It will not be news to anyone here that the roll out of the Affordable Care Act (aka Obamacare) has not gone smoothly. I don't want to comment on the pros and cons of the policy per se, but instead simply use the "coordination failure" to highlight Hayek's basic insight that: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
When Hayek won the Nobel in 1974, his lecture was titled -- "The Pretense of Knowledge". It was not directed at the comprehensive central planning of Soviet style socialism, but at the piecemeal economic management of Keynesian macroeconomics practiced throughout the democratic west. Despite his popularity in the wake of this recognition, and the experience of stagflation, Hayek's warning was never really heeded by either the Reagan or Thatcher administrations. Yes, a more "conservative" approach was followed, but the basic structure of public administration was not addressed.
As detailed by Vincent Ostrom in The Intellectual Crisis in American Public Administration, the Progressive Movement successfully transformed the administrative apparatus of government starting with Woodrow Wilson and continuing through WWI, the Great Depression and WWII. This administrative apparatus is built on the "pretense of knowledge" and operates assuming that the "pretense" is not a pretense. Trained experts will be able to effectively manage affairs to achieve the public interest.
But we see the track record of failure in all of these administrative efforts whenever and wherever we look. If we didn't, jokes like "I am from the government, I am here to help" wouldn't produce a laugh (even if in many instances that is accompanied by tears). In my office in Arlington I have this poster hanging:
Indeed the solutions are often worse than the problems. My colleague Chris Coyne in discussing the hubris associated with our efforts at nation building likes to ask audiences --- how can it be that you understand how poorly run the US Post Office, yet you believe that the US can successfully rebuild nations?
It is human arrogance and human opportunism with guile that gets us all the time in our efforts to pursue idealized plans for public management of economic and social affairs with the purpose of human betterment. And this isn't just a matter of slouching toward a solution. Arrogance and opportunism have huge costs in terms of money and lives, and very few benefits in terms of devising better solutions.
Any governmental plan that exhibits the arrogance of the pretense of knowledge, and unleashes opportunities for the most opportunistic of us to benefit at the expense of others, must be resisted and ultimately rejected as an approach to public policy. We need a stronger filter on policies within the given structure of government -- e.g., a generality norm -- but more importantly we need to make sure the structure of governance is such that we do not ask the government and its officers to do things that they are incapable of doing. We need to address not only questions of the size of government, but more importantly the responsibilities of government.
What better time to start this conversation than now? We going to have another round of budget talks, and we are in the middle of the roll out of a new major government initiative that all can see is suffering serious coordination failures. If the government cannot run the Post Office in a cost effective manner, why do we think it can do all these other range of activities so effectively?
As Steve Horwitz likes to stress, 'ought' does not imply 'can' -- those may well be two very separate questions. And I would add, therefore, it is also important to remember just because you 'can' pass a law doesn't mean you 'ought' to pass that law, nor does it follow that when you implement that law it will produce the results you intended.