|Peter Boettke|
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.
While there are certainly plenty of examples of private sector doing better than public, when it comes to large scale programs involving large scale IT ops, not so obvious. Most large scale IT ops also have major rollout difficulties, and in the current case of the national level ACA exchanges, the website was outsourced to a private firm. Most of the state exchanges are working pretty well.
Posted by: Barkley Rosser | October 31, 2013 at 12:38 PM
I have this quote on the top of my homepage: "Just because you CAN doesn’t mean you SHOULD; just because you SHOULD doesn’t mean you WILL."—Paul Davidson Silverman (Silverman is a fictional character in my as yet unwritten political trilogy)
Posted by: Tomesnyder | October 31, 2013 at 04:46 PM
And of course Barkley Rosser jumps into position and says that the "state should do that." But still it is not the state's fault because the project was outsourced to a private firm, surely after an honest biding contest and not because of political contacts or campaign contributions.
Posted by: Enial Cattesi | November 01, 2013 at 09:57 AM
Enial,
Just where did I say "the state should do that," much less "jump in" while doing so?
As it is, I have seen one report, but only one and not from a reliable source, that incompetent CGi got its contract in a closed bid by it alone and has some sort of personal connection to Michelle Obama, however, I shall await confirmation from more reliable other sources before I believe that. It is possible, of course, and we know such things go on (see Halliburton Iraq contracts during Bush admin).
Oh, I did say that the state exchanges are doing pretty well, which I gather is largely the case with some hiccups in some of them. Do keep in mind that all of the offerings on these state exchanges (and the national one as well) are by private insurance companies, with the idea of offering a competing public option having been ruled out. So, even if one does not like how it is set up, or the bad behavior of the federal exchange, this plan is essentially an extension of private markets with some extra regulations, which is why it is not surprising that it was originally a GOP-backed proposal that came out of the Heritage Foundation and Stuart Butler back in 1989. Socialism it is not.
Posted by: Barkley Rosser | November 01, 2013 at 04:45 PM
It may not be socialism (still down the road), but it is cronyism. The health insurance and pharmaceutical folks took the bait all so quickly. (And, gee, the LP was not powerful enough to stop it.) No "Harry and Louise" ads from deep pockets this time, as were run every few minutes for a year back in 1992-1993. Reminds one of the "workers comp" bill of goods sold to the country by the insurance industry at the beginning of the last century.
Posted by: Jule R. Herbert Jr. | November 01, 2013 at 05:56 PM
The website problems are important because they symbolize or are emblematic of the incompetence of Obama and his people. But these website problems will ultimately be fixed. The real problem is the law itself in terms of its likely bad economic effects including the unlikelihood of "attracting" enough young healthy people to make the scheme work. It is also bad because it displaces more sensible healthcare reforms based on quasi market principles.
I also add that I do not like the never-ending abject dependency of a once-proud people on the State.
Mario Rizzo.
Posted by: Thinkmarkets.wordpress.com | November 01, 2013 at 09:58 PM
Part of the reason government projects fail is the left's disdain for management. They think anyone can do the job of CEO, so they never bother to study management or successful managers. They don't try to gain experience as managers. As a result the stumble from one disaster to another.
Posted by: Roger McKinney | November 05, 2013 at 11:00 PM
Barkley, I work in health insurance and believe me there is nothing even remotely free market about it. The only decision insurers are allowed to make is whether to load the costs on the premium, the copays or the deductibles. Everything else is determined by legislation.
Posted by: Roger McKinney | November 05, 2013 at 11:03 PM