Central planning vs. complex systems

Central planning vs. complex systems October 25, 2013

The problems with HealthCare.gov and the Obamacare rollout go beyond the technical glitches, says Michael Gerson.  He draws on economist Friedrich Hayek, who showed why highly complex systems simply cannot be managed by  centralized technocratic planners.

From: Michael Gerson: Ailing Obamacare could become a crisis for liberalism – The Washington Post.

The failed rollout has already raised ideological issues of broader significance. It has reinforced a widely held, preexisting belief that government-run health systems are bureaucratic nightmares. And it has added credence to the libertarian argument that some human systems are too complex to be effectively managed. Perhaps the problem with Obamacare is not failed leadership but rather the whole project of putting a federal agency, 55 contractors and 500 million lines of software code in charge of a health system intended to cover millions of Americans.

I am not a libertarian who argues against the need for programs such as Medicare and Medicaid. But Friedrich Hayek has this much going for him: He understood that the challenge of technocratic planning is always limited information: “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

Which is why planning tends to fail, particularly in highly complex systems. “This is not a dispute about whether planning is to be done or not,” Hayek said. “It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.”

So maybe the problem is not Obama or Sebelius but rather a government program that requires superhuman technocratic mastery.


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