Wednesday, January 27, 2010


During a health care discussion recently, my interlocutor mentioned her belief that if we had enough really smart (bipartisan) people focusing on the issue, with no outside interferences, they would be able to come up with a great solution. These hypothetical experts may be able to solve the problems in this case, although I am skeptical. A far-reaching plan has so many chances to go awry that it is a wonder any positive legislation ever occurs. Plus, the downside of having bad plans adversely affect so much of a country when a large plan fails is, in my opinion, too high.

Let's look at a few well known historical examples. Shortly after FDR became president during the Great Depression, he developed what is known as the Brain Trust:
he called together the people he regarded as the most powerful and important corporate, banking, and labor interests – together with a gaggle of professors from Columbia – and essentially asked them what they wanted to get the economy going again.
FDR, with the help of these experts, then implemented his New Deal, which most economists these days credit with prolonging the Great Depresh.

Next, we have JFK (how many presidents are known just by their initials?) with his group of the best and the brightest,
fellows who '"carried with them an exciting sense of American elitism, a sense that the best men had been summoned forth from the country" to bring "a new, strong, dynamic spirit to our historic role in world affairs"'. Through pursuing its goal of stopping the spread of Communism, this group is mostly responsible for the disaster that was the Vietnam War.

OK, but maybe people have gotten a lot smarter in the last 40 years. But we need to remember all the experts, both in government and finance, who thought we had conquered economic cycles with our brilliant financial innovations. These same experts even now don't really know why we are in our current economic mess. Scott Sumner, a prominent economics blogger, laments that
in the last year my respect for authority, which was never very high, has fallen to a new low. As I read each interview in the Big Think, it becomes more and more obvious that the experts don’t have a clue as to what went wrong, nor how to fix the problem. Indeed they don’t even agree with each other, and none of them agree with me.
The point so far has been that, despite high hopes and good intentions, experts basically never have all of the knowledge they need in order to make perfect decisions. The upshot of this is that when they are given a lot of power and fail, bad things happen to a lot of people. And the nature of government is such that even when something is recognized as a bad policy, it is very difficult to change it (ethanol subsidies, anyone?)

Time to move on to health care. Health care spending made up around 17% of the economy last year; that is more than 1/6 of all the goods and services produced in America last year. Going into this spending are innumerable decisions made by innumerable agents: doctors, nurses, insurance companies, pharmacists, consumers (healthy and otherwise), bureaucrats, researchers, inventors, manufacturers, and many more.

What group of experts would be necessary to ensure that all the requisite information was considered in any health care legislation? How could such a team possibly be assembled? Especially today, with the Internet's making information so diffuse, the only way to build an effective team would be to include just about everybody.

Luckily, this team can actually be assembled pretty easily: don't give a small group of experts all the power. If more decision-making is left up to individuals, they will automatically use the best information they have on hand. If an individual makes a spectacularly bad decision, it doesn't harm the entire country. Most importantly, they will respond to the ever-changing health care environment more nimbly than any government agency could.


Ashley said...

I hate to write with so little understanding of what I'm going to say, but I will anyway: sounds like you're suggesting a health care version of the price mechanism.

It seems essential that we do gather a number of experts from a variety of fields learn what troubles need to be remedied, or at least addressed. An inherent problem with expecting individuals to make the right decisions with the info they are given is the plain fact that little information is actually available about health care pricing (not to mention the staggered pricing for the insured and not) or the quality and nature of potential heath care providers. On top of that, the very diffuse nature of information that you cited regarding experts would likely thwart, or at least overwhelm, many information seekers. That's not to say that people shouldn't be given the opportunity to make their own decisions, but considering our health care system in its present state, that opportunity is one that is unlikely to be taken up by many people and is somewhat likely to defeat many others. I'd like to think that most Americans are above average and would seek the necessary information, but I'm not sure that is the case. Even more disconcerting is the idea that many people probably don't have the "luxury" of expending the requisite energy to learn the info necessary to make informed decisions.

Although it is sometimes easy for me to try to find the big picture and think, well, the country overall wouldn't be harmed by individuals' "tragedies" and poor choices, that kind of thinking can be problematic when those individuals add up so seemingly quickly!

What do you think? (sorry for poor writing, I'm supposed to be getting ready for bed!)

David said...

Yes, I agree that information is not readily available, and that makes it tough for consumers to know what to do. That's why I sort of would advocate legislation to increase transparency, such as having hospitals list the prices for all their services.

Another point to consider is that this information is probably not available because no consumers ever ask for it yet. As consumers became more cost-conscious, health care providers would automatically begin competing more on price, and price information would be much easier to find.

Yes, the transition period would be painful until people and businesses figured out what works best. But in the long run, as a whole we would be in a much better position than we will be under our current trajectory or the health plans that just died in Congress.