The limits of central planning

Katie van Schaijik | Jul 22, 2009

Yuval Levin makes sense on health care, reminding me again of Newman’s idea of the illative sense in the moral life.  In the Corner today:

To me, this all looks like a demonstration of how much of what you conclude about public policy from social science really depends on the implicit assumptions you bring to the table about human behavior and human fallibility. When I look at the immensely complicated picture of American health-care decision-making that emerges from those Dartmouth studies, I don’t think “we need to centralize this,” I think “this can’t possibly be centralized.” I take it not as an indictment of local variability but as proof of the limits of imposed efficiency. Those limits, if we take them seriously, argue for rules that set general incentives and then give individual players the freedom to find their own ways of responding to them, because we cannot know in advance the peculiar pressures that will drive behaviors in different parts of the system, and we cannot hope to eliminate those pressures. There has to be room for local and individual decision makers to find what works for them. That certainly means that the system won’t be optimized for efficiency, but optimal efficiency is not in fact the alternative to this kind of messy market approach. The alternative is artificial shortages.