Sunday, November 17, 2013

System Failure

I predicted, like many did, that there would be a problem with the implementation of the health care exchanges. One of the main reasons that IT projects fail in government is a top down approach to planning and design that is both suboptimal and incredibly risky. There is just too much unpredictability in the system to think that you can figure out what works on paper and then make it a reality.

My boy Arnold Kling, who saw this coming long before I did, makes this point in a very concise and insightful way:
the deeper answer is that when we look at Kayak and Amazon, we are seeing the survivors that emerged from an intense tournament. In this tournament, thousands of competing firms fell by the wayside. Competitors tried many different business models, web site designs, business cultures, and so on. did not emerge from this sort of competition. It came about because Congress passed a law.
Central to my approach to economics, and that of other economists who are variously called Austrians or market-oriented economists or Smith-Hayek economists or what have you, is the respect that we have for the evolutionary process by which markets produce innovation and excellence. My sense is that what divides us from pundits like Brooks and Shields, and even from most economists, is the credit that we assign to market evolution rather than elite expertise as a process for solving problems.
I have seen similar mistakes throughout my career in government, and nobody ever seems to learn. Yes they passed a law, but they didn't have to implement it with central planning and disinterested consultants who get paid whatever the outcome. Maybe some of the states we'll step up to show the way forward, but the system is not in a good place right now, and this may be irreparable.


  1. I find it a bit incredulous to say that the problem with Obamacare implementation is lack of deference to market forces. The whole thing is a Rube Goldberg contraption specifically engineered to ensure the sustenance of a market-centric in the provision of health care.

    So yeah, the whole thing is stupid complex there are plenty of criticisms to be made about how it was designed and implemented. But its a little rich to hear that coming from market fundamentalists. We could have had Medicare for all if the ideology of competition wasn't such a sacred cow.

    1. I guess I agree with you. I was thinking of the IT side of the project only, not the public policy; so even though Kling is a bit hypocritical, I think he's right.

      Nassim Taleb says that longevity is the best indicator of quality (for books, anyway). From that perspective, it seems like Medicare for all, with a few trial tweaks to enhance competition, might have been a better approach.