I aint got no Satisficing

Satisficing is one of my favorite concepts and words. Yes, my name is Richard Mayhew and I am a nerd of unusual size.

And in a just world, satisficing and the related concept of bounded rationality would have made Milton Friedman a very smart, very interesting thinker who had some excellent things to say about the world around us and not the economic intellectual father of the current socio-political superstructure that is around us today.

Wikipedia has a good definition and example:

Satisficing, a portmanteau of satisfy and suffice,[1] is a decision-making strategy that attempts to meet an acceptability threshold. This is contrasted with optimal decision-making, an approach that specifically attempts to find the best option available. A satisficing strategy may often be (near) optimal if the costs of the decision-making process itself, such as the cost of obtaining complete information, are considered in the outcome calculation.

The word satisfice was given its current meaning by Herbert A. Simon in 1956,[2] although the idea “was first posited in Administrative Behavior, published in 1947.”[3][4] He pointed out that human beings lack the cognitive resources to optimize: we usually do not know the relevant probabilities of outcomes, we can rarely evaluate all outcomes with sufficient precision, and our memories are weak and unreliable. A more realistic approach to rationality takes into account these limitations: This is called bounded rationality.

And here is a good example:

Example: A task is to sew a patch onto a pair of jeans. The best needle to do the threading is a 4 inch long needle with a 3 millimeter eye. This needle is hidden in a haystack along with 1000 other needles varying in size from 1 inch to 6 inches. Satisficing claims that the first needle that can sew on the patch is the one that should be used. Spending time searching for that one specific needle in the haystack is a waste of energy and resources.

Another useful example is thinking about picking up an attractive person to hook up with as graphed against time at the bar.  Early in the night, individuals may be attempting to optimize the matching process and hook-up with the most attractive person who is willing to say yes to them.  As the night goes on and failure to score with the 10, the decision process changes until at last call, the decision is to hook up with whomever is willing to say yes.  This is slightly different than the decision process described in A Beautiful Mind bar scene, although all of the men in that scene were engaged in satisficing decision making.   


I’m being oppressed and made better off

Conservatives are having fun with stories like the following:

Ian Hodge, 62, is one of nearly 13,000 central and eastern Pennsylvanians who will soon need to shop for health insurance because Highmark Inc. is discontinuing their coverage at the end of the year.

Highmark has announced it is withdrawing five of its insurance plans that don’t comply with the Affordable Care Act, key parts of which take effect Jan. 1.

The hash-tag #TCOT is flinging poop under the quip “Obama lied, my health plan died”.
Let’s look at the details as to why Highmark is cancelling these plans:

The new regulations, for instance, prohibit insurers from denying coverage to applicants who have pre-existing health problems….

Highmark’s Classic Blue is a guaranteed-issue plan, meaning the Hodges and other customers were not required to inform Highmark of their health status to get coverage. But applicants couldn’t count on coverage for any pre-existing condition for their first 12 months under the plan….

Under the Affordable Care Act, beginning Jan. 1, all insurers must issue policies regardless of an applicant’s health history.

The guaranteed issue policies were Pennsylvania’s “solution” to some people with pre-exisiting conditions who fell through the cracks.  The individual insurance market in Pennsylvania is segregated (until Jan. 1, 2014) into two broad groups.  The first is medically underwritten individual insurance.  The risk pool for medically underwritten insurance is younger and healthier than typical.  The second group is the guaranteed issue group which has older and sicker individuals in it.  Jan. 1, 2014 changes this paradigm as all health insurance written on or after that date will be community rated so this distinction no longer serves any purpose.
Mr. Hodge from the article was paying $1041.85 per month for him and his wife for Highmark Classic Comprehensive Blue.
I only could easily find the 2012 product sheet for this plan.  It looks like the 2012 version at that rate for a married couple would have an in-network deductible of $3,000 with co-insurance above that at 80% on the next $30,000 for total family potential out of pocket of $9,000.  After $30,000 in medical expenses, the plan covers everything after that.  Pre-exisiting conditions are not covered for the first year.
That coverage is not too good.  It is inadequate and unaffordable coverage under Obamacare regulations.  Under Obamacare, the policy above is Catastrophic at best.
Looking back to yesterday’s data dump from HHS, the lowest Gold plan in Pennsylvania for a 27 year old is $205 per month.  Given that rates can not vary by age by more than a factor of 3, that Gold plan for Mr. and Mrs. Hodges can not be more than $615 per month per person.  Buying as a family will probably reduce that rate to be equal to what they are paying now.  This calculation does not include any tax subsidy.  Gold would be a massive improvement in coverage over what they have now.
Using the Kaiser Family Foundation Zip code specific calculator, Silver plans are available to a family of 2 in a random Lancaster County zip code for $5,070 under the typical case scenario,  total costs for the family of two without tax credits would be no more than $10040 before subsidy.  That is significantly less than the $13,000 in premiums the Hodges are currently paying.  Throw in the fact that the value of coverage has increased dramatically, the Hodges will be significantly better off.
Stop the oppression by improving the material condition of people….

 (updated a math error)