of independence among our elites is mistaken. The medical industry and politicians would never have let Gruber anywhere near this debate if he were truly independent. They chose him because he reflects their views. They work with him and give him access for the same reason. All of this makes getting funding easier for Gruber as well. It is all self-reinforcing. If Gruber really were independent, would he have the gig at MIT, special government grants, would he be the go-to guy for Democrats in the White House and Congress, would we see him on TV and read him in the New York Times? Well, maybe, but let’s just say it would be extremely unlikely.

Gruber made his reputation off his modeling. Let’s look at economic modeling for a moment. We are going through the biggest smashup since the Great Depression. Most of what produced this disaster was based on models that suggested that crap could be turned to gold and that this was all possible because broad downturns were impossible. Ratings agencies, banks, hedge funds, private equity, pensions, sovereigns, they all had their models and they were all wrong. Why? Models must assume equilibrium conditions to make any sense. But as a couple hundred years of capitalism has shown, it cycles between boom and bust. Disequilibrium is the rule, not the exception.

Then too Gruber is a microeconomist. We all know about examples like the paradox of thrift: Saving, good for the individual but if everyone were to do it, economic activity would cease and the economy would collapse. The point here is that what works at the micro level can have the opposite effect on the macro one. Microeconomics does not necessarily scale up.

Finally, it is important to understand that while models are necessary for things like cost projections, those projections should never be taken at face value. 10 year projections are virtually meaningless. Projections become increasingly unreliable beyond a few years. Even then, non-economic events, like wars, bubbles, or meltdowns can blow them out of the water. They are only as good as their assumptions, and their assumptions are almost always wrong. This does not mean we should not use them. It means we should be real clear about what their limitations are. But, of course, none of this matters as long as Gruber is saying something those who pay him in Washington want to hear.

A final thought too on elites, the lines between our elites are very blurred. Industry people (take the Goldman mafia, for example) can enter government or run for office. Politicians can go into industry, become lobbyists, or go into academia or media. Academics can move back and forth between university and government jobs. They can also go into media like Krugman or become experts the media go to like Gruber. In such a world, what does “independent” mean? Are we really surprised when an academico- media economist like Krugman defends another academico- media economist like Gruber? Do we really expect Gruber with his connections to the Democratic party to be “independent”? Do we expect Krugman to be objective about Bernanke (to whom he owed his job at Princeton)?

And if you will note, to this point, I haven’t even mentioned the thing that started all this: Gruber’s failure to disclose his financial ties to the Administration while pretending to be independent. But when you realize how tied in all these guys are you can see how natural those connections are. The bottomline is that “independent” does not mean, for them, what we think it means.